Agility

The Enterprise Systems Center

Lehigh University

Agility

Agility Has Four Principal Elements:

¨ Enriching Customers — Products vs. Solutions

In an agile world, customers pay either a fee for skills, materials and a modest profit for products, or they pay a percentage of the perceived value for

solutions. Companies adopt a value-based strategy to configure products and services into solutions which enrich their customers.

¨ Mastering Change and Uncertainty—Entrepreneurial Organization

Agile competition is based on the agility to thrive on change and uncertainty.

Companies use an entrepreneurial organizational strategy, which can respond more

quickly than a hierarchical structure to changing condition.

¨ Cooperating to Enhance Competitiveness — Virtual Organization

In an agile organization, cooperation enhances competitive capability. Companies use the virtual company model inside and outside to share responsibility and enhance cooperation opportunistically across organizational lines.

¨ Leveraging the Impact of People and Information

In an agile environment, organizations sell skills, knowledge, and information over time. Companies make investments to increase the strategic impact of their people and information on their bottom line.

A comprehensive strategic response to fundamental and irreversible changes that are taking place in the dominant system of commercial competition in “First World” economies.

What are we changing from?

Competition based on mass-market products and services that are:

● Uniform/standardized

● Long-lived

● Built to forecast

● Low on information content

● Characterized by single instance sales

● Priced by manufacturing unit cost plus margin

What are we changing to?

Competition based on niche products and services that are:

● Individualized

● Short-lived

● Built to order

● High on information content

● Characterized by continuing relationship sales

● Customer perceived-value driven

What are the forces pushing these structural changes?

● Continuing fragmentation of markets

● The ability to build to order in arbitrary quantities

● The ability to treat “mass” customers individually

● Shrinking product lifetimes

● The fusion of goods and services

● The emergence of true global competition

● The spread of cooperation and competition among companies

● The rise of new distribution infrastructures

● Persistent corporate reorganization frenzy

● Pressure to internalize social values

Agility is multifaceted, serving as an identifier for the elements of a new system of commercial competition.

● At the level of marketing, agile competition is characterized by an

individualized, highly variable combination of goods, information, and services priced

as a function of individual customer-perceived value.

● At the level of production, agile competition is characterized by the ability to produce a wide and rapidly changing variety of goods and services to customer order in arbitrary lot sizes.

● At the level of design, agile competition is characterized by a methodology that integrates supplier relations, production processes, business processes, customer relations, and the product’s use and eventual disposal.

● At the level of organization, agile competition is characterized by the ability to

synthesize new productive capabilities out of the necessary resources — the

expertise of people and physical facilities — regardless of their physical location,

within a company or among groups of cooperating companies.

● At the level of management, agile competition is characterized by a shirt from the command and control philosophy of the modern industrial corporation to one of leadership, motivation, support, and trust.

● At the level of people, agile competition is characterized by the emergence of a knowledgeable, skilled, and innovative total workforce as the ultimate differentiator of successful companies from unsuccessful ones.

Why is agility as a system of competition better suited to marketplace realities than the mass production system?

An agile competitor, whether an individual or a company, is able to thrive in and to profit from and environment of continual, rapid, and unpredictable marketplace change. This capability is enabled by operating within a strategic framework defined by the four principles of agile competition.

1. Enriching the Customer

The “products” of an agile company are perceived by its customers as solutions to their individual problems. The packages of goods and services that they buy are only means for implementing these solutions. With effective uncoupling of the cost of production from lot size, the goods and services that an agile competitor produces for an individual customer can be priced as a function of the value of the solutions they provide to that customer.

2. Cooperating to Enhance Competitiveness

Cooperation, internally and with other companies, is an agile competitor’s operational strategy of first choice. The end is bringing agile products to market as rapidly and as cost-effectively as possible. Cross-functional teams, empowerment, reengineering of business processes, the formation of virtual companies and of partnerships, even with direct competitors, are all means employed to leverage resources through cooperation.

3. Organizing to Master Change and Uncertainty

An agile company is organized in a way that allows rapid reconfiguration of human and physical resources. It can support multiple, concurrent, organizational configurations as the requirements of different customer opportunities dictate. The goal of very rapid concept to cash time implies innovative, flexible, organizational structures that enable rapid decision-making by distributing managerial authority.

4. Leveraging People and Information

People — what they know, the skills they possess, the initiative they display — and information are the differentiators among companies in an agile competitive environment. Because knowledge-based products offer the greatest potential for mass individualization, continuous workforce education and training is integral to agile company operations. It constitutes an investment in future prosperity rather than a cost to be assigned to current overhead expenses.