Today, it goes almost without saying that the rate of change on the outside is increasing: the “clock speed” of business in terms of product cycles, new technology roll-outs, and social media stories seems higher than ever. But does that mean firms have the internal capacity to mobilise and adapt quickly in the face of disruptive challenges?
Are we seeing a comparable growth in responsiveness within firms to the increased pace of change and the speed of external shocks? For the most part, the answer is no.
The recent outbreak of Covid-19 highlighted how poorly equipped firms are to deal with one-off shocks, and I would argue that many established firms are struggling to keep up with broader shifts in demand and customer expectations.
Speed up the clocks
Taking a closer look at what firms are doing to increase their internal clock speed, there are positives and negatives. The positives might include innovations in their IT systems, which are increasingly being configured in a way that permits real-time responses, such as logistics companies providing real-time tracking services for customers.
Alternatively, while small start-ups are generally good at hustling and responding quickly, most large firms have organisational structures and internal processes that are anything but agile. The clock speed in large organisations is measured in weeks, months and years, but customers are operating on a clock speed measured in hours and days, which makes it hard to stay relevant.
When exploring solutions, there is value in pausing and reflecting before expensive or irreversible courses of action are pursued. If we take the response to Covid-19, most organisations were ill prepared and moved too slowly, but it is inconceivable that something as unprecedented as this might have been dealt with automatically.
In a fast-changing world, we need our decision makers to make good judgements, and this involves giving them the time to pause and reflect. It also means giving them rapid access to the relevant information, and this is where things go awry. In most organisations, decision makers receive a mix of data, where the focus can be on standard information that IT systems were designed to report on rather than timely relevant information, such as customer feedback and employee engagement.
Decision making therefore goes at the speed of that information delivery and how comprehensive it is.
There are two ways forward to consider, because it is useful to reflect upon and work with both.
Move at two speeds
First, build a dual clock-speed organisation, where you match the internal decision-making cycle to the business need. Consider also how to respond to a crisis such as the Covid-19 outbreak. Creating a CEO-led task force to monitor the situation is a good first step.
But this task force also needs to have the authority to act quickly — so that the organisation can keep up with what is happening outside its boundaries. Unfortunately, many of the task forces created during the outbreak found themselves reporting to committees of well-meaning, but ill-informed, managers, thereby slowing down the whole response plan.
Second, work on increasing your real-time organisational intelligence. This means building the systems and capabilities that enable people across the organisation to know what’s going on at all times, so that they can make smart decisions about how to act.
Focus on the instant
This logic of real-time feedback has been applied in many successful companies, but these companies are the exception not the rule, and it is no mystery why. People in large firms are comfortable with the slow-and-steady internal rhythm of the business, the weekly or monthly cycle of updates, and the annual budgeting process, and they don’t really know what else might be possible.
This is not a reason to leave things as they are because there is always scope for experimentation in order to help your firm stay responsive and relevant. Moreover, one-off shocks like the Covid-19 virus are sometimes the push we need to shake things up and try something new.
— Julian Birkinshaw is Professor of Strategy and Entrepreneurship and Deputy Dean at the London Business School.