Published on 06 July 2021
What is Agile transformation and how can it benefit your organization?
The pace of change in the marketplace is accelerating as customer expectations evolve more rapidly than ever before. Organizations pursuing heightened future competitiveness and sustained success need to be able to anticipate changes in customer behaviors and have the flexibility to quickly adapt and respond accordingly. For most organizations, this implies a need to adopt Agile and continuous delivery practices. But moving to an agile operating model is tough, especially for established organizations. Addressing the need for Agile methods presents certain challenges, but your organization can avoid some common pitfalls that we have seen organizations encounter.
Based on our expertise across numerous transformations, we have listed the most recurrent challenges, misconceptions and drivers that organizations face when they go through an Agile transformation. In our experience, becoming armed with the right level of understanding for how to drive an agile transformation, and respecting the complexity of such a transformation, is a first step toward a successful journey
Why Agile?
Traditional organizations are designed to be stable. Their core premise assumes that they are operating within a predictable environment. Controls are in place, alongside a well-established hierarchy for decision-making and flow of information. However, the premise of working in a predictable environment is no longer valid. Nowadays, organizations operate in an uncertain, fast-paced, dynamic, global environment. Digitization continues to drive business strategies as business strives to meet evolving consumer demands and continuously adapt to changing surroundings. Being successful in today’s digital economy means being flexible, adaptable, and responsive – in short: being Agile.
To achieve this, organizations must embrace a complex and unpredictable environment by being customer-centric rather than profit-centric, focusing on value creation rather than the cost optimization. They should adopt fast learning, embrace shorter decision cycles and build a network of empowered teams and individuals enabled by technology and driven by a shared purpose.
Drivers for Agility in KPMG’s Agile Survey
Every path towards agility is unique in its route and needs, but the underlying motives are not. Based on KPMG’s Agile Survey, we can identify several common drivers for an Agile transformation.
Faster product delivery is the most common driver for agility
Organizations have various drivers for shifting towards agility. Our survey showed that the most common driver for becoming Agile is faster product delivery to better respond to changing customer needs. Together with continuously improving customer satisfaction, steering towards the customer’s needs and/or satisfaction was a driver for 85% of respondents. Today’s customers expect more. With the introduction of digital natives such as Amazon and Netflix, customers increasingly want to see the simplicity and effortless experience that they have with these organizations as part of their experiences with other organizations.
STRONG: Increased flexibility
Another important driver for shifting towards an Agile way of working is increased flexibility, and this should be no surprise. In our digital age, industries are rife with disruption. Having the flexibility to adapt when faced with change in the Agile way of working is crucial to avoid becoming irrelevant.
STRONG: Organizational silos between business and IT
Our world today is digital and the boundaries between IT, technology and business are blurring. There is no longer a business strategy with an IT strategy layered on top of it. Technology should be embedded in the core overall strategy, truly embracing digital. The Agile way of working allows for silos between business and IT to be broken down, encouraging a new way of working that is cross-functional, collaborative, human, and technical.
Challenges encountered in shifting towards agility
The road towards the Agile way of working leads to many challenges along the way. In our Agile survey, we found that regardless of how long it’s been since an organization has undergone an Agile transformation or the maturity of their current use of the Agile way of working, Culture and Performance Management is consistently the challenge felt most strongly by respondents. Furthermore, regardless of whether an organization has ‘Just Started’ their transformation or have been undergoing their transformation for 3+ years, the limited suitability for systems (e.g. modularity, complexity, technical debt, etc.) remains a challenge.
Among organizations who have just started their Agile transformation and/or are currently conducting Agile pilots, a key challenge is the availability of resources with Agile delivery experience. And conversely, organizations who have been undergoing an Agile transformation for 3+ years, or currently identify their use of the Agile way of working as enterprise agility, find that scaling beyond the team level and Flawless Operations are key challenges that they face.
What is Agile?
Agile methods are relatively new, but they have strong roots in the history of software engineering combined with Lean thinking principles.
The Agile Manifesto describes the four Agile Values and twelve Agile Principles of flexible (Agile) delivery. It was introduced in 2001 by a small group of software developers who wanted to change their existing, traditional way of working: the ‘waterfall method’. This project management style consists of making a design with a pre-defined scope where you only move on to the next task if the previous one is completed. The customer requirements are known from the start, but all phases such as design, implementation, testing and delivery are executed in series and without the customer’s feedback. The result may therefore not be what the customer wants, and unforeseen time or budget overruns are not uncommon.
Agile methodology, on the other hand, focuses on delivering value in short iterations of typically two weeks and with continuous feedback from the customers and/or stakeholders. This approach has gained more attention and popularity over the last couple of years, including in non-IT related projects.
In the past decade, the Agile methodology has made its way further into organizations than just the Technology departments. We’re seeing a fundamental shift in how organizations function when agility is truly embraced. The entire operating model of organizations may change. In our view, this ranges from structure and governance, to capabilities & processes, technology, sourcing, people & culture, and performance management. All these domains are optimized for customer focus, speed and flexibility, while increasing transparency, predictability and control, and lowering costs through efficiency. These changes typically require a lot from employees as they need to move away from the status quo and embrace change in their known, stable environment. Structural items such as functions, collaboration mechanisms and processes change, while culture and values are also impacted.
Some common misconceptions about Agile
Agile is not a purpose in and of itself
Even though ‘Becoming Agile’ seems to be a trend, embarking on an Agile Transformation Journey is more than just implementing another project management methodology. Organizations are adopting an Agile way of working in order to address accelerated market changes more quickly and be more customer-centric overall. Meanwhile, new digitally born companies are entering the market, forming direct or indirect competition. Having no legacy from previous (outdated) operating models, the modus operandi of these digital natives is Agile at its core. In order to keep up with this new kind of competition and ever-changing customer needs in the market, going Agile is the only way forward for existing companies.
Agile is not the game of IT
Agile transformation is not an introduction of a new methodology to deliver IT projects. It is a cultural shift within the organization. The Agile journey might start within IT, but it cannot be successful unless Agile principles are adopted across the entire organization. There’s a track record of successful implementations of an Agile way of working outside IT. Typically, this works well for functions such as HR or Marketing that are cross-functional in their nature, but lately operations functions are also adapting well to this iterative operating model. Important to note is that we observe the same excellent results from implementing an Agile way of working in non-digital deliveries, such as faster time to market and customer satisfaction. One of the reasons for success is much better collaboration with internal or external business stakeholders across the value chain ecosystem.
The Agile journey is not only about saving money
While many may think so, cost-cutting is not among the key motivations for Agile transformation. Even though it does create some savings due to efficiency gains within the organization - increasing revenue as a result of better meeting customer expectations - money is not the main driver for most companies. The key reasons for moving to the Agile way of working are to meet customer demands quickly and for companies to equip themselves to readily adapt to the changing environment as needed. Furthermore, an Agile way of working facilitates bridging the gap between business stakeholders and IT, eliminating the traditional IT demand – supply model. Nowadays, companies are moving away from the concept of developing their IT strategy as a response to their business strategy. As IT becomes inseparable from the business, more and more companies are developing a holistic approach where the IT component is an integral part of the overall (business) strategy.
