Operational Agility: The Key to Withstanding Market Volatility

Bradley Chapman

Operational Agility: The Key to Withstanding Market Volatility

The need for operational agility has never been greater. Companies that prioritize operational agility are 2.5 times more likely to withstand market volatility and achieve operational excellence. As market conditions fluctuate and technological advancements disrupt industries, organizations must adapt quickly to stay competitive and resilient. This article explores the importance of operational agility, its three pillars, and how companies can enhance their decision-making and responsiveness to navigate turbulent times. By embracing operational agility, companies can not only survive but also thrive amidst market volatility.

The Importance of Agility and Absorption in Business

Agility and absorption are two fundamental approaches to mastering uncertainty in business. Agility, exemplified by Muhammad Ali, is the ability to quickly spot and exploit opportunities. It comes in the forms of operational agility, portfolio agility, and strategic agility. Operational agility allows companies to improve operations and processes within their business model, while portfolio agility involves reallocating resources to more promising units. Strategic agility is the ability to jump on game-changing opportunities.

Absorption, exemplified by George Foreman, is the strength to withstand punishment and weather sudden shifts. Companies can build absorption by capitalizing on size, diversifying assets, and stockpiling cash.

Balancing agility and absorption is critical for success, as seen in Apple’s ability to combine agility with a loyal customer base during the 1990s. By cultivating both capabilities, companies increase their chances of emerging as market leaders.

The Role of Strategic Agility in Turbulent Markets

Fundamental market changes are occurring more frequently and with higher impact, posing challenges for companies to adapt. Environmental issues are expected to become the most important factor driving these changes. Strategic agility, defined as a company’s capacity to identify and capture opportunities faster and with higher impact than competitors, plays a crucial role in navigating turbulent markets.

Companies need processes and capabilities to identify and understand fundamental changes before they occur. Strategic agility combines operational scalability and flexibility with strategy processes aimed at identifying and acting upon fundamental changes. Norwegian companies have focused on improving their operational agility but still have untapped potential in seizing strategic opportunities created by market turbulence.

Building a strategically agile company requires a focused and systematic approach.

The Findings of the Capgemini Consulting CEO study

A study by Capgemini Consulting highlights the growing impact of market changes on businesses. Companies are facing an increasing frequency of fundamental market shifts with significant consequences. To navigate these changes successfully, agility has emerged as the most crucial non-financial factor influencing the valuation of firms.

The study reveals that while Norwegian companies have made considerable efforts to improve their operational agility, they have yet to fully embrace the potential of strategic agility. Strategic agility, which combines operational scalability, flexibility, and strategic processes, enables companies to identify and seize opportunities even during market turbulence.

To capitalize on market changes, companies must develop structured capabilities related to strategic agility. This entails being prepared for significant market disruptions and having the flexibility to adapt quickly to new circumstances. By combining operational scalability and flexibility with strategic agility, companies increase their chances of success in today’s volatile business environment.

Bradley Chapman