The way to business agility

Introduction

The quest for business Agility is akin to seeking the Holy Grail of modern organizations. However, unlike mythical quests, this journey does not end with a single find. It's a continuous effort, a shift in culture, and a change in mindset. A truly Agile organization breathes, evolves, and responds to its environment seamlessly.

This is the journey that we, Henri Hämäläinen and Mikko Korkala, have been navigating for years with a myriad of organizations in various stages of their transformation. Our experiences have been a rich tapestry of victories and lessons learned the hard way, and we're privileged to share these with you in this whitepaper.

In the following pages, we unpack the often invisible forces that catalyze or impede the path toward business Agility. We introduce you to the driving forces, both business and delivery efficiency-oriented, that steer organizations toward their intended goals. Yet, it is the counterforces, already entrenched in the organization, that we found to be pivotal and often underestimated. Beyond identifying these forces, we offer you a pragmatic blueprint—the 10 building blocks of business Agility. These principles, when implemented, can aid in dismantling counterforces and embedding Agility into your organization. We also address the most crucial yet overlooked aspect of any transformation—culture. Because in the end, true change comes when the professionals within an organization align their behaviors with the agreed change vision.

As you navigate through this whitepaper, we hope that you find not just understanding but an inspiration to confront the challenges and realize the true potential of business Agility.

1.1 Don't predict the future, anticipate it

One of the most important aspects and benefits of Agility is its ability to manage uncertainty, which can be defined as a lack of information. When a new project is initiated, it will often face significant uncertainty related to actual customer needs, existing market situation, technology landscape, etc. The larger the effort is, the longer it will take, resulting in an increase in uncertainty. This is about making a bet on what the future will look like. The Waterfall approach tried to eradicate all uncertainty from the effort, which is not only impossible but futile if we take management specialist Peter Drucker's word for it.

According to Mr. Drucker, there are two things we know about the future:

• It cannot be known

• It will be different from what exists today, and it will be also different from what we are now expecting it to be

Based on this, the future is more or less of a black box and our attempts to accurately foresee it will be fruitless due to its nature. But organizations still need a way to deal with this. Customers need to be satisfied by offering them a valuable product that serves their needs, organizations need to explore new opportunities, etc. All of this must happen in a world full of unknowns, meaning that while we cannot predict what will happen in the future, we must anticipate the future effects of events that have already irrevocably happened. Simply put, the outcomes of our actions are based on the decisions we make today.

This is where Agile ways of working are particularly suitable. Agile methods are iterative and incremental, which create a much shorter cadence for examining the state of the work and its impacts and therefore provide more frequent opportunities for adjusting the course if required. Whereas traditional development approaches made a single huge bet about the future, Agile methods place their bets in much smaller quantities. After each iteration, we can stop and analyze if we are going in the right direction and what can be learned from what was being done.

The end of an increment is a decision-making point that (with increased understanding and a bit less uncertainty) will help us make more solid decisions and anticipations about the next increment and the effort itself.

1.2 Agility creates a winning employee experience

It is finally time for the organization to recognize the fact that the people are its true asset that either makes or breaks an organization's success. Agility has been proven to positively contribute to people's engagement and job satisfaction. This, in turn, has a positive impact on the financial performance and outcomes of the organization. The main point is that engaged and happy employees are key success factors.

While intrinsic motivators vary, one of the most common motivators is decision-making autonomy. Agile methods promote the empowerment of employees by letting those with the best knowledge about the subject make decisions within agreed limits. This puts people throughout the organization front and center, giving them the mandate of owning their jobs and an opportunity to make a significant contribution to the organization. This, in turn, creates an acute sense of purpose, which is one of the most common intrinsic motivators.

While this has solid financial justifications, enabling Agility in the organization is also important in the context of the current labor market. Competition for professionals is fierce, and employee retention is paramount for organizations to succeed. For this reason, a winning employee experience is vital, and both Agile and Agility are excellent tools for this.

