A Formula for Surviving Disruption
Disruption — what makes your business as usual a liability — is more likely today. There are lower barriers to entry in your market and to reach your customers. And who knows what rules are going to change.
You’ve heard hundreds of times already, “the pace of change is faster today”. “Silicon Valley is going to eat your lunch.” Innovation is critical. Or is it digitization? Agilitization?
Technology is evolving, your competitors are evolving, market demand is evolving. Unfortunately the management best practices we’ve inherited have us doing our best to police adherence to plans and the process designs of our management systems.
In the last decade change management has become a strong discipline to help businesses replace one management system with another.
But when competitors and market demand evolve faster than you can change you will fall behind. It’s pretty hard to recover from that.
Of course if markets evolve faster than us we need to increase business agility, but how do we define it? I like David J. Anderson’s formula:
Business Agility = Capability + Optionality.
Capability means if you need to be able to do something, you can. On time.
Optionality means you can choose from more than one thing to try at any time.
Then, to increase business agility, or your chances to survive disruption, you must improve capability and increase optionality.
IMPROVE CAPABILITY
It’s a challenge to reduce the time from commitment to delivery in a complex, knowledge-work environment. Lots of dependencies, unexpected issues, difficulty with estimation, etc., interrupt our best plans.
Modern management practices have been discovered and tuned through years of practical application and group discussion among an international collection of consultants and managers.
These have made a significant impact with approaches for middle management to get in control of capacity, update plans more frequently, and commit resources with more certainty.
A sample of some practices to improve capability:
Visualize intangible work and the work flows in a business, making work countable and creating at-a-glance transparency into progress
Get in control of capacity by limiting the maximum (and sometimes minimum) number of work items in progress in the work flow
Create formal management reviews that overlap hierarchies and silos, looking together at measures of meeting demand
Put together, these practices establish mechanisms for continuous evolutionary change led by initiative-taking at all levels of the business.
By relying on learning these to increase capability over other means (business process or organizational redesign, hiring more or better talent, M&A, etc.) you will have a business that can keep up with evolving market demand.
But no matter how fast you can execute and deliver, it will never be instantaneous. There will always be a delay. Your competitor launches a surprise today, and immediately your future sales are diverted away at an increasing rate.
INCREASE OPTIONALITY
To overcome the penalty for the lag time between recognizing the opportunity (or dire need) to deliver something new, have a pipeline of options. By pipeline I mean at one end there are vaguely identified opportunities. At the other end is a short list of desirable, feasible and viable options ready to commit to delivering when market realities and trade-off decisions call for it.
First you have to find opportunities. The problem is actually that opportunities are endless and it’s difficult to sort through them. Strong strategic leadership helps shape the search, and can even get more initiative from people in different parts of the business when communicated well.
An opportunity is not really an option if it’s not desirable to customers, not something that can be done, or not economically viable. This means identified opportunities need to go through a process to convert them into options.
Apply a systematic workflow to evaluate and sort through the opportunities identified within the scope of strategic intent. Innovation labs and methods like lean startup and design thinking provide direction of how to structure the work flow.
The objective for the option-creating work flow is a short list of things you can start and complete with a relatively high amount of predictability. Improving capability here is critical, too.
GETTING STARTED
My recommendation is to start with capability. I have seen companies invest in innovation that didn’t get anywhere. Without the capability to produce and deliver what your startup lab put together to customers, cutting-edge innovation is a waste of time. Get your house in order first.
However, if your execution is top-notch and you can turn strategy and operations on a dime, then just learn some innovation techniques or acquire the talent.
The rest of us are better served by improving capability first, putting you in control of capacity, then deliberately allocating some capacity to explore opportunities. Everyone can (and should) learn to do that.
