The Fourth Industrial Revolution has brought extraordinary shifts in the technological landscape, opening new markets and unlocking possibilities at a blistering pace. Artificial intelligence (AI), virtual and augmented reality, hyper-automation, and other technology trends are already breaking barriers in almost every industry. The speed of these breakthroughs has no historical precedent. According to the World Economic Forum, “When compared with previous industrial revolutions, the Fourth is evolving at an exponential rather than linear pace.”
When compared with previous industrial revolutions, the Fourth is evolving at an exponential rather than linear pace.World Economic Forum
At the same time, customer expectations have also dramatically changed, driven by the technology-powered experiences they get on digital-first platforms like Amazon and Google. Forrester Research, which declared the new “age of the customer” in 2011, says customers have more leverage and higher expectations than ever before, placing increasing demands on businesses to satisfy customer needs. “Simply put, the age of the customer has changed, and continues to change the rules of business.”
The convergence of these accelerating trends will force businesses to adapt their models if they hope to survive—and grow. To take advantage of emerging opportunities and confront potential threats, they’ll have to evolve from the rigid approaches of the past by embracing agility to create customer value for the future. When the ground is shifting beneath your feet, you need the ability to move quickly and respond to changing conditions.
In short, business agility has become a fundamental requirement for achieving strategic business objectives. That means looking beyond quarterly goals and individual product development lifecycles and instead taking a holistic, introspective look across your organization, with the aim of implementing a Lean-Agile discipline to drive effectiveness and deliver a meaningful experience to customers before your competitors do.
Respond to Rapid Change with an Agile Mindset
The Agile construct is a set of guiding principles that puts forth a groundbreaking mindset on delivering value through constant iteration, collaboration, and learning. There are a multitude of frameworks, processes, and methodologies for putting Agile into practice, such as Scrum, Kanban, SAFe®, LeSS, Xtreme Programming, DAD, etc.
Although best known in the IT world, Agile is not just a process or methodology for software and product development. It’s a mindset and organizational capability that enables individuals and organizations to nimbly respond to change—and thrive in a dynamic and challenging business environment.
As the Agile Manifesto principle puts it, “Agile processes harness change for the customer’s competitive advantage.” And in this age of continual disruption, driven by digital and other technological innovation, Agile transformation is a must.
While many organizations see the need to “go Agile,” most struggle to truly adopt the values and principles in a meaningful way, often ending up hurting efficiency and employee morale. As with any radical change, you have to consider the “people part” of Agile transformation. It’s not enough to explain the “how.” You must also help your employees understand the “why,” whether you’re facing the challenge of a “burning platform,” managing scarce resources or empowering innovation.
Avoid a ‘Burning Platform’
In 2011, former Nokia CEO Stephen Elop sent a metaphoric memo to employees describing the scenario on a North Sea oil rig that had exploded in flames. Workers faced a dire choice between certain death on the burning platform—or a terrifying plunge into the frigid waters below. There was really only one option if they hoped to survive.
Some leaders, like Elop, acknowledge that they’re standing on a “burning platform,” while others realize it’s only a matter of time before old, inflexible systems kill their businesses. Over time, a system is repeatedly tweaked to produce output more quickly and efficiently, often making it complex and rigid, unable to adapt quickly to changes in market behavior. The very engine that helped your organization become successful is now your burning platform.
Yet, in spite of the risk, the culture in many organizations devolves to promote disconnected siloes and systems that support the burning platform, losing sight of the big-picture goals of value creation and innovation. This focus on the survival of “selfish components” ultimately leads to lower everything: customer satisfaction, market share, revenue, and profits.
In his book Project to Product, Mik Kirsten argues, “The problem is not with our organizations realizing that they need to transform; the problem is that organizations are using managerial frameworks and infrastructure models from past revolutions to manage their businesses in this one.”
The problem is that organizations are using managerial frameworks and infrastructure models from past revolutions to manage their businesses in this one.Author Mik Kirsten
Transforming your business to be more agile cannot mean more of the same; it calls for a courageous leap. As Nokia learned the hard way, you can either disrupt—or be disrupted. That means business leaders must share a sense of urgency with their teams and create the environment to introduce and support a no-blame culture that focuses on improving operational effectiveness. This shifts the teams’ focus to solving problems instead of pointing fingers, creating a natural path to embracing a growth mindset and injecting it into every discussion and decision to avoid the burning platform.
