C O M P E T I T I V E N E S S

OUJ TO C R E A T E A n l I B l E O R G A n l l A T l O n With the ever more urgent need to delight their customers, organizations have realized the importance of nimbleness-the ability to succeed by responding more effectively and more efficiently than their competitors. In this excerpt from his new book, change expert Daryl R. Conner goes beyond defining the characteristics of a nimble organization and details what today’s businesses must do to succeed in turbulent times.01998 John Wiley & Sons, Inc.

by Day1 R. Conner

Change is so pervasive these days that many organizations are being dangerously drained of their time and resources. Only the most nimble of systems will survive and prosper.

What does it mean to be nimble? Nimbleness is the ability of an organization to consistently succeed in unpre- dictable, contested environments by implementing changes more efficiently and effectively than its competitors.

As important as nimbleness is, it is no more than the means by which an organization is able to accomplish its true objective, which is to make the adjustments necessary to stay aligned with its market.

Leaders that want to help their organizations become nimble must do three things: (1) Ensure that the enterprise is an “open system” (that is, keeping people and things in an unending growth and renewal mode); (2) take steps to increase the enterprise‘s absorption limits; and (3) constantly press the envelope of these boundaries by introducing as many important changes as possible without overextending available adaptation resources.

Nimble organizations have a distinct edge over their more constrained competitors in dealing with constant tran- sition. They:

Repeatedly succeed in erratic, competitive envi- ronments through fast and effective modifications of their operations

Demonstrate a superior capacity to deal with un- anticipated problems and opportunities Rapidly redefine and redeploy their human, physi- cal, and financial resources following a disruptive change Orchestrate multiple, even simultaneous reconfigurations of their various corporate struc- tures Employ associates who accept frequent reassign- ment of their duties and perpetual reordering of their priorities as the norm Help their people view a continuous flow of un- planned activities as simply the inevitable price to be paid for competing in volatile markets

Nimbleness means more than flexibility. It is a term that conveys speed, grace, dexterity, and resourcefulness. As a nimble operation adjusts itself to unfamiliar pressures, people go beyond merely accommodating new demands. A nimble enterprise is both malleable within its existing bound- aries of operation and capable of redefining those bound- aries so it can shift its success formula whenever necessary.

Being nimble is not a static position. Organizations must constantly calibrate their agility against not only what i t takes to successfully implement the changes they have chosen to pursue, but also the response time of their competitors for

* * * Daryl R. Conner is president and CEO of ODR, a research-based consulting firm in Atlanta, Georgia, that works exclusively t o help organizations prepare for and implement major change. He is the author of Managing at the Speed of Change Willard, 1993) This article is excerpted from Leading at the Edge ofChaos: How to Create the Nimble Organization. Daryl R. Conner, Copyright 0 I998 by Daryl R. Conner Reprinted by permission of the publisher; John Wiley & Sons.

NATIONAL PRODUCTIVIIT REVIEW / Autumn 2000 This article was originally published in National Productivity Review,Volume 17, Number 4.01998 John Wiley & Sons, Inc

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achieving similar results. A company or agency that was impressive last year with its quick, capable response to a situation, can, this year, appear lifeless and cumbersome by comparison, even though its reaction time and capabilities have not lessened. An organization may be no less malleable and resourceful, and may, in fact, be even more responsive and creative than it was in the past, yet it can quickly lose its standing if outdone by an ambitious contender.

RESPONDING TO THE MARKET AND THE COMPETITION

Nimbleness is a distinction that is relative to the circum- stances in which an organization finds itself It is a comparative quality, manifested only when an organization contrasts itself to the changing market and the speed and agility of its competitors.

If a company’s reaction to pivotal but unfamiliar mar- ket conditions is slow or ineffective, it can’t secure or de- fend a nimble standing. Just as Olympic gold medalists meet new and higher qualifying standards for entry to succeed- ing games, nimble organizations must constantly address tougher standards to maintain their prowess.

A company also can lose its claim to the coveted nim- bler status if its reaction to existing market demands is im- pressive, but lags behind that of its competitors. Though an Olympic runner-up may have broken a world record, he or she is still noted as the first-place loser. Being nimble in one’s market is no different. Winning at change is not a fi- nite challenge; it’s a relative one. Winning is contingent on the surroundings. The nimble provider in the market is the purveyor that can successfully solve problems and exploit the opportunities presented by unfamiliar circumstances faster and more effectively than its competitors.

