When Agile isn’t Responsive to Business Goals

Today, leaders often strive to be responsive to an ever-changing marketplace, and their current tool of choice is often Agile. Agile processes, from IT delivery methods, have been adapted and adopted across organizations and at enterprise scale. This is primarily because it provides principles and practices that anticipate and handle ambiguity and change in a formalized process. Although this may be true, the constant refinement of strategy development, business processes, and service delivery can quickly veer off in directions never considered by the business. Sometimes this leads to profitable serendipitous outcomes, but many times, after some reflection, the journey results in a destination where the organization as a whole did not anticipate nor fully desire to go. This also tends to leave some parts of the organization behind and/or struggling to keep up, leaving the enterprise without a united front. Responsive business agility is more than an ever-changing direction that attempts to drag along the organization. It needs to be heads-up, ever vigilant to the changing landscape, responsive yet still self-aware enough to navigate opportunities towards key achievable goals.

In the early days of the digital business, companies relied on large technology firms that built hardware to also provide needed software solutions with their products. Eventually, as the information technology skills grew within companies, the process of delivering new solutions needed to be formalized and better managed – think classical waterfall project approaches. This would entail a full analysis of requirements, then full design based on those requirements, then build, test, and deploy. These new methods provide far more reliability that the end result would be more or less what was expected at the start of the project. As more solutions and complex projects were undertaken, cracks in the linear waterfall approach became apparent. These cracks were not insignificant, and there were plenty of very large complex projects being abandoned well before completion was achieved – at a massive cost. Soon more and more projects were adopting agile methodologies to build in small digestible iterative steps to reduce the risk of getting to the end with a product that was no longer needed or didn’t quite meet expectations. Agile was a revolution and continues to be practiced in various evolving forms in most companies.

Why it’s plausible – Agile firms, especially start-ups, are always turning on a dime and they certainly don’t seem to be following any kind of plan. Easy enough, then, to assume that what you see an agile firm doing – acting at high speed, maintaining a high tempo, being highly responsive – is all there is.

Why it’s wrong – Agility is not a strategy. It is a capability, a very valuable one which has immediate operational benefits, but that cannot permanently affect a firm’s competitive position unless there is a strategist taking the right decisions about where to direct that capability.

This article correctly addresses why the approach is seemingly logical, yet all too often misguided. There is significant pressure on businesses to respond to customers, adapt to market pressures, and continue to evolve products and services, all while achieving financial revenue and profitability goals. This pressure can be overwhelming and force many companies to continually adjust their strategy. An ever-changing single strategy is not effective and therefore not truly responsive to both the needs of the customer and the organizational stakeholders.

Business agility is an excellent goal and there are places where agile principles and methods are warranted, but the complexities and pitfalls should not be overlooked.

One critical aspect of adopting these principles that does not get enough attention is the cultural change that is often required. Strategy change is very disruptive to an organization that is well-tuned to reliably deliver to existing customers. Customers too, force disruptive changes on businesses and strategies, but surprisingly there are cases where the customer pull is not disruptive yet still detrimental.

In the classic business book, the Innovator’s Dilemma – When New Technologies Cause Great Firms to Fail, by Clayton M. Christensen, there are warnings from business history about companies who followed their current customers into an unprofitable future by following good management principals and strategies. The book provides some longitudinal studies of market dynamics in a few industries to demonstrate this phenomenon. The overly simplistic, but still informative lifecycle sketch, of these firms is the following:

1. New technology, process, or unique strategy enables your entrance into a market – usually to satisfy small niche or low-profit subset of market (not pursued by established market leaders)
2. Initial agility and survival instincts drives early growth.
3. Learnings, customer loyalty, formalization of key processes and enhanced reliability lead up the profitability curve.
4. At market leading position, organization becomes well-tuned to deliver to current customer demands – Focus, investment, awareness recedes away from niche, less profitable customers.
5. New technology, process, or unique strategy enables a new entrant into a market – usually to satisfy small niche or subset of market (not pursued by established market leaders = YOU).
6. As new a firm moves up, current customers either begin to adapt to market disruption and move to new entrants or begin to fail with you.

And so the cycle repeats, over and over, for too many companies across too many industries. So, what is the lesson here for established market-leading firms? Overall, the strategy needs to be clear, with defined direction but without blinders or unnecessary constraints to market changes on the periphery. Some successful mitigation techniques that may apply agile principles, but in a more “targeted” way, are:

Spin-offs or Skunkworks approach

Enable a dedicated team with a separate strategy to assess and address potential opportunities. The benefit of this approach is that it enables agility to take on a potential new strategic direction without pulling the entire organization through the change, until it is proven.

Dynamic Process approach

Build-in more dynamic and adaptive processes to allow more course correction without the need to change the overall strategy. The benefit of this approach is to enable continued alignment and minimize disruption by “building-in” change into business processes. This often requires an organizational culture that is generally more adaptable.

Balanced Strategy approach

Equalize the demands across employees, shareholders/ stakeholders, as well as customers to incorporate higher business purpose and value to ensure future changes are still aligned to overall direction. The benefit is to minimize unnecessary disruptions unless there is clearly aligned benefits and achievability. A defined roadmap and measurement strategy can keep these interests aligned and balanced when handling or adapting to changing directions.

Losing track of the desired outcomes

Another cautionary tale involves companies losing track of their organizations’ desired business outcomes when considering new, immediate, potential business opportunities.

As is commonly the case, assessing new opportunities is inherently challenging. There are problems with accurately valuing the new opportunity, predicting future impacts, or understanding what future opportunities my follow / result from these opportunities. Added to this is the difficulty of assessing and planning the full scope of cultural and structural changes necessary to make this new opportunity feasible. This is often compounded by the inability to effectively evaluate the priority of the pursued opportunity in comparison to other initiatives, opportunities, or transformational efforts underway. All in all, there is difficulty in being agile enough to successfully address a new strategic direction without the formalized strategy definition and roadmap to guide the process.

Enablement of team members, demands on data and insights to support effective dynamic decision making, and operational impacts should be included in evaluation, adoption, execution and monitoring of successful transformation strategies.

Communicating the strategy depends on understanding how the strategy will be implemented.

This is often difficult because a comprehensive strategy requires coordinated activities across groups. RCG utilizes a roadmap and initiatives map to aid in the communication of strategy and its implementation to the larger organization. The roadmap is then built upon the underlying strategic direction, so each action has strategic context. The benefits of this type of roadmap is to ensure that various parts of the organization are continually working toward the same outcomes despite being responsible for different “swim-lanes” of activity

A strategy has to adapt to both external and internal changes. An effective strategy needs to enable the organization to adjust to new threats without losing sight of their primary business goals and objectives. Agile methods are a capability that can be leveraged to enable change in a controlled manner with clear principles and methods. The danger is with overreliance on these agile methods to avoid the critical work of laying down a firm, but responsive strategic foundation. The foundation should enable, not hinder, reliable strategic change without abandoning strategy. This is a hard task, but one that is possible and ultimately more likely to ensure long-term success.