Digital technology allows disruptive business models to emerge and expand at previously unimaginable rates. For incumbents, this unlocks a Pandora’s box of uncertainties, with no sector unaffected. Most business leaders know this. But what those disruptions actually look like and which ones businesses should take seriously—that’s a tougher nut to crack. After all, the upheaval of the media, travel, and retailing sectors looks somewhat obvious in hindsight, but it was difficult to predict in advance. And seeing around corners only becomes harder as the pace of change accelerates. That’s why agility—the ability to react quickly to threats and opportunities—is an increasingly critical capability as companies seek to become digital to the core.
How can companies become more agile? Take a look at your information-technology team. Agility has long been essential to creating usable software quickly, and chief information officers have developed a suite of agile approaches and tools to address long delivery cycles and inflexible legacy systems. Many of these approaches can be expanded well beyond the perimeters of IT and applied across an organization:
- Increase decision velocity. The IT world has shifted from slow “waterfall” methodologies to agile techniques such as “scrums.” At their heart is rapid decision making. Small cross-functional teams work side by side, checking in daily for quick progress updates and problem solving. Teams work to produce something new—such as a product or feature—and test it with end users every one to two weeks. Some even bring end users into the process. This approach can be applied more broadly across a business, with small teams meeting frequently and people from relevant functions actively working together with greater authority to make decisions quickly (no more monthly steering committees). Working at this pace means focusing on fewer objectives and putting in place well-defined controls such as decision rights and risk guidelines. One consumer-technology company, for example, redesigned its process for marketing campaigns to reduce the time from idea generation to launch from six weeks to three. It used a simple one-page strategy brief to ensure that marketers were clear about their objectives from the outset, reducing the temptation to develop overly long strategic compendiums.1
- Democratize the data. IT systems are only as good as the data with which they operate. The best IT architectures create tight standards for data that rely on one system that houses all approved data, a “single source of truth.” Organizations can apply these principles more broadly. For example, a single source for management information systems stops the debate over whose numbers are correct and refocuses discussion on insights and action. A single source can be distributed across the organization in real time, allowing faster decisions and eliminating confusion among competing data sets.
- Design assets for reuse. Reusable IT systems are critical for efficiency and are characterized by modularity (independently functioning modules of code) and interoperability (modules interacting seamlessly using standard protocols). While the “hard asset” world of manufacturing has embraced such standardization—with reusable parts or engines that can fit in multiple vehicles, for example—companies have been slower to apply it to “soft assets” such as creating business processes that can be reused. Making the process of opening a bank account modular, for instance, would mean creating modules for each phase of the process, such as collecting customer data, processing them, and setting up the account. Many of those same modules could then be used across different channels, such as when a person opens the account in person, on a mobile device, or online. Standardizing these “process modules” would also allow them to be used in other cases—for example, the data-collection process when someone opens a bank account could also be used when someone applies for a mortgage. While pursuing specialization and standardization shouldn’t be confused with creating rigid systems, the critical element is to collect the same data no matter which channel is used. Implemented correctly, thoughtful specialization provides more flexibility because employees are freed from doing the basics over and over and can focus on actions that add value.
- Minimize complexity. Complexity is the enemy of agility. In the IT world, complexity is reduced by limiting the number of variants (for instance, not catering to every use case) and using middleware to connect systems to one another via hubs rather than requiring systems to connect directly (also known as “point to point”), as well as by building on standard platforms. The corollary to this IT hub-and-spoke approach in the wider organizational context is breaking up the matrix. In plain English, that means having fewer people involved in making decisions so you can get things done. Companies that operate in matrix models scale capabilities by integrating people into increasingly complex reporting structures and delivering through multiple channels, and dealing with petabytes of data means we’re now at a tipping point of complexity. Simplifying lines of accountability and devolving decision-making rights farther down the organization can ratchet back the point-to-point organizational complexity that bedevils many large companies. In organizations that run on consensus, this can be particularly tricky but no less valuable.
- Rapidly redeploy resources. Agility means resources can be rapidly directed to wherever there is an opportunity or threat. In the IT world, technologies exist that allow processing power to be pooled across systems and drawn from external sources (such as the cloud). In the broader organization, rapid redeployment means a fungible workforce, cross-trained to switch between roles; access to external labor pools such as on-tap external contractors; and, most important, a budgeting process that reallocates resources where they are needed. One bank uses a single global work queue for operations tasks, for example, enabling it at any given moment to distribute available resources in real time wherever they are needed.
Agility may require short-term investments, including those to improve management information systems. Yet, as IT’s agile approach has shown, operating in today’s increasingly uncertain world requires companies to both think and act with much greater flexibility.