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5S
The 5S organizational agility organizational
framework: a dynamic agility
framework
capabilities perspective
Saša Baškarada and Andy Koronios 331
University of South Australia, Mawson Lakes, Australia
Received 10 May 2017
Revised 21 July 2017
29 August 2017
Accepted 19 September 2017
Abstract
Purpose – Although there is widespread agreement that organizational agility is increasingly becoming
critical to achieving sustained competitive advantage, there is little consensus on what exactly constitutes
organizational agility, or how it may be assessed and improved. The purpose of this paper is to contribute
toward operationalization of the organizational agility construct through a high-level conceptual framework
grounded in dynamic capabilities.
Design/methodology/approach – This is a conceptual paper that presents a new organizational agility
framework, which draws from, and builds on, the existing literature.
Findings – This paper defines organizational agility as rapid, continuous and systematic evolutionary
adaptation and entrepreneurial innovation directed at gaining and/or maintaining competitive advantage.
The 5S Organizational Agility Framework proposes five dynamic capabilities (sensing, searching, seizing,
shifting and shaping) underpinning organizational agility.
Originality/value – The framework presented in this paper contributes toward operationalization of the
organizational agility construct.
Keywords Strategic management, Dynamic capabilities, Organizational transformation,
Absorptive capacity, Organizational agility
Paper type Conceptual paper

