Microfoundations approach to strategic agility – Exploration to operationalization

Abstract

Strategic agility (SA) has become an established construct in strategic management literature. SA has been an existential element in firms for superior firm responsiveness towards market requirements. The presence of SA in organizations resulted in achieving competitive superiority. However, there has been dearth of literature regarding the enablers of SA in organizations. The authors explored this based upon an exploratory study by anchoring the study in the banking industry, which was witnessing dynamic shifts in both the operating environment and the industry landscape. The research purpose was to build a process level understanding of SA through microfoundation approach. Data were collected from 34 expert bankers. Using content analysis technique, the researchers found 11 microfoundations. The two meta-capabilities of SA were strategic sensitivity and resource fluidity. Identification of these microfoundations would help managers to promote organizational SA and undertake effective and sustainable firm initiatives towards market response.

Keywords

banking dynamic capabilities emerging markets India microfoundations strategic agility

Introduction

Strategic agility (SA) as a concept encompasses the rapid responses of firms towards opportunities and risks sprouting from the business environment (Doz and Kosonen, 2010). This notion of SA has mostly been associated with high-technology and knowledge-intensive industries where business model renewal and innovation occurred frequently (Arbussa et al., 2017; Doz and Kosonen, 2010; Morgan and Page, 2008). Over the last couple of decades, the banking environment has witnessed large-scale changes driven by increased regulation, greater compliance requirements and proliferation of financial technology (fintech) companies (Blakstad and Allen, 2018). The growing popularity of fintech companies and vanishing customer loyalties posed a big threat to banks (PwC, 2019). A survey of customers (PwC, 2019) found that 50% of consumers were just as likely to open their next account with a new bank as they were with their existing banks. Banks had historically not demonstrated it to be adept at responding with agility to these changes leading to a growing feeling that while banking functions are needed, banks themselves may be redundant (Gomber et al., 2018). The operating environment of Indian banks had changed significantly due to the introduction of many government funded and subsidised digital platforms. Further, the falling cost of Internet access and the mobile revolution provided enormous possibilities for fintech companies and incumbent banks alike to come up with innovative plus customized financial products and disruptive business models that addressed unmet customer needs (McKinsey & Co, 2017).

The SA literature has been growing over the years. Research on SA had covered a number of organisations including football clubs (Di Minin et al., 2014), telecom companies (Oyedijo, 2012), hospitals (Abu-Radi and Al-Hawajreh, 2013), banks (Sampath and Krishnamoorthy, 2017) and high-technology companies (Doz and Kosonen, 2008b). The significance of SA in a variety of like business model transformation (Arbussa et al., 2017), business model innovation (Doz and Kosonen, 2008b, 2010) and entry strategy (Fourné et al., 2014) had also been studied. Doz and Kosonen (2008a) outlined a series of actions needed to enable the meta-capabilities of SA, but they didn’t define SA at a microfoundational level. Further, while prior discussions on SA had discussed the role of top management in building SA (Doz and Kosonen, 2010; Morton et al., 2018), the role of middle managers in contributing to the development and deployment of these capabilities has been relatively less explored (Salih and Doll, 2013). This research focuses on obtaining senior and middle managers’ perspectives on microfoundation of SA as they play several strategic roles within organizations including as change agents which drive organisational strategies (Rouleau and Balogun, 2011).

The changing dynamics of the banking sector and resulting implications on bank strategy offered a relevant and interesting background to the study SA as there were very few studies of SA in the banking context. This research also addressed the need to study SA in the context of emerging market firms, wherein SA assumed greater importance than in developed markets because of the fluid nature of institutional supports (Tarba et al., Forthcoming). The article has been structured as follows. The second section reviews the relevant literature, the third section explains the research design and method, the fourth section presents the analysis and discussion of results and the fifth section draws conclusions from the research.

Discussion of extant literature for theoretical perspectives

The banking industry was one of the most heavily regulated world over with extensive government regulation (Vives, 2010). This covered aspects like what interest rates banks could charge, what activities banking firms could engage in, what risks banks could or couldn’t undertake, what capital the banks must hold and in what locations banks could operate in (Kroszner and Strahan, 2014). State ownership and intervention in the form of public sector banks (PSBs) had been necessary to stabilise the system, especially in developing markets (Vives, 2001). The past decades have seen a wave of foreign bank (FB) entry in many developing countries leading to increased competition in financial markets (Beck, 2008). The introduction of competition in banking had allowed banks to rely on its own internal models to control risk and formulate strategic responses to competition (Vives, 2010). SA has been found to have a positive correlation with competitive capabilities and performance of banks (Khoshnood and Nematizadeh, 2017; Sampath and Krishnamoorthy, 2017). Hence, it was important to understand the underlying organisational capabilities that could help banking firms to build SA capabilities.

The authors reviewed extant literature in the areas of microfoundation, SA and two meta-capabilities of SA – strategic sensitivity (SS) and resource fluidity (RF) to build the research propositions theoretically. In this section, the author presented the relevant constructs as well as the propositions.

Microfoundations

The study of microfoundations had attracted significant research interest in the last decade (Felin et al., 2015). The microfoundations lens was not a theory but a way of thinking about macro-outcomes and has been applied to a variety of macro-concepts like routines (Winter, 2013), performance (Eisenhardt et al., 2010), absorptive capacity (Volberda et al., 2010), strategies (Verma and Bhattacharyya, 2016) and dynamic capabilities (DCs) (Teece, 2007). It sought to find explanations for organisational outcomes like performance and competitive advantage by examining lower level phenomena like the origin, development and management of organisational routines and capabilities (Felin et al., 2012). Microfoundations involved adjustment and recombination of an organisations’ existing capabilities and actions that constituted towards effective managerial decision-making under uncertainty (Teece, 2018). Grant (1996) had suggested that understanding the role of firms in reconfiguration required a focus on micro-level actors whose decisions shaped capabilities that may lead to superior firm performance. As one of the motivations for the microfoundation approach was to unpack collective constructs such as organisations into underlying constituents, Felin et al. (2012) proposed that microfoundations could be organised into three overarching categories: (1) individuals, (2) processes and routines and (3) structure and design. Felin et al. (2015) further found DCs as an important area for application of the microfoundations approach. They suggested that the structural arrangements under which employees worked were organisational design, structure and human resource practices and policies (Felin et al., 2015). These factors could play an important role in a firm’s ability to identify opportunities in the environment (Felin et al., 2015).

Salvato and Rerup (2011) explored the relationship between routines and capabilities in the development of DCs. Routines were defined as complex and analytic processes that extensively relied on existing knowledge, linear execution and repetition (Eisenhardt and Martin, 2000). Routines in turn helped build capabilities, which were consciously developed and deployed to enable firm-level outcomes (Zollo and Winter, 2002). The authors adopted the microfoundation approach to build a better understanding of how organisational routines, structure and individuals contribute to the development of the SS and RF.

