Businesses must be agile enough

Walt Shill, senior global managing director of Accenture, is the leader of the Accenture Agile Management Research Project. He has been closely following and researching the C2B evolution trend of the entire industry and the process of customer-driven enterprise change. In August 2012, he disclosed his unique views in an exclusive interview with "CEConline".

Agility is the key capability to cope with this change

"CEConline": Does the consumer-centric business model mean that the driving force of all business and management activities of the company will come from the outside? That is to say, it will subvert the traditional thinking of management from the inside to the outside, and turn to the cycle from the outside to the inside and then to the outside?

Walt Shill: A customer-oriented business model means that a business is highly sensitive to customer needs, can respond quickly to changes, and adapt to areas where value or competitive advantage is created. But business leaders must be careful not to respond too hastily, that is, not to blindly follow customers, which can lead to constant unprincipled, undirected changes, chasing too many unprofitable or short-lived customer opportunities. A customer-oriented model does not mean that a company abandons its principles and architecture altogether.

CEConline: Does such an outside-in business cycle mean that most companies' existing management models are facing a 180-degree transformation? Or, just make changes in some areas and get more with less?

Walt Shill: It's hard to imagine a management model completely immune to the turmoil of transition. Some levels of the business will be more agile after upheaval, and some areas will require less change. For example, procurement/product (online and offline) and supply chain departments will undergo significant changes while retailers continue to make significant changes, while accounting departments will need to make relatively few changes.

While this may seem confusing, we believe that one of the most important goals of business transformation is to create a more dynamic and agile business.

CEConline: There are many management methods under the traditional management model, such as the ERP system that manages enterprise resources according to plan. In the consumer-driven business model, does this management method mean failure?

Walt Shill: Large-scale ERP systems certainly have many limitations and can be a major impediment to change. But it's too early to say ERP is a complete failure. Hyperscale, complex enterprises require pillars and architecture. Without the basic flow of information and management insight, most organizations face failure quickly. The most successful leaders make careful decisions about where business processes must fit into the ERP system, where ERP fits in the business, and where ERP doesn't create value and should be discarded.

CEConline: Is 'Agility' the most important capability to ensure a consumer-centric business?

Walt Shill: Agile will be one of the key competencies for businesses if they pursue consumer centricity. Consumer needs are constantly changing, and other companies are actively catering to them. This means that any consumer-oriented company needs to constantly adapt and change. The most important element of agility is the ability to predict, sense and respond to market changes. It is extremely difficult for companies and individuals to listen carefully. Being consumer-centric means anticipating changes in consumers, listening or sensing changes, and then responding quickly to the best opportunities.

Perspectives and rules different from traditional management

"CEConline": Jurgen Appelo wrote in his "Management 3.0: Cultivating and Improving Agile Leadership" that agile is to build the self-organizing ability of the enterprise . That is, by motivating employees, empowering teams, reconciling constraints, cultivating capabilities, structural growth, and overall improvement, a large enterprise is transformed into a flexible organization composed of different autonomous operators. Do you agree with this statement?

Walt Shill: Agile definitely requires a resilient organizational structure. Self-organizing independent units can undoubtedly improve the flexibility of the organizational structure. However, if these units are completely independent, the business completely loses all advantages of scale. Small independent units also do not benefit from relying on larger organizations. The most effective organizations are able to do the best of both worlds—using small, independent units while benefiting from relying on large corporations. The most productive companies carefully link flex units to each other to take advantage of their scale. For example, a single unit of a pharmaceutical company might not be able to hire the top bioscientists because it doesn't have the reputation or resources to attract the world's leading academics. But different units within a pharma company can join forces to recruit such top talent and share it internally. So, in many ways, economies of scale are the key to success.

CEConline: What should be the core perspective of agile management thinking?

Walt Shill: The most agile companies see market volatility and change as a cradle of competitive advantage, not just a risk to avoid. Executives at these companies anticipate, sense and respond to market fluctuations and opportunities more quickly than their competitors.

For example, many companies are currently aggressively reducing their operations in southern Europe due to a lack of confidence in the future of the euro. But the most nimble companies saw a huge opportunity and made strategic investments to take advantage of the euro crisis to expand their market share in Europe.

"CEConline": Agile management needs to ensure that front-line people can quickly integrate all internal resources of the enterprise, but in the enterprise, the front-line people are generally inferior and weak, therefore, in your agile management In the model, what mechanism is used to enable the frontline people to have sufficient resource integration capabilities? At the same time, to ensure that they do not abuse their authorization? Also, to ensure that they have the necessary collaborative spirit?

