Why agility is key to success in the Fourth Industrial Revolution - a book extract

Successfully Navigating the Fourth Industrial Revolution Requires Agility

Agile organizations treat disruption and adversity as opportunities. They grab the initiative and turn the environment into a critical supporter of their vision. In contrast, organizations that cling to the status quo and fail to take smart risks face extinction. The disparity between those that thrive and those that stumble grows when the pace of change accelerates. The average tenure of a firm on the S&P 500 index has short­ened from thirty-three years in 1965 to twenty years in 1990. It’s expected to continue shrinking, with some analyses indicating that nearly half of today’s index may turn over in the next ten years.[i]

Evolutionary fitness of organizations is determined by their ability to effectively respond to environmental changes. Extinctions generally follow a familiar pattern. Environmental signals—both positive and negative—are undetected or ignored. Leaders fail to recognize the new reality and accept it for what it is. No viable strategic vision for the new environment is devel­oped. Instead, a myriad of tactical activities is deployed, without amounting to a coherent strategy. Existential risks remain hidden until it’s too late.

Of course, a chorus of advice to leaders and organizations is urging them to address these challenges by becoming more nimble, adaptable, flex­ible, dynamic and, yes, agile. But none of these terms has been rigorously defined or differentiated from one another. The absence of a cogent under­standing of what’s required is causing confusion and leading to incomplete or generic prescriptions. The approach to fostering agility we introduce in this book fills the gap by providing a comprehensive intellectual framework as well as an oper­ational roadmap. The objective is to enable all organizations to quickly rec­ognize threats and opportunities, shape timely responses, decisively execute, and do so consistently as environments change.

Accelerating Change and Pervasive Uncertainty

We have thus far seen only a sneak preview of what Peter Drucker called the “future that has already happened.” Thanks to big-data analytics and cloud computing, we’re getting better and better at assessing oceans of information in real time. Gene editing is poised to trans­form healthcare and agriculture. Artificial intelligence will surely change professional services, medical diagnostics and business intelligence. Equally groundbreaking developments are occurring in hypersonic systems, micro satellites, robotics, transportation, energy, 3D printing, nanotechnology, virtual and augmented reality, and distributed ledger technologies. Soon enough, we are told, our daily lives will be enveloped by the omnipresent and omniscient “internet of things.” Of course, the specific manifestations of these new capabilities and the timeframes within which any of them may happen are unknowable.

In describing the “scale, scope and com­plexity” of the ongoing Fourth Industrial Revolution, founder of the World Economic Forum Klaus Schwab forcefully conveys “the transformation…unlike anything humankind has experienced before.” Most industries in most countries are either in the midst of or on the verge of disruption, and “a fusion of technologies” is “blurring the lines between the physical, digital and biological spheres.” The very technologies that are driving progress pose not only competitive but existential threats. Even leading experts are no lon­ger capable of absorbing or synthesizing the full range of developments in their domains.

Geopolitical Backdrop

The scope of the technological revolution is staggering, and yet we can­not afford to make it our sole focus. Powerful forces of geopolitical and social change are amplifying the volatility and unpredictability of our competitive environments. In today’s multipolar world, established and emerging pow­ers are aggressively vying for economic, physical and moral spheres of in­fluence. Cyberwarfare has created entirely new kinds of adversaries, targets and vulnerabilities. The post-World War II international order and its long standing alliances are being stressed, creating an environment that military thinkers call persistent conflict.[ii] The fight for dominance in artificial intelligence, gene editing and quantum computers is intensifying. Concerted efforts to gain access to natural resources—with a special focus on the nexus of water, food and energy—are posing their own dangers and challenges.

Thanks to intensifying disruption and conflict-ridden geopolitical and so­cietal backdrops, the fog and friction of our competitive environments are becoming even more daunting. Who will win the arms race of advanced technologies? Will gene-edited super-intelligent “designer babies” change the course of human evolution? Will robotization eliminate billions of jobs? What impact will the eradication of entire species of disease-carrying insects have on various ecosystems? The pervasive uncertainty surrounding such questions leads to an important realization. Relentlessly studying the trends that are shaping our “future that has already hap­pened” is critically important but not sufficient. Ways in which we define and operationalize agility must explicitly reflect the full nature of our oper­ating environments—with their inherent uncertainty, ambiguity, conflict, and a proclivity to descend into chaos.