This means nimbleness is not a fixed feature of an or- ganization; it remains very much in flux. It is a virtue that may be powerfully demonstrated or never exist at all. It may be securely entrenched during one period of time and a dis- tant memory in the next. The status of being the nimble pro- vider in a market can evaporate at any time. Think of nimble- ness as a prestigious differentiation that can be won, lost, and reclaimed again in a very brief period of time,

In contrast, operations that are unable to carry out de- cisions intended to deal with shifting demands for success are constrained organizations. Despite their intention to sometimes do otherwise. constrained organizations rigidly adhere to the status quo. Some of these operations con- sciously resist change, while others see the need for it but are unable to execute their intent. Even after a concerted effort to conform, most constrained organizations gravitate back to operations that are similar in nature, if not in form, to the ways things were before the challenge surfaced.

Being the nimble provider in a market brings a number of important competitive advantages beyond the obvious ones related to securing and maintaining market alignment.

For one thing, nimble organizations are able to attract and maintain more competent employees, as well as design and deliver more creative solutions to their customers.

Another benefit of being nimble is the ability to secure new business and keep existing customers close to home because of the organization’s capacity to execute that which has not yet even been requested, As more companies realize their world will continue to shift, they will be looking for providers who can be as agile in servicing them as they must be in servicing their customers.

Soon, the competitive advantage will be not in deliver- ing what is needed today, but in being able to have a nimble response to the next generation of needs that are not yet known by the customer. Delighting customers by meeting or exceeding their current expectation will no longer offer differentiation; even second- and third-tier contenders that operate at the rear of an industry’s standard of excellence will provide this level of customer satisfaction. Giving cus- tomers what they want, when they want it, at a price they will pay will become a commodity that no longer separates those who once dominated from the rest of the field. The defining moment for customer service will be not when es- tablished needs are expressed but will be when the unex- pected requirement materializes overnight.

Nimble cornpanies and agencies believe they must op- erate xithin a sphere of incessant novel<]: and they treat their a b i l i ~ ~ to nianage the unexpected as a strategic asset. They acquire as much of this strength as they can and refuse to waste it on frivolous projects that reflect only a casual interest or marginal returns.

Following is a look at some of the most critical charac- teristics of nimble organizations.

Hiring Only the A g i l e T h e most important step in building a nimble operation is hiring and retaining the kind of people who can translate the desired vision into tan- gible reality. Operationalizing the goal of becoming the nimble provider in your market is dependent more on who is on your team than on how teams are structured or what responsibilities they are assigned. Leaders must be sup- ported by a cadre of managers, supervisors, and employ- ees who are able and willing to go beyond the guidance provided them.

When staffing the organization for nin~bleness, 80 per- cent of your resources should be directed toward hiring people already prone toward the desired attributes, and then training and coaching them to expand their capabilities even more. No more than 20 percent of your resources should be allocated to assisting those who say they are willing to work against their own instincts and biases and try to develop completely new propensities that would help them contrib- ute to a nimble environment.

Nimble operations tend to attract people who display resilience during change. Resilient people are positive that they can succeed in unfamiliar circumstances, re-

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How to Create a Nimble Orpanizatiort 71

What Makes an Organization Nimble?

Nimble organizations are usually distinctive in their deep sense o f a sharedpurpose. Employees refiise to be trapped by past success or current pathologies. Line and stufpersonnel operate within flexible interpretations oftheir existing roles and assume they may face complete& new job responsibilities on a periodic basis. In addition to individual assignments, people are accustomed to working in synergistic, cross-functional work teams. Although opportunities for input are expected from those involved in projects, people also e.upect,fast, insightfill decision-making. Employees and leaders alike demonstrate their ability to.focus on the company j . ultimate success rather than the discomforts they may experience in getting there. Employees think it is normal to deal with constantljj evolving initiatives and an abun- dance of diverse ideas. It seems only natural to associates to engage in uninhibited dialogue, straightforward ,feed- back, and open, constructive conflict. Manugement expects to be held accountable for both the quality ofits decisions regarding what to change as well as the implementation architecture necessary to address how the human variables will be handled during transitions. People at all levels tend to view succeeding in unfamiliar circumstances as one oftheir top priorities. Employees generally feel valued because of their current performance, not their tenure. Employees tend to support the organization’s cultural values and ostracize those who do not. People believe thev will earn advancement because oftheir abi1it;v to build knowledge.

main focused on objectives during times of confusion, exhibit flexibility about how to address inhibitors, find order within what appears to be chaos, and proactively engage change rather than run from it. They also tend to be resourceful, multiskilled, highly motivated people who have a high tolerance for ambiguity, a desire to experi- ment, and a willingness to appropriately challenge au- thority. When an organization creates a critical mass of people with these qualities, its ability to attend to shift- ing demands dramatically accelerates.

