Whitepaper

Agility: The Key to Surviving Recession and Digital Disruption

by Erik Dorr, Angela Caswell-LaPierre, and Anthony Snowball of The Hackett Group

Available for download with permission.

How Agile is Your Business?

Business services functions must understand and address weaknesses in their ability to respond to changes in business conditions and disruptive events—i.e., improve agility. Potential disruptors—including risk of a recession—abound: trade conflict with China, political gridlock, a looming debt crisis, geopolitical instability that could affect demand and supply chains, and more. Inability to anticipate and swiftly respond to change impairs both functional and enterprise performance, jeopardizing competitiveness and possibly the future of the company. Recognizing this, business services functions rank strategy enablement as the most important value driver of agility-improvement initiatives. In our study of agility, cultural resistance to change was found to be the most important inhibitor of agility improvement. Further, there is a very significant gap in agility between the study’s peer group and top performers, explained by higher levels of adoption and effectiveness of specific agility-enabling practices by top performers. Business services in the peer group must adopt effective agility-improvement practices to close the gap.

Disruption and the Agility Imperative

In a volatile business environment, companies must be able to shape, anticipate and adapt to change in order to survive, let alone thrive. This ability is commonly referred to as agility. In this report, we analyze the impact of economic uncertainty in conjunction with the risk of digital disruption on business strategies, specifically the need for companies to drastically improve agility.

Business services functions play important yet different roles in enabling enterprise agility. HR organizations are deeply involved with talent strategy, management-related issues and cultural change; IT with provisioning agile technology platforms and rapid solution development needed to accelerate time to market; finance with providing the analytical services required to sense and anticipate change; and procurement with managing supply risk. GBS organizations, too, are important to enterprise agility, given their ability to rapidly scale capacity up or down as conditions change.

In this report, we look at the agility of business services functions in the aggregate as opposed to individually.

Agility Inhibitors

It is important to understand what is preventing business services functions from improving their own agility. The top inhibitor is cultural resistance to change.

This is no surprise, as the success of any effort to adopt an agile operating model depends on changing behavior and culture. This is notoriously hard and is the root cause of many failed transformation initiatives. Skills deficiencies are ranked as the least important agility-inhibiting factor, confirming it is not so much a lack of specific skills that prevents functions from becoming more agile, but rather inertia and individuals’ resistance to change.

Transforming the Service Delivery Model

Finally, we analyze the types of initiatives that are targeted to improve agility, plus the effectiveness of these initiatives.

The digital service delivery model shows the percentage of organizations that include specific service delivery model components in scope of transformation initiatives aimed at improving agility.

Action Items

Business services functions must understand and address weaknesses in their ability to respond to changes in business conditions and disruptive events. To improve their agility, they must:

  1. Use existing business-partnering relations and other lines of communication with the business (or establish new ones) to improve the dialogue between themselves and the business.
  2. Through these channels and partnerships, improve the function’s understanding of the importance of the enterprise’s ability to respond to specific types of business events and disruptors.
  3. Analyze the dependencies of enterprise agility needs on functional capabilities (e.g., ability to bring in new talent, develop a new service for integration in a value stream, provide critical data and analysis).
  4. Assess the effectiveness of any practices that have already been adopted to enhance agility.
  5. Analyze the suitability for adoption of practices that are considered highly effective by external sources (industry peers, external research, consultancies).
  6. Develop a roadmap specifying which practices will be adopted, fine-tuned, accelerated or sustained.
  7. Given that the most significant inhibitor of increased agility is human resistance to change, establish a strong change-management program.
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