A tectonic shift is reshaping organizations.
The business and operating models of most organizations are the legacy of mechanistic systems that flourished in the early 1900s. They can be traced back to industry titans Frederick Taylor and Henry Ford.
Taylor influenced the course of history by applying science to the engineering of processes and management. In doing so, he was able to eliminate waste and achieve mass production. This paved the way for Ford to dominate the auto industry. Ford employed assembly lines and labor specialization to deliver 8x production efficiencies, reducing costs to a tipping point that brought automobiles into the mainstream.
Today, most organizations essentially follow the static, siloed, structural hierarchy that fueled 20th-century growth. Goals and decisions flow down the hierarchy, and siloed units adhere to strict annual budgets and seek approval for initiatives at every turn.
The skeletal structure is strong—but also rigid and slow moving. In contrast, an agile business is built for velocity and adaptability, and continuously creating new sources of competitive advantage. Agile operating models reconfigure strategy, structure, processes, people, and technology toward the pursuit of value-creating and value-protecting opportunities.
Agility allows businesses to harness the energy of change, continuously innovate, and bring desired products to market—breathing new life into the firm.
Why change now?
The term “VUCA” was first used in 1987 to describe the increasing volatility, uncertainty, complexity and ambiguity associated with the global forces of change. Since then, we have seen entire industries collapse, dominant firms get upended, and operating models become obsolete.
To surmount the VUCA challenge and drive the growth demanded by stakeholders, many leaders turn to tried and trusted techniques, such as shuffling business portfolios and restructuring.
But the statistics are overwhelmingly clear that this hasn’t worked. S&P 500 data show that corporate lifespans are contracting rapidly, where it was over 30 years in the 1980s, we now see it heading quickly toward less than 15 years in the 2020s.
An alternative approach
Old models are sinking in the face of rapid change. In contrast, organizations adopting business agility have the potential to harness the energy from market changes through continuous innovation.
Agile organizations focus on customers, embedding customer-centricity deeply into the fabric of their culture. They install practices that fluidly adapt and adjust to emerging technologies, shifting consumer demands, increasing competition, and new policy and regulation. The shed hierarchy in favour of open, inclusive environments that embrace uncertainty and ambiguity with greater confidence.
Despite the promise, many organizations that make the leap to business agility fall short. That’s because a successful transformation requires commitment from everyone in the organization. It also means changing the way teams work, and the environment in which they operate.
Although every organization will have its own, unique take on business agility, we set out to identify the common characteristics that underpin a successful transition. For simplicity, we provide a high level review to serve as a thumbnail checklist for leaders considering the move, and for those who have initiated the transformation and are having difficulty building proper momentum.
- Rally the organization around a clear purpose that distinguishes how value is created for customers and stakeholders. This creates a center of gravity that relentlessly aligns leaders and teams across the organization.
- Install a flexible and adaptive approach to people leadership, dismantling organizational silos and aligning integrated teams around common goals, unleashing energy and passion as everyone readily sees the impact of their role.
- Establish and reward collective performance, continuously testing and iterating on lean practices that improve goal setting, decision quality and speed, speed to market, service delivery, and organizational learning.
- Empower a network of small teams to create a tipping point, setting the stage for a scaled roll out based on inspiring signals of success. Avoid reverting to top-down change, rather, facilitate sharing ground-up innovations that work and encourage sharing through communities of practice.
- Reshape organizational systems—critical policies, processes, and technologies—that are needed to reinforce the change, and prevent fall back to old ways. For example, redesign functional incentive systems to drive collaboration and coordination.
Leading an agile transformation
An agile transformation is unlike previous generations of restructuring. Before, we simply moved ‘boxes and wire’, but the concept of hierarchy reigned supreme. With agile, we fundamentally reimagine the operating model and challenge the very tenets of traditional organizational design.
The demands on leadership are substantial, and the shift can be uncomfortable. Hierarchy is familiar. The chain of command clearly conferred control and authority. A right earned through a lifetime of career growth and honed through years of managing people.
In an agile model, the leader steps back from this well understood machine, and instead focuses on shaping culture and guiding the organization, rather than directly managing it. New skills, capabilities, mindsets, and behaviours are required.
Successful leaders of an agile transformation will develop strategic priorities that embody their vision while providing clarity for teams. They will reorganize how work gets done, shifting ownership to their network of teams. They will change the way projects are funded, how talent is hired and developed, and how culture is nurtured.
Their new role will be a permanent shift. Core responsibilities will now revolve around underscoring purpose, architecting the future, inspiring people, and coaching for performance. The change is not without challenges, but the cost of retreating is high, and the opportunity for growth immense.