Introduction
Organizational agility, the capacity to flexibly respond to changes in the environment by
quickly adjusting product and service offerings, is increasingly becoming critical to
achieving sustained competitive advantage (Singh et al., 2013). In a 2006 global survey with
more than 1,500 executives from businesses across a range of industries as well as
government, non-government and not-for-profit organizations, McKinsey & Company, a
global management consulting firm, found that more than 90 per cent of respondents agreed
that the importance of agility (the ability to anticipate, adapt to and react decisively to events
in the environment) and speed (the ability to rapidly execute operational or strategic
objectives) had increased over the past five years (Macias-Lizaso and Thiel, 2006). A non-
executive director on the board of Telstra, Australia’s largest telecommunications and media
company, recently observed that “Whether you are a director, a manager or an employee,
change is the main game right now” (Birmingham, 2016). The importance of agility was also
recently highlighted by the Prime Minister of Australia, who argued that “the Australia of
the future has to be a nation that is agile” (Turnbull, 2015). However, most mature
organizations are still optimized for efficiency rather than strategic agility – “the ability to International Journal of
Organizational Analysis
capitalize on opportunities and dodge threats with speed and assurance” (Kotter, 2012, p. 46). Vol. 26 No. 2, 2018
pp. 331-342
Agility has greater impact on organizational performance in more volatile markets © Emerald Publishing Limited
1934-8835
(Tallon and Pinsonneault, 2011). For instance, Grewal and Tansuhaj (2001) have shown that DOI 10.1108/IJOA-05-2017-1163
IJOA strategic flexibility has a positive effect (enhanced by competitive intensity) on
26,2 organizational performance following crises or anomalous events. Judge and Miller (1991)
similarly argued that decision speed was associated with higher performance only in high-
velocity environments. Others have claimed that agility has detrimental effects on
organizational performance in relatively stable environments (Nadkarni and Narayanan,
2007).
332 While the academic literature had traditionally focused on punctuated equilibrium, in
which long periods of relative stability with continuous small incremental changes are
periodically interrupted by brief periods of radical discontinuous change, for many
organizations, the ability to continually engage in rapid change has been critical for their
survival (Brown and Eisenhardt, 1997). In line with Schumpeter’s theory of competitive
behavior (Schumpeter, 1939), empirical research has shown that sustaining a single
competitive advantage over time is increasingly becoming more difficult in a wide range of
industries (Wiggins and Ruefli, 2005). Accordingly, the expected length of leadership by any
particular company has declined dramatically over the past 50 years (Comin and Philippon,
2006). This situation has led to a hypercompetitive environment in which companies are
forced to identify new areas of competitive advantage at increasingly shorter time intervals
(Wiggins and Ruefli, 2005). Although most pronounced in high-technology industries
(Porter, 1996), hyper competition may be spreading more broadly owing to rapid changes in
ubiquitously deployed information and communication technologies (Wiggins and Ruefli,
2005).
Observing that the concept of organizational agility has not been sufficiently or
consistently addressed in the management literature, Singh et al. (2013) argue that there is a
need for a better operationalization of the construct. The resource-based view (RBV) of
strategic management, which suggests that organizations generate enduring advantages
only through organization-specific capabilities and assets (Peteraf, 1993), is unable to
explain how successful organizations achieve timely responsiveness and flexible adaptation
in situations of rapid change.
Building on the RBV, the dynamic capabilities view aims to explain agility by focusing
on second-order capabilities that allow an organization to adapt (create, integrate and
reconfigure) its resources and first-order capabilities. While first-order capabilities may
ensure technical fitness (i.e. efficiency and effectiveness), dynamic capabilities are needed to
ensure evolutionary (Helfat et al., 2009) and entrepreneurial (Teece, 2007) fitness. In addition
to being able to effectively adapt to changing environmental conditions, organizations with
mature dynamic capabilities also proactively shape their environment through innovation
and collaboration (Teece, 2007).
However, most studies dealing with organizational agility have focused on the
characteristics of agile organizations rather than on the underpinning organizational
capabilities (Appelbaum et al., 2017a, Appelbaum et al., 2017b). Characteristics/attributes of
agile organizations identified in previous research include flexibility, responsiveness,
culture of change, speed, integration and low complexity, high quality and customized
products and mobilization of core competencies (Sherehiy et al., 2007). Accordingly, there is
no universal agreement in the scientific literature on what the key dynamic capabilities
underpinning organizational agility are. As the discussion of dynamic capabilities in the
literature has largely been the subject of theoretical debates, the key constructs, which are
very abstract, have not been adequately operationalized. As such, they are difficult to assess
and improve. This paper aims to partially fill this gap by identifying the key dynamic
capabilities underpinning organizational agility.
What is organizational agility? 5S
Singh et al. (2013) trace the origin of the concept of agility in management to a Harvard organizational
Business Review interview with Jack Welch, the legengary chairman and chief
executive officer of General Electric, in which he stressed the importance of “speed,
agility
agility, and simplicity” (Tichy and Charan, 1989, p. 3). Agility also gained significant framework
prominance in the software engineering community in the early 2000s (Fowler and
Highsmith, 2001).
Agility may be viewed from different perspectives. For instance, strategic agility refers 333
to the capacity to spot and seize new opportunities, portfolio agility refers to the capacity to
shift resources quickly and effectively between business areas and operational agility refers
to the capacity to exploit opportunities within the existing business model (Sull, 2010).
McKinsey defines strategic agility in terms of an ability to sense strategically relevant
information from the entire organization, seize emerging opportunities and burst company
boundaries (Heiligtag et al., 2015). Others have differentiated between resource agility,
which deals with the access to necessary human and technological resources, process
agility, which deals with the flexibility of the core processes, and linkage agility, which deals
with the nature of stakeholder interaction (Sarker and Sarker, 2009).
On the basis of a comprehensive review of literature from top management journals,
