“Large organizations cannot be versatile. A large organization is effective through its mass rather than through its agility. Fleas can jump many times their own height, but not an elephant.”

— Peter Drucker

“Agile methods derive much of their agility by relying on the tacit knowledge embodied in the team, rather than writing the knowledge down in plans.”

— Barry Boehm

“Agility within and of itself is a strategy.”

— Pearl Zhu

“Strength without agility is a mere mass.”

— Fernando Pessoa

“I came to the conclusion long ago that limits to innovation have less to do with technology or creativity than organizational agility. Inspired individuals can only do so much.”

— Ray Stata

So many businesses today are struggling to figure out how best to cope with, adapt to, and succeed in the suddenly-new business environment of a COVID-scrambled world. The stability of the recent past has gone – forever. Stability in some new form may gradually emerge but until it does, as we hope it does, the world we all face each day is characterized by uncertainty, complexity, volatility, and rapid changes.

Businesses are learning, mostly the hard way as always, that the solution is far different from what worked well in past. What seems to be required is a very different business model in the sense of organization, process, and people.

In trying to get some idea of what might be required, I ran across a series of fascinating articles by consulting giant McKinsey & Company. These seem to capture the essence and some detail on where the business world is headed, like it or not. I am not particularly a McKinsey fan, but these articles are among the best that I have run across in my way-too-much reading over the years. This post outlines what I have taken away from these articles.

A hearts-and-minds transformation

McKinsey & Company in its recent article on “Doing vs being: Practical lessons on building an agile culture” appears to have nailed the real challenge perfectly. An agile transformation requires a culture change, not simply yet another, often fad-driven, reorganization.

Culture is people. Every organization has different people and consequently has a different culture. Maybe not unique as McKinsey argues but definitely specific to each particular business. There is no one-size-fits-all here.

As an example, McKinsey offers the experience and insights of New Zealand-based Spark:

“At New Zealand–based digital-services and telecommunications company Spark, one of the first steps the leadership team took in its agile transformation was to launch an effort to articulate the cultural from–to’s. Spark boldly decided to go all in on agile across the entire organization in 2017—flipping the whole organization to an agile operating model in less than a year. From the beginning, Spark understood that the change needed to be a “hearts and minds” transformation [emphasis added] if it was to successfully enable radical shifts to structure, processes, and technology.”

The real challenge in brief

This, to my mind, captures the real challenge in a very few words:

“In essence, agility at an enterprise level means moving strategy, structure, processes, people, and technology toward a new operating model by rebuilding an organization around hundreds of self-steering, high-performing teams supported by a stable backbone. On starting an agile transformation, many organizations emphasize and discuss tribes, squads, chapters, scrums, and DevOps pipelines. Our research shows, however, that the people dimension—culture especially—is the most difficult to get right. In fact, the challenges of culture change are more than twice as common as the average of the other top five challenges (Exhibit 1).”

Agile began in software development but this is very different

Agile software development practices were aimed at using small cross-functional teams to discover user requirements and develop IT solutions collaboratively. These agile concepts and practices are beginning to be applied to customer interactions, product redefinitions, and even operations with a special focus on value-creation for end-users.

Moving an enterprise from complex, functionally-isolated, multi-layered approaches to simple, cross-functional, nearly flat structures for purposes of value-creation of many kinds is neither straightforward nor easy. It involves major, deep organizational change.

Many businesses are not particularly skilled at effective organizational change, especially one of this nature. They tend to focus on processes – org-charts, procedures, and job descriptions – rather than on how the people involved are supposed to interact and produce in highly flexible, dynamic, autonomous ways. The process-based approach rarely generates real organizational change but instead just a reconfiguration of the existing structure.

Agility is primarily about people and their interactions

An agile business model involves structural changes but far more important are the people and their interactions. Rather than following standardized procedures, agile teams develop and evolve ways of interacting that are most effective for the specific people involved. Each one is different because the people and purpose are different.

Agile teams are not managed. They must be enabled, facilitated. Once their goals are specified and agreed to by those involved – end-users as well as team members, how the team achieves its goals is determined within the team itself. It is a collaborative process rather than anything visibly managed.

Team leadership becomes important. This is not a command and control team manager but an enabling, coordinating, encouraging role. Many “leaders” within businesses are managers in practice despite the “leader” euphemism.

Responsibility for success or failure belongs to the team as a whole and not to the leader. The leader’s role is to help make the team successful in its interactions leading toward the goals. It is really a process facilitation role.

