Business Agility Explained

What is Business Agility? (What does Business Agility mean?)

According to the Business Agility Institute®, “Business Agility is a set of organizational capabilities, behaviors, and ways of working that give your business the freedom, flexibility, and resilience to achieve its purpose, no matter what the future brings.”

Citing Ewerton Santos, a respected figure in Brazil and someone I’ve collaborated with on a significant agile transformation: “In the new economy, organizations need to understand the critical skills that unlock Agility throughout the organization, impacting business results. Leadership plays a vital role in the transformation journey, along with talent preparation and adaptable practices.”

The term “Business Agility” refers to an organization’s ability to swiftly adjust and react to changes in the business environment, anticipating, adapting, and taking advantage of market opportunities in an agile and effective manner. This concept is closely linked to Agility in product development, organizational flexibility, and responsiveness.

Characteristics and Practices Associated with Business Agility

In today’s fast-changing business environment, adopting Business Agility practices can significantly benefit organizations, helping them stay competitive by responding faster and more efficiently to market demands.

These are the key characteristics associated with Business Agility:

• Quick Response to Changes
  Agile organizations swiftly identify and respond to market conditions, customer preferences, or external factors.
• Collaboration and Transparency
  Open and transparent communication is encouraged within the organization and with external stakeholders, promoting effective collaboration for better decision-making.
• Continuous Iteration
  Agile methods like Scrum and Kanban emphasize iterative and incremental product delivery, allowing for frequent adaptations based on continuous feedback.
• Team Empowerment
  Agile organizations decentralize decision-making, empowering cross-functional teams to make relevant decisions, fostering innovation and effectiveness.

• Customer Focus
  Understanding and meeting customer needs is essential. Agile organizations continuously seek to understand and meet customer expectations.
• Continuous Learning
  A culture of continuous learning is fostered, encouraging experimentation, reflection on results, and constant adaptation based on lessons learned.
• Efficient Risk Management
  Agile organizations proactively identify and manage risks, recognizing the inevitability of change.

Why is Business Agility Important?

While Agile transformation has succeeded in software development, it hasn’t permeated the entire company.

The Agile Manifesto, a significant milestone in Agility, originated in software development, leading to what many now refer to as the “Island of Agility”:

Many areas adopt agile practices, yet the company as a whole remains a bureaucratic giant. Amy Kates, Greg Kesler, Michele DiMartino, and Julie Sweet, in their book, “Networked, Scaled, and Agile: A Design Strategy for Complex Organizations,” point out the challenges of “agile business units” unable to work together for a complete customer experience.

To address this, focusing on Business Agility is crucial.

Achieving true Business Agility helps the company

• Adapt to market changes
• Continuously innovate
• Satisfy customers

• Attract talent
• Proactively manage risks
• Gain a competitive advantage

Challenges for Business Agility

Implementing and maintaining Business Agility pose challenges, involving significant cultural, process, and organizational changes. 

These challenges include:

• Cultural Change
  Transitioning to an agile culture requires a profound shift in mindsets and practices, facing resistance, lack of understanding, and insufficient leadership support.
• Leadership and Sponsorship
  Leadership plays a crucial role, and lack of support can lead to implementation failures. Leaders need to understand, support, and practice agile principles.
• Integration with Traditional Structures
  Integrating agile practices into existing structures can be challenging, leading to conflicts between agile and traditional methods.
• Capability Building and Training
  Lack of skills and knowledge about agile can be an obstacle, emphasizing the need for ongoing training.
• Ineffective Communication
  Inadequate communication can result in misunderstandings, resistance, and lack of alignment, highlighting the importance of transparency.

• Integration of Multidisciplinary Teams
  Forming multidisciplinary teams can be challenging, requiring effort and cooperation to overcome organizational silos.
• Performance Measurement and KPIs
  Establishing agile-aligned key performance indicators (KPIs) challenges traditional metrics, requiring a shift in measuring success and progress.
• Scalability
  As agile adoption grows within an organization, scaling can be a challenge. Ensuring that agile practices are scalable to meet the entire organization’s needs is a common concern.
• Change Management
  Implementing Business Agility involves significant organizational change, requiring effective management, including identifying and mitigating resistance.
• Maintaining Long-Term Agility
  Maintaining an agile mindset over time is challenging, requiring continuity and adaptability in the face of external pressures or leadership changes.

