The advantages of agility over size have reached a turning point in the world of modern business.
Being the biggest business on the block has never been less of an advantage. In fact, it’s often a disadvantage, as the prevalence of overused terms like “act like a start-up” or “turning around a battleship” have made clear. Big companies now want to be small.
That isn’t to say that companies shouldn’t focus on growth, of course. Investors, founders, stockholders, employees, they all want to see success. They want more revenue, more market share and more products. The key is achieving agility and continuing to innovate amidst that growth. One only needs to look at the newspaper industry, the music industry, video rentals or taxi cabs to see how quickly disruptive start-ups and technological advances can change the business landscape. It’s given way to even more dire warnings like “innovate or die” and made clear that change is coming faster than ever. Businesses need to be able to adapt or reinvent on the fly.
It’s not just innovators and technology that are disrupting business, however. Smart businesses are disrupting themselves. Hardware companies are adding software and services. Software companies are adjusting revenue models.
What’s holding you back?
In fact, in many cases it’s not the size of the business holding companies back, it’s their software. While the past five to 10 years have introduced some of the fastest rising companies in history, the Fortune 500 is still dominated by businesses with a long history of success. Those businesses likely invested in big ERP systems that were built before the Internet existed and simply weren’t architected to be nimble and adapt. Those systems were built with the idea that one size fits all, with standard processes not only within industries but across them.
That’s left too many businesses ill-prepared to respond quickly to disruption. The problem is, implementing enterprise software is disruptive — and not in a good way this time. While new implementations offer an opportunity to reevaluate and adjust business processes, it is also time consuming and can take away from the focus of the business. No one wants to go through the time and expense of evaluating, selecting, purchasing and implementing new business software every time the business changes. You need to have something that can adapt as you do. These adjustments to business or revenue models aren’t easily handled by those legacy software systems.
Moreover, the reality of innovation — particularly for large, established companies – is that you have to be prepared to fail. Launching a new service or product or entering a new market shouldn’t mean betting the company, but with older on-premise systems with high upfront investments in hardware, systems and integrations, that’s just what you’re doing.
A chance to start over
You can fail slow and expensively or you can fail fast and inexpensively. The next generation of ERP systems is allowing businesses interested in innovating to do the latter. And if that innovation takes root, these modern systems can scale with the new venture.
That’s also led to the rise of two-tier ERP. Since its inception, the core value explicit in a two-tier ERP strategy was of cost savings. Businesses that had already invested heavily in large installations at headquarters could more easily and more affordably launch subsidiaries, far-flung divisions and offices. What we’re beginning to see is that two-tier strategies are no longer simply about cost savings, they’re about agility. Replicating the same system at headquarters somewhere else brings more than just cost problems, it means replicating the integration hassles.
And businesses that get a chance to start over? They’re turning wholesale to modern, cloud applications. When American Express Global Business Travel spun off from its parent company, it had to get off the previous system. Executives there treated it as a unique opportunity. They launched the new business on cloud applications across ERP, CRM and human resources. They now have a system in place that will allow them to keep innovating, keep experimenting and outpace the competition.
If all you do is make widgets that are all the same, with no variability, then you may not need innovation. But if you’re in a business that’s been challenged by start-ups and is testing new business models, then you need agility and you need to be able to flex.
Image credits: Business man jumping chasm drawing © Sentavio – Fotolia.com; headshot by NetSuite.