Emergence of the Agile Enterprise 1
Emergence of the Agile Enterprise

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By1Michael1Hugos1
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The most profound innovation since the assembly line is staring us
right in the face. But we don't see it because we are so busy looking
for something else.
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For1most1of1us1the1word1"innovation"1still1conjures1up1images1of1amazing1new1
gadgets1such1as1technology1to1turn1water1into1gasoline,1black1boxes1to1project1
moving13D1holograms1from1our1TV1sets,1and1bio,tech1breakthroughs1that1reverse1
the1agingprocess.1 1
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Of1course,1some1of1these1things1will1come1to1pass.1But1in1our1fixation1on1
individual1gadgets1we1are1missing1an1innovation1that1is1based1on1process1more1
than1it1is1on1technology.1A1hundred1years1ago1there1was1a1similar1process,based1
innovation1in1business1that1was1so1profound1it1became1the1basis1for1the1economy1
of1the1industrial1age.1That1process1was11assemblythe 1line.11
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The1assembly1line1and1industrial1technology1are1so1intertwined1in1most1people's1
minds1that1they1do1not1realize1industrial1technology1had1been1in1widespread1use1
for1501or1601years1before1the1assembly1line1was1introduced.1It1was1the1process1
innovation1called1the1assembly1line1and1not1new1technology1that1brought1our1
current1consumer1economy1into1existenc11e.
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The1next1wave1of1innovation1and1productivity1will1again1be1based1on1process1
and1not1new1technology.1A1combination1of1processes1that1are1coming1to1be1
collectively1known1as1the1agile1or1real,time1enterprise1will1become1the1basis1for1
our1economy1in1the1information1age.1The1agile1real,time1enterprise1is1an1
organization1that1employs1a1set1of1processes1enabled1by1existing1information1
technology1and1an1organizational1structure1that1allows1it1to1acquire1and1act1on1
up,to,date1information1to1continually1improve1existing1operations1and1devise1
new1operations11as opportunities1aris1e.
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© Copyright 2008, Michael Hugos Center for Systems InnovationEmergence of the Agile Enterprise 2
Markets1are1constantly1moving.1Product1life1cycles1are1measured1in1months1or1a1
few1years,1no1longer1in1decades.1Companies1cannot1fine,tune1their1operations1to1
fit1some1present1set1of1conditions1and1then1expect1to1simply1run1those1operations1
unchanged1for1years1and1years.1That1was1the1old1industrial1model1and1that1
model1no1longer1yields1the1profits1we1seek.1We1need1something1much1more1
responsive--something1that1constantly1adjusts1to11changesand1opportunities.1
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The1effect1of1a1thousand1small1adjustments1in1the1operating1processes1of1a1
company11as its1markets1change11isanalogous1to1the1effec1t 1of compound1interes1t.1A
real,time1organization1constantly1makes1many1small1adjustments1to1better1
respond1to1its1changing1environment1and1in1doing1so1it1steadily1reduces1costs1
and1increases1revenues.1No1one1adjustment1by1itself1may1be1all1that1significant,1
but1the1cumulative1effect1over1time11is enormous.11
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Traditional1organizations1are1now1caught1in1an1inexorable1squeeze1as1profit1
margins1on1their1commodity1products1and1services1are1relentlessly1ratcheted1
down1by1the1global1economy.1Soon1those1companies1that1cannot1earn1profits1
from1constant1small1adjustments1will1hardly1be1profitable11at all.1
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Three Process Loops for the Agile Enterprise
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There1are1three1essential1processes1that1combine1to1bring1the1real,time1enterprise1
to1life.1Those1processes1are1illustrated1in1Figure11.01below.1The1three1processes1
are1activity1loops1enabled1by1information1technology1that1occur1continuously1
and1simultaneously.1The1first1loop1(Loop11)1is1for1monitoring1the1environment1
and1deciding1what1needs1to1be1done.1This1is1the1process1that1is1responsible1for1
making1the1decisions1that1deliver1success.1People1in1this1process1are1the1ones1that1
decide1what1a1company1should111do.
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Once1a1decision1has1been1made,1one1or1both1of1the1other1two1loops1are1engaged1
to1act1on1the1decision.1People1in1these1processes1are1the1ones1who1decide1how1
something1will1be1done.1One1loop1(Loop12)1is1for1improving1existing1operations,,
that1is1what1delivers1efficiency.1The1other1loop1(Loop13)1is1for1creating1new1
operations–that1is1what1delivers1effectiveness.1Through1the1combination1of1
these1three1loops1an1organization1can1sense1and1respond1to1change1in1a1way1that1
is1both1effic1ientand1effective.11
© Copyright 2008, Michael Hugos Center for Systems InnovationEmergence of the Agile Enterprise 3
Figure11.01
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These1three1loops1describe1how1work1is1organized1in1a1real,time1enterprise.1The1
other1key1concept1in1a1real,time1enterprise1is1how1work1is1carried1out.1Work1is1
carried1out1by1a1network1of1largely1autonomous1operating1units.1Each1operating1
unit1has1the1resource1ands 1authority1it1needs1to1do11job.its1
