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Issue Report

Collection of full-length papers and in-depth analysis of economic and management issues.

Organizational Agility: A Key to New Success

Organizational Agility: A Key to New Success

KIM Chi-Poong, KIM Jae-WonYoon Woo-Geun

June 12, 2012

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In the hyper-competitive business environment, survival depends on exploring opportunities and nimbly entering new businesses at the appropriate time. In general, Korean companies give less attention to discovering new ventures than to expanding their existing business segments, improving product quality and lowering costs. Going forward, their success in new businesses will depend on attaining organizational agility -- the ability to detect and respond to environmental changes in a flexible and timely manner.

Organizational agility encompasses the ability to sense, capture and execute opportunities swiftly. Prompt, efficient decision making and execution is necessary as well as ability to pivot in various directions and to adjust speeds. There are three types of organizational agility. First, strategic agility is the ability to constantly probe for new business opportunities, seize them at the right time and, if goals are not met, exit promptly. Second, portfolio agility means the capacity to rapidly acquire and allocate resources as well as to flexibly adapt products and business areas to market changes. Third, operational agility refers to the ability to execute business plans swiftly through effective and pliable operations.

According to a survey of organizational agility in Korea, large corporations scored highest in operational agility (64.9 points). Strategic agility (61.7 points) and in portfolio agility (58.6 points) followed but large corporations views did not match their action. They ranked order of importance as strategic, portfolio and operational. In order to succeed in new businesses, strategic agility should be their highest priority. In contrast, small- and medium-sized enterprises (SME) scored higher in strategic agility (60.3 points) than operational agility (59.4 points) and portfolio agility (55.1 points). As for the importance of the agility categories, the SMEs' ranked them the same as large corporations. Strengthening portfolio agility should be placed at the forefront of SMEs' priorities.

To reinforce organizational agility, seven tasks need to be addressed.

① Steer CEO's time toward exploring opportunities
② Use external networks to enhance risk analysis
③ Create a separate organization to search for new opportunities
④ Hire through social media and M&A
⑤ Allocate adequate resources to new businesses
⑥ Establish a system to evaluate new business based on its buildup progress
⑦ Install a system to support swift execution of new businesses.
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