Organizational and leadership agility, rather than strategy, is the essential prerequisite to successful digital transformation, according to Michael Wade professor of innovation and strategy at IMD Business School in Switzerland.
Last summer Wade also became the inaugural director of IMD’s Global Centre for Digital Business Transformation, a research initiative largely funded by Cisco. He admitted at a session in London recently that since starting the work on Digital Business Transformation, he has become concerned about his academic title – as he thinks strategy is a lot less relevant now than before. Companies thrive on agility today, he asserts.
Ten years ago companies could analyse where they were, and identify where they wanted to be, the route in between became their strategy. Today, while hopefully companies can still locate their current position, with the velocity of business activity and change being so accelerated, it is impossible to identify where a good place to be in three or five years might be. Everything will have changed by then.
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As such Wade has refined the key element of what a company needs to survive and thrive in today’s business environment as the ability to be agile. And the critical elements of that agility are threefold:
- Informed decision-making
- Fast execution
With the environment continually changing all around you, it is the role of company leaders to always be surveying that ecosystem to understand how it is evolving, what are the forces shaping it, and critically what it the impact of those changes are going to be for their business. There is nothing new in this; leaders have been walking the shop floor for many years to gain an understanding from those on the front-line as to what is happening there, and taking those micro-insights to a macro-level. CEOs are traditionally insulated from this kind of, often bad, news as it filters up an organization, so the best ones go out and experience it themselves. What has changed is the speed of change, so Wade’s focus on being ‘hyper’-aware is important. Leaders at all levels need to be taking-on and making sense of change, however minor it may at first appear, all the time.
The second element is on informed decision-making. We are awash with data these days; technology allows us to collect micro-data from every interaction of a business service or product journey. The digital world drowns us in this data – and it is business’s task to make sense of it. Wade describes the example of a motor insurance call centre which was trying to improve the cancellation rate of renewals, after much analysis and wrong-turns they identified that matching callers and agents by demographic types made the most impact in increasing renewal rates of those calling to cancel. This insight was only possible through crunching the data on which calls were successful and which not and through a digital analysis. Changing the call-centres procedures to allow this was not simple, but when done saw renewal rates of such calls double from 16% to 32%, a significant commercial improvement. This is what Wade sees as evidence-based ‘informed’ decision-making, not just deciding on a hunch.
The final element for successful ‘agile’ companies is ‘fast execution’. As this is a process that is continual and on-going, the ability to alter processes and structures quickly is vital. This element is fundamentally about culture and organizational design; the ability to accept failure as part of the experimental process, and as long as failure is achieved through honest endeavour and not lack of focus or amateurism, then it should be embraced and accepted.
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