Strategic agility

Agility has been defined as an organization’s ability to sense and respond to market opportunities and threats in a timely manner (Aitken et al., 2002). SA has been viewed as a deep-rooted organizational capability of managers to think and act differently which could result in business model innovations (Doz and Kosonen, 2008a: 6). SA enable firms to be more proactive in changing their organizational systems to gain advantages as part of their intended strategy rather than only reacting to external changes (Clauss et al., 2019).

SA has been identified as a DC in various research (Helfat et al., 2007; Sampath and Krishnamoorthy, 2017). Cepeda and Vera (2007) posited that the creation of DCs involved transformation of firm’s knowledge resources and routines and possible reconfiguration of operational routines. This was supported by Doz and Kosonen (2008a) when they proposed three dimensions to SA: SS, collective commitment (CC) and RF. They found these dimensions as being most valuable to corporates in aligning firms’ resources with customer requirements. To achieve this alignment, organisations needed to build capabilities to continuously sense and seize opportunities and simultaneously transform various aspects of the organisation (Teece, 2018). This included organizational culture to address threats and opportunities as it sprouted (Teece, 2018). Managers in organisations building SA capabilities therefore were required to integrate, build and reconfigure internal and external competencies to compete in rapidly changing environments (Augier and Teece, 2009). Despite the importance of understanding SA as a key capability, research efforts in terms of understanding it as a set of routines and processes for building SS, CC and RF have been sparse. The authors used the notion of SA as proposed by Doz and Kosonen (2008a) for generating the research propositions for the study of two dimensions – SS and RF.

Strategic sensitivity

SS has been related to the ability of the firm to identify new business opportunities and enable strategic responses (Doz and Kosonen, 2010). Menor and Roth (2007) suggested that SS entailed a range of capabilities and actions necessary for the firm to relate to its business environments. This included aspects like market scanning, anticipating, experimenting, distancing, abstracting and reframing. Doz and Kosonen (2008a) added that true strategic insight could only be derived by learning from customers and competitors and studying new trends and innovations in the firm’s industry or in other industries. Organisations possessing information about future behaviours of customers, competitors and cost structures would benefit most from the changing market opportunities where the benefits were short-term in nature (Ojha, 2008). Chen et al. (2016) recommended that innovation-driven firms should focus on customer requirements and competitors’ strategies in the design of products and service offerings.

In financial services companies, the factors determining the success of innovation included market acumen or knowledge of the market and customer (Johne and Harborne, 2003). However, market research was not viewed as key input to innovation as innovation in banks was largely limited to imitating products and services of competitor banks (Akamavi, 2005). Research on Indian banks found that they were not very focused on generating market intelligence which hampered both innovation and competitive responses (Kaur and Gupta, 2012). Based on this, the authors proposed proposition 1a as,

Proposition 1a: Generating market insights is a microfoundation of the meta-capability of SS in banks.

Senge (1992) had commented that organisations which would truly expected to excel in the future would be such firms that had discovered and mastered the art of how of tapping employee commitment and firm wide capacity to learn across levels. Organisational learning was the process of improving actions through better knowledge and understanding (Fiol and Lyles, 1985) and was important in the creation of agility capabilities (Doz and Kosonen, 2008a; Eisenhardt and Martin, 2000). Learning organisations excelled at systematic problem-solving, experimentation with new approaches, learning from past experience, learning from the best practices of others and transferring knowledge quickly and efficiently throughout the organization (Garvin, 1993). Such organisations were characterised by a supportive learning culture, intense focus on feedback and performance improvement (Garvin, 1993). Further, managers in such firms were receptive to ideas from both inside and outside the organisation, possessed high levels of autonomy and had supportive leadership that encouraged individuals to voice their ideas and opinions in an uninhabited manager (Senge, 1992).

Wang and Ahmed (2003) further elaborated that organisation learning also included individual learning. Garvin (1993) had found that organisational learning initiatives affected individuals at three overlapping levels namely, cognitive (ability to think differently after exposure to new ideas and expansion of knowledge), behavioural (internalise new insights and alter behaviour) and performance (changes in behaviour leading to improvements in results such as superior quality, better delivery, increased market share). Prior research in the financial services industries had also linked organisational learning to improved performance and corporate reputation (Blazevic and Lievens, 2004). Organizational structure and design also affected efficient learning, the utilization and exchange of knowledge and ideas and the development of expertise (Felin et al., 2012). Felin et al. (2015) found that flatter organisation structures tended to encourage experimentation and led to effective learning and innovation. Organisational learning was also facilitated by emphasis on collaboration and cross-functional teams (Salvato et al., 2009). Prior research on organisational learning had linked it with the development of insights, knowledge and associations between past and future actions (Huber, 1991). Hence, the authors proposed proposition 1b as,

Proposition 1b: Organisation learning ability is a microfoundation of the meta-capability of SS in banks.

Resource fluidity

Organisational adaptation to change in the external environment often required the enhancement or alteration of strategic assets through innovation and organisational learning (Zollo and Winter, 2002). Processes in turn support the creation, protection and augmentation of strategic assets (including technological and other intangible assets) and competencies (Augier and Teece, 2009). Agile organisations possessed the ability to be assembled, disassembled and reconfigured around key resources and processes (Doz and Kosonen, 2008a). RF called for developing capabilities that allowed companies to quickly access, integrate and leverage new competencies and skills (Doz and Kosonen, 2008a).

Doz and Kosonen (2008a) identified information technology (IT) and human resources as core mechanisms impacting RF. Adaptability and flexibility of key resources were useful criteria to assess organisations’ agility (Harraf et al., 2015). However, Doz and Kosonen (2008) cautioned against all resources including human resources, becoming core rigidities if it wasn’t modified or renewed at regular intervals. O’Reilly and Tushman (2011) suggested that firms could build sustained competitive advantage through its ability to leverage and reconfigure existing competencies and assets in ways that were valuable to the customer but difficult for competitors to imitate.

Pavlou and El Sawy (2006) found that various IT-related resources combined to form an IT capability that were attributes of valuable, rare, nonimitable and nonsubstitutable. Bharadwaj et al. (1999: 4) defined IT capability as the ‘firm’s ability to acquire, deploy, and leverage its IT resources to shape and support its business strategies and value chain activities’. They added that IT capabilities included IT infrastructure, business process integration, external and internal IT partnerships, IT management and a strategic vision of IT. IT impacted agility in organisations by speeding up activities, providing intelligent and autonomous decision-making processes and enabling organisation-wide collaboration (Aburub, 2015). However, IT could help businesses generate value only if it was integrated with firms’ strategies, organisation design, structure and competencies (Sambamurthy et al., 2003). The banking sector had witnessed a slew of technology-driven products and distribution channels and emergence of new banking models based around technological differentiation (Parada and Bull, 2014). Banks could use IT capabilities to differentiate products, impose switching costs on customers and induce customer loyalty (Chae et al., 2014). Hence, the authors posited proposition 2a as,

Proposition 2a: Flexible IT is a microfoundation of the meta-capability of RF in banks.

