In an environment already characterized by market volatility, recent rises in inflation, supply chain disruption, and above all the Covid pandemic have severely shaken business confidence. For businesses to now feel assured about their future, to invest and innovate for growth they need to have the ‘strategic flexibility’ that will ensure they can succeed through turbulent times.
This is not merely a matter of resilience and protecting the status quo. Businesses in all sectors require strategic flexibility to set a sustainable new trajectory for future growth—especially if they also wish to commit to ‘Net Zero’ and desire to ‘build back better’ for themselves and the wider community.
Becoming strategically flexible isn’t easy. In a recent White Paper, based on research into the adaptive capabilities of over 400 organizations in a number of sectors, Carine Peeters, Professor of Strategy at Vlerick Business School, suggests that it requires striking a balance between not changing enough and changing so much that you lose focus and alienate the organization in the process. To find this balance companies need to develop capabilities which her research found to be less well developed than might be hoped.
Peeters highlights these five essential capabilities for strategic flexibility: Awareness; Experimentation; Ambidexterity; and Decisiveness. None of these are new to business thinking, but the admirably clear and concise way they are connected and explained in Peeters' paper is very useful.
Having an awareness of the many external factors that impact a business—from technological advances to changing customer preferences—is essential. Being able to ‘next-sense’ future trends is better still. But neither is enough. It is equally important that companies are able to ‘translate’ the information their awareness brings into effective well-timed action. The research showed that companies are “well equipped to identify relevant trends, but they struggle to tie them to the concrete needs of their business.” A ‘translation’ effort is required and “this is most successful when closely guided by long-term vision and purpose.”
Once an awareness is tied to the needs of the business new potential opportunities can be identified. Ideas, sought from across the business and externally, will not be hard to find—as this research confirms. The difficulty is in knowing which ideas have the potential to succeed. Experimentation, supported by a company culture in which failures are seen as learning events, is the key. It is important that the innovation and experimentation processes are fast, adaptive, capture and embed customer and market feedback early in the process, and do not lock the business into long-term costly projects.
To be strategically flexible the organization needs ready access to a wide range of skills and resources. Some of these can be developed inside the company and some found externally. In both cases effective partnering is required. Internally, it is vital that organizational structures do not hamper the free flow of ideas or cross-function collaboration—sometimes to harness necessary skills structures may need to change. The breadth of vision implicit in ‘flexibility’ means that no company can expect to cost-effectively deliver all necessary resources internally. Companies should encourage staff to seek out ideas and join forces with external parties to co-create insights and new capabilities. Unfortunately, looking externally is not the norm according to this research.
Ambidexterity, in a business context, means being able to explore new opportunities and innovate, while at the same time continuing to exploit the company’s existing core business. Exploration, preparing for an untried future, versus exploitation, cashing-in the fruit of past efforts, is always a big dilemma for established organizations. It also plays to the idea of finding a balance. Peeters’ research found many organizations to be adept at leveraging existing resources but poor at giving sufficient autonomy to the more innovative teams. She observes that “Leaders will need to understand the dual and shifting context their organization operates in and take the bold decision to reconfigure their organization models to accommodate both the ‘exploitation’ and ‘exploration’ sides of the business.”
Indecision or equivocal messaging, will undermine any amount of experimenting with new opportunities and no doubt also damage the core business. Decisiveness means being able to take and implement decisions at the most appropriate time—rather than being the first or fastest. Strategic flexibility requires that strategic decision making is not an episodic event, but an ongoing conversation informed by the latest market insights and the initiatives the company has ongoing. Decisiveness was the weakest of the five capabilities among the companies surveyed by Peeters, for three reasons: unnecessarily long decision making cycles; matching the timing of decisions to evolutions in the market; and being able to halt (non-promising) initiatives after launch. Moving away from annual budget cycles to a system with more continuous funding (and defunding) of initiatives may be a way to counter these reasons for indecision.
By developing the five capabilities pinpointed by Peeters companies can build and strengthen their strategic flexibility—an essential prerequisite for operating in turbulent times and a key to grasping the many new opportunities that these times afford.
You can access the full White Paper here: Five Keys to Strategic Flexibility