Posted: November 14, 2011
Why that voodoo you do might not work anymore
Time to up your business agilityBy Todd Ordal
Volatile, Uncertain, Complex and Ambiguous (VUCA). Does this sound like our current economic climate? How do you prosper in this environment?
If I ask you to name one organization that needs to be able to predict and plan, above all others, you might suggest the U.S. Army. Would it surprise you to know that people refer to the U.S. Army War College as VUCA-U? Though change affects some organizations more than others, no one escapes the effects of VUCA. It can either torment you, or you can capitalize on it. General Eric Shinseki (retired four-star general and current secretary of the Veterans of Foreign Wars) said, "If you dislike change, you're going to dislike irrelevance even more!"
Below is a brief test to identify your company's susceptibility to change. Rate each statement from 1 (low agreement) to 5 (high agreement).
1. Our competitive advantage is based on intellectual property or technology.
2. Our customers have multiple options to meet their needs.
3. Our product/service is non-essential.
4. We're dependent on things we cannot control (for example, interest rates, government intervention, weather and suppliers).
5. Our business model requires many critical relationships.
6. We have a high fixed-cost structure.
7. Innovation is high in our industry.
8. Our value proposition is hard to articulate.
9. It's difficult for us to predict trends in our industry.
10. Our company has been stable for many years.
(Question 10 might be misleading. Stability is good, but it also becomes a significant barrier when rapid change is required.)
If you score below 25, you'll likely benefit from considerable planning. If you score above 30, you'd benefit more from high agility. If you score 40 or above, I'd be extremely concerned about how change might impact your future. Consider taking steps to change your business model and become more agile. If you score extremely high, there's a chance that you're in pain right now given the VUCA environment.
VUCA is one of the best reasons I know of to search for the right questions to ask yourself about your business. Here are a few you might consider with your management team to increase your agility:
1. How could we turn fixed expense into variable expense?
2. What organizational design best allows us to deal with VUCA?
3. What kind of financial reserve should we have to navigate rough waters?
4. What kind of market sensors can we establish to help see what's coming our way?
5. How can we eliminate concentration issues (that is, high dependence on a few customers, suppliers or fickle customer groups)?
6. How can we take advantage of VUCA?
7. How can we increase the speed of our critical processes?
There's a saying in the military: "The plan never survives the first contact with the enemy." This is a great case for agility! General Dwight Eisenhower also said, "In preparing for battle, I have always found that plans are useless but planning is indispensable."
Build in organizational agility, but don't stop planning!
Todd Ordal is President of Applied Strategy LLC. Todd helps CEOs achieve better financial results, become more effective leaders and sleep easier at night. He speaks, writes, consults and advises on issues of strategy and leadership. Todd is a former CEO and has led teams as large as 7,000. Follow Todd on Twitter here. You can also find Todd at http://www.appliedstrategy.info, 303-527-0417 or firstname.lastname@example.org