Enterprise Agility is a company’s ability to outperform the competition and drive growth in new, ambiguous situations by learning and adapting when confronted with foreseen and unforeseen circumstances, dilemmas, crises, and complex problems.
Companies striving to become agile must think in terms of three kinds of drivers of change:
- the “operating environment” that might radically reshape their business environment;
- “strategic responsiveness” or the soft levers they can pull in response;
- and the “organizational flexibility” that invariably affects their capacity to respond quickly.
Figure 1. source:PWC
The need for Enterprise Agility is driven by the current VUCA (Volatility, Uncertainty, Complexity, Ambiguity) market dynamics. Competitive pressures against large organizations across industries are increasing. Contributing to these pressures and the change in these market dynamics is disruption from global innovators, particularly through start-up organizations which are able to compete in new ways. They are achieving this by pinpointing lucrative/niche segments and combining these with a customer first focus and new technologies. This is lowering the barrier to entry allowing start-ups to compete at scale with traditional large corporations. Not only is the competitor and technology landscape changing, so are customer demands for a better, more personalized service. With the rise of digitization and the global economy, this has changed the information customers now have access to. This means the goal for organizations now also needs to change. No longer can an organization prioritize their shareholders needs over their customers. They can no longer offer an average service or customer experience and see no broader impact outside that single customer. They can also no longer take months or years to provide customers with the products and experiences they want. The customer needs to be at the heart of everything they do. As customers are now more interconnected, this heightens the need for providing customers a great experience. Single customer experiences can now have significant impacts on an organization, especially through easy-to-share channels through social media and on your mobile. For example when the recent incident showcasing the treatment of a passenger on United Airlines went viral, this resulted in United Airlines stocks dropping $1.4 Billion. Even though stocks may have since bounced back, the impact on the brand was still felt. While the obvious answer is to focus on the customer experience with everything we do, there are other ways organizations can change their ways of working by adopting the Agile mindset and principles more broadly. By doing this, not only will they achieve further customer benefits (some of which may be indirect), but they will also achieve direct benefits for the organization. Examples of these are reduced operational costs, less bureaucracy, and increased employee satisfaction. Enterprise Agility however, not only focuses on the speed in which an organization can adapt. It also considers the impacts this change has on the broader organization. When an organization needs to adapt, they need to be able to do this in a way that has minimal negative disruption to the organization. An organization which has achieved enterprise agility is also one that operates effectively and with efficiencies gained in all areas across the organization (and continuously striving to be further optimized, as there is no end state). It is also one that leverages the next gen and innovative technology to create a digital experience for both customers and employees and maximizes productivity through a high degree of automation. Ultimately, it means changing the way we do our work across all elements of an organization, to adopt the values highlighted in the diagram above.
- Adaptability: Adaptability refers to the vivacity of an organization to quickly assemble its technology, management, and resources through means such as communication and information infrastructures in an effective, intentional, and coordinated response to an increase in changing external and internal environments. The market environment in question needs to be experiencing a continuous and unanticipated change. In contemporary organizations, continuous change is increasingly becoming a “new normal” phenomenon. For this reason, interest in organizational agility has increased exponentially for managers and corporate personnel. Organizations attempt to adapt and respond to these market changes through coordinated processes and responses, thus making the organization adaptable
- Flexibility: Agility facilitates increased flexibility in the organization. An organization is flexible if it can easily implement its core business objectives in a loose hierarchy and adapt to the rapid changes in the market and global environment. An organization that can easily reshape its cultural and business practices in line with changing circumstances through the contribution and participation of the team members is said to be flexible and fits the description of organizational agility. Organizational agility ensures equal contribution and participation by the team members. There is a team structure that is characterized by role authority where individual members of the team have a role to play in the organization. Efforts contributed by each member to the organization are recognized and encouraged. These organizations focus on a result-driven rewards scheme instead of the predefined KPIs. It also involves the extent to which the organizations can scale its knowledge base and awareness.
- Balance: Agility enables organizations to balance both the aspect of control and autonomy through its organizational infrastructure. The organization achieves balance among its core activities when it has acquired the dynamic capabilities in the form of combined competencies and resource development and has created a source of competitive advantage so as to respond rapidly to the changes in the market conditions.
