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Agile working: Why organizations should integrate agile holistically

Cecilie Buhl

What does your organization need to survive in today’s marketplace? The short answer: Agile working. This means that you have to integrate agile practices in every aspect of your organization. Across all units. Even in the way you think about resources, like labor. You have to integrate agile working holistically. This is the message from a report by McKinsey that says you need to be agile at work in order to not only survive, but thrive, in today’s business world.
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Why?
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Because technological developments are disrupting every area of business. As a business executive, you’re required to adapt to these technological innovations, act on your feet, and be able to change direction overnight. To thrive in today’s marketplace, organizations need to be agile at work, by exhibiting agility and adaptability to stay competitive.

 

Agile working: Why organizations should integrate agile holistically


The most common misconception about agile working is that it’s only a phenomena of the IT department. According to research by Harvard Business Review, most managers believe their organizations practice “agile”. However, when digging a bit deeper, most of this agility was with the software engineers. Indeed, if you’re a CIO, you’ve most likely adopted agile SAFe practices and abandoned the old Waterfall methods.

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But if you’re a HR leader or a Corporate Procurement executive, there’s a fair chance you haven’t, according to the Harvard Business Review study. There’s little mention of “agile in HR” or “agile in procurement”. But agility is not just an IT phenomena – every aspect of organizations needs to be agile to survive in today’s ever-changing business environment, according to McKinsey.

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Let’s look at corporate procurement. Do not dismiss it as merely a cost-cutting mechanism – it’s a vital area for agility. Instead of focusing on the most cost-effective way of saving money on the reparation process of old machines, think of it in an agile way: Are there any new innovations you could tap into to cut costs over time that would also make you more efficient and increase productivity?

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Or, when you’re sourcing for a programmer for a time-specific software programming project, instead of spending money on a long hiring process for a full-time employee, why not tap into the liquid workforce and hire a specialized freelancer to take care of the job? You’d take an agile working approach to sourcing for ressources. There’s plenty of qualified fish in the sea.


You might say: The way we do business is working just fine – even without integrating agile working holistically. According to
McKinsey, there’s a fair chance you’re stuck in an old paradigm. Read along to make sure your business is prepared for the future.

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The industrial paradigm – Organizations managed like machines


In the old industrial paradigm, managing businesses was equivalent to running a machine. The creator of this thinking was Henry Ford. A revolutionary of his time and a true entrepreneur. Ford was only one of many small car manufacturers in 1910, but a decade later, Ford Motors had a 60 percent market share of the new car market globally. Ford managed to reduce assembly time per vehicle from 12 hours to 90 minutes, made vehicles affordable by reducing prices considerably, while also paying employees competitive salaries.

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Ford’s management style optimized labor productivity and kicked off an era of efficiency. Businesses were hierarchical and specialized. For decades, companies adopted this model, and ran their businesses like machines. Focused on being the most efficient. The most productive. Gaining the most market share.

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These goals are no less important in today’s new business paradigm. But managing your business like a machine is ineffective, and it will make you a laggard in today’s world. Today, you need to think of your business as a living, breathing organism in order to implement agile working. 

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The new paradigm – Organizations managed like organisms


Technological developments, such as artificial intelligence, machine learning, robotics, big data, and internet of things, are now disrupting the old way of thinking about business management. It’s disrupting industries, economies and societies at large.

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McKinsey
characterizes these developments with four megatrends:

  • Quickly evolving environment
    In today’s business environment, anything can happen faster than you know it. And as a business leader, you have to adapt. If you’re a retailer of clothes, the time spent from when a collection hits the runway to when it arrives in stores needs to be minimized. Fast-fashion-manufacturing is of the essence, because next week a different trend might be of demand. Business today is all about adaptability.
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  • Constant introduction of disruptive technology
    New technologies are disrupting established businesses, automization is replacing manual labor, and entire industries are facing the challenge of how to reinvent themselves using these new technological innovations. Today’s businesses have to work with, not against, new technologies.
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  • Accelerating digitization and democratization of information
    The increased volume, transparency, and distribution of information requires organizations to quickly engage in multidimensional communication across both online and offline platforms, engage with customers, partners, and colleagues, and handle public scrutiny, by being quick and agile in their communication.
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  • The new war for talent
    As creative and learning-based tasks become increasingly important, read about this in our blogpost here, businesses need to clearly define their specific value proposition to acquire talent. Millennials are not just driven by economics – they are driven by purpose. They are fluid workers, who value the flexibility to choose their own lives and their own jobs. Don’t think of it as acquiring or retaining people in full-time employment positions – think of it as accessing people according to your businesses needs. On a project-dependent and time-specific basis, allowing you to scale up and down according to your demands in an agile way.

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The trends described above are dramatically changing how businesses and employees work. According to McKinsey, traditional machine organizations who have tried to fit their old model into the new technologically disrupted world have failed. Fewer than 10 percent of the non-financial S&P 500 companies in 1983 remained in the S&P 500 in 2013.

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But how do you implement agile working in your business?


According to McKinsey, truly organizations that are truly agile at work are both stable (resilient, reliable, and efficient) and dynamic (fast, nimble, and adaptive). They are made up of backbone elements that make them stable, but they are complemented by dynamic elements to adapt rapidly to new opportunities and challenges.

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I like to use the analogy of a computer: A computer has a slick, robust, and stable hardware design. But inside, it carries a myriad of dynamic systems and applications – constantly updated and revised according to newest developments.

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Businesses should do the same.

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To survive in the new paradigm, businesses must think of the way they are structuring their organization as consisting of more dynamic elements that can be adapted quickly to new challenges and opportunities. Agile businesses are flexible, mobilize quickly, make it easy and quick to act on its business needs. Just like a living organism would.

Source: McKinsey

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Rita Gunther McGrath, a Columbia Business School professor conducted a
study among 2,300 successful, large US companies that increased their net income by at least 5 percent annually in from 1999 to 2009, to see what these companies had in common. What’s your guess?

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These companies were all stable companies with a robust foundation, but also rapid innovators, who worked agile in every aspect or their organization, and were able adjust their resources according to changes in the environment.

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Agility pays off – Considerably


Research by McKinsey shows that organizations who have implemented agile working, meaning they have integrated agile holistically in the organization, have a 70 percent chance of being the top performers in terms of organizational health, the best indicator of long-term performance. Further, such companies also gain greater customer centricity, faster time to market, higher revenue growth, lower costs, and a more engaged workforce.

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You might read this blogpost and think the road to integrating agile holistically is daunting, because you can’t grasp what work needs to be done. Accenture conducted a
research between 1,300 C-suite and senior-level executives in different industries across 16 countries. Its goal was to find out how these companies were practicing agile in dimensions like strategy, organization, marketing, operations and finance. They found that while business leaders recognized the need for agile, there was a gap between awareness and taking action towards integrating it throughout.

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A critical prerequisite for sustaining real change is implementing the behavioral norms required for a successful transformation, according to McKinsey. It is not a matter of making cultural statements or listing company values. It is rather, a matter of instilling the right kinds of behavior for “how we do things around here.”

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The clearer and more widely adopted these sorts of agile behaviors become, the easier it will be to adapt structures, governance, and processes in pursuit of being agile working. The key to thriving in today’s digital world.

 


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