Business Agility – An Introduction
Business agility is not to be confused with Agile approaches to software development. It is much more than Scrum or Kanban. The word Agility is often used in the context of software development or non-traditional project management. The purpose of this article is to illustrate business agility in broader terms and with real-world examples.
Business agility can be defined as the ability of organizations to renew, adapt, evolve quickly and succeed in VUCA conditions and environments (Volatile, Uncertain, Complex and Ambiguous).
From a cause and effect perspective, VUCA conditions cause organizations to descend into chaos and dysfunction without the ability to learn, adapt and evolve quickly (which is fundamentally what Agility is).
While that definition is certainly applicable to software development, Business agility is much broader and applies to the core operations of the company and not just to their software capability.
Agility can be understood better through two perspectives. One is obvious and straightforward, which is the dynamic capability to learn, adapt and evolve quickly – through the characteristics of speed, nimbleness and responsiveness. The other perspective of stability is not so intuitive. It seems paradoxical that agility implies an ability to adapt to change and yet demonstrate stability. Stability and Change seem to be on opposite ends of a spectrum. It is useful to understand this paradoxical idea by analysing the word “fragility” that uniquely describes the opposite of agility. Fragile things, objects, individuals or even organizations break when force is exerted on them. Force may be exerted on them to change something, maybe its position, location, shape, behaviour, output, performance, etc. If the entity is fragile then it will break because of the force (change). If the entity does not break but stays the same then it is not really responding to the change. We want organizations to change and become stronger when we exert force or stress on them.
This is that unique perspective of seeing business agility through the lens of stability where organizations thrive on change (force) and become stronger and more capable.
Business agility is of critical importance to organizations not just to deliver good performance and results, but more fundamentally for sheer survival in the present day and age of high competitiveness, globalization and disruption.
Disruption is impacting almost every sector and industry at a pace that is mind-boggling. Every organization is likely to face a disruption, tomorrow, that they haven’t seen coming today. If agility is not in their culture they are likely to not exist in the future in their current form or function.
Dimensions of business agility
Forrester research have identified ten dimensions of business agility, grouped into three areas – Market, Organizational and Process. These dimensions are useful to understand where organizations stand in terms of agility as shown in the figure below.
10 Dimensions of Business Agility
Channel Integration is to do with ways in which organizations work and communicate internally and within the broader ecosystem, from marketing to customer service.
Market responsiveness is to do with how organizations respond, reactively and proactively in areas of customer demand / interaction, industry-specific changes, etc.
Knowledge dissemination is how organizations make information and data available inside, through and around silos, when and where it matters.
Digital psychology, also knowns as Web psychology, is a relatively new discipline that combines the concepts of behavioural economics, psychology, digital marketing and communication to influence the consumer.
Change Management is to do with the capability of how quickly and effectively individuals embrace and respond to market changes, new business processes, changes to structure, culture, systems, etc. It is also closely aligned with the dimension of Digital psychology.
Business Intelligence is the capability of organizations to support business decisions more effectively, through the technologies, applications and practices for collection, integration, analysis and presentation of business information.
Infrastructure elasticity is the ability of infrastructure (IT and other Infrastructure) to quickly expand or cut back capacity and services without hindering stability, performance, governance or compliance protocols. Elasticity in the context of agility refers to adaptability rather than just scalability. In a cloud service environment elasticity usually implies the ability the service can expand or contract in real time using SLA’s to make changes automatically, instead of relying on human administration.
Process Architecture is a commonly understood, shared view of all people, steps, components and business processes that an organization performs to deliver a product or service to customers. The organization's ability to change and adapt is greatly enhanced by simplifying and becoming process centric and understanding the linkage between process, business objectives and customer value.
Software Innovation relates to the ability of organizations to adopt innovative practices that quickly deliver flexible, working, integrated and value-focussed software used for customer interaction, delivery of products or services or embedded in the organization's products and processes.
Sourcing and Supply Chain is the ability of the organization’s supply chain to respond to market and environment changes and competitive forces. Supply chain agility is a measure of how effectively organizations adapt their supply chain to changes and poses the challenge of balancing cost versus responsiveness.
Examples of Business Agility
A Retail organization that can consistently make price changes, based on its closest competitors, to its 100,000 products in less than 4 hours and publish those changes to 1000 stores across the country demonstrates high business agility.
A Lending organization that can conditionally approve 80% or more of home loan enquiries, made through a smartphone, tablet or computer, within 3 minutes of the borrower accessing the lender’s website demonstrates high business agility.
An IT Services organization being able to submit a proposal for delivering services for a $1m project within 48 hours of being first approached demonstrates high business agility.
An online store selling collectibles consistently taking 4 hours to reset forgotten passwords of customers demonstrates poor business agility.
A Telecommunications company needing 2-4 weeks as a minimum or usually much longer to provide an Internet connection demonstrates poor business agility.
The reasons for the levels of poor business agility in the above real-world examples has often to do with lack of customer focus and empathy, operational silos, disintegrated processes and systems and poor organizational culture.
Business agility is the ability of organizations to renew, adapt, evolve quickly and succeed in volatile, ambiguous, complex and ambiguous environments. Those organizations that are unable to transform themselves into highly agile organizations are very likely to perish to competitors that are more agile. It is of paramount importance for Leaders to effectively develop their organization’s ability to adapt to and embrace ambiguity and change and adapt to complexity and volatility.