Case for Business Agility
The key problem that business agility should address is enabling organizations to cope with the unprecedented rate of change that is the new normal today.
How do organizations respond to the revolutionary rate of change within today’s global marketplace without either slinking into inertia or exhaust itself in a frenzy of action in random directions?
Business Agility can help organizations find a third way to continually reinvent itself so that they discover, embrace and benefit from the opportunities among the chaos. The Compass for Agility is a framework is a pragmatic and personalized path for business reinvention and is the focus of this book.
Even a casual observer of our business or cultural environment recognizes this sense of ever-increasing change intuitively. We acknowledge, maybe with a moment of surprise or recognition, that new companies become household names almost overnight. New products and services emerge and quickly become part of the new normal for the average person.
The Reasons for Change
The reasons for the unexpected rate of change are multi-fold:
Internet of Things, including the explosion of digital devices offering instant access to information and networks
Perpetual rate of new technologies and their adoption as the new norm
Deregulation such as net neutrality, etc.
Continued shift from manufacturing to knowledge work to automation
Political changes, not just in the United States but also across the world
The evidence of this change explosion in the business sector can be seen almost everywhere –in the lifecycle of products, number of patents filed in the US Patent Office, amount of cell phone activity across national boundaries—on and on and on. And what's particularly important is that it's not just going up. It's increasingly going up not just in a linear slant, but almost exponentially.
One powerful indicator of this rate of change is a familiar touch point for business leaders: the Fortune 500 list, which is a compilation of Fortune magazine that ranks the top companies in the United States, based on total revenues for the fiscal year. The turnover in the companies listed annually in the Fortune 500 has increased dramatically in the last two decades. The life expectancy of a firm listed in the Fortune 500 used to be about 75 years and now it is less than 15 years, with the average still decreasing.
A business school advertisement I came across a few years ago stated baldly, that nearly half of the Fortune 500 companies wouldn’t be on the list in 10 years.
Standard & Poor 500, an index of top US companies, also shows marked decrease in the average lifespan of listed companies from 67 years to 15 years over its 100-year history, as noted by Richard Foster, a former senior partner at McKinsey & Company.
An Awareness of Change
Awareness of this increased rate of change usually leads to smart people acknowledging that we can’t keep doing things the way we did in the past if we want to survive and even thrive going ahead.
The changes are no means limited to the business sector, but business leaders have a particular imperative to develop response strategies since the survival and success of their business directly depends upon them. Leaders in other sectors such as politics or education don’t face quite the same urgency since they generally have a longer feedback loop.
Every business executive knows at least something about dealing with change, and they are exposed to the basic change management framework, either in business school or through organizational work experience.
The standard change management framework provides a response mechanism that, up to a certain point, seems to be sufficient. But then at a seemingly random point – which does vary depending upon a number of factors such as the industry, the organization’s profile, the nature of their work, the caliber of leadership – it collides into an invisible wall and just is not enough.
The change management framework is not enough anymore.
Not when the changes are almost multiple and continuous while being both almost too small to detect and too big to not detect but also too big to respond within existing frameworks. You can throw more resources at it, you can throw more bodies at it, and it just doesn't generate what you need and for more and more organizations these days, public/private doesn't matter—they're hitting that point, high tech in particular.
And at that point, you need a totally different way of going about dealing with change – recognizing trend lines in change, having adaptable response strategies at all levels of the organization and most of all, a mindset that accepts change as the new normal.
A New Response
A compelling business case encompassing both the rate of change as well as the need for new response strategies is the essential argument for the book, The Innovation Tools Handbook, as can be seen from this excerpt:
Authors H. James Harrington and Frank Voehl identify four elements of a successful strategy that can enable survival and triumph in the face of this argument:
Design business process that combines quality and speed to enable innovation
Better decision-making through the innovation process (from idea to prototype through to market-based validation) to reduce the inherent risk of innovation
Expand the pool of innovators -- “crowd-sourcing” from the corporate ecosystem -- as another way to reduce the risk of innovation
Invest in and empower leaders who can create and sustain the appropriate environment for the above three elements
As the Innovation Tools Handbook asks, “What is required, then, to master innovation and to become an agile, adaptive, winning organization?”
The answer is business agility.
What the authors call agile innovation – the combination of IT-based agile approaches such as Scrum and Kanban – as well as best practices derived from Lean and systems thinking – is what I define as business agility.
Business is often interpreted today as “commerce” or “occupation” — something inherently transactional and financial. Therefore, business agility is quite defined as applying agile beyond the realm of information technology especially software development and/or scaling agile across a large enterprise since it falls into the traditional mindset of IT as a subset of the “business” — the profit-making purpose of an organization. This narrow and artificial interpretation of both Agile and business agility is ultimately detrimental towards achieving agility for a number of reasons.
Nearly every manager I’ve worked with states that they’re facing a resource crunch – having to do more with less, not having the right people, etc. Well, the one resource that is infinite is human potential. If you can tap into and realize the potential that lies inside all of your people – and the value generated from their interactions – then resource shortage in this particular context will never be a problem.
When speaking of business agility, I believe the definition of the word business that is most appropriate is “an activity that someone is engaged in” within the context of an expected result or outcome. So, if you’re applying the practices and principles of Agile to identify, deliver and validate value for any given context, then you’re doing business agility.
Most organizations have some element or instances of business agility in practice, even if they don’t call it that. But business agility needs to be – explicitly, internationally – be your organization’s way of working for its benefits to be realized.
Transitioning from ad-hoc instances of agility to intentional and aligned agility requires a fundamental re-thinking of the purpose of organizations, the structure of an organization, the re-design of business processes, workflow, information sharing and decision-making protocols – in short, the why and how of our way of working.
Here are three key points to consider in re-shaping our organizations and our culture of work:
1. Focus on Outcome and Impact
Value-based organizations look first at the impact and outcomes they wish to have on their customers and the world, rather than at the volume or efficiency of output.
2. Design Responsive Organizations
To achieve business agility, organizations much be structured optimally for collaboration, responsiveness, and value-realization.
3. Enable Organizational Agility
New and differentiating behaviors and ways of thinking about leadership, strategy, management, and team contribution are vital on the business agility journey.