Operating Environment That Necessitates Agility

The Urgent Need for Agility

To thrive in the years ahead, all organizations, both public and private, will need to make a concerted and ongoing investment in the knowledge, capabilities, processes and cultures that foster a distinctive and all too rare organizational quality—agility. Only then will they be positioned to adroitly respond to change, exploit uncertainty deliberately and decisively, and fulfill the unprecedented promise of the Fourth Industrial Revolution.

We have long believed that the concept of organizational agility can be formally defined, deconstructed, and operationalized. To us, agility is the capacity to detect, assess, and respond to environmental changes in ways that are purposeful, decisive, and grounded in the will to win. Agile organizations possess both strategic and tactical agility. Strategic agility enables entire organizations to move with the speed of relevance: to detect and assess major trends and environmental changes and dynamically adapt their strategic visions, business models, human capital and campaign plans.[iii] Tactical agility enables employees to move with the speed of the chal­lenge: to take smart risks, capture opportunities, improvise and innovate as they execute a clear strategy. This requires the buy-in and active engagement of the whole organization, up and down the hierarchy and out to the very edges.

The Agility Process we present—designed to be rigorous, flexible and re­peatable—directly reflects our definition of agility. It starts with detection of environmental changes that warrant action. Once detected, threats and opportunities are rigorously assessed, along with a range of potential re­sponses. After the preferred course of action is determined and execution unfolds, ongoing environmental changes—including those created by our own actions—are continuously monitored and evaluated with rigor. Some­times they lead to adjustments of strategic plans and tactics, while at other times they help determine that deliberate inaction is the right option. All stages of the “detect, assess, respond” process are enabled by three essential core competencies—risk intelligence, decisiveness and execution dexterity—which we refer to as pillars of agility.

Detecting, assessing and responding to change is hard work. The capacity to do this consistently requires a particular style of leadership that cultivates an organizational environment of trust, honesty, accountability and empowerment. We call this environment the Agility Set­ting. Stepping into the unknown requires courage, conviction and tolerance for setbacks and failures. All team members must be unified around a com­mon cause and values and must be alert and engaged. They must be com­fortable bearing bad news, voicing dissent and rigorously debating environ­mental signals and potential responses. A principled pursuit of truth must trump formal authority, ideologies and personal agendas, turning the entire organization into what we call The Forum of Truth. People at all levels need to feel both accountable and empowered to improvise and take well-calcu­lated risks. For all of this to happen, they need to trust that their leaders and colleagues have their backs.

The need for agility is not new. The fog and friction of the Fourth Industrial Revolution, persistent geopolitical and societal conflict, and an arms race of new technologies are just the modern reincarnations of the challenges that have fueled the humanity’s enduring search for agility. As we navigate these powerful forces, any organization and leader can become better positioned to seize the unprecedented possibilities of this new age by investing in agility.

[1] Scott Anthony, S. Patrick Viguerie and Andrew Waldeck, “Corporate Longevity: Turbulence Ahead for Large Organizations,” Innosight Executive Briefng (Spring 2016), http://bit.ly/2VVgGty.

[1] Operations: Field Manual 3-0, US Department of the Army.

[1]As we’ll elaborate in Chapter 9, some of this language builds on that in Stephen Covey's The Speed of Trust (Free Press; Reprint edition October 17, 2006) and Smart Trust (Free Press; Reprint edition January 10, 2012).

Adapted with permission from Agility: How to Navigate the Unknown and Seize Opportunity in a World of Disruption by Leo M. Tilman and Charles Jacoby, 2019, Missionday. Copyright © 2019 by Leo M. Tilman and Charles Jacoby. All rights reserved.