Frameworks: Making Steady Progress in Organizational Agility

The need for organizations to reassess their strategic planning process in order to stay flexible and get ahead of the “unexpected” is more important than ever. More pointedly organizations have struggled with adjusting to changes in their business environment because they do not effectively assess the external environment for potential risks or opportunities on an ongoing basis, use simulation to understand what could happen, and then develop contingency plans to ensure they aren't reacting to disruptions.

To further this idea, APQC recently finished a survey exploring strategic planning practices and organizational agility.

Organizational agility is simply the ability to quickly identify and execute initiatives for opportunities and risks that align with the organization's overall strategy. Organizational agility is comprised of two key components:

Strategic responsiveness—the ability to sense/identify new risks and opportunities and respond to them quickly (typically, in the form of new initiatives).
Organizational flexibility—the adaptive capacity to stay flexible in the implementation of plans (including the ability to adjust processes and structures, introduce new plans, and kill off plans as needed).

This article is a comparison of the importance, capabilities, and practices in strategic planning and organizational agility between the 2015 study and 2021 study.

The Value of Organizational Agility

The last year has pushed organizations and required they quickly triage their business and adapt to an environment fraught with uncertainty and the unexpected. All of which emphasized the need for organizational agility. Hence, it's not surprising that organizational agility is even more important than six years ago, the last time we conducted this study.

Are We More Agile?

The simple answer is yes. There are substantive improvements in organizations' capabilities. Organizations who feel they have strong or outstanding agility capabilities have increased for both strategic responsiveness (from 35% to 54%) and organizational flexibility (from 28% to 49%) in the last six years.

Making-Steady-Progress_fig2 — Organizational Capabilities Comparative

This improvement parallels not only the increasing importance of organizational agility, but also changes in organizations' planning and implementation practices.

Where We've Improved

The bulk of improvements have been made in the areas of strategic responsiveness and planning practices. This includes the pacing of planning activities, inclusion of predictive or “what if” analysis, and ensuring that decision makers have access to a wide array of information to base their plans upon. However, there are also two key improvements in organizational flexibility: the frequency of implementation reviews and granularity of measures used to track implementation success.

Augmenting the Annual Cycle

While an annual planning cycle is still the norm, many organizations augment the yearly cycle with quarterly rolling plans. The rolling approach typically includes managing an array of mid- and short-term initiatives tied to the long-term goals. decisions. This helps the organization break up large scale ideas into bite size piece that build on one another. This approach also ensures that organizations can reassess and adjust accordingly to changes in the organization and business environment.

Moving Beyond SWOT

Six years ago, SWOT (strengths, weakness, opportunities, and threats) analysis was the predominant method for strategic planning. While SWOT is still vital for planning it has been supplanted by risk analysis. The last year's uncertainties have hit organizations hard and consequently they have reprioritized understanding the impact risk has in developing long-term plans and preparing for uncertainty. Additionally, a growing number of organizations have also stressed the need for a wider array of analysis that include benchmarking (for contextual insights), customer value analysis (so they can focus on what drives the needle), and resources assessments (to ensure their vision is feasible). Though not as prevalent, there have also been a distinct increase in the number of organizations that include predictive analysis (e.g., scenario planning, wargames, and predictive modelling) in their approaches.

Taking a Broader Look at External Influences

When organization think about the external environment—in the context of strategic planning—they have typically looked at the market, their customers, and competitors. While these factors are important, they do not account for all the forces that can impact an organization—as organizations experienced over the last year. Consequently, there is an increase in assessing social, political, and environmental trends as part of the planning process. These factors play a vital role in shaping customer needs, ensuring resiliency, and preparing for potential business environment risks and opportunities.

Putting a Place for Process at the Strategy Table

Establishing a virtuous relationship between strategy and process work has been an ongoing challenge for many an organization. However, this year over half of the respondent organizations include process performance as a key input in their planning process. This means that strategy and process reenforce and support one another. Process performance helps identify gaps and strengths, while it in turn is guided by the organization's goals.

Baking in More Frequent Reviews

One key ingredient to flexible implementation is ensuring that the organization reviews each initiative on a regular basis. The trick of implementation reviews is to ensure they are frequent enough to keep the plans flexible, but not so often there is no real progress to discuss. Implementation teams have taken this idea to heart and increased the frequency of the implementation team reviews (from quarterly to monthly). Even more importantly organizations have increased the rate of reviews between the implementation team and senior management from bi-annually to quarterly. Which helps the team address potential roadblocks, and also address changes to the plan or tactics as needed.

Increasing Granularity of Monitoring Success

Overall, there has been an expansion the KPIs organizations use to monitor implementation and track the success of their strategy. Organizations continue to include the usual suspects: financial measures (e.g., ROI), project milestones, and organizational KPIs. However, organizations are diving in deeper and including business-specific KPIs and objective-specific KPIs into the mix. Which indicates that organizations are making efforts to tie together their corporate strategies, business line strategies, and explicit initiatives together for a holistic approach to managing success. Though not as commonly used, measures like stakeholder satisfaction and new behavior adoption have doubled in their use over the last six years.

Impediments to Agility

Though there have been great strides towards better agility, organizations still face two key impediments.

Trapped in the Budget-Driven Annual Cycle

Most organizations are still beholden to the legacy of an annual planning cycle that is closely tied to the budget. This means organizations are much slower to recognize changes and recalibrate their initiatives. This inertia is further compounded by the limitations and inflexibility created by static, annual budgets.

Lack of Real-time Insights

The frequency of internal and external assessments used to support planning and decision making have decreased over the last six years. Rather than adopting the ideal of delivering data and insights in real-time, strategy analysis tends to line up neatly with the planning cycle and implementation reviews. To stay aware and flexible organizations need to combine real-time analytics and triggers to ensure timely evaluation of the impact of trends on current initiatives.

Conclusion

In many ways organizations' planning methods have remained consistent—mix of budget driven plans, SWOT analysis, and balance scorecards. However, there's also a marked increase in the number of organizations that bake agility in through more frequent planning and review cycles, broader range of insights, which are then applied to “what if” analysis like scenario planning. So, while organizations continue to rely on their tried and true approaches, they are enhancing their practices and methodologies to avoid being reactive and prepare for the unexpected.

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Holly Lyke-Ho-Gland

Holly Lyke-Ho-Gland is a research specialist at APQC, with over ten years of business research and consulting experience. Her focus has predominantly been on best practices in business processes, corporate strategy, and R&D. She can be reached via email at hlykehogland@apqc.org and on Twitter at @hlykehogland.