Strengthening Business Readiness for Global Change
Planning no longer happens annually for markets. Market tastes change in months, competing products emerge in weeks, and technological innovations transform whole industries in between budget planning periods. Managers who used to rely on detailed multi-year plans are now facing an even more difficult problem of how to act fast while staying in control. An increasing number of managers respond with Agile Management Practices.
From Software Teams to the Whole Enterprise
The method was developed in the software engineering industry, but now it is used much more extensively – principles like short cycles, rapid feedback, cross-functional teams, and constant reprioritization are used by such departments as finance, marketing, human resources, and even operations. Rather than investing several months into a particular strategy, the team introduces an increment and tests it on real customers.
Faster Learning and Tighter Alignment
The first benefit is that organizations with small releases make mistakes early on in their development process, where corrections do not need any significant amount of effort. People involved in business with agile management practice want a steady stream of facts rather than a big-bang approach and can realign investments before the wrong idea gets all of the funds. Each iteration is a cheap experiment, not a risky one.
The second benefit comes through the strategic implementation process. In traditional organizations, strategic planning will inevitably lose its efficiency when it comes from higher organizational levels to lower ones. Agile Management Practices solve this problem. Priorities are defined and implemented by the managers and teams respectively but are reviewed on a weekly basis when the problems occur. The decisions are made by those who have better knowledge about the situation.
Case Study: ING’s Squad Model
This is demonstrated well through an example of the Dutch bank ING. The restructuring took place in 2015 when the headquarters of ING Netherlands was redesigned to form small multidisciplinary teams known as squads and bigger teams referred to as tribes; a model used partly due to the inspiration from tech companies such as Spotify. As noted by McKinsey, the reorganization involved the arrangement of approximately 3,500 people in around 350 squads. The benefits mentioned in the reports include reduced time to market and increased employee engagement.
Talent and Resilience
Talent makes up the third component. Talented individuals demand empowerment, clarity in terms of their objectives, and evidence of tangible progress. These can be provided by agile management practices in the form of allowing small teams to take responsibility for results and make progress visible to all. Managers stop instructing and start solving problems, thereby leaving executives free to develop strategy.
The fourth benefit lies in resilience. Market upheavals, disruptions in supply chains, and changes in legislation catch firms off guard. Companies that operate on a basis of short planning cycles are better able to deal with such upheavals due to the fact that they regularly evaluate their priorities and can reallocate resources, put on hold projects that do not add value, and prioritize urgent tasks.
The Limits of the Method
However, the process is not a panacea. The company uses all the practices, including the daily stand-up meetings and sprint reviews, while leaving the decision rights in place as they were before. Such companies benefit from the terminology without seeing any improvements. It is frustrating for the team to keep going through the chain of approvals, and disappointing for the management to see the performance measures still rewarding process over results.
What Leaders Must Do
It is, therefore, imperative that success be attained through more than just training. There is need for executive sponsorship of change, granting of power to teams and measuring progress in terms of customer value rather than man hours. Companies that begin on a smaller scale and demonstrate proof of concept in one business unit before scaling are more likely to succeed.
Agile management practices work well when used as a management philosophy rather than as a set of tools for project management. The questions executives seeking to launch Agile Management practices will have to answer are: Which customer problem needs its own team? Who is the one that has power to make decisions without recourse? And which one metric demonstrates value in one quarter?
The Strategic Case
Strategic logic is easy to see. The firms that get good at using agile management practices will learn more quickly, integrate execution and strategy, get better people, and bounce back from disruptions faster than their competitors who are stuck in their rigid planning. It takes patience, humility, and delegation of power to make the shift. The leaders who are committed to this transformation will end up with adaptive organizations just like their markets.