The Adaptive Enterprise – A Key Challenge For Strategic Managers
by Gogo Erekosima
Some of my favorite VCs and startup business advisors have built a large following by pointing out some of the ways the small firms can beat big business incumbents. Of course, “beat” in this context is very relative and usually refers to landing that mid-sized account, or profitably harvesting a market niche so small or undefined that the big boys don’t consider it worth their effort.
Fast Is The New Big
However, as the Idea Age acceleration of information technologies, connectivity, and logistical improvements moves forward, large corporations have sometimes found themselves on the defensive from a disruptive new entrant, or a large scale profit/value migration away from industry sectors where they are well entrenched to new playing fields where they are too slow to seize advantage.
Small businesses, with fewer layers of management and communication are quicker to decide and swifter to act in the dynamic new business environment that has emerged. In fact, the “fast eats the slow” execution is one of the cornerstones of our consulting to small and midsized companies.
In his excellent book, Strategic Learning, Willie Pietersen shares a term that the Army War College in Carlisle, Pennsylvania uses to describe these environments. They refer to such an environment as a VUCA environment – which stands for “Volatile”, “Uncertain”, “Complex” and “Ambiguous”.
Strategic leaders and executives at many a large company have found just how inhospitable such environments can be for large, lumbering, slow-to-adapt organizations. The 2013 Fortune 500 list shows that only 11% of the companies originally listed in 1955 are still on the list. While that may not impress you, a Kauffman foundation report, “What Does Fortune 500 Turnover Mean?” for instance, showed the following:
- From 1955 to 1993, median Fortune 500 turnover was 29 companies per year
- From 1995 to 2011, median turnover was 39 companies per year
Although there are some explanatory factors associated with changes to the makeup of the list, the study concludes that factors ranging from changes in technology, increased M&A activity, as well as the larger number of competitors, have played a part in a more complex environment for large firms.
Former stalwarts like Eastman Kodak and Bethlehem Steel never adapted to the new environment and paid the price.The Race To Adaptive Enterprise
Large firms, whether industrial or service organizations, now almost universally recognize the need to become an adaptive enterprise – an organization where strategy, planning, information systems, processes, and culture are built on the assumption that trying to predict the future in a VUCA environment is less useful than responding speedily and strategically to change. Such organizations harvest competitive advantage from the speed and sophistication of their responses to dynamic change.
I have found Willie Pietersen’s Strategic Learning Cycle (Learn – Focus – Align – Execute – (Re) Learn/Renew)
to be a simple yet robust and effective framework for any large organization that wants to be sustainably agile.
We show small and midsize businesses how to use adaptive enterprise strategies from the largest companies to accelerate business growth.