1.3 Companies need true Agility instead of Agile practices

For any ideology or practice to sink into an organization, it needs to create a competitive advantage. Companies are about business, in one way or another, and business success is the goal of any organizational phenomenon. The same is true for Agility, which must bring business success. But at the same time, business success can only be achieved with true Agility. This is a dilemma for many organizations. Business success depends on true Agility, which can only be achieved by understanding how Agility can help businesses.

As we discussed, Agility is about managing uncertainty and to achieve this, we need to accept that uncertainty exists and we have to live with it. This often requires a radical shift in how we see, e.g., planning and plans. Planning is still important, but companies must understand that plans are always flawed. Instead of seeing them as absolutely correct representations, they always reflect their makers' best understanding at the given moment. True Agility is, therefore, not about Agile itself. Organizations can use all the Agile practices in the world and use them flawlessly but lack Agility if they are unwilling to change with the world around them.

In the upcoming chapter, we will discuss the forces affecting Agility. We present the driving forces for Agility and the counterforces holding Agility back in an organization.

2. The driving forces for Agility: Business and efficiency

All organizations, both in the public and private sectors, operate in a business environment. Their objective is to serve their intended customers and markets effectively and efficiently. This suggests there are two distinct forces in play when considering Agility: business drivers and delivery efficiency.

Why does business matter?

First, a note about one of the most common business-driven rationales behind adopting Agility: cost efficiency. Here, the goal is often seen as the means to reduce costs by achieving the outcomes faster and more efficiently and to increase the efficiency of utilizing organizations' professionals and resources. In the context of Agile development, this is counterintuitive. The aim of an Agile organization is not to maximize its utilization rates, for example. Instead, an Agile organization needs to be aligned to focus on creating the most valuable outcomes at any given time. This alignment includes organizations' resources and personnel as well. Therefore, it is more appropriate to discuss cost-effectiveness as a business driver for Agility.

From this, we can land on defining Business Agility. As with Agility, there is no uniformly agreed definition of business Agility. We define it as the "organization's ability to align its financial and operational resources to meet the needs of its current and future business environment". What this means is that the organization needs to be able to sustain and develop its current business, and respond to emerging market changes while also being able to anticipate the future scenarios of what will happen there. As with Agility in general, business Agility is as much about the organization being nimble enough to respond fast as being vigilant about what will likely happen.

2.1 Business-driven forces

The business logic behind the change needs to be clear for the organization. This helps to identify and focus on the essential challenges the organization needs to resolve to achieve successful results from their change initiative. It is also worth noting that the driving business forces change over time, as will their relative importance against each other. Therefore, these business forces do not exclude each other. Organizations will likely recognize several business forces that are important.

Main business-driven forces for adopting Agility into an organization are:

• Improved customer experience

• Cost-effectiveness

• Increased time to market

• Seizing new opportunities

Business-driven forces are about building an improved market position by building the right things for the market efficiently. The market is always volatile and uncertain, and the future can not be predicted. Agility is not just about managing uncertainty. It is about building resilience in the organization to compete in the constantly changing environment.

When analyzing the big picture, uncertainty is about accepting unknowns. Customers can't tell what they need, and only the market can tell what will succeed. There are always uncertainties in all strategies and business opportunities. This is something every organization must understand—requiring a willingness to change when information backs up the need for it.

Let's take a closer look at the business-driven forces to understand how Agility could help in achieving those.

2.2 Improved customer experience

Customer experience is at the core of every successful business. Products and services that fulfill the needs of customers better will have a significant impact on customer retention or the ability to gain new customers.

Multiple studies have shown that the customer experience has an enormous effect on business performance. For example:

• 68% of consumers say they are willing to pay more for products and services from a brand known to offer good customer service experiences

• 89% of consumers are more likely to make another purchase after a positive customer service experience

• Increasing customer retention rates by just 5% can increase profits by between 25% and 95%

It is easy to agree that customer experience is one of the most important business forces driving the change to Agility.

2.3 Cost-effectiveness

Cost-effectiveness is an easy-to-understand concept at a high level. Every company wants to optimize and align the organization's resources to enable the creation of the best possible value for the customers and users with limited resources.

