5 Steps Leaders Can Take Toward Business Agility

In a recent Agile Amped podcast, SolutionsIQ Chief Technology Officer Evan Campbell and Senior Agile Coach Kat Conner discussed “The Rise of Business Agility”. This podcast was recorded from our annual employee gathering in Tucson, Arizona, where the whole company came together to reconnect and refocus. In this timely podcast, Evan and Kat focus on common organizational and cultural impediments to business agility. Here we have consolidated their advice into five actionable steps that leaders can start taking today on their journey to business agility.

1. Modernize Budgeting and Management

The need to reframe entire performance management systems and move away from fixed targets and budgets is obvious when considering the constant volatility and uncertainty of the market today. According to Evan, “It’s easy to get the executives to a point of agreement that annual budgeting is irritating and wasteful and not very efficient in the things that we use it for.”

In response, Kat identified something that would aid leaders in the charge to modern budgeting and portfolio management: decoupling forecasting from their annual or strategic targets.

“You still need to have a forecast… to understand where you really are today in relationship to a target, but the target needs to be just as flexible and adaptable, changeable, based on what’s happening within the market conditions… You [have to apply] Agile principles to these high-level, enterprise targets and goals. [For example] a goal today that’s typically three to five years away will change based on market conditions, and [you need to ask,] ‘Do we have the right budget systems, forecasting systems, strategic planning systems in place to understand that quickly and be able to change?'”

Need a compelling stat to convince you? Evan’s got one:

“One of the most interesting statistics that I like… about innovation, digitizing, and leveraging modern technology in the line of business and making technology an inherent competency and strategic advantage for the business is that… In 1975, 80% of the market value of the S&P 500 was made up of physical assets. Plant equipment, property, transportation assets, things like that. 80% of the S&P 500 was physical assets. Today’s, that flipped entirely. 80% of the value of the companies on the S&P 500, their market value is made up of intangible assets… [That means] today, much, much more of the value of our business is based on intangibles, on knowledge, faster moving, more learning-based assets in our organization.”

For this reason, traditional fixed assets, in many cases, impede an organization’s ability to respond more quickly both to market pressures and opportunities. Evan goes on, “This ability to understand your market, sense and respond to what customers want, and competitive threats… means information and knowledge has to flow through the organization very rapidly. Business agility is all about helping our clients become learning organizations that can adapt themselves even more rapidly. This goes all the way to the idea of changing their corporate structures, their policies, their rewards, compensations and measures. All of these things should be open to management innovation of the organization.”

In 1975, 80% of the market value of the S&P 500 was made up of physical assets. Plant equipment, property, transportation assets, things like that. 80% of the S&P 500 was physical assets. Today’s, that flipped entirely. 80% of the value of the companies on the S&P 500, their market value is made up of intangible assets…

2. Focus on Transforming Culture and Mindsets, Starting with Leadership

“We often talk in the Agile community about specific practices and even mindsets that need to be put into place [in organizations],” says Kat, “but if the organizational structures don’t change to support … the flow of work and the flow of ideas, that’s a major failure point for large-scale business agility transformations.”

Evan agrees saying, “There’s no way that we’re going to be able to change critical governance and asset allocation and policy components of a large publicly traded company without the senior leadership of that company having the vision and the courage and the awareness to actually lead the organization.”

But it isn’t just leaders who need to change: it’s everyone in the organization, because culture emerges from thousands of random interactions regulated by both tacit and explicit agreements. Says Kat, “What we’re talking about is changing our hearts and minds, not just changing our practices, and that’s a huge cultural shift.” For this reason, a cohesive change management effort is necessary for transformation to stick. “In our approach to transformation,” Evan says, “an Agile change management program to support the organizational transformation towards business agility is really the core or the capstone of what we bring to help [our clients] learn to learn, and ultimately to adapt to be more efficient.”

3. Empower Rapid Response Through Delegation

Many of the problems we face daily now surpass the level of complexity that any individual can effectively manage. This is even, or perhaps especially, true for knowledge work and the people who do it. Knowledge workers need greater latitude to experiment, learn fast, make quick and impactful decisions, and resolve problems at the source before they can spread. Traditional command-and-control leadership rose naturally out of the industrial age, where human workers were viewed as fungible and as interchangeable as any cog in a machine. But, Evan tells us, “the role of leadership really becomes something different from the old directive models”.

