Jason Inacio, Partner at McKinsey, and Gui Riederer, Associate Partner will be at Digital Transformation Asia in Kuala Lumpur this week guiding attendees on reinventing operating models for the digital age. Hear their insights below before the presentation on Wednesday.We are living in a truly unique time, an age of extraordinary change driven by technological disruptions on an unprecedented scale. As the pace of change is accelerates, we see great opportunities for those who adapt, but over half of the S&P 500 are forecast to be replaced in the next decade.
And yet, these new opportunities bring with them new challenges and expectations. Technology is moving to the core of an organization’s operations with IT and business becoming one, fundamentally shifting the way organisations are run. Millennials, who will form more than 75% of the workforce in less than a decade from now, have different expectations from working and value autonomy, flexibility and finding meaning in their work, all elements that old talent management models are
not suited to deal with. Meanwhile, consumers, now presented with more choices than ever before, are expecting flawless experiences.
Keeping pace with these changes requires a new type of operating model; one that is fast, engaging and customer-focused. In this environment,
Agile has emerged as a potential solution with many companies succeeding in this new era operating (even if not strictly calling it) Agile.
In fact, a recent survey we conducted found that adopting Agile across the entire organization has become a top priority for 75% of companies globally. Many respondents said, however, that their companies had not yet fully implemented Agile ways of working, either company-wide or in the performance units where they worked. Although the advantages are clear, just 4% reported having successfully adopted Agile at scale.
What is Agile?
Agile is a shift to structuring the organization by what matters to its customers. It is an operating model that enables organizations to truly listen to the voice of the consumer, to respond more quickly to changes in customer demand and the market environment. Applying Agile across different parts of the organization requires a rapid reconfiguration of strategy, structure, processes, people, and technology toward value-creating and value-protecting opportunities.
In an Agile organization, teams are built around end-to-end outcomes that target value as opposed to being built by functions that target financial outcomes. Resources are dynamically allocated based on priority through quarterly business reviews (QBRs), while unnecessary hierarchy and bureaucracy is removed.
Overall, a move to Agile empowers an organization’s people to be more self-directed, improves its productivity, and ultimately, improves the products and services it delivers to its customers. In our experience, organizations that successfully transition to Agile capture significant benefits, including: a 30-point improvement in customer NPS; a 30-point improvement in employee NPS; a 30% saving in operating expenses (OpEx); and a 10x faster time to market for their products. We have also seen employees in organizations transitioning to Agile feel that the proportion of their time spent on value-adding work more than doubled from 30% to 70%, with a drop in the amount of time spent in meetings from 30% to 10%.
How to go Agile
Aiming to achieve the positive outcomes from an Agile transformation, organizations commonly ask us what the key steps to going Agile are. Although there isn’t a single formula on how to run such a complex transformation, our experience has proven that 7 key practical elements significantly increase the chances of a successful Agile implementation:
- Have a bold, aligned leadership team ready for change – Involve top leaders extensively in the transformation and have clarity on “why”
- Engagement model – Communicate, communicate and communicate. Build a concise narrative and use the transition to excite the organisation, while bringing everyone along on the journey
- Agile coaches – Invest in building your Agile Coaches’ capabilities early in the transformation. They will be key in building and maintaining the new Agile culture and processes
- People evaluation – Clarify how people will grow, thrive and progress in your new organisational setup. Career paths and talent development will need to be updated to reflect the new cross-functional, non-hierarchical Agile model
- Structure governance – Create transparency of each team’s accountabilities and focus governance forums on driving value. Agile processes such as the QBR provide transparency across the organisation for each tribe’s objectives and key results (OKRs)
- Interfaces – Integrate the areas that will be operating in new ways of working to the rest of the organization. For example, non-agile functions may need to have special processes or structures (e.g. flow-to-work pools) to help them adapt to the flexibility needed by new Agile teams
- Capability building – Build capability and understanding in all employees to create clarity on the roles in the new Agile model. Doing so will help teams hit the ground running in Agile ways of working and smooth organizational culture shifts
Embarking on a journey to a new operating model is not a simple exercise and will require significant effort. In this new, rapidly evolving digital environment however, many businesses will need a customer-first, fast-to-failure and rapidly adaptive operating model to thrive. Agile may be the answer for the digital age.
