To sharpen your competitive advantage, you need to optimize performance across growth, profitability, sustainability, and customer trust – you need to operate with agility
"The pace of change has never been this fast, yet it will never be this slow again," Canadian Prime Minister Justin Trudeau said at the 2018 World Economic Forum. He couldn't have predicted COVID-19.
Change can be a challenge for small and medium-sized businesses (SMBs). Business structures evolve, as do customers' needs and expectations, and technology continues to advance rapidly.
SMBs need to understand, react to, and reflect these developments – they need to be agile. The focus must be on strategies that embrace innovation, flexibility, scalability, and technology to drive sustainable growth and profitability.
In Move fast to thrive (2019), professional services company Accenture highlights that three-quarters of businesses report an increase in the disruptive effects of constantly changing customer demands, as well as market entrants. The report found that these same businesses are slow to change operating models or cannot keep pace with change.
Also revealed in the report is that agile organizations benefit from 'a nearly threefold earning advantage'. Further, agile organizations achieve 'long-term EBITDA [earnings before interest, tax, depreciation, and amortization] growth of 16%, compared to just 6% for non-agile organizations'.
The next logical question is, how does a business achieve agility?
According to McKinsey & Company, agile businesses are stable and dynamic. To reach these operational heights requires a business to establish core elements – structures, governance, and processes, dynamic ones that enable you to adapt to new challenges and opportunities quickly.
At the heart of this are five' key trademarks' around strategy, structure, process, people, and technology. That translates to 'a network of teams within a people-centered culture that operates in rapid learning and fast decision cycles which are enabled by technology and a common purpose that co-creates value for all stakeholders.'
Put simply, to be agile you need a shared purpose and vision with buy-in across your team(s), a structure with strong leadership supported by a network of empowered people, each with a clear and accountable role.
A robust operational process means that you can make quick decisions and, underpinned by next-generation technology, you'll maintain a competitive edge. Easy!
Technology is revolutionizing how SMBs operate and supporting business agility. A small business might lack the people power or skills to implement comprehensive operational strategies. Technology provides scalable solutions, so they gain an additional resource that brings them up to speed in a competitive market.
These are often enterprise-level tools but, bought in on a subscription basis, have less of an initial investment cost for small businesses.
Cloud technology, or cloud computing, is one area driving change. It enables businesses to store and access data and programs online rather than on a computer's hard drive, bringing greater flexibility to workflows — access anywhere — and how teams work together by opening new channels for communication. What cloud-based software offers is access to a suite of technologies that enhance operations, promote flexibility, and offer a more agile way of working.
Similarly, business apps create new operational opportunities. With apps covering the broad remit of business functions – from accounting and inventory management to marketing and content management – small businesses can improve cash flow, customer billing, and time management to improve workflows, cash flows, and profitability.
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As with any change, there are challenges to agile transformations, but nothing a little change management can't handle.
McKinsey & Co identified five common characteristics during the COVID-19 crisis that can help build agility in the next normal:
1. Establish a common purpose and clear communications
2. Set up structures to enable rapid decision making, including the reallocation of resources against new priorities
3. Create networks of local teams with clear, accountable roles
4. Develop a culture that empowers people and gives them the opportunity to unleash their entrepreneurial drive
5. Provide people with the technology they need.
The biggest challenges during agile transformations are cultural. For example, a mismatch between agile ways of working and job requirements, a lack of collaboration, and employee resistance.
To manage this culture change, focus on the following:
organizational alignment on mindsets and behaviors needed to move toward;
leaders role-model new attitudes and behaviors and hold each other accountable for making these changes;
employees are supported in developing skills needed to succeed in the 'future organization';
formal mechanisms are put in place to reinforce change and reward and incentivize people to demonstrate new behaviors.
Agility thrives when a shared vision and purpose is underpinned by actionable, strategic guidance. The vision must be held and believed in by all and should inform how your team approaches different functions – such as sales, marketing, or customer services.
The root of success is a well-informed plan. When making your business more agile, there's no one-size-fits-all approach, but there are specific points to consider:
the part(s) of the organization you want to transform and define how;
the best approach to achieve agility and implement so that what you do in one area reinforces other areas;
the resources and time frame that the transformation requires.
The future is unpredictable. An agile business is a business that can quickly adapt to changes as they happen, is scalable, and can remain customer-focused in a challenging business environment.
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