“The only constant is change”. The concept embodied in this phrase, credited to the Greek philosopher Heraclitus, has been particularly prevalent to many organizations’ strategy of creating an adaptable business model, i.e. a model that allows businesses to adapt to ever-changing circumstances and stay ahead of the competition. In the context of large organizations, this adaptability has generally been determined by their ability to change: change strategy, change processes, change products, etc.
From Agile delivery, to an Agile organization
While the principle of constant change has been generally accepted since the aforementioned phrase was first coined some 2.5 thousand years ago, over the past century the increased prevalence of another concept has been witnessed which, even though not novel, had remained fairly unexplored in the past: the idea that the pace of change also needs to be factored in. It is widely recognised that the rate at which variables change in today’s world is both unprecedented and continuously increasing (accelerated change). As such, it is not only the ability of organizations to change that comes into question, but also the extent to which they can do so at a fast-enough pace.
Large organizations have traditionally employed various methodologies in order to deliver change, mostly involving a series of sequential steps (from ideation to delivery), performed by different teams. However, the abovementioned pace of change is encouraging organizations to explore alternative methodologies, where change delivery is broken down into smaller components, managed by multifunctional teams.
Many factors have led organizations to seek a new way of working in order to keep up with today’s accelerated pace of change, brought about by phenomena such as the exponential increase in connectivity, the global spread of mobiles, the widespread adoption of social networks, etc.
The need for agility
The need of organizations to increase the pace at which they deliver change is multifaceted, and can be evidenced by multiple occurrences on a global scale, such as the rapidly changing economic environment, technological advances that are disrupting entire industries, and increased political uncertainty. The main factors underlying this trend include:
- Emergence of disruptive technologiesInnovation and speed to market are two of the key requirements to capture and retain clients. New technologies such as Data Analytics, Artificial Intelligence and the Internet of Things are enabling companies to develop state-of-the-art products and services, bring them to the market before their peers, and learn from their errors when they fail. Organizations that embrace digitalisation are building resilient and flexible processes that enable them to quickly reallocate critical resources to adapt to the evolving needs of the customers. This trend goes beyond IT businesses, as more and more companies across all industries are introducing these new technologies in their operating models. In addition, the emergence of digital leaders such as Google, Apple or Amazon, or new digitally native business models such as Netflix, Spotify or Uber, has reshaped customer relationships and customer expectations around quality of product, quality of service and accessibility, enabling these companies to achieve better results while being more efficient, and increasing market competition.
- Increased political uncertaintyThe recent financial crisis, in addition to some other circumstances, has disrupted the global political framework. The rise of national extremism, coupled with various political events such as the planned exit of the UK from the European Union, have impacted international trade, whilst at the same time increasing overall uncertainty over the future state of global business. As a result, organizations are decreasingly able to plan for the long run.
- Changed competitive landscapeThe global competitive environment is rapidly changing. Fuelled by factors such as globalisation, easier access to information, and low barriers to entry, new disruptive competitors are emerging at a fast pace. Such organizations can use digital technologies to reach a wide audience quickly, and at the same time rapidly deploy new products and solutions. As such, large, established organizations, often burdened with a complexity that comes with decades of operation, need to be able to adapt and become flexible in order to keep up with the new competitive forces. This is evidenced by the continued growth of the global start-up revolution, with global venture capital funding booming, with over $140 billion invested and creating value at global level estimated to be $2.3 trillion during the period 2015-2017 (a 25.6% increase from previous years).
In the financial services industry, for instance, GAFA (Google, Apple, Facebook and Amazon) & FinTechs have shaken the confidence of leading institutions, right after the major setback suffered due to the financial crisis and the regulatory wave that followed it. Global investment in FinTechs increased steadily between 2014 and 2017; accelerating their growth in the first half of 2018.
The fact that these new digital-born competitors do not suffer the constraints that traditional major entities have, such as out-of-date legacy platforms and tighter regulations, has enabled an exponential growth of their influence and market share. And their long-term potential is even greater.
- Shift to customer focus cultureCustomers’ expectations and behaviours are evolving far faster than most companies can address, as they have become much more unpredictable than they used to be, stimulated by increased access to information through channels such as social media and the internet. This has in turn increased customers’ expectations of their service providers and limited their tolerance to unfair outcomes. At the same time, increased competition and lower costs of switching providers have amplified customers’ bargaining power, making it more difficult for companies to develop and retain a loyal customer base.
As a result, top organizations have shifted their orientation in order to try to meet the changing needs of their clients, placing the customer at the centre of their processes and strategies. Companies need to become flexible, adaptive and receptive to change to succeed in an environment with ever-changing demands.
- Increasing relevance of data
The amount and quality of information that organizations are able to gather regarding their customers, products and markets is also changing at a fast pace. The rate of change in information creation is best demonstrated by the amount of data created: 90% of worldwide data was generated in the past 2 years. There are 2.5 quintillion bytes of data created each day at our current pace, and that pace is only accelerating with the growth of the Internet of Things (IoT).
Increased availability of information, coupled with advanced techniques that can be used to analyse it, have led to data becoming a core strategic asset in successful organizations. A successful exploitation of this asset can drastically improve the service provided to the client, reveal ways to make processes more cost-efficient, and enable senior management to make more informed business decisions.
A new way of working
The accelerated pace of change has curtailed organizations’ capacity to anticipate the future and make long-term bets. This has resulted in shorter strategic cycles, where companies define their strategy for the next 2-3 years, as opposed to 5-10 years. As such, organizations are required not only to change their strategy, operations and culture, but also to accelerate and transform the way they deliver new products, services, processes and software.
Organizations need to quickly adapt to changes in the market and the behaviour of customers, and owning the latest innovations is not enough. Being capable of quickly designing and building minimally viable products, test them with the clients, refine them in rapid iterations, and finally select the one that meets the customer’s and the business’s expectations, is a key element to succeed in the current environment. In short, organizations need to become agile. This concern seems to be shared across industries. More than 500 senior executives from around the world were interviewed in 2018, and 92% of them said they believe organizational agility is critical to business success.
Within this context, the present study aims at providing insight into the present and future of Agile organizations. For this purpose, the document is structured in three sections, which correspond to three objectives:
- Outlining the journey from traditional delivery techniques to an Agile way of working.
- Reviewing the implications and challenges for organizations in adopting Agile methodologies.
- Analysing some misconceptions and lessons learned through practical implementation experience, and giving an overview of the upcoming future of Agile methodologies.
Related documents: Conduct Risk framework: Industry trends and challenges.