51

Managing in
Turbulent Times
–The Adaptive Enterprise

Sam Wong and Nicole Kwock

With the right strategy and

appropriate investment in
processes and technology,
adaptive enterprises can gain
the information they need at the
speed at which the market moves,
enabling them to respond to
changes quickly and to model new
scenarios ahead of market events.

Whether caught in a recession or an extreme market correction,

the world economy is experiencing a significant, systematic slowdown.
The recent decline has led to budget pressures at every level; profit margins
have fallen and consumer confidence is slipping. The outlook for immedi-
ate recovery is measured – a pragmatism which was further impacted by
the September 2001 terrorist attacks in the US, the recent Iraq war, and the
SARS outbreak.

In light of today’s uncertain marketplace and extreme budgetary pressures,

forward-thinking enterprises are taking proactive measures to streamline
their business environments to achieve higher efficiencies and better re-
turns while weathering the current market conditions. Only organizations
that gain competitive advantage will survive. But how do you get a step
ahead of the competition?
52 The SGV Review • March 2004

The solution is the ability to answer business questions of the present, to

take intelligent actions, and to forecast their effects on the future. Based
on the right information, at the right time, wise decisions can be made that
will drive an enterprise forward with smarter actions, putting itself in front
of the competition.

Standing still in the face of a sluggish economy is not a viable option. To-
day, e-business is the status quo and leveraging IT to enterprise, supplier,
and customer integration is more important than ever. Gaining a competi-
tive edge is no longer just a profit issue; for many enterprises, it’s a sur-
vival issue.

The adaptive enterprise

Entrepreneurs today need fast access to timely, accurate information on any

aspect of the business, at any level, from any perspective, no matter how
much or how often the information changes. At the same time they need to
keep this high visibility across the entire business.

Information is an asset as important as any other kind. The ability to find

and analyze the required quality management information quickly and
cost-effectively, even as the business and market change, will be one of the
critical competencies of successful enterprises in the 21st century.

Organizations need both visibility

Flexibility
and flexibility. Visibility means
Visibility Visibility
the ability to have multiple views
of the business at any level of de-
Flexibility Flexibility tail — product, service line, and
The even customer. With visibility,
Adaptive
Enterprise an organization can compare and
Visibility Visibility model different sets of data to gain
new insights into business perfor-
mance and strategies, view the im-
Flexibility Flexibility
pact of past decisions, and model
Visibility
new ones simultaneously.
 Managing in Turbulent Times - The Adaptive Enterprise 53

Flexibility, in this instance, means being able to remain flexible as the orga-
nization changes. The rigid structure of the organization makes it difficult
for it to respond quickly to internal and external changes.

Many organizations are stuck between these two worlds. They either suffer
from the lack of visibility across the business or force common practices
in order to increase visibility but then quickly find themselves suffering
from rigidity or information invisibility when things change. The best of
both worlds, rarely achieved with existing enterprise information systems,
is increasingly becoming a business-critical requirement for the creation of
what many industry experts now call the Adaptive Enterprise. Such an en-
terprise has a clear view of both its internal and external environment and
can act with agility based on that clear view, while at the same time is able
to quickly adapt to change.

Market forces require constant strategy realignment and restructuring. New

regulations require new, robust reporting techniques, and rapid market
downturns demand consolidation of business and product portfolios. Enter-
prises have no time to lose if they want to capitalize on a new opportunity
to survive a market crisis.

Many entrepreneurs know the decisions they want to make and are pre-
pared to make them. However, they have no way of accessing the quality
of information they need fast enough to make the critical strategic deci-
sions they need to drive the business forward. Paralysis caused by indeci-
siveness is seen to demonstrate management weakness.

In today’s competitive environment, fast access to timely, accurate infor-

mation on any aspect of the business, at any level, from any perspective, no
matter how much or how often the information changes, is crucial. There is
also a need for the ability to keep this high visibility across the entire orga-
nization through major changes in the internal and external environment.
54 The SGV Review • March 2004

Organizational IQ and EQ: Visibility and flexibility

Employees need to understand the

Strategy information that is important to the or-
ganization as a whole and be prepared
to gather the appropriate information.
The organization, in turn, needs to be
ORGANIZATIONAL
Technology IQ AND EQ: People structured, and have the infrastructure
Visibility & Flexibility and processes to share that information
effectively and efficiently. The appro-
priate information technology is critical
– giving executives the ability to have
Focus
an up-to-date, change-ready view of
the organization from any perspective
while not being constrained by any monolithic, inflexible, information sys-
tem. The alignment of adaptive, well-informed decision making and strategy
with flexible and integrated information systems is a key ingredient for cre-
ating the Adaptive Enterprise.

