Sunday, 2 September, 2007

Business agility explored

While discussing SOA adoption, we believe that SOA is needed for achieving business agility. However, at the same time, we find our understanding of business agility is limited. We understand that business agility means the ability of business to respond quickly to the ever changing needs of environment in which it operates. It also means how quickly the business can launch new products, enter new markets or respond to new regulations. However, beyond this understanding of business agility, we stop to explore.

An article from the Research Briefing 2006 of MIT Sloan CISR would perhaps help us in understanding more about business agility. In this article, authors Jeanne W Ross and Cynthia M Beatch, have defined agility as the set of possible business initiatives a firm can readily implement leveraging pre-determined competencies with managed cost and risk. Based on their research, the authors have identified seven types of business agility, which they have grouped into three categories. These categories and the types are as given below:
  • Business Efficiency: Continuous improvement and Scalability
  • Market Responsiveness: Product innovation, Process re-engineering and New business model
  • Boundary Spanning: Acquisitions and Partnerships

Business Efficiency agility
attempts to identify repetitive processes and extract unnecessary cost and time. The continuous improvement agility is more found with commodity businesses such as consumer product manufacturers. Such organizations are required to implement continuous improvement initiatives for accelerating profitability while reducing business risks. Scalability agility is the ability to rapidly scale up and down in response to changing business volumes. This kind of agility is almost must for companies from the Property and Casualty (P&C) Insurance industry as they would experience extraordinary demand for claim processing after natural disasters. The key organizational characteristics that would help to achieve the Business Efficiency agility include the following:
  • Standardized IT environment
  • Standardized operations processes, systems and data
  • Enterprise-wide process design
  • Strong metrics and
  • Shared services

The speed with which organizations are required to respond to new customer demands and competitive challenges have gained increased importance for market responsiveness agility. Unlike Business Efficiency agility, Market Responsiveness agility disrupts, builds and reuses core capabilities. Interestingly, even if processes must change, companies benefit from developing clearly defined, standard operations processes and related data. Standardized IT Environment also helps in providing the foundation for new processes and interactions. Most notably, matrixed management structure helps companies introducing new capabilities without discarding old capabilities.

Organizations with boundary spanning agility have competencies enabling profitable growth through their acquisitions and partnerships. The key organizational capabilities that enable Boundary Spanning agility include aligned incentives, strong metrics and individual heroics. Interestingly, the key organizational capability for other two categories of agility, the Standardized IT Environment is actually found to be negatively correlated with profitable acquisitions. On the other hand, while the heroic actions of individuals enable boundary spanning agility, it gets highly discouraged for achieving other two categories of agility.

While some organizational characteristics would help for more than one categories of agility, there would involve some trade-offs if an organization attempts to achieve agility in multiple categories.

This kind of understanding of business agility would definitely help in planning for SOA adoption. Let's hope to receive even more understanding about business agility from MIT CISR. We will then be more wise while discussing the need of SOA for achieving business agility.

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