Digital Economy Dispatch #048 -- How to Achieve Business Agility in Large Established Organizations

Digital Economy Dispatch #0488th August 2021

How to Achieve Business Agility in Large Established Organizations

Over the past few years I have worked with many different organizations to provide guidance and support for their digital transformation journeys. Their situations vary enormously. From companies introducing new technologies to automate existing practices to the design of digitally-powered business models and services. From public sector departments overcoming major bureaucratic hurdles to lean digital-by-default commercial teams aiming to maintain momentum as they scale. All of them have made progress in delivering on their digital strategies.

As a result, in today’s digital world there is no shortage of understanding and a wealth of available experience in the details of applying digital technologies of all kinds. Yet the aspirations expressed by these organizations as they pursue their goals seems too often to be disappointingly out of reach. Small-scale improvements and pilot agile initiatives are rarely influential beyond the local team. Hence, throughout these engagements, there is one question more than any other that is at the root of the concerns that arise: How do we increase business agility throughout the organization to improve the speed at which we deliver products and services to our clients and stakeholders?

Each organization brings its own unique opportunities and challenges with respect to digital transformation. But for Large Established Organizations (LEOs) they are frequently overwhelmed with the complications of dealing with issues of scale, heritage, regulations, administrative overhead, budgeting cycles, and a myriad of other concerns. In addressing the challenges of undergoing digital change, they find themselves in the middle of a perfect storm: Facing the disruption that comes with all major adjustments to operating practices while trying to live up to the growing expectations of external stakeholders and managing the frustrations of employees inside the organization.

For many organizations, it can often feel like “business agility” is an oxymoron. It is easy to conclude that either you can have a well-structured functional organization, or you can have speed, flexibility, and adaptability. But can you have both? Traditional ways of bringing new ideas into practice seem to be inadequate. To be successful in driving digital transformation in LEOs requires a much more flexible, integrated approach across all aspects of the organization. So that now we are beginning to see a way forward that brings the right balance of speed and stability with those of flexibility and focus.

Establishing such a balance is far from easy. Michael Schrage very succinctly described this challenge as a fundamental shift in innovation practice from traditional R&D to a much more adaptable E&S approach. The well-known Research & Development (R&D) model adopted by most organizations involves a very structured research process in which “the research group” investigates new ideas against a set of technical, business, and funding goals. Following established engineering practices, a series of stage-gates must be overcome before any new product or service is handed off to “the development group” to move it through to delivery. Increasing levels of review and sign off are essential at each stage to ensure progress.

In contrast, we now see a move to an Experimentation & Scaling (E&S) model as organizations recognize the importance of a more iterative style of coordinated approach to quickly test new ideas across technical, business, and financial concerns. This series of fast design/delivery cycles aims to evaluate their viability, build confidence, and reduce risk with each review. This encourages the least promising ideas to be rejected without wasting too much time. Then, once a sufficient level of confidence is reached in the remaining innovations, attention turns to investment in scaling delivery through a coordinated, targeted, and concentrated set of actions to direct effort to where it can have more impact on potential clients.

This is often referred to as a “design thinking” approach, championed by the Stanford d.school and promoted by organizations such as IDEO. It is now widely discussed and forms part of the digital strategy of many of the world’s most well-known organizations. But, while terms such as “pivoting” and “minimum viable product” have become part of every company’s lexicon, the key concepts are found to be deceptively simple in theory, but remarkably difficult to apply in practice. In my experience, the issues causing this theory-practice gap are essentially those at the heart of the “business agility” debate: Creating a scalable way to balance the flexibility required to adapt to change with the stability essential to deliver sustainable value across a large established organization.

The key findings of the 2019 Business Agility Report reinforced the nature and depth of the challenges being faced. Based on its survey of almost 500 business executives, the report concluded 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.” Building momentum across the organization is crucial.

Furthermore, their analysis pointed to three important indicators of an organization’s progress in achieving high levels of business agility:

• A shift in funding model toward outcome-based initiatives where incentives are better aligned to delivering on stakeholder needs.

• Internal team coordination around value streams that bring together key capabilities across the organization to ensure efficiency in meetings business targets.

