What is Business Agility?

The term Business Agility has become more prominent in recent years, but I’m not convinced it is a recent idea. I think the concept of Business Agility has evolved over time and some of the ideas from Alvin Toffler (Future Shock 1970) talking about the rapid pace of change and the need for organisations to adapt, and  Peter Drucker emphasized in his 1980s publication, Innovation and Entrepreneurship, that organisations need to be more adaptive and innovative, are probably forerunners of the wide range of literature we see today. 

In the late 1990s, some consultants and business authors began using the term ‘organisational agility’ in discussions about rapid market changes and the need to respond swiftly. The term Business Agility seems to have followed on from the publication and popularity of the Manifesto for Agile Software Development in the early 2000s.

Certainly, from the mid-2000s onwards major consultancies and business journals (like Harvard Business Review) began publishing case studies and thought-leadership pieces on how “business agility” – not just agile projects – could help organisations stay competitive.   

By 2010, the term Business Agility was in widespread enough use that major companies, analysts, and industry conferences were all using it as a shorthand for “the ability of an organisation to rapidly adapt to market and environmental changes in productive and cost-effective ways.” It has only become more popular since, often linked with discussions about digital transformation and adaptive organisational cultures.

The Business Agility Manifesto was published in 2017, with its authors Burlton, Ross and Zachman identifying 10 Principles associated with a prime directive that “all initiatives must demonstrably align with the management imperatives.”

Recently, large organisations have evolved various strategies often focused on specific aspects of their businesses e.g. General Mills has an Agile Marketing Strategy called Consumer First Design aimed at accelerating product launches. The strategy incorporates consumer feedback early in the development process and uses data driven decision making. The data comes from consumer insights related to their digital marketing and sustainability initiatives.

Similarly, HSBC have overhauled their marketing research activity, using an Agile Insights Approach focused on gaining faster, deeper and more agile insights.

These examples could not have been achieved when Tofler and Drucker were writing because the technical infrastructure was not available. We sometimes forget that it was only in the late 1990s that the worldwide web emerged as a digital enabler with smartphones following on a decade later. Concepts like experimentation with rapid feedback that underpin agility seem very closely tied to their digital enablers.

Business agility delivers clear benefits to an organisation that stem from enhanced:

1. Customer Focus

At the core of agile businesses are satisfied customers. This is not something that emerged with Business Agility – Drucker, for example, was leading thought on this in his 1950s publication. The Practice of Management; “The purpose of a business is to create and keep a customer”. Putting the customer ‘front and centre’ is, however, a powerful catalyst. Agile organisations deliver value quickly and efficiently and by consistently gathering feedback, they continuously improve the customer experience through active listening and empathy.

2. Flexibility and Adaptability

An effective agile business can thrive in a dynamic environment because its processes are flexible enough to deal with minor variations in typical circumstances. Where flexibility alone is insufficient, governance structures allow for rapid but controlled process adjustments to deal with more significant changes.

The organisations people are critical to an agile organisation’s ability to flex and adapt processes. Regarding flexibility, they must leverage professional understanding, judgment and discipline to ensure compliance with the spirit of policies, processes and procedures that may not  exactly match a given circumstance. Regarding adaptability, trust in the same professionalism is needed if changes are to be swift and effective.

3. Operational efficiency

Operational efficiency lays at the heart of an agile organisation. It is only by streamlining processes and reducing waste that the organisation can be truly efficient. Agility leverages innovation and creativity within their teams to deliver increasingly beneficial services to customers while taking care to contain cost of their delivery.

Empowerment of people in operational roles to ‘own’ the way they work is key. These are the people that best understand their way of working because they ‘live it’ every day. It makes sense that given clear direction and outcomes, they are best placed to shape their way of working to optimize efficiency.

The agility afforded by the agile characteristics described above contribute to competitive advantage. By leveraging them organisation-wide the company can move quickly in response to market changes, opportunities and threats.

Businesses embracing agility in this way can out-perform their traditionally thinking, less nimble competitors. The consequences suffered by those competitors unable to respond to changes in customer demands are made even worse by having opponents in the marketplace who can.

Engaging everybody in the organisation with these competencies is what makes a business agile. It is important to understand, however, that achieving agility isn’t a one-off activity, it is a continual process throughout the entire organisation. It is a journey without end.

Reflect for a moment how online retailers are now delivering a range of products in increasingly short delivery times rather than accepting that “next week or even next day” is good enough.  A few years ago, a friend was running a workshop in the City of London.  He realized he didn’t have a charger for his laptop. He ordered it online and it was delivered within 2 hours.  The delegates had no idea his laptop was about to close down. The retailer best attuned with customer need, best adapted to the possibilities offered by e-commerce, and with the operational efficiency to achieve a 2-hour delivery surely had a competitive advantage when compared to the ‘next day delivery’ alternatives.

There are several frameworks encompassing all aspects an organisation needs to address to be considered truly agile.  Two of the most notable are:

The Framework for Business Agility from the Agile Business Consortium.

