Why Business Strategists Need a Night at the Improv
- Strategic improvisation is the capacity of a management team to respond to events that cannot be planned for but must be addressed speedily.
- Strategic improvisation relies on flexible IT infrastructure — made up of business intelligence and knowledge management systems — combined with a strong information management capability.
- Improvisation also requires an experimental culture and a loose organizational structure.
- To develop strategic improvisation, leaders are advised to take stock of the organization’s competitive environment to determine if improvisation is necessary; assess IT systems and IM capabilities to identify lagging areas; gain a better understanding of the link between organizational culture and outcomes; and take a long-term perspective on strategic improvisation.
When a train explosion hit Lac-Mégantic in 2013, a Canadian firm that offers donor management services to humanitarian organizations was faced with an unprecedented challenge. To deal with the flood of donation requests over an extended period of time, it had to simplify its hiring processes, scale its IT systems, and change its internal lines of communication. There was no roadmap to follow and no time to waste.
By chance, a small environmental consulting firm received a request for proposal on smokestack emission analysis, an area in which they had little to no experience. The clock was ticking; would they jump in?
The donor management firm found ways to connect its IT systems with those of its clients and scale them to handle larger volumes of data, and adapted its data sharing processes. As a result, the firm was able to offer a new crisis management service to its non-profit clients.
For its part, the environmental consulting firm leaped on the RFP, won the bidding process, and subsequently abandoned its other lines of business.
Blindsided or Opportunistic?
Organizational leaders — even the best of them that seem to have an answer for every conceivable risk — can be blindsided by unexpected events. Many stumble due to a lack of relevant information or organizational agility. Others, like performers at an improv theatre, can quickly turn a suggestion from left field into a big win.
“Organizations that have developed a strategic improvisation capability are better able to deviate from their strategic plans, to act creatively and in an unplanned way, and to identify and take advantage of unexpected opportunities and withstand sudden threats,” says Levallet of Ohio University College of Business.
What Levallet and Chan refer to as strategic improvisation is not operational agility so much as the capacity of a management team to respond to events that cannot be planned for but that must be addressed speedily.
“How do the top management leaders put their heads together and almost instantly grab the knowledge, grab the information, analyze in the moment, and execute a response that’s strategic and for the best of the organization?” says Chan of Smith School of Business. “It involves creativity and fast action.”
IT As The Foundation
What does strategic improvisation look like in action and how do organizations develop the capacity to improvise successfully? To answer these questions, Levallet and Chan surveyed senior managers from roughly 100 Canadian firms, mostly in the service sector, and did on-site visits for deeper case studies.
At the start, the researchers assumed that information technology (IT) would play an important role. They learned that IT is actually the foundation for improvisation. “What surprised us was the importance of IT infrastructure, much more than we thought,” says Levallet. “My initial thoughts were more about top management team characteristics, organizational context, and behaviour.”
Drilling deeper, they found that strategic improvisation relies on flexible IT infrastructure — made up of business intelligence and knowledge management systems — combined with a strong information management (IM) capability.
A flexible IT infrastructure enables real-time information and instantaneous communications, the researchers say. That comes from an organizational investment in technologies that are scalable, adaptable, compatible, and modular.
IM capability is downstream: it allows leaders to leverage the relevant information residing in their systems. IM capability is based on a secure data platform and processes that allow for everything from the creation and storage of information right through to its distribution.
“You need to leverage all you can from an information perspective, to be able to make sense of it very quickly,” says Levallet. “You need to know that on the spot so you can act. Otherwise you’re really acting on guts, and that’s not what effective improvisation is about.”
“People will say, Shouldn’t you just plan better so you don’t have more surprises? Well, that’s in the old world. . . You can’t plan to prevent having no surprises”
For strategic improvisation, IT is essential but not sufficient. Improvisation also requires an experimental culture and a loose organizational structure. In an experimental culture, managers are allowed to deviate from the plan and rewarded for going out on a limb in the interest of finding better alternatives. In an organization with tight controls and many levels of approval, response time slows considerably. It’s hard to improvise when a window of opportunity closes while a manager waits for permission to act.
“I studied an organization that I thought would be good at improvising and that ended up not being the case,” says Levallet. “I think the main factor was their lack of willingness to experiment. You need to be able to be willing to take risks and fail.”
The researchers advise leaders to take a stepped approach to building strategic improvisation capability.
First, take stock of the organization’s competitive environment. As Levallet and Chan point out, strategic improvisation is most useful in dynamic environments where the rate of change is high. “If a company is in this situation, then its top management team may benefit greatly from strategic improvisation,” says Levallet, “especially if the company strategy tends to seek to influence the environment rather than simply react to it.”
Second, assess the IT systems and IM capabilities to identify lagging areas. Organizational decision makers must have confidence that any deficiencies in IT infrastructure will be identified and addressed by specialists. Without that confidence, they’ll be reluctant to take chances.
For effective IM capability, the goal is a data platform that allows leaders to derive insights from the information and to make decisions based on those insights. The assessment should ensure that all data critical to managerial decision making have been identified, the researchers say. “We know from past research that, too often, organizations focus on the fastest and most direct ways to monetize data using customer data without considering internal needs and ways that data can be used to improve organizational processes,” says Levallet. “Process efficiency gains from analytics can also bring real value to organizations.”
Third, gain a better understanding of the organization’s culture and the link between organizational structure and outcomes. Experimental cultures and loose structures allow for improvisation to flourish. More formalized structures restrict the decisions that leaders and managers can readily make. In what ways, if any, is the organization willing to adapt to become more improvisational?
Fourth, take a long-term perspective on strategic improvisation. That means continually improving IT infrastructure and identifying new ways to combine IT and business processes to help leaders respond rapidly to events. The researchers suggest creating what past research has called a “two-speed infrastructure” based on time pressures: IT infrastructure that supports customer-facing activities, for example, would be designed for rapid response while other IT systems need not be designed to support immediate action.
The point of all this effort is to be able to be continually ready for disruptions by responding with strategic improvisation.
“People will say, Shouldn’t you just plan better so you don’t have more surprises?” says Chan. “Well, that’s in the old world, not twenty-first century, high-tech, environmentally dynamic living. You can’t plan to prevent having no surprises. What this research is about is knowing that you can land on your feet time and again, to consistently win when faced with these surprises.”
Is a firm’s strategic direction defined merely by its core competency or something deeper?
With the recent growth in availability of data and inexpensive analytical tools, forward-thinking enterprises can mine the potential of these powerful methods for themselves. Here is what you need to know to get started.