Unlocking Organisational Agility in SMEs: How to Navigate Change and Outpace Competitors

Contemporary work environments are experiencing unique levels of volatility, uncertainty, complexity, and ambiguity (VUCA). This period of economic and social upheaval has been especially challenging for small-to-medium enterprises (SMEs), smaller organisations with limited resources. As a result, both organisations and researchers are showing increased interest in organisational agility (OA).

Organisational agility

Organisational agility refers to how well an organisation responds to change and the challenges posed by uncertain market environments whilst seeking out new business opportunities. It is key in countering any negative effects caused by volatility and uncertainty.

Potential benefits

Potential benefits of organisational agility include improved:

• Ability to capitalise on growth opportunities
• Overall return from work efforts
• Implementation of innovative and novel ideas
• Creation of successful business models and new products

It is important to understand which capabilities enhance organisational agility.

Previous Studies

Previous studies have found that there are a number of suggested antecedents or foundational elements necessary for creating organisational agility, for example:
• Relational capability
• Innovation capacity
• Digital technology capability
• Financial performance

Relational capability

Relational capability refers to the quality of the relations that exist within and without the organisation. Relational capabilities appear to support organisational agility as they help people build and sustain healthy relationships that underpin just about everything that happens in and to an organisation. High-quality internal interactions between leaders, employees and co-workers are essential for creating effective operations. Fostering external partnerships with other organisations that have valuable resources is also important. None of this can be accomplished without trust and a positive attitude towards relationships.

Digital technology capability

Digital technology that facilitates communication tend to support relational capabilities along with a range of other necessary functions. Researchers are not sure whether technology is an antecedent that predicts agility, or whether organisational agility enables organisations to adopt new technologies. Leaders need to be knowledgeable and skilled enough to fully integrate the technology and manage the transformation of outdated work processes and systems using enabling technology.

Innovative capacity

Innovation is a highly prized and sought-after ability by most organisations, regardless of their size. Generating novel ideas and solutions to problems that are then successfully integrated into the organisation’s business models, processes, products and services is critical to its longevity. This is based on a good level of risk-taking capability and entrepreneurial attitude. Outcomes of innovative capacity are commonly measured by two different elements that reflect developed products and internal work processes:

1. Product and service innovation – creating a product or service that is new to the market or making significant improvements to a previously released product.
2. Process innovation – implementing an improved or new production/delivery method to make daily operations more efficient.

Financial performance

Better financial performance also generates more profits and capital for leaders to reinvest into the organisation, which can help it survive future challenges if the market goes through another period of instability.
All of these antecedents or foundational elements appear to be important for increasing organisational agility.

Previous research

Previous research looking at organisational agility and its antecedents has found that:

• To develop organisational agility, flexibility of processes and people must be present at the operational level and strategic level.
• Agility helps organisations gain a more advantageous market position and increase profits.
• Strategic agility significantly improves a small-to-medium organisation’s chances of becoming internationalised and increases the speed and overall success of intenationalisation.
• An increasing number of organisations are developing organisational agility through customer-focused experimentation using digital technologies.
• Organisational agility helps leaders balance organisational ambidexterity or exploration of new resources and products vs exploitation of existing products and resources.
• Other potential antecedents of organisational agility include:
  • Collaborative innovation
  • Organisational learning
  • Internal alignment

A new study

A new study by researchers from the University of Campania and the University of Calabria in Italy and the University of Reading and Aston University in the UK has looked at the antecedents of organisational agility and at the significance of innovation capability for small-to-medium enterprises or organisations.

Findings

The study found that the following are significant predictors of organisational agility:

1. Digital technology capability
2. Innovation capability
3. Relational capability

The researchers discovered that small-to-medium organisations that have higher levels of these capabilities tend to have significantly increased levels of organisational agility. In turn, organisational agility was found to be a good predictor of performance in rapidly changing market environments.

Organisational agility was also found to significantly increase financial performance and to improve the outcome of innovation activities. SMEs with higher levels of organisational agility are also significantly more likely to engage in both product / service innovation, as well as process and business model innovation.

Based on these findings, researchers recommend that leaders focus on improving the three primary capabilities in their small-to-medium organisations to produce superior performance levels.

Reference

Troise, C., Corvello, V., Ghobadian, A., & O’Regan, N. (2022). How can SMEs successfully navigate VUCA environment: The role of agility in the digital transformation era. Technological Forecasting and Social Change, 174, 121227.

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