Figure 2. source: Modern Analyst
Achieving Enterprise Agility
Here are three ways (based on the software industry) organizations can become more agile, regardless of its size or structure:
- Enterprise Agility and Self-Organization: Create broader, more flexible job roles that allow employees to organize around specific problems and initiatives they care about. Enable them to collaborate cross-functionally to reduce dependence on others outside the team. Encourage them to utilize all of their skills, not just those related to their job functions. Team size matters. Keep teams as small as possible while ensuring that all necessary skills are included.
- Collaboration: Relentlessly seek out and eliminate any communication barriers that are standing in the way of real-time collaboration. Every “throw over the wall” wastes valuable time. Provide channels for quickly and easily sharing information and expertise between groups. In agile software development, physical co-location is considered optimal, but close online collaboration can produce the same results.
- Autonomy for project teams: Finally, help find ways to give project teams more autonomy. Allow teams to move more quickly by giving them decision-making authority. The fewer approvals and sign-offs a team needs along the path to project completion, the better. Teach managers to guide, oversee and support rather than direct. A leader’s top priorities should be continually removing impediments to the team’s progress and helping the team avoid roadblocks. Allow teams to achieve optimal efficiency and productivity as they discover the best ways to work together.
In a survey conducted by the Economist Intelligence Unit, 90% of executives across all industry sectors cite organizational ability as critical to any organization’s long-term success, and a study conducted by MIT suggests that companies embracing agile principles grow revenue 37% faster and generate 30% higher profits than non-agile companies. By taking a few tips from the software industry, your organization will gain the speed and flexibility it takes to compete at today’s lightning-fast pace of business.
Patterns for Enterprise Agility (See Figure 3.)
The four patterns for enterprise agility have been extracted from everyday practice in applying agile in complex, large-scale enterprises. They can be applied individually, depending on organizational needs and objectives, but are preferably combined for optimal value and true agility in the enterprise context. Surely, if the agile principles would have been applied consistently throughout the entire service delivery chain, we wouldn’t need to discuss enterprise agility. But reality is that many large enterprises still encounter powerful issues regarding portfolio, scale, lifecycle management and external parties. These four patterns illustrate a comprehensive path to enterprise agility for these enterprises, enabling them to truly deliver on the agile promise.
Figure 3. source: Sogeti
- 1. Fit for Future: The first pattern revolves around the alignment of the individual agile teams with the overall business strategy and portfolio. Surely, having decentralized decision making to product owner level, like in Scrum, empowers teams to respond quickly to changing market needs. Most enterprises, however, also deal with long-term strategic themes (eg. mobile strategy) and related programs which need to be brought into line with the several team backlogs.
- 2. Fit for Enterprise: Organizations of substantial size generally deal with programs comprising more than, say, 100 people working on shared program objectives. This level of complexity and scale puts more and more pressure on monitoring dependencies, sharing architectural guidelines and harmonizing delivery cadence. Your organization may decide to use SAFe (Scaled Agile Framework), DAD (Disciplined Agile Delivery), may be inspired by the way of working at Spotify, or simply use Scrum instruments to scale (Scrum of Scrums, Meta Scrum). Irrespective of the solution you choose, an organizational and cultural fit is key for true agility at scale.
- 3. Fit for Lifecycle: The third pattern deals with the lifecycle scope of agile. Despite the massive growth of DevOps cultures and Continuous Delivery practices, most organizations that have adopted agile, still focus on agile for their software development domain. Making agile truly work for your enterprise implies translating its principles and instruments to the other domains involved in the IT delivery chain. From the moment new ideas emerge (business, IT innovation) until the moment they are maintained in production (operations, support), agility needs to be integrated in current practices.
