Anomalies, as I argued in an earlier post, are gaps between reality and the mental maps we use to guide actions. Incongruities often point to opportunities to create economic value.
5. This could work in our industry (but we don’t do it). In 1976, Dr. Govindappa Venkataswamy retired at the age of 58 as a practicing ophthalmologist, and opened an 11-bed clinic in Madurai, India with two other ophthalmologists. Dr. V. was frustrated that existing procedures could not clear India’s backlog of 20 million blind. The “aha” moment came for Dr V. while passing a McDonalds on a trip to the United States. Amazed that McDonalds could serve millions of hamburgers daily, at low cost and with uniform quality, he wanted to learn whether a standardized approach could be used to remove cataracts, the leading cause of blindness in India. After visiting Hamburger University in Oak Brook, Illinois, Dr. V. refined an assembly-line model of screening, preparing and operating on patients, that allowed staff at his Aravind Clinic to conduct nearly ten times as many operations per year compared to doctors in the state-owned hospitals.
4. We should have this at home (but we don’t). In the early 1990s, a Swedish business student tried to store his belongings, but found that all the local self-storage facilities were full. Surprised by the demand for a
Most managers (90% according to two recent surveys) agree that agility is important to succeed in turbulent markets. There is less agreement on precisely what agility is. My research on companies competing in turbulent markets reveals three distinct types of agility: operational, portfolio, and strategic. Operational agility is a company’s capacity, within a focused business model, to consistently identify and exploit opportunities to create economic value, and do so more quickly than rivals. Toyota, Wal-Mart, Southwest Airlines, and British grocery chain Tesco are good examples of operational agility.
Opportunities are not defined by their novelty, per se, but by their ability to create economic value. Economic value is the gap between a customer’s willingness to pay for a good or service,
My last post described strategic agility as a means by which US Marines allocate scarce resources to their most productive use, despite facing situations in constant flux, incomplete information, time pressure, and high stakes. Strategic agility focuses on plunging into the action, remaining alert to unexpected opportunities, retreating in the face of established resistance, and vigorously exploiting opportunities when they arise. The rise of Tingyi, a leading Chinese food company, illustrates strategic agility in action.
Based in Tianjin and traded on the Hong Kong stock exchange, Tingyi booked 2008 revenues of US$4.3 billion, EBITDA of US$625 million, and had a market capitalization of US$6 billion at the end of that year. Tingyi controls “Master Kong,” one of the best recognized consumer brands in China, as well as a distribution network of over five hundred sales offices serving nearly six thousand wholesalers and seventy thousand retailers. According to ACNielsen, at the end of 2008 Tingyi was the leader in China’s market for instant noodles with 51% share, ready-to-drink tea with 43% market share, and number two in sandwich crackers with one-quarter of the market.
Tingyi’s success in China was neither inevitable, nor particularly likely. Tingyi traces its origins to the Ting Hsin
Leaders recognize the value of agility in turbulent markets, but are often less clear on how they can enhance their own organization’s ability to identify and seize opportunities more effectively than rivals. Over the past decade, I have analyzed more and less successful firms in some of the world’s most turbulent markets, including China, Brazil, European fast fashion, and financial services. My research revealed three distinct forms of agility-operational, portfolio, and strategic agility.
Operational agility is a company’s capacity, within a focused business model, to consistently identify and exploit opportunities more quickly than rivals. Toyota, Soutwest, and Zara exemplify this form of agility at the corporate level. In diversified groups, operational agility occurs (or doesn’t) within discrete business units. Opportunities create economic value either by raising a customer’s willingness to pay (which translates into higher price or volume) or by reducing costs. The best firms exploit both types of opportunity with equal fervor. Toyota, for example, has consistently anticipated consumers’ shifting preferences-for quality, fuel-efficiency, and environmental impact-and introduced vehicles to meet emerging needs. At the same time, Toyota’s production system weeds out activities that do not add value for customers.
Toyota illustrates another aspect of operational agility. Firm’s should exploit revenue and cost opportunities