The recently published 2019 Business Agility Report has revealed three predictive indicators for achieving better business outcomes with business agility:
- Adapting Funding Models – By funding business outcomes (rather than specific work outputs or projects), adaptive funding models and associated governance processes allow organizations to quickly and easily invest in new products or services as soon as market opportunities arise and, just as quickly, stop or change work that isn’t delivering the expected business value.
- Aligning Around Value Streams – By designing flexible work processes that are both efficient and customer-centric, value streams allow organizations to tightly integrate teams from across the organization in service of maximizing value creation for the customer.
- Relentless Improvement – By encouraging a culture of learning and experimentation to thrive, organizations will continuously improve both what they do and how they do it, thus reducing costs, improving efficiency, and delivering greater value to customers.
Let’s briefly consider each of these indicators.
1. Adaptive Funding Models
For many organizations, the primary barrier for success with business agility is a result of the fact that they still think of the world in terms of annual project cycles. They fund projects based on a promised return on investment, but then rarely hold themselves accountable to that return, instead measuring success by output metrics like schedule performance, percentage of scope delivered and budget variance. To make matters worse, they don’t prioritize projects against each other according to objective criteria. Traditional funding models do not use the same language to determine organizational demand and organizational capacity, and thus are incapable of measuring them against each other – if they measure either of them at all.
Organizations who are achieving success with business agility are breaking away from annual funding and planning cycles by investing in concepts like Agile portfolio management and Beyond Budgeting. This is allowing them to respond to new market opportunities because they are no longer tied to annual cycles. These organizations stop making prioritization decisions based on output metrics and are also testing their assumptions by incrementally funding initiatives based on the outcomes they are achieving, thereby freeing up organizational capacity to focus on highest-impact initiatives that will deliver business outcomes.
[Traditional businesses] fund projects based on a promised return on investment, but then rarely hold themselves accountable to that return, instead measuring success by output metrics like schedule performance, percentage of scope delivered and budget variance.
2. Aligning Around Value Streams
Many organizations who are adopting Agile practices at the team, program and even enterprise level are still struggling with breaking away from a project mindset. People are assigned to multiple projects with competing priorities with arbitrary beginning and end states with funding attributed to this set period. Teams may be created at the onset and dissolved at the end. While there is nothing wrong with this approach per se, it is increasingly ill-suited to knowledge work, which includes most software development and transformation work.
Again, according to the report, organizations who are seeing success with business agility are realigning their people to value streams and funding the value streams as though they were an asset. This is allowing people to have a better sense of alignment to the business goals. It’s creating an environment which is more conducive to enabling high-performing teams as well as a better flow of value through the organization. Some organizations use customer journey maps to define their value streams, some use customer segments, and others base their value streams on business capabilities. There is no one-size-fits-all method for aligning to value steams, and organizations that do this well are constantly revisiting these decisions value stream by value stream to ensure that these types of trade off decisions are optimized for their overall business strategy. By connecting these value streams to their new funding and governance models, they are improving their organization’s alignment of work to strategic goals, increasing the ability to change direction, while also improving overall focus and promoting a higher degree of shared purpose, an essential ingredient for higher autonomy.
3. Relentless Improvement
A lot of organizations start to learn about concepts like continuous improvement and kaizen as they start to adopt lean thinking and Agile ways of working, and yet it’s difficult for this to become ingrained in the culture. These organizations perform retrospectives and inspect and adapt, but it’s not uncommon for business leaders to underinvest in improvement in order to achieve short-term gains.
Relentless improvement is the last of three key predictors of organizations who are achieving noticeable results with business agility. These organizations have baked it into their culture as they transform into learning organizations. They each have a culture that constantly challenges assumptions, where they strive to go through as many learning loops as possible to outlearn the competition.
A Little Perspective
Based on the evidence revealed in this year’s Business Agility Report, it’s clear that organizations who are beginning their business agility journeys should consider focusing on these three areas:
- Adaptive funding models
- Alignment around value streams
- Relentless improvement
One other thing the report revealed: the top two reasons for striving for business agility reported by respondents were customer satisfaction and employee satisfaction. This is the take-away: the need for business agility isn’t some abstract higher purpose that businesses don’t fundamentally care about: the need for business agility is that, without it, the vast majority organizations today will be incapable of engaging with and delighting the people who buy their products and services and the people who make those same products and services.
The top two reasons for striving for business agility reported by respondents [of the 2019 Business Agility Report] were customer satisfaction and employee satisfaction
Read the Full 2019 Business Agility Report
Continuing the theme from last year, the survey for the 2019 Report found that, while most organizations rate their current business agility maturity relatively low, they have enthusiasm and hope for the future. Many respondents report that they are struggling with systemic leadership issues relating to trust, investment and culture while maintaining ongoing momentum in their business agility journey.