Of all the things companies can strive to achieve, agility delivers the highest return in today’s business environment, according to Peter Weill, director of MIT Sloan School of Management’s Center for Information Systems Research.
“Business environments are becoming less predictable,” Weill said at a recent Massachusetts Institute of Technology conference. Cycles are shorter; quicker refreshes are required; and companies have to contend with the pressures of globalization, thinning margins, rampant merger and acquisition activity, and tighter regulations.
The center’s examination of hundreds of companies shows agile companies can better navigate these choppy waters, increasing revenue and profits faster.
The paradox, Weill said, is that the most agile companies are those that have digitized and standardized their core business processes and platforms. That represents a great opportunity for IT leaders to drive reform.
Agile firms have several practices in common, he said:
• A clear operation model and sense of how they will grow.
• IT leadership with a vision. “Don’t just be order-takers,” Weill said. “Take the lead on getting the company to figure out how it is going to become agile.”
• Simple and clear IT governance. “Simplify and limit red tape,” he said. “Be stronger at the core, but demand less adherence at the edge to improve innovation.”
• IT portfolio management broken down into asset classes. “Agile companies spend 11% more on infrastructure, but they spend it right,” he said. “They also have the lowest IT unit costs.”
• A mature and modular enterprise architecture.
• Business leaders who play active roles in IT governance.
Regarding growth, Weill said there are four core operating models and companies should focus on one. His models:
• Coordination, where unique business units need to know each other’s transactions. The key IT capability: access to shared data through standard interfaces.
• Unification, where a single business has standards for global processes. Key IT capability: enterprise standards and global data access.
• Diversification, where independent business units have different customers and expertise. Key IT capability: providing economies of scale without limiting independence.
• Replication, where businesses are independent but similar. Key IT capability: providing a standard infrastructure and application components for global efficiencies.
Weill’s main message was that IT leaders can help companies recognize the importance of business agility and then play a key leadership role in achieving that goal.