Even though the concept is easy to understand, it is very difficult to measure or even realize how a cost-effective organization is making products or services with digital assets. The nature of digital assets is that multiplying the assets is free, and delivery of the service is usually cheap, meaning the main costs come from creating the assets themselves. Measuring something that is always done differently and trying to estimate how cost-effective that is, is very difficult. It is always speculative whether something is efficient because the thing will never be done the same way again.

In any case, cost-effectiveness is an important business driver. Every organization wants to be effective with resources, and Agility is a great tool for driving toward better usage of resources. Flexible resourcing, shorter budgeting cycles, increased self-organization, and focus on outcomes instead of outputs are among the Agile practices and principles that aim towards cost efficiency.

2.4 Faster time to market

Getting to the market at the right time is essential for many businesses. Sometimes, products or services are on the market too early, but more often, too late. The time between initiating the idea to releasing the outcome to the markets is called time to market. The organization can measure this to realize how long, on average, it takes from a need or an idea to get to the market and start gaining revenue and profit.

Time to market is an important business driver for any organization. The goal is to provide products to the market faster than the organization is currently capable of for faster Return on Investment, as a response to competition, or to learn about the customer needs and the market environment itself.

Agility with cyclical learning, fast feedback, and focus on customer value can be seen as a good tool to drive time to market forward.

2.5 Seizing new opportunities

Every product, every service, and every technology will eventually be the one that will endanger the existence of the organization's business. Everything will become outdated and, therefore, a burden to the organization. Every business needs to constantly reinvent itself and seize new opportunities within the current market or a new environment.

Seizing new opportunities is an important force driving business forward. The goal is to provide new products fast to the market, to explore new markets, or to gain new customers. There is constantly a need to change the business to fit the existing market conditions.

Agility is seen as a powerful tool for this purpose. Fast experimentation, short learning cycles, and a culture of pivoting are built into Agility, so seizing new opportunities can be one of the key driving forces to business Agility.

3.1 Flow efficiency

One of the key ideas in Agility is to concentrate on value creation rather than resource optimization. This relates closely to the idea of concentrating on outcomes rather than outputs. It is not important that everyone is always busy, but the key is that they can help each other when needed. Value creation in organizations is often so complex that required interactions cannot be anticipated or planned. So the focus instead needs to be on Flow efficiency.

One effective way to focus on Flow efficiency is to focus on the work in progress. The limit the Work In Progress (WIP) principle insists that the organization takes a value-driven instead of a quantity-driven approach to the work it conducts. This requires active prioritization of work items and leads to a limited set of assets to be developed, delivered, and maintained, improving both the focus and flow of work.

Move from sub-optimization to total optimization. In order to improve the organization, it is essential that it needs to be seen as a system in which individual parts have an impact on others. The changes in some parts of it eventually cascade to the rest of the organization. Since the organization is a system of interconnected parts, optimization should be done on a system level instead of sub-optimizing certain aspects of an organization.

3.2 Queue efficiency

Product organizations have three queues: Backlogs, non-released work, and non-integrated work. These queues will affect queue efficiency but are also closely connected to flow efficiency. These two forces, despite being closely connected, are separate. It is also possible to have an efficient flow but poor queue management and vice-versa.

Ideally, organizations should drive for the no-queue approach, but that becomes impossible as the information and assets need to be stored somewhere. Needs and ideas almost always arise when there is something under development or production, with parts of the solutions becoming ready without the next party being able to continue with their implementation. This implies the ideas, needs, and assets need to be stored in backlogs (i.e., a queue) where they can be taken for further development. If there weren't any queues, the organization could only produce one idea, need, or a thing at a time, which would be a waste of resources. It is much more efficient to work on a few (but not too many) ideas and needs at the same time.

Being efficient with queues is important. Backlogs shouldn't grow too large, integrations should happen as soon as possible, and work should be released as soon as it is feasible. Managing queues is a lot about limiting the work-in-progress throughout different phases. Part of being efficient with queues is also about planning them well. Queues in an organization come primarily from the organizational structure. Therefore, an important aspect of product organization design is to think through both the backlogs and team structures to keep the amount of queues as small as possible. The more queues you have, the longer you'll be queuing.