Singh et al. (2013) define agility as “persistent, systematic variations in an
organization’s outputs, structures or processes that are identified, planned, and
executed as a deliberate strategy to gain competitive advantage” (p. 7). According to
this definition, ad hoc and unsystematic responses do not constitute agility. They
propose a two-dimensional specification in terms of the magnitude of change (i.e.
flexibility) and the rate of change (i.e. speed). Accordingly, organizational agility may
be increased along either one of these dimensions. Primarily focusing on increasing the
magnitude of change (i.e. flexibility) may lead to infrequent discontinuous change,
while primarily focusing on the rate of change may lead to frequent incremental
adaptation. Associating discontinuous and incremental adaptation with explorative
and exploitive innovation (March, 1991) suggests that these two aspects stand in
relative tension. In view of that the preferred approach may be determined with
reference to environmental threats and opportunities (Baškarada et al., 2014). Focusing
on flexibility and speed at the same time may result in frequent discontinuous change.
Furthermore, the ability to easily switch between infrequent discontinuous change and
frequent incremental adaptation may also be considered as a form of agility. Singh et al.
(2013) also make a distinction between an organization’s agility capacity (the range of
intentional change performances that an organization could execute) and capabilities
underpinning/enabling that capacity.
Although the concept of agility has been much more prominent in sports science than in
management, the sports science literature does not offer agreement on the precise definition
of the term (Sheppard and Young, 2006). Although sports science literature has traditionally
defined agility as the ability to rapidly change direction; some scholars have additionally
highlighted the importance of perceptual and decision-making factors (Young et al., 2002;
Chelladurai et al., 1977). Viewed as such, agility involves a deliberate response to an external
stimulus. Recognizing the importance of cognitive factors, Sheppard and Young (2006)
further argue that the change of direction and change in speed should be considered
independently, so that rapid acceleration/deceleration in a straight line, in response to a
stimulus, also constitutes agility. Roughly translated as the ability to rapidly adjust output
capacity based on external stimuli (i.e. scalability), this aspect of agility has received little
attention in the management literature.
IJOA How can organizational agility be achieved?
26,2 Agility requires a stable backbone comprising relatively fixed structures that define how
resources are distributed (this is frequently instantiated in some form of a matrix structure
with fixed homes and dynamic/temporary staff allocations to project/task), governance that
dictates how decisions are made and certain core processes, as well as more dynamic
elements that leverage the stable backbone and can be quickly adapted to emerging
334 opportunities and challenges (Aghina et al., 2015). For instance, drawing an analogy to the
smartphone, the phone’s fixed hardware and operating system form the stable backbone,
whereas the ability to add, remove and update apps and the operating system form dynamic
capabilities. Companies without a stable backbone (e.g. start-ups) may be too chaotic and
unpredictable, while companies with a strong backbone but without dynamic elements may
be too bureaucratic and risk-averse. Based on a survey of 161 companies, McKinsey
associated agility (defined in terms of a stable backbone in combination with dynamic
capabilities) with superior organizational health and performance, and identified 10
management practices that differentiated the most from the least agile organizations,
including role clarity, top–down innovation, capturing external ideas, process-based
capabilities, operational discipline, internal competition, meaningful values, knowledge
sharing, inspirational leaders and people–performance review (Bazigos et al., 2015).
This is not necessarily a new insight as the significance of semi-structures, in which
some features (e.g. responsibilities and priorities) are prescribed or determined while others
are not, was recognized by McKinsey in the 1990s. For instance, Brown and Eisenhardt
(1997) argued that semi-structures are to be preferred over purely organic or mechanistic
structures because they are sufficiently rigid so that organizational change can be
structured but not too rigid to prevent it from happening. They highlighted the importance
of limited structure in the form of clear responsibilities, priorities and formal meetings,
underpinned by extensive formal and informal communication. They also emphasized the
importance of using a variety of low-cost approaches to frequently probe into the future,
including experimental products, future studies and strategic alliances with major, leading-
edge customers and frequent meetings to discuss options. Although such activities cannot
predict the future, they may, nevertheless, lower the probability of surprise by an
anticipated future. Arguing against comprehensive planning or a purely reactive approach,
Brown and Eisenhardt (1997) observed that it was important to have an iterative and
flexible innovation process that was less like disciplined problem solving and more like
improvisation. Finally, they stressed the importance of carefully managing the transition
between past, present and future time horizons.
Similar to the McKinsey idea of a stable backbone complemented by more dynamic
elements, Kotter (2012) argues that agility requires two parallel organizational “operating
systems”. The first one, comprising traditional hierarchies and processes, is optimized for
efficiency, while the second one exclusively focuses on continual update and implementation
of organizational strategy. Traditional hierarchies and processes are risk-averse and
resistant to change. In other words, they favor stability over agility. Similarly, traditional
change management processes, which work well when there is a clear understanding of
starting and end points, the planned change is relatively small and employee resistance is
not a major concern, do not necessarily scale to situations of continuous, rapid and relatively
ambiguous change. The second “operating system” proposed by Kotter (2012) involves the
creation of a volunteer strategy network comprising approximately 10 per cent of staff (from
the entire breadth and depth of organizational hierarchy), who are highly motivated,
engaged and prepared to act as change agents.
 Finally, Tallon and Pinsonneault (2011, p. 2) empirically show that strategic information 5S
technology (IT) alignment, “the extent of fit between information technology and business organizational
strategy”, as well as IT infrastructure flexibility, “the extent to which key IT resources can
scale and adapt for different purposes” (p. 3), have a positive and significant effect on
agility
organizational agility, “the ability to detect and respond to opportunities and threats with framework
ease, speed, and dexterity” (p. 2).

