How and why “agile absorption” is essential when seizing the upside of turbulence in the global marketplace
Donald Sull provides a brilliant analysis of a process that continues throughout the world as I now compose and then you read this brief commentary: “To succeed, managers must commit to a specific mental map of the world, and reinforce it with processes, resources, external relationships, and a culture that supports their world view.” However, over time, commitments harden and then (more often than not) become obsolete and counter-productive. Hostage to what James O’Toole so aptly characterizes as “the ideology of comfort and the tyranny of custom,” managers respond to turbulence “by accelerating activities that worked in the past, a dynamic I have termed active inertia.”
I agree with Sull that the three factors that drive turbulence (i.e. dynamism, complexity, and competition) are likely to amplify volatility in the future. “Turbulence did not begin with the current downturn, nor are we likely to return to a predictable world after the [current] recession ends.” Sull’s own research (including research on others’ research) suggests that there will be both “bad news” and “good news” in months and years to come. Many (most?) companies will be devastated by their active inertia (i.e. digging an organizational “hole” even deeper while struggling to climb out of it) whereas other companies will take full advantage of new opportunities in three distinct ways, each of which Sull rigorously examines: opportunities from new ingredients, opportunities from a novel combination of resources, and opportunities from shifting taste.
Readers will appreciate the skill with which Sull organizes and presents his material. His focus is how HOW business leaders can help their organizations to develop what he characterizes as “agile absorption” so they can take full advantage of opportunities generated within an uncertain world that is certain to become even more turbulent. With regard to agile absorption, he devotes all of Chapter 11 to discussing what it is, how it functions, why it’s important, and how to develop it. There are several structural factors:
o More “good fats” (e.g. cash reserves), few “bad fats” (e.g. lower fixed costs)
o Actively manage trade-offs (e.g. Toyota traded higher fixed costs for flexible work rules)
o Build an agile culture on an absorptive asset base
Re the last point, Sull observes, “When the context shifts – and turbulence ensures that it will – the bloated organization lumbers through the ring like a punch-drunk heavyweight, absorbing blows it can no longer dodge and missing opportunities it is too slow to seize.” He concludes the chapter – and the book — with a “Going the Distance Survey” that will help the reader to determine her or his organization’s capacities for agility and absorption.
So, what to make of this book that develops in somewhat greater depth with somewhat wider application material he introduced in previously published book, Revival of the Fittest: Why Good Companies Go Bad and How Great Managers Remake Them? Here’s my take. First, it is obviously much easier and far better to avoid agile inertia than it is to recover from it. Sull explains how. Also, all companies are vulnerable to the perils of turbulence caused by dynamism, complexity, and intense competition. Sull explains how and why agile absorption can help them avoid or overcome those perils. Finally, business leaders can take specific and practical steps to seize “the upside of turbulence.” Sull explains what that requires, not only of the leaders but of everyone else involved in the given enterprise.