Those who master large-scale software delivery will define the economic landscape of the 21st century.

—Mik Kersten, Project to Product [1]

Business Agility

Business Agility is the ability to compete and thrive in the digital age by quickly responding to market changes and emerging opportunities with innovative, digitally-enabled business solutions. Business Agility requires that everyone involved in delivering solutions—business and technology leaders, development, IT operations, legal, marketing, finance, support, compliance, security, and others—use Lean and Agile practices to continually deliver innovative, high-quality products and services faster than the competition.

Competing in the Age of Software

In Technological Revolutions and Financial Capital, [2] Carlota Perez plots the evolution of society, business, and financial capital based on technological revolutions that have occurred over the last few hundred years. She opines that these disruptive trends happen every generation or so. These include technology trends such as the ‘age of steel and heavy engineering,’ ‘age of oil and mass production,’ and others, as illustrated in Figure 1.

She concludes that these technology revolutions radically alter society, first via a mass movement in financial (investment) capital, which then results in new production capital (goods and services). Massive societal change, disruption, and a new economic order sets in. These are truly ‘world-shaking’ disruptions that occur with three distinct phases:

  • Installation Period – New technology and financial capital combine to create a ‘Cambrian explosion’ (a geological term for a relatively short time over which a large diversity of life forms appeared) of new entrants.
  • Turning Point – Existing business either master the new technology or decline and become relics of the last age
  • Deployment Period – Production capital of the new technological giants starts to take over
Figure 1. Technological revolutions over the past few centuries. [1, 2]
Figure 1. Technological revolutions over the past few centuries. [1, 2]
With respect to the ‘Age of Software and Digital’ in Figure 1, the question arises as to whether we at the turning point, or in the deployment period?

  • If we are looking for the explosion of new entrants, we would need to look no further than the dotcom boom and bust at the start of this century.
  • If we were looking for the turning point, where existing business either master the new technology or decline, Blockbuster, Nokia phones, AOL, and many others come to mind
  • If we were looking for the deployment period, one might look at the market capitalizations of Google, Apple, Amazon, Baidu, Salesforce, or Tesla—all companies that didn’t exist just 20-30 years ago

In his analysis of this work and in his book, Project to Product, Kersten [1] notes that with respect to production capital “The productivity of software delivery at enterprise organizations falls woefully behind that of the tech giants, and the digital transformations that should be turning the tide are failing to deliver business results.”

This means that many large and successful enterprises today face an existential crisis, the distinctive competencies and massive tangible assets that got them there—distribution, real estate, manufacturing, retail, local banking centers, insurance agents—will not be adequate to assure survival in the digital age.

So how can traditional enterprises thrive in the digital age? Simply, they need to master the ‘Business Agility Value Stream’, which is the ability to quickly respond to an emerging opportunity—as Figure 2 illustrates.

 

Figure 2. Business Agility is the ability to respond quickly to a business opportunity
Figure 2. Business Agility is the ability to respond quickly to a business opportunity

As seen in this figure, it’s not a trivial undertaking to accelerate value this way and traditional approaches using stage-gated, waterfall delivery simply won’t get you there. Instead, a number of different steps are involved in this new value stream:

  • Sensing an opportunity involves market research, customer feedback, and direct observation of the customers in the marketplace. Even more importantly, it demands that senior executives have a thorough involvement with the customer and the market, the “go see” mentality that provides a rich source of ideas and possibilities to create value.
  • Quickly leveraging an identified opportunity requires a flexible, lean approach to funding the people and material resources needed to produce the Minimum Viable Product (MVP) – an initial solution sufficient to both test the business hypothesis and deliver a first solid increment of value.
  • The quick development of the MVP hinges on the ability to bring together professionals from different skills areas and form cross-functional teams and trains, that are organized or reorganized around customer value.
  • These teams-of-teams connect to the customer by applying design thinking to intimately exploring the nature of the customer problem and define solution capabilities that help customers achieve their objectives.
  • Through rapid, synchronized iteration and PI cycles, the teams quickly deliver the MVP which provides a strong empirical foundation for further product management, development, and funding decisions.
  • Depending on the learnings from the MVP, the organization will choose to pivot or persevere, either abandoning the initiative, pivoting to a new opportunity, or continuing to invest in the solution as the facts and economics dictate.
  • If the decision is made to persevere, the continuous delivery pipeline substantially minimizes the cost of delay and provides the ability to deliver value continuously.
  • The ability to measure and adapt is integral to the process and provides routine opportunities to measure, learn and adjust direction as necessary.

The business goal is simple: to establish a fast flow of value through this set of steps—the entire business agility value stream—and to ensure that what is being delivered enables the business opportunity.

Why Organizations Struggle to Achieve Business Agility

“The problem is not with our organizations realizing that they need to transform; the problem is that organizations are using managerial frameworks and infrastructure models from past revolutions to manage their businesses in this one.” — Mik Kersten

Most of the leaders in traditional organizations are well aware of the threat of digital disruption, and yet many fail to make the transition to take their place in the next economy. The question is, why?