Dynamic capabilities and organizational agility

335
The RBV of the firm anchors competitive advantage in organizational capabilities and
resources (Peteraf, 1993). Resources are “stocks of available factors [. . .] owned or controlled
by the firm”, while capabilities are capacities to deploy resources, usually in combination,
using organizational processes, to achieve desired objectives (Amit and Schoemaker, 1993).
They are “information-based, tangible or intangible processes that are firm-specific and are
developed over time” (p. 35). Distinctive and superior resources and capabilities may become
the basis for competitive advantage (Peteraf, 1993). If a firm is to sustain its competitive
advantage, its resources need to be heterogeneous, immobile, valuable (in terms of being
able to exploit opportunities and/or neutralize threats in the environment), rare, imperfectly
imitable and there cannot be valuable but neither rare nor imperfectly imitable strategically
equivalent substitutes (Barney, 1991; Amit and Schoemaker, 1993). Furthermore, there must
be other short- and long-term limits to competition (Peteraf, 1993). However, the RBV does
not seem applicable to high-velocity markets (situations of rapid and unpredictable change),
for which dynamic capabilities may provide a more suitable theoretical explanation
(Eisenhardt and Martin, 2000).
Instead of focusing on resources as the main source of competitive advantage, the
dynamic capabilities perspective considers those processes that allow organizations to
integrate, build and reconfigure resources and capabilities to address rapidly changing
environments (Teece et al., 1997; Eisenhardt and Martin, 2000). They may include
knowledge creation, product development, change management and strategic planning
routines. Dynamic capabilities underpin both evolutionary adaptation (Helfat et al., 2009)
and entrepreneurial innovation (Teece, 2007). In other words, they enable organizational
adaptation to the environment as well as the shaping of that environment. While being
important enablers, dynamic capabilities are not themselves a source of sustained
competitive advantage (Eisenhardt and Martin, 2000). As such, they are a necessary, but not
a sufficient condition for sustained competitive advantage.
Teece (2007) discusses sensing and shaping jointly, combining them in one high-level
dynamic capability. Given that sensing is aimed at identifying (Kirzner, 2015) and shaping
at creating (Schumpeter, 1934) market disequilibrium, these two activities have very
different objectives, and may also have different micro-foundations. Accordingly, it may be
beneficial to separately consider absorptive/sensing (Cohen and Levinthal, 1990) and
innovative/shaping (McGrath, 2001) capacities. Other high-level dynamic capabilities
discussed by Teece (2007) include seizing and transforming.
Sensing and shaping are fundamentally about external and internal organizational
learning respectively. They require the ability to detect new opportunities and threats from
the external environment, as well as the ability to create (shape) new opportunities internally
within the organization. Somewhat surprisingly, Teece (2007) does not discuss absorptive
capacity – the ability of an organization “to recognize the value of new, external information,
assimilate it and apply it” (Cohen and Levinthal, 1990, p. 128). By adopting absorptive
capacity as a theoretical lens, we may further operationalize external sensing in terms of the
following: acquisition – the ability to identify and acquire relevant external information;
IJOA assimilation – the ability to analyze, interpret and understand relevant information, as well
26,2 as to infer relevant consequences; and transformation – the ability to combine existing
knowledge with new information (Zahra and George, 2002). Exploitation, the remaining
absorptive capacity capability, defined as the ability to incorporate acquired and
transformed knowledge into operations, relates to the “transforming” dynamic capability.
Given that opportunities for external sensing are essentially endless, Teece (2007) notes
336 that organizations should use their strategy to guide their sensing efforts. He also highlights
the usefulness of external networks, particularly with universities. Creating new
opportunities requires the ability to synthesize externally acquired knowledge in novel
ways. Thus, shaping has a strong relationship with organizational research and innovation
activities. Although many organizations may undertake sensing and shaping informally,
Teece highlights the need for dedicated resources and formal processes. Although Teece
briefly mentions scenario planning and notes the importance of hypothesis generation and
testing of personal beliefs, there is little discussion of future studies, e.g. foresight and
horizon scanning (Baškarada et al., 2016b).
Seizing opportunities involves business model and strategy transformation that is
underpinned by the knowledge gained through sensing and shaping activities. This may
include product and service design, and requires an understanding of expected future
revenues and costs as well as customer and competitor behavior. Understanding capability/
product/service co-specialization/complementarity/interdependence, within organization as
well as in relation to other organizations, is also critical. Seizing may also require a
redefinition of organizational boundaries, e.g. by deciding to outsource some capabilities.
Transforming is about maintaining competitiveness through enhancing, combining,
protecting and reconfiguring of organizational resources. This may be hindered by
traditional hierarchical management structures with centralized decision-making. In
contrast, loosely coupled organizational structures that align governance with ownership
may facilitate organizational transformation. Organizations also require effective
knowledge management processes and systems that facilitate transformation and ensure
organizational knowledge does not dissipate.

