What Is an Agile Organization?
An agile organization is a human-centric organization that responds and adapts quickly to changes in the marketplace or environment. The agile organization focuses on satisfying its customers' needs through the continuous delivery of valuable products.
Why Do You Need an Agile Organizational Structure?
Agility is no longer a luxury. It's a necessity. Nowadays, most businesses operate in a so-called VUCA market (volatile, uncertain, complex, ambiguous) where requirements change frequently. What customers might have deemed an exciting product functionality yesterday can easily turn into just a satisfier today. Furthermore, emerging startups quickly develop innovations, making it harder for traditional organizations to keep up with their pace. As a result, those organizations risk becoming obsolete and ultimately uncompetitive on the market.
An example is McKinsey's study based on the S&P 500 Index, which found that big companies' average lifespan fell from 61 years in 1958 to about 18 years in 2011. Furthermore, projections show a considerable risk for 75% of companies currently quoted on the S&P 500 to have disappeared by 2027.
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To prevent that, many of them have already turned to agile practices and applied them on the team level, usually looking to improve product development efficiency. However, ensuring long-term business survivability asks for a scaling agile approach where the entire company adopts agile ways of working, not only separate parts of it. The idea is to enable it to more quickly and effectively adapt to a changing environment, continuously improve, innovate at a faster rate, and thus better meet customer requirements. In reality, this is what can be defined as organizational agility.
To achieve it, there needs to be alignment between all organizational levels, faster communication, more frequent releases of value, and a way to ensure that the right thing is worked on at the right time.
What Are the 8 Key Characteristics of Agile Organizations?
While researchers may have varied perspectives on the main characteristics of an agile organization, their insights can generally be categorized into seven main groups.
- A "North star" / shared purpose and vision
- Customer-centric approach, ensuring clarity of intent
- Empowering leadership styles and a "people first" culture
- Encouraging experimentation, rapid iteration, decision-making, and learning.
- Focus on value-based delivery
- Engaged culture
- Next-generation enabling technologies
- Flexible structures/networks of empowered teams
1. A "North-star" / Shared Purpose and Vision
Research suggests that successful agile organizations establish a "North star" vision, a shared purpose and vision that serves as a guiding light for all activities. This clear direction not only aligns teams and employees toward common goals but also inspires them to work collaboratively toward a shared vision of success. By defining a strong vision, agile organizations can navigate uncertainties and challenges with clarity and purpose, driving alignment and motivation across the whole organization.
Research made by Gallup discovered that purpose is one of the key drivers of employee engagement. People want purpose and meaning from their work.
2. Customer-Centric Approach, Ensuring Clarity of Intent
Agile organizations prioritize a customer-centric approach, ensuring that every decision and action is guided by a deep understanding of customer needs and preferences. By maintaining clarity of intent and alignment with customer expectations, organizations can deliver products and services that truly resonate with their target audience. This customer-focused mindset fosters trust, loyalty, and satisfaction, driving sustained success in competitive markets where customer experience is paramount.
In fact, McKinsey reports that customer-centric organizations achieve twice the revenue growth compared to their competitors.
3. Empowering Leadership Styles and a "People First" Culture
Empowering leadership styles and fostering a "people first" culture are crucial for successful agile organizations. Leaders who prioritize the well-being and growth of their teams create environments where individuals feel valued, supported, and empowered to contribute their best work. By promoting autonomy, collaboration, and continuous learning, leaders inspire trust and confidence, unleashing the full potential of their teams to drive innovation and excellence.
Indeed, the State of Agile Culture report revealed that such a culture can increase commercial performance by 277%.
4. Encouraging Experimentation, Rapid Iteration, Decision-Making, and Learning
It is not a secret that agile organizations embrace a culture of experimentation, rapid iteration, and continuous learning, according to research findings. By encouraging teams to take calculated risks, experiment with new ideas, and iterate quickly based on feedback, agile organizations foster a culture of innovation and adaptability. This iterative approach to decision-making and learning enables organizations to respond rapidly to changing market dynamics, seize new opportunities, and stay ahead of the competition.
