In a December 2009 article in the McKinsey Quarterly titled Competing through organizational agility, Donald Sull defines organizational agility as the capacity to identify and capture opportunities more quickly than rivals do. He further identifies three distinct types of agility: strategic, portfolio, and operational.
Quoting from the article, “Strategic agility consists of spotting and seizing game-changing opportunities. Portfolio agility is the capacity to shift resources—including cash, talent, and managerial attention—quickly and effectively out of less promising business areas and into more attractive ones. And operational agility involves exploiting opportunities within a focused business model.”
This note focuses on portfolio agility and how our Skills Library and profiling (SLP) tool enables organizations to take informed decisions. Portfolio agility requires managers to base these decisions on logic and data rather than emotion and politics and to have the courage to implement unpopular decisions.
Companies with diverse business portfolios often face challenges when they attempt to shift resources out of less promising areas and into more promising ones. Portfolio agility can also break down when managers apply a uniform set of objectives, such as a fixed gross-margin percentage or time-to-break-even, across all opportunities, regardless of their stage or long-term potential.
To enhance portfolio agility, companies must reallocate not only cash but also people. Before doing so, they should cultivate a cadre of managers versatile enough to move from business to business. Forward thinking Companies invest heavily to develop managers by giving them P&L responsibility early on, rotating them through functions and markets, and offering leadership training.
HR has a key role to play here, in identifying managers with potential, keeping track of their skill-sets and rotating them on a regular basis to acquire additional skills. As a result, such companies can redeploy their managers to emerging opportunities, even if they do not know in advance what form those opportunities might take.