What agility actually means for your business

What is one of your main goals for this this year? To make this company agile enough to respond to industry challenges. This is one of the most common conversations that every turnaround professional is currently having with their clients.

But what does this mean?  To find the answers, McKinsey launched a Global Survey that reached 2 190 respondents across industries and geographies. The company wanted to go beyond the fluff, so it asked respondents what, if anything, their companies did in practice to advance agility, and what hard numbers they achieved regarding business impact.

Objective measuring

The McKinsey Survey points out that their organizations fell into two broad groups.

The first group consisted of organizations with no agile transformation efforts in process; the second group consisted of organizations on the move, pursuing, or having recently completed an agile transformation beyond a few individual teams (see sidebar “Organizations are on the move”). Two-thirds of those pursuing a transformation, however, said that their organizations were just treading water, taking no decisive action, and consequently achieving little or no business impact.

Within the second group, McKinsey identified a select set of organizations (represented by 10% of the entire sample) that were driving highly successful agile transformations. They were embracing agility at scale to create and capture value instead of treating agile as team-level experiments in discrete departments. This means reimagining the entire organization as a network of high-performing teams, each going after clear, end-to-end business-oriented outcomes, and possessing all of the skills needed to deliver, such as a bank boosting the performance of customer journeys; a retailer analyzing turns and earns of product categories; a mining company reviewing production- and safety-process steps; an oil and gas company planning wells; a machinery player undertaking full product management, from R&D to go-to-market; or a teleoperator simplifying products. The teams are essentially interconnected mini businesses, obsessed with creating value rather than just delivering functional tasks.

Total transformation

However, agility at scale goes beyond adding more agile teams and team-level practices. The McKinsey survey points out that the broader operating model, the connective tissue between and across the teams, also needs to be transformed. The organizations driving highly successful agile transformations made sure to do that by building an effective, stable backbone. This means optimizing the full operating model across strategy, structures, processes, people, and technology by going after flat and fluid structures built around high-performing cross-functional teams, instituting more frequent prioritization and resource-allocation processes, building a culture that enables psychological safety, and decoupling technology stacks.

Enterprise agility is thus a paradigm shift away from multilayered reporting structures, rigid annual budgeting, compliance-oriented culture, separation of business and technology, and other traits dominating organizations for the past hundred years. If this is true, and not just hype, a discontinuity of this magnitude should provide an opportunity for organizations to turn their operating models into a competitive advantage—as did early adopters of lean in the 1990s.

While individual case studies and agile success stories have been plentiful, having quantifiable results and a larger sample allowed us to go beyond anecdotes for the first time. Two major findings emerged.

Agility results in a step change in performance and makes it possible to overtake born-agile organizations.

The survey points out that highly successful agile transformations typically delivered around 30 percent gains in efficiency, customer satisfaction, employee engagement, and operational performance; made the organization five to ten times faster; and turbocharged innovation. While conventional wisdom sometimes sees these targets as contradictory (for example, efficiency at the cost of employee engagement), our results show otherwise. The respondents, on average, reported gains across four dimensions of performance, out of seven included in the survey.

This step change also showed up as a competitive advantage. Organizations that achieved a highly successful agile transformation had a three times higher chance of becoming a top-quartile performer among peers than those who had not transformed. And they also overtook the born-agile organizations: they not only had a higher chance of becoming a top-quartile performer, but also had a greater chance of achieving a more mature operating model across all dimensions.

Instead of waiting for agility to happen bottom-up, organization leaders need to take charge

The survey asked respondents in detail what actions they took before and during their agile transformations. Our analysis then compared the close to 300 highly successful transformations with the 580 less successful ones to distill what they did differently. Four elements stood out in our logistic regression model, and together these formed a recipe that raises the chance of success from an average of 30% to 75%:

• Ensure the top team gets it. Before you start, spend sufficient time up front to ensure the top team masters the concepts and can lead the change;
• Be intentional and go after value. Be clear on how agile creates value and have the top team lead the organization to pursue it in a structured manner instead of relying on bottom-up piloting and waiting for agility at scale to emerge;
• Go beyond agile teams to build connective tissue. In the scope of your transformation, rewire the entire operating model (strategy, structure, process, people, and tech) to make sure it supports and connects rather than holds back the team; and
• Maintain a high speed and use front-runners. Complete the main phase of the agile transformation in less than 18 months to preserve momentum and avoid exhausting the organization; go even faster in selected front-runner areas to demonstrate commitment and early results.

Done right, agility enables a step change in performance and puts you in a position to surpass even born-agile organizations. Highly successful agile transformations delivered significant performance improvement.

Your organization as a network

The survey points out that the essence of an agile transformation is reimagining the organization as a network of high-performing teams, supported by an effective, stable backbone of strategy, structure, processes, people, and technology. Imagine working on such a team—having the right people working together, all with different capabilities, enables organizations to move with unprecedented speed. This can increase customer satisfaction and boost operational performance. It can also provide a safe place to experiment with the authority and funds to do so, helping organizations drive more innovation. Employees will feel more engaged and enthused by a clear and common purpose, the autonomy to make decisions, and an ability to develop mastery in their craft. On the organization level, agile emphasizes prioritization and reduces overhead roles, which leads to more efficiency.

Does agility work in practice? The survey points out that pioneers in the field have proved that significant impact is possible, and we have documented many such examples. With this research we wanted to provide hard facts, so we asked each organization that underwent a transformation about the quantifiable improvements they achieved. Exhibit 1 shows that highly successful agile transformations achieved a step change in performance and greater impact across multiple dimensions than the less successful transformations.

There are plenty of useful tips in the survey that South African companies can apply to their business. Agility doesn’t only mean different things to different companies, it is different within different markets. Agility in the USA is different to agility in Europe. And agility in South Africa means something different altogether.

In a future article we will take a look at what highly successful transformation look like in practice.

Moses Singo is a Partner at Genesis Corporate Solutions and is a Junior Business Rescue Practitioner.