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  1. 1. Industrial and Commercial Training The challenges of organizational agility (part 1) Steven H. Appelbaum Rafael Calla Dany Desautels Lisa Hasan Article information: To cite this document: Steven H. Appelbaum Rafael Calla Dany Desautels Lisa Hasan , (2017)," The challenges of organizational agility (part 1) ", Industrial and Commercial Training, Vol. 49 Iss 1 pp. 6 - 14 Permanent link to this document: http://dx.doi.org/10.1108/ICT-05-2016-0027 Downloaded on: 06 January 2017, At: 01:37 (PT) References: this document contains references to 33 other documents. To copy this document: permissions@emeraldinsight.com The fulltext of this document has been downloaded 4 times since 2017* Access to this document was granted through an Emerald subscription provided by emerald-srm:543096 [] For Authors If you would like to write for this, or any other Emerald publication, then please use our Emerald for Authors service information about how to choose which publication to write for and submission guidelines are available for all. Please visit www.emeraldinsight.com/authors for more information. About Emerald www.emeraldinsight.com Emerald is a global publisher linking research and practice to the benefit of society. The company manages a portfolio of more than 290 journals and over 2,350 books and book series volumes, as well as providing an extensive range of online products and additional customer resources and services. Emerald is both COUNTER 4 and TRANSFER compliant. The organization is a partner of the Committee on Publication Ethics (COPE) and also works with Portico and the LOCKSS initiative for digital archive preservation. *Related content and download information correct at time of download. Downloaded by FUDAN UNIVERSITY At 01:37 06 January 2017 (PT)
  2. 2. The challenges of organizational agility (part 1) Steven H. Appelbaum, Rafael Calla, Dany Desautels and Lisa Hasan Abstract Purpose – Planned episodic change programs, rigid processes and traditional structures, optimized for efficiency rather than agility, are no longer appropriate in a context where competitive advantage is fueled by high-speed innovation, supported by a more entrepreneurial mindset. The purpose of this two part paper is to offer a review of relevant research to provide an informed case for continuous strategic transformation facilitated by enhanced organizational agility. The concept of agility is explored, defined and a framework for categorizing agility-enhancing capabilities is presented. Specific aspects of this agility framework are examined to better understand how these interrelated competencies contribute to overall corporate performance in this fast-paced world. Design/methodology/approach – A range of published empirical and practitioner research articles were reviewed to study the concepts of organizational agility and transformation as critical factors contributing to sustained competitive advantage, organizational performance and survival in the increasingly competitive global context. This literature review explores how organizations are overcoming the challenges imposed by their traditional structures, cultures and leadership models and identifies dynamic competencies to be developed to achieve a greater level of corporate agility. Findings – Increased organizational agility increases the ability to respond proactively to unexpected environmental changes. The commitment to continuous transformation and agile strategies implies changes at all levels of the organization from its structure, through its leadership and decision-making dynamics, down to the skills and interpersonal relationships of the individuals implementing the agile mission. Research limitations/implications – There is a gap in the literature with respect to agility, namely, that most research focuses on the characteristics of agile organizations, with little attention given to how to develop agile capabilities and embed the commitment to continuous change deep into the corporate DNA, beyond the process level, into the psyche of the people driving the organization. Practical implications – Managers should consider agility as an overarching principle guiding strategic and operational activities. Fostering agility-enhancing capabilities will be paramount in ensuring the successful integration of agility as a performance enhancing paradigm. Social implications – For small- and medium-sized companies with limited resources, this reality makes staying relevant an uphill battle but also opens windows of opportunity. The challenge of the next century for large organizations will be to rekindle their innovative agile beginnings and for start-ups to continue to foster their dynamic capabilities as they grow. Originality/value – The paper provides practical and empirical evidence of the importance of enterprise agility and specific