A Guide to AQ: How to Strengthen Your Company's Ability to Manage Change

In a past that seems more recent than ever due to its relevance, John Maynard Keynes famously coined the term technological unemployment.

While he didn’t predict everything about the future with complete accuracy (15-hour work weeks, anyone?), he did predict unemployment for certain jobs would grow “due to our discovery of means of economising the use of labour outrunning the pace at which we can find new uses for labour.”

In the 1930s when Keynes penned Economic Possibilities for our Grandchildren, he was extrapolating upon automation and machinery that was “outrunning the pace” of and thus replacing human labor in mines and factories.

And that prediction still holds up nearly a century later.

Between digital transformation, artificial intelligence, and the automation Keynes warned of; products, occupations, and entire industries are being upended left and right.

In fact, a study by the University of Oxford estimated that 47 percent of total U.S. employment is at a high risk to be automated within the next two decades.

But this is no funeral dirge for employment nor industry. Rather, it’s the canary in the coal mine of Keynes’ day.

Change is is coming for your organization—whether you’re ready for it or not.

The volatility of business operating margins has more than doubled since 1980. Now, the probability that the leader in market share is also the leader in profitability has decreased from 34 percent in 1950 to 7 percent in 2007.

While it’s hard to quantify exactly what globalization and advancing technology will mean for the future of business, what we do know is that instability is the new norm.

So how does a business remain strategic in an environment where even a one-year plan could become irrelevant?

By developing a strong adaptability quotient.

Strengthening Change Management: Understanding “Adaptability Quotient”

If you’ve read any business publications from the past several years, you’re probably familiar with the term “emotional quotient,” or “EQ.”

Well, adaptability quotient (AQ) is the newest of “the Qs” to hit the scene since the OG IQ kicked things off as much as a century ago.

Descriptions of Adaptability Quotient (AQ), Emotional Quotient (EQ) and Intellectual Quotient (IQ)

AQ is exactly what it sounds like: The potential, innate or learned, to adapt successfully to a new environment.  

And, if the trend of instability is any indication, AQ is poised to become the competitive advantage in the many industries where change is so rampant it’s hard to know who you’re even competing with anymore.

Whether you’re starting something new or you’re helping your enterprise adapt to meet new demands, these are the organizational capabilities and tactics you must develop for a strong adaptability quotient.

Four Organizational Capabilities for a Strong Adaptability Quotient

The problem with your current strategy is that it assumes predictable outcomes based on the past.

Static strongholds like market position, forecasts, and five-year plans simply won’t cut it in an unpredictable present (and future).

Instead, capabilities such as proactive listening, experimentation on the largest scale, codependent multi-company systems, and flattened hierarchies will propel companies to the leading edge of their industries.

Proactive Listening

It’s easy enough to understand that recognizing and acting on shifts in the market and consumer behavior is vital to adaptability, but how does a company actually do so in an age where information is plentiful to both you and your competitors all at once?

Quite honestly, you’re going to want to implement some kind of technology to collect and parse tons of data, recognize patterns, and enact real-time actions to take advantage of split-second opportunities to boost revenue.

Take for example Tesco in the UK.

The grocery retailer employs real-time data analysis on the purchase patterns of its loyalty program members. Their artificially-intelligent system is able to recognize changes in consumer behavior and create custom offers even at the single store level.

With digital tools that make it an obvious leader in UK’s retail space, Tesco is able to leverage its technology even further by selling access to it to other retailers that haven’t quite caught up.

Experimentation (and Failure)

Just what you wanted to hear—spend even more time and money on R&D, right?

Well, that’s not quite the case for companies with a strong adaptability quotient.  

Yes, high-AQ companies do tend to experiment more; but because they embrace digital transformation their experiments can be done in a way that takes less time, costs less in materials and personnel resources, and won’t damage your brand should it flop.

When Procter & Gamble starts to develop a new product, it taps into crowdsourcing platforms to solve technical issues, sets up experiments in virtual “stores,” and employs online communities to gather feedback.

Now, over 80 percent of every single new-business initiative at  P&G takes advantage of the digital “sandbox” they’ve developed.

Ikea takes their experimentation capability all the way down to their actual business model.

In Russia, Ikea makes more profit from the malls it develops and operates than it does from its meatball-slinging retail stores. They saw the chance to experiment with a new business model and took it—creating a brand new revenue stream.

But much like experimenting in a lab, experimenting within a business can also blow up in your face. The difference with adaptable companies is how they choose to learn and continue to innovate in the face of failure.

