Don Sull's blog

With the worst of the economic crisis behind them, many executives look forward to a period of stability and predictability when companies can return to business as usual. They are likely to be disappointed. Market turbulence did not begin with the fall of Lehman Brothers, and it will not end when the global economy recovers. As I’ve noted in an earlier post, scholars using a variety of measures including stock price volatility, firm mortality, persistence of superior performance, frequency of economic shocks, and speed of technology dissemination. have converged on the finding that volatility at the firm level has increased somewhere between two- and four-fold between the 1970s and 1990s. Turbulence, in other words, was on the rise before the current recession began, and there is little reason to believe it will retreat end when the global economy recovers.

In turbulent markets, business leaders recognize the value of organizational agility in dealing with rapid-fire change. A recent McKinsey survey found that nine out of ten executives ranked organizational agility as both critical to business success and growing in importance over time. Despite widespread agreement that agility matters, there is less clarity on what the term means. I define agility as the capacity to consistently identify and exploit opportunities to create value more effectively than rivals. Agility can help organizations seize a range of opportunities: Respondents to the McKinsey survey, for example, identified diverse benefits from enhanced agility, including higher revenues, greater customer satisfaction, improved operational efficiency, faster time to market, and greater employee satisfaction.

Agility is not raw speed. “The fast beat the slow” (or its Darwinian version “the fast eat the slow”), has entered the conventional wisdom of strategy. This is incorrect. The best way to enhance raw speed is to develop a crystal clear long-term vision and send the troops off at a dead sprint in pursuit. If the vision is wrong or the world changes, however, this approach only guarantees an organization arrives at the wrong place before anyone else. People often forget this basic insight in their rush to secure “first-mover advantages” or to “get big fast.”

Cannon succeeded in 35mm cameras, NCR in automated tellers machines, Amazon in online book retail, and Texas Instruments in pocket calculators. My colleague Professor Costas Markides notes that none of these companies were first to seize the opportunity. The “winners” measured by raw speed were De la Rue, Charles Stack, Net Investor, and Bowman, long-forgotten firms that got there first, often ahead of their customers, suppliers, and supporting infrastructure. Timing matters more than raw speed, and too early can be just as bad as too late.

Instead of increasing blind speed, agility improves timing, the ability to do the right thing at the right time. My next few posts will explore the relationship between agility and timing, and the types of agility, and how to enhance agility.