Business Agility

Business Agility is the ability of an organization to:

• Adapt quickly to market changes - internally and externally
• Respond rapidly and flexibly to customer demands
• Adapt and lead change in a productive and cost-effective way without compromising quality
• Continuously be at a competitive advantage

Business agility is concerned with the adoption and evolution of values, behaviors and capabilities. These enable businesses and individuals to be more adaptive, creative and resilient when dealing with complexity, uncertainty and change leading to improved well-being and better outcomes.

Definition of Business Agility

SAFE® defines Business Agility as: “The ability to compete and succeed in the digital age by responding quickly to market changes and opportunities with innovative business solutions. It requires that all those involved in providing solutions – business and technology leaders, development, IT operations, law, marketing, finance, support, compliance, security and others – apply lean and agile procedures to continuous providing innovative, quality products and services faster than the competition."

source: Pedco

It is important to remember, Business Agility happens when the entire organization—business and tech leaders, compliance, development, finance, legal, marketing, operations, sales, security, support—use Lean and Agile practices to continually and proactively deliver innovative business solutions faster than the competition.

Origins of Business Agility

The history of business agility as a concept begins with software development. It is part of the agile framework that was a means to address the problems of changing requirements and uncertain outcomes because of the complexity of the technological project. The complexity of systems also lent themselves to a fast-changing environment.

Some of the ideas that find themselves in business agility came from the study of complexity science and the notion of complex adaptive systems, where a perfect understanding of parts of the process doesn’t translate into a perfect understanding of the whole system’s behavior.

The outcomes of software teams in such complex adaptive systems is unpredictable but does eventually form a recognizable pattern. The agile framework was developed to take advantage of the ever-changing project environments.

The ideas behind business agility arose independently and simultaneously from a variety of sources. It appears that the ideas originated with agile manufacturing in the early 1990’s when members of industry, government, and academia got together to figure out how to make the United States competitive in manufacturing. These ideas were initially described as agile manufacturing and were later described as enterprise agility by some of the people involved in those original discussions.

1991: A group of 15 executives from 13 companies joined together to produce the 21st Century Manufacturing Enterprise Strategy, An Industry-Led View report and create the Agile Manufacturing Enterprise Forum. This work results in the spread of the concept of agile manufacturing and a broader view of the agile organization as one situated to deal with change. The full report is available in paperback form.

2001: Rick Dove, one of the participants in the Agile Manufacturing Enterprise Forum, publishes Response Ability: The Language, Structure, and Culture of the Agile Enterprise. The book describes how to prepare organizations to respond to their changing environment and appears to be the first extensive treatment of agility at the organizational level. Many of the ideas contained in the book are also available at the Paradigm Shift International Library.

Business Agility - An Overview

Businesses which lack adaptability may be left paralyzed when faced with changing markets and environments. To counter this, business agility can be developed in the enterprise, making change a routine part of organizational life. An agile enterprise may be able to nimbly adjust to and take advantage of emerging opportunities in a perpetually changing environment. The agile enterprise can be viewed as an integral component of a larger system whose activities produce a ripple effect of change within both the enterprise itself and the broader system.

The discipline of enterprise architecture supports business agility through techniques including layering, separation of concerns, architecture frameworks, and the separation of dynamic and stable components. The model of hierarchical complexity — a framework for scoring the complexity of behavior — has been adapted to describe the stages of complexity in enterprise architecture.

One type of enterprise architecture that supports agility is a non-hierarchical organization without a single point of control. In such an organization, individuals function autonomously, constantly interact with each other to define the organization's vision and aims, maintain a common understanding of requirements, and monitor the work that needs to be done. Roles and responsibilities are not predetermined but in flux, and emerge from individuals' self-organizing activities. Projects are generated across in the enterprise and sometimes from outside affiliates. Key decisions are made collaboratively, on the spot, and on the fly. Because of this, knowledge, power, and intelligence are spread through the enterprise, making it capable of quickly recovering and adapting to the loss of any key enterprise component.

In business, projects can be complex with uncertain outcomes and goals that can change over time. Traditionally these issues were dealt with by planning experts who would attempt to pre-determine every possible detail prior to implementation; however, in many situations, even the most carefully conceived projects will be impossibly difficult to manage. Agile techniques, originating from the software development community, represent an alternative approach to the classic prescriptive planning approaches to management. The main focus of agile methods is to address the issues of complexity, uncertainty, and dynamic goals, by making planning and execution work in parallel rather than in sequence to eliminate unnecessary planning activity, and the resulting unnecessary work.

