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Business Agility
“Those who master large-scale software delivery will define the economic landscape of the 21st century.”
—Mik Kersten, Project to Product
Business agility is the ability to compete and thrive in the digital age by quickly responding to market changes and emerging opportunities with innovative business solutions. Achieving business agility requires that everyone involved in delivering solutions use Lean and Agile practices to continually create innovative, high-quality products and services faster than the competition. Such solution delivery typically requires active participation from business and technology leaders, Agile teams, and representatives from IT operations, legal, marketing, finance, compliance, security, and others.
Competing in the Age of Software
In her book, Technological Revolutions and Financial Capital, Carlota Perez describes the recurring patterns and changes that have emerged from five revolutions (e.g., age of oil and mass production) illustrated in Figure 1-1. Her research concludes that they occur every generation or so and have a profound impact on society.
Figure 1-1. Technological revolutions over the past few centuries1
1. Carlota Perez, Technological Revolutions and Financial Capital: The Dynamics of Bubbles and Golden Ages (Edward Elgar Publishing, 2002).
First, they cause a massive influx of financial capital (investment), which then results in new production capital (goods and services). Second, they cause market disruption, social change, and a new economic order.
These truly ‘world-shaking’ technology disruptions typically occur in three distinct phases.
Installation period. New technology and financial capital combine to create a ‘Cambrian explosion’ of new entrants.
Turning point. Existing businesses either master the new technology or decline and become relics of the last age.
Deployment period. Production capital of the new technology giants starts to overtake existing businesses. This changes society in fundamental ways.
As Figure 1-1 illustrates, the installation period has already occurred for the age of software and digital. What, perhaps, is less clear is whether we are at the turning point or deployment period.
However, we are already seeing examples of tech giants overtaking existing businesses and changing society in fundamental ways. The rapid pace of technological change indicates that we are passing through the turning point or more likely we are already in the deployment period.
One might simply look at the massive market capitalizations of Google, Apple, Amazon, Baidu, Salesforce, or Tesla (all companies that didn’t exist just 20 to 30 years ago) as strong evidence that we are in the deployment period. It’s abundantly clear that every enterprise must prepare for the inevitable business and societal change brought on by the digital age.
In his book Project to Product, Mik Kersten analyzes Perez’s work and notes that the technological challenge facing our world economy is that “the productivity of software delivery at enterprise organizations falls woefully behind that of the tech giants, and the digital transformations that should be turning the tide are failing to deliver business results.”2
2. Mik Kersten, Project to Product (IT Revolution Press, 2018).
Kersten’s insightful analysis points to an undeniable truth—that many large and successful enterprises today face a daunting existential crisis. The capabilities and physical assets that made these organizations successful, such as brick-and-mortar retail stores, manufacturing, distribution, real estate, local banking, and insurance centers, will no longer be adequate, by themselves, to ensure survival in this new era.
How Did We Get Here?
“The problem is not with our organizations realizing that they need to transform; the problem is that organizations are using managerial frameworks and infrastructure models from past revolutions to manage their businesses in this one.”3
—Mik Kersten
3. Ibid.
Most leaders in traditional organizations are well aware of the threat of digital disruption, and yet many of them fail to make the transition to survive and thrive in the next revolution. The question we have to ask is, why?
In his recent book, Accelerate: Building Strategic Agility for a Faster-Moving World, organizational researcher and author John P. Kotter describes how successful enterprises didn’t originate as large, cumbersome, and unable to survive a rapidly changing market. Rather, these organizations typically began life as a fast-moving, adaptive network of motivated individuals aligned to a common vision and focused on the needs of their customers. At this stage, roles and reporting relationships are fluid, and people naturally collaborate to identify customer needs, explore potential solutions, and deliver value in any way they can. In other words, it’s an adaptive ‘entrepreneurial network’ of people working toward a shared, customer-centric purpose (Figure 1-2).
Figure 1-2. New enterprises start as a customer-focused network
As the enterprise achieves its goals, it naturally wants to expand on its success and grow. This means individual responsibilities need to become clearer to ensure that critical details are carried out. Taking on these responsibilities requires gaining expertise, hiring specialists, forming departments for efficiency, and developing policies and procedures to ensure legal compliance and driving repeatable, cost-efficient operations. As a result, businesses start to organize by function. Silos begin to form. Meanwhile, operating in parallel, the network continues to seek new opportunities to deliver value (Figure 1-3).
Figure 1-3. Growing hierarchical structure running in parallel with an entrepreneurial network
The organization’s hierarchy grows faster and larger to achieve ever-increasing economies of scale. But naturally, the practices and responsibilities needed to run a large business begin to conflict with the entrepreneurial network. With the power, influence, and responsibility of current revenue and profitability, the hierarchy collides with the faster-moving, more adaptive, entrepreneurial network. The result? The network gets crushed by the hierarchy. Customer centricity is one of the casualties (Figure 1-4).
Figure 1-4. Entrepreneurial network collides with a growing hierarchy
Still, as long as the market remains relatively stable, the economies of scale and revenue provide a protective barrier against competitors, and the enterprise can enjoy continued success and growth. However, when customer needs shift dramatically or when a disruptive technology or competitor emerges, the organization lacks the agility to respond. Years of market domination and profitability can vanish, seemingly overnight. The company’s very survival is now at stake.
Kotter notes that the organizational hierarchies that we’ve built over the past 50 years have done a great job of providing time-tested structures, practices, and policies. They support the recruiting, retention, and growth of thousands of employees across the globe. Simply put, they largely work and are still needed. But the question becomes, how do we organize and reintroduce the entrepreneurial network? In addressing the dilemma, Kotter points out, “The solution is not to trash what we know and start over but instead to reintroduce a second system.” This model, which Kotter calls a dual operating system, restores the speed and innovation of the entrepreneurial network while leveraging the benefits and stability of the hierarchical system.
So, how do we create such a dual operating system? We will describe that in the next section.
SAFe: The Value Stream Network for Business Agility
Implementing the Scaled Agile Framework (SAFe) offers a way for enterprises to realize the second operating system and regain the focus on customers, products, innovation, and growth (Figure 1-5).
Figure 1-5. SAFe as the second value stream network operating system
Moreover, this network operating system, SAFe, on the left is flexible. It’s built on proven Lean, Agile, and SAFe practices, and it can organize and quickly reorganize with minimal disruption to the enterprise. That’s what business agility demands.
However, implementing SAFe effectively requires organizations to gain a significant degree of expertise across seven core competencies. These will be briefly described in Chapter 2, Introduction to SAFe.
While each competency can deliver value on its own, the competencies are also interdependent. Consequently, real business agility can be achieved only when the enterprise achieves some amount of mastery of all. It’s a tall order, but the path is clear.
Summary
The age of software and digital transformation threatens the very existence of many enterprises across the globe. Put simply, the organizational structures, management methods, and way of working that created success in the past cannot keep up with an increasingly digital future. In order to survive, enterprises must create, evolve, and master a dual operating system. One looks like a fairly traditional hierarchy, with familiar roles and responsibilities, but is leaner and follows more Agile practices. The second is a more adaptive and flexible entrepreneurial network that is Lean and Agile to its core and focuses exclusively on the customers and opportunities the market presents. This network organizes and reorganizes continuously to address changing value propositions.
Together, these two operating systems provide stability and operational strength coupled with a dynamic network that continually addresses new opportunities with innovative technology-based business solutions. The result is a Lean enterprise that is ready to thrive in the digital age.