The Organizational Agility (OA) competency describes how Lean-thinking people and Agile teams across the enterprise optimize their business processes, evolve strategy with clear and decisive new commitments, and quickly adapt the organization as needed to capitalize on new opportunities.
Organizational Agility is one of the seven core competencies of Business Agility, each of which is essential to achieving Business Agility. Each core competency is supported by a specific assessment, which enables the enterprise to assess its proficiency. The Measure and Grow article presents these core competency assessments and recommended improvement opportunities.
Why Organizational Agility?
In today’s digital economy, the only truly sustainable competitive advantage is the speed at which an organization can sense and respond to the needs of its customers. Its strength is its ability to deliver value in the shortest sustainable lead time, to evolve and implement new strategies quickly, and to reorganize to address emerging opportunities better.
Organizational agility is critical to respond sufficiently to challenges. Unfortunately, most businesses’ organizational structures, processes, and cultures were developed more than a century ago. They were built for control and stability, not innovation, speed, and agility. Small incremental changes to how businesses manage, strategize, and execute are insufficient to remain competitive. This requires a leaner and more Agile approach which, in turn, requires sweeping changes that have a positive, long-lasting impact on the entire enterprise.
The SAFe approach to addressing the challenge of digital transformation is the ‘dual operating system’ (see Business Agility). This approach leverages the stability and resources of the existing organizational hierarchy while implementing a value stream network that leverages the entrepreneurial drive still present in every organization. By organizing and reorganizing the enterprise around the flow of value instead of the traditional organizational silos, SAFe restores the second (network) operating system. It allows organizations to focus on the innovation and growth of new ideas and the execution, delivery, operation, and support of existing solutions.
The organizational agility competency is instrumental in bringing the power of the second operating system to support the opportunities and threats of the digital age. This competency is expressed in three dimensions (Figure 1):
Figure 1. Three dimensions of organizational agility
Everyone involved in solution delivery is trained in Lean and Agile methods and embraces their values, principles, and practices.
Teams apply Lean principles to understand, map, and continuously improve the processes that deliver and support business solutions.
The enterprise is Agile enough to sense the market and quickly change strategy when necessary.
Lean-Thinking People and Agile Teams
Lean-thinking people and Agile teams is the first dimension of organizational agility. This dimension is critical to delivering business solutions—not just the software applications and digital systems, but all supporting activities (privacy, security, support, availability) necessary to continually address the business problem. Even though the solution is not stand-alone, it lives in the larger context of its environment—including other hardware, software, network systems, and more.
Everyone involved in delivering business solutions—operations, legal, marketing, people operations, finance, development, and others—can apply effective Lean and Agile methods and embrace the mindset, values, principles, and practices.
Extending the Mindset, Values, and Principles to the Enterprise
Extending the Lean-Agile mindset to the entire enterprise forms the cornerstone of a new management approach and results in an enhanced company culture that enables business agility. It provides leaders and practitioners throughout the enterprise with the thinking tools and behaviors needed to drive a successful SAFe transformation, helping individuals and the entire enterprise achieve their goals.
The Lean-Agile mindset establishes correct thinking, but it’s the ten underlying SAFe principles that guide effective roles, practices, and behaviors. These principles are fundamental to organizational agility and the Lean-thinking people and Agile teams who enable it. Everyone in the enterprise can apply these principles to their daily work and become part of the leaner and more Agile operating system.
As Agile Teams begin to form, we’ve often observed a ‘three-step maturity cycle’ which illustrates how they develop and mature the practices that are particular to their domain. (Figure 2):
First, the teams adopt and master the Lean-Agile mindset and practices. This creates a universal value system and a shared understanding of Agile. SAFe’s Lean-Agile principles and Lean-Agile Mindset guide the right thinking and behaviors for teams and their leaders. They provide a ‘North Star’ that points the way to being Agile, even when specific Agile guidance does not exist for that domain.
Next, teams must know how they participate in the organization’s flow of value within the operational and development value streams. Taking a system’s view of the value delivery process allows teams to understand where and with who most of their interactions occur. Value Stream Mapping helps understand the steps in value delivery and the boundaries of the value stream. Based on this knowledge, teams organize to increase productivity and deliver business value.
As teams and individuals mature, they must evolve their practices to define what Agile and built-in quality mean in their context. In this way, they make it their own. While driven by the same set of principles, the practices, and the methods in which they are applied, differ. Organizing around value, facilitating flow, planning, synchronizing, reviewing results, building quality, and delivering value depend on a set of unique parameters within which each team operates. Teams pick a simple starting point and continually adjust their way of working based on their individual experience with a set of practices. As already discussed here, many business and technology domains have already begun this journey.