Both Evan and Kat have experience leading both at SolutionsIQ and at previous companies. Kat shares how scary it was for her to start making the mindset transformation:

“It was for me 30 years ago when I first dipped my toe in… I’m an MBA, I come from a fairly large operations background, Lean Six Sigma — so in my mind I had very clear operational management techniques that made me successful. It’s a hard transition to be able to believe that if you create the structure, create the knowledge, create the support, the information is going to flow back to you so that you can trust the decisions [being made]. I went through a transition phase and I’m sure that every leader I worked with seems to have their own version of that, as they’re moving into this different world.”

In the end, delegation by leadership is what enables an organization to sense and respond to real-world data in real time, which unlocks business agility. For any who are hesitant to embrace uncertainty, Evan has this advice: “It’s hard for large organizations to be fast and responsive and highly efficient if information and decisions have to flow up and down long chains of command.”

It’s hard for large organizations to be fast and responsive and highly efficient if information and decisions have to flow up and down long chains of command.

4. Establish Teams as Long-Lived, Persistent Value Delivery Units

In Agile, we understand that uncertainty is everywhere, so we actively seek out ways to mitigate uncertainty. Agile organizations seek to remove unnecessary waste and tap into human-centric values like trust and community to create a resilient ecosystem. This is at the root of establishing long-lived teams. Members of persistent teams build deep trust bonds and community ties, which makes for the sharing of learning, feedback and experience seamless and continual. The result is the mitigation of uncertainty inherent in new team formations – and yet surprisingly most traditional businesses, if they leverage teams at all, still measure individuals as the unit of value.

For many Agile organizations, however, teams are the unit of value delivery, thus championing team persistence along with constant knowledge cross-pollination. As Evan put it:

“The most foundational thing in Agile always is establishing high-performance teams that stay together as a cohesive unit, groups of teams that stay together in product lines, or value streams… The important thing is instead of thinking of projects as the primary means of asset allocation and organization of people, we look at the critical streams of value that are flowing from technology to business leaders or customers, and we create long-lived, persistent, capable delivery units… We invest in them over time, and instead of measuring secondary outputs like on time, on budget, in exclusion to value delivered, we really focus on [things like] ‘What’s the impact this investment stream is having on the products, customers, and users in the marketplace? Should we increase or decrease that investment over time?'”

To be sure, we are not advocating for treating teams as fungible units, either. Changing team members, even one, changes the team dynamic and only time will reveal whether the delta is in the positive, negative or neutral directions. Even so, establishing, supporting and incenting long-lived, persistent teams of knowledge workers reduces the uncertainty that is inevitably injected into ever new project that you start up, because the traditional calculus assumes that individuals operate at the same capacity regardless of factors like environment, morale, team dynamics. The same calculus assumes that people are only motivated by money and prestige. Both of these are proving to be less and less true today.

For more on what we call “return on team”, read this article.

The most foundational thing in Agile always is establishing high-performance teams that stay together as a cohesive unit, groups of teams that stay together in product lines, or value streams…

5. De-risk Learning to Unlock Innovation

One important element of an organization’s culture is its risk tolerance. Risk is a continuous concern for business, and yet to innovate and disrupt markets, the Agile organization must learn new ways to mitigate risk, on the one hand, and de-risk learning on the other. As mentioned above, return on teams can be one way to mitigate risk over time. Meanwhile business agility, as we define it, is an emergent property of learning organizations – organizations who seek out learning opportunities in the midst of uncertainty to make sense of small segments of a whole in hopes of coming to better grips with the whole itself.
Here, too, the traditional business fumbles. “[One thing] that can really kill innovation is the idea that if a hypothesis is disproven, it is a failure in the sense… that instead of appreciating that we learned something and acquired some knowledge, we ask, ‘Well, why didn’t you guess the right hypothesis the first time?'”
This mindset belies how business feels about learning and experimentation: if you fail, you’ve wasted time and money. In fact, only through rapid learning cycles and experimentation can the business respond to changes it senses in its surroundings. Therefore, to de-risk learning, Evan advocates for making innovation “safe and cheap”:

“[If] you have a hypothesis, I have a hypothesis, if we can get comfortable in an environment where we’re using theory-driven decision-making, we can both accept that neither of us knows enough to be certain of our hypothesis, but we can agree to design experiments that will run fast and cheap and help validate one or both hypotheses as rapidly as possible… It creates a whole cultural shift when everybody from the developers and testers up to the senior leadership is saying, ‘Have you validated that? I hear what you’re saying and that’s very interesting, but it’s really still just a hypothesis. How can we validate that before we make too big a bet on it?'”

Business agility is all about helping our clients become learning organizations that can adapt themselves even more rapidly. This goes all the way to the idea of changing their corporate structures, their policies, their rewards, compensations and measures. All of these things should be open to management innovation of the organization

Excerpts are taken from this recent Agile Amped podcast:

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