Strategic agility in a changing world White Paper
- White Paper
- Digital transformation
- Project management
- Project progress
- Career progression
April 17, 2019 |
20 min read
- White Paper
- Digital transformation
- Project management
- Project progress
- Career progression
Over the past two decades, advances in technology have triggered unprecedented changes across all aspects of society, and the strategies that once delivered deep market power and long-term dominance are no longer effective.
Over the past two decades, advances in technology have triggered unprecedented changes across all aspects of society. In the business world, this tech-shift has created a context of constantly evolving customer and market needs. Developments in digital technologies, such as smart devices, the Internet of Things (IoT), artificial intelligence (AI) and blockchain, have disrupted and transformed markets at astonishing speed. The world as we know it today is volatile, uncertain, complex and ambiguous1. As a result, the strategies that once delivered deep market power and long-term dominance are no longer effective.
Previously, when organizations created a strategy, they could compare their current state with a fixed target state and had time to implement a strategy to achieve their desired goal. However, this is no longer possible. In a world that is constantly changing, the target state is no longer static, but 'will constantly move as the wider context changes and evolves'2. The rapid pace of change puts an end to the concept of the perfect strategy. Instead of believing that a strategy can help them attain an ideal future state, organizations must instead see strategy as a continual journey of change and growth. They must leverage the technology, people and assets across their entire organization to create an enterprise-wide culture of agility. They need to see change not as a one-off project or programme of projects, but as an ongoing part of their business activities. They must accept that to remain competitive, they must manage change forever.
In this paper, we will look at how organizations need to adapt their approach to strategy to survive in the current business context, and how adopting and embracing AgileSHIFT™ practices and principles can support them in this.
1 This is also known as VUCA. For more information, see A guide to AgileSHIFT, section 1.1
2 A guide to AgileSHIFT, section 1.4
2. The end of the perfect strategy
The end of the perfect strategy
Creating a successful organizational strategy is difficult because there are many uncontrollable factors that affect it. Firstly, none of us can accurately predict the future, therefore the strategies we develop are guaranteed to be imperfect. Secondly, the more moving parts there are in an organization, the more challenging it is to create a strategy that succeeds across that scale and complexity. The larger the organization, the more complex the channels of communication become between teams and team members. Figure 2.1 shows the relationships between team numbers and channels of communication, and the exponential effect this has on the complexity of connections. Thirdly, every strategy requires humans to execute it, which adds unpredictability and human error into the picture even in normal times.
How have new strategies traditionally been created? Often, the top management team employs a consultant to help them define a new strategic direction for the organization. They then present this strategy to the organization, with assurances that the new method will form a shining path to success. Things go well for a while: each division and department recalibrates around the new strategy and starts meeting the new goals. Then, after three or four quarters, it becomes harder to implement the strategy within organizational ranks, or a disruptor3 calls the entire strategy into question.
The organization may start to see the following signs that its strategy is not working effectively:
- It misses major opportunities it did not see.
- It misses major opportunities it did see but could not respond to fast enough.
- It struggles to attract and retain the talented staff it needs to deliver its strategy successfully.
- It has the right people but has not clearly communicated its organizational strategy to them, and as a result they do not know what they need to achieve.
- There is strong evidence that a lot of time and money has been wasted on failing initiatives.
- A competitor overtakes it in one of its core areas of focus.
All these problems could occur in any organization even in relatively stable times. But these are not stable times; these are times of tremendous change where traditional approaches are no longer adequate. That is why organizations need the ability to adapt their strategy on an ongoing basis. The following sections look at how AgileSHIFT provides an approach and a set of practices and principles that enable organizations to rapidly adjust to the rise of disruptive competitors, technological advances, shifting economic conditions and increasing customer demands and expectations.
3 An entity that changes the way in which an industry or sector operates, especially in a new, more effective, and unexpected way. It may create a market where none existed before. It can be caused by, or expressed through, digital capabilities, channels, or assets.’ A guide to AgileSHIFTsection 1.3
3. Strategy and AgileSHIFT practices
Strategy and AgileSHIFT practices
Some organizations are naturally agile: with seeming effortlessness, they continually move to where they can deliver the most value to their customers. They make mistakes on the way, but their agile processes allow them to learn quickly and to respond by improving their performance with every new challenge.
However, most organizations are less coordinated and have less foresight on where or how to deliver the best value. They often move in fits and starts rather than in fluid adjustments to changing conditions. In slow-moving markets, being a little less co-ordinated is acceptable, but when the pace of change picks up and when disruptors rapidly enter the market, agility becomes the critical approach and mindset for organizations.
