Insights 24. January 2019

Is real agility possible in corporate organizations?

It’s clear to all of us: the world is changing rapidly at an increasing speed and customers are increasingly demanding. Corporate organizations have for decades ruled the global business. But are they fast enough to keep up with the increased speed of market changes – lead by rapidly increased tech development and customer demand?

Are they agile enough? – And if not, what can they do?

All successful corporate organizations want to be agile. They have to, in order to generate innovations that customers value – and ultimately in order to stay in business.

They base strategies on the assumption, that exactly their organization is, or will be able to work, more agile than most colleagues in the market. But for a number of reasons, most corporate organizations are far from as agile as they wish to be – mainly due to the fact that the more people and the more decision makers, the harder it is to change.

Many corporate organizations try to become more agile by letting business units work so-called “independently” – but for most of them only with the result, that the independent unit finally does what must support the overall business. The “independent unit” employees are born corporate, have corporate contracts & incentives – and therefore work and act corporately in order to take care of their career unlike startups.

That said, many corporate organizations succeed with so defined[1] operational agility: improving existing products for existing users. But they never reach strategic agility – real agility – which is needed to generate market-creating innovations. The reason for this is that market-creating innovations sometimes involve self-cannibalization or eliminating products or features, thus, interfering with existing revenue streams (even though they might be declining), business goals set years ago, “results now”-incentives etc. Real agility also requires a try fast/fail fast mindset. All requiring C-level decisions and therefore unlikely to happen at fast speed.

A well-known example is, that it wasn’t an easy decision within Apple to include a music-playing capability in the iPhone, because it cannibalized the iPod market. But the success of doing so is indisputable.

The lack of real agility applies to corporate organizations in any industry – it comes with size. To really be agile you need to be able to work in small teams, to try fast/fail fast, love your product, love your team, have one focus and be fully independent – both mentally and physically.

Typically, startups have seen a sweet spot that disrupts established business processes and products. They are born with a narrow all-in-focus and mostly born digital. Often driven by eager approach and the wish to be more customer-focused. Fundamentally meeting the “Blue Ocean” strategy[2].

The most innovative corporate companies in a number of industries like i.e. Telco, Medico and Finance have already acknowledged the lack of agility and for the past years they have extensively been partnering up with fully external and independent startups and scale-ups. Examples include Grandhood in partnership with Saxo Bank and Tink in partnership with Nordea.

This has proven to be a direct and strategic agile way of meeting the fast changes in customer demand.

So how to become really agile?

As noted by Steve Denning[3]: To enable Strategic agility and thus market-creating value, it “involves a shift in thinking from the known to the unknown — from existing products to unknown products, and from users to non-users of the firm’s products. It also means a shift from thinking of outputs of the organization to considering outcomes for the customer or end user.

Customers, in turn, are making fewer purchases to accumulate physical things and more purchases to achieve outcomes, convenience, and value.”

Corporate organizations can keep trying to shift thinking, identify needs & platforms, acquire new competencies, create more workshops, reports, business cases and playbooks – again facing the C-level constraints and the need to fundamentally transform company focus and conversation.

Or they can reach out to the obviously fast-paced startups following the all-in game. The latter solution seems overwhelmingly attractive and it does turn out that more and more corporate organizations have acknowledged this option.[4]

In other words: Real agility is possible in corporate organizations BUT by the time many of them get there, their potential new market space has already been taken by a startup. So, to achieve the needed level of agility in time, partnerships with startups seems to be an obvious solution.

[1]https://www.forbes.com/sites/stevedenning/2017/05/22/the-four-keys-you-need-to-achieve-strategic-agility/#393c91117da8

[2]http://lexicon.ft.com/term?term=blue-ocean-strategy

[3]https://www.forbes.com/sites/stevedenning/2017/05/22/the-four-keys-you-need-to-achieve-strategic-agility/#393c91117da8

[4]https://www.pwc.com/jg/en/publications/pwc-global-fintech-report-17.3.17-final.pdf

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