Adaptability as a Competitive Advantage

One of the better summaries on how companies need to be adaptable is the Harvard Business Review article by Martin Reeves and Mike Deimler called “Adaptability: The New Competitive Advantage“.

Increasingly, managers are finding that it stems from the “second-order” organizational capabilities that foster rapid adaptation. Instead of being really good at doing some particular thing, companies must be really good at learning how to do new things.

The main point is that the world is far less predictable than in the past.

 That which cannot be deduced or forecast can often be discovered through experimentation.

Adaptibility is an approach that does not rely on prediction, but instead on experimentation, but experimentation necessarily means a bumpy road:

Adaptive companies are very tolerant of failure, even to the point of celebrating it.

They describe four organizational capabilities that are necessary to foster rapid adaptation.  Specifically:

  1. The ability to read and act on signals of change;
  2. the ability to manage complex and interconnected systems of multiple stakeholders;
  3. the ability to experiment rapidly and frequently—not only with products and services but also with business models, processes, and strategies; and
  4. the ability to motivate employees and partners.

In regards to point 3 above, experimentation is not something that is exclusively done by the CEO.  Experimentation is done throughout the organization, at all levels.  They point out:

Adaptation is necessarily local in nature—somebody experiments first at a particular place and time. It is also necessarily global in nature, because if the experiment succeeds, it will be communicated, selected, amplified, and refined.

This really helps explain why there must not be a distinction between “run time” and “design time”:  experimentation at a particular place and time means that the change happens in the situation, and not separate from it, and particularly not in an isolated design time.

Traditional predictive management would institute strict procedures and policies, and use this to drive interaction in place of what was really happening.  But to achieve an adaptive organization, anything might change, you dont’ specify the policy.  Instead you need to be a lot more transparent about what is really happening:

Typically, adaptive companies manage their ecosystems by using common standards to foster interaction with minimal barriers. They generate trust among participants—for example, by enabling people to interact frequently and by providing transparency and rating systems that serve as “reputational currency.”

See also “Throw Away the Process Map, use Status Feedback Instead“.

In order to adapt, a company must have its antennae tuned to signals of change from the external environment, decode them, and quickly act to refine or reinvent its business model and even reshape the information landscape of its industry.

Decentralize is always a theme of adaptibility:

As they create more-fluid structures, adaptive companies drive decision making down to the front lines, allowing the people most likely to detect changes in the environment to respond quickly and proactively.

To be adaptable, it is necessary to think more holistically:

Signal detection and experimentation require a company to think beyond its own boundaries and perhaps to work more closely and smartly with customers and suppliers. This flies somewhat in the face of the unspoken assumption that the unit of analysis for strategy is a single company or business unit.

Focus you managers in risks and uncertainties:

Get your managers to put aside the traditional single-business forecast and instead examine the risks and uncertainties that could significantly affect the company.

every significant source of uncertainty should be addressed with an initiative.

An excellent article on how the nature of the business world is changing, and you have to get used to change in order to survive.  Adapt!

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One Response to Adaptability as a Competitive Advantage

  1. Pingback: How an Adaptable Business Model Can Drive Your Start-up - BusinessnWealth

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