The agile-digital convergence
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BETWEEN 1965 and 2012, according to Deloitte’s 2013 Shift Index Metrics report, the rate at which companies lost leadership positions in their industries increased by almost 40 per cent as technology intensified competition, disrupted industries, and forced businesses to transform their cultures and develop new capabilities.
To create value from the opportunities created by powerful current technologies, companies today are pursuing digital transformation to drive innovation in service delivery and product development. Becoming digital requires business agility and applying agile practices across the entire organisation, including an organisational structure that is less top-down and more collaborative.
Digital represents different things to different organisations, from the technologies behind a company’s products and services to a new way of engaging with its customers or to an entirely new business model. Ultimately, however, digital is a way of doing things that create new customer value.
McKinsey explains digital by breaking it down into its different attributes. Among the foundational abilities of a digital organisation are “the technological and organisational processes that allow an enterprise to be agile and fast.” He explains that being digital “is about using data to make better and faster decisions, devolving decision-making to smaller teams, and developing much more iterative and rapid ways of doing things.”
The agile management structure and governance norms represent the most significant redesign of the business organisation in over 100 years.
These are among the many fundamental elements common to both agile and digital organisations, but where agile succeeds on its own attributes, a digital transformation needs an agile environment and values to be successful. In a 2017 global survey by Forbes Insights, 84pc of senior executives agreed that “organisational agility is necessary to succeed in digital transformation”.
The core values of agile management are an unwavering focus on meeting customer requirements and improving the employee experience. As explained in ‘The age of agile’, published recently in this newspaper, the name comes from its roots in the 2001 agile software development manifesto that transformed software development and delivery.
In the same way, agile management is transforming how work gets done at companies of all sizes, across industries and in emerging and developed economies. The challenge for business leaders in the 21st century is to integrate agile values with agile management structures and governance norms that represent the most significant redesign of the business organisation in over 100 years.
The new governance norms reflect the paradigm shift from seniority-based authority to collaborative and front-line decision-making that empowers multidisciplinary teams to take decisions in operations and customer areas that affect the performance of their work.
As decision-making becomes more broad-based, it also creates a cultural shift away from undue deference to authority that prevails in senior management levels in many parts of the world. A chapter on “the ethnic theory of plane crashes” in Malcolm Gladwell’s book, Outliers, for example, connects a country’s culture of submission to authority to recurring plane crashes at its national airline.
In Pakistan, where this tendency is perhaps stronger and more deep-rooted, the several decades of deterioration we have seen in state enterprises is as much due to contradictory government objectives as it is to overbearing executive power that prevents lower levels of the hierarchical structure from challenging bad decisions and confronting corrupt practices.
Managing the agile organisation revolves around leadership roles that combine the remnants of the old structure and the responsibilities that evolve from the new one. Senior executives continue to provide leadership and guidance across all levels of the organisation, while mid-level managers are assigned to head the new organisational units in three different roles: building functional capabilities and deploying people to independent teams; developing strategies and tactics to deliver specific business outcomes; and planning and coordinating the work of individual teams. Most employees work under separate administrative and operational control and have dual reporting lines to their ‘home’ base and business units.
Many of these principles are clearly illustrated in the real-world agile makeover of the Dutch banking group ING — a major multinational financial institution. In June 2015, they began shifting to an agile model as a response to “changing customer behavior and expectations that were being shaped by new digital distribution channels by digital leaders in other industries”.
Adapting the structures of companies such as Google, Netflix, and Spotify, ING created 350 nine-person teams they called ‘squads’ which were part of 13 so-called “tribes” (each consisting of 150 people); all employees belonged to different “chapters” that was their organisational home and to which they returned once their ‘squad’ assignments were completed. The tribes and squads represented the new dynamic structure while chapters provided the balancing continuity and the stable backbone.
ING also created two new roles: product owners who were part of the squad and coordinated its activities; and agile coaches who trained individuals and squads to create high performing teams. Chapter leaders represented the hierarchy for squad members and were responsible for their personal development and performance management. The role of a full-time manager was abolished and the number of job types were drastically reduced.
In an interview published in January 2017, the company’s chief information officer and the chief operating officer at the time of the changeover reported that ING’s agile transformation had “already improved time to market, boosted employee engagement, and increased productivity”. It has also earned ING Western Europe’s best bank award for 2018 from Global Finance magazine and the 2018 Australian Business Award for Process Improvement.
The agile organisation typifies what EY Global has called “the power of many”. Deloitte’s 2017 Human Capital Trends report notes that as networks of teams continue to replace organisational hierarchies, the traditional question “For whom do you work?” is being replaced by “With whom do you work?”
The writer is an independent consultant and founding president of NEW-G, an entrepreneurship platform.
Published in Dawn, October 2nd, 2018
