The Agile Organization

What is an agile organization?

At its core, being agile means being adaptive and ideally proactive to changes in the marketplace. But being agile means more than that. Today, we see organizations that co-create products with customers. We see organizations that manage to look at previous competitors and see partners. We see organizations that instead of thinking in products or services, think in ecosystems and aim for more than just shareholder value. They consider a broad range of stakeholders incl. customers, partners, their employees, and society at large including our planet.

An organization does not achieve agility by simply implementing Scrum, Kanban, or Design Thinking into its current setup or operating model. To become an organization that can change as fast as change itself, most businesses need to significantly transform how they work. They need to build a new operating system, a system that is designed with different structures, different policies, and different metrics.

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Why organizational agility is important?

In his 2011 talk Gary Hamel says "organizations need to change as fast as change itself." This is a really good description of an agile organization and business agility. An organization that is capable of changing the products and services it offers to customers. An organization that manages to refine and reinvent its business models. And, an organization that is courageous enough to change how it does all of that on a continuous basis.

Most businesses were designed to deliver consistently the same product - think of the Ford Model T that was built around 10 million times by 1927 with little changes to the product. This is not an easy feat. The operating system that was built be it in the automotive, engineering, aerospace, pharma, banking, insurance or any other industry laid the foundation for the wealth (not only financial) created over the past century.

Yet today, organizations are facing a set of completely different challenges summarized as VUCA. It is not about having thousands of people (mostly referred to as resources) to show up at work and do what they are told. Organizations today need to consistently invent and innovate, they need to deliver high-quality products at a faster pace than ever, and they need to address very changing needs and preferences from customers all around the world.

This challenge can not be addressed with the existing operating system and the existing culture, it requires a new one. Not one that is slightly

refined e.g. some teams working in Scrum, or a few leaders practicing coaching. It needs a holistic new approach: a new operating system. This new operating system results in doing everything different e.g. strategy, leadership, moving from projects to products, and from organizational silos to value streams - these are just a few things that will be impacted.

In his book Built to Last, Jim Collins developed a concept called Genius of the AND. He says: Instead of being oppressed by the “Tyranny of the OR,” highly visionary companies liberate themselves with the “Genius of the AND”—the ability to embrace both extremes of a number of dimensions at the same time. Instead of choosing between A OR B, they figure out a way to have both A AND B.

These changes require organizations to develop and learn new capabilities. After all, creating an agile strategy is fundamentally different from traditional strategy development - this is just one example. Learning new skills goes beyond a few training initiatives for a small group of people in the innovation department. The whole organization needs to embark on a learning journey. A journey on which everyone first understands the reason for change and then explores how each person can not only participate in that change but actually impact it in a way that their organization becomes better at delivering stakeholder value and better at continuously improving itself.

How does an agile organization look like?

It's easy to refer to the big tech companies whenever we think about agile organizations. After all, companies like Apple, Amazon, Microsoft, Google, Tesla, Netflix, Salesforce, and others manage to deliver great products (software, hardware, and services) at an ever faster pace and excite customers. Most of these companies seem to have been designed from day 1 to be agile i.e not only respond to market changes, but actually create the winds of change.

This might be true to some extent for Tesla, Netflix, Amazon, and Salesforce - especially as all of them are still or used to be lead by their founders. In the case of Apple and also Microsoft the founders have been out for quite some time. And even when Steve Jobs returned to Apple at the turn of the century he was the founder but by no means did he have the majority of voting shares.

Among all of these companies, both Apple and Microsoft are great examples of companies that managed to change and become more agile. In the case of Apple the company actually avoided bankruptcy

by 90 days. Both companies became innovation power houses with Apple introducing products like iPod, iPhone, iPad, a bunch of new services, and recently also new chips. Microsoft managed to add cloud services to their portfolio and significantly innovate on their business model i.e. moving to a subscription service for Office - among many other things.

