Updated Formula for Business Agility

The post last week where I suggested a formula to define business agility got some interesting comments. That prompted further thinking and resulted in some important refinements to the agility formula.

These comments add more depth to each element of the agility formula. Let’s review the formula and explore what emerges. The basic formula is as follows:

BUSINESS AGILITY = (VISIBILITY + MOTIVATION) x TRAINING

[ I do lively presentations on this and related topics - mhugos@yahoo.com ]

BUSINESS AGILITY: In spite of some questions, I’m going to stick with the definition of agility as the ability of a company to consistently earn an additional 2 – 4% margin (and sometimes more) above the market average for the products and services the company sells. I’ve seen it happen and if companies cannot earn this additional profit margin then why should they go to all the trouble of being agile in the first place?

By choosing this definition of agility it means if any company consistently earns this additional profit margin then we need to study and learn its techniques even if they are new and even if they do not fit our preconceived notion of what agility is supposed to be.

When I offered this definition I also made the condition that it must be a sustainable ability; it must be self-renewing, not self-consuming. Companies can always earn an additional short term profit by cutting headcount, lowering product quality and customer service levels, and squeezing their suppliers for lower prices, but this is not sustainable; it’s like spending down your bank account and eventually must come to an end.

A reader made this further observation, “Quasi monopolists have earned above market returns for years but that, in my view, does not equate to agility.” I agree; so now there are two conditions that relate to how a company earns the additional 2 – 4% margin.

VISIBILITY: I had an interesting conversation last week with a fellow blogger who thinks a lot about business agility (James Taylor) who shed more light on what constitutes visibility. He said that just making lots of data available to people isn’t helpful; instead tell people what the data means; show people the patterns and trends in the data and show them probable outcomes indicated by these patterns and trends based on past experience. Then provide people with possible responses that worked well in similar situations.

These ideas combined nicely with another reader who asked, “How do you recognize what it is you want?” He suggested that vision has to incorporate the idea of experience. Another reader said “I’m assuming that “Visibility” includes experience ….” Yes, they are right. Visibility is powered by systems that (to some greater or lesser degree) learn from experience and use business rules or decision algorithms to interpret data, identify relevant patterns and suggest effective responses.

MOTIVATION: It was a comment about resources that provided a very useful insight that further defines motivation. A reader suggested the element Resources should be added to the agility equation; he said, “Under-resourced and agility can still be achieved but will be handicapped; likewise, over-resourced can provide an advantage” This caused me to think about how closely the two elements of motivation and resources are related to each other.

From personal experience, I believe that the motivation to become agile starts with an urgent desire to achieve some outcome but, because there are not enough resources to achieve it the conventional way, one is compelled (or motivated) to find a “better, faster, cheaper” way, a more agile way.

It’s true that you have to have some resources; you can’t do anything

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