• Relentless improvement in capabilities by supporting experimentation, data-driven planning, and fast-paced learning cycles.

Of course, in a world where “every business is a software business”, an essential starting point for many organizations is to develop a scaled agile approach by starting within their software delivery and IT teams. Creating a scalable software delivery function is fundamental to business agility for LEOs in the digital world. This is recognized in the way agile software development has evolved toward scaled agile frameworks such as SAFe, a structured model for organizations to adopt agile practices across all areas of the business. SAFe is the most widely known and used framework, as recognized in the latest State of Agile survey. Using SAFe helps to create a well-defined structure for organizational improvement to expand the adoption of agile practices beyond the core software development teams.

Interestingly, in recent days the SAFe people have updated their Business Agility approach. In the keystone article that defines and explains what they mean by “Business Agility” they have recognized the importance of a broad approach to agility by defining their view of an organization not in terms of departments or groups, but in terms of “value streams” delivered. In the latest revision to this approach, they reconsidered the steps in value stream management. This has resulted in a refactoring of the elements of business agility in SAFe. A key part of this is a new perspective which they call the “Business Agility Value Stream” that describes the integrated set of key activities involved in moving from business opportunity to its scaled delivery.

As seen through the lens of SAFe, business agility is described as a set of steps that all teams across the organization can adopt. In relation to the Michael Schrage’s framework, it can perhaps be seen as something of a halfway house between the waterfall stage-gates of the R&D approach and the fully agile iterations of the E&S model. It will certainly be interesting to see the results from its application over the coming months.

However, this approach is not without its critics. For some agile practitioners, frameworks such as SAFe represent the introduction of unnecessary rigour and constrain the creativity inherent in any agile approach. The warnings of “fake agile” express concern that these frameworks use the language and ceremony of agile methods but may be obscuring the adoption of underlying principles that is essential in any successful agile adoption. Even so, for many LEOs such frameworks are not only useful reminders of the critical ideas. They are fundamental to deliver large scale change.

Delivering business agility across large established organizations is never going to be easy or straightforward. It is equally important to recognize that there is no single formula for success when you are dealing with demanding clients, complex organizational structures, and diverse teams of individuals with a variety of backgrounds, needs, and aspirations. However, over the past few years we have been learning some important lessons from which all organizations can benefit. Perhaps they can help your organization as it defines a path toward “business agility”.

Digital Economy Tidbits

Hundreds of AI tools have been built to catch COVID. None of them helped. Link.

A really useful analysis of the use of AI-based tools over the past 18 months. The disappointing conclusion is based on a catalog of errors and lack of discipline in the use of AI across a wide range of tools. Here is a great reminder….if we needed it….that the application of AI in digital health is still in its early stages. Some important lessons here.

In the end, many hundreds of predictive tools were developed. None of them made a real difference, and some were potentially harmful.

She and her colleagues have looked at 232 algorithms for diagnosing patients or predicting how sick those with the disease might get. They found that none of them were fit for clinical use. Just two have been singled out as being promising enough for future testing.

“It’s shocking,” says Wynants. “I went into it with some worries, but this exceeded my fears.”

The CEO of Pfizer on developing a vaccine in record time. Link.

Absolutely fascinating discussion of the Pfizer journey. A “must read” on what it takes for a Large Established Organization to act in an agile way. What does it take? Urgency. Purpose. And a willingness to drive through the blockers.

There were several important characteristics of the approach they took:

It took a moon-shot challenge, out-of-the-box thinking, intercompany cooperation, liberation from bureaucracy, and, most of all, hard work from everyone.

Underlying this is a data-driven innovation strategy requiring deep digital skills across the leadership team:

We had to become a more modern company, digitizing data through every link in our value chain.

The timeline and the path taken is fascinating, leading to the first use of the vaccine:

The UK was the first country to authorize the use of our vaccine, and Margaret Keenan got the first dose, on December 8, 2020.

The lessons learned from this experiences?

1. It takes a team

2. Purpose matters.

3. Shoot for the moon.

4. Support novel approaches.

5. Break through beauracracy.

6. Cooperate across all dimensions