A Multi-Company Ecosystem

Digital connectivity has made neighbors of us all.

Take advantage of your new neighborhood by developing a dynamic ecosystem in which each company is a codependent yet unique element of the equation.

Once upon a time, Nokia led the cell phone market. Today, there are some generations who don’t even know what Nokia is.

So how did competitors like Apple wipe them away?

By getting out of the cell phone business.

Apple is an innovation and design company at heart. They’re able to focus on this core competency while relying on a complementary ecosystem of suppliers, manufacturers, telecom companies, and application developers to bring to fruition the devices that make them a market leader today.

Decentralized Decision Making

Illustration showing the Whole Foods decision making model

What’s the point of having all these awesome AQ capabilities if Angela from accounting doesn’t even have the freedom to share a spending trend she spotted with her well-meaning but under-informed regional manager?

Mobility doesn’t just do an economy good—it’s also necessary to create a work environment in which ideas and knowledge are free to flow, diverse viewpoints are heard, autonomy is celebrated, and flexibility is encouraged.

Companies with higher adaptability quotients tend to depend less on rigid hierarchies and more on strategic teams of skilled people that can be reorganized to fit the issue at hand.

Like at Whole Foods, strategy and important decisions are informed by teams that are in the thick of day-to-day business instead of execs who can be states or even countries away.

These small, agile, customized teams are simply better prepared to recognize changes in consumer behavior and act upon them.

Contrary as it may seem, a “free-range” workplace isn’t quite no holds barred.

In order for decentralization to work, very adept managers must apply just the right mix of freedom and boundaries while hiring people who can thrive in a high-power, high-responsibility environment in the first place.

At Netflix, instead of clocking in and out and tracking PTO—the powers that be trust their hires and steep their culture in several strongly-held core beliefs.

Tactics to Foster Adaptability Even at The Enterprise Level

While you might not be able to drop everything to pursue new core capabilities, there are tactics you can take inside even the most rigid or large businesses to create space in which adaptability can flourish.

As a company leader, you should empower managers and other decision makers to operate these tactics as if they’re an extension of their everyday tasks.

An image of a trade show

Look Beyond Known Competitors

It’s all too easy to look at what your long-time competitors are doing to make sure you’re tracking or, better yet, staying ahead of the curve.

But what about the disruptors? The innovators? Almost every industry has at least one organization that’s changing the game. They are who you should be striving to emulate.

Furthermore, what’s going on in industries related to yours? What HR technology, sales automation, or AI-powered customer service can you take advantage of?

With a laser focus on what’s next for your industry, your enterprise leaders will develop an adaptive mindset that’s always looking for the next big competitive advantage.

Be Diligent on Short-Term Uncertainties

You have a long-term strategy to stick to. That’s perfectly understandable. But to survive in today’s business landscape, you must do your due diligence to ensure your safety blanket doesn’t become a straight jacket.

Uncertainties can present themselves in many forms. Maybe your leadership team has firmly-held beliefs that aren’t panning out the way they were expected to. Maybe it’s time to face the fact that you aren’t prepared to react appropriately to uncertainties in time. Maybe there’s nothing you can do but expect the unexpected.

Whatever uncertainties you uncover, fold the most pressing and actionable items into the strategic initiative plan you’re already executing against.

Though these initiatives may not feel as tangible as your product portfolio or your daily ops, the risk you run by not preparing for uncertainty can make or break you.

So attach time frames. Measure success. Make someone accountable. Be diligent when it comes to managing uncertainty.

Hear Diverse Alternatives

Business solutions will soon cease to be linear. So should any changes you propose to make.

Again, leaders are encouraged to be prepared for any contingency by setting forth several alternatives for every initiative in the business strategy.

By considering diverse viewpoints and having a variety of next steps already lined up, you’ll find you’re ready to adapt much faster than ill-prepared competitors.

Adopt a Sense of Urgency

You can only adapt faster if you make decisions and implement change faster.

Most enterprises don’t have the option to completely break down their hierarchies to speed up decision making, but managers can make a huge difference by changing the pace of these decision-making events.

Instead of one big annual planning meeting, what if you broke it into shorter but more frequent touchpoints? Have more conversations, more frequently, about change and you’ll start establishing a culture of adaptability befitting of a modern enterprise leader.

Change is the new norm. And a company’s ability to adapt to it will be the deciding factor that separates market leaders from market losers in almost every industry.

As a business leader, empowering your organization to implement these capabilities and tactics will help you develop the strong adaptability quotient you’ll need as modern business rockets further into uncharted territory.

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