Four components influenced the behaviour of organisation members namely, organisation structure, social factors, physical setting and technology (Balogun and Johnson, 2004). Building adaptable human resources was a key but difficult aspect of RF and it required considerable organisation attention (Doz and Kosonen, 2008a). Adaptation of strategic assets in response to changing business environment of an organisation involved managerial choice and action (Helfat and Peteraf, 2015). Managers’ knowledge, experiences, capabilities, skills, creativity and innovativeness were connected to each other and collectively contributed to success in work (Hussi, 2003). The ability to perceive changes in the operational environment and adapt the immediate activity tasks was also found as a key managerial trait contributing to success (Edvinsson and Malone, 1997).

Regulated industries, such as banking, were characterised as having environments with low managerial discretion in decision-making especially for the middle level managers’ action being usually restricted at operational level (Peteraf and Reed, 2007). Felin et al. (2012) in their research found that employees of an organization served as microfoundations of routines and capabilities by their choices, characteristics, abilities and cognition. Helfat and Peteraf (2015) had identified the importance of managerial abilities of attention and perception in relation to sensing and problem-solving and reasoning in relation to seizing of opportunities. Felin et al. (2012) also found that variations in organisation routines and capabilities could be partially explained by differences among employees with respect to their attitude, skills, knowledge and experience. Building SA was therefore dependent on the managers’ perceptions about the need for change which in turn was based on external stimuli such as competition and regulation and internal aspects such as perceptions of performance, risk appetite and personal motivations (Ambrosini and Bowman, 2009). Hence, the authors posited proposition 2b as,

Proposition 2b: Managerial attitude towards change is one of the microfoundations of the meta-capability of RF in banks.

Based on review of literature conducted, the authors proposed a framework (Figure 1) of microfoundations of SA for this research.

Figure 1.

Study framework of microfoundations of strategic agility.

Methodology

The study sought to enhance knowledge about SA using the microfoundation lens. Qualitative research was deemed appropriate as the study explored linkages between organizational goals and processes with an exploratory point of reference (Skinner et al., 2000) and the research questions were open-ended, exploratory in nature (Elliott and Timulak, 2005). As the focus of this research was on understanding the microfoundations of SA in the hitherto underexplored context of the banking sector and the nature of research questions were exploratory, a positivist qualitative approach guided the data gathering and analysis (Silverman, 1998). The use of propositions offered a directionality for the results as the objective of the research was to provide an alternative perspective using the microfoundations lens to further our understanding of SA (Ghauri, 2004; Sandberg and Alvesson, 2011).

In qualitative research, the experience and knowledge of respondents determined the quality of data collected from in-depth interviews (Rubin and Rubin, 2011). A preliminary interview with two senior banking experts with over two decades of experience in the banking industry helped to establish an understanding of bank organisation structure and key managerial roles and responsibilities. The first banking expert was a retired CEO of India’s largest and oldest PSB. The expert had over 35 years of experience in the banking sector across various divisions and functions. The second banking expert had over two decades of experience in banking operations in India in leadership roles with two FBs and two private banks. Based on inputs from the experts, the sampling purposes table, presented in Table 1, was prepared. These managers collectively represented different types of banks, operating in India. They performed different types of management roles and were well-suited to enlarge our knowledge of the subject of SA and its microfoundations (Amabile et al., 2001).

Table 1.

Study sampling purposes table.

Key functions to be covered	Location to be considered for sampling	Representative management level/designation^a	Approached for participation (confirmed)
A. Retail banking
A1. Retail liabilities (deposits and allied services)	Branch	Branch Head/Cluster Head/GM	PSB – 2 (1)
			PVB – 2 (1)
			FB – 1 (N)
A2. New product and service initiatives	HO	GM/VP	PSB – 1 (1)
			PVB – 2 (1)
			FB – 1 (N)
A3. Payment business and marketing	HO	Head/GM/VP	PSB – 1 (N)
			PVB – 2 (1)
			FB – 1 (1)
A4. Retail asset products – mortgages	Branch/HO	GM/Manager	PSB – 2 (1)
			PVB – 5 (3)
			FB – 1 (1)
A5. Retail asset products – others	Branch/HO	GM/Manager	PSB – 2 (N)
			PVB – 2 (1)
			FB – 1 (N)
A6. Retail risk management	HO	Function Head	PVB – 2 (2)
A6. Retail risk management	HO	Function Head	FB – 2 (2)
A7. Branch operations	Branch	Cluster Head/Regional Manager	PSB – 2 (1)
			PVB – 2 (1)
			FB – 1 (N)
B. Wholesale/corporate banking
B1. Key account management	HO	VP/Manager	PSB – 2 (1)
			PVB – 2 (1)
			FB – 1 (1)
B2. Trade finance and other lending		VP/Manager	PSB – 2 (N)
			PVB – 2 (1)
			FB – 1 (N)
C. Corporate functions
C1. Treasury	HO	Function Head/VP	PSB – 2 (1)
			PVB – 2 (2)
			FB – 2 (2)
C2. Compliance	HO	Function Head	PSB – 2 (N)
			PVB – 2 (1)
			FB – 1 (N)
C3. Risk management	HO	Function Head	PSB – 2 (N)
			PVB – 2 (1)
			FB – 2 (2)
C4. Operations (including technology and HR)	HO	Function Head	PSB – 2 (1)
			PVB – 2 (1)
			FB – 1 (N)
C5. Strategic planning	HO	Function Head	PSB – 1 (1)

Note: PSB: public sector bank; PVB: private sector banks; FB: foreign bank; HO: head office; GM: General Manager; VP: Vice Presidents.

^a Designations vary across different types of banks, and hence, generic nomenclature was used. Further job rotation policies ensured that managers with over 10 years’ experience had exposure to at least one other functional area and/or branch operations prior to their current position.

Sampling

Based on the interviews with the two banking experts, key functions and desired respondent profiles were identified. Thereafter purposive sampling technique was adopted to identify study participants and create a coherent sample that provided an in-depth understanding of the research questions by ensuring information richness (Robinson, 2014). Given the multilayered structure of the Indian banking sector to capture the whole gamut of divergent perspectives, the respondents were systematically selected across a variety of banks and banking functions. The purposive sampling technique was complemented with snowball sampling so that respondents were open and frank in their interaction. Snowball sampling was adopted. This was because the respondents were senior managers and were unlikely to respond to invitation to participate in the study due to the sensitive nature of the questions (Robinson, 2014). Table 2 provided summary details of the respondents of the study.

Table 2.

Summary of respondents.

Type of bank	Number of respondents	Age of respondents – Range (years)	No. of respondents with experience in more than one bank	Expertise covered	Average experience (years)
Foreign/MNC (FB)	9	37–45	8	Risk management, treasury, retail banking (various)^a	8 years in corporate office; 9 years in branch/operations
Private (PVB)	17	35–50	11	Treasury, compliance, corporate credit, branch banking, retail banking (various)^a, operations, IT and HR	10 years in corporate office; 10 years in branch/operations
Public sector (PSB)	8	45–58	1	Operations, new initiatives, retail banking, branch banking	10 years in corporate office; 12 years in branch/operations
Total	34		20

Note: FB: foreign bank; PVB: private sector banks; PSB: public sector bank; IT: information technology.

