Supply shocks, talent shortages, digital revolution, a pandemic and political bombshells such as Brexit make for a volatile world. In the face of such instability, today’s businesses are looking to reinvent themselves as agile, nimble organisations that can respond fast to the latest unexpected jolt to the system.
But many long-established companies struggle to create the agility they need to confront the challenges of modern times. While they are undergoing digital transformations and have introduced new technology to cope with change, many have failed to spread new-found agile ways of working widely across their organisation.
The role of the COO is shifting in response to this need for enterprise agility. “This has become the apogee of the COO’s responsibility,” says Adrian Clamp, head of digital transformation at KPMG in the UK. “The COO is perfectly placed to create the new structures of an agile enterprise operating model. COOs are the best people to help a business to unlock the benefits of agile at scale. They often see more clearly than others the need to connect functional silos, increase the pace of change and introduce new ways of working. They are typically the sponsors of enterprise agility” he adds.
Redesigning organisations to become responsive to change requires technology, processes and people to work together in new ways. A route to achieving this agility is adopting the approach of a smaller business, says Clamp. “You’re trying to mirror how a startup works, but you’re doing it within a big company. A startup doesn’t have all the functional silos of a larger business, or all the hierarchy and cultural obstacles in place. You just have people innovating rapidly together. Established businesses need to mirror that model, but at scale,” he says.
From Facebook and Google to Uber, Netflix, Amazon and Airbnb, the hyper-scale Silicon Valley startups of the past two decades have used agile methods to create rapid global success. Now long-established giants are looking to adopt their methods. Banks and insurers are pushing ahead with agile methods as an explosion of innovation in fintech has created a range of new mobile-first fintech apps. Automobile makers are using agile to shift to electric cars. The race for net-zero carbon is being conducted through agile methods. Public sector organisations are also using agile methods to deliver more for less.
For those who get agile right, the rewards are substantial. Organisations that adopt enterprise-wide agile working are better equipped to navigate external and internal change at market speed. They produce value faster and achieve better growth on average. Their revenue growth is 37% higher than those that do not adopt agility according to MIT, while Forrester says their growth is 3.2 times higher than industry average growth.
Clamp sees the move to enterprise agility as an historic shift in management away from the Fordist, Taylorist model of standardised mass production of small tasks, the organising principle of business for over a century. An agile enterprise treats colleagues, not as individual cogs in a machine, but as the well-spring of change and innovation. They work in small, cross-functional teams drawn from across departments to share knowledge and expertise in the drive to make continuous improvements which respond to the needs of the customers and their colleagues. However, this has dramatic implications for the way the business is organised and for the mind-set of everyone from board directors to staff.
“Agility is needed in anything that drives change for the organisation,” says Mel Newton, a partner in the people consulting practice at KPMG in the UK. Agile methods can be used to implement new technology or to change work processes, to move staff to different roles or target new customer groups, to enter a new market or respond to a change in regulation or a global pandemic.
The methodology of agility originated in the early 2000s as a way of improving software development. Rather than creating, testing and introducing new software then launching it fully formed on a certain day, software developers went agile. They created cross-functional teams alongside product testers and user interface experts to build the software, go live and then perfect it while it is being used. This means crafting a minimum viable product, then tinkering with it on the go as problems come to light, “fixing the plane while flying it.”
Enterprise agility takes this approach business wide. In the present environment of post-pandemic inflation, supply shortages and the talent drain, agility is coming into its own. Companies are focusing on the changing behaviour and needs of both customers and employees.
However, businesses pay too little attention to the cultural and people aspects of agility, says Newton: “An agile enterprise requires a completely new organisational culture and fresh ways of working.” A fresh approach is required from the chief executive, CFO, CMO, CHRO and COO. Their main task is to invert the traditional power structure, step back and hand control over to their employees.
She adds: “The people on the coalface, those who are actually running these processes and doing the work and interacting with customers are the ones who know best about how to deliver the operations and are in touch with what customers need.”