dynamic capabilities on firm performance. Keywords Performance management, Agility, Organizational transformation, Dynamic capabilities Paper type Literature review Introduction This two part paper will explore how companies are attempting to achieve a fine balance between operational efficiency and strategic agility in the current competitive context. Transitioning from the twentieth century model, where competitive advantage was based on economies of scale, hierarchy and control, to a more entrepreneurial mindset, has significant implications for the entire organizational system. The ability to manage and reassemble, rapidly and decisively, complex networks of resources and relationships capable of taking advantage of short-lived opportunities is key to sustained competitive advantage in today’s volatile business environment (Kotter, 2014; McGrath and MacMillan, 2009, cited in Leavy, 2014). Our review of the literature will focus primarily on how organizations are overcoming the challenges imposed by Steven H. Appelbaum is a Professor of Management at the John Molson School of Business, Concordia University, Montreal, Canada. Rafael Calla, Dany Desautels and Lisa Hasan are all based at the John Molson School of Business, Concordia University, Montreal, Canada. PAGE 6 j INDUSTRIAL AND COMMERCIAL TRAINING j VOL. 49 NO. 1 2017, pp. 6-14, © Emerald Publishing Limited, ISSN 0019-7858 DOI 10.1108/ICT-05-2016-0027 Downloaded by FUDAN UNIVERSITY At 01:37 06 January 2017 (PT)
  3. 3. their traditional structure, culture and leadership models in their quest to combine internal stability with external agility and how these transformational change programs contribute to overall organizational agility, operational performance and survival. The argument for organizational transformation While “the driving forces for change are well known: new technology, new types of competition, economic uncertainty, evolving customer needs, deregulation, globalization and fragmentation of markets” (Drew and Coulson-Thomas, 1997, p. 163), how to react to this extreme volatility is still the subject of great debate. Recent research on the subject tends to refute the principles of structural inertia theory that associated core structural and strategic changes with higher risk of corporate failure (Dobrev et al., 2001). This two part paper will demonstrate how major organizational change programs and their unpredictable breadth, depth and duration were often charged with preventing organizations from functioning efficiently and reliably and were deemed responsible for thrusting organizations into a downward spiral of poor performance, with little or no promise of recovery (Barnett and Carroll, 1987; Miller and Friesen, 1984; Dobrev et al., 2001). Though the challenges associated with implementing transformational change remain great in the short-term, the new reality is that refusing to adapt to environmental changes comes at the much higher price of certain failure in the long term. An empirical study, conducted in the context of deregulation in the banking industry, showed that “not only did organizational transformation not increase the risk of failure […] [it] played a crucial role in enabling organizational survival. Almost all (94.4%) of the 18 firms that […] [survived the period of deregulation] had engaged in transformation one or more times during the observation period. Furthermore, 61% of these firms undertook at least two transformations. In contrast, almost 61% of the firms that exited the industry before 1995 had not undertaken any transformations” (Wischnevsky, 2004, p. 372). This study even makes the case for an increased frequency of fundamental organizational change, as recommended by supporters of the punctuated equilibrium model (Romanelli and Tushman, 1994; Wischnevsky and Damanpour, 2005), based on the significant positive correlation between the length of inertia spells and the risk of failure (Wischnevsky, 2004). These findings corroborate the earlier body of research as cited by Romanelli and Tushman (1994, p. 1142): Miller and Friesen (1982, 1984) showed that organizations that radically and quickly altered their formal structures, decision-making routines, and information-processing devices performed better over their lives than organizations that changed gradually or incrementally. Similarly, (Virany et al., 1992) showed that organizations that accomplished transformations discontinuously and in response to basic changes in their environments performed better over their lives than organizations that were either never transformed or were transformed excessively without the clear stimulus of environmental change. In essence, the “liability of newness,” as described by Hannan and Freeman (1984), has become part of the cost of remaining competitive in an environment that calls for continuous reinvention and in which inaction, in the face