Information technology has revolutionized the way companies manage and compete. Yet, the evolution of IT is never-ending.
This article is provided by the Deloitte Institute of Innovation and Entrepreneurship.
Kishore Sengupta and Andrea Masini have investigated whether and how being technologically agile makes for higher corporate performance and whether an organization can be too agile for its own good.
In the 1990s, when mighty IBM was attacked on all sides by smaller, nimble PC makers (not to mention Microsoft), it had a very difficult time retooling itself. Not only did the company principally sell mainframe computers, its own information technology (IT) was built on a big rigid computer platform. We share this bit of techno history as an analogy, more or less, of what’s happening today in a lot of companies. The computing world is very attuned to the law laid down by an Intel co-founder. Here’s how Intel puts it on their own website: “Intel co-founder Gordon Moore is a visionary. In 1965, his prediction, popularly known as Moore's Law, states that the number of transistors on a chip will double about every two years. And Intel has kept that pace for nearly 40 years.”
As Intel goes, so goes the rest of the computing world. But what about your own company? You probably don’t work in the computing industry, but your company is likely overflowing with digital equipment. From accounting to manufacturing to shipping; it’s all computerized these days. The question is whether your company is as hunkered down (technologically) as IBM was in the ’90s, or whether your company and its IT leadership are agile.
IT agility – the ability of a firm to adapt its IT capabilities to market changes – is increasingly suggested as an important organizational capability. Yet, a review of the relevant literature suggests that the construct is still ill-specified, that it lacks reliable measurement and that its posited contribution to organizational performance needs further articulation and empirical validation. We’ve dug deeply into the subject and, after analyzing in detail the IT processes of almost one hundred companies, we have drawn some interesting conclusions. First, we posit that IT agility is of two different types: range-agility and time-agility. Then, we utilize this conceptualization to propose an approach for measuring IT agility in organizations and to examine its relationship with performance. While we have used our research lens to study the impact of different types of IT agility in large manufacturing companies, what we’ve learned has implications for many other organizations.
Types of agility and strategic options
Stated in an extremely simple way, IT agility is all about reconfiguring or replacing your information technology systems when new marketplace realities change the way you have to do business. While most studies we reviewed generically interpret IT agility as the ability to respond to changes in the external environment through appropriate internal adjustments, they implicitly refer to one (or more) of two evaluation criteria to gauge whether a firm possesses this ability. They consider either the extent to which an organization can respond to changes in the external environment – its range of agility – or to the time required to execute this response. Let’s take each type in turn. Range-agility This represents an organization’s ability to broaden (or shrink) specific aspects of its capabilities. They include increasing or decreasing the repertoire of products and/or services offered to the market, or expanding or shrinking internal capabilities in manufacturing, services or processes. Adjustments in range can be accomplished by exercising options available internally (for example, better integration in processes or strategic business units), and externally (for example, via alliances and partnerships). Consider National Bicycle as a good example. It is one of the largest Japanese bicycle manufacturers, an affiliate of Matsushita Electric Industrial Co.
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