For C-suite leaders, empowering agile teams can be tough as it means giving up power bases they may have built up over many years. Senior executives need to become “servant leaders” who facilitate the rest of the team and empower them to lead change.
At the same time, the organisation needs to become much more flexible and fluid and adopt a matrix structure.
An example could be head office and support staff from human resources, finance, risk management and procurement working together to support the rest of the organisation. These staff spend some time in their own departments then work in cross-functional teams helping with the creation of new programmes, changing processes, or assisting in new product development.
“And that’s quite a change of shape for most organisations,” says Newton. “It means heads of department lending their people to the rest of the business. And it means thinking about the processes of the entire business, not just their own individual roles.”
Typically, says Newton, organisations create a transformation plan to respond to a market risk – such as a new rival – and that transformation process might last more than a year. But by the time the plan is finally put into place, the original business case might be out of date – through market disruption, inflationary shocks or any of the myriad causes of change. “Agile is about looking to get benefits during the journey of that transformation through continuous improvements that can be introduced every step of the way,” Newton says.
According to Martin Molloy, a partner at KPMG in the UK’s technology advisory, a crucial factor for many organisations is a change that began about a decade ago. Before this, technology used in the workplace was far superior to the technology staff had at home. But that has reversed with the prevalence of fast broadband, smartphones, tablets and 5G. This is creating profound changes to working patterns as businesses transform their processes accordingly and implement work from home practices and allow staff to use their own devices. At the same time, technology is moving faster and the cycle times for innovation are shortening.
These trends heap pressure on businesses to be ready to adapt to the new realities that are impacting the experiences of both the customer and the employee, says Molloy. “These factors make it easier for new entrants into your market to be disruptive,” he says. “They can lure away your staff and your customers too, tempting them with the latest advances in technology.” This is how many of the Silicon Valley scale-ups of the past 20 years have re-invented markets and outmanoeuvred legacy businesses.
Established players are responding with their own agile development programmes.
However, while improving enterprise agility is vital to keeping pace with market disruption, the process often falls flat, says Molloy.
“The reason agile is often only partially successful is because it’s easy to do software development and build new tech features and capabilities but if the users and the customers don’t help to design them and know how to use them quickly, you don’t get the value from them. We need to not only help the technology function become more flexible and in tune with the business environment, but also to educate everyone in the business about what agile means and how the new features work,” says Molloy.
Another area that requires a complete rethink when shifting to agile working is the issue of budgeting and value creation. Traditionally, budgets are given to development teams annually, and the team must have a clear plan of exactly what they are going to deliver in 12 months’ time before they get the finance. But agile teams can’t plan forward in this way. They make continuous improvements, fail fast and work through trial and error, driven by how effective the changes are in driving growth or reducing costs.
According to Allaster Finke, a director in the technology team at KPMG in the UK, businesses should move away from annual budgets towards more flexible monthly cycles. “When budgets are moving month to month, businesses can reallocate their funding in a way that helps them better respond to whatever pressure or demand the market has on them. It’s much harder for an organisation that sets the budget annually to be able to change direction and make that rapid reaction,” he says.
“If a team is being agile and fleet of foot, they might not know what they are going to finally deliver or when. So how do you work out budgeting for them and how do you incentivise your people?” adds Molloy. “People tend to be measured by annual cycles and on objectives that are financial and non-financial. But this may be incompatible with an ever-changing environment where the goalposts are constantly moving around.”
Clamp adds: “Businesses often tell us they are too siloed, too hierarchical, and too bureaucratic to respond to a rapidly changing world. They know they need to be more customer-centric, leaner, agile and better connected.” Becoming a connected enterprise isn’t so much about turning around a super tanker as redesigning the old vessel in the form of dozens of fast-moving, highly-manoeverable speed boats. As the world becomes ever more unpredictable, enterprise agility is essential in helping businesses to maximise value in the digital age.
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