The nimble organization also tends to attract people who focus on the success of the entire enterprise. They lack the time or inclination to pursue the latest office gossip or en- gage in provincial battIes waged by insecure egos fighting over insignificant issues. These people have no less a desire to exercise their needs for power than those in a constrained operation, but they feel they have more opportunities to in- fluence the issues and actions that will have a greater bear- ing on the success of the overall organization and, thus, they choose to invest their energy there.

Nimble operations are by no means void of differing opinions, arguments, and heated conflict. The difference is that in constrained environments, the vehemence and vi- ciousness of the hostility often become counterproductive, if not outright destructive, to the individuals involved, as well as to the organization’s overall ability to compete.

People working in a nimble organization have no less a need for clout than those trying in vain to control a con- strained system. They simply go about meeting this need very differently. Instead of pursuing issues of negligible im- portance to the organization, they seek to fulfill their power needs by pursuing matters that produce a sense of accom- plishment for themselves and contribute to the overall suc- cess. This alignment of personal potency with organizational benefit is much more likely when the organization keeps pace with the escalating and oscillating demands it faces.

Understanding the Role of Control-Constrained or- ganizations have a history of introducing significant, dis- ruptive modifications for which associates have little warn- ing and may be unsure of how to develop adequate response strategies. In effect, they are asked to perform their assigned duties while facing unmanageable change and without the benefit of direct or indirect control. These initiatives usu- ally are placed before people with marginal or low levels of resilience to change. The combination of little control with insufficient personal resilience is a formula for transition disaster.

Nimble organizations are characterized by just the op- posite kind of circumstances. Their associates typically are less caught off guard by announcements of impending change, and when they are surprised, they usually are more confident in their ability to deal with the situation. Leaders of these companies tend to create environments where most changes are introduced to highly resilient people. with as much direct or indirect control provided as possible.

Tolerating Ambiguity-The ability to perform in highly ambiguous situations is a core competency for those on a nimble team. Unfortunately, the notion of “tolerating ambiguity” has become supercharged with misinformation and misunderstanding.

When facing the unfamiliar, fight or flight are the op- tions we usually exercise first. To reduce the malaise we experience in confusing situations, we either try to counter our bewilderment by attempting to make sense out of the

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quandary we find ourselves in (“Maybe this is how they treat all the companies they acquire.”) or we try to get out of the predicament as fast as we can (“I put my resume on the street as soon as I heard the announcement.”). By either bringing meaning to the confusion or fleeing the circum- stances, we can regain a sense of control and reestablish the balance we seek.

A third option, actually a pseudoalternative, sometimes develops: immunity. If people find it’s impossible to over- come or run from confusion, they sometimes will make an intellectual effort to accept things as they are. In doing so, they unconsciously hope to reduce the distress they feel. Individuals who use this tactic really aren’t seeking a higher tolerance for ambiguity; what they want is indemnity from its impact. They hope to use this bogus acceptance as a way to circumvent the real issues and secure an exemption from the emotional stress of uncertainty rather than learn to op- erate within it.

The immunity approach seldom works because of the faulty logic it presents. Ambiguous situations cause vexa- tions that appear to be relieved only by fight or flight. If neither fight nor flight strategies are available to relieve our stress, the symptoms associated with loss of control don’t disappear simply by acknowledging their presence. Accept- ing that neither the fight nor flight alternative is feasible doesn’t mitigate the remaining vagaries and confusion. There are no pardons from the uneasiness that comes with uncer- tainty; the discomfort remains intact.

Most people who make reference to “tolerance for am- biguity” consciously or unconsciously hope that somehow, through the miracle of acceptance, they will be able to rise above the uneasiness that unfortunately always coexists with uncertainty. They usually assume that the acceptance pro- cess yields some mystical means for becoming content with their discomfort. This, of course, is not the case. Think about the logic involved in this immunity strategy. By acknowl- edging the inevitable, an individual is supposed to some- how transform anxiety, dread and despair into tranquillity, appeasement, and calmness.

When neither the legitimate fight-or-flight strategies nor false immunity is considered an option for adequately dealing with the burden of ambiguity. a fourth alternative still remains-tolerating the ambiguity while maintaining high performance. This last strategy is the most difficult and, therefore, usually the least preferable of the choices. Yet it is the only one that is really viable when circumstances remain muddy and equivocal for long periods of time.