Overcoming these challenges demands sustained commitment, strong leadership, ongoing education, and an iterative approach to adjusting practices as needed. Recognizing that Business Agility is an ever-evolving process is essential, and successful organizations are willing to learn, adapt, and continuously improve.

Business Agility Frameworks and Models

There are various approaches to instilling Business Agility in companies, encompassing multiple frameworks and models designed to expedite this process. Among them, notable examples include:

Scaled Agile Framework (SAFe)

SAFe, or Scaled Agile Framework, stands out as the most widely used framework for scaling agility. It was specifically developed for large-scale agility, evolving to embrace Business Agility.

SAFe is inspired by the concept of Business Agility capabilities and provides seven core competencies to attain it:

• Team and Technical Agility: Focuses on the ability of development teams to deliver value in an agile, high-quality manner, incorporating agile practices, engineering, and collaborative working methods.
• Agile Product Delivery: Involves developing, delivering, and always being ready to launch products and solutions in short, regular cycles, ensuring quick adaptation to changing customer needs.
• Enterprise Solution Delivery: Concentrates on coordinating and delivering large solutions and systems involving multiple agile teams, emphasizing efficient integration and continuous delivery of customer value.
• Lean Portfolio Management: Applies Lean and Agile principles in portfolio management, aligning strategies and investments with agile delivery, and enabling value-based decision-making.

• Organizational Agility: Involves adapting culture and organizational structure to support agile principles, encompassing leadership, mindset, and practice changes to create a more agile organization.
• Continuous Learning Culture: Focuses on promoting a culture of constant learning and continuous improvement at all levels of the organization, incorporating the ability to learn from mistakes, feedback, and experiences to drive innovation and evolution.
• Lean-Agile Leadership: Encompasses developing agile leaders at all levels of the organization, empowering them to lead transformation, inspire and motivate teams, promote an agile culture, and make effective decisions in complex environments.

A potential side effect of adopting SAFe is the perpetuation of the agile island concept mentioned above. Lean Portfolio Management acts as a “resource allocation bridge,” connecting the “main island of bureaucracy” with the “island of agility,” according to Beyond Budgeting (discussed below).

BUILD (BUsiness AgILity Design)

BUILD, created by Alexandre Magno, a leading pioneer of Agility in Brazil, introduces a model based on Scaffolds instead of Frameworks. Scaffolds are temporary structures applied in the organization to adapt and consolidate new practices. They are not incorporated into the organization’s processes but serve to aid in adapting processes. The model consists of three steps:

1. Brief: Conduct an initial assessment of the organization’s current state, define specific objectives and agile transformation goals, and identify stakeholders.
2. Sense: Engage in benchmarking activities to understand industry best practices, conduct a detailed analysis of the organization’s internal and external environment, and educate stakeholders about the principles and benefits of Business Agility.
3. Design: Create a shared vision, align goals across the organization, develop an implementation strategy considering organizational culture, structure, and processes, and implement agile practices starting with pilot teams and gradually expanding across the organization.

Beyond Budgeting

Beyond Budgeting presents an alternative management approach to the traditional annual budgeting process. It aims to overcome limitations associated with conventional budgeting methods, fostering greater adaptability to dynamic business environments. This approach, emerging even before the Agile Manifesto in 1998, works on a modern vision of business necessary for differentiation in a scenario where business and operational models no longer distinguish a company.

Key principles of Beyond Budgeting include

• Replace Budgets with Objectives and Targets: Establish clear objectives and goals instead of fixed annual budgets, allowing teams more freedom to seek effective solutions.
• Decentralization of Authority: Favor decentralization, enabling local teams to make more autonomous decisions in response to changing market conditions and customer needs.
• Relative Performance Instead of Absolute Targets: Focus on outperforming competitors and continually improving relative performance rather than achieving specific budgetary targets.
• Accountability and Transparency: Assign greater responsibility to teams and individuals, emphasizing transparency about performance and results.
• Continuous Feedback and Learning: Promote a culture of continuous learning, encouraging experimentation, constant feedback, and rapid adaptation.
• Leadership and Shared Values: Encourage leaders to adopt a leadership style that inspires trust, promotes collaboration, and aligns with shared values.

The core idea of Beyond Budgeting is to create more agile, adaptive, and value-focused organizations by replacing the emphasis on fixed budgets and rigid hierarchies with a flexible, principles-driven approach. This approach is especially relevant in volatile business environments where rapid responsiveness is essential to organizational success, addressing the agile island effect mentioned earlier and connecting the organization’s core strategy to its operations.