The impact of corporate agility on financial performance

By Tony Duggan - November 02, 2023

Organisational agility can have a direct and indirect impact on a corporate's financial performance. This was highlighted in a McKinsey report on "The impact of agility: How to shape your organization to compete”. The ultimate measure of that agility is a company's share price.

Financial performance is impacted by several factors, including the industry, market sentiment, competitive landscape, and the specific actions the company takes to become more agile. Here are some ways in which organisational agility can affect financial performance and ultimately the share price of a company:

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  1. **Attitude:** People in a company can significantly affect agility. This can result in improvement initiatives being blocked or delayed by negative attitudes and obstructiveness to change. This can result in organisational stagnation with people who are positive change agents leaving a company. The resultant inertia can significantly impact earnings and in turn, negatively impact share prices.

  2. **Innovation:** Agile companies tend to be early adopters of innovation. This approach to innovation may e.g. improve financial metrics and subsequently investor interest, potentially boosting the share price. Such examples include the use of AI to make working capital models inclusive of the entire supply chain lowering costs enabling delivery of higher margins.
  3. **Earnings Growth:** Organisational agility, driven by positive attitudes, can create its own “yes we can” momentum accelerating a positive change culture in a company leading to faster product development, quicker time-to-market, and the ability to seize new opportunities. This can result in increased revenue, lower costs and, ultimately, higher earnings. Companies with strong earnings growth naturally attract more investors, which can drive up the share price.
  4. **Risk Mitigation:** Agile organisations with a positive culture are often better equipped to manage risks and respond to unexpected challenges effectively. This risk mitigation capability can be seen as a positive signal to investors, reducing concerns about downside risks and adding to the value of the company’s shares.
  5. **Recognise the value of tactical opportunities:** Companies often produce great strategic plans. However, they omit to include tactical win opportunities which can be highlighted to investors if there are delays in delivering the strategic plan. Investors lose confidence when there is a lack of positive news which changes sentiment. Delivering tactical wins demonstrates agility and, consequently, a higher share price.

It's important to note that Investors and financial analysts regularly assess a company's agility. This significant impacts on the share price, which is the ultimate measure of a company's collective efforts and agility.

Crossflows AI driven working capital marketplace enables innovative companies to improve key financial metrics rapidly. As an outsourced project Crossflow can deliver across all organisational cultures with the support of the company’s board. This creates confidence in the delivery of major initiatives quickly, building investor confidence.

The question for corporates is, where do you want to be ?

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Tony Duggan- Tony is one of the founders of Crossflow. He served as Supply Chain Director at Wickes and B&Q prior to serving as Product Development Director at SWIFT, the global banking network. He also managed an outsourced fintech development project for HSBC in Hong Kong.

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