- 4. Fit for Integration: The final pattern for enterprise agility hinges on the observation that virtually no modern enterprise builds and runs their IT completely in house, without any external supplier. Almost every organization has to deal with complex value chains, comprising multiple external parties like body shops, outsourcing partners or cloud suppliers. Integrating these individual components to sustainable business value is key for the modern enterprise. Upcoming models like SIAM (Service Integration And Management) help providing guidelines to organize for integration. The challenge remaining here, is how to combine external agreements (fixed contracts, SLAs) with agile behavior and processes. The most effective way to deal with this disparity is to embrace the agile context even on integration level, such as agile service management, reducing batch sizes, value stream mapping and focus on cycle times.
Key Topics in Agile Enterprise Studies
- Comparing agile enterprises to complex systems
- Interactions, self-organizing, co-evolution, and the edge of chaos are concepts borrowed from complexity science that can help define some of the processes that take place within an agile enterprise. Interactions are exchanges among individuals etc. holding a common vision and possessing the necessary resources, behaviors, competence and experience in aggregate. They are an important driving force for agile enterprises, because new ideas, products, services, and solutions emerge from the multiple exchanges happening over time. The interactions themselves, rather than individuals or the external environment, are significant drivers of innovation and change in an agile enterprise.
- Self-organizing describes the spontaneous, unchoreographed, feedback-driven exchanges that are often found within agile enterprises. Vital initiatives within the agile enterprise are not always managed by one single person—rather all parties involved collectively make decisions without guidance or management from an outside source. The creativity and innovation that arises from this self-organizing process gives the agile enterprise an edge in developing (and redeveloping) products, services, and solutions for a hyper-competitive marketplace.
- Co-evolution is a key process through which the enterprise learns from experience and adapts. The agile enterprise is constantly evolving in concert with (and in reaction to) external environmental factors. Products and services are in a constant state of change, because, once launched, they encounter competitors' products, regulators, suppliers, and customer responses that force adaptations. In one sense, nothing is ever completely "finished", although this does not mean that nothing is ever made, produced, or launched.
- The edge of chaos is a borderline region that lies between complete anarchy or randomness and a state of punctuated equilibrium. The agile enterprise ideally operates in this region, needing the tension between constant change and the constraints that weaken change efforts to keep the organization perturbed enough for innovation and success. In other words, the edge of chaos is the space in which self-organizing and co-evolution flourish.
- Agile enterprise versus bureaucracy: There are several key distinctions between the agile enterprise and the traditional bureaucratic organization.
- The most notable is the agile enterprise's use of fluid role definitions that allow for dynamic decision making structures. Unlike the rigid hierarchies characterizing traditional bureaucracies, organizational structures within agile enterprises are more likely to fluidly adapt to changing business conditions into structures that support the current direction and any emergent competitive advantage.
- Similarly, agile enterprises do not adhere to the concept of sustained competitive advantage that typifies the bureaucratic organization. Operating in hyper-competitive, continuously changing markets, agile enterprises pursue a series of temporary competitive advantages—capitalizing for a time on the strength of an idea, product, or service then readily discarding it when no longer tenable.
- Lastly, the agile enterprise is populated with individuals pursuing serial incompetence — they work hard to obtain a certain level of proficiency in one area but are driven to move on to the next "new" area to develop expertise. There are no "subject-matter experts" specializing for years in one topical area, as found typically in a traditional bureaucracy.
- Operating at the edge of chaos: Although agile enterprises by definition include numerous, constantly co-evolving and moving parts, they do require some structure.
- The enterprise must develop specific structures (also called system constraints) to serve as a counterbalance to randomness and anarchy, keeping the enterprise optimally functioning on the edge of chaos. These structures—including a shared purpose or vision, resource management aids, reward systems, and shared operating platforms—often emerge from three key organizational processes: strategizing, organizing, and mobilizing.
- Strategizing is an experimental process for the agile enterprise, in which individuals repeatedly generate ideas (exploration), identify ways to capitalize on ideas (exploitation), nimbly respond to environmental feedback (adaptation), and move on to the next idea (exit).
- Organizing is an ongoing activity to develop structures and communication methods that promote serial execution. It often includes defining a shared vision, as well as systems and platforms, that ground the enterprise.
- Mobilizing involves managing resources, ensuring the fluid movement of people between projects, and finding ways to enhance internal and external interactions. Typically, enterprise values, personal accountability, and motivational and reward systems are a key output of this process.
Benefits of Enterprise Agility
- Increase business value creation: Enterprise agile aligns the entire organization through a set of lightweight, shared processes and practices. By doing that, the organization as a whole can adapt quickly as the market changes or as new ideas come to the fore. By harnessing the entire organization to focus effectively on the few top priorities, with progress visible to all through objective, meaningful metrics, the organization is able to rapidly create and deliver value and then move on to the next-highest-priority items.
- Meet customer needs and exceed expectations: The agile enterprise values rapid feedback loops in all aspects of work—both internal and external. This builds transparency and trust with co-workers and customers alike. The mantra of "release early and often with high quality," as exemplified by the DevOps culture, can be exciting for customers who learn to eagerly await the next imminent release.
- Create a positive shared culture: By their nature, enterprise agile practices foster a culture of teamwork, honesty, and transparency. Everyone collaborates closely, fostering a spirit of cooperation and shared trust. Retrospectives and other forms of actively engaging improvement opportunities mean that everyone has a real chance to make things better. No lonely, ignored suggestion boxes needed.
Enterprise Agility Challenges
- 1. Preparing for the Unknown: Doing business today is not about just preparing for tomorrow. It’s about preparing for an unknown, unpredictable future that is filled with uncertainty. Worryingly, 70 percent of executives who responded to a recent Accenture survey expressed dissatisfaction at their inability to predict future performance in the new normal of permanent market volatility and the uncertainty it creates.
- 2. Realizing Value from Investments, Rapidly: Any investment, whether in real estate, resources, personnel or technology not only has to be justified at board level, but must demonstrate a return more quickly than ever. If the days of long implementation cycles are over, the days of stringent measurement of total cost of ownership, combined with quick return on investment have arrived.
- 3. Converting Skills and Knowledge: A key challenge faced by businesses in complex, technical industries is how to convert skills, knowledge and ideas from individuals, as human capital into structural capital that can benefit the whole business. In highly technical and geographically distributed industries, the knowledge of specialist teams and employees can be an organization’s greatest asset and therefore should be managed accordingly. Information needs to be diffused and shared as much as possible in order to create effective knowledge transfer to new employees and ensure vital information stays within the organization.
- 4. Transforming Customer and Supplier Relations: The growing digitization of everything has not only fundamentally changed the way businesses operate, but it has changed the way consumers think, behave and engage with organizations. The power of the internet combined with the onslaught of mobile devices, giving consumers access to information 24/7 means organizations must adopt a digital transformation strategy to remain competitive. Project - and asset-based businesses – such as energy and utilities, manufacturing, construction and defense -- are under pressure to transform how they serve and interact with customers, suppliers and partners.
- 5. Changing Working Culture, Processes and Practices: As well as adaptable technology, adaptable people and culture within an organization are also essential to agile businesses and helping organizations work towards a strategic vision that is itself constantly changing. Driving this change is a new generation of worker. According to Forbes, “Millennials are going to make major shifts in corporations over the next decade and most people aren’t ready for the amount of change that’s coming. By 2025, Millennials will account for 75 percent of the global workforce." What this means for organizations is that in order to capitalize on these changes to create business advantages, they must have the systems, processes and culture in place to facilitate transformation, as and when it occurs.
- What is Enterprise Agility? Korn Ferry
- Building Enterprise Agility PWC
- Explaining Enterprise Agility Deloitte
- Enterprise Agility Enablers Modern Analyst
- How can organizations become more agile? Rallyteam
- The Four Patterns for Enterprise Agility Sogeti
- Key Topics in Agile Enterprise Studies Wikipedia
- Some of the Benefits of Enterprise Agility Techbeacon
- Five Agility Challenges for Enterprise Investments IFS
- 7 Obstacles to Enterprise Agility srumreferencecard.com
- Enterprise Agility: Asking The Right Questions To Be Agile Global PM Systems
- The Pursuit of Enterprise Agility Aakash Srinivasan
- What is Enterprise Agility? \\ Strategy Execution Series Lindsay Scott
- What's Hampering Enterprise Agility Vesa Palmu