Enterprises need to maximize two key elements of their management infor-

mation systems: strategy in visibility and flexibility. They need the visibility
to drill down and across the organization, at all levels. They want to be able
to pull apart and manipulate the data that would otherwise be “hard-wired”
in business unit reports with limited preset “views” of the business.

They also need to be flexible as an

organization in order to capitalize on 360
degrees
opportunities and react to positive or Standardized Adaptive
negative changes. They need flex- Enterprise Enterprise
VISIBILITY

ibility in terms of policies across the

organization.
“Steady State” Decentralized
The requirement to achieve both vis- Enterprise
ibility and flexibility often pulls the Static
organization in different directions Low High
and many organizations achieve ex- FLEXIBILITY
cellence in one only at the expense of
the other.
 Managing in Turbulent Times - The Adaptive Enterprise 55

Barriers to being an Adaptive Enterprise

First, there has been an accumulation of disparate information systems

over the years. The race to become technologically advanced, e-business
initiatives, business process reengineering, enterprise resource planning,
customer relationship management, supplier relationship management, and
knowledge management are just some of the trends that have led to discon-
nected silo information systems and even management systems. A single
request for certain cross-functional information will cause many employ-
ees to scramble to consolidate, combine, and compile data from different
places to produce the report. Furthermore, the forced combination of these
data obtained from disparate systems, which are likely to be backed by dif-
ferent assumptions and bases, eventually leads employees to “add apples
to oranges.” As a result, costly and unreliable information is used to make
important decisions.

Second, the degree of flexibility within operating units can have a signifi-
cant effect on the quality of information received by management. Whether
the organization adheres to a decentralized or centralized strategy, flexibil-
ity is an issue.

Third, the impact of change can hamper an organization’s ability to view

key business metrics regardless of what IT strategy is chosen. The relation-
ship between each piece of data breaks down once an assumption linking
each piece is invalidated.

Barriers
• Accumulation of disparate
information systems over time
• Degree of flexibility within
operation units
• Impact of change
• Data residing outside the
organization
56 The SGV Review • March 2004

On top of all these, the advent of the extended enterprise has made access
to quality up-to-date information even more challenging. Data now resides
not just across multiple business units but across customers, partners, and
suppliers as well.

The challenge is to harness and formulate all this information fast and flex-
ibly enough to make the right decisions before the competition does.

The Adaptive Enterprise is the state at which an enterprise has the capabil-
ity to accommodate radical change so that business reports on key per-
formance indicators are still relevant even if there are internal or external
changes. As a consequence, executives of matrixed organizations can view
their key information on businesses, products, brands, customers, and sup-
pliers from any viewpoint or perspective.

In today’s volatile environment, with high-speed changes and opportuni-

ties appearing and disappearing quickly, adapting to new customer needs
and exploiting new markets require information awareness and, at the same
time, high flexibility. The Adaptive Enterprise, for example, can create real-
time targeted bundles of products depending on very current, potentially
very ephemeral, demand. For example, on January 4, 1999, the day after
Michael Jordan’s retirement, eBay created a brand new storefront devoted
entirely to Jordan’s memorabilia – in effect creating a new version of itself.

Conclusion

The challenge facing executives is

to recognize that it is the information
The challenge facing executives
within the systems, not the systems is to recognize that it is the
themselves, that is important. information within
the systems, not the
The Adaptive Enterprise is the optimal systems themselves, that is
way – an ideal but attainable state. En- important.
terprises can gain the information they
need at the speed at which the market moves, through any internal or ex-
ternal change. They can respond to change quickly and be informed. More-
over, the information is of high enough quality and detail to model new
 Managing in Turbulent Times - The Adaptive Enterprise 57

scenarios ahead of market events. The Adaptive Enterprise is one to which

organizations can aspire, with the right strategy and appropriate investment
in processes and technology.

The starting place is to think big, start small, and evolve from there. If an
organization can find a key strategic problem with which to start exercising
this approach, then it can establish a knowledge base and build its expertise
across the whole organization.

______________________________
Sam Wong <Sam.Wong@sg.ey.com> is a Senior Manager of Ernst & Young Associates Singapore.
Nicole Kwock<Nicole.Kwock@sg.ey.com> is an Associate in the practice.

©2003 Ernst & Young. All Rights Reserved.