An Agile organization is a human-centric organization that responds and adapts quickly to changes in the marketplace or environment. The agile organization focuses on satisfying its customer’s needs through the continuous delivery of valuable products.
Why Do You Need an Agile Organizational Structure?
Nowadays, most businesses operate in a so-called VUCA market (volatile, uncertain, complex, ambiguous) where requirements change frequently. What customers might have deemed an exciting product functionality yesterday, it can easily turn into just a satisfier today. Furthermore, emerging startups quickly develop innovations, making it harder for traditional organizations to keep up with their pace. As a result, those organizations risk becoming obsolete and ultimately uncompetitive on the market.
An example is Mckinsey's study based on the S&P 500 Index, which found that big companies' average life-span fell from 61 years in 1958 to about 18 years in 2011. Furthermore, projections show a considerable risk for 75% of companies currently quoted on the S&P 500 to have disappeared by 2027.
To prevent that, many of them have already turned to Agile practices and applied them on the team level, usually looking to improve product development efficiency. However, ensuring long-term business survivability asks for a scaling Agile approach where the entire company adopts Agile ways of working, not only separate parts of it. The idea is to enable it to more quickly and effectively adapt to a changing environment, continuously improve, innovate at a faster rate, and thus better meet customer requirements. In reality, this is what can be defined as organizational agility.
To achieve it, there needs to be alignment between all organizational levels, faster communication, more frequent releases of value, and a way to ensure that the right thing is worked on at the right time.
What Are the 6 Key Characteristics of Agile Organizations?
Before we dive deeper into how you can develop an Agile organization, let's set the ground with a few common traits that those processed companies share.
1. Follow a Shared Purpose and Vision
One of the main attributes of Agile organizations is that they are customer-focused and committed to creating value for all stakeholders. The main idea is to shift focus to outcomes rather than merely output. That's why there is a shared purpose and vision for everybody to follow, as leaders aim to constantly communicate it while letting people decide how to support it with their day-to-day activities best.
2. Evolved Transparency for Knowledge Sharing
Building an organizational structure that encourages knowledge sharing and keeping everyone in the loop requires radical transparency across the entire organization and a culture shift to a more open environment. In practice, companies achieve that by focusing on improving collaboration between teams and setting up low-tech, high-touch tools (such as visual charts and boards) that radiate information. This helps keep everyone on the same page and increases their sense of belonging to the common purpose.
3. Focus on Customer Value Delivery
Another essential trait of Agile organizations is they recognize the fact that the best way to minimize risk is to embrace uncertainty. Instead of developing long-term and detailed plans that signal false security, companies need to make more rapid decisions by frequently releasing value to the market.
Agile organizations accomplish that by reducing batch sizes of everything, from individual work items to high-level strategic objectives, to gather fast feedback from the market. This allows them to respond to customers’ switching behaviors promptly and, thus, continuously deliver valuable products.
4. Regular Feedback Loops to Achieve Alignment
Agile organizations engage in regular learning cycles (feedback loops) where they reflect on any new information, adapt to changes, and continuously look for improvements.
Moreover, they focus on seeking feedback constantly from both internal and external stakeholders to see how well they are executing on the high-level vision. This allows leaders to regularly evaluate and track the progress of strategic objectives and decide whether to accelerate them or shift direction to accommodate changing market conditions.
5. Empowered Teams and Cross-Functional Communication
Agile organizations build their structures by viewing them as an ecosystem of interdependent services where each service contributes to the final customer value delivery. There is an established connection and visibility across all of them, allowing a faster stream of communication top-down, bottom-up, or sideways. This will enable companies to visualize the flow of their solutions across all structures and thus focus on optimizing the entire value delivery stream.
Furthermore, the Agile teams responsible for each service within the company continuously aim to evolve their work processes to make them more "fit for purpose". They are empowered to make local decisions, freely share ideas, and experiment with new things. This way, Agile organizations aim to create an engaged workforce that delivers more quality products or services to the end customers.
6. Adopt a Continuous Improvement Mindset
Startups heavily use the principles above to develop innovative products. However, even big, established businesses need to adopt them by creating alignment between all teams and seeing them as small startups that produce value for the final market offering.
