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Mon, Mar 12, 2007 14:06 EDT

A Formula to Measure Business Agility

Measuring and managing your drivers of business agility

Topic: Enterprise Management

Blog: Doing Business in Real Time

Current Rating: 5 Comments: 17

This weekend I spent an afternoon sitting in a coffee house in my downtown Chicago neighborhood pondering what it means to be agile and how to measure it. The place was busy but I got lucky and snagged the cushy armchair next to the plate glass window in front that looks out on the sidewalk and the apartment building across the street. Watching the other patrons, looking at the people who pass by, and enjoying that burst of mental energy induced by a fine café au lait is often a good way to get inspired and be creative. 

I started with the definition of agility in business as: the ability to consistently earn profits that are 2 – 4% (and sometimes more) higher than the market average. Agility enables companies to earn an additional 2 – 4 % because they can make a hundred small adjustments every day to reduce operating costs and increase revenues. And sometimes agility enables you to earn even more by sensing and responding quickly to opportunities for new products or services, that for a while, have terrific profit margins.

I decided to use this results oriented definition of agility instead of attempting to describe what agility is because we have a lot yet to discover about being agile (agility “best practices” as they say) so any description I offer now will only change later. Also, I figured that unless agility actually delivers additional profits then why go to all the trouble of being agile in the first place?

There is one caveat to this definition of agility though - true agility is self-sustaining, not self-consuming. By this I mean companies can always get a short-term boost to profit margins by cutting headcount, reducing customer service, squeezing suppliers for lower prices, and deferring repairs and improvements to infrastructure. But that is self-consuming, like spending down your bank account. It’s not agile because it isn’t sustainable; it does not create or renew; it only uses up.

So if business agility is the ability to consistently earn an additional 2-4% (and sometimes more) then what is the combination of factors that delivers this delightful state of affaires? At this point I ordered another café au lait. And as I sipped that hot, foamy, milky coffee, I looked out the plate glass window and saw a woman walking by with two big dogs; the dogs were so happy to be outside they pulled at their leashes and wanted to charge off down the street. She worked hard to keep them out of trouble.

Then I eavesdropped on a conversation going on at the table next to me. A couple of college students were discussing an upcoming organic chemistry test; one student was showing the other how to read a formula and draw out the molecular structure implied by the formula. Good coffee houses serve up a stimulating mix of impressions like this to go along with their fine fare and the resulting blend is often the source of interesting ideas.

Here’s the idea that emerged from the blend of that second café-au-lait and the impressions I just described. First of all, I think agility happens when we see something we want and when we are highly motivated to go after it. But we can’t just go charging off down the street; we have to focus on what’s important and act effectively. Secondly, I think there’s a formula to measure agility and it goes like this: 

Business Agility = (Visibility + Motivation) x Training

What this means is that companies will consistently earn an additional 2-4% profit if their people can clearly


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Tue, Jan 26, 2010 3:26 EST
Anonymous user
Posted by: RU2
Rating:

Jolly good day Michael,

Rummaging through some of your posts I was surprised to read your statement that, "Since my mother and father were both born and raised in the western US state of Montana – Big Sky Country – that makes me a Cowboy."

You Yanks have constantly stressed motivation, training, vision and related factors other than genes as the keys to who you are. Often I wonder whether we Brits would have gotten a bigger piece of the pie after World War II if Monty had understood that as well as Ike. Of course, there would have been little difference since we in the west eschew the spoils system.

One idea if you really want to claim your heritage is to actually get in the saddle for a summer as did one of your great manchild presidents, TR. Bring your iPod and blog to your heart's content -- perhaps the change of scenery will be even more inspirational than your coffee shop with the old newspapers.

When you come back, you'll be able to claim "tenderfoot" as your ethnicity and, to paraphrase Will, you might even have a little of that "lean and hungry look."

Yours,
Bobby

 
Mon, Apr 30, 2007 18:06 EDT
Anonymous user
Posted by: Justin
Rating: 90

Michael,
I believe the second latte was an excellent idea. The formula condenses OODA pretty well. As an aside - I was thinking this and was looking for where I had read about OODA and pulled "Building the Real-Time Enterprise" off my bookshelf and noticed an eerie similarity between the authors name and yours. Guess I don't need to say that Observe and Orient makes up the visibility section of the formula and the Decide and Act pretty much make up motivation (in a company that does not reward innovation I may decide to do nothing....). I do like the training aspect. With training greater options become available to the motivated employees. This has a dual effect since employees, supplied with the right kind of information they can trust, are enabled to make better decisions they are happier employees. I believe most of us want to do a great job. And of course happy employees don't tend to leave - so it is self-serving to a large extent. I like the formula and have the added benefit of letting you know I enjoyed your book, even though I did not initially make the connection.

 
Sun, Feb 24, 2008 4:34 EST
Anonymous user
Posted by: Ali Anani
Rating: 90

Interesting reading. You may wish to consider the motivation part. Motiation is the product of desirability*ability*institutional support. Ability is enhanced by training. So, the taining part in your formula is covered in the motivation definition. Desirability is embeeded in the vision part of your formula. Institutional support may enhance or decrease the desirability and ability.

So, going back to your formula it would read like
Business Agility = (Visibility + Motivation) x Training
= (visibility+ (ability+desirability+institutional support))*training

 
Sat, Jan 16, 2010 8:40 EST
Anonymous user
Posted by: RU2
Rating:

Hello c4si,

We have a quip here in the Island Nation that in America freedom reigns while here it just rains. So forgive our dreary side, however, often we see ourselves as needing to bring you Yanks back down to earth a bit. Dear chum, your OODA formula may be mildly clever, yet assigning numerical weights to the components you describe to get an actual numeric result would be highly subjective.

As a seafaring nation -- and perhaps you'll forgive me for touting the Union Jack a bit here -- we've known for centuries about the importance of visibility, training our crews and being motivated to sail across uncharted waters. You Yanks so often forget that it was we Brits who established english as the language of business, and the sun never set or has set on the trading routes we established. Indeed, we did use real numeric values in our navigation.

Your OODA formula is more a "chip off the old block" than the product of too much caffeine. As such a Shakespearian assessment of your grand innovation might be "much ado about nothing". For real inspiration try tea, old chap.

Fondly,
RU

 
Thu, Jul 17, 2008 2:18 EDT
Anonymous user
Posted by: mfaisal
Rating:

Thanks for the article. It was quite interesting. However, what are you views on the following:

1- Scope of visibility?
2- Adding a 't' time component to the equation so as to introduce the acceleration bit. Since one could argue that you need to achieve agility or respond to change in a fast and timely manner!

...thanks.

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