Make Better Use of Scarce Resources
Time and money—the two resources whose perpetual scarcity is the bane of every leader. Yet, our experience shows many organizations spend these precious resources on initiatives of marginal value, leaving more meaningful work to starve.
The most common approach to prioritization relies on creating business cases that make unsubstantiated assumptions about greatly increased revenue or market share and massive reductions in costs that can’t or won’t ever be measured. Worse still are efforts that improve individual components of a value stream in isolation and end up having no real impact on either your customers or your bottom line.
Time and money are better used by employing Agile prioritization techniques that favor the relative ranking of options, forcing smaller, more valuable outcomes to be prioritized higher than others. These approaches promote business agility because they’re easy to understand and quick to revise while still producing accurate results. Research shows that in the face of uncertainty, humans crave one thing above all: clarity. Removing friction from the decision-making process makes it easier to adjust to change.
Getting to value faster, easier. For example, the WSJF (Weighted Shortest Job First) model, based on the work of Don Reinertsen, prioritizes jobs that offer the most value in the least amount of time for the least amount of effort and risk. This approach favors producing value quickly and breaking larger tasks down into smaller efforts to promote fast learning cycles, ensuring the best use of scarce resources. Additionally, Agile promotes establishing work-in-progress (WIP) limits to ensure teams focus on the tasks at hand, rather than juggling multiple priorities.
Organizing around customer value. An Agile approach also promotes effective use of resources by establishing cross-functional, self-organizing teams who are directly involved in activities generating value, instead of teams siloed by job function. This allows Agile teams to focus on delivering outcomes to the end customer.
For example, with the economic fallout from COVID-19, our global automotive finance client experienced a 400% increase in call volume. Using the Scaled Agile Framework (SAFe) we helped them implement, they were able to develop an online self-service solution in a little more than a week. This allowed customers to defer or extend their financing, without call center support. More than 1,000 customers took advantage of this solution in the first 24 hours after it was launched.
Functional silos, on the other hand, tend to become the selfish components focused only on outputs without regard to actual outcomes.
Outcome-based success metrics. Measuring success by identifying your desired outcomes will drive your teams to deliver more valuable work. By using Agile techniques to prioritize demands, apply a value-stream funding model, organize the work, and measure the value delivered, you free your teams to focus on the most meaningful work.
Make Innovation a Core Competency
The technology shift towards an endlessly empowered and interconnected future seems to be following Moore’s Law—progressively becoming twice as powerful and half as expensive. Customer expectations are tracking upward along the same exponential curve, creating market conditions that call for extreme innovation.
Some companies have figured out how to thrive in these fast-changing conditions. Amazon continues to expand the markets it serves using innovative warehouse and delivery solutions. Companies like Netflix, Uber, GrubHub, Airbnb, Square, and Stitch Fix are disrupting mature, seemingly high-entry-barrier industries by adapting their delivery models to take advantage of new technologies and consumer behavior. They’re delivering desired value to consumers and getting rewarded handsomely for it.
Embracing innovation as a core competency requires leaders to weave an entrepreneurial culture into their organization’s work fabric. In this Lean startup approach, small self-organized teams work together to create increments of value. These iterative increments can be small experiments, prototypes, improvements, or product changes delivered to users. Using highly data-driven techniques, teams capture and analyze user behavior, providing valuable feedback to make an informed decision on the next steps: continue to scale, pivot to provide better value, or stop working on the product.
Transformation Is a Team Sport
Business agility infuses an innovation capability into your organizational culture, regardless of company size. When you organize teams around delivering value to customers, instead of working in specialized functional silos, they begin to act like micro start-ups. A sharp focus on changing market conditions, new technology platforms, and customer behavior, coupled with decentralized decision-making, allows organizations to create fast-learning cycles that optimize the outcomes of their value streams.
Initiating Agile transformation is a bold move for any organization, but in this age of disruption, it’s also a proven path to survival and glory. Leading companies that have already benefitted from Agile recommend beginning the transition early so the benefits can be realized early as well.