Australia and New Zealand: Building ‘agile’ capability

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Modernising long-accepted operating models has become a global hot topic, with many of the world’s most recognised brands embarking on agile transformations.1The impact of agility: How to shape your organization to compete,” McKinsey Global Survey, May 25, 2021. In this piece, we unpack agile transformation for organisations in Australia and New Zealand (AuNZ). We discuss how the disruptive nature of the pandemic makes this the perfect opportunity to embrace agile, as well as how the current lag between AuNZ businesses and their global peers in executing agile is a competitive gap that smart businesses can close to their advantage. (For a definition of “agile,” see sidebar “What is agile?”)

How agile in AuNZ compares with the rest of the world

To examine AuNZ’s performance on agile in a global context, we conducted a comparison between McKinsey’s global data set on the impact of agility2The impact of agility: How to shape your organization to compete,” McKinsey Global Survey, May 25, 2021. and the Australia and New Zealand subset. We found that while Australia and New Zealand offer some pioneering successes in agile transformation, the model is less adopted and less deeply embedded than the global mean.

First, let’s recognise the successes. There are several AuNZ organisations being celebrated as global benchmarks for agile transformation. For example, Spark NZ (formerly Telecom New Zealand) is an example of agile success in the Pacific, having gone “all in” to adopt agile management across the entirety of its business in 2018. There is also an uptick in local transformations in industries such as consumer packaged goods and retail, which are generally less intuitively associated with agile. For example, one of Australia’s largest beverage companies and a major Australian retailer introduced agile ways of working across a range of functions in their organisations. In both cases, new-product development, marketing activity, and supply-chain improvement have been accelerated through agile models.

By going all in on agile, these companies transformed their operating models from end to end and introduced the key backbone elements of agile planning, budgeting, performance management, and leadership development. They achieved shared clarity of purpose and priorities. They then simplified the operating models and adapted new ways of working to drive those same priorities. Delegation and trust in project teams helped accelerate decision making, allowing leaders to spend more time connecting with their teams and focusing on the strategic road ahead. Old boundaries and silos were lowered, and new technologies and work methods were adapted at speed.

Those that have completed transformation successfully are seeing results: a to-market time that is two to ten times faster, a 5 to 30 percent increase in customer-satisfaction score, a 15 to 50 percent increase in employee engagement, and cost savings of 10 to 30 percent.

With these successful pioneers gaining traction, it’s not surprising that the clear majority of AuNZ businesses have started, plan to start, or have executed an enterprise-agile transformation (Exhibit 1). However, our research shows that AuNZ companies as a group lag behind the global mean in terms of their appetite for agile, with nearly 30 percent of AuNZ respondents not planning an agile transformation, compared with 25 percent of global respondents. Moreover, 55 percent of AuNZ businesses identify agile as a “top-three priority,” which prompts a question: what is holding back the other 45 percent?

Twenty-nine percent of respondents from Australia and New Zealand reported no plans to start an agile transformation.

When we asked AuNZ businesses why they were not pursuing agile at this time, the most common answers were the following:

  • They lack familiarity with enterprise agility.
  • Enterprise agility is not beneficial or applicable in their business.
  • Other priorities are higher on the agenda.
  • Resources are insufficient for such a transformation.

This current gap in knowledge and comfort with agile creates enormous potential for AuNZ businesses looking to adopt agile, extract value, and gain a competitive advantage by modernising their operating models. (For different approaches to agile, see sidebar “The four corners of agility.”)

What are some key elements of a successful agile transformation?

As shown in Exhibit 2, our research3The impact of agility,” 2021. on the global adoption of agile tells us that high-performing agile transformations share the following essential ingredients that have ensured their success:

  • Ensuring the top team is ready. Before starting, spend sufficient time up front to ensure that the top team understands key concepts and can lead others through them.
  • Being intentional and going after value. Understand how agile creates value for your business and have leadership guide the organisation to pursue that value in a focused manner. Don’t rely on small-scale piloting and waiting for benefit to emerge at scale.
  • Going beyond pilot teams to build organisational connective tissue. In the scope of the transformation, aim to transform the full operating model to make sure it supports and connects agile transformations and does not hold back innovation teams.
  • Maintaining the speed and supporting the front-runners. Aim to deliver the bulk of the transformation in less than 18 months to maintain momentum and avoid fatigue in the organisation. Support selected front-runner areas to demonstrate exemplary commitment and early results.
Organizations can follow a four-step recipe to boost their chances of success  to 75 percent.

In comparison to the global perspective, our AuNZ research indicates that local competitors are less likely to have fully embedded these four elements of agile success than the global mean. This means that there is an opportunity to gain competitive advantage within the AuNZ market. There are no intrinsic reasons why local companies should lag behind the rest of the world in these agile outcomes, which means that businesses can leverage these insights to close the gap and outperform local competitors. Exhibit 3 illustrates the gains to be made.

Each of the four elements of the recipe are composed of specific actions that increase the odds of success.

For AuNZ businesses looking to implement the performance advantages of agile, it is vital to understand and integrate the elements of success we’ve outlined above. As a first step on your agile journey, we recommend a deep dive with your leadership team on the following:

  • Seek voices of experience. How can you access other executives that have gone through this journey? What insights—good, bad, and ugly—can your networks offer?
  • Get on the ground. Articles and briefings are one thing, but unique insights can be gained by getting into the boardrooms and shop floors of companies that have already transformed to agile.
  • Bring the insights back home. Spend significant and dedicated time with your leadership to really understand the learnings from steps 1 and 2 and how these can be applied to your organisation.
  • Build the plan. Using our known elements of success and insights from your own research and deep dive, build and gain clarity on a comprehensive and holistic plan for your business’s agile ambitions.

Go agile—the time is now

Introducing agile as the basis for your operating model is a bold move. Like all reinventions, it requires a leap of faith—with bold and multifactor moves reaping the biggest rewards in terms of organisational performance. The value unlocked by agile operation is getting too big to ignore, and the current gap between AuNZ and global peers in executing agile transformation is a competitive gap that astute AuNZ businesses can close to their advantage. As we plan for a postpandemic economy, every advantage will count.

Of course, organisational cultures respond differently—and sometimes unpredictably—to disruptive change. Leaders might ask themselves, “How disrupted are my business, my workforce, and our culture?” The answer is likely to demonstrate not only why there is much to gain from reinvention at this time but also why there is much less risk to going agile in terms of disruptive impact.

Born about 20 years ago from the growth phase of some of our most disruptive—and successful—businesses, the agile approach now seems almost designed for the disruption caused by the COVID-19 pandemic. Agile can equip businesses and teams with the flexibility and responsiveness they need to surf the disruptive waves of the pandemic at a time when individuals and teams are more ready to flex and adapt their work practices than at any time in recent memory. The time to act on agile is now.

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