An agile organization is a business that constantly innovates on many fronts. It innovates on operations i.e. how they build things e.g. the Tesla manufacturing system which automates more and more steps. An agile organization innovates products and services like Apple building and shipping new versions of each of their products more or less on an annual basis. An organization innovates on strategy including business models like Adobe and Microsoft moving to a subscription based model instead of selling licenses. And finally, an agile organization innovates on its own operating system like Haier has done over the past decades.


What does an agile culture look like?

All of the companies mentioned above have similar characteristics e.g. they operate more or less consciously according to agile principles, and through that have built an agile mindset. Does that mean that all of them have the same or similar cultures? No! Talking to people at each of these companies one gets a sense that their cultures vary significantly.

And even if their cultures were identical, something like culture can not be copy and pasted through a one-year consulting project - even if one hires McKinsey, BCG or Bain. Cultures - to use Jeff Bezos words - are enduring, stable, hard to change. They can be a source of advantage or disadvantage. You can write down your corporate culture, but when you do so, you’re discovering it, uncovering it – not creating it. It is created slowly over time by the people and by events – by the stories of past success and failure that become a deep part of the company lore. If it’s a distinctive culture, it will fit certain people like a custom-made glove. The reason cultures are so stable in time is because people self-select.

Assessing a corporation's culture e.g. by using the Competing Values Framework or the Culture Map from Strategyzer helps to understand what the predominant culture of an organization is. It also helps to visualize and define where an organization needs to go and why that is the case. But none of these exercises result in the cultural change needed for most organizations. It takes a lot of work, by a lot of people (especially leaders), over a long period of time.


The journey of becoming an agile organization

Today, fortunately more and more organizations have understood the need for change. Yet, only few know what to aim for i.e. which principles to adopt. And even less know how to approach it. Many ask how to implement agile in an organization as if agility was just another way of project management. To be fair, with a growing number of large and small consultancies selling agile with frameworks such as Scrum as a quick fix to implement, it is understandable that some senior executives fall for that trap.

Our aim is to outline a journey that organizations serious about the change and with the discipline to follow through on it can take to become agile i.e. change as fast as change itself. Of course this journey includes new frameworks such as Scrum incl. new roles e.g. Product Owners and Scrum Masters, new structures such as cross-functional teams, techniques to introduce and increase customer-centricity, new approaches to decision-making, and building the capabilities to focus while being flexible.

Being Agile vs. Doing Agile

In 2010 Bob Hartman created awareness about the difference between being agile and doing agile. Unfortunately, many people's key takeaway was that you do not have to do agile, you need to simply be. So they went on a quest to shift mindsets by talking, inspiring, and doing all sorts of weird things. If it were that easy to shift mindsets, don't we think that most organizations would be agile by now? After all, watching a Simon Sinek or Tony Robbins talk would do the job... As it turns out, in theory, theory and practice are quite similar, in practice, not so much.

Teaching more than 10,000 people and working closely with a bunch of organizations over the past 10+ years, we have learned that the organizational mindset is the collective mindset of the people working there - of course disproportionately shaped by the mindset of leaders. The mindset of any individuum is that person's habits. We receive a certain, we process that input based on our unique neurological pathways, and then we show an action which is our output.

Each habit is created slowly over time by actions and by events – by the stories of past success and failure. Does that remind you of something? It is fairly close to Jeff Bezos' definition of an organization's culture. The only way to change habits and through that change our mindset is through action. So doing - and doing agile right - is essential to becoming or being agile. This is as true for individuals as it is for organizations - which are nothing else than a collective of individuals.


Laying the foundation for organizational change

Anything that we want to do, we need to learn first. If we want to play football, we need to learn about the rules, learn techniques of handling the ball, learn tactics of how to play as a team, and learn strategy on how to beat our competition. There is a reason why the best sports teams - in any sports - invest a significant amount of money in attracting the best players and the best trainers and coaches.

Too many organizations start their agile journey by selecting a few teams and telling them to do Scrum. In many of these organizations not a single person is sent to a training and they don't hire a professional coach to support the team changing their way of working. After a few months the team is frustrated as are the stakeholders. Key takeaway: Agile and Scrum does not work.

