This document summarizes key aspects of strategic agility based on research of leading companies. It finds that strategically agile companies demonstrate three enabling capabilities: strategic sensitivity through open strategy processes and alertness; leadership unity through mutual dependency and collaborative teamwork; and resource fluidity through dynamic resource allocation, modular structures and mobilizing people. Each capability is supported by specific management practices like purposeful dialogue, shared incentives, and values-based performance measures. True strategic agility requires attention to all three dimensions simultaneously rather than a piecemeal approach.

1. 6 Strategy Magazine March 2008 I Issue 15 I www.sps.org.uk
How agile is
your strategy
process?
Some companies are more strategically agile than others. Of course there is
no panacea, but recent research demonstrates the value of three key enabling
capabilities. By Yves Doz and Mikko Kosonen
T
wo major forces call for constant Most companies are ill-prepared to face
agility. The first, obviously, is speed. these twin challenges and to rejuvenate their
The more virtual, information-rich strategy process. Put simply, as with human
and service-based a business model is the beings at risk of a heart attack, many
faster change happens. The second, perhaps companies suffer from strategic sclerosis
less obvious force, is change. Change is now without their CEOs and strategy staff
much more systemic among interdependent knowing it. Companies are often victims of
or convergent industries, where the their own success. They die not because what
consequences of change in one industry may they did was wrong, but because they kept
have ripple effects on many others. doing it for too long.

2. www.sps.org.uk I Issue 15 I March 2008 Strategy Magazine 7
Furthermore, the strategy process itself comprehend, experiencing rather than just
may well have decayed, from a healthy hypothesising becomes a must. Thought
substantive approach to strategic choices into experiments need to give way to true
a routine yearly exercise where form wins experiments.
over substance.
An extensive research programme within Heightened strategic alertness
leading incumbents in the information and Remaining strategically alert while successful
communication technology industry is perhaps one of the most challenging
resulted in the identification of three sets of capabilities required for strategic agility. Andy
enabling capabilities in strategically agile Grove’s call to ‘be paranoid’ when he was
companies: strategic sensitivity, leadership CEO of Intel and staying so in the face of
unity and resource fluidity. success is well known. Some companies, such
Each of these capabilities is rooted in a as SAP or Cisco, have CEOs who keep making
series of management practices highlighted public promises about new products and
in figure 1 and summarised below. functionalities that they know will stretch
their organisation to the limit (and
Open strategy process occasionally beyond). Beyond stretch goals,
Strategic agility requires superior creative tension through contradictory goals
information, strong real-time insight and helps to keep people attentive, intellectually
good judgement. Active and purposeful mindful and intensely preoccupied.
dialogues with key stakeholders allow At SAP or IBM, for example, providing
companies to borrow their insights. The more more services, and even distributing software
parties that are involved in such strategic products, through the internet has been
dialogues, the more opportunities there will perceived as reflecting contradictory goals
be for breakthrough ideas and well-informed with respect to customer intimacy and
judgements. Practically, the companies we efficiency. Maintaining an active dialogue
researched pursued a variety of approaches about difficult choices and commitments,
to open their strategy process, both internally involving many in the organisation, can
and externally. genuinely lead to a ‘right vs right’ framing
For example, over the past 15 years IBM because they reflect contradictory goals. This
has used a variety of approaches to involve its is another way to help exploit external
customers more intimately in its strategy connectedness, learning from experiments
development. It started with regular and playful modelling.
meetings with CEOs of client companies and
then it began working directly with its clients’ Figure 1: The vectors of strategic agility
researchers to help them develop IT-based
solutions to complex and specific innovation
problems.
Other companies have built significant
STRATEGIC
internal intellectual resources devoted to SENSITIVITY
strategy. SAP’s corporate strategy team, for Open strategy process
Heightened strategic alertness
instance, is composed of about 30 senior High quality internal dialogue
LEADERSHIP RESOURCE
consultants and investment bankers hired UNITY FLUIDITY
from outside. After a few years supporting the Mutual dependency Dynamic resource allocation
Working together as a team Mobilising people
strategy process, they move into line CEO leadership style Modular structures and processes
management positions and infuse them with
a corporate strategic perspective.
As well as greater and more open
intellectual strength, there needs to be a more
experiential – and experimental – attitude
towards strategy development, as we
observed in the role of new venture groups at
IBM and Nokia. In a fast-changing
environment, characterised by systemic STRATEGIC
changes that are hard to anticipate or even AGILITY