This final strategy also calls for a form of acceptance. but of a very different kind from that associated with ini- munity. Here, a person fully recognizes that discomfort is the constant companion of significant unccrtainty. As such. he or she understands that major change always will be tied to some level ofunpleasantness. irritation, and aggra- vation. These qualities come with the territory. The person

using this approach is able to acknowledge that, regard- less of the pain and suffering endured he or she must be held accountable for whatever job responsibilities or du- ties have been assumed.

Nimble companies consistently operate within this fourth option. They hire and promote people with strong tolerance for ambiguity and then they train, coach, and reward this be- havior to fortify it hrther. In contrast, constrained organiza- tions tend to hire associates who become dyshnctional when confronted with accelerating ambiguity.

Knowing How to Reconfigure Itself-when an en- terprise redefines its own structure to achieve market suc- cess, it is demonstrating its ability to self-organize. An organization’s structure consists ofthe arrangements of ele- ments like employees, technology, and capital, or patterns of activities like procedures, processes, and habits used to operate its basic business. Self-organization is the ability to create new structural options out of existing resources. The word “self” in this term means that the drive to search for a new order is not imposed from outside the system’s bound- aries. Whether the search is for minor adjustments that cor- rect small deviations or for a complete transformation, if the impetus for movement comes from within, the principle of self-organization is at work.

All living systems gravitate toward some type of regu- larity and harmony. Sometimes this drive for equilibrium is led by something or someone from outside a system’s bound- aries that offers or mandates new arrangements. Such an impulse might arise after, for example, an acquisition, when one company’s property and buildings are purchased by another and later sold or after a bank forecloses on an un- paid loan and claims the collateral as its own. In both cases, the relocation of assets is a result of outside forces at work.

When a system self-organizes, however, external in- fluences are less influential in the search for a new order. The reassignment. reallocation, redeployment, or recon- struction of available assets to better meet the challenges at hand are initiatives primarily driven from within the company or agency.

The need to self-organize occurs when whatever has promoted success in the past no longer does. Nimble orga- nizations rely heavily on their ability to self-organize be- cause they operate in a world that demands that they con- stantly reinvent themselves to remain viable. To achieve and maintain the nimble status in today’s market requires that the foremost drive and urgency for change come from within the system.

Shifting from an Event to Process Mentality-Lead- ers of constrained organizations usually try to maintain their organization’s equilibrium by directing and predicting cvcnts. In contrast, nimble leaders invest their resources into di- rectly influencing what they can and then relying on respon- sive processes for meeting the rest of their organization’s security needs.

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Attempting to establish stable conditions in which to work is not the primary way people in nimble organiza- tions provide security for themselves. They prefer, instead, the safeguard of understanding and knowing how to uti- lize various forces that can influence a situation as their strategy for securing control. Rather than clinging to a concrete pillar embedded in the ocean floor, they would feel more confident surfing waves of change. One of the ways nimble leaders promote “surfing” behavior instead of “entrenching” behavior is by helping people learn to trust the processes they use more than their predictions about forthcoming events. Instead of trying to predict events, nimble companies focus on developing processes that will allow quick, effective responses to events as they unfold. This process approach to maintaining control re- quires the nimble leader to pursue a different path from his or her event-based, constrained counterpart. The typi- cal preoccupation with what will occur in the future is re- placed with a new focus on how to address key events as they unfold. For example, nimble companies pay more at- tention to how they will identify customer needs than they do on guessing exactly what particular needs customers will have.

Focusing on responsive processes to secure a sense of control is by no means a passive act. It calls for early detec- tion systems that alert the proper personnel at the first signs of a new threat or opportunity, and for the procedures to determine what the proper response should be. For example, nimble organizations don’t manage their customer relations by hoping to correctly guess the details of next year’s de- mand and then tooling to provide only that product or ser- vice. Instead they build a responsive process that can pro- vide what the customer wants now, react quickly to the customer’s unanticipated needs, and scan the horizon for early signs of emerging customer requirements so that an early onset of the development cycle for an innovative re- sponse can occur. Finally, the nimble operation educates customers about capabilities and possibilities they may not have realized were feasible.

Manifesting Resilience-Resilience is the ability to ub- sorb large uniounts of’ disruptive change without a signif;- cant drop in palit! and productivity standards. A highly resilient organization is one that regains its equilibrium quickly after the disruption of change, accomplishes im- portant tasks during periods of confusion, and makes sure that its people are physically and emotionally healthy while its systems remain operational despite high levels of stress. After implementing key initiatives, it gains in assimilation capacity rather than becoming depleted and unable to face the next transition demand.

