A. Avoid irreversible commitments. Major capital investments. Multi-year labor contracts. Specialized facilities. High fixed costs. All these things are dangerous in a world where the future is unlikely to mirror the past. Historically, managers have often traded away future flexibility for short-term economic advantage (like temporary labor peace, better long-term lease rates, or larger scale production lines). Going forward, executives will need to ask themselves, “How might this decision reduce our degree of freedom in the years to come?” The Four Seasons hotel chain gets this. Though the recession has battered luxury travel, the Toronto-based company has resisted the temptation to slash published room rates. Instead, it has offered travelers a fourth or fifth night for free. While cutting tariffs might help to fill hotel rooms in the short-run, it would undermine the company’s premium pricing over the long-term and, in consequence, its ability to provide the platinum service for which it’s famous.

B. Invest in flexibility. It’s not enough to avoid inadvertent lock-in, every company must also act positively to increase its room for maneuver. In a world of fractured markets, fickle customers and whipsaw shifts in demand, any company that figures out a way to reduce its break-even point or accommodate greater variety in its product mix will gain a decisive advantage. Consider Toyota. Long renowned for its flexibility, Toyota became more limber still when it rolled out its Global Body Line manufacturing system earlier this decade. When compared to its aptly named predecessor, the Flexible Body Line, the GBL reduced the cost of building multiple vehicles on the same assembly line by an additional 70%. It also reduced the footprint of the assembly line 50% and halved the associated capital costs. Paradoxically, building a flexibility advantage often requires a degree of operational standardization. The ability of the GBL to handle a wide variety of Toyota models is based in part on the fact that every vehicle is designed around common dimensional standards that allow assembly line robots to move seamlessly from one car model to another. Toyota’s ultimate goal: to be able to manufacture any of its products on any of its production lines, anywhere in the world—so it can instantly respond to shifts in customer demand and global economics. Now that’s flexibility.

C. Think competencies and platforms. To be adaptable, a company must decouple its fortunes from the fate of any particular market or product category. This requires a corporate self-definition that is elastic and extensible—one that is built around deep competencies and broad platforms rather than around specific products and services. Think about it: if Amazon had defined itself as an online bookseller, its growth would have stalled out long ago. Instead, Amazon defines itself as a platform for online retailing and as a platform for cloud computing. In a similar vein, if Apple had defined itself as a computer maker, rather than as a company that brings world class design skills and user engineering to digital devices, it would have never reinvented the music industry or transformed the mobile phone business. A final example: Gore & Associates has made money every year since its founding half-a-century ago—a testament to the company’s adaptability. Gore’s secret: it has no “core business.” It sees itself instead as a portfolio of chemistry-based competencies that can be exploited in dozens of markets.

– Gary Hamel