Don Sull's blog

My last post presented findings from a survey on organizational agility that I conducted with McKinsey Quarterly. This post explores findings from two earlier surveys on agility.  In June 2006, McKinsey Quarterly conducted a survey, collecting responses from 1,562 executives from public and private companies across a range of industries. The Economist Intelligence Unit (EIU) survey, conducted in December 2008 and January 2009, included responses from 349 executives with 49% from three European countries (UK, France, and Germany), 19% from the United States and Canada, and the remainder from Singapore, Australia and New Zealand. The EIU respondents represented eighteen industries, and nearly one-third had revenues in excess of $5 billion.

The precise definitions of agility varied between the two surveys. For McKinsey, agility is linked to speed and defined as an organization’s “ability to change tactics or direction quickly…to anticipate, adapt to, and react decisively to events in the business environment.”  while the EIU defines it as how firms “respond quickly and nimbly to the changing environment.” Both definitions share a focus on how well a firm anticipates and responds to environmental changes.

1. It’s not about IT. Information technology factors were ranked as the three least important organizational elements promoting agility according to the McKinsey survey, with “state-of-the-art IT” cited as promoting agility by only 7% of respondents, access to business unit information (18%), and knowledge sharing (26%). In McKinsey’s survey, the two factors ranked as least important barriers to agility were incompatible information systems (5%), and lack of access to up-to-date performance information (7%). The EIU survey found that “unified/flexible application infrastructure” was the least critical trait of an agile business.  This is not to say that information doesn’t matter. The EIU survey also found that access to the right information at the right time ranked third among critical traits for agility. As I have argued in previous posts, massive expenditures on sophisticated IT systems are neither necessary nor sufficient for agility.
2. Fast decision-making is the engine of agility. The EIU survey found that “rapid decision-making and execution” was the most critical trait of an agile organization, while in a separate question slow decision-making was cited as the biggest obstacle to increasing agility. McKinsey found that “overly centralized, slow, or complex decision-making/approval processes” were cited by 50%  of respondents as the barrier most likely to hamper agility, a factor cited twice as frequently as next most common barrier. Two of the three elements cited as promoting agility in the McKInsey survey also dealt with decision-making., including decision-making authority pushed as far down the organization as possible (cited by 39%) and clearly defined decision-making authority (30%)
3. Customer-facing functions most agile, back-office functions least so. The EIU survey asked respondents to identify the three most agile units within their company and also the three least agile. Subtracting the percentage of respondents who listed a functions as least agile from the percentage who listed it as most agile yields a crude proxy for functional agility.  Sales was ranked the most agile with 44% of respondents listing it among the most agile and 15% among the least agile, for a net score of 29%. Marketing was next (38% most agile, 12% least, 26% net), followed by customer service (33% most, 11% least, 22% net).  Legal, risk, and compliance (8% most, 30%, least, -22% net) and human resources (9% most, 31% least, -22% net) were tied for least agile, followed closely by IT (14% most, 33% least, -19 net) and finance (15% most, 29 least, -14 net). Senior management and the board were in the middle, with 26% ranking them most agile and 15% least agile.
4. Agility confers diverse benefits. McKinsey asked participants to select the top two benefits their organization would receive from greater agility. The executives listed a diverse range of benefits from enhanced agility including higher revenues (39%), greater customer satisfaction (36%), greater operational efficiency (29%), increased market share (26%), faster time to market (23%), more innovation (19%), and greater employee satisfaction (16%).
5. Agility matters. Both surveys find that nearly ninety per cent of respondents see agility as important to their organization’s success, with 37% of respondents to the McKinsey survey (40% for EIU survey) classifying agility as “extremely important.” 91% of respondents in the McKinsey survey believed the importance of agility has increased in the five years preceding the survey. Unfortunately, neither report broke out results by industry, so it is impossible to discern how much the need for agility varies by sector.