Pragmatic methods for achieving organizational agility should start from an organization's competitive bases and the organization's mission, vision, and values. Agile methods integrate planning with execution, allowing an organization to find an optimal ordering of work tasks and to adjust to changing requirements. The major causes of chaos on a project include an incomplete understanding of project components, incomplete understanding of component interactions, and changing requirements. Sometimes requirements change as a greater understanding of the project components unfolds over time. Requirements also change due to the changing needs and wants of the stakeholders. The agile approach allows a team or organization of collective trust, competence, and motivation to implement successful projects quickly by focusing on only a small set of details in any change iteration. This is in contrast to non-agile in which all the details necessary for completion are generally taken to be foreseeable and have equal priority inside of one large iteration.

Business Agility Value Stream

In his analysis in the book, Project to Product, Mik Kersten notes that with respect to production capital “The productivity of software delivery at enterprise organizations falls woefully behind that of the tech giants, and the digital transformations that should be turning the tide are failing to deliver business results.” This means that many large and successful enterprises today face an existential crisis, the distinctive competencies and massive tangible assets that got them there — distribution, real estate, manufacturing, retail, local banking centers, insurance agents — will not be adequate to assure survival in the digital age. So how can traditional enterprises thrive in the digital age? Simply, they need to master the ‘Business Agility Value Stream’, which is the ability to quickly respond to an emerging opportunity — as the figure below illustrates.

source: Scaled Agile, Inc

As seen in this figure, it’s not a trivial undertaking to accelerate value this way and traditional approaches using stage-gated, waterfall delivery simply won’t get you there. Instead, a number of different steps are involved in this new value stream: Sensing an opportunity involves market research, customer feedback, and direct observation of the customers in the marketplace. Even more importantly, it demands that senior executives have a thorough involvement with the customer and the market, the “go see” mentality that provides a rich source of ideas and possibilities to create value. Quickly leveraging an identified opportunity requires a flexible, lean approach to funding the people and material resources needed to produce the Minimum Viable Product (MVP) – an initial solution sufficient to both test the business hypothesis and deliver a first solid increment of value. The quick development of the MVP hinges on the ability to bring together professionals from different skills areas and form cross-functional teams and trains, that are organized or reorganized around customer value. These teams-of-teams connect to the customer by applying design thinking to intimately exploring the nature of the customer problem and define solution capabilities that help customers achieve their objectives. Through rapid, synchronized iteration and PI cycles, the teams quickly deliver the MVP which provides a strong empirical foundation for further product management, development, and funding decisions. Depending on the learnings from the MVP, the organization will choose to pivot or persevere, either abandoning the initiative, pivoting to a new opportunity, or continuing to invest in the solution as the facts and economics dictate. If the decision is made to persevere, the continuous delivery pipeline substantially minimizes the cost of delay and provides the ability to deliver value continuously. The ability to measure and adapt is integral to the process and provides routine opportunities to measure, learn and adjust direction as necessary. The business goal is simple: to establish a fast flow of value through this set of steps—the entire business agility value stream—and to ensure that what is being delivered enables the business opportunity.

Principles of Business Agility

• Inspection and adaptation: Business Agility means your organization is able to continually inspect and adapt their products and their processes. Both personal and organizational retrospectives are necessary here.
• Create an innovative culture: You want your team to feel comfortable trying new things and learning to inspect and adapt as they go. Creating a safe, innovative space where there is no blame is key! Remember, fear of failure/incrimination will undoubtedly limit innovation, creativity and job engagement.
• Transparency: Communicate, communicate, communicate! This is where daily huddles are invaluable.
• Executive buy-in: It’s incredibly important to have Agile approaches & values organization-wide, which starts at the top. Executives should be able to model the Business Agility behavior they want to see throughout the organization.
• Reducing unnecessary policy and procedure: Watch out for an overload of policies. You don’t need a policy every time something goes wrong!
• Results-based not time-based: In a Business Agility mindset, it’s about what you accomplish (quality and innovation), AND (maybe more importantly) how smartly/strategically you work. An example of this is no set working hours.
• Empowering self-organizing teams: For true Business Agility, you want to shift away from command-and-control to empowering self-managing/self-organizing teams.
• Focus on your customer and their changing needs (see #2!): Never forget that extreme customer service is the goal! You need to continually inspect and adapt the organization’s product and processes to make sure it fits the customer’s needs. Having a firm plan that cannot be amended is not a good agile practice.

