What is Business Agility?
...and why is it so important right now?
The world is changing so rapidly that in many cases companies no longer meet customer requirements for speed, flexibility, responsiveness, and innovation. Companies that undertake a successful Agile Transformation completely change their performance on customer satisfaction, customer loyalty, employee motivation and satisfaction, and along financial metrics that make a substantial contribution to business performance. A successful Agile transformation places your organization at the forefront of any industry.
The Definition of an Agile organization is one that combines a stable backbone of core processes and capabilities
with a high degree of flexibility for rapid response to change. (McKinsey, July 2019). (McKinsey, 2018)
Note that agility is based on stability: A stable base of highly predictable and reliable practices and behaviours on top of which a highly empowered and rapidly responding Agile organization can operate.1 Business Agility is not limited to any industry and, has been undertaken successfully in a wide variety of industries including banking and financial services, Pharmaceutical R&D, Platform industries, automotive, and manufacturing.
Mechanistic Company vs. Organic Organization.
Throughout the 20th century and until very recently, most companies were visualized as machines, which took a set of inputs, and through very highly planned processes produced outputs, in the form of products or services, that were sold into markets which had been deeply analyzed and broadly segmented.
While this gave the appearance of interaction and stability, it actually resulted in rigidity, and situations where employees were not empowered.
Mechanistic organizations relied on making very large investments in product or service roll-out, with a limited number of precisely defined and planned new roll-outs per year. Technological innovation, in particular in consumer internet penetration, has made the mechanistic business model obsolete. In fact, once mighty companies that have not been able to make the leap to a more Agile structure are facing an existential crisis.
“Success today requires the agility and drive to constantly re-think, re-invigorate, react, and reinvent. ”
An Agile organization is able to make very rapid response to changes in customer and consumer demands, and produces very rapid iterations of products or services to meet customer needs. Employee responsibility now resides with a much smaller, much less hierarchical group: the team, or the tribe. Matrix reporting lines are eliminated, and budgeting is set in response to the rapidly evolving needs of the customers.
Agile organizations’ increases in speed to market have led to improvements in ROI as high as 30% or more. This improvement is simply not possible under a mechanistic company organization and function.
Agile Transformation vs. Cost cutting.
Agile transformation differs from cost transformation. In any Agile transformation, the key metric is increase in capacity of the organization. Example metrics would be increase in throughput, increase in projects completed, increased employee retention, greater engagement, increase in R&D capacity.
The Imperative for Organizations in Japan to make an Agile transformation:
Japan’s economic development and prosperity over the past 50 years has been the relentless pursuit of maximum quality in standardized,
high volume manufacturing. This, combined with technical innovation, and keen insights into mass markets made Japanese brand companies some
of the most valuable in the world. A few Japanese companies continue today as leaders, but this number has dwindled as markets around the world have rapidly changed.
Manufacturing Quality is no longer the preserve of any particular country or company and is now available almost everywhere: the axis of competition today and for the future is design, functionality, speed of updates, and precise response to consumer and customer demand. Trying to match the speed required under the mechanistic company framework is essentially impossible, given the rate of innovation expected by markets.
That means that companies need to embrace an Agile way to respond to their customers in order to continue to expand their business and strengthen and grow their organizations.
The Starting Point for your Agile transformation is to have a clear vision of the future state of your organization. Developing this vision takes the concerted effort of the top management of the company, and complete buy-in to be successful.
Our series on Agile Transformation will continue with insights into setting the vision, and filtering it into your organization.
Contact Innova Solutions to gain from our deep industry expertise in Agile Transformation.