The 5S organizational agility framework

In line with the preceding literature review, we define organizational agility as the capacity
for rapid, continuous and systematic evolutionary adaptation and entrepreneurial
innovation directed at gaining and maintaining competitive advantage. The definition
highlights the importance of speed; ceteris paribus, organizations with a quicker turnaround
time are considered more agile. This capacity also needs to be continuous rather than
periodic, as well as systematic/planned rather than ad hoc. Drawing from, and building on,
the preceding discussion, the conceptual framework shown in Figure 1 proposes five
dynamic capabilities underpinning organizational agility:

sensing shifting

seizing
Figure 1.
The 5S organizational
agility framework searching shaping
 (1) Sensing: The ability to detect new opportunities and threats from the external 5S
environment[1]. organizational
(2) Searching: The ability to create new opportunities within the organization. agility
(3) Seizing: The ability to make unbiased decisions about strategy, business model framework
and capability transformation.
(4) Shifting: The ability to effectively implement new strategy, business model and
capabilities. 337
(5) Shaping: The ability to execute and scale new capabilities to affect the external
environment.

As previously noted, Teece (2007) combines both external and internal organizational
learning in one dynamic capability. Given that while external organizational learning
enables evolutionary adaptation, internal organizational learning supports entrepreneurial
innovation, these two aspects also may have different micro-foundations. As a result, our
framework separates these two dynamic capabilities into sensing and searching.
Seizing forms the core of the framework by connecting and influencing the other four
capabilities. It depends on the knowledge gained through sensing and searching, while
providing high-level guidance on the scope of those activities, e.g. by articulating strategic
focus areas. Being focused on exploiting opportunities and minimizing threats, seizing is
primarily the responsibility of senior/top management who may use a range of strategic
management approaches, including corporate portfolio management (Hedley, 1977; Hedley,
1976), value chain analysis (Porter, 1985) and balanced scorecards (Kaplan and Norton,
2008). Relevant decision-making under uncertainty should seek to minimize cognitive biases
and facilitate organizational ambidexterity (Baškarada et al., 2016c) by ensuring appropriate
balance between exploitation (incremental innovation) and exploration (discontinuous
innovation; March, 1991; Baškarada et al., 2017; Baškarada and Watson, 2017). Seizing also
takes input from shifting and shaping through ongoing monitoring of relevant
transformational and operational activities, while providing continuous oversight and
governance.
Being focusing on external organizational learning, sensing is a key enabler of
evolutionary adaptation. Building on Porter (1985), Yang and Liu (2012) argue that sensing
should focus on unexpected changes in customer, competitor and supplier behavior.
However, such a narrow focus may be considered too defensive/reactive. A more proactive
approach to sensing should, for instance, also include scientific and technological
developments that may threaten existing and/or enable potential future business models
(Appelbaum et al., 2017a; Meredith and Francis, 2000). Although all employees may
contribute to sensing through an ongoing process of horizon scanning, staff with specialized
expertise may be more effective at identifying relevant weak signals from the external
environment (Sutherland and Woodroof, 2009). Sensing has a close relationship to searching
as knowledge gained from the external environment should be used to shape activities
aimed at generating knowledge internally within the organization. However, any influence
of sensing over searching would be mediated through the seizing capability. Similarly,
internal knowledge generation requires awareness of the latest scientific and/or
technological developments. Thus, searching would also contribute to sensing, albeit with a
much narrower focus. Drawing an analogy to scientific research, sensing is akin to a
literature review, while searching relates to experimentation.
Searching may include exploitation (incremental innovation), exploration (discontinuous
innovation), as well as forecasting and foresighting (Baškarada et al., 2016a; Baškarada
IJOA et al., 2016b). The purpose of forecasting and foresighting is not necessarily to predict the
26,2 future but to challenge deep-seated assumptions and expand existing mental models by
speculating about potential and/or probable futures. Being focused on internal
organizational learning, searching is a critical enabler of entrepreneurial innovation. Both,