As organizational researcher and author John Kotter illustrates in his book, Accelerate: Building Strategic Agility for a Faster-Moving World [3], successful enterprises don’t start as large and cumbersome. Rather, they typically began as a fast-moving, adaptive network of motivated individuals focused on responding to the customer and the new business opportunity. Roles and reporting relationships are fluid, and people collaborate organically to identify customer needs, explore potential solutions, and deliver value in any way they can. In other words, it’s an adaptive ‘entrepreneurial network’ of people working to leverage an opportunity (Figure 3).

Figure 3. New enterprises are focused on business opportunities
Figure 3. New enterprises are focused on business opportunities

As the enterprise succeeds, it naturally wants to expand on its success and grow. This means that individual responsibilities must become clearer to ensure that critical details are carried out. To add expertise, specialists are hired. Departments are created. Policies and procedures are established to ensure legality and compliance and to drive repeatable, cost-efficient operations. The business starts to organize by function. Silos begin to form. Meanwhile, operating in parallel, the network continues to seek new opportunities to deliver value (Figure 4).

Figure 4. Growing hierarchical structure running in parallel with an entrepreneurial network
Figure 4. Growing hierarchical structure running in parallel with an entrepreneurial network

To achieve increasing economies of scale, the hierarchy continues to grow. And grow. However, by assuming the practices and responsibilities incumbent on a large business, it begins to conflict with the entrepreneurial network. With the authority of current revenue and profitability behind it, the hierarchical organization collides with the faster-moving, more adaptive network. The result? The network gets crushed in the process. The focus on the customer is often is one of the casualties. (Figure 5.)

Figure 5. Entrepreneurial network collides with a growing hierarchy
Figure 5. Entrepreneurial network collides with a growing hierarchy

Still, as long as the market remains relatively stable, the economies of scale provide a barrier against competitors, and the enterprise can enjoy continued success and growth. However, when customer needs shift dramatically, or when a disruptive technology or competitor emerges, the organization lacks the agility to respond. Years of market domination and profitability can vanish, seemingly overnight. The result is an existential crisis; the company’s very survival is at stake.

And yet the organizational hierarchies that we’ve built over the last fifty years have done a great job of providing time-tested structures, practices, and policies. They support the recruiting, retention, and growth of thousands of employees across the globe. Simply put, they are still needed. But the question becomes, how to organize and reintroduce the entrepreneurial network? In addressing the dilemma, Kotter points out, “The solution is not to trash what we know and start over but instead to reintroduce a second system.” This model, which Kotter calls a ‘dual operating system’ (Figure 6), restores the speed and innovation of the entrepreneurial network while leveraging the benefits and stability of the hierarchical system.

Figure 6. A ‘dual operating system’ offers efficiency and stability with the speed of innovation
Figure 6. A ‘dual operating system’ offers efficiency and stability with the speed of innovation

So how do we create such a dual operating system?

SAFe 5 – Your Operating System for Business Agility

By organizing the second operating system around value streams instead of departments, SAFe offers a way for enterprises to focus on customers, products, innovation, and growth (Figure 7).

Figure 7. SAFe as a second organizational operating system
Figure 7. SAFe as a second organizational operating system

Moreover, this second operating system is flexible. It is built on time-tested Lean, Agile, and SAFe practices, and it can organize and quickly reorganize without completely disrupting the existing hierarchy. That’s what Business Agility demands.

To achieve this, the organization requires a significant degree of expertise across seven, digital-age core competencies, as illustrated in Figure 8.

Figure 8. The Seven Core Competencies of Business Agility
Figure 8. The Seven Core Competencies of Business Agility

While each competency can deliver value independently, they are also interdependent in that true Business Agility can be present only when the enterprise achieves a meaningful state of mastery of all. It’s a tall order, but the path is clear.

Each of these competencies provides the knowledge, skills, and behaviors, that enable enterprises to achieve business agility:

The Lean-Agile Leadership competency describes how Lean-Agile Leaders drive and sustain organizational change by empowering individuals and teams to reach their highest potential. They do this by leading by example, adopting a Lean-Agile mindset, and leading the change to new ways of working. The result is more engaged employees, increased productivity and innovation, and successful organizational change.

The Continuous Learning Culture competency describes a set of values and practices that encourage individuals and the enterprise to increase knowledge, competence, performance, and innovation continually. Organizations become a learning organization by committing to relentless improvement and promoting a culture of innovation.

The Team and Technical Agility competency describes the critical skills and Lean-Agile principles and practices that high-performing Agile teams and Teams of Agile teams use to create high-quality solutions for their customers. The result is increased productivity, better quality, faster time-to-market, and predictable delivery of value.

The Agile Product Delivery competency is a customer-centric approach to defining, building, and releasing a continuous flow of valuable products and services to customers and users. This competency enables the organization to provide solutions that delight customers, lower development costs, reduce risk, and outmaneuver the competition.

The Enterprise Solution Delivery competency describes how to apply Lean-Agile principles and practices to the specification, development, deployment, operation, and evolution of the world’s largest and most sophisticated software applications, networks, and cyber-physical systems.

The Lean Portfolio Management competency aligns strategy and execution by applying Lean and systems thinking approaches to strategy and investment funding, Agile portfolio operations, and governance. These