^aRepresents various retail banking functions such as assets, mortgages, retail lending etc.

All respondents possessed at least 15 years of banking experience with a minimum of 8 years at the corporate office level. In alignment with the theoretical sampling strategy, the authors used information saturation as a criterion to determine the sample size (Lincoln and Guba, 1985; Robinson, 2014). Based on the guidelines recommended made by Guest et al. (2006), we realised data saturation after 30 interviews as new information thereafter did not yield to new codes or provide new insights.

Data collection

To ensure reliability and validity, the authors followed the triangulation approach using three sources – academic literature, trade journals and interviews (Golafshani, 2003). The perspectives obtained from different information sources enhanced construct validity (Creswell and Miller, 2000). The interviews fulfilled the need for qualitatively rich and in-depth insights into a real world phenomenon. This was ensured by the inclusion of experts across functions, levels and banks. This further helped in reducing the personal interpretation biases (Eisenhardt and Graebner, 2007).

The review of literature related to the meta-capabilities of SA as proposed by Doz and Kosonen (2008a) was used to prepare a discussion guide, which improved the internal validity (Gibbert and Ruigrok, 2010). Semi-structured interviews using the discussion guide were used to gather data for the research as they provide opportunities for exploring understanding and meanings in depth and also ensured that same standards were applied across all interviews (Bryman and Hardy, 2004: 324). The semi-structured interview comprised three main parts – relevance of SA in the current banking environment, process adopted by banks in building SS and RF capabilities and challenges faced by banks in building SS, RF and SA capabilities.

The data for the study were collected over a period of 8 months as emphasis was laid on recruiting experts only as per the sample profile. All the interviews were recorded and transcribed by the first author within 72 h. The interviews lasted an average of an hour leading to transcripts comprising over 600 pages. The interviews transcripts were reviewed by the researchers and the informants prior to analysis to establish authenticity and completeness.

Data analysis

In line with the method advocated by Miles et al. (2014), the iterative data analysis followed a process of data reduction, data display and drawing of conclusions. In the data reduction phase, the authors focused on simplifying and focusing on relevant insights and in the data display phase on the organising and grouping of relevant insights into tables or matrices. The authors then analysed the data using a word processing software and followed the coding procedure of Saldaña (2015). A mix of in vivo (to explore meanings in the words of the respondents’ narratives) and descriptive coding (to better catalogue the participants’ responses) methods were used to analyse the data and to name concepts (Saldaña, 2015: 61). To establish consistency in the data and enhance the quality of the findings, the first and second authors of the article independently coded 10 interview transcripts over 3 months as recommended by Thomas (2006). The inter-coder reliability was over 91%. Figure 2 depicted the research process followed for analysis of the raw data.

Figure 2.

The research process (as prescribed by Creswell, 2002).

As prescribed by Thomas (2006), the authors iteratively grouped concepts into first-order categories. Then, the authors reviewed and abstracted the initial categories into second-order categories. Further, the authors after careful examination of second-order categories abstracted them into overarching themes. Figures 3 to 6 show the process of aggregating the categories into themes, and Table 1A in the Appendix 1 provided the sample quotes used for the analysis. Throughout this process of analysis, the authors were guided by the meta-capabilities discussed by Doz and Kosonen (2008a) and the definition of microfoundation provided by Felin et al. (2012). The data analysis was an iterative process where we cycled between our data, discovered themes and dimensions and relevant literature to validate our theoretical proposition (Gioia et al., 2013). We further built on the data analysis and examined the emergent themes as – enablers (the underlying competencies that are needed to build and/or enhance a capability), process (how the capability unfolds because of the enablers) and impact (influence of the enablers and processes on building or enhancing meta-capabilities of SA). The summary of this analysis has been tabulated in Table 2A in the Appendix 2.

Figure 3.

Particularities of microfoundation of SS – Generating market insight. SS: strategic sensitivity.

Figure 4.

Particularities of microfoundation of SS – Organisation learning ability. SS: strategic sensitivity.

Figure 5.

Particularities of microfoundation of RF – Flexible IT capability. RF: resource fluidity; IT: information technology.

Figure 6.

Particularities of microfoundation of RF – Managerial attitude to change. RF: resource fluidity.

Findings and discussion

The focus of this research was to build on the findings of Doz and Kosonen (2008a: 8) where SA resulted from firms’ ability to sense market dynamics, flexibility to respond to market realities and leadership that can bring about organisational alignment. The context for the study was the Indian banking sector which faced business model challenges from new and agile competition such as payments banks, non-banking lending institutions, small finance banks and microfinance institutions (PwC, 2018). This research discussed there aspects namely, how firms acquired and showed SS and RF, what specific management processes, practices and behaviours helped in building these capabilities and how organisational processes, practices and behaviours affected attainment of SA. The microfoundations approach enabled the research focus on the roles of routines and capabilities, individuals and processes in organizations and inside the boundary of the firm interactions. The first step of the study analysis revealed underlying process and people capabilities that emerged out of discussions on the constructs of ‘Generating Market Insight’, ‘Managerial Attitude to Change’, ‘Organisation Learning Ability’ and ‘Flexible IT Capability’. The second step of analysis explored a causal relationship between the emergent themes. The findings and discussions based on the analysis have been presented subsequently.

Generating market insight

In the present day context, the biggest challenge for organisations was obtaining business information that was accurate and easily available to support decision-making processes in a challenging and rapidly changing operating environment (Gregor and Kalinska-Kula, 2016). The adoption of technology solutions across most banking operations combined with various initiatives by the government of India had led to a rapid increase in the volume and nature of customer data captured (Ministry of Electronics & Information Technology (GoI), 2019). Management of customer information in such circumstances required an ability to transform the available data into knowledge (Wills and Williams, 2004).

This served as a background to our discussions with experts regarding the importance of market insights with respect to building SS capabilities. On exploring the link between building market insights and SS, majority of respondents said that market insights and customer proximity were vital to exploit emerging opportunities. The retail banking head of a fast-growing FB asserted ‘Our ability to read the market and be aligned with customer needs has given us a sustainable competitive advantage’. A branch manager at a small PSB remarked that, ‘It’s all about increasing our share of the customer’s wallet’. The discussions on generating market insight leading to SS found two themes – process of customer data management and use of analytics for generating insights.

Process of customer data management

The Head-Consumer Cards and Merchant Acquisition of one of India’s largest PVB’s remarked, ‘…building market understanding is a key responsibility of all front-line managers – anyone who meets a customer has to have a finger on the pulse of that customer’. Customers were viewed as key participants in the innovation process and played an important role in the development of products and services (Price et al., 2015). The Product Manager (Bancassurance) of a large FB opined ‘…if we don’t know our customers, markets and our competitors, we might as well not sell this product’. However, understanding and managing customer relationships was dependent on insights gathered from accurate data which in turn was collected from a wide variety of sources (Han-Yuh, 2007). This sentiment was also shared by the Head – Operations and Information Technology of a PVB when he remarked, ‘We regularly hold training for bank staff on the importance of collecting quality data and work on building sound processes to acquire, clean and process meaningful data’.