Business Agility Framework

According to the SAFe 5.0, business agility is made of seven core competencies. These work to keep the organization together and agile regardless of how much the company grows, while remaining customer-centric. The competencies are:

• Enterprise Solution Delivery
  • Apply lean system engineering to build large systems
  • Coordinate and align the full supply chain
  • Continuously evolve systems
• Agile Product Delivery
  • Keep the customer at the center of your product management strategy
  • Develop on cadence and release on demand for continuous delivery
  • Continuously work to integrate, innovate, and deploy
• Team and Technical Agility
  • Build cross-functional, high-performing, and agile teams; break down silos within the organization
  • Quality is built-in to make happy customers
• Lean Portfolio Management
  • Align strategy with funding and execution
  • Optimize operations across the entire portfolio
  • Deploy lightweight governance to allow for decentralized decision-making
• Organizational Agility
  • Foster an organization-wide Lean-Agile approach
  • Respond quickly to threats and opportunities
  • Lean out business operations
• Continuous Learning Culture
  • Build a culture where everyone learns and grows together in the organization, regardless of role
  • Promote creativity and exploration as part of the company’s DNA.
  • Focus on continuous improvement
• Lean-Agile Leadership
  • Model the desired behaviors to inspire others to do the same
  • Align mindset, actions, and words to the Lean-Agile principles
  • Actively lead and guide others to the new approach

Domains of Business Agility - The Operating Model for Agile Organizations

At its simplest, business agility is the capacity and willingness of an organization to adapt to, create, and leverage change for their customer’s benefit. This simple statement exposes the dramatic shift in mindset needed for agile organizations. Introduced by the Business Agility Institute, the Domains of Business Agility are the defining cultural and behavioral characteristics of an agile organization. It is simple model consisting of 12 interacting domains across four dimensions center around the customer. Spanning the entire organizational system, each domain is equally important, necessary, and interrelated to each other. This model outlines the capabilities needed with which an organization is instinctively able to seize emerging and unforeseen opportunities for its customers' benefit. The Domains of Business Agility also offers a helpful guide to each step of the transformation process, from just starting out to maturity.

source: Business Agility Institute

Customer Domain is at the center of the model to represent your organization’s purpose. Depending on your organizational values and structure, you could define your customer as; paying clients, the broader community, the environment, society, or some combination of these. Regardless of how you define it, your customer is why you are in business and thus at the heart of the model.