Applying SAFe to Business and Technology Teams
As described in the Team and Technical Agility competency article, the emergence of Agile software development is fairly advanced and well understood. With the advent of the DevSecOps movement, IT operations and security are also rapidly adopting Agile. Agile is also making its way to other technical domains, such as networking, operations (see DevOps), hardware (see Applying SAFe to Hardware Development), electronics, and more. After all, Agile technical teams typically achieve a degree of unprecedented performance and personal satisfaction with their work. Who doesn’t want to be on a high-performing Agile team?
In addition, once the business understands this new way of working, it begins recognizing that the same benefits apply and typically starts creating cross-functional Agile business teams. These teams may be involved in any of the functions necessary to support developing and delivering business solutions, including the following:
Additionally, Built-in Quality practices in SAFe apply to Agile Business Teams, helping them improve the value of deliverables and achieve faster flow. No matter your business function, the steps to achieve quality with Agility include the following:
Patterns for Agile Business and Technology
|Pattern||Key characteristic||Importance to Organizational Agility|
|Business-Enabled ART||Includes the business people needed to deliver a full business solution||Integrates the business knowledge required to make effective solutions|
|Agile Business Train||Builds and operates a full business solution||Empowers employees and teams to define, build, test, deploy, support, and commercialize innovative business solutions with the shortest possible lead times|
|Agile Executive Team||Exemplar, cross-functional Agile team with Team Coach and PO||Speaks with one voice, fosters a more productive decision-making process, and instills a Lean-Agile Mindset by leading by example|
|Agile Business Function||Applies Lean-Agile practices to streamline business operations||Improves speed and quality of the business function, improves interactions with organizational value streams, and provides transparency of workflow|
|Combined Portfolio||Includes operational and development value streams||Enhances strategy and governance with a holistic view of operations and development of solutions within a Portfolio|
Agile Working Environments
Lean Business Operations
Figure 3 illustrates the relationship between operational and development value streams.
Mapping Value Streams
Figure 4. Value stream mapping showing the total lead time, total processing time, and time efficiency
Teams look for the opportunity to improve the efficiency of each step, consequently reducing the total lead time. This includes reducing process time and improving the quality of each step measured by the percentage complete and accurate. (The percent complete and accurate represents the percentage of work that the next step can process without it needing to go back for rework.)
As is the case in the figure above, the delay time (the waiting time between steps) is often the most significant source of waste. If the team above wanted to deliver a marketing campaign faster, they would need to reduce the delay times, as the processing steps are only a small part of the total lead time. Reducing delays is typically the fastest and easiest way to shorten the total lead time and improve time to market.
Figure 5. Bottlenecks reduce the flow of value through the value stream
Implementing flow is a comprehensive task that involves this and other accelerators that span from workers and their work environment to process steps and work items that pass through them.
Strategy agility is the third dimension of organizational agility. Strategy agility is the ability to sense changes in market conditions and implement new strategies quickly and decisively when necessary. It also includes the good sense to persevere on the things that are working—or will work—if given sufficient time and focus. Figure 6 illustrates how the strategy must respond to market dynamics to successfully realize the enterprise’s mission.
Figure 6. Strategy responds to market dynamics
Enterprises that have mastered strategy agility typically exhibit several capabilities, including those described in the following sections.
Market sensing represents the culture and practice of understanding changing market dynamics based on the following:
Savvy, Lean-thinking leaders ‘go see’ and spend significant time in the place where the customer’s work is actually performed. They return with current, relevant, and specific information about the realities of their products and services instead of opinions filtered through other perspectives.
Innovating Like a Lean Startup
After sensing opportunities, the Lean enterprise visualizes and manages the flow of new initiatives and investments by adopting a ‘build-measure-learn’ Lean startup cycle . These initiatives are often new business solutions but may also be new business processes and capabilities that use existing solutions. Testing the outcome hypothesis via a Minimum Viable Product (MVP) before committing to a more significant investment reduces risk while generating helpful feedback.
Implementing Changes in Strategy
Identifying and defining a new strategy is only the first step. Once determined, the strategy must be communicated to all stakeholders in a new vision and roadmap and then, of course, be implemented. After all, significant strategy changes often affect multiple portfolio solutions and require coordination and alignment. Consequently, most large strategy changes require new epics to implement the change across value streams.