of external changes, poses a far greater threat to market share and, ultimately, firm survival. So what is organizational agility? The blanket solution, most often proposed for dealing with the woes of the fast-paced present, is employing organizational agility. The problem, as described by John P. Kotter (2014), in both his book and articles, is that most well-established companies are “optimized much more for efficiency than strategic agility,” and the, “hierarchical structures and organizational processes that we have used for decades to run and improve our enterprises are no longer up to the task of winning in this faster-moving world” (Kotter, 2014, cited in Leavy, 2014, p. 7). Defined broadly by the Advanced Research Programs Agency (ARPA) and the Agility Forum (AF), as “the ability to function and compete within a state of dynamic, continuous and often unanticipated change” (ARPA and AF, cited in Sarkis, 2001, p. 88), organizational agility promises VOL. 49 NO. 1 2017 j INDUSTRIAL AND COMMERCIAL TRAINING j PAGE 7 Downloaded by FUDAN UNIVERSITY At 01:37 06 January 2017 (PT)
  4. 4. to bridge the relative inertia gap between the speed of organizational learning and the speed of environmental change (Wischnevsky, 2004). The devil, however, is in the details of how to transform corporations, having grown complacent as a result of long standing market dominance, into highly adaptive, flexible, learning organizations having the skills required to effectively implement strategically driven waves of change and renewal (Trahant et al., 1997; Meredith and Francis, 2000). The multitude of definitions and models attempting to capture the concept of agility brings to light the true complexity hidden behind this deceptively simple seven-letter word. Yang and Liu (2012) synthesized the work of several researchers (Atuahene-Gima, 2003; Vokurka and Fliedner, 1998; Goldman et al., 1995; Li et al., 2008; Sambamurthy et al., 2003) into the following definition: Enterprise agility is a complex, multidimensional, and context-specific concept, comprised of the ability to sense environmental change and quickly respond to unpredicted change by flexibly assembling resources, processes, knowledge, and capabilities (Yang and Liu, 2012, p. 1023). Evolution or revolution? Regardless of how you define organizational agility, it is undeniable that transitioning from more static models to truly adaptive learning organizations is a “multiyear endeavour with major challenges and setbacks along the way. The effort require[s] systematic, ongoing change to help organizations transcend existing product-based or geographic silos and, in some cases, replace them with customer-oriented ones” (Gulati, 2007, p. 100). The organizational evolution and revolution model proposed by Greiner (1998) plots fundamental business revolutions as a function of the corporation’s age, size and industry growth rate (see Figure 1) and provides a visual representation that hints at how, in a hyper-growth/hyper- volatile context, certain periods of evolution and revolution might merge into what may be perceived as a single event; a multidimensional, meta-transformation resulting in a new type of corporation defined by the dynamic capabilities that allow it to respond, not just to a single vision of the future, but to its’ new ever-evolving nature. Dynamic capabilities How organizations develop and successfully integrate agility-enhancing “dynamic capabilities” (Sune and Gibb, 2015; Schuiling, 2014) such as coordination, cooperation, capability development and connection (Gulati, 2007) into their corporate activities is at the heart of the matter at hand. Goldman et al. (1995 as cited by Yang and Liu, 2012, p. 1024) groups the capabilities of agile organizations into the following four strategic dimensions: enrichment of customers, competitive enhancement by cooperation, mastery of uncertain change and leverage of key people and information. Meredith and Francis (2000) believe that “organizational strength in turbulent situations requires proactivity, adaptability, flexibility, speed, learning and skills to provide strategically driven and effectively implemented waves of change” (p. 138). According to their research, competitive advantage increasingly rests upon a dynamic capability to compete successfully in an environment of frequent, challenging and, often, unpredictable change. Sustaining competitive advantage through price alone is no longer a viable strategy for most firms particularly in markets where a range of non-price advantages are expected by customers. Order-winning criteria include rate of innovation, fitness for purpose, volume flexibility, variety, extreme customization and above all, rapid responsiveness. Increasing global and local competition means that companies unable to respond to these new customer demands are unlikely to survive. Deployment of the principles and practices of agile enterprise appears to offer a solution (Meredith and Francis, 2000, p. 137). The agile wheel reference model also presented by Meredith and Francis (2000) (see Figure 2) provides a useful framework for understanding the multiple interdependent components that contribute to organizational agility. A wheel is weakened if any spoke is absent, broken or fragile. The same is true for organizational agility. If any of the 16 components, grouped under four categories, is under-developed, the firm’s agile capability is weakened (Meredith and PAGE 8 j INDUSTRIAL AND COMMERCIAL TRAINING j VOL. 49 NO. 1 2017 Downloaded by FUDAN UNIVERSITY At 01:37 06 January 2017 (PT)