Organizations that aspire to be truly agile must move and adapt quickly across the whole organization to meet the constantly evolving customer and market needs. AgileSHIFT supports this holistic enterprise- wide approach and encourages organizations to adopt five practices: a set of practical approaches that will bring real benefits to any team wishing to work in more agile ways.
Figure 3.1 The AgileSHIFT practices, A guide to AgileSHIFT (2018) AXELOS
The AgileSHIFT practices are as follows:
- Engage stakeholders. Establish goals based on the needs of one or more stakeholders such as customers and partners. An agile organization never loses sight of its core stakeholders’ needs and actively engages with them to ensure they are still being met.
- Build collaborative teams. Agile decision-making is treated as a team sport. Collaboration within and across teams must be as rich and effective as it can possibly be, especially during periods of rapid change.
- Plan to be flexible and adaptable. Decision-making processes empower people in the organization as deeply as possible. If the only people who are empowered to make decisions are at the top, agility is impossible. You need to ensure that the people closest to the problem to be solved are given the power to solve it.
- Deliver iteratively and incrementally. Decisions must be tested as quickly as possible. Agile decision- makers ask themselves, ‘If we are right, how will we know?’ They then work towards increasing the certainty that they are heading in the right direction through iterative and incremental working. Regular demos and feedback cycles will help ensure that customers’ and other stakeholders’ needs and expectations are understood, with the co-creation of measurable value as the end goal.
- Measure value. Ensure that the increase in value creation is quantifiable and that ‘before’, ‘during’ and ‘after’ measurements are recorded.
Strategic agility may not seem important to some organizations, especially if they are in an arena that does not seem to be changing very rapidly. But if your field has not already been affected by disruption, it is only a matter of time before it is. And the pace of change will catch up very quickly.
4. Strategy and organizational culture
Strategy and organizational culture
If addressed continually, the AgileSHIFT practices will allow an organization to adapt to the changing business context. However, they must go hand in hand with an appropriate organizational culture that supports a transformational mindset underpinned by the AgileSHIFT principles. Those involved in defining the organizational strategy and ensuring that it is executed must take organizational culture into account; strategy requires a culture shift in order to succeed.
There are three things to keep in mind:
- Every organization already has a culture that is defined by the actions of all the individuals in it. In order to change the culture, firstly identify and understand what it looks like today.
- Some organizations have multiple cultures. The organization may be a mix of separate companies, it could be geographically spread or may have historic reasons for these differences. This can lead to people in key roles having a hard time knowing how to make the right decision across the organization. It is important to understand where and why the culture varies.
- The existing culture is difficult to transform. People are creatures of habit and do not change easily. Senior management needs to lead by example to develop an environment where everybody adds value4, and middle managers must be a bridge between the delivery teams and the transformational leadership.
It may seem that start-ups have an advantage over other types of organizations when it comes to defining a consistent organizational culture, because they can define their values from the beginning and, most importantly, they can hire the people who match that cultural profile. However, if a start-up begins to grow rapidly, it needs to make very expedient hiring decisions. This can result in the original culture starting to erode and growing start-ups will eventually face the same challenges as other, more mature, organizations.
How to embrace a culture of Agility
Many leaders will say they want to foster a culture of innovation where staff embrace risk and create breakthrough results so that the organization can be as agile as possible. But many leaders are not willing to commit to what is required: a high level of trust in their employees and a potential loosening of centralized control. So how can organizations create a culture that embraces risk? They need to start by understanding how people respond to risk as individuals.
Most people do not take risks unless they have the right combination of opportunity and incentives. They operate in protection mode and do not venture outside the boundaries of their role too easily. Employees are more likely to embrace risk if they are in an organizational culture that regularly rewards new ways of thinking and encourages people to get out of their comfort zone. Here are the three most important things that organizations need to do to encourage risk-taking:
- Grant permission to challenge the status quo5. This is the single most valuable way to encourage greater risk-taking or embracing failure. If staff think they will be criticized for their initiatives, they will not take risks. Managers need to grant permission to their staff to offer new ideas, and co-workers need to encourage their team mates when they try new approaches.
- Establish a no-blame culture. If you give people permission to take risks but penalize them for not achieving a specific goal in the process, you send a strong message that staff should avoid risk-taking. Encourage staff who have taken risks by celebrating their attempts, and then help them understand their mistakes and show what they can do differently next time.
- Focus on the outcomes, not the processes. Concentrate on clearly communicating the problems that need to be solved and the outcomes that need to be generated rather than telling staff what steps they need to follow. Let staff take necessary risks to accomplish those goals. If managers focus too much on the process, their staff will automatically revert to their comfort zone.