How to go about building an agile culture

Building an agile culture is very hard. There are many significant obstacles, as this list from a CGI paper reports:

  • Lack of experience with agile methods (44%)
  • Company philosophy or culture at odds with core agile values (42%)
  • Lack of management support (38%)
  • External pressure to follow traditional waterfall processes (37%)
  • Lack of support for cultural transition (36%)
  • A broader organizational or communications problem (33%)
  • Unwillingness of team to follow agile (33%)
  • Insufficient training (30%)

Although this paper was aimed primarily at IT agile projects, its overview seems much more broadly applicable.

For a very high-level picture of actually building an agile culture, you will probably want to check out McKinsey’sDoing vs being: Practical lessons on building an agile culture” that has a sub-head: “Four global success stories offer insights and lessons learned on achieving organizational agility.”. The article exhibit below seems to offer a nice summary of the challenges, which are clearly major.  

Bottom line:

The only practical way to survive and succeed in a long-term turbulent business world is to develop an agile business model that can respond quickly, effectively, and creatively. Many businesses have been working on doing this for years with limited success. The challenges here are very difficult but the need is so important that persistence toward eventual success seems critical. Change or die.

McKinsey lays out the agile business model challenge for a COVID-turbulent world in its “Agility in the time of COVID-19: Changing your operating model in an age of turbulence”:

“To survive and thrive in this more volatile, uncertain, complex, and ambiguous world, leading companies are reaping significant benefits by embracing agility at scale. Enterprise agility reimagines an organization as a collection of high-performing teams, each with a clear purpose and the skills it needs. In the early days of agility, these teams—often called squads, combining developers, testers, data analysts, customer-journey specialists, and user-interface designers—played their biggest roles in the digital corners of companies. But similar models have now been launched across the whole spectrum of business and technology. Retailers use squads built around specific product categories (for example, fresh food) to drive volume and margin. Telecom providers ask squads to simplify products. Mining companies make their operations safer and more efficient by empowering squads across operations, maintenance, and engineering. These are just three of countless examples. Companies across industries are moving from efforts to optimize their performance within siloed functions to capturing the value between them.”

“Organizations going agile must reimagine themselves around customer journeys, products, and other axes of value creation. Typically, this means transitioning from multilayered functional organizations into simpler forms, often with just three layers, as in the case of Allianz Turkey. Besides changing the structure, agile organizations must change their processes and people models and, often, decentralize their technology by making business units responsible for it.”

McKinsey also reports on progress toward agile organizations as of early 2018: “The five trademarks of agile organizations”:

“As a result agility, while still in its early days, is catching fire. This was confirmed in a recent McKinsey Quarterly survey report of 2,500 business leaders. According to the results, few companies have achieved organization-wide agility but many have already started pursuing it in performance units. For instance, nearly one-quarter of performance units are agile. The remaining performance units in companies lack dynamism, stability, or both.”

“However, while less than ten percent of respondents have completed an agility transformation at the company or performance-unit level, most companies have much higher aspirations for the future. Three-quarters of respondents say organizational agility is a top or top-three priority, and nearly 40 percent are currently conducting an organizational-agility transformation. High tech, telecom, financial services, and media and entertainment appear to be leading the pack with the greatest number of organizations undertaking agility transformations. More than half of the respondents who have not begun agile transformations say they have plans in the works to begin one. Finally, respondents in all sectors believe that more of their employees should undertake agile ways of working (on average, respondents believe 68 percent of their companies’ employees should be working in agile ways, compared with the 44 percent of employees who currently do).”

Peter Abraham in the Business Agility blog offered a somewhat different view on how to handle agile transformations: “A Guide to Building Agile Culture”:

“Our focus was on identifying the way businesses managed the four key elements of organisational culture to more efficiently pursue agile transformations. These four elements are:

1. Recognition: Recognising good or hard/smart work. One in five claim that there are never any personal development reviews inside their organisation…and strongly disagree that there is a system of recognition.

2. Communication: Organisational purpose, clarity of expectations and alignment of people. One in five companies claim that the organisation’s values are not visible…and a similar number claim that the relationship between their role and the purpose of the organisation is not clear.

3. Trust: Trust in other people. Trust is more likely to be associated with fellow colleagues rather than senior management.

4. Learning: Investment in training. In controlling cultures there’s less investment in skills.

An agile culture has to be built on an agile mindset. This allows things to move more quickly, less hierarchy in decision making and responsibility handed to small agile groups and teams to make things happen. Communication channels are then efficient and open, as in there is more transparency.

Building an agile mindset and culture offers a way to harness the power of the people in your organisation to find ways to be more adaptive, innovative and resilient in a fast-paced digital economy.

An agile culture is increasingly recognised as a critical component for the survival and growth of a business.”

53380cookie-checkAn Agile Business Model for Turbulent Times (Maybe Forever)