sensing and searching, require breaking down of organizational silos. In other words, they
are underpinned by effective coordination of information and activities as well as
338 cooperation across organizational units (Gulati, 2007; Cheuk et al., 2017). Accordingly, they
are enabled by employees who can operate across internal boundaries while contributing to
multiple organizational products and services. Searching generally requires staff with
specialized skills (Baškarada and Koronios, 2017), who are at the forefront of scientific and
technological knowledge in their fields (Jung et al., 2003).
Shifting is ultimately about moving an organization from a current-state to a planned
future-state. This may relate to productivity enhancements through technology adoption
(Brynjolfsson and Hitt, 2000; Henderson and Venkatraman, 1992), planned provision of
new products and services (Leonard-Barton, 1992), adjustments to the current operating
model (e.g. through outsourcing of non-core capabilities; McIvor, 2000), vertical and
horizontal integration (Soosay et al., 2008) and the like (Tsoukas and Chia, 2002). Being
focused on creating and reconfiguring capabilities, shifting is the responsibility of
executive and middle management who may use a range of change management
(Todnem By, 2005) and organizational transformation tools and techniques. It is
important to note that shifting does not operate in isolation, but through interplay
between seizing and shaping. While seizing provides oversight and direction, shaping
(the stable organizational backbone) provides a baseline and data on current operations.
Thus, shifting also contains a component of experimentation; it delivers incremental
changes, which are tested through shaping and adjusted via seizing. Ceteris paribus,
being able to achieve a shift of a greater magnitude in less time relates to greater overall
agility.
Shaping is ultimately about achieving operational efficiency, effectiveness and
scalability. Being focused on delivering the desired environmental (external) effects, shaping
is primarily the responsibility of line management who may use a range of operations
research and operations management tools and techniques, including forecasting,
production planning, inventory management, capacity and demand management, queueing,
resource acquisition, quality management, scheduling and the like (Aksin et al., 2007; Starr
and Gupta, 2017). It may not be immediately obvious how and why such activities relate to
organizational agility, and much of the relevant literature, which primarily focuses on
dynamic aspects, largely ignores these operational activities. Nevertheless, shaping
represents the stable core around which other dynamic activities take place, and where the
effectiveness of evolutionary adaptation and entrepreneurial innovation may be evaluated.

Conclusion
In a world of ever accelerating change, organizational agility, the capacity for rapid,
continuous and systematic evolutionary adaptation and entrepreneurial innovation directed
at gaining and/or maintaining competitive advantage is becoming ever more important.
Given that most organizations are still optimized for efficiency rather than agility, and
considering that the concept of organizational agility has not been sufficiently or
consistently addressed in management literature, the framework presented in this paper is
both timely and relevant. The framework proposes five dynamic capabilities (sensing,
searching, seizing, shifting and shaping) underpinning organizational agility. As such, it
contributes toward operationalization of the organizational agility construct.
 A number of factors, including strategy, structure, capabilities, employees and 5S
leadership may, in various ways, affect organizational agility (Appelbaum et al., 2017a; organizational
Appelbaum et al., 2017b). Such factors may interact with the capabilities comprising the
organizational agility framework presented in this paper in complex ways. For instance,
agility
different capabilities may require different (perhaps competing and/or incompatible) framework
configurations of such factors, leading to a complex mix of organizational structures and
leadership styles. The specific effects of any relevant factors on the capabilities comprising
the organizational agility framework presented in this paper were outside the scope of this 339
study, and would need to be investigated in any future research.

Note
1. Identify, acquire, analyse, interpret, integrate with existing knowledge, and understand relevant
external information, as well as infer relevant consequences.

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Corresponding author
Saša Baškarada can be contacted at: baskarada@gmail.com

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