Remember: creating a culture of risk-taking is a journey, not a destination. There will likely never be a perfect balance between taking enough risks to foster innovation and taking so many risks that the organization’s success is endangered. If you encourage an environment of granting permission, embracing failure and focusing on outcomes you will lay the groundwork for a culture that can continually work to optimize its ability to innovate.
Leaders who are trying to build strategically agile organizations often want staff to follow a set of practices that will make them more innovative, but they often struggle to follow those practices themselves. If leaders want a strategically agile organization, they must be as adaptive as the staff that they are trying to encourage. In AgileSHIFT this is described as the alignment between running the organization (RTO) and changing the organization (CTO); leaders must do both.
Figure 4.1 Integrating RTO and CTO, A guide to AgileSHIFT (2018) AXELOS
4 This is one of the AgileSHIFT principles, a set of fundamental rules that guide an organization in all circumstances. For more information, see A guide to AgileSHIFT, section 7
5 This is one of the AgileSHIFT principles. For more information, see A guide to AgileSHIFT, section
5. Strategy and purpose
Strategy and purpose
In addition to agile practices and an appropriate organizational culture, organizations that want their strategy to succeed need a purpose that all their employees can follow. That may sound like a very sentimental assertion, but it is actually a logical and rational requirement for strategically agile organizations. As new opportunities appear, decision-makers throughout the organization need to be empowered to assess what fits the organization’s portfolio of assets and initiatives so they can make decisions quickly and independently. That is why a strategically agile organization, one that is designed to continually adapt to a constantly changing world, must have a clear purpose.
How is purpose connected to enterprise agility? In every way: the organization’s purpose shapes its strategy. When an organization clearly defines its purpose in the world and in its markets, its strategy improves and becomes more agile. A stated purpose gives everyone in the organization the same information about what success looks like.
There are three components to an organization’s purpose: a vision of the world you want to see, a mission that defines the organization’s goals, and a set of core values that define the actions to reach those goals. Think of these as anchors that root the organization in a set of common characteristics to help it stay on course when it is buffeted by the winds of change.
An organization’s anchor is its vision. A vision statement is ‘a concise, motivational description of where an organization aspires to be, through a process of strategic transformation, in the mid- to long-term future6. What kind of world does your organization want to help create? It could be anything from a world where you have made your customers ecstatically happy to a world where you have created a lasting change on a global scale. The vision should be so big it is virtually unattainable, because this acts as an inspiration and stretch for the organization. To a plumbing company it might be a world where everyone has access to clean running water; to a software company it could be to help every small business manage its finances with its product to optimize revenue and reduce costs.
An organization’s mission is finding the solution to the problem it is working to solve. A mission should be something that is achievable: a plumber might want to solve every customer’s problem in a single visit and a software company might hope to fill a gap in the market by creating a new product. Staff in the organization need to feel that they can attain the mission if they work hard enough and smart enough.
The vision and mission help to define the organization’s core values. These values need to describe the kinds of actions that staff in the organization will take as they are helping the organization to reach its strategic goals. These values could include ‘treating everyone fairly’ or ‘placing the customer first’. The organization should only have up to ten values, because everyone in the organization needs to be able to remember them. Each value statement needs to be specific in terms of the kinds of behaviours that are tolerated and supported (and, by inference, those that are not).
Without a clearly stated purpose it will be increasingly difficult to hire, retain and develop the staff your organization needs to be successful, especially millennials who are increasingly seeking to work for organizations that have a clear purpose.
6 A guide to AgileSHIFT, glossary definition, p. 99
6. Strategy and alignment
Strategy and alignment
Even if you think you have a near perfect strategy, remember that it must be executed by your staff: you need to have buy-in from employees to achieve the organization’s strategic goals. Alignment is the process of linking together the organization’s strategic goals with the goals of each individual in the organization.
Every single worker needs to understand which of the strategic goals they are supporting and how their own activities help the organization succeed. There are myriads of approaches for aligning organizations around strategic goals and most of them advise the following:
- The organization must communicate its strategy to every single worker, with no exceptions. Any member of staff must be able to list the organization’s strategic goals.
- Each division, department and team must work towards one or more of the strategic goals and they need to understand how their work contributes to the bigger picture.
- Every individual needs to have clear objectives that are tied into the missions and goals of the team and the organization7.