  5. 5. Francis, 2000, p. 139). This paper will concentrate on a few specific aspects of each of the four quadrants: agile strategy, agile processes, agile linkages and agile people and examine how these quadrants contribute to overall corporate performance. Organizational agility and performance Now that organizational agility has been defined and a framework for categorizing agility-enhancing capabilities provided, the more pressing questions can finally be posed: what factors play a role in determining the level of agility within a company? How are they supported? And to what extent do these actions directly impact organizational performance? Figure 1 Five phases of growth large small Size of Organization Company in high-growth industry Company in medium-growth industry Company in low-growth industry evolution: stages of growth revolution: stages of crisis mature Age of Organization young large small Size of Organization evolution: stages of growth revolution: stages of crisis mature Age of Organization young Phase 1 2 3 4 5 collaboration coordination delegation direction creativity autonomy control red tape “?” leadership Source: Greiner (1998) VOL. 49 NO. 1 2017 j INDUSTRIAL AND COMMERCIAL TRAINING j PAGE 9 Downloaded by FUDAN UNIVERSITY At 01:37 06 January 2017 (PT)
  6. 6. Agile strategy Strategic commitment to agility Given the increased intensity of competition and speed of adoption of new technologies, organizations must embrace continuous strategic change if they are to remain relevant and retain their competitive advantage. This is not to say that companies should embark on change for the sake of change, nor that they should stray from their core competencies. In fact, it has been recognized that “a management feature in successful firms is a commitment to the organization’s original arena of expertise” (Appelbaum et al., 1998, p. 289). Management must, therefore, be committed to adopting agile strategies, across the entire organization, that promote the development of innovative ways to leverage existing areas of expertise to anticipate and fulfill changing customers’ needs (Meredith and Francis, 2000, p. 140). This commitment to agility goes well beyond simply proposing new policies and procedures, it requires that management rethink organizational structures, functions and time-honored management practices such as planning, budgeting, incentive and measurement systems that have embedded deep within them a bias toward the status quo (Hamel, 2009, pp. 4-6). The importance of environment scanning Hay (2006) supports this reinvention of traditional functions and proposes that market research (MR) and organization development (OD) functions “unite […] in order to accelerate the speed and impact of [their] contributions to strategic planning” (Hay, 2006, p. 55). According to Hay (2006), MR fills the strategy with content and promotes efficiency while OD humanizes the strategy by gaining the valuable commitment and engagement of those responsible for Figure 2 Agility wheel Agile Strategy Agile People Agile Processes Agile Linkages I II III IV Agile Scoreboard Flexible Assets and Systems Fast New Product Acquisition Rapid Problem Solving Rich Information Systems Agility Bench- marking Deep Customer Insight Aligned Suppliers Performing Partnerships Adaptable Structure Multi-Skilled /Flexible People Rapid, Able Decision Making Continuous Learning Wide-Deep Scanning Strategic Commitment Full Deployment Ic Ib Ia Id IIa IIb IIc IId IIIa IIIb IIIc IIId IVb IVc IVd IVa Source: Meredith and Francis (2000, p. 139) PAGE 10 j INDUSTRIAL AND COMMERCIAL TRAINING j VOL. 49 NO. 1 2017 Downloaded by FUDAN UNIVERSITY At 01:37 06 January 2017 (PT)