The idea is not just to make sure that the teams are developing the right product or service but also that the entire company moves in the right direction. By integrating frequent "test, learn, adapt" cycles, organizations become capable of managing uncertainty, better understanding complexity, and thus continuously improve at a faster rate.
How to Develop an Agile Organization in 4 Steps?
To drive organizational agility, companies need to have a complete management system at their disposal that they can leverage to build radical transparency, create a symbiosis between all structures, and facilitate information flow within them. Another critical part of the equation includes the organization's ability to improve predictability and thus better balance demand with capabilities.
But how can you tie all those things together to make your organization more resilient to changes? One way to accomplish that is to implement the workflow management method Kanban that can improve organizational survivability through evolutionary change management. Focusing on visualization, data-driven continuous improvement, and engagement for all stakeholders is an appropriate answer to the turbulent pace of change in today's business environment.
Let's dig deeper to see how this can happen in practice.
1. Use Kanban System for Every Service in the Organization
As mentioned earlier, Agile organizations aim to view their structures as a network of interdependent services and thus see the flow of a given solution from concept to fruition. In reality, this can happen by introducing interconnected Kanban boards where the value stream of every service is visualized.
This provides unmatched transparency and, through integrating various practices such as limiting work in progress (WIP), uncovers bottlenecks, and enhances flow efficiency. As a result, teams can build a Kanban system for every service delivery process and then gradually evolve it to meet service level agreements (SLAs).
Those represent commitments made to the customer regarding service delivery rate, which is defined by metrics such as lead, cycle time, and throughput. It is the criteria against which we should frequently measure how "fit for purpose" our processes are and discuss potential improvements to ensure customer satisfaction.
1.1. Managing Dependencies between Teams
Often in large organizations, there are different teams involved in releasing a complete service to the market, accumulating dependencies between them. In the Lean/Agile world, those are classified as waste, so companies need a straightforward way to manage them to reduce the risk of delay.
Оne solution for dependency management that avoids heavy disruptions of existing processes is to visualize the dependencies on interconnected boards and track their progress. For example, suppose one team is dependent on another for producing some form of value. In that case, they can create a specific column on their Kanban board (parking lot) where work items enter to signal the need for another team's input.
Creating a "parking lot" column on a Kanban board when other teams' input is required
This creates a queue in the work process, which the dependent team needs to monitor regularly. A good practice here is to apply WIP limits on the queue to restrict the number of work items that reside there. This will allow you to improve their flow and prevent the other team's Kanban system from overburdening.
On top of that, with lead and cycle time data, you can calculate how long dependent work stays in a parking lot. Based on the findings, you can form service level agreements with the other teams (that you are dependent on) and collaborate with them in periodical intervals to gradually improve the overall service delivery process.
2. Use Feedback Loops to Build an Information Flow
When talking about frequent collaboration, Agile organizations aim to achieve it through regular Agile ceremonies/cadences across all company levels. This contributes to the creation of symbiosis between structures and streamlines information flow to ensure that the right things are executed at the right time.
In Kanban, for example, there are seven cadences, which are essentially meetings that aim to streamline communication between teams. These include Strategy Reviews, Operation Reviews, Risk and Service Delivery Reviews, as well as Replenishment, Delivery Planning, and Daily Meetings.
Kanban cadences or feedback loops for improvement and collaboration
Let's break them down into two major categories to explain their application better.
2.1. Service Delivery Set
The cadences in this category are mainly concerned with pulling new work and ensuring the old one is getting done in every Kanban system across the organization. They include the Daily Kanban, Replenishment, and Delivery Planning meetings.
For example, every single team can practice the Daily stand-up meeting where co-workers sync progress on projects and individual tasks in front of a Kanban board. With the help of the Kanban Replenishment cadence, on the other hand, teams can discuss what work to start next, while the Delivery Planning meeting is reserved for making decisions on which items are ready for customer delivery.
2.2. Improvement/ Evolutionary set
The next category encompasses cadences, where the main idea is to adapt to changes both on a team and management level and look for ways to evolve organizational systems. Those include Service Delivery Reviews (team level), Operations and Risk Reviews (middle management) as well as Strategy Reviews (executive management).
The Service Delivery Reviews, for example, are concerned about a single Kanban system where individual team members reflect on past events and discuss how they can do things better. Operations and Risk Reviews, on the other hand, take those discussions to a higher organizational level. They aim to reflect on the performance of multiple Kanban systems, where you review dependencies, identify risk events, and look for ways to mitigate them.