Walt Shill: The most important thing is to provide multiple and repetitive communication channels so that front-line personnel can ensure that the business problems and opportunities they see are quickly and accurately communicated to managers. Frontline workers should be empowered to make decisions within their purview. For example, any airline employee should be able to prevent a flight from taking off if a serious safety issue is discovered. Terms of reference should be set up for customer service agents so they can respond to appropriate questions. Like, can they give away free tickets? Can certain fees be waived when certain conditions are met? In addition to setting terms of reference, front-line workers should be trained to make trade-offs on important issues and understand the impact of their decisions.

"CEConline": It is the hope of many enterprises to make large enterprises small and agile. Even those enterprises that are not very large also hope to eliminate the diseases of large enterprises to varying degrees. However, many enterprises are faced with The actual problem is that it is easy to disassemble an enterprise into small organizations, but integration is a difficult problem to solve, and they cannot find an integrated standard or interface. Obviously, if they cannot be integrated, the large enterprises that have been dismantled will be scattered, and they will not be able to talk about competitiveness. Do you have any good suggestions for this integration method and standard?

Walt Shill: Many companies use different approaches in an effort to retain the advantages of scale of large corporations while taking advantage of the flexibility of smaller entities.

We believe that a key factor in integrating within a business is the ability to have a set of core values or beliefs that act as the "glue" that maintains a common culture and direction.

We believe that the most important factor is building or maintaining a strong information network among multiple entities. Information and business knowledge are at the heart of achieving economies of scale. Companies must ensure that this business knowledge and in-depth understanding of the market flow smoothly between departments within the company.

Many companies have established "centers of excellence," which have deep professional backgrounds and strong capabilities, but whose high costs cannot be afforded by smaller entities. A Center of Excellence can serve all entities with specific issues or opportunities such as pricing, marketing, procurement and supply chain.

CEConline: In addition, the agile management method ensures that the enterprise can quickly respond to the current needs of the market. Then, how to ensure the forward-looking ability of an agile enterprise for the future?

Walt Shill: We believe that one of the key elements of an agile enterprise is anticipating change and proactively envisioning scenarios in which the economy, industry, or customer group will change accordingly, and then developing alternative responses for the company. Even if the envisioned scenario differs from reality (as is often the case), the leadership team has developed a consensus and perspective on the change, enabling more timely detection and action when it occurs.

CEConline: In China, there are two companies that are transforming with consumers as the core. One is Huawei, they want to let "people who can hear the fire make decisions", and the other is Haier. Haier is becoming more than 2,000 self-operated entities. I don't know if you have seen other companies besides China making such management changes within the scope of your research? Can you tell me which companies are most sensitive to such changes?

Walt Shill: Certain industries, such as consumer electronics and fashion, are already changing faster. There are certainly changes in mining or hydropower, but usually not as frequently and as widely as in consumer electronics.

CEConline: What kind of genes and soil must an enterprise possess to achieve such agile transformation?

Walt Shill: We believe there are two qualities that drive a company's transformation to an agile enterprise.

First, I believe that market volatility and changes bring more opportunities than risks. Agile companies have a philosophy of looking for market volatility and meeting its challenges, while others tend to avoid change and work to mitigate the risks that come with it.

Second, there is an inherent sense of insecurity. Former Intel CEO Andy Grove once said, “Only paranoia survives.” Leaders of agile companies have a deep-seated insecurity that whatever they have right now Success is temporary, and any current competitive advantage will be quickly lost as competitors catch up and the market changes rapidly. We rarely see arrogant or complacent agile companies.

Look at your flexibility in these dimensions

1. Has your business envisioned at least three possibilities for the most likely changes in your industry over the next 36 months? Are you ready to respond?

2. In what three areas does your company want to act in order to gain flexibility?

3. Imagine three potential competitors that you previously thought were unlikely. How would you respond to them?

4. From the perspective of your biggest competitor, what will they do in the next year to disrupt the market? What's your winning formula?

5. How is your company increasing its ability to quickly detect market changes? Are you able to take advantage of the new capabilities of today's analytical tools?

6. What are the top three factors preventing your organization from becoming more agile? What are your plans to overcome these obstacles?

7. Are you compromising your business agility and ability to grow by cutting spending too much (especially in talent) during a recession? If so, how do you plan to remedy it?

8. In what areas should you work with your competitors to drive market change?

9. Among your new leaders, who is the most effective use of market volatility? How are they different from those veteran leaders?

10. Which of your clients best represent future market opportunities?

11. Where in your company can faster decision-making maximize benefits?

12. Over the past few years, have you been able to successfully reduce your company's fixed expenses to increase flexibility?

Source: Walt Shill