Operating Models for Enterprise Agility

Jon Ward

Enterprise Agility is the ability of an organisation to rapidly adapt to market threats and opportunities, thereby increasing growth and profitability. Therefore, it has a dual focus externally on markets and customers and internally on business operations and efficiency. These two elements impose constraints and objectives on the target operating model and organisational design.

Traditional functionally aligned operating models are hierarchical, rigid, and fixated on stability with functional efficiency. Conventional models are not designed to service customers with speed and flexibility. On the other hand, Agile operating models are flatter, adaptable, customer-centric, and constantly evolving. These operating models are aligned to value streams and designed for pace and adaptability, with processes and governance designed for customer experience and response to customer feedback. They use data-based decision-making that is as close to the customer as possible.

Dual Operating Model

In today's fast-paced and competitive business environment, modern enterprises face the dual challenge of maintaining operational efficiency while being agile enough to respond to rapid market changes or seize strategic opportunities.

In his book XLR8, Dr John Kotter, a renowned expert in change management, addresses this challenge through his rationale for a dual-operating model. This model aims to balance the strengths of traditional hierarchical structures with the flexibility of a more dynamic network-like structure, enabling organisations to thrive in an ever-evolving landscape.

Traditional hierarchical structures have long been the backbone of organisational management, providing stability and efficiency in day-to-day operations. However, Kotter argues that these structures are often too slow and rigid to effectively respond to the rapid changes and strategic opportunities that characterise today's business environment. While adequate for specific routine and governance tasks, the hierarchical approach can hinder an organisation's ability to innovate and adapt quickly.

To overcome these functional limitations, Kotter proposes adding a second, customer-focused network-like structure that operates alongside the traditional hierarchy. ?This agile operating model is aligned to value streams and designed to be flexible, dynamic, and adaptable, quickly implementing strategic change to create enterprise agility.

Governance in traditional operating models is based on managerial control, oversight, and decision-making. In contrast, the efficacy of Agile operating models is based on empowered employees in autonomous teams making decisions. The agile operating model is designed based on autonomous teams with agile governance practices.

By leveraging the strengths of both operating structures, organisations can maintain their operational efficiency while being nimble enough to respond to emerging opportunities or challenges.

Autonomous teams

Autonomous teams are a cornerstone of enterprise agility. Such teams may be in any aspect of the business, such as customer operations, Human Relations, or Marketing. The actual organisational model will largely be dictated by the markets in which the enterprise operates. For example, a local microbrewery would have a different organisational structure than a multi-national food manufacturer.

Team construction in either model aims to enhance flexibility, customer responsiveness, and innovation within the enterprise. Team sizes are variable and unlikely to follow team-size guidance from software engineering but are typically small groups using automation with high levels of self-organisation and autonomy.

The operational design should ensure that each team has the skills, tools and capacity to provide external or internal services with minimum dependency on other parts of the organisation. Operational team construction is based on value stream analysis and seeks to employ artificial intelligence and automation to gain speed, accuracy and efficiency.

The principle behind agile autonomous teams is to empower team members to make decisions, manage their work, and collaborate closely to achieve common goals without needing constant oversight from higher management. This autonomy creates a heightened sense of employee job satisfaction and engagement.

A key characteristic of agile autonomous teams is their ability to make decisions within guardrails based on real-time feedback and changing circumstances. Operationally, this trait allows them to respond quickly to new information, pivot when necessary, and continuously improve their processes and outcomes. The implication for the agile operating model is that it is sure to evolve and develop. The hierarchical elements of the enterprise need to be designed to facilitate and enable these adaptations.

Autonomous teams represent a powerful approach to managing all types of work in dynamic and uncertain environments, driving customer satisfaction, innovation and efficiency. The collective ownership of tasks and responsibilities within the team fosters a sense of accountability and commitment, leading to higher motivation and productivity. However, the success of these teams also depends on the organisational environment and support they receive. Effective agile teams require leadership and a culture that encourages continuous learning, open communication, and trust.

Courageous Leadership

In a traditional organisation, delivering value often requires multiple vertical functions within the enterprise. However, as mentioned earlier, the agile operating model aligns employees into teams focused on value streams. Consequently, agile leadership shifts its focus from functional areas to the end-to-end creation of value. This value can be consumed externally by customers or internally by other parts of the organisation.

Agile enterprises, therefore, require executives to shift their behaviours from managing functions to courageously leading and delivering value. In traditional organisations, executives monitor, motivate, and use departmental reporting and financial analysis. Agile leaders provide data to their teams, enabling autonomy and informed decision-making. This information flow ensures that teams align with the organisation's evolving goals and can quickly respond to operational challenges and opportunities.

Courageous leaders create a culture, an environment that promotes ongoing learning, transparent communication, and trust. They cultivate a culture that passionately prioritises the customer and empowers individuals to make ethical decisions, regardless of the expense.

Agile leaders typically have a wider span of control than their traditional counterparts because the Agile operating model is flatter and has fewer managerial levels. Of course, teams undertake some managerial elements previously the remit of middle managers. These teams are encouraged to make decisions within governance guardrails. Depending upon the industry and the nature of the value stream, an Agile Operating model is likely, in some instances, to support Agile Leaders with Operational Risk specialists.

In some circumstances, organisations cater for the broader span of control by dividing functional leadership from staff management, forming Chapters. The chapter model groups individuals with similar skills or functions into "Chapters" led by a Chapter Lead. The chapter model enhances capability building and knowledge sharing by organising teams around their profession or expertise. The Chapter helps an organisation by spreading functional expertise across its operations and developing career paths for individuals, enabling them to swiftly adopt new processes, information, technologies, and methodologies.

The combination of functional agile leaders and chapter leads results in most employees working in a matrixed structure. But even with the duality, agile operating models are flatter, leaner structures.

For further information regarding Enterprise Agility, please contact Beneficial Consulting.