Source: Agile Business Consortium

There is a wealth of information on their respective websites which enables you to delve into detail to fully understand both the challenge of moving towards Business Agility and the opportunities it can deliver.

The Domains of Business Agility from the Business Agility Institute.

Source: Business Agility Institute

Drawing from both frameworks, they define Business Agility as a set of organizational capability behaviors and ways of working. At their heart they focus on culture, leadership and governance, with the ultimate aim of making the business more flexible and resilient to be in the strongest possible position to attempt to deal with whatever the future may bring.

Reading through both frameworks, there are some core messages about Business Agility:-

1. It is more about people than process

This is fundamental. While valuable improvements to customer focus, adaptability and operational efficiency can be achieved through traditional process improvement initiatives, proponents of business agility suggest its impact will be limited. They argue that the problem-solving creativity of the humans in the system, rather than slick processes, is at the heart of true agility. Business agility, therefore, depends on staff buy-in and maintaining morale.

The importance of this in any context, not just with agility, is borne out by research that exposes the staggering impact that low staff morale has on a business:-

• Employee engagement: According to research by Gallup, only 23% of global employees are engaged at work. Or, 75% of the workforce feels disconnected, which has a negative impact on productivity and company performance.
• Productivity loss: Disengaged employees are 18% less productive. Looking at it from another viewpoint, 20% of their annual salary is wasted.
• Turnover rates:  Organisations with low employee engagement rates experience higher turnover rates ranging from 25% – 65%.
• Absenteeism: Clearly low morale is a significant driver of absenteeism.

Business Agility is clearly not something that can be bolted on, it needs to be a thread throughout the entire organisation. Quite simply, to have agility you need to act with agility and it is people that bring agility to process.

Considering business agility as a mindset, rather than a set of processes and being able to secure the support of everyone in the business is critical to agility. A growth mindset – a belief that a person's capacities and talents can be improved over time – underpins the people-side of agility.  

2. It is a never-ending journey

Business Agility is a means to an end, not an end in itself – it represents a way of thinking and a way of operating that is responsive to the ever-changing context of the business itself. 

There is always room for innovation and always a need to respond to changing customer demands. An agile organisation will continually adapt and learn in this dynamic environment, not only growing in its agility but also redefining what business agility means in their unique context.

3. There isn’t a single measure.

Throughout an organisation different levels of Business Agility capability are both expected and probably necessary. A given organisation could be very agile in one aspect of its business and only weakly agile in another. While this may indicate excellence in one dimension and room for improvement in another, it could also indicate excellence in both aspects.

Consider the supplier of a regulated product such as a medicine. It may well benefit from agility in marketing or distribution but high levels of agility in its manufacturing processes would be highly undesirable.

4. There is no ‘one size fits all’

There are hundreds, if not thousands of approaches, practices, ways of working and operating models that can be used to improve the organisation’s flexibility and resilience, drive out waste and enhance customer service.  Each organisation is likely to look different but, as with many approaches, there is no single silver bullet. The key is to understand what you are trying to achieve as a business, understand where agility could be enhanced to help achieve it, then focus attention in those areas.

The more I read about Business Agility, and every conversation I have about it, makes me realize that it is much more about thinking and behaving than it is about doing and delivering. The latter are relatively easy to measure, the former are almost impossible. But I think that is perfectly OK.

What it means to be agile will look very different from organisation to organisation and even from team to team within a given organisation. The philosophy of agility may be similar in all cases but, as described previously, agility is a means to an end and not an end in itself. Given this reality, it makes more sense to measure the impact of agility than agility itself.

A range of the following measures should prove valuable when assessing business performance improvements related to investment in Business Agility:

One or more of the following may prove valuable in measuring Customer Focus: 

• Customer satisfaction surveys – track trends in satisfaction using feedback from customers about their experiences with your business.
• Net Promoter Score (NPS) – track trends in loyalty via the likelihood of your customers recommending your business to friends or family members.
• Customer Retention Rate – track trends in the strength of your customer relationships by the proportion of customers who continue to do business with you over time.
• Customer Lifetime Value (CLV) – track trends in revenue generated from individual customers over time.
• Customer Complaint Resolution Time – track trends in your commitment to satisfaction by the time taken to resolve complaints and issues.
• Customer Engagement Metrics – track trends in customer appeal via digital data such as website visits, email open rates and social media interactions.

One or more of the following may prove valuable in measuring Operational Efficiency.

• Process Cycle Time - The length of time it takes to complete a key process from start to finish (e.g., order-to-cash, production run, customer onboarding)
• Cost per Unit or Transaction - How much it costs to deliver one unit of product or service (or to complete a single customer transaction).
• Productivity per Employee (or Team) - The amount of output (units produced, revenue, or any other key performance indicator) generated per employee or per agile team.
• Operating Expense (OpEx) Ratio - The ratio of operating expenses to total revenue.
• Throughput or Flow efficiency - The rate at which work items (or products, transactions, etc.) move through a system from initiation to completion.