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There1is1a1central1coordinating1body1that1sets1overall1enterprise1performance1
goals1but1it1is1up1to1the1operating1units1to1figure1out1how1they1will1act1and1
achieve1their1goals.1Real,time1enterprises1push1decision,making1and1authority1
out1to1autonomous1operating1units1because1that1is1the1only1way1to1be1fast1enough1
and1responsive1enough1to1consistently1capitalize1on1opportunities1and1respond1
to1threats1as1they1arise.1
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Real World Examples of the Agile Enterprise
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Lest1this1seem1like1just1an1interesting1theoretical1discussion,1consider1the1example1
of1two1very1successful1organizations1that1adhere1closely1to1these1operating1and1
organizational1principles.1Both1of1these1organizations1have1arrived1at1similar1
© Copyright 2008, Michael Hugos Center for Systems InnovationEmergence of the Agile Enterprise 4
operating1models1despite1being1in1very1different1lines1of1work1and1coming1from1
quite1different1directions.1The1first1organization1is1the1United1States1Marine1
Corps.1The1second1organization11is Whole1Foods1Market.1
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The1Marine1Corps1is1perhaps1the1epitome1of1an1effective1modern,1mobile1military1
organization.1Whole1Foods1Market1is1a1$4.51billion1grocery1chain1that1is1
outperforming1all1of1its1competitors1(including1Wal,Mart)1and1is1setting1new1
levels1of1profitability1with1operating1margins1that1are1nearly1twice1that1of1other1
large1grocery1chains.1Both1these1organizations1represent1striking1examples1of1
how1the1application1of1real,time1operating1principles1can1deliver1a1whole1new1
level11of performance1and1results.1
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Both1organizations1are1composed1of1highly1autonomous1operating1units.1The1
basic1operating1unit1of1Whole1Foods1is1not1the1regional1office1or1even1the1
individual1stores1but1the1store1team.1Every1store1is1composed1of1eight1or1more1
teams,,1theproduce1team,1the1bakery1team,1the1checkout1team,1etc.1These1teams1
roll1up1into1stores1and1regions1but1performance1is1always1evaluated1and1
rewarded1at1the1team1level.1The1basic1operating1unit1of1the1Marines1is1the1
platoon,1not1the1regiment1or1division.1Platoons1of1infantry,1armor,1artillery,1etc.1
are1combined1as1needed1to1create1expeditionary1units1or1task1forces1appropriate1
to1the1mission1assigned1to1them.1
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Both1of1these1organizations1employ1a1highly1decentralized1organizational1
structure1and1decision,making1process.1Basic1strategic1doctrine1of1the1Marine1
Corps1is1put1forth1in1a1short,1110,page1book1titled1Warfighting.1Under1the1section,1
"Philosophy11of Command",11Marinethe 1Corps11hasthis1to1say1[italics1are1theirs]:1
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First1and1foremost,1in1order1to1generate1the1tempo1of1operations1we1desire1and1to1best1
cope1with1the1uncertainty,1disorder,1and1fluidity1of1combat,1command1must1be1
decentralized.1That1is,1subordinate1commanders1must1make1decisions1on1their1own1
initiative,1based1on1their1understanding1of1their1senior's1intent,1rather1than1
passing1information1up1the1chain1of1command1and1waiting1for1the1decision1to1be1
passed1down.1Further,1a1competent1subordinate1commander1who1is1at1the1point1
of1decision1will1naturally1have1a1better1appreciation1for1the1true1situation1than1a1
senior1some1distance1removed.1Individual1initiative1and1responsibility1are1of1
paramount1importance.1
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© Copyright 2008, Michael Hugos Center for Systems InnovationEmergence of the Agile Enterprise 5
At1Whole1Foods,1decisions1ranging1from1what1employees1to1hire1to1what1
products1to1carry1are1often1made1at1the1team1level.1The1decision,making1
philosophy1at1Whole1Foods1stresses1that1decisions1should1be1made1as1close1as1
possible1to1the1place1where1they1will1be1carried1out.1And1the1people1who1will1
carry1them1out1should1make1their1decisions1without1interference1from1people1
who1are1no1t directly1involved.1
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In1a1world1of1constant1change1and1short1product1life1cycles,1a1centrally1controlled1
hierarchy1simply1cannot1see1the1opportunities1or1move1quickly1enough.1The1use1
by1these1organizations1of1state1of1the1art1information1technology1is1not1enough1
because1they1still1lack1the1processes1and1the1organizational1structure1to1act1
efficiently1and1effectively.11
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Innovative1and1successful1companies1will1learn1to1differentiate1themselves1and1
find1profits1in1better1serving1the1unique1needs1of1specific1groups1of1customers1
that1they1decide1to1do1business1with.1They1will1deliver1value1by1employing1real,
time1processes1and1organizational1structures1that1are1already1being1
demonstrated1by1organizations1such1as1the1U.S.1Marines1and1Whole1Foods1
Market.1


Michael Hugos is a mentor and practitioner in business agility at the Center for Systems
Innovation in Chicago, Illinois. He is an award-winning business architect who integrates
people, process and technology to create decisive competitive advantage. This article
excerpted from his book The Greatest Innovation Since the Assembly Line (Meghan-
Kiffer Press, 2007). He can be reached at: www.MichaelHugos.com.


© Copyright 2008, Michael Hugos Center for Systems Innovation