Insights from customer data also required to be complemented by front-line employees who played a crucial role in service delivery and building relationships with customers (Yavas and Babakus, 2010). Respondents from PVBs and FB reflected that they used many sources for market intelligence ‘from our people, sales teams and customers’. This is in line with suggestions made by Kohli and Jaworski (1990) that market-oriented companies demonstrated an organisation wide responsibility for generation of intelligence about customer needs.

Use of analytics for generating insights

The potential of using digital data to build commercially workable products and build successful business models had been convincingly demonstrated by companies like Google and Amazon over the last two decades (Chen et al., 2012). Banks which had been able to integrate data from online and offline channels and offered a unified view of clients to enhance customer relation management helped in terms of both lead conversion rates and improved customer satisfaction (The Financial Brand, 2014). A respondent from a large PVB shared ‘We use customer data analytics extensively to understand customer behaviour and build focus in our customer relationship management’. This was echoed by the Head – New Product Initiatives of a large PSB when he explained, ‘Any bank today generates huge amounts of transactional and customer profile data, which if analysed using sophisticated data analytic solutions, would yield huge business opportunities’.

However, implementing big data analytic solutions in banks wasn’t easy due to legacy systems (McKinsey, 2017). A senior manager from a large PSB shared for experience that ‘PSB’s struggle to implement sophisticated data analytic solutions as many of us have legacy systems and it is very difficult to integrate data across incompatible systems’. Deutsche Bank, one of the world’s largest banks, had struggled with its big data implementation since the beginning of 2012 due to problems with traditional systems – mainframes and databases, while it was trying to make big data tools work with these systems (The Financial Brand, 2014). Hence, banks needed to emphasise and plan for a comprehensive analytics strategy to gain effective market insights and achieve SS. The operations head of an FB summed up the analytics strategy as ‘Our focus is on intelligent use of analytic solutions technology to improve customer experience and efficiency in operations’.

In conclusion, market intelligence and insights had been proven to be critical in helping organisation achieve early warning of opportunities or threatening developments. This provided scope to deal with increasingly diverse and dynamic array of factors of competition. This also enabled firm managers to understand specific competitors, customers and markets. This helped to improve an organisation’s general ability to learn about its customers and markets so as to act upon that knowledge (Calof et al., 2008). This study findings indicated that the construct ‘Generating Market Insight’ was an organisation process. It manifested by understanding customers and competitors and by generating business opportunities with the help of data analytics.

Organisation learning ability

The capabilities of a firm was determined by the organising principles by which individual and functional expertise were structured, coordinated and communicated (Zander and Kogut, 1995). Slater and Narver (1995) found that organisations that created a culture that maximized organizational learning would be able to create superior customer value and build a competitive advantage. Market-oriented organisations were able to complement market intelligence with growing amount of information that already was possessed by an organisation in the form of knowledge and experience of employees at different levels (Wills and Williams, 2004). Organisational learning could thus be defined as the development of new knowledge and insights that have had the potential to change behaviour and improve performance (Huber, 1991; Slater and Narver, 1995). Experts in this study offered their views on the learning ability of their organisation and perceived links, if any with SS. Four themes emerged from these which were emphasis on continuous learning, importance of training in organisational learning, learning from past mistakes and culture to empower learning.

Emphasis on continuous learning

Operational business processes were performed by individuals and groups using knowledge (Firestone and McElroy, 2004). This in turn was generated by the processes of organisational learning (Spender, 2008). To learn, managers needed to actively manage their knowledge gap between the knowledge they need to have and the knowledge they actually had (Cepeda and Vera, 2007). The Treasury Head of a large FB stated,

It’s very important for banks to continuously learn as the banking business is follows set cycles and we cannot keep making the same mistakes. Learning ability for my bank means constant review of what went wrong in the past and building safeguards into our systems and processes so that we don’t make them again.

Continuous learning represents an organisation’s effort to create continuous learning opportunities for all of its members (Marsick and Watkins, 2003). A senior banker from a PVB stressed this in his comment, ‘Learning is a continuous process in our bank. We believe in on-going learning across all management levels’.

Provision of continuous learning opportunities for individuals was effective only if knowledge so gleaned could be embedded in organisational systems and practices so that it could be shared and regularly used (Marsick and Watkins, 2003). Knowledge codification into procedures and technologies also made past experience and extant routines easier to apply (Zander and Kogut, 1995). The treasury head of a PVB concurred with this and stated ‘We focus on capturing learning across both internal (within the bank) and external interactions (with customers, regulators and competitors) as a form of knowledge management’. Örtenblad (2002) suggested that implementing an organisational learning perspective focuses on the storage of knowledge in the organisational mind. Garvin (1993) found that learning organisations exceled at learning from its own experience and history and transferring knowledge quickly and efficiently throughout the organization. The GM-Strategic Planning of one of India’s oldest PSB’s echoed this opinion, ‘Organisational knowledge is a bridge between the past and the future and needs to be constantly reinforced’.

Importance of training in organisational learning

Training was a key organisational resource that impacts organisational success and outcomes (Yavas and Babakus, 2010). Experts from most banks echoed this and remarked, ‘…structured training program is a key part of organizational learning’. The experts in this study stressed the importance of training in the complex banking environment due to the strict compliance requirements. A senior PSB expert succinctly said, ‘All training programs stress on knowing the business well; operations training is essential in building basic competencies in operations and customer servicing’. Yavas and Babakus (2010) in their research on bank employees found that training programs sponsored by organisations improved employees’ behavioural skills and enhanced their capability to deal with varying customer needs effectively. The Head – Compliance of a large PVB said, ‘When we hire, we look for potential and invest in them through training and other interventions to make them the best in the industry’. PSB experts also concurred on the depth and breadth of their operational skills and competencies due to HR policies related to job rotation, training infrastructure and scale of operations. A senior banker from the second largest PSB in India pointed out, ‘PSBs training, job rotation policies and operational exposure ensures our people are extremely competent at what they do’.

Learning from past mistakes

Learning from mistakes or failure was an important aspect of organisation learning (Edmondson, 2011; Maidique and Zirger, 1985). This was highlighted by a Credit Risk expert from an FB when he remarked ‘True organisation learning happens when the bank shows humility in terms of recording, accepting and openly discussing past mistakes’. Error management culture encompassed organisational practices related to communication. This was about communicating errors, sharing error knowledge, to help managing during in error situations, so as to quickly detect and handle errors (Van Dyck et al., 2005). A senior banker from a PVB rued, ‘FBs are relatively more tolerant of failures. We are trying to build that kind of culture but it is taking time as people don’t want to admit or discuss their failures openly’. Organisations that have an effective approach to errors are more apt to experiment and are more likely to innovate (Van Dyck et al., 2005). Sitkin (1992) found that organisational mangers were likely to learn from failure when they followed an ‘action/failure/feedback/correction cycle’. An expert from a PSB agreed with this statement, ‘As banks we don’t have much flexibility in product design but there is ample scope for mistakes in product delivery. We have lost customers to PVBs and FBs who smartly learnt from our mistakes and market failures’.