3. 8 Strategy Magazine March 2008 I Issue 15 I www.sps.org.uk
“Companies are often victims of consequences. However, situated learning
based on insight is difficult and potentially
their own success. They die not hazardous in the absence of contextual
sensitivity. (Situated learning is a model that
because what they did was wrong, suggests that all learning is contextual,
embedded in a social and physical
but rather because they kept environment.) Both contextual sensitivity
and conceptual richness of language are
needed for high strategic agility.
doing it for too long.”
Mutual dependency
Enhancing strategic sensitivity is of little
High-quality internal dialogue use if top management cannot agree on
People of different sensitivities, areas of critical strategic redirections and make
expertise, cultural origins, age, gender and strong, unified commitments. The most
types of intelligence need to be brought basic mechanisms for enhancing collective
together in a structured, purposeful dialogue. commitments are interdependent action
By dialogue (as opposed to debate), we mean agendas and incentives. Most of the
a conversation where participants articulate companies we studied have recently
assumptions and explain the logic of their increased shared corporate incentives
thoughts, rather than defend conclusions and relative to business unit-specific rewards.
present arguments. This, of course, is not easy For instance, SAP’s top team members now
in a corporate context. Corporate leaders are have 100% common incentives, and senior
used to, and trained for, oratory tournaments, managers of less fully integrated
where the most forceful argument – not companies have around 50%. This fosters a
always grounded in the most thoughtful sense of ‘cabinet responsibility’.
considerations – wins. Companies also enhance mutual
Expressing difference or dissent in a dependency by distributing corporate roles
corporate hierarchy is often difficult, and among key line executives. This helps shift
potentially costly, yet it is essential to strategic the criteria for team participation away from
sensitivity. When divergent and different the size of the units a person represents to the
views are suppressed without being quality of that person’s contribution. The key
examined, or self-censored before they are principle in designing these roles is to make a
even expressed, valuable perspectives are clear distinction between a person’s unit
silenced and sources of insight are lost. By responsibility and corporate-wide
calling for participants in a strategy dialogue responsibility. Adoption of a true corporate
to systematically reveal their underlying perspective is not possible if the corporate
assumptions, and ensuring others role is subordinate to the ‘primary’ line role.
understand them, the dialogue builds on Organisational interdependency gives
common ground and fosters the substance to a shared strategic agenda: all top
development of a common language. team members become deeply dependent on
Language also conditions what each other in practically all matters. They
management sees or doesn’t see, how it become interdependent contributors to an
interprets what it sees, and whether or not integrated corporate strategy, instead of
what it sees provides a useful relationship to independent subunit ‘barons’ pursuing
reality. The quality of language is a separate business strategies and agendas. The
precondition for the quality of dialogue. A shared agenda may be fully operational,
highly contextual language may prevent strategic or centred on learning and
companies from registering weak signals and experience.
interpreting them correctly. Creating a multidimensional organisation
Anticipation based on foresight is difficult into which multiple perspectives are
in the absence of a concept-rich language; a structurally embedded is a way to break the
language that allows systemic modelling of blind alignments of the strategic and the
trends and the ways they unfold, and of operational. Combining customer-facing and
potential discontinuities and their channel-management organisations, product

4. www.sps.org.uk I Issue 15 I March 2008 Strategy Magazine 9
groups, platforms for areas of technology, provide answers, as nobody is likely to know
core competencies, standards and so on, these for sure, but rather set a context for and
provides a way to embed multiple guide the search for a feasible answer to the
perspectives that have to be reconciled and challenge at hand. The role of the leader in
organisational units that have to work this situation is to provide a foundation for
harmoniously together to achieve results. collective work. In the search process,
individual members transcend their initial
Working together as a team position, reframe their understanding and
Integration of responsibilities at the top can gain personal commitment to the collectively
quickly prove dysfunctional if the right developed solution. This applies to all work
collaborative processes and practices are not throughout the organisation, from top to
in place. Unfortunately, a constructive, open bottom, when in search of strategic agility.
dialogue is not natural for many well- Adaptive leadership starts at the top, and
established top teams. The main way to the behaviour of the CEO makes the
contain the risk of public agreement and difference between a real team and a ‘non-
private dissent is to embrace conflicts and team’ at the top. CEOs set the context,
address them via substantial dialogue in the provide meaning and pick the leadership
top team. Senior executives in integrated team they want to work with in different
companies need to become comfortable with roles. It is hard for the rest of the top team to
direct, informal dialogue. adopt new kinds of interaction patterns and
Beyond substance, the transparency of top roles if their CEO does not appreciate and
team members’ personal motives has a big practise collaborative behaviour.
impact on the quality of dialogue. One of the
main reasons for misunderstandings and Dynamic resource allocation
personal mistrust among top team members Without resource fluidity, strategic sensitivity
is that they do not fully understand each and leadership unity are useless. Intelligence
other’s deeper motives, personal values and and commitment without rapid resource
drivers in life. This may even be the case deployment in fast-developing strategic
between top team colleagues who have situations bring no advantage. Yet in many
worked side by side for years. companies both capital and human resources
Getting a deep enough understanding and are often locked in support of existing activity
appreciation of these differences takes time, systems, leaving little leeway for
and this is difficult to achieve in the course of redeployment.
normal management team work. Taking In established companies where
extra time as a group to share each other’s leadership unity has decayed, rapid changes
personal values and drivers strengthens the in resource allocation patterns are difficult to
basis for dialogue. Henning Kagermann, CEO achieve. Continuous resource constraints and
of SAP, for example, makes a point of holding creeping doubts about the fairness of
quarterly offsite meetings with the executive corporate-level resource allocation lead
board. managers to hoard resources within their
units. The more successful, powerful and The main way to
CEO leadership style autonomous the business units are, the more
contain the risk of
Like instinctive team behaviour, ‘adaptive of a problem this becomes.
leadership’ skills are rare among typical top Of course, portfolio management models public agreement
team members. Senior executives are used to addressed this issue long ago, suggesting that
‘knowing better’ and thus when approached strategic business units should be decoupled
and private dissent
for advice they make decisions using their from operating business units. Ironically, is to embrace
wide experience and expert judgement. This though, conventional planning systems and
works when operating within a known and budgeting practices only deepen resource conflicts and
stable market, but not when the company imprisonment in many companies. address them
faces increasing ambiguity and needs to Formal bureaucratic management
choose a new course, or perhaps even processes leave little room for adjustment and via substantial
construct a new business model, in the face of change. Instead of challenging, they protect dialogue in the
unforeseen discontinuities. the interests of core businesses by seldom
Leaders in this situation should not try to questioning the history and existence of the top team.”