If you want a group of people e.g. a team let alone a whole organization succeed with agile, you need to train them first. Everyone needs to know WHY this change is needed, HOW it looks like, and WHAT is expected from them going forward. Also, everyone needs to know that they have a place in the future operating system. For most people their role i.e. their place will change, but it's important for them to know they will still exist and won't be eliminated as a human being. If not, they will become detractors and saboteurs of the change.

These trainings need to be delivered by professionals not by people who learned about these frameworks themselves a week ago. It is very easy to spot a great trainer: It's people with significant experience in those specific roles, people that can articulate the most complex topics in a simple way (ideally using visuals to do that), people that can share case studies from various industries, and finally people that care about people's growth.

Make the agile transformation a strategic initiative

Making something strategic means tying it to business outcomes of the organization. It means making leaders accountable for achieving this goal. And it means making it important in the long run not just for the next quarter. Strategic initiatives are things were there is C-Suite and in many cases Board attention. Failing on strategic planning initiatives should not be an option which increases the incentive to focus on such initiatives and make them work. Strategic initiatives also tend to get the best people on the initiative plus enough capacity and budget.

Building a new operating model or a new operating system is hard. One can look at organizational development through the same lens as product development. Today we know that the best products, products that deliver value to customers and the organization, are the result of frequent inspect and adapt cycles. The same is true for organizational development. Building the next version of your organization is not simply a copy and paste from Spotify, ING or any other "agile" organization out there. You need to find your own way.

Finding your own way

Depending on what an organization wants to achieve and what the starting point of their journey is, they might need to address different things than others. Great trainings result in a shared understanding of why, how, and what. They also result in people building a basic skill set which then needs to be honed. Some people manage to take the learnings from a training and implement them into practice without further support. But most people - at least for a period of time - are better off with a coach to guide them.

A great coach for the transformation team helps them with business strategy creation and strategy execution. A great coach helps the team and the organization to determine what type of an agile company they want to be and which current problems they want to address in their environment. A great coach also helps to identify what characteristics and values the organization wants to keep.

Further, a great coach helps to make intangible things like culture and values tangible. They help the organization to understand which enablers and blockers resulted in their current culture. Based on this, they can also systematically identify which enablers and blockers can result in a new culture - always keeping in mind that usually there are no quick fixes.

The most impactful levers for organizational design are: structures, policies, and metrics. All three can be changed as none of them is god-given. Some are easier to implement especially when we introduced them as experiments e.g. pilot teams working based on agile methodology or agile methods. Others are more difficult to change e.g. reducing levels of hierarchy.


The role of leadership

From the agile transformation strategy to every tactical initiative tied to that strategy it is leaders that drive the transformation within their organization. Creating an agile organisation and the agile operating model associated with it requires communication and leaders that are knowledgeable and experienced in organizational design and change. If not, there are only two options: First, they quickly learn about these topics from a great trainer and get ongoing support from experienced coaches. Second, we find a new leader to lead the initiative.

Behind every great product, there is a great team. The same saying is true for agile transformations. One great leader driving the transformation won't be enough. A great agile team is needed to make the transformation successful. This core team on the one hand executes the strategy and delivers results. On the other hand, the core team is a role model for Agile Values and collaboration to all other agile teams and their team members.

A never ending story

By now, you can probably guess that becoming an agile organization is not something you achieve in a short period of time and also it is not something that is done once. You need continuous improvement and you need to stay customer-foused the whole time. Being agile means to continuously improve, it means to continuously change, to always look for better practices and never settle with what others perceive as best practices. You want a competitive advantage and not copy what others already did.

Change being the only constant means that you need to build the capabilities to deal with change internally and flexible. They cannot rely and be dependent on external parties. Therefore it is our aim to help you help yourself. It is our aim to teach and coach your people so that they can drive this initiative and only pull us in as sparring partners.

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