Why investment in systems and technology is key to the success of agile strategy

By Ralph Fernando

The Age of Agile

First expounded by the US Army War College in the early 90s, the term “VUCA” (an acronym for volatility, uncertainty, complexity and ambiguity) now has renewed and heightened relevance. Protectionist political shifts, economic turbulence and volatile, networked consumer demand are choppy waters through which organisations must now steer a path. Forced to ride this VUCA wave, many have adapted and evolved, with “agile practices” becoming an increasingly common part of the landscape.

The transition has been tough. The concept of an agile strategy – the ability to adapt quickly – is easy to grasp but hard to implement. The first step is to define it in practical terms. In my book Agile Strategy: How to create a strategy ready for anything, I argue that an organisation’s agility can be judged against three criteria:

• Responsiveness: the speed with which one reacts to organisational or market stimuli. Consider Zara, that translates product from catwalk to shop floor in 4-6 weeks
• Adaptability: Responsiveness has two scenarios: in the first, the organisation is already set up to respond to a specific stimulus and does so; in the second, it must first change (e.g. processes, structures, systems and people) to be able to respond. The effectiveness with which an organisation can do the latter is the measure of its adaptability. Consider the examples of traditional casual dining restaurants which have had to adapt their operating model to accommodate the rapid rise of home delivery through third parties such as Deliveroo, Just Eat and Uber Eats.
• Control: Responsiveness and adaptability require control to maintain consistency and ensure that the organisation does not simply lurch from one stimulus to the next

Developing these “RAC Factors” successfully requires changes across many areas, including structures, processes, people and culture. Unsurprisingly, systems and technology are critical in this regard, as they affect all three.

Responsive systems mean systematic responsiveness

From robotic process automation to artificial intelligence, sensors to 3D printing, the ability for technology to drive greater responsiveness is well documented, but also swiftly evolving. This is particularly true in the area of data and analytics where, through a continuous cycle of anticipating, analysing, acting and adapting (“The A-Cycle”), organisations can learn and adapt quickly.  For example, Nike’s LA and New York concept stores use its online sales and NikePlus app data to shape the stores merchandising mix based on what local consumers are buying, refreshing the collection every two weeks.

Adaptabil-IT

A key element of an organisation’s agile strategy is to continuously question how it should adapt to changing market and organisational dynamics. From a technology and systems perspective, three important questions are typically asked:

• How is technology affecting the behaviours of our customers, markets and competitors?
• To what extent is our current technology differentiating or constraining us?
• How can we capitalise on emerging technologies?

Given the rate at which technology is deployed, and the speed with which it transforms industries, investment in these areas will be key to maintaining a competitive advantage. Apple is now the world’s largest watchmaker, yet it was not even making watches five years ago; Airbnb became bigger than the top five hotel brands put together before it even turned ten years old.

This illustrates another important point: investment in systems and technology is not just about addressing current opportunities more effectively. It also creates new opportunities, be it entirely new “white space” (e.g. Spotify and other music streaming services) or transforming cost structures to make markets accessible to a wider audience (e.g. cloud computing and software as a service).

Control yourself

Business intelligence, monitoring and performance management are key aspects of control in any environment, and vital in a VUCA environment. For example, by transforming its York-based facility into a fully connected and digitised “smart factory”, monitoring, control and execution were transformed and enabled Harley Davidson to shrink its 21-day production schedule for new orders down to six hours and reduce operating costs by $200m.

It is not just about large-scale manufacturing. In services, collaboration is another vital element in ensuring control at speed, as it provides a constant stream of check and challenge from different perspectives. However, anyone who has tried to implement collaborative working across multiple locations without the technology and systems to support it will know how painful that can be.

A final word

Agile strategies are action-oriented, data-hungry and technology-inspired. This necessitates investment in systems and technology and, whilst determining where to invest remains challenging, underinvestment is increasingly not an option – see the cautionary tales of Toys R Us and Blockbuster for where that leads.

Article by Ralph Fernando, author of Agile Strategy: How to create a strategy ready for anything, published by FT Publishing, priced £19.99.

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