Business Flexibility - An Analogy

This piece was inspired by an article on Richard Veryard's SOAPBox Blog, entitled "The Value of Emptiness". In it Richard muses on the value of flexibility, and thinks about the business equivalents of expansion capabilities like the spare slots in a desktop PC.

The value of an option increases with uncertainty (for example, the value of a financial option increases with the price volatility of the underlying item). Flexibility is therefore a choice you make depending on your situation. The only thing certain about my desktop PC is that I continuously find new purposes for it. Therefore expansion capacity is important. But in a laptop I willingly forgo expansion capacity in exchange for efficiency in a more limited purpose, e.g. light weight. Even if it costs more and has a shorter life, this may still be the right solution.

Also flexibility, even in PC architecture, takes different forms. This allows us to extend Richard's metaphor to different types of business change:

• You may choose surplus capacity (such as a big disk). The business equivalent is a larger factory than the immediate need.
• The expansion slot allows you to do new things, but you have to acquire devices and reconfigure the PC, not a zero-effort activity. The business equivalents are probably new channels, and M&A activity.
• But in the brave new world of USB 2, you can plug and play new devices, and you may not have to take permanent ownership of them. A service oriented business is more like this.

So the way we design our business depends, as ever, on our plans. If we want to do more of the same, we need cheap capacity. Expanding our own core capability demands the equivalent of the expansion slot - things like flexible people with enough time to tackle M&A work. But if we want to use or supply external services, then a service structure is most appropriate.

The advantages of any provision for future flexibility are that they should enable you to react more quickly when the need arises, they can help to smooth investments over time, and they can help to manage the impact of change. Just buying a new card rather than a whole PC is a good example. But flexibility usually has a cost, and makes best sense in the context of the type of change you forsee for your endeavour.