5. 10 Strategy Magazine March 2008 I Issue 15 I www.sps.org.uk
legacy. Management systems in hierarchical potential, in the same way as products. In
organisations often compound this problem practice this means that business process
as they are typically designed to support modules originally designed for a specific
resource allocation within divisions, not activity, but with flexibility in mind, can be
across them. reused in another business configuration
To overcome these shortcomings with the same activity.
companies need to establish more strategic Modularity enhances innovation and
and dynamic resource allocation processes. adaptability at both the subsystem and
Nokia, for instance, has replaced annual system levels. At HP, for example, corporate-
planning and budgeting with a more wide councils for balancing resources allow
adjustable, assumption-based planning the company to differentiate ‘horizontal’
process. To increase the flexibility of its corporate-wide and ‘vertical’ business-
capital resources allocation, instead of specific activities.
conventional budgeting the company uses The principles of modularity can also be
continuous planning with six-month, short- applied at the job design level. In many
term plans supported by monthly latest companies, intranets are being transformed
estimates. Most people’s incentives are tied to into comprehensive workflow and people
the six-month plans, but they can also be tied management environments. When
to longer-term projects. formalisation of tasks is possible, and roles
Together the strategic planning, short- can be well defined, these new work
term planning and individual incentive environments enable individuals to
planning make up what is called the disassociate themselves from roles and tasks.
‘Integrated Planning Process’ at Nokia. The This kind of structured working environment
main benefit of this process is improved allows companies to dispense with many of
timeliness of actions, but it also helps the the local hierarchies and controls linked to
company to allocate capital resources in a roles and tasks that were previously needed
more flexible way. for managing individuals.
Mobilising people Good news ... and bad
BOOK DISCOUNT Like investment resources, people can also be So how agile is your strategy process, really?
This article draws on research imprisoned in ‘silos’. Tough performance The good news, based on our research, is that
presented in Fast Strategy by targets make it difficult for managers to let achieving strategic agility is not black magic.
Yves Doz and Mikko Kosonen, their best people go as this might have a First, it is attention to strategic sensitivity.
(Wharton School Press, 2008, negative impact on their performance. Second, it is collective commitment and
£22.99). SPS members are Individuals may also be afraid of moving out discipline in the working of a top team and a
entitled to a 20% discount. of their comfort zone. CEO who has the courage to lead. Third, it is
Visit: www.pearson- Many companies, including IBM, Nokia building organisational infrastructure,
books.com/strategymagazine and Cisco, have developed lists of behaviour resource allocation processes, people
and value-driven attributes describing the management, and modular structures and
way in which performance is expected to be business processes that can be reconfigured
ABOUT THE AUTHORS achieved. In such companies managers’ fast and provide resource fluidity.
Yves Doz is the Timken chaired values-based behaviour is regularly Now for the bad news: strategic agility is
professor of global technology measured. To support personal development not a piecemeal ‘to do’ list. All three
and innovation at INSEAD and a IBM, for instance, has established special dimensions – strategic sensitivity, leadership
visiting professor at Helsinki improvement programmes, such as ‘help my unity and resource fluidity – are important.
School of Economics. manager to become a better manager’, to Being good at one, or even two, or working
Mikko Kosonen is executive vice- address the behavioural elements of hard to rebuild selectively some capabilities
president at SITRA, the Finnish performance management. and not others, will not help much. It may
Innovation Fund, and was even lead you to a dead end. ■
formerly chief strategy and Modular structures and processes
information officer at Nokia. An organisational design consisting of
modular business processes and IT systems
+33 (0)1 60 72 42 43 enables greater agility in establishing and
strategicagility@insead.edu scaling up (and down) new businesses. This
www.strategicagility.com offers higher and faster redeployment