Seven Steps To Creating Business Agility In Your Organization
There is no shortage of examples or quotes on the increased speed at which business is done, but my favorite is the classic from Marc Benioff at Davos in 2016: “Speed is the new currency of business.” The need for speed has increased since then, with the rise of digital and channel disruption, years of uncertainty stemming from the trade wars and now COVID-19.
According to findings from IDC, spending on digital transformation initiatives will increase to over $2.3 trillion in 2023, over half of all IT spending. Why the massive increase? Because digital transformation enables business agility, the speed of response to changing market conditions. Examples of changing market conditions include cost, competition, demand and macro-economic trends.
The pandemic has awakened many companies to this need. For example, in the first five weeks of the pandemic, G2 pricing software searches increased by 75%, quote-to-cash software by 48% and CPQ by 22%. Whether it’s pricing, customer service, supply chain or quoting, business agility is what allows agile companies to outmaneuver their competition.
When you can outwit your competition, you are in the driver’s seat: They must respond to you. This is how established market leaders get disrupted, and digital natives like Amazon excel at this. You need to put together the strategy, people, process and systems to compete.
What is the process to enable this kind of business agility?
First off, figure out what the people aspect should look like. You need the right people to put together the strategy and tactics, and determine what data, systems and processes need to look like to enable them. Generally, this means a center of excellence in the organization looking at increasing business agility throughout the company with dotted line reports from the different BUs or regional teams giving input and helping to guide decision making.
Consider the process. There is actually a process methodology called agile that was originally built for software but can be used to drive incremental change in an organization. I would suggest using that methodology when looking at how to improve your processes, as well as elements of Six Sigma when examining business processes and how to improve them. This will in some cases translate into data requirements, organization changes, process and systems changes.
Then you’ll need data to base your analytics, strategy and tactics on (e.g., costs, competition, index data, transactions, customer and product data). Most enterprises have made moves to do so in the last five to 10 years, but it can be difficult to bring it all together in a useful form. Also, this is not a one-time effort; it takes care and feeding and governance. Once you have the plumbing set up to get data, centralize it, as well as the systems and governance, so you can count on the quality going forward. But central governance combined with local access means you need the flexibility to allow for input and visibility of local team, reflecting local market conditions.
After you have the data, you can enable analytics on top of it. For example, identify low and underperforming customers and products, or a combination thereof. Then pinpoint what is causing this underperformance: Is it list pricing, sales discounts, rebates, costs to serve, cost of goods or some combination of these? What else do you need to factor into your pricing, competition, cost, etc.? You can do this exercise with descriptive analytics or use predictive and prescriptive analytics, using AI to automate it and make suggestions based on what is in the data.
Using AI and algorithms allows for extreme agility by automating the process of response with integration, segmentation, rules and algorithmic responses that have common sense built in. These common-sense rules set caps on price increases, margin floors, competitive positioning and so on. Sometimes they will be in conflict with each other, in which case workflow, manual review and decisions are needed; but this should be the exception.
Consider embedding these analytics into the business process to make prescriptive recommendations that can be easily consumed by the organization, whether it be sales, customer service or customers themselves. Enable feedback loops to allow your people and the AI and algorithms to improve over time. The faster you can learn, test and adjust, the more agile your company will be.
The benefits of increased business agility are clear. Results come in the form of much faster strategy and tactical responses, faster quotes, more quotes and increased win rates. Most importantly, enabling intelligent guidance and predictive modeling that accounts for all of the factors that influence pricing and profitability has been shown to potentially increase profits according to firms McKinsey. This works together with eliminating margin leakage and reducing overhead and risk to enable profitable growth now and in the future.
Bill Belichick once said, “The time-speed is always a tricky thing because time-speed isn’t football speed. When you run a 40-yard dash, there’s nobody in front of you, nobody’s going to hit you. It’s just Point A to Point B, and there’s something to be said for that. Football’s in a lot of cases not like that.”
Neither is business, and the football speed he is referring to is akin to business agility. You might be able to run in a straight line for a bit, but your competition is chasing you. Agility is the ability to avoid the hit or adjust after you are hit. And that’s what defines greatness.
Author: Gabriel Smith