This is about measuring how flexible the organisation is in dealing with minor fluctuations in its market environment and how quickly it can adapt to more significant opportunities and threats. For example:  

• How rapidly can it ‘bounce back’ to a position as good, or better than before when impacted by a challenge?
• How effectively can it adapt existing products and services to exploit market changes?
• How quickly can it introduce new products and services to meet market demand?
• How severely is it impacted by relatively minor changes to rules, regulations, policies, and procedures?

In all cases it is likely that analysis of changes to metrics related to Customer Focus and Operational Efficiency in the face of change will be used to measure Flexibility and Adaptability. To be meaningful in the context of improving agility these will need to be comparative for example, comparing: 

• This organisation’s performance to a competitor facing a similar issue
• The organisation's performance this time, compared to previous times, it faced a similar issue.

One or more of the following may prove valuable in measuring how engaged staff are with the business. Note - that this is not about measuring agility per-se the references to growth mindset are key in this regard:

1. Employee Engagement Surveys: Include questions that assess employees' attitudes towards learning, growth, and their willingness to take on challenges.
2. 360-Degree Feedback: Collect feedback from peers, subordinates, and supervisors to gauge how employees perceive their own and others' growth mindsets.
3. Learning and Development Metrics: Track participation in training programs, courses completed with acquired skills evidenced in practice.
4. Performance Reviews: Include growth mindset-related criteria in performance evaluations, such as adaptability, willingness to learn, and resilience.
5. Employee Retention Rates: Monitor retention rates to see if there is an improvement in employee satisfaction and commitment.

Unless the vast majority of staff buy into the personal and interpersonal aspects of agility and high staff morale is maintained, it is likely that any move towards business agility will fail.  It is important to observe improving trends in the above through operational metrics and carefully crafted surveys associated with demonstrably effective retrospectives.

Many popular agile frameworks package the underpinnings of agility discussed above with light-weight process to help organisations improve agility in focused areas of their business. By far the biggest of these frameworks is Scrum. 

Can you run your business using Scrum?  Probably not, because it is framework aimed at delivery teams with 10 or less members and focuses on the iterative development and incremental delivery of products.  For many organisations, though, implementing such frameworks in specific areas does offer a sensible place to start a journey towards more broad-based agility. The following are considered by many to be sensible early steps towards agility:

1. Start Small and Scale Gradually: Begin with a pilot project or a small team to test agile practices before rolling them out more widely. This allows you to learn and adjust as you go.
2. Train and Empower Employees: Invest in training to ensure employees understand Agile principles and feel empowered to make decisions.
3. Focus on Mindset and Culture: Cultivate a growth mindset and Agile culture that values collaboration, continuous improvement, and customer focus.
4. Create Self-Organising Teams: Encourage teams to self-organise and make decisions. This fosters a sense of ownership and accountability.
5. Provide focus and direction: Set clear aspirational goals and maintain a prioritized backlog of activities to achieve them, focusing on delivering business value early and often.
6. Encourage Cross-Functionality: Foster collaboration by forming cross-functional teams that work together to achieve common goals.
7. Implement Short Iterative Cycles: Use short development cycles (such as Scrum Sprints) to deliver value quickly, while allowing for continuous improvement and adaptation.
8. Embed Regular Stand-Up Meetings: Hold short, daily stand-up meetings to discuss progress, identify obstacles, and plan the day's work.
9. Emphasize Continuous Feedback: Create a culture where feedback is regularly given and received. This helps in identifying issues early and making necessary adjustments.
10. Embrace Data-Driven Decisions: Use data to inform decisions and track progress. This ensures that changes are based on evidence rather than assumptions.

Many organisations are ‘sold on a dream’ of agility without understanding the extent and complexity of the never-ending journey that represents. When considering such a journey, it is essential to remember that agility itself is not the goal. The goal always relates to why agility is being considered – most often, a desire to improve business performance.

To justify the sustained investment in agility required to improve business performance, it is essential that a baseline of current business performance is measured at the outset across a wide range of measures, and that indicators of agility – essentially the aspects around people described above – are also baselined.

Beyond that baseline, measure trends in performance regularly. Using an incremental approach to your business agility initiative, it should be easy to compare parts of the business that are embracing agility with areas that are yet to try. Metrics associated with both business performance and the way staff feel about the agile way of working should influence investment decisions.

Research from Boston Consulting Group suggests that about half of the companies that claim high agile maturity achieve their transformational goals and can demonstrate real business impact.  The others adopted agile practices but didn’t reap the benefits of improved performance. They missed their transformation targets, mainly because they underestimated the people-side of the transformation equation, failing to deal adequately with challenges such as poor communication, resistance to change and lack of true management buy in.

Business Agility brings significant benefits and if you approach those with the above risks in mind, you are setting yourselves up for success and are likely to join the 50% of organisations that have successfully made the transformation.