  7. 7. its implementation. These recommendations are in line with the observations of other scholars citing the need for wide scanning, so as not to miss changes which can occur anywhere across the global competitive landscape and deep scanning, in order to fully understand their business implications (Meredith and Francis, 2000, p. 139). “Steadily delivering additional value to customers, rather than just fine-tuning the value chain for the existing portfolio of products and services requires an organization-wide capability to deal with unexpected shifts in customer expectations” (Denning, 2013, p. 5). Discovering these deep customer insights and rapidly adjusting product offerings, production methods and even entire business models to meet ever-evolving target market demands requires “a degree of nimbleness that can’t be achieved by the hierarchical bureaucracies that prevail in most large organizations today” (Hamel, 2009 as cited in Denning, 2013, p. 5) and has been the impetus behind many restructuring efforts over the past decade and will be at the center of many more such projects in the years to come. Adaptable organizational structures Dual structure Flatter, decentralized organizational structures, emphasizing cross-functional team-based work (Drew and Coulson-Thomas, 1997) are ways of working around the rigidity imposed by overly complex hierarchies and centralized decision-making authority. In an effort to bridge the gap between existing hierarchies and truly flexible models, Kotter (2014) proposes a dual structure, where a “strategy operating system” runs in tandem with the traditional “performance operating system,” in order to ensure that renewal can be continuous rather than episodic (see Figure 3 – dual operating system). In theory, the strategy operating system, involving 5-10 percent of the employee population, functions as a network, free from bureaucracy and heavy controls over decision-making, allowing it to “mimic successful enterprises in their entrepreneurial phase […] [leaving] the hierarchy less encumbered and better able to perform what it is designed for: doing today’s job well, making incremental changes to further improve efficiency and handling those strategic initiatives that help a company deal with predictable adjustments” (Kotter, 2014, p. 10). Figure 3 The Dual operating system: key characteristics The Dual Operating System Management-Driven Hierarchy (The “Left ”) Strategy Acceleration Network (The “Right ”) No.1 Function No.1 Function Other Functions Other Functions Eight Accelerators Action Through Management Tools Reliability and efficiency (Meet today’s numbers) • Incremental or predictable change • Agility and speed (Leaping into the future) • • Constant innovation • Leadership Development • Plans/Budgets • Compensation • Metrics • Problem Solving • Job Description • Urgency on Big Opportunity • Guiding Coalition of Volunteers • Change Vision and Strategic Initiatives Sources: From accelerate by John Kotter. As published in Leavy (2014, p. 7) • More and more volunteers • Barriers knocked down • Wins Celebrated • Relentless Action • Changes Institutionalized VOL. 49 NO. 1 2017 j INDUSTRIAL AND COMMERCIAL TRAINING j PAGE 11 Downloaded by FUDAN UNIVERSITY At 01:37 06 January 2017 (PT)
  8. 8. In reality, achieving “a truly reliable, efficient, agile and fast enterprise, [where] the network meshes with the more traditional structure [and] […] is not some sort of ‘super task force’ that reports to some level in the hierarchy” (Leavy, 2014) is an enormous challenge even for the largest, most successful companies. Nike’s attempt to impose a customer-focused, collection-based approach on a product-driven company to address the needs of the women’s fitness market is a compelling example. The champions of the initiative, a group of highly motivated, relentless volunteers, determined to breakdown the testosterone-driven cultural barriers and institutionalized ways of working, exemplify the dual structure and accelerators proposed by Kotter (2014). Though deemed a strategic and financial success, the category-driven approach was not extended to the entire organization and footwear was removed from the women’s collections because the operational, cultural and leadership barriers where deemed insurmountable (Burgelman and Denend, 2007). Network structure Despite the difficulties associated with more flexible structures, Yang and Liu (2012) take the concept of adaptable structure one step further by proposing that a firm’s agility capability, as exemplified through a company-wide network structure, can be an enduring source of organizational competitive advantage. Their empirical study employed a survey method and data collected from 250 companies in Taiwan’s glass industry using structural equation modeling technology. By considering the contagion effect of a strategic network, this study confirms that enterprise agility and network structure contribute positively to firm performance. Interestingly, the study goes beyond the direct effects of agility and the network structure on firm performance and explores the mediation effect of both network structure and enterprise agility on firm performance. These results indicate that enterprise agility is a major determinant for managing and maintaining the network relationships. In addition, firms with superior enterprise agility have, according to their findings, been better able to