That probably looks like a very top-down hierarchical process with high-level goals defined by organizational leaders and a linear set of connections down to the employees. But that is where agile processes come in. The most strategically agile part of any organization is a small team of people who are empowered to deliver great results. That is why strategic goals need to focus on the problems to be solved and the results to be generated, not on the process with which they will be achieved. An organization can empower its employees by giving them a clear idea of what success looks like and then getting out of their way while they work towards it. Think of alignment as a loose, flexible and invisible network of goals linking the entire organization and empowering everyone in the organization to contribute to its success.
In terms of how this reflects on the various levels of the organization, an agile environment has:
- individuals who are empowered to make decisions about how to support the organization’s strategic goals in an environment where everybody adds value8
- teams that can identify a customer need or problem and that are focused on the co-creation of customer value9
- managers who guide, coach and give strategic advice, but do not specify the exact steps that staff need to take.
People accomplish far more when they understand their own unique skills and have clear personal goals within the organization. When every individual’s work supports the organization’s strategic vision and direction, the organization is efficiently developing an environment where everybody adds value.
7 This is one of the elements of AgileSHIFT’s effective teams. For more information, see A guide to AgileSHIFT, section 9.1.3
8 This is one of the AgileSHIFT principles. For more information, see A guide to AgileSHIFT, section 7
9 This is one of the AgileSHIFT principles. Ibid.
7. Are you achieving your strategic goals?
Are you achieving your strategic goals?
Once you have spent time implementing the AgileSHIFT practices and embedding the AgileSHIFT principles outlined in this paper, you need to know what it looks like when you are getting close to becoming an adaptive and agile organization. Below is a set of measures to help you recognize early signs that your organization is becoming more strategically agile:
- You start to see major opportunities in your market that you would have previously missed.
- You are able to rapidly take advantage of major opportunities that you wouldn’t have responded to before.
- You are attracting and retaining the talented staff you need to make your strategy work and you are including them in the strategic planning process.
- You can stop staff at any time to ask them if they know the organization’s strategy and they list the top goals before you have even finished the question. Those same staff not only know the organization’s strategic goals, they know exactly how their own work directly supports those goals.
- You have strong evidence that the organization has abandoned initiatives that were failing and has moved resources towards innovating on new opportunities.
- If a competitor attacks you in one of your core markets, you respond so quickly and so effectively that they are boxed out of the market.
In addition, there are three possible ways for maintaining strategic agility in the long-term:
- Involve front-line staff and new members of staff in the strategy development process. Involving them in the process will aid, inform and enrich the overall strategy development process.
- Ensure there are regular integration points for the organization to synchronize on strategy. Waiting too long to implement new strategic goals can impact stakeholders in key parts of the organization.
- Re-energize people across the organization by helping them to continually realign their personal and team goals with the goals of the organization.
In the current context of disruptors, the increasing pace of change and technological advances, organizations need to change their approach to strategy in order to stay competitive. They must keep in mind that, unlike in the past, there is no longer one perfect static state to work towards, but that their strategy should be agile, adaptable and tailorable. An organization can build strategic agility through adopting AgileSHIFT practices, creating an appropriate organizational culture, getting clear on its purpose and aligning its goals.
Strategic agility is challenging because it requires continuous adaptation. Like any long-term programme, it can start to feel like strategy is a never-ending process, which of course it is. You may develop strategy development fatigue when it feels like you have been through the same sequence repeatedly. One way to avoid this is to incorporate alternating rhythms into the strategy development process, for example, by building in periods that are focused more on incremental changes in strategy and alternating these with periods where deeper strategy analysis over the long-term is performed. It is also important to continually update the metrics you use to measure the effectiveness of the agile strategies you have developed. You will need a combination of short-term and long-term analyses to know if you are helping your organization to reach its strategic goals. Make sure you also have a way to track the softer milestones of ongoing changes, such as organizational culture and breakthrough innovations, which cannot be recorded in a spreadsheet. In the bigger context, you need to engage every individual in order to create a culture of enterprise-wide agility and navigate confidently through a state of ongoing change.
9. About the author
About the author
Kuldip Sandhu is the Managing Director of Innovative Quality Solutions (IQS) and helps C-level executives to develop digital/IT Strategies on major transformation and change programmes. He has over 23 years’ experience in IT across public and private sectors internationally. His clients have included RBS, Citigroup, Saxo Bank, State Street, University of London International Academy, University of Cambridge, Durham University, Wakefield District Council, Coventry City Council, AIA, Aviva, Scottish Widows, EDF Trading, Bank of Tokyo Mitsubishi, First Data Corporation, Slaughter & May, Hogan Lovells, and ExCeL.