How companies can become faster, more productive, and more responsive in their Agility journey?

What is agile?

Agile started life as a set of working practices in software development that were really focused on ensuring that product development was done in a customer-focused way—so end-user centric, heavily iterative. All of those things that a lot of people associated with agile at a working-practice level. And we’re in a very exciting time now where those working practices are being scaled up. Not just scaled up in IT, but actually scaled up across entire organizations.

And we are ending up with organizational constructs that look and feel quite different to what a lot of us grew up with over the past 30 years.

Agile is, at its core, in its simplest, a set of almost team-based working practices. If you ask me, “What is agility at an enterprise level?” I’d say it’s the scale-up of that in a meaningful way across entire organizations.

Th one thing that also is really important to think about when we think about agile organizations is to remember that it’s not only about what we would typically think about as organization structure.

To really become agile, it’s very much around mindsets and behaviors and really adopting a very different way of working. And so, I was just actually having a conversation yesterday with someone who said, “Well, we have cross-functional teams. It sounds basically the same as what agile is.” And it’s not. If you have a truly agile organization, you have groups of people who are singularly focused on what we would call a mission or a value driver or task, however you want to define it.

And the right groups of people are brought together to accomplish that. So if it’s about coming together to launch a new product, the people from insights and R&D and marketing and supply chain will all come together into a squad or a team. And their job is to say, “Instead of launching a new product in three years, how do we do it in six months?” How that’s enabled is not just to say, “We came together,” and then gave them a task. It is giving them the room to make decisions quickly. It is giving them the autonomy to pull in the right people when they need them, so that they can get the right insights at the right time. And they can actually make choices to move faster than what our traditional, hierarchical, matrixed organizations will allow them to do. If you’re on a team, you feel quite empowered. You feel like you have an end goal. Everyone on the team, no matter what part of the organization you come from, is incented on that end goal—not what my function or chapter expects of me, but we’re all driving against the same goal in the same time.

How many organizations are really trying to go big on this?

Simply put, there are a lot of organizations that say, “Well, we have cross-functional teams.” Or there are certain parts of the organization—typically, software development to begin with, but other things as well—that are trying to work in an agile way. How many organizations would you say are really going big and trying to do this at enterprise scale?

We have to be a little cautious around what we define as going big because the end blueprint of what one company may look like in its fully agile state could look and feel quite different to another, right? And that depends highly on industry contacts, the specific portfolio you have, a whole bunch of things—not least the legacy and sort of historic baggage that a lot of organizations have.

Now, how many have an ambition to do this at scale, as per some recent surveys,across industries, that says 70 percent of companies in some shape or form are piloting agile now.

It is a big difference from running agile pilots to actually feeling comfortable that version one of whatever your agile operating model is, is in place. And with that, it’s not “I’ve done my architecture; now I can sit back and breathe,” but it is having an ambition to say, “I’m not just doing it in IT. I’m not just doing it in these shiny, new digital areas. I’m not just doing it in these particular business units.”

Almost use system thinking to say, “I can have individual teams that work in very much the way that Sherina described earlier. But actually, I need a backbone that supports them. I need an HR system that enables people to move around. I need a finance system and a budgeting system that allow me to resource reallocate. I need to have career paths defined for people.” So I think there are a lot of companies—I would argue even to say most companies—that are experimenting.

And then I think there are a handful of companies around the world who have done it at enterprise scale successfully.

And interestingly, those aren’t the biggest companies. Actually, the ability of some small and midsize companies to move very quickly on this agenda, where this is actually quite existential for them—you do this or you die—or indeed, they have the ability to mobilize the entire organization against this mission: those are where we see some really, really interesting case studies.

But the things that come out of them are that you are getting happier customers, you’re getting a productivity uplift, and you’re getting happier employees with improved engagement. So it’s a long way of saying, “How many companies are trying? An awful lot are trying.”

There maybe two other things to consider. The ones that we see moving faster along that journey are the ones who, in many cases, have to. It’s a do-it-or-die kind of thing.

And that’s maybe a little bit alarmist. And we see that, for example, in the financial-services industry and places where the external environment is changing so fast, such as digitization—how consumers are using technology and interacting with that industry. So you actually have to change in a way that is faster to respond to what’s going on—meeting the needs of consumers. There’s another slew of industries, whether it’s consumer or healthcare, coming right behind as well. So I think that’s one reason that accelerates people through the journey.

The other, is leadership. There are definitely companies that are not quite on the cusp of “we really must change.” But the CEO or a business-unit leader has recognized the power of what this could be and has started to take the organization on a journey, albeit maybe slowly, trying to really build the muscle in order to get there first.

What are some companies that come to mind that are a fair way along on the journey?

There are some fairly good examples that are high profile. In the banking sector, you could pick many banks. But the most publicly known is obviously ING. If you look in the telecom sector, Spark in New Zealand is a great example of leadership-led transformation.

In the pharmaceutical world, Roche has been taking a real leadership stance but with a very different angle around creating agile leaders and what that means. And the list goes on. Those are still companies that are on a journey.

And then there are companies that were sort of born agile, like Spotify, which is one of those sorts of talismanic examples of a company that’s just done this almost since the very beginning.

If you’re talking about a 60,000-, 70,000-person organization that is across 80 countries and has been operating in a matrix with very well-established norms, then [becoming agile is] more of a journey.

Dynamic resource allocation

A pretty important success factor, is the notion of dynamic resource allocation, which larger, more stable companies are not used to. They're used to yearlong planning cycles, budget cycles, but to be much more agile, you have to think about quarterly. There are reams of proof that it actually is a value-creating driver. But it’s a very hard thing to change—especially if—you’re not used to it at all.

To dig into the point around dynamic resource allocation as an example of the types of things that are different, there’s absolutely a hardwiring piece. Finance organizations are not built to move money around. We don’t have the management information systems that allow us to track.

We don’t have the forums and meeting cadence and business calendar that free up enough time to make real trade-offs. We haven’t trained leaders to have the right discussions around this. But sitting above all of this is also a massive change in management mindset.

We have an entire cadre of leaders. I will paint this in black and white, just to point out the extremes: “I have been successful as a leader because I was given my budget, and I delivered or overdelivered on my budget.” That is very different from an enterprise-leadership mindset, which is essentially, “We’re all in service of a mission.”

To do that, if things change, the budget I thought I had, the financial and human capital, can and should be reallocated. And that is a massive shift from “my number and budget commitment is my bond as a leader, and that is my commitment to the enterprise too.” I am now a participating leader in service of a mission. or example: if you’re incented on making your budget, that’s what you’re going to do. Whereas if you think about an organization that’s agile, you’re not incented on your function. You’re not incented on your box. You’re incented on the purpose, the mission, which is very clearly tied to the value creation of the company. That changes the entire mindset and behaviors of the people. Again, easy to say. Not very easy to flip the switch when you’ve grown up in an organization.

will carry forward more on this in next article

Regards, Alok

Excerpts borrowed from Mckinsey research