Agile Transformation — Definition of Business and Enterprise Agile

Because Agile is not about Software Development

In the?first part,?we have discussed the evolution of society and the business environment, that created the need for change. In the second part,?we have observed actions, through which various organizational functions responded to those needs. In this last part, we will define Business Agility and Agile Enterprise and look at how they all fit together.

3.?Definition of Business Agility — Agile Enterprise

Agile Transformation is an adaptation of the organizations to changes in the external environment, which shifts from the Orange paradigm to Green and potentially to Teal. It is a change permanent and therefore strategic. Any strategic change in the organization must be governed by top execs and it must be at their highest priority agenda. The bottom-up approach is contributing, but as such, it is not able to provoke sustainable change. As Charles Lambdin puts it in his article?Agile’s Ethical Dilemma, Decision Distribution, and the Troyan War?about agility:

Agility, it turns out, has more to do with the distribution of decision authority and very little to do with the efficiency of [software] dev teams…. Agile Transformation, at its very core, is about new ways of managing. It’s about new ways of leading.

In 2008 I was invited to become the CEO of the Actum company in the Czech Republic. The company I took over was in poor performance shape, and I decided to radically reinvent it with the use of agile techniques. I was addressing 4 elements in the organization while building an Agile Enterprise.

Pic. 6 — Aguarra's Agile Transformation Framework for Enterprise Agility

Agile is Motivation

Building an agile organization is not an individual exercise, it is rather a team sport. The objective is to bring knowledge of every single individual to the table and engage or empower him/her to use it to the best for the organization. It is not possible to order someone to be motivated and engaged most of the time. On contrary, it is possible to create an environment, where people feel intrinsically motivated and where they are actually bringing new ideas to the table.

It requires leaders to understand theories of motivation and in consequence radically change their managerial style. It requires focusing their attention on the people they are supposed to lead, inviting them to the activities, and accountability and organizing work around those motivated individuals. It is not micromanagement anymore, but rather creating space for self-organization. How to make sure all are going in the same direction? Defining company culture and values, clear objectives, interesting and ambitious goals, purpose and meaning, transparent communication, deep interest in people, or no politics are just a few techniques. It motivates people, encourages self-organization, and works like a glue that keeps the organization together even in times when things are not ideal. It creates boundaries and provides everyone with clear direction and expectations. Put co-workers (employees) first in front of all other stakeholders!

Agile Culture, in my experience, is the culture that unlocks the engagement of every individual within the organization so it can direct its energy and capabilities into creative flow.

Agile is Value Creation

It is important to understand, how an organization creates value. What is value for the customer, what is the actual value chain, and how organization delivers value? Moreover, these processes must be transparent for every individual in the organization. This way we can secure that people understand operational issues right, decisions are done with consideration of the information available and with an understanding of the consequences of such decisions. Right metrics can be then implemented to provide further insight into the situation.

Agile is a Response to Change

Design internal processes and organizational structure in the way the organization will be capable of responding to change. Processes should provide rapid feedback, and support collaboration and self-organization. Collaboration among co-workers, but also with other stakeholders — customers, suppliers, or even authorities. Organizational structure should be able to adapt to actual workflow and demand. Hierarchical vertical bureaucracy is not an option, fluid structures, based around Holacracy principles or groups of self-organizing cells being coordinated together are better options.

Agile is Knowledge Management

For every agile organization, knowledge management is paramount. Agile organization requires a broader spectrum of knowledge from everyone. T-people are needed rather than I-people. Culture must demand people acquire knowledge and apply this knowledge, and at a much faster pace than they were used to. If technical development needs automation, this new technique must be learned and mastered. If the organization of activities requires collaboration, self-organization, pair work, and extensive healthy communication, people need space and time to learn and practice it. If products and services in Agile are supposed to address value delivery rather than delivery of a number of working hours, people need time and guidance to help them to adapt to this new mind shift, because it is indeed radical. If the way of work requires an alternative organizational structure, people have to learn it. It is also good to remember, and pay attention to, that a lot of habits and knowledge must be also unlearned. Bring in activities, which help people learn and grow through small and relatively safe experiments.

Most probably, these 4 elements of (Enterprise) Agility are more-less similar to your understanding. In the model, the quadrant Motivation has green color. If an organization has just a little money or resources or needs to act quickly, changes should start there. It is in fact possible to say that Agile is all about motivation. I started to use this model to structure the analysis or assessment when I work with organizations. However, my experience over the last 10 years showed me that ideal is when all four quadrants are addressed from the very beginning and in parallel. It is the only way to achieve an agile way of work, which is sustainable over a longer period of time. Changing only one quadrant causes strong tension toward change and may cause organizational disbalance resulting in strong opposition, disengagement, and hidden or open rebellions.

Change has iterative nature, it is not a linear process. It can be adopted in monthly or quarterly iterations and it is an ongoing process, it continues forever. The purpose of all these activities is to build an Agile Enterprise, a body more flexible and more dynamic to respond in the Green (VUCA) world.

Definition of Agile Enterprise

Agile does not have a fixed definition in the agile community, which causes misunderstandings. I am providing the following one, which reflects my last 20 years of practice in managing organizations + practical experiences from the transformation of the Actum software house or from supporting around hundred bigger or smaller changes in organizations across a few countries.

Agile Enterprise is an organization that shifted from vertical bureaucracy, command and control, siloed structure, prescriptive fixed targets, and budgetary obsessed management model toward lightweight focused on value delivery, flexible, trust-based, collaborative, creative, and experimental management model, which builds around the environment where people are intrinsically motivated, empowered to decide and be accountable for their decisions.