For an organization to respond to change in a resil- ient fashion, it must take action to reshape the flow of the system’s inputs, outputs, and processes while displaying minimal dysfunction. The organization must remain:

Positive:

Focused:

Flexible:

Organized:

Proactive:

Take a stance of security and self-assur ance based on a view of the marketplace as complex, but filled with opportunity

Have a clear vision of what must be done to prosper

Demonstrate a creative ability when re sponding to uncertainty

Have structured approaches for manag ing ambiguity

Engage change rather than defend against it

These characteristics must be displayed by the organization’s leaders; be expressed in its vision, mission, and strategy; and be evident in its beliefs, behaviors, and assumptions.

Being Consciously Competent-Most organizations that achieve a nimble status do so without leaders, manag- ers, supervisors, and employees knowing explicitly what contributed to their success. They may be tacitly aware that they have an ability to move through change with a level of proficiency not experienced in a constrained system, but they usually are unsure about how this happens. This kind of intuitively based dexterity can limit success and even present some problems.

The requirements for remaining the nimble player in one’s market will escalate over time, either due to more change demands or because of an increased agility demonstrated by competitors. Regardless of the cause, nimble organizations must rise to the occasion. Meeting each new level of chal- lenge, however, calls for more than mere passion and resolve. It is also essential to know explicitly what to do. Organiza- tions that are nimble but lack the insight into what they actu- ally do to produce this powerful quality will more than likely lose it over time and ultimately become constrained. When the need arises, they won’t know how to protect or strengthen the agility and versatility they have. Leaders and the various levels of management and employees can’t develop skills they don’t know how to identify and intentionally replicate. When an organization loses its intuitively based nimbleness, it only has luck to rely on as it vainly attempts to reproduce the magic it never fully understood.

Companies and agencies need to study the phenom- enon they seek to master. It is imperative that leaders under- stand not only the individual features that contribute to nimbleness, but also how these separate aspects form the interdependent relationships that make up the whole. Orga- nizations must have the ability to successfully wage a cam- paign to become the nimble competitor in their market, as well as position themselves to determine if and when the

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status is in jeopardy. When the danger signal is triggered, leaders should be ready to diagnose what needs to be done to protect or regain the nimble status and build plans to fo- cus on the precise elements that need attention. This is not a task for people lacking an explicit understanding of their own nimble skill base. Unconscious adeptness is not enough. Leaders must be consciously competent about how to plan and execute their organization’s transitions.

BECOMING THE NIMBLE PROVIDER

At any single point in time there can be but one com- pany that is able to recalibrate itself to the shifting needs of its customers faster and more effectively than the competi- tion. This is the nimble provider within a particular market segment. Just as there is only one business more profitable than its rivals or one with the highest stock price, only one organization at a time can claim its operations are the most nimble among its opponents.

The singular nature of this distinction makes it both appealing and intimidating. Holding such a unique status is, of course, a powerful differentiation. But at the same time, the odds of actually securing the rank are inherently low. Many people would like to be the best tennis player at their club or the most accomplished equestrian on their riding team, but most people view the top position as unattainable and don’t even strive for the goal. In a similar vein. should a company strive to be more nimble than in the past, even if it has no hope of actually becoming the nimble provider in its chosen market? The answer is an emphatic “yes!”

Just as increased profitability and accelerated share price are worthwhile goals in themselves, even if a com- pany should never outperform its competition, increased nimbleness is a justifiable ambition, regardless of the organization’s nimble rank. Although being the nimble pro- vider carries with it some powerful implications, all busi- nesses that advance their ability to absorb change will ben- efit from doing so.

Knowing what you want usually proves to be some- what advantageous in getting it. In this respect, it is impor- tant for leaders to be realistic about their nimble aspirations. Most organizations should follow the challenge articulated in the United States Army’s ad campaign to “Be All That You Can Be.” The key for success is to stay focused on the benefits gained from being a formidable nimble contender, despite the possibility of falling short of the ultimate objec- tive. Not only is there true competitive value in becoming more agile than most of your market rivals, but keeping close to the leader also means you are within striking distance of the company with the most nimble status when (not if, it falters.

The nimble provider in a market will achieve this stand- ing through the inherent strengths it possesses, a tremen- dous amount of hard work and, of course, the ever-present possibility of good fortune. The length of time a business will enjoy this prestige is a function of the degree to which its leaders are consciously competent at putting distance between themselves and other organizations that aspire to be the most nimble, but lack the commitment and resources to do so.

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