Culture to empower learning

Firms demonstrating a strong learning culture was good at creating, acquiring and transferring knowledge, as well as at modifying behaviour to reflect new knowledge and insight (Škerlavaj and Dimovski, 2007). For learning to happen, information needed to be acquired, understood and transformed into action (Garvin, 1993), but such learning was effective only when it was accompanied by behavioural and cognitive changes in the functioning of the organisation (Škerlavaj and Dimovski, 2007). A senior banker from a PVB remarked, ‘Technology offers data but it is only in the right learning environment that the data becomes a powerful tool’. In financial services companies, it was important to have free exchange of information across all levels of the organisation to build effective learning capabilities (Blazevic and Lievens, 2002). Respondents in this study also emphasised the importance of free flow of information in fostering a learning culture. Most experts stressed the importance of empowerment and culture in the context of organisation learning. Skyrme and Amidon (1997) had found a knowledge creating and sharing culture, continuous learning, a well-developed technology infrastructure and systematic organisational knowledge processes as a key to building robust knowledge management practices. An expert from a PSB’s remarked ‘PSB processes, culture, legacy technology and hierarchical organisational structures are hurdles in creating a proactive learning culture’. This was in line with the findings of Dougherty and Hardy (1996) that learning in mature organisations was constrained because of a desire to support stability, conformity and continuity.

Organisation learning literature advocated learning outcomes as change in behaviour (Spender, 2008). This supported the study proposition of organisation learning as a microfoundation of SS. Organisation learning ability enabled organisations to synthesise market, competitive and customer intelligence with organisational knowledge. This was key to building SA capabilities. Egan et al. (2004) had viewed a learning organization as one that had capacity for integrating people and structure to move an organization in the direction of continuous learning and change. Such organisations were able to enhance this capability through the building blocks of effective organisation design and focusing on building appropriate employee skills and competencies (Goh, 1998).

Flexible IT capability

IT capabilities is defined as the ability of a firm to mobilise and deploy IT resources in combination with other resources and capabilities to differentiate from competition (Bharadwaj, 2000). Technology strategy involved development of long-term objectives for technological change in the organization and systematically acquiring capabilities required by the organization so as to pursue its overall business strategy (Weiss and Birnbaum, 1989). In the financial services industry, IT was also a prerequisite for financial innovation because of the high volume, variety and velocity of financial transactions which provide powerful insights about customers and markets (Woo, 2017). Experts in this study commented on the significance of flexible IT systems and its impact on building SA capabilities. Three themes emerged from discussions – treat IT as a strategic function, embed IT in the culture of the organisation and align IT to organisational strategy.

Treat IT as a strategic function

Technology enabled firms to achieve competitive advantage by enhancing employees’ capacity to offer superior service to their customers (Yavas and Babakus, 2010). Philip (2007) suggested that IT strategy should be an ongoing process involving a top-down analysis to clarify business needs and a bottom-up evaluation of existing information systems to study their effectiveness and to find gaps in existing technology. This strategy focused on the accomplishment of strategic goals and dealt with the exploitation of existing assets, such as infrastructures, resources and ability (based on experience), and exploring new solutions and tasks through social interactions and creativity (Marabelli and Galliers, 2017).

Experts confirmed that effective and efficient use of technology to meet customer expectations was what differentiated banks. They elaborated that in their respective banks, IT strategies were focused on tools to ‘enhance customer experience’, ‘offer a secure transaction environment’ and ‘ensure safety of customer data’. All the experts shared that that IT contributed in building organisation agility only if it was treated as a strategic function. They suggested that a meticulously crafted and well executed IT strategy and ‘flexible and malleable IT capabilities were vital to achieving SA’. However, the study results revealed that the nature of approach to IT strategy affected firm IT capability.

Embed IT in the culture of the organisation

Experts from PSBs lamented over how legacy systems had affected the IT capabilities at their banks. A banker in one of the oldest PSBs said, ‘Over the last two decades PSBs have also implemented innovative technology solutions across all businesses and functions but challenges remain in integrating the software with legacy systems’. The treasury head of a Singapore head quartered FB remarked that, ‘For us, technology is a cultural DNA thing. It is just woven into how the bank operates’. The retail banking head of a UK headquartered bank shared ‘For a long-time banking used technology only for operational efficiencies but with the growing penetration of mobile phones, there will soon be a mobile only bank as that’s what customers want’. Within a few months of the interview, the bank launched an innovative digital bank for the first time in India. A manager handling the mortgage product portfolio in the largest PVB said, ‘In the last 2 decades, all our decisions about products, channels and risk are built around technology led differentiation because we know we have an edge here’.

Alignment of IT function to organisational strategy

The ‘Information Systems’ literature identified three forms of IT and business alignment – functional alignment, structural alignment and dynamic alignment (Reynolds and Yetton, 2015). Reynolds and Yetton (2015) had described functional alignment as how IT resources use business capabilities. The structural alignment was the allocation of business and IT decision rights across the organization while the dynamic alignment was regarding how the strategic decisions to develop alignment at one point in time influenced the range of decisions available in the future (Reynolds and Yetton, 2015). Experts from PVBs and FBs commented that they treat ‘technology as a strategic tool’ for delivering value to customers. This focus helped them to ensure that technology did not became an obstacle or a rigidity even when they scaled the operations. As the Head – Corporate Banking of a PVB remarked, ‘Our clients value that our technology adapts to and evolves with their banking requirements. In today’s world without flexible and adaptive technology we will be on the back foot’. A respondent from an FB cited a global IT budget running into billions of dollars for their technological superiority while a respondent from a PVB highlighted the efforts made by the bank to ‘integrate the software with their customer’s software for seamless data transfer and access to information’ as a reason for dominance in a niche market.

To summarise, technology has the potential to both enable and disable RF, and hence, flexible IT capability was an important aspect of RF. Customer-focused technology solutions were the key to building flexible and adaptive IT capabilities. This also suggested that achieving this capability was as much about budgets and investments as it was about a change in mindset about the importance of the function. The study found support for Philip’s (2007) suggestion that IT strategies should be developed using the same process and at the same time as business strategies. This was crucial if organisations were to derive maximum advantage from IT systems. Similarly, suggestions made by Salmela and Spil (2002) about the frequency and nature of the IT strategic plan were also echoed by experts when they emphasised the importance of frequent review of the IT strategic plan to ensure relevance with the changing business environment.