exploit the network structure as a mechanism allowing for rapid, flexible access to critical and valuable resources, capabilities and information in order to improve their competitive edge and overall firm performance (Yang and Liu, 2012, p. 1039). All of these competencies, nourish the complex web of agile linkages between performing partners, aligned suppliers and satisfied customers and confirms the interrelationship between the various agile-building capabilities described by Meredith and Francis (2000). According to Crocitto and Youssef (2003), these interpersonal, cross-functional and organization-spanning relationships are critical elements of the agility paradigm. Their research and resulting agility model (see Figure 4) proposes the integration of advanced information technologies as a means to strengthen connections between organization members, suppliers, customers and other partners provided the human side of the equation is thoughtfully taken into consideration. These connections rely on the ability of leadership to create and support an agility mission and vision, to move agility beyond enhanced market and environment scanning, to focus on the creation of true learning organizations capable of harnessing the most powerful resource in today’s global economy, knowledge through a deeper appreciation of the human behaviors and motivations of all stakeholders (Crocitto and Youssef, 2003). Though hierarchy is bound to remain a feature of most organizations, the new customer-driven, outside-in orientation and decentralized decision-making requires that this model be reinvented along with management roles, practices, values and communication channels to ensure successful transformation. According to Denning (2013), “veteran managers trained to respect hierarchical systems are daunted by the fundamental changes in thinking and culture that are required to implement the agile approach” (p. 7). This statement highlights the need not only for new structures, policies and procedures, but also for a new breed of socially savvy, influential leaders capable of “leveraging the power of shared values and aspirations […] [and] mobilizing others despite a lack of formal authority” (Hamel, 2009, p. 3). Part two of the paper will cover agile leadership style, agile people and sustainability as key variables in the quest to design, develop and maintain agile organizations in the quest of transformation. PAGE 12 j INDUSTRIAL AND COMMERCIAL TRAINING j VOL. 49 NO. 1 2017 Downloaded by FUDAN UNIVERSITY At 01:37 06 January 2017 (PT)
  9. 9. References Appelbaum, S.H., St-Pierre, N. and Glavas, W. (1998), “Strategic organizational change: the role of leadership, learning, motivation and productivity”, Management Decision, Vol. 5 No. 36, pp. 289-301. Atuahene-Gima, K. (2003), “The effects of centrifugal and centripetal forces on product development speed and quality: how does problem solving matter?”, Academy of Mangement Journal, Vol. 46 No. 3, pp. 359-73. Barnett, W.P. and Carroll, G.R. (1987), “Competition and mutualism among early telephone companies”, Administrative Science Quarterly, Vol. 32 No. 3, pp. 400-21. Burgelman, R. and Denend, L. (2007), Nike’s Global Women’s Fitness Business: Driving Strategic Integration (Case Study No.SM152), Stanford Graduate School of Business, Stanford, CA. Crocitto, M. and Youssef, M. (2003), “The human side of organizational agility”, Industrial Management & Data Systems, Vol. 103 No. 6, pp. 388-97. Denning, S. (2013), “Why agile can be a game changer for managing continuous innovation in many industries”, Strategy & Leadership, Vol. 41 No. 2, pp. 5-11. Dobrev, S.D., Kim, T.Y. and Hannan, M.T. (2001), “Dynamics of niche width and resource partitioning”, American Journal of Sociology, Vol. 106 No. 5, pp. 1299-337. Drew, S. and Coulson-Thomas, C. (1997), “Transformation through teamwork: the path to the new organization?”, Team Performance Management: An International Journal, Vol. 3 No. 2, pp. 162-78. Goldman, S., Nagel, R. and Preiss, K. (1995), Agile Competitors and Virtual Organizations: Strategies for Enriching the Customer, Van Nostrand Reinhold, New York, NY. Greiner, L.E. (1998), “Evolution and revolution as organizations grow”, Harvard Business Review, Vol. 76 No. 3, pp. 55-68. Gulati, R. (2007), “Silo busting: how to execute on the promise of customer focus”, Harvard Business Review, Vol. 85 No. 5, pp. 98-108. Figure 4 Organizational agility model ORGANIZATIONAL AGILITY QUALITY SPEED RESPONSIVENESS SUPPLIERS CUSTOMERS Manufacturing Agility Organizational MEMBERS Leadership, Culture and Reward Systems FLEXIBILITY ADVANCED MANUFACTURING and INFORMATION TECHNOLOGIES COST Source: As published in Crocitto and Youssef (2003, p. 392) VOL. 49 NO. 1 2017 j INDUSTRIAL AND COMMERCIAL TRAINING j PAGE 13 Downloaded by FUDAN UNIVERSITY At 01:37 06 January 2017 (PT)
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