3.3 Resource efficiency

The resources we are talking about in this context consist of people, digital and physical assets. Long story short, resource efficiency is the underlying force of all businesses as resources should deliver value as efficiently as possible. But resource efficiency is not always easy to execute, as it needs to be considered from a longer timeframe to make long lasting business success.

All the forces of delivery efficiency are linked together. Having an efficient flow and just enough content in the queues needs well thought resource usage. For this reason, resource efficiency can not work in a vacuum. Additionally, Resource efficiency means very different things in regard to what the product or the service of the organization is. In any case, organizations want to get all the value possible from the existing resources.

Agility is often taken as something to improve resource efficiency. It is a common misconception that by using Agile methods, resource usage will be maximized. However, aiming for high resource usage can cause poor Resource efficiency if approached this way. This may be counter-intuitive, yes, but the most efficient use of resources isn't about using resources the most. It is the outcomes that matter, not the outputs.

3.4 Sufficient capabilities

To operate efficiently and effectively, organizations need appropriate frameworks, practices, tools, and know-how to conduct the work. These range from the individual to the whole organization. In addition, different roles, goals, and decision-making authorities require careful analysis. On the practical side, automating everything that can be automated is an example of increasing efficiency and effectiveness.

Sufficient capabilities are needed for delivery efficiency. Agility and Agile practices are seen as a way to create sufficient capabilities to operate effectively, with some frameworks or toolsets bringing at least the baseline of the capabilities to the organization to deliver efficiently.

Understanding both business and delivery forces is important in the context of business Agility. The organization cannot truly align its resources and utilize them effectively and efficiently without explicitly considering what drives the change externally and how well the delivery forces are aligned with the organization's aims. On the other hand, the very definition of business Agility insists we take both dimensions into account and are under constant evaluation and improvement.

5. Identifying counterforces

Identifying the counterforces is an exercise for revealing aspects that need to be addressed. This requires a systematic, thorough examination of the organization, its practices, structures, mindsets, tools, management, and leadership approaches, the flow of work, delivery mechanisms, sales and marketing, Portfolio management, Idea management, internal competences, and roles. Simply, understanding the current state of the organization requires that it is studied and analyzed as a whole in a "360-degree" fashion. Different focus groups, semi-structured and open interviews with participants widely representing the organizational demography, workshops focusing on dedicated topics such as tooling or portfolio management, and analysis of relevant materials, such as development value streams and life cycle models are well-tested tools for gaining a solid understanding on the current state of the organization.

The outcomes of this analysis can be grouped into Themes that represent the larger areas of improvement. Each of these themes will contain one or several improvement areas which contain one or more concrete improvement items. In Agile terms, this classification is similar to the Epic-feature story structure. Our experience suggests there are between two to four themes and 10 to 15 valuable and impactful improvement areas that can be found after analyzing the organization and its current state.

One might ask why bother doing a comprehensive, lengthy, and costly analysis when one could just simply look at the counterforces opposing the company's business driver and start looking if they exist in one's company, and tackle them accordingly. This is indeed a valid question, and the answer is twofold.

First, anchoring is a psychological phenomenon that gives disproportionate weight to the first information a person receives, which guides our thinking and subsequent judgments and thoughts. In practice, this shows by focusing on the things in the organization that stand in the way of achieving the business driver and neglecting everything else. Anchoring is a formidable force because it is a subconscious and automatic reaction that can never be eliminated from our decision-making and thinking. Luckily, we have tools to mitigate its effects. First, we recognize that anchoring affects our decision-making and thinking. To counter this, the analysis process, data collection, and data need to be actively discussed and challenged by the people involved in studying the organization. If the analysis is conducted by an external consultancy, it would be a viable option not to disclose the business forces driving the transformation.

The second part of the answer is that instead of sub-optimization, an organization should be optimized as a whole to ensure the best possible end results. While addressing a particular area or aspect of an organization results in improving it, the results into overall performance are minute and sometimes even counterproductive. In the latter case, improvements on a particular area can create unanticipated and detrimental consequences on other parts of the organization or a value stream. A more practical example would be a removed bottleneck from a particular part of the value stream emerging unexpectedly on another part of it, creating major challenges. As discussed earlier, moving from sub-optimization to total optimization is fundamentally important when changing the ways organizations operate.