Advancing further up the hierarchy, Strategy Reviews are concerned with engaging top-level executives (ex. CEOs, Agile project managers) who evaluate the business environment and adapt to changes. By aggregating information from other cadences, including market observations, they can plan strategic initiatives and ensure that the company is moving in the right direction.
3. Implement Data-Driven Continuous Improvement
Developing an Agile organization also requires improved predictability so you can better match demand with capabilities and meet customer delivery requirements. The way to accomplish that is by analyzing service delivery data and then deriving improvements based on the findings.
To do that, you can use Kanban metrics such as lead and cycle time, WIP, and throughput. You can measure and collect data on those metrics with Cumulative Flow Diagrams (CFD), Cycle Time Scatter Plots and Histograms, WIP, and Throughput Run charts, which will help you analyze workflow stability and come up with service level agreements across the organizations.
For example, in Kanbanize, we apply those charts and plot our historical service delivery metrics in Monte Carlo Simulations. This allows us to forecast when and how many work items we can deliver to the end customer or shared services based on probability rather than estimation.
Analytics for Data-Driven Continuous Improvement & Forecasting in Kanbanize
As a result, you will be able to improve service delivery or project predictability and have a way to anticipate demand better. This will enable you to make the right decisions based on real data to improve overall organizational agility continuously.
4. Understand and Focus on Customer Expectations
Last but not least, remember that the path to organizational agility is never-ending. The ideas discussed above can help you boost it, but your primary target for ensuring long-term survivability should be to delight your target market continuously.
That's why don't be afraid to experiment. Just make sure you collect your feedback as soon as possible, so you can better understand your customer's expectations. This will enable you to adapt to their changing needs and innovate faster.
What Are the Benefits of Adopting an Agile Organizational Model?
There are plenty of benefits you can experience from bringing agility into your organizational structure. There are quite a few Agile companies' examples to prove that switching to this project management approach will make evolutionary changes to how your business operates.
Being able to adapt to changing environments and customer expectations is the most recognizable one. However, let us outline a few more:
Increased collaboration across all organizational levels
Better alignment to business objectives and daily activities
An Agile organization is a customer-centric structure that adapts and responds quickly to changing customer requests and market conditions. Its primary goal is to deliver customer value within a short time.
How Do You Create an Agile Organization?
Creating an Agile organization requires adopting a set of practices and principles that enables the organization to be more responsive to changing markets and clients' needs and requirements.
What it takes to accomplish this is having a management system that allows transparency across the organization, building an information flow through open communication and feedback exchange, and making data-driven decisions to improve predictability to balance demand with capabilities.
What Are the Characteristics of an Agile Organization?
The key characteristics of an Agile organization are:
Following a shared purpose and vision
Cross-functional communication for knowledge exchange and alignment
A customer-centric approach that focuses on understanding and meeting customer needs
Shared leadership and empowered teams
Constant internal and external feedback exchange for tracking the progress of strategic objectives
Embracing a continuous improvement mindset
Why Is Agile Important in an Organization?
With the fast-changing market conditions and increasing customer demand, companies need to find ways to adapt to these changes to stay competitive. Agile ensures company survivability by promoting a culture of continuous improvement of processes, constant innovation and learning, empowered teams, and a safe culture of experimentation. Thus, Agile creates an environment where companies can quickly respond to rapidly changing market conditions and frequently deliver value to their customers.
What Are Examples of Agile Companies?
A few popular companies that have adopted the Agile way of working are:
What Is the Difference between Traditional and Agile Organizations?
The most significant difference is that Agile organizations are characterized by their flexibility. This allows Agile organizations to be more responsive to the market and customers as decisions are made across all organizational levels based on open cross-functional communication and regular feedback.
On the other hand, a top-down approach is typical for a traditional organization where all decisions are made at the top and passed down different hierarchical layers.
Achieving organizational agility requires a cultural shift to a more transparent environment and a mindset of “test, learn and adapt”. To create an Agile company, you need a complete management system at hand that allows you to:
Achieve radical transparency across all organizational structures;
Build an information flow within them;
Improve predictability to balance demand with capabilities.