I am a huge proponent of bringing business agility into companies, especially small- and medium-sized service businesses. Consider current events like the COVID-19 coronavirus, or previous events like the financial recession of the early 2010s. Service SMBs are often the hardest hit by events that cause uncertainty in customers’ spending habits. These same SMBs are the most likely to realize significant benefits from becoming an agile business to weather – and grow through – the storm.
Business agility is the ability of a company to quickly adapt its strategy, structure, processes, people, and technology toward opportunities that create and protect value. In this post, I will cover the 5 essential parts of an agile business and why they are critical to your business success, especially in times of uncertainty.
Why is Having an Agile Business Important?
Imagine a carousel at a theme park. The horses, while in motion, are forever moving in the same circular path. The music, while light-hearted and fun, plays repeatedly. A typical business often operates in the same way: moving in the same circle, playing the same song, too busy to see the outside environment.
Now consider a sports car. Sure, you could drive in a circle around a race track while playing the same song over and over. If it rains, and the track becomes too slick, you can suddenly decide to drive over to that nice cafe for lunch. If the weather is warm and clear, you can take a road trip. Agile businesses can examine the environment around them and pivot quickly, much like the driver of a sports car. This allows your business to take advantage of opportunities, mitigate risks, and take successful paths your competitors are too slow to catch on to first.
Agile Business Essential #1: Strategic Agility
Defining a strategy is the most important step a business can take. In an agile company, a business strategy is not a static, rigid plan that is followed blindly. Agile strategic management – the iterative review of strategy using a framework – allows a company to regularly assess the current business environment and adjust the strategic plan as needed. Reviewing your strategy consistently will enable you to identify opportunities to rise above your competition and serve your customers in new ways.
Agile Business Essential #2: Financial Agility
Agile businesses budget their operational and capital funding around value streams. Value streams are the direct flows of value between a customer and your business. Value can take the form of cash payments, products, services, information, online reviews, and more. Traditional funding models result in adversarial “cost center” versus “profit center” thinking while funding drawn-out projects and inefficient operational processes. Agile funding recognizes everyone in a value stream is on the same team. This allows your business to realize returns on smaller projects, gradual operational process improvement, and building new value streams. If a change to value streams is identified in agile strategic management, funding can be quickly shifted to capitalize on opportunities and mitigate threats.
Agile Business Essential #3: Delivery Agility
Delivery represents the actions your business takes to provide products and services to your customers in return for revenue and value. An agile company delivers new products, product updates, and service improvements iteratively. Results are measured after each iteration to ensure the delivery of new and updated products and services are meeting objectives so that the next round of improvements can be planned. If a strategic pivot requires a change in products and services, iterative delivery allows the company to move quickly without impacting existing business.
Agile Business Essential #4: Operational Agility
Operations – sales, marketing, resource coordination, manufacturing, customer service – set the tempo of your business. The faster inputs flow through these operating systems to become outputs, the more revenue your business earns. The scalability of a business – the actual driver of business growth – depends on repeatable, efficient operational systems. Operational agility is the ability of your organization to remove bottlenecks that block the flow of business and adapt the system as needed to support the business strategy and promote customer success.
Agile Business Essential #5: Cultural Agility
Cultural agility is the result of creating a team environment and structure that supports changes in the other four essential parts of an agile business. Employees are hired for their agile culture fit and their skills. People are organized around value streams, creating a network of cross-functional teams that can adapt to changes in the business. The individuals on these teams have a built-in desire for relentless improvement that drives both delivery and operational agility. A culture of learning and an innovation mindset is a hallmark of cultural agility that starts with leadership by example, at the very top of your company.
Developing the essential parts of an agile business allows your company to move fluidly between times of opportunity and times of risk mitigation without negatively impacting customers, employees, or your bottom line. Further, becoming an agile business creates a significant differentiator to put your business ahead of the competition. Building towards agile strategy, finance, delivery, operations, and culture is critical to securing and growing your business.