Agility inside organisations.

Case: the capacity to reconfigure your resources

Yasmine, the newest Jester, has immersed herself in the agility of organisations, in which dynamic capabilities play an important role. In this blog she describes a case from her research and tells what organisations can learn from it.

Agility as a means of survival and growth

Now that we have been living in a corona era for over a year, almost no organisation can get past the importance of agility. Agility to be able to react to events in your environment in order to stay on your feet. But agility is certainly just as important in times when the economy is doing well, because the battle to remain relevant continues. Research has shown that agility is important in both stable and unstable environments. Today, organisations are asked to keep adapting and renewing themselves constantly.

Charles Darwin already saw the importance of agility 200 years ago when he said: "It is not the strongest of the species that survives, nor the most intelligent that survives. It is the one that is the most adaptable to change."

In short: agility is indispensable for every organisation. At Jester Strategy we therefore consider it important to create robust and future-proof strategy for organisations.

Dynamic capabilities

The constant renewal that is asked of organisations today demands certain skills and processes of an organisation, namely: dynamic capabilities. Dynamic capabilities are the capabilities an organisation needs to integrate, build and reconfigure its processes. The routines of the organisation that are of an organisational and strategic nature. This allows an organisation to realise new reconfigurations of resources in a rapidly changing market. In the market, an organisation has to be able to see opportunities and be able to seize them. To respond to the environment, organisations have to make use of their knowledge of the external environment. This knowledge first has to be internalised by the organisation, by sensing the opportunity and learning from the newly acquired knowledge. Subsequently, the new knowledge has to be combined and integrated with the existing knowledge. This then has to lead to reconfiguration of the organisation's resources.

The time when, as an organisation, you had a safe position with a valuable, rare, inimitable and non-substitutable product or service is over. To remain competitive as an organisation, you must have dynamic capabilities. The organisation must be able to compose and combine the resources within your organisation in a different way, in order to respond to changes in the market.

Research has shown that there is a relationship between having dynamic capabilities and organisational performance. Organisations that can react quickly, are flexible and able to restructure internal and external resources are the "winners of the marketplace".

The importance of reconfiguration

The dynamic capability that may well be the most important for innovation in the SME sector is the capacity to reconfigure resources. In addition, this is important for organisations in a dynamic environment. Research has shown that organisational efforts on this capability lead to positive results. Recomposing resources is a "key capability", as it transforms resources in response to monitored market developments and changes. To innovate and achieve a competitive advantage, it is crucial for organisations to compose resources differently. There are four dimensions of this dynamic capability relevant to this case: 1) Scope expansion, 2) Scope reduction, 3) Innovation and 4) Institutional frictions.

The impact of the organisational structure

The organisational structure facilitates dynamic capabilities. It influences the impact of dynamic capabilities on the performance of an organisation. Change of organisational structure can be a reflection of reconfiguration processes. The performance of the efficiency of these processes is improved by modular forms in the structure. For strategic flexibility, an organisation should have a simplified structure, but it must retain control over non-core functions. Renewing the organisational model and recomposing the structure at the same time causes problems. To reduce these problems, the organisation could reconfigure already existing structures and activities to realise new opportunities. Reconfiguration of structure and resources therefore have a mutual relationship. Organisational structure is divided into a number of dimensions, namely: 1) Size, 2) Centralisation of authority and decision-making and 3) Interdependence of organisational components. These three specific dimensions have been selected for their relevance to the case organisation and/or the development of this dynamic capability.

The influence of organisational culture

Organisational culture has an influence on dynamic capabilities, more precisely on the process of reconfiguring resources. The culture of an organisation determines the shared beliefs and expectations that people have. This creates shared norms that have a major influence on the behaviour of individuals and groups within an organisation. Culture is an important and therefore frequently researched aspect of part of an organisation's success. If management understands organisational culture well, this can reduce the likelihood of an organisation failing. Organisations usually do not change when there is a mismatch between the planned change and the existing culture. Moreover, organisations often fail in the change process because cultural issues are ignored. If an organisation decides to change strategic direction, it may find that culture is either a source of strength or a source of weakness. Because building an organisational culture takes a long time, it is also difficult to change. To understand the organisational culture on a deeper level, it will be divided into several dimensions, namely: 1) People orientation, 2) Innovation and 3) Results orientation.

The case

To what extent do organisational structure and organisational culture influence the development of capabilities for the reconfiguration of resources?

This was investigated through a case study with qualitative interviews with employees and managers of a multinational in the design & consultancy industry. The study showed that greater organisation size contributes to the development of reconfiguration capabilities through institutional frictions. This is due to the increased amount of resources present at a larger organisation size. Resources that could be spared and therefore deployed for this process in order to innovate. The case organisation had a decentralised decision-making structure. This was not conducive to the reconfiguration of resources through scope reduction and institutional frictions. A central approach with a shared vision can help to counter fragmentation and stimulate focused and joint efforts in the reconfiguration of resources. A high level of interdependence of the organisational components proved to be a reason for the development to be able to reconfigure resources.

People orientation also helped the organisation to make progress in their digital transformation and at the same time to develop capabilities for the reconfiguration of resources through institutional frictions. People were the greatest capital of this organisation. A high people orientation may not have a positive influence on organisations where this is not the case. Innovation orientation and innovation as a dimension of the reconfiguration of resources also proved to be linked. A need to innovate proved to be stimulating to reconfigure existing resources. Finally, the study showed that a strong focus on results was not conducive to the ability of an organisation to innovate, and therefore not to their ability to reconfigure resources through institutional frictions. This must, however, be interpreted with the necessary caution, as a results orientation is needed for vision and efficiency and this could be stimulating for the development of the ability to reconfigure resources. In summary, the findings suggest that organisational structure and culture can have a positive influence on the ability to reconfigure resources.

What can we learn from this?

The case about developing reconfiguration capabilities to be more agile as an organisation is certainly relevant in the current corona pandemic. Agility is more than ever necessary for organisations to build into their organisational structure and culture. This case shows how, through organisational structure and culture, you can build dynamic capabilities to compose your resources differently. Innovating by composing and deploying the (existing) resources within your organisation in a different way. To achieve this, it is important to turn the right knobs on your organisational dashboard. The organisation size, centralisation of decision-making and the interdependence of organisational components are structural aspects on which change can be made relatively easily. Adjusting cultural aspects such as the degree of people orientation, innovation orientation and results orientation is a longer process. Nevertheless, this too can be changed.

Jester Strategy is happy to think along about developing a robust and future-proof strategy. It is important to look closely at the resources the organisation already has and make optimal use of them, and where necessary recompose the resources in your organisation. Is your organisation ready for the future? We would be happy to think along with you.