Figure 7 illustrates how new epics go through the various Kanban systems and backlogs that manage the flow of work. During the ordinary course of work, all backlogs are continuously reprioritized. Kanban systems help changes in strategy move quickly across value streams to the teams who do the implementation. This way, execution is aligned—and constantly realigned—to the evolving business strategy.
Figure 7. Strategy change makes its way quickly through the network of dynamic backlogs
However, other smaller, local changes may require only new stories or features and will go directly into the team or ART backlogs.
Evaluating the benefits of a change in strategy can take a long time. Traditional financial and accounting metrics, Profit and Loss (P&L) and Return On Investment (ROI), are lagging economic indicators that occur too late in the life cycle to inform the evolving strategy. In their place, Innovation Accounting applies leading indicators—actionable metrics focused on measuring specific early outcomes using objective data. They are an essential part of the economic framework that drives business agility.
Ignoring Sunk Costs
A key factor in strategy agility is ignoring sunk costs, the expenses that have already occurred during solution development. Sunk costs cannot be recovered or changed and are independent of any future costs a company may incur . Because strategic decision-making affects only the future course of business, sunk costs are absolutely irrelevant when evaluating a change in strategy. Instead, decision-makers should base all strategy decisions solely on the future costs of the initiatives necessary to achieve the change. When stakeholders do not have to waste energy to defend past spending, the organization can pivot more quickly to a new strategy.
Organizing and Reorganizing Around Value
Finally, SAFe Principle #10 – Organize around value guides enterprises to align their development efforts around the full, end-to-end flow of value. This principle highlights the ‘dual operating system,’ one that leverages the benefits of the existing hierarchy but also creates a value stream network (Figure 8 below). This network assembles the people who need to work together, aligns them to the needs of the business and customer, minimizes delays and handoffs, and increases quality.
Figure 8. The network operating system can quickly reorganize around changing strategy
But as strategy moves, future value moves with it; new people and resources must be applied. In other words, some degree of reorganization is required. Indeed, in some cases, this will require entirely new value streams to be formed to develop and maintain new solutions. Other value streams may need to be adjusted, and some will be eliminated as solutions are decommissioned. Fortunately, the people and teams of an increasingly Agile enterprise see those changes coming through the portfolio. They can then use their new knowledge and skills to reorganize Agile teams and ARTs around value whenever it makes sense.
No portfolio is an island. Instead, each typically depends on other portfolios, suppliers, partners, and operational support, all of which require implicit or explicit contracts to deliver the value. Traditionally, these contracts are based on the assumption that requirements, deliverables, and service levels are known upfront and will remain stable. We know from experience that it is just not true. As strategy changes, these traditional contracts can become enormous impediments that lock the business into assumptions of a former strategy. Although the business would like to change strategy, it is blocked by existing contracts.
Achieving business agility requires a more flexible approach to all types of contracts. How this is achieved depends on the nature of the contract, but each must be considered in terms of the adaptability required. ConNo portfolio is an island. Instead, each typically depends on other portfolios, suppliers, partners, and operational support, all of which require implicit or explicit contracts to deliver the value. Traditionally, these contracts are based on the assumption that requirements, deliverables, and service levels are known upfront and will remain stable. We know from experience that it is just not true. As strategy changes, these traditional contracts can become enormous impediments that lock the business into assumptions of a former strategy. Although the business would like to change strategy, it is blocked by existing contracts. Achieving business agility requires a more flexible approach to all types of contracts. How this is achieved depends on the nature of the contract, but each must be considered in terms of the adaptability required. Contracts for suppliers that provide components, subsystems, or services for enterprise solutions are particularly critical as they may tend to lock solution elements into requirements that were fixed long before. The Agile Contracts advanced topic article provides guidance on contracting strategies that can provide the needed flexibility,
Without organizational agility, enterprises can’t react fast when things happen. To be fully responsive to threats and opportunities requires Lean and Agile ways of working to spread throughout the entire organization. This change demands a workforce trained in Lean-Agile practices and understands and embodies the culture, values, and principles.
Lean business operations recognize that delighting customers goes further than purely solution development. The entire customer journey, which includes delivering, operating, and supporting business solutions, must be continually optimized to reduce time to market and increase customer satisfaction. Strategy agility provides the ability to sense and respond to market changes, evolve and implement new strategies quickly, and reorganize when necessary to address emerging opportunities. As a result, ‘change becomes an opportunity, not a threat.’