Chapter 1 Introduction
1.1 Background and Motivation
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Chapter 1 Introduction
With the volatility and versatility of global business competition environment leveling up, enterprises are obligated to respond correctly in uncertainty and unpredictability. Enterprises nowadays operate in an extremely competitive environment of a global context. The increased rate of innovation and technological developments, fragmentation of markets, and elevated customer expectations toward customized products have led to the especially turbulent and rapid changes in the business environment. As globalization and regional economic partnership are leading to fiercer competitive pressure to the industries, corporations are required to adapt to much more volatility, risks, market variations, and so on. Many different solutions have been proposed for businesses to survive in this new competitive environment, such as networking, modular organizations, virtual enterprise. Among them, adaptive, flexible, and agile are the most prevailing topics under discussion.
Generally speaking, all of the concepts mentioned aimed at increasing and improving the companies’ ability to adjust and respond to changes. Agility is the proposed concept to describe a new approach in enterprise management necessary to achieve success in a modern dynamically changing market, which is generally accepted as having considered all three criteria mentioned above. (Shrerhiy et al., 2007; Sharifi and Zhang, 2001; Yusuf et al., 2002)
1.1 Background and Motivation
It is now clear that the importance of achieving high business agility has come to the notice of many organizations worldwide. According to an IBM study in 2011 on business agility, strong correlation was reported between agility and success.
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Furthermore, a McKinsey survey in 2006 concluded a similar result when it was found that more than 90% of the surveyed executives consider agility as influential to business performance. Moreover, the Boston Consulting Group report indicated that agility is a kind of competitive advantage that would assist enterprises in sustaining their performances. All of the industrial reports above came to the same conclusion that nowadays, enterprise agility is the entry point not only for businesses to survive in the competitive environment, but for all businesses that are building up and sustaining their competitive advantages. (Axelsson and Blomqvist, 2012; IBM, 2011;
Boston Consulting Group, 2011; Microsoft, 2009; McKinsey, 2006)
Agility has been considered to be the winning strategy for becoming a global leader in an increasingly competitive market of quickly changing customer requirements. As businesses competition leveling up in such an unpredictable and uncertain global context nowadays, it is becoming clearer than never before that businesses incapable of responding to changing environment opportunity of pressure, such as Kodak and Facit AB, are being pushed into filing for bankruptcy protection or even liquidation. It is, therefore, safe to conclude that agility is becoming the baseline for leading enterprises to continuing and sustaining their leadership in the industries. (Tseng and Lin, 2011; Bloomberg, 2012)
Prior to 1990, most of the research on how organizations respond to changing environment focused on “adaptability”, which is how the organization’s form, structure, and degree of formalization influenced the ability to adapt. Afterwards, starting at the 80s, researchers turned their attention to the concept of “flexibility”, focusing on an organization’s capacity to adjust its internal structures and processes in response to changes in the environment. However, most of the discussions on flexible organization are mainly on the ability to adapt and to respond to changes.
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As global economic integration brings corporations to a more dynamic and fast-changing competition environment, “agility” emerged in the 90s as a new idea to cope with this complex environment. Researches argue that an agile enterprise is an enterprise whose processes are able to respond effectively to unanticipated change.
The problem of creating agile business processes, however, is enhanced by the lack of a comprehensive method. Hence, agility could be considered as the new paradigm that enables the enterprise to thrive on unanticipated change. (Burns and Stalker, 1961;
Reed and Blunsdon, 1998; Volberda, 1996; De Toni, 1998; Meade, 1997)
According to FM Global, a globally renowned loss prevention service provider, the year of 2011 marks the reminder of the vulnerability of global supply chains.
Coming only months after the automakers forced to shut down production lines and facilities for critical components during Japan earthquake and tsunami, Thailand flood caused leading automakers to not only halt their production facilities, but to slow production rate down in several countries on their supply chain. These natural disasters provide case studies into the fragility of modern global supply chains. This catastrophe has become the basis for illustrating how a localized event can affect the supply chains of thousands of companies and have consequences that reverberate across the global economy. (FM Global, 2012)
As indicated by Gartner’s 2013 supply chain analysis report, companies rated as having top supply chains differentiates themselves as being leaders in the innovation of next generation agile supply chains in one way or the other. As internationalized businesses release more low-value-added functional operations abroad than never before, the distance and complexity of their supply chains is increasing at the same time. While the more complexity businesses have to handle, more considerations would have to be invested in managing the cooperative relationships with the partners