The State of Agile Culture reports that encouraging experimentation is the most important leadership quality for agile organizations.
5. Focus on Value-Based Delivery
Research indicates that agile organizations prioritize value-based delivery, striving to deliver tangible value to customers and stakeholders with each iteration. By focusing on delivering features and functionalities that directly address customer needs and generate measurable value, agile organizations maximize return on investment and drive sustainable business growth. This value-driven approach enables organizations to prioritize efforts, allocate resources effectively, and optimize outcomes for a wide range of stakeholders (for example, employees, investors, partners, and communities).
The 6th Business Agility Report shows that organizations categorized as "high-performance" excel at relentless improvement and value streams.
6. Engaged Culture
Research studies have highlighted that agile organizations cultivate an engaged culture characterized by collaboration, trust, and transparency. By fostering a culture where individuals feel empowered to voice their ideas, share feedback openly, and collaborate across teams and departments, agile organizations create environments where innovation thrives and performance flourishes. This engaged culture not only enhances employee satisfaction and retention but also fosters a sense of belonging and purpose, driving collective success.
For example, The State of Agile Culture Report shows that engaged culture creates higher levels of psychological safety while cultivating 'learning organizations'.
7. Next-Generation Enabling Technologies
Researches underscore the importance of leveraging next-generation enabling technologies within agile organizations. By embracing cutting-edge tools and platforms that facilitate collaboration, automation, and data-driven decision-making, Aaile organizations can streamline processes, enhance productivity, and accelerate innovation. These next-generation technologies empower teams to work more efficiently, adapt to change more effectively and deliver value to customers with greater speed and precision.
A PWC study shows that adopting a modern technology architecture foundation enabled companies to innovate, develop, and scale with speed.
8. Flexible Structures / Networks of Empowered Teams
According to research findings, agile organizations adopt flexible structures, such as networks of empowered teams. By organizing teams around specific objectives or projects and granting them autonomy to make decisions and take ownership of their work, organizations foster agility and responsiveness to change. This flexible structure enables organizations to adapt quickly to evolving priorities, allocate resources dynamically, and optimize collaboration and communication across teams and departments.
Another popular observation supporting the above is the kanban service-oriented strategy. You should recognize that your company is a network of interdependent services and every organizational function (IT, customer support, etc.) is responsible for producing one. Visualizing all dependent services, you can put on display the entire value stream of the organization. This helps companies become more resilient on a global level.
What Are the Benefits of Adopting an Agile Organizational Model?
There are plenty of benefits you can experience from bringing agility into your organizational structure. There are quite a few agile companies' examples to prove that switching to this project management approach will make evolutionary changes to how your business operates.
Being able to adapt to changing environments and customer expectations is the most recognizable one. However, let us outline a few more:
- Increased collaboration across all organizational levels
- Better alignment to business objectives and daily activities
- Increased visibility in the process lifecycle
- Faster response and better customer service
- Improved time to market
- Recognized and delighted employees
Why Is Agile Important to Successful Organizations?
In stable, self-contained environments with clear cause-and-effect relationships, optimizing resources makes perfect sense. Something that works as a well-oiled machine. However, today's market conditions are far from stable. They're constantly shaken by disruptive forces and increasing complexity.
Over-optimization in stable environments can leave companies in paralysis when faced with disruption.
Take Nokia, for example. Once the largest worldwide vendor of mobile phones, Nokia crashed spectacularly, because of its failure to keep pace with changing technology and trends. Nokia was famous for introducing innovative hardware features to its phones. However, this approach somewhat blocked the company's ability to adapt to the rapidly evolving market.
At the end of the day, with the fast-changing market conditions and increasing customer demand, companies need to find ways to adapt to these changes to stay competitive. Agility ensures company survivability by promoting a culture of innovation, continuous improvement of processes, constant learning, empowered teams, and a safe culture of experimentation. Thus, Agile creates an environment where companies can quickly respond to rapidly changing market conditions and frequently deliver value to their customers.
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