Managerial attitude towards change

Organisational routines were an important source of flexibility and change as it consisted of the related parts of the structure of the routine and the actual performance of the routine itself (Feldman and Pentland, 2003). Organisational routines could also be seen as a product of organizational learning (Argote, 1999). The performance of routines by employees of an organisation was carried out against a backdrop of rules and expectations involving multiple participants (Feldman and Pentland, 2003). This interdependence among participants could set practical constraints on individuals in circumstances which required deviation from established routines (Feldman and Pentland, 2003). Organisations demonstrating human RF possessed the capacity of keeping its human resources aligned on an ongoing basis by constantly transitioning from one human resource configuration to another (Dyer and Ericksen, 2006). Experts in this study elaborated on how their organisations influenced their managers’ ability to adapt and respond to change. Two themes emerged from these discussions which were recruit the right talent and create a change-oriented structure and culture.

Recruit the right talent

Organisational learning and adaptability to change was facilitated by a norm of professionalism which included mastery and regular updating of knowledge (Popper and Lipshitz, 2000). Staffing was a key activity in building flexible human resources (Cappelli and Neumark, 2004). The head of operations and HR in PVB shared ‘We recruit people for their ability to be responsive and adapt’. In contrast, senior managers from PSBs admitted ‘Despite our implicit promise of job security we find it difficult to attract and retain young talent because of our hierarchical structure and bureaucratic policies’. All experts from FBs confirmed ‘We focus on recruiting the best talent and invest in grooming them. We look for intelligence, competence and the right attitude while recruiting people’. The head of credit cards of a Germany headquartered bank pointed out,

Our culture is very performance oriented and the road map for employees’ growth is quite clear. When people join, us they know what they must do to progress. So, adaptability and amenability to change is not really a worry for us.

Both PVB and FB experts were unanimous in their opinion that they had been able to outperform PSBs because of their focus on recruiting young and talented managers and enabling them to achieve their career goals in the organisation.

Create a change-oriented structure and culture

Organisational alignment theory found that well aligned organisations demonstrated processes to maximise efficiency and reduce barriers to performance (Semler, 1997). In firms with a motivational structure, linking reward systems with strategic goals and a high degree of agreement between organisational culture and strategy was required (Semler, 1997). Employee behaviour in turn was influenced by the extent to which strategy, structure and culture were aligned to create an environment that facilitated the achievement of organizational goals (Hung et al., 2010). Bushardt et al. (2011) defined organisational learning as the addition to or change of the shared common knowledge of the organization’s culture.

Experts from PVBs and FBs concurred on their focus on building ‘lean organisations’ and creating a ‘performance oriented culture’. An expert from an FB remarked that, ‘In the Indian markets we have to be agile and adaptable to compete with the large PVBs. So, change is a way of life in our bank’. This statement was also supported by Bushardt et al. (2011), who found that the relative strength of organisational culture was indicated by the degree to which members of a group behaviourally respond to a common environmental stimulus. On similar lines, an expert from an FB echoed ‘When you have people with the right attitude at the top, change is not a challenge. If we must change to win then that is what we will all do’.

A senior PVB expert remarked ‘Our managers are rewarded and promoted based on their attitude and competence. We encourage healthy competition and are generous in rewarding high performers. Therefore, you see so many young people in our bank holding very senior positions’. Further, experts from both PVBs and FBs claimed that they could easily implement change management practices due to their ‘policy of recruiting people with an agile and flexible mind-set, progressive human resource policies and practices and goal oriented culture’. Experts from PSBs cited many reasons for their slow response to the changes in the banking industry initiated by PVBs and FBs and other non-banking institutions. Some of the key aspects highlighted by them included ‘bloated organisation size’, ‘slow acceptance of need to change’, ‘bureaucratic approach to decision-making’, ‘unattractive employee compensation and progression policies’ and ‘passive culture with lot of inertia’.

Organisational change could occur in two temporal paces namely, evolutionary (slowly, continuous) and revolutionary (swiftly, discontinuous) (Burgers, 2016). Iterative or continuous change led to incremental improvement and efficiencies and tended to be more frequent at lower levels of the organisation (Burgers, 2016). While the revolutionary or strategic change were common in the higher levels of the organisation (Mintzberg and Westley, 1992). Further, Mintzberg and Westley (1992) suggested that stable and adaptive organisations were characterised by planned changes around procedures and practices as the larger strategic matters were under control. This was supported by the treasury head of a UK headquartered bank when he remarked, ‘Making sudden changes is always difficult in an organisation. We focus on regular and focused change in our bank – many small, some big’.

To summarise, the proposition of managerial attitude to change includes managerial ability to recognise and respond to change as key to building RF. Assessing and managing the organisational culture was a key managerial task. Building RF capabilities needed managers to decide whether to gradually change the culture or to take a revolutionary approach. Organisation trying to build SA capabilities therefore needed to focus on an effective alignment of right managerial resources (Buller and McEvoy, 2012). The performance of these managers was required to be supported by enabling organisational structures and empowering cultures (Spreitzer, 2008).

Conclusion

In moderately dynamic markets, such as banking, SA capabilities were built through predictable, analytic processes that rely extensively on existing knowledge, linear execution and evolution over time (Eisenhardt and Martin, 2000; Nelson and Winter, 1982; Zollo and Winter, 1999). Organisational processes were routines or actions that accomplished a repetitive business task and enabled firms to acquire, shed and recombine resources (Bingham and Eisenhardt, 2011). Codification of the routines through technology and formal procedures enhanced the sustainability and robustness of the processes (Eisenhardt and Martin, 2000). Strategy literature had identified structural levers (managerial actions, organisational learning and continuous improvement practices and strategy supportive systems and policies) and managerial skills (strategic leadership, effective allocation of resources and shaping of corporate culture) as keys to successful implementation (Crittenden and Crittenden, 2008). This study reflected on the microfoundations (consisting of individuals, processes, routines, structure and design) of SS and RF.

This research focus on microfoundations confirmed the linkage between SS and empowerment, participation and learning at all organisational levels as suggested by Farrell (2000) in the context of building market-oriented organisations. The authors not only found support for the proposition that emphasised regarding the importance of continuous learning driving the transformation and reinforcement of organisation culture (Narver et al., 1998) but also that it impacted managerial attitude towards change. Empowered employees possessing clarity of organisational goals and values with the right attitude and capabilities was found to be most effective in a market-oriented service organisation (Kasper, 2002) and this study builds on this by specifying a process guide for enabling this. The importance of market and customer analytics using big data was highlighted in this study. The adoption of big data-driven strategic decisions could lead to transformations in banking strategy and business models (Chen et al., 2017). Further, the study results also found that all the microfoundations of SS and RF interacted with and were dependent on each other. This study served two purposes. Firstly, it deepened the understanding of SA by studying it in an industry characterized by paradoxes – stability versus agility, conformity versus innovation. Secondly, it offered an emerging market perspective on strategic decision-making. This was an important perspective as emerging markets were characterized by abundant opportunity for incumbents and new entrants alike – especially when compared to stagnant and saturated Western markets. By adapting the microfoundations approach for SA, the authors identified various practices with regard to the actual building of SA capabilities.

