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Business Transformation

The five trademarks of agile organizations

Friday, March 22, 2019

Is your organization making the transformation to agile? Thanks to digitalization and a range of disruptive trends that are transforming industries economies, and societies, such as the democratization of information, restructured competitive landscapes and the war for talent, many organizations have no choice. It’s a transform-or-die-trying reality.

Becoming an agile organization isn’t as easy as a typical re-org. In recent years, many leaders have been inspired by Frederic Laloux’s Reinventing Organizations and other new approaches to organizing such as Holacracy, and Sociocracy. But there is no blueprint for successfully creating an agile organization. Agile transformation is a journey, with no fixed answers. But as you go forward, no matter which approach you take, it’s good to keep in mind McKinsey’s five trademarks of agile organizations.

1. A shared purpose and vision across the organization

Agile organizations reimagine both whom they create value for, and how they create it. They are intensely customer-focused and seek to meet diverse needs across the entire customer life cycle. They are also committed to creating value with and for a wide range of stakeholders including employees, investors, partners, and communities.

To give coherence and focus to their distributed value creation models, agile organizations set a shared purpose and vision. Combining a shared purpose with a flexible, distributed approach to value creation allows them to rapidly sense and seize opportunities. Individuals across the organization proactively watch for changes in customer preferences and the external environment and act upon them.

Agile organizations can also allocate resources flexibly and swiftly to where they are needed most. They regularly evaluate the progress of initiatives and decide whether to ramp them up or shut them down, using standardized, fast resource-allocation processes to shift people, technology, and capital rapidly between initiatives, out of slowing businesses, and into areas of growth.

2. A network of empowered teams

Agile organizations maintain a stable top-level structure but replace much of the remaining traditional hierarchy with a flexible, scalable network of teams. Networks are a natural way to organize efforts because they balance individual freedom with collective coordination.

An agile organization comprises a dense network of empowered teams that operate with high standards of alignment, accountability, expertise, transparency, and collaboration. The company must also have a stable ecosystem in place to ensure that these teams are able to operate effectively. Many agile organizations:

  • Implement clear, flat structures that reflect and support the way in which the organization creates value.
  • Ensure clear, accountable roles so that people can interact across the organization and focus on getting work done, rather than lose time and energy.
  • Foster hands-on governance where cross-team performance management and decision rights are pushed to the limit.
  • Evolve functions to become robust communities of knowledge and practice as professional “homes” for people, with responsibilities for attracting and developing talent, sharing knowledge and experience, and providing stability and continuity over time.
  • Create active partnerships and an ecosystem that extends internal networks and creates meaningful relationships with an extensive external network so the organization can access the best talent and ideas, generate insights, and co-develop new products, services, and/or solutions.
  • Design and create open physical and virtual environments that empower people to do their jobs most effectively in the environment that is most conducive to them.

3. Swift decision and action cycles

Agile organizations work in rapid cycles of thinking and doing that are closely aligned to their process of creativity and accomplishment. Whether it deploys these as design thinking, lean operations, agile development, or other forms, this integration and continual rapid iteration of thinking, doing, and learning forms the organization’s ability to innovate and operate in an agile way. There are several characteristics of this rapid-cycle way of working:

  • Rapid iteration and experimentation – teams produce a single primary deliverable (or minimal viable product) very quickly, often in one- or two-week “sprints”.
  • Standardized ways of working – to facilitate interaction and communication between teams, including the use of common language, processes, meeting formats, social-networking or digital technologies and dedicated in-person time, where teams work together for all or part of each week in the sprint.
  • Performance-oriented – exploring new performance- and consequence-management approaches.
  • Full transparency of information – so that every team can quickly and easily access the information they need and share information with others.
  • Continuous learning – is an ongoing, constant part of the DNA.
  • Emphasize quick, efficient, and continuous decision making – preferring 70 per cent probability now versus 100 per cent certainty later.

4. Dynamic people

An agile organizational culture puts people at the centre, which engages and empowers everyone in the organization. They can then create value quickly, collaboratively, and effectively.
Leadership in agile organizations serves the people in the organization, empowering and developing them. Rather than planners, directors, and controllers, they become visionaries, architects, and coaches that empower the people with the most relevant competencies so these can lead, collaborate, and deliver exceptional results.
People processes help sustain the culture, including clear accountability paired with the autonomy and freedom to pursue opportunities, and the ongoing chance to have new experiences. Employees in agile organizations exhibit entrepreneurial drive, taking ownership of team goals, decisions, and performance. Agile organizations attract people who are motivated by intrinsic passion for their work and who aim for excellence.

5. Seamlessly integrated technology

Agile organizations will need to provide products and services that can meet changing customer and competitive conditions. Traditional products and services will likely need to be digitized or digitally-enabled. Operating processes will also have to continually and rapidly evolve, which will require evolving technology architecture, systems, and tools.
Organizations will need to begin by leveraging new, real-time communication and work-management tools. Implementing modular-based software architecture enables teams to effectively use technologies that other units have developed. This minimizes handovers and interdependencies that can slow down production cycles. Technology should progressively incorporate new technical innovations like containers, micro-service architectures, and cloud-based storage and services.
To accomplish all of this, agile organizations need a robust, agile ERP solution that can support a range of unique technologies and be the sandbox of its innovation. An agile ERP can support high-velocity sprints, countless minimal viable products and endless iteration. It can also support a dynamic network of empowered teams and a pool of talented and inspired people. To find out more about how your ERP system can support your agile transformation, get in touch with Pipol.

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