Rapid adaptation is relatively more important when the external environment is turbulent and uncertain and when the organization's strategy emphasizes unique, leading-edge products and services. Adaptation may require small incremental improvements or major changes in products, services, operational processes, and the organization's competitive strategy.

Effective leaders assess the external environment to identify threats and opportunities. They help people interpret events and determine the implications for the organization. Such leaders recognize when major change is needed and know how to develop support from the people who can make change happen. Because many innovations in large organizations result from a bottom-up ...

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