The following section sheds more light on this.

5.1 Primary and secondary counterforces

When identifying counterforces, they can be either primary or secondary in the context of a particular business driver. The earlier discussion about business and delivery efficiency drivers and their counterforces listed the primary counterforces. While these are the most pressing obstacles, they are not necessarily the only ones found in the analysis. Consider the following example:

Your organization aims to improve its customer experience in order to gain additional paying customers. The analysis reveals that there is defective external awareness considering customer needs. This is one of the primary counterforces in the context of Improved Customer Experience. Your analysis also reveals that there are major challenges with Excessive Portfolio Complexity as well. This is a primary counterforce regarding Improved customer experience. These are the challenges you absolutely must overcome to reach your goal. In addition to these, the analysis also reveals Prioritizing for immediate gains over long-term success, tools and value flow are not in sync and competence gap in leading software business as prevailing counterforces. In the context of improved customer experience, these are secondary counterforces. They do not directly oppose achieving the business driver but are nevertheless important aspects to be addressed if the organization wants to improve its operations in a comprehensive manner.

Leaving the secondary counterforces unaddressed not just sustains these challenges and keeps the organization's performance and effectiveness at suboptimal levels, but might ultimately create additional problems. What if we continue to prioritize just immediate gains more strongly to sustain a good customer experience? Will this be in line with the product's vision and strategy? How can we be sure if this approach does not derail the product in the long run? How will this product retain its users and maintain its good customer experience 2 years from now?

As this example shows, it is paramount that we consider the secondary counterforces as well. This importance does not rise just due to organizations' sub-optimal performance, but also due to risks and impacts that might emerge while addressing the primary forces alone without thoughtful consideration of the whole. The most important lesson for an organization transitioning to business Agility is to focus on the whole.

5.2 Counterforces are stronger than business forces

Business forces are real and strong forces driven by the management. For example, they are essentially aspirations the organization wants to achieve. Instead of seeing business forces merely as target states, which they also are, they are real forces of aligning the organization so that the desired business outcomes will be achieved.

The nature of a business force as an aligning force is important to understand. It implies that a business force is never a force that enables the change and this will make it a weaker force than the counterforces.

While business forces are the initiating and aligning elements, the change is enabled by addressing the corresponding counterforces. Counterforces are exceptionally strong since they represent the current state and culture of the organization. Compared to business forces, they are forces at play in any organization.

Having counterforces in an organization doesn't necessarily mean they are bad for business or Delivery efficiency, but that they are strong existing forces that drive an organization to a certain direction and make it operate the way it operates. In this context we are talking about organizational change, so counterforces will affect the organization's ability to change. Since the organization has formed to its current existence sometimes over a significant period of time, its current ways of working, structures, practices, etc. have become established and solidified. Simply put, the existing counterforces are both a part and a result of the organization's evolution and culture.

Counterforces are exceptionally strong since they represent the current state and culture of the organization. Compared to business forces, they are real forces at play in any organization.

5.3 Both sides of the story

When organizations take the steps towards Agility or aim to improve their Agile approach, their focus is often on operational aspects. Implementing Agile frameworks, getting the backlogs in shape, re-evaluating roles and responsibilities, selecting and evaluating tools, etc. are examples of starting points for embarking on the journey towards Agility. While these are perfectly valid and important aspects of an Agile organization, they also need to consider what is their main business driver behind this transformation and why it is essential for the organization. Having this set up, everyone in the organization has a clear understanding on why the transition is being done. If this is not done, Agile transformation may likely remain as yet another pointless exercise done for the sake of change itself.

Delivery efficiency is an equally important factor in successful transformation. The four principles of delivery efficiency will help align the organization operatively so that it can best respond to the requirements set by the main business driver. Both the business drivers and the principles of delivery efficiency are the key components of business Agility, which is essential for thriving in a turbulent environment.

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