• Relationship Dimension: The ring immediately surrounding the customer is the Relationships Dimension. The three domains within the Relationships Dimension provide context for your organization. They are highly contextual and the specific definitions change depending on your organization type (e.g. private company, public company, not-for-profit, government organization, etc.).
  • Workforce: Workforce is responsible for delivering value to customers. Business Agility requires a mission-aligned, passionate, empowered workforce built of individuals with a strong culture fit and potential over fit for a specific position.
  • Board of Directors: The Board of Directors is the highest expression of shareholder intent and ownership. Business Agility requires an open, 2 way, relationship between an organization’s leaders and the board of directors; built upon customer-focus and long-term success, which enables the company leaders to go after long-term bets, as opposed to short-term wins.
  • External Partners: Partners are the vendors, distributors and other strategic partners who enable your business. Business Agility requires partnerships crafted with flexibility and driven by customer value so both an organization and its partners are able to adapt in a coordinated and complementary manner, rather than a series of contractual transactions.
  • Leadership Dimension: The first three domains of business agility are part of the Leadership Dimension and govern how to shape an agile organization. In this context, leadership is a mindset with associated capabilities and techniques. Everyone can be a leader, whether they have institutional authority or not. It is agile leaders (who may not be managers) who orchestrate and guide the organization towards business agility. Leaders who help align the organization to a single purpose, enabling individuals and teams, and taking corrective action where needed.
  • People Management: People Management defines the relationship between individuals and authority. Business Agility requires leaders to recruit and hire people with a strong fit for future potential and cultural alignment, over fit to position.
  • One Team: One Team is a culture of collaboration underpinned by communication and transparency across individuals, teams, and divisions. Business Agility requires a One Team mindset of co-creative efforts to achieve shared goals that span functions, teams, and divisions within the organization.
  • Strategic Agility: Strategic Agility shapes how an agile organization sets, communicates and operationalizes an adaptive market vision. Business Agility requires leaders who set, and clearly communicate, an adaptive strategy that empowers teams to identify opportunities to execute that strategy in potentially innovative and previously unforeseen ways.
• Individuals Dimension: The three domains under the Individuals Dimension govern how an agile organization delivers value. they address the Individual and how to deliver work.
  • Growth Mindset: Growth Mindset promotes experimentation and learning from failure. Business Agility requires that individuals are open to continuous learning and personal development as well as being comfortable operating and making decisions in a dynamic and ambiguous environment, free from the fear of failure.
  • Craft Excellence: Craft Excellence defines the techniques for delivering high-quality work, regardless of function or subject matter, in an agile way. Business Agility requires craft excellence that continually improves over time, is the most impactful to creating value, and enables individuals to take advantage of emergent opportunities for customers.
  • Ownership & Accountability: Ownership & Accountability empowers individuals and teams. Business Agility requires deep ownership and accountability so individuals close to the work and customers drive timely decision making and adaptations.
• Operations Dimension: The final dimension is the Operations Dimension. These three domains operate in concert to define how an agile organization works.
  • Structural Agility: Structural Agility defines the relationships between individuals, teams & divisions to create an agile organization. Business Agility requires the ability for an organization to create coalitions or change structure as needed to embrace new opportunities with ease and without disruption.
  • Process Agility: Process Agility encompasses an individual value stream - the combination of discrete activities that are undertaken by teams and projects. Business Agility requires operations to adapt and continuously evolve as needed in service of creating value for customers.
  • Enterprise Agility: Enterprise Agility scales agility across divisions, departments, the organization, and between organizations. Business Agility requires business operations governance frameworks that enable, rather than stifle, individuals and teams pursuing emergent opportunities.

Business Agility Examples

The examples below give an understanding of what true business agility looks like.

Airlines — Food Service
Source: Taken from "Branson's Flight Plan," Time Magazine, April 28, 2008, pp. 40-43.

Financial Services — Credit Card Fraud Detection
The scoop:

• The bad guys pick up and move shop from Idaho to Manhattan.
• Transactions deemed suspicious by zip code yield a 10x increase in volume.
• Suspicious transactions are kicked out to fraud specialists for manual inspection.
• Fraud specialists are an expensive and non-scalable resource.
• Additional selection criteria (e.g., location of store, type of store, frequency of use, size of transaction, etc.) must be introduced to keep the volume of kick-outs relatively constant.

Insurance — Product Offerings

Benefits of and Risks of Business Agility

Benefits of Business Agility

• Challenge management. Organizations adopting business agility can easily react and respond to opportunities and threats in the marketplace while remaining customer-centric. Freed of long-term plans and strategies, these organizations can adapt to situations much faster than their more bureaucratic counterparts.
• Competitive advantage. Agile businesses can seize upon short-term opportunities, giving them the ability to be a first mover. They can learn from their mistakes and setbacks, readjust trajectories quickly and not remain committed to their plans. And they can confidently react proactively to keep pace with (or outpace) the competition.
• Cross-functional collaboration. Business agility can also break down organizational silos and foster creativity and innovative problem-solving thanks to the cross-pollination of ideas and supportive environment. But decentralized decision making comes with its own share of drawbacks.

Risks of Business Agility

• Short-term solutions. Agility sometimes sacrifices long-term competitiveness. This can create disadvantages versus organizations that have invested in new technologies and strategies that require a longer development cycle. If an organization is solely in read-and-react mode, it’s difficult to define, build, and bring to market completely new solutions.
• Lack of innovation. There is a high risk of different parts of the organization reinventing the wheel, duplicating efforts or creating conflicting versus complementary solutions. The larger the organization, the harder it is to effectively implement business agility at scale.

See Also

• Business Strategy
• Business Capability
• IT Strategy (Information Technology Strategy)
• IT Capability
• Agility
• Strategy
• Corporate Governance
• IT Governance