This study elaborated how structure, culture, process and people interacted to enable SA and identified key areas of importance to effect prompt, optimal and sustainable responses to exogenous change. Managerial attention was required in organisation regarding a multitude of organisational aspects to achieve SA. Managers were required to ensure that management support was present for both intangibles and tangibles for innovation projects. Continuous innovation should be a key theme in management communication, so managers must create an organisational setting that facilitated and encouraged learning behaviour as a good learning environment could lead to attainment of sustainable competitive advantage. This was hard to imitate by competitors. Managers were required to focus on market- and customer-driven product design and delivery. This was to be supported by new technology as opposed to mere incremental technological innovations. Managers were required to apply organizational practices like empowerment, participation and learning to create a change-oriented culture. Finally, managers were required to support cross-functional interactions, encourage creative thinking, reward experimentation and promote knowledge sharing.

The study scope was its focus on a single industry and context. However, the study set in the banking context in India had provided various dimensions in SA for further exploration. An extension of the study to other emerging markets especially in Asia and Africa would add to the understanding of SA. Further research into understanding the meta-capabilities of SA and their interlinkages would help to operationalise the SA construct and facilitate implementation. For this research, the authors focused on only few aspects of microfoundational enablers of SA. A more encompassing research of organisational practices routines and subroutines would be required to enable this capability to contribute in building theory based on the findings of this work. A longitudinal empirical investigation into the process of building SA would also contribute to examining the nature and behaviour of causal relationships and the joint effects over a period. Lastly, application of quantitative techniques to explore causal relationships among the identified microfoundations would enable replicability and generalisability of the study findings and contribute to enhancing the body of knowledge on SA.

Footnotes

Declaration of conflicting interests

The author(s) declared no potential conflicts of interest with respect to the research, authorship, and/or publication of this article.

Funding

The author(s) received no financial support for the research, authorship, and/or publication of this article.

ORCID iDs

Gayathri Sampath

Som Sekhar Bhattacharyya

Appendix 1

Flexible IT capability
Sample quotes	First-order categories	Second-order categories	Aggregate dimension
‘Change in technology entails huge cost in both dollar and people terms. So, it’s important to track return on technology investments and not just follow all trends’	Important to track ROI on technology investments	Measuring risk and ROI s in technology	Treat it as a strategic function
‘Digitization to be balanced with risk and cost to be successful’	Managing technology risk is important	Measuring risk and ROI s in technology
‘We have a mix of software – some developed in-house, some outsourced. Integration of various software – treasury, accounts etc. With core banking software is a complicated and time consuming process’	Software integration and legacy software management are time-consuming and complicated	Plan for legacy and software integration issues
‘Over the last two decades PSBs have also implemented innovative technology solutions across all businesses and functions but challenges remain in integrating the software with legacy systems. This is one of the reasons why despite having reach and large customer base, they struggle when compared to private sector banks’	Legacy software poses integration challenges	Plan for legacy and software integration issues
‘Type and scalability of technology is very important in building agility’	Scalability of technology is important	Scalability of technology
‘Treat technology as front end strategy and not merely as a support function for best results’	Technology as a strategic function	Technology as a strategic function
‘It is key driver for agility given how customers use banking services now’	Technology is a key driver of banking services
‘Technology is strategic tool in building customer centricity and in providing competitive advantage’	Technology as a strategic tool
‘New technologies will throw up more opportunities; will become game changers – like for financial inclusion, faster payments etc.’	Technology as a game changer
‘In the last 2 decades, all our decisions about products, channels and risk are built around technology led differentiation because we know we have an edge here’	Technology led strategic decisions
‘So, to me the person who uses innovation effectively will win and for innovation to become more effective I think technology is becoming increasingly important. It will be key in enabling innovation’	Technology enables innovation	Technology-driven innovation	Align IT to organisation strategy
‘It depends on how technology is integrated with your value propositions, how you deliver your products and services. If it is a core part, if it is well integrated, then I think that company has a good chance of winning’	Technology integrated with operations and strategy	Technology investments based on bank strategy
‘Technology investments are based on organisation appetite for growth and investments’	Technology investments based on growth strategy	Technology investments based on bank strategy
‘What will differentiate us from another bank say Citibank will be touch points like technology, within the same consumer banking space’	Technology can be used as differentiator	Using technology as a differentiator
‘Having good technology is a good platform for competitive advantage’	Good technology can provide competitive advantage
‘Our clients value that our technology adapts to and evolves with their banking requirements. In today’s world without flexible and adaptive technology we will be on the back foot’	Clients appreciate flexible and adaptive technology
‘Our focus is on intelligent use of technology to improve customer experience and cut costs’	Use technology to improve customer experience	Using technology effectively	Embed it in the culture of the organisation
‘My bank is using technology for proactive customer relationship management’	Technology used to improve customer experiences
‘There’s a key role of technology in changing banking. We must use the right technology for efficiency and agility. Improper application of technology could impede agility’	Technology can both enhance and impede agility
‘It is a cultural DNA thing. How much is technology woven into how the bank operates’	Technology as part of cultural DNA	Technology as part of cultural DNA

Note: SA: strategic agility; RF: resource fluidity; IT: information technology; ROI: return on investment; PSB: public sector bank.

Appendix 2

Table 2A.

Enablers of strategic agility.

Category/definition	Enablers	Process	Influence on SA
Generating market insight	Generate quality customer data for customer insights	Build a system for gathering competitive intelligence	(1) Aids in effective customer and market segmentation (2) Aids in innovative product design (3) Helps to improve customer service (4) Helps in formulating competitive responses
	Focus on building and improving data analytics capabilities	Capture customer insights through regular interactions
		Involve front-end staff in gathering customer voice and competitive intelligence
		Use analytics to bolster marketing efforts
Organisation learning ability	Build organisation cultures that support learning and empower people	Ensure documentation of organisation failures and learning from past experiences	(1) Fosters collaboration and builds support for organisation agility initiatives (2) System, structure and people work together for agility
	Support open and free organisation culture with freedom to experiment	Training should be a continuous and ongoing process
	Encourage cross-functional interaction and collaborative decision-making	Focus on learning from both current and future competitors
	Build robust training and knowledge management practices	Focus on customer-side learning
	Implement flat organisation and flexible organisation structures	Enable free and easy information sharing
Managerial attitude to change	Build change readiness among people, processes and technology	Scan the environment for external stimulus	(1) Helps identify and address organisation rigidities (2) Organisation can anticipate and respond to change proactively (3) Increases internal stakeholders’ willingness to change
	Build business case for change among internal stakeholders	Focus on both big and small changes
	Adopt technology that supports change	Make change a continuous process
Flexible information technology	Embed technology in the culture of the organisation	Choose right technology based on customer needs and growth plans	(1) Superior IT capability helps differentiation vis-à-vis competition (2) Encourages innovative behaviour
	Position IT as a strategic not support function	Use technology to support product and service innovation
	Align technology to strategy of the firm	Technology investments to be evaluated constantly for returns; metrics to measure returns to be decided
		Tenure of leadership defines implementation of SA
		Promotes experimentation and innovative thinking
		Aligns employees to vision of the organisation

Note: SA: strategic agility; IT: information technology.

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