As far as I can tell, risk management as a business practice is pretty well embedded now, more than a decade after the Great Recession. But it appears to be more of a cost of doing business that is required by boards, regulators and rating agencies rather than as a boon to management of businesses. It is usually focused almost entirely on negative outcomes and insists on using its own language that is not even slightly close to the language used by top management in discussions of strategy for the firm.
When we overestimate our overall capacity, tangible and intangible, in relation to risk, we endanger our performance and even survival.
At the same time, there are continual examples of strategic failures, failures that you could imagine could be avoided with some risk management thinking. (Stories like Kodak’s failure to develop a realistic vision of the coming impact of digital photography to its film business or Blockbuster’s failure to understand the threat from Netflix’s internet based business model.)
A new book, Agility, by Leo Tillman and General Charles Jacoby (ret.) suggests that we can enjoy the benefits of linking risk management to strategy by becoming . . . Agile. The book provides stories, both from businessman Tillman and military man Jacoby to illustrate the pitfalls of operating without Agility and the benefits of operating with.
Vital to an effective process for achieving agility is that it is not defined or operationalized in a rigid, one-size-fits-all way.
I think of their ideas as eminating from the realization that because we usually operate in a competitive environment, even the simplest of plans can be wrecked by unexpected reactions of those competitors.
My sense of Agility, after reading this book, is that it is a sort of continual restlessness, of never being satisfied that everything is running as well as it could and of not feeling completely safe from harm either. Always ready to change course to gain more advantage or to steer away from danger that was recently not even in sight. Tillman and Jacoby give the example of the football running back who might change course at any time to find daylight or to avoid a tackler.
Few plans survive contact with reality because our assumptions turn out to be incorrect, our adversaries act in unforeseen ways, or because our actions set in motion a multitude of forces that change the operating landscape itself.
They say that Agility has three components: risk intelligence, bias towards action and flexibility. Risk intelligence involves a forward-looking unbiased assessment of risks and opportunities associated with the risks. Tillman has written previously about risk intelligence. Bias towards action seems to be clearest in the military context. It is easy to imagine that a military unit that experienced analysis paralysis would not be long for the world. Flexibility is the ability not just to change plans but to execute the new plans well. That last item is probably the most difficult item here. It is one thing to assemble a team who can do a good job executing a pre-planned task, but another much more difficult task to create a group who are willing and able to change their goals and objectives significantly and who will proceed to deliver on those plans. But while difficult, Tillman and Jacoby point out that it is almost essential ability for an organization that expects to persist in the long run.
Adopting the agility mindset fundamentally transforms this perspective, turning a nice-to-have “luxury” into a mission-critical priority.
The agility mindset does not view risk as either inherently positive or negative. Instead, as alluded to earlier, it considers risks indispensable arrows in the quivers of decision makers. If we detect and assess environmental changes adroitly, these arrows enable us to both dynamically manage our portfolios of risks and alter our adversaries’ risk equations.
We fly blind when we do not fully understand our portfolio of risks, its role in our business model or its connection to our operating landscape.
While the premise of this book is well founded and well explained, the thing that really makes the book stand out is the inclusion of the military examples to show how each of the points that they make are supportable not only by Tillman’s business examples but also in the military sphere. Examples include Napoleon at the Battle of Borodino with the concept of risk intelligence, the invasion of Afghanistan and Iraq illustrating execution and the Normandy invasion to illustrate the entire concept of a combination of strategic and operational agility.
Riskviews 