(based on the work of Gary Hamel, Jeremy Hope, Knut Fahlén, Tom Gilb, Frederick Laloux, Taichi Ohno, Ricardo Semler, Ed Schein and Dave Snowden)

Why Agile Transformation for enterprise is difficult?

For a quick illustration, I will use Schneider’s Model of organizational culture. It divides organizational cultures into four quadrants. While large enterprise organizations do not have only one culture type, usually one type prevails. An organization designed like vertical bureaucracy typically belongs to the Control culture quadrant. These are governed by strict policies and through following plans. Success is defined as compliance with the plan, sometimes overachieving above the plan. For people in the organization, success is to grab power and maintain power. Organizations are very good at planning, detecting deviations from the plan, and correcting deviations. It is all Orange paradigm. Pushing this organization into Green requires abandoning most of what is organization good at. Given that there are tens of thousands of people involved, it is not easy to change the way of thinking, change objectives or implement a new structure overnight or even in the long term.

Pic. 7 — Schneider's Model of Organizational Culture

However, these organizations feel growing pains, as society evolves into Green. They are not able to respond to changes fast enough, they have difficulties attracting young people with creative or entrepreneurial minds because those usually seek different cultural models.

Enterprises approach Agile Transformation as a project — to implement Agile something and eventually uplift pains with the hope to meet their Orange (Waterfall) numbers faster. This is how their leadership is currently paid to think. Their pay is tied to output. In their understanding, more value might be generated by maximizing outcomes through a greater number of people or cutting costs. They are just not ready to understand, that inside Agile Transformation there is not only the death of Orange (Waterfall) but also nearly all of the structures that feed into it.

So they appoint a senior project manager or a former director of some unit to become transformation manager and task him with preparing a detailed plan for 1–2 years ahead. An advisory company is selected in process of competing tender, which advices deploying a prefabricated framework (SAFe) or copying/imitating somebody’s else structure (Spotify), based on advisory preference. The organization invites an army of coaches and the framework is implemented. Leading positions in the new structure are filled in by former managers. Despite the change, it continues practices of outsourcing nearly everything including core competencies. When people are foreign to the organization, they typically do not care about the outcome. New buzzwords are introduced — the department is relabeled to the tribe, project manager to Scrum Master, etc. One or two years later, the project is completed. Check.

It is obvious that the entire transformation starts with the process, and is focused on process change (orange paradigm). It typically does not address people’s motivation and feelings, fairness, cooperation, engagement or values, or anything from the Green paradigm. Simply because the definition of success comes from the Orange paradigm, too — organization as a machine, preferred stakeholders, and keeping the numbers. Until “Agile Transformation” will be seen as process updates, the such transformation will remain a painful cosmetic exercise.

Acknowledgment:

I would like to thank Robin Fraser, co-author of the book Beyond Budgeting and founder of Beyond Budgeting Roundtable, and?Andrew Craddock, former director of DSDM Consortium (today?Agile Business Consortium) for providing me with new details and clarifications on the purpose and circumstances of foundations of Beyond Budgeting Round Table and DSDM Consortium.

Literature:

List of literature I used to form my ideas for the article.

• Bogsnes, Bjarte (2016) —?Implementing Beyond Budgeting. Wiley.
• Dove, Rick (2007) —?Response Ability: The Language, Structure, and Culture of the Agile Enterprise.?Wiley.
• Fahlén, Knut (2018) —?Dynamic Management Strategy. Lyber.
• Gilb, Tom (1989) —?Principles of Software Engineering. Addison-Wesley.
• Goldman, Steven; Nagel, Roger; Preiss, Kenneth (1994) —?Agile Competitors and Virtual Organizations.?Van Nostrand Reinhold.
• Hamel, Gary (2012) —?What Matters Now: How to Win in a World of Relentless Change, Ferocious Competition, and Unstoppable Innovation. John Wiley & Sons.
• Hope, Jeremy; Fraser, Robin (2003) —?Beyond Budgeting: How Managers Can Break Free from the Annual Performance Trap. Harvard Business Review Press.
• Laloux, Frederick (2014) —?Reinventing Organizations: A Guide to Creating Organizations Inspired by the Next Stage in Human Consciousness. Nelson Parker.
• Nagel, Roger; Dove, Rick (1991) —?21st Century Manufacturing Enterprise Strategy: An Industry-Led View. Diane Pub Co.
• Semler, Ricardo, (1993) —?Maverick. Grand Central Publishing.
• Schein, Edgar (2010) —?Organizational Culture and Leadership. John Wiley and Sons.
• Schneider, William (2000) —?The Reengineering Alternative. McGraw-Hill Education.
• Sinek, Simon (2011) —?Start with Why: How Great Leaders Inspire Everyone To Take Action.?Penguin.
• Takeuchi, Hirotaka; Nonaka, Ikujiro (1986) —?The New, New Product Development Game. Harward Business Review.

27.07.2019 Update, I will add one more book here, which is very interesting, but unfortunately available in Swedish so far. For the summary in English visit Agilia Conference 2018.

• Francke, Lennart; Nilsson, G?ran (2017) —?The Agile Company (Det agila f?retaget : fiskstim eller supertankers i en dynamisk v?rld? Flexband.

About the author: Michal Vallo builds agile organizations and helps managers to understand agile techniques, benefit from its adoption and consequently radically improve organizational performance. He is an agile trainer, coach, and manager at?Aguarra, a founding member of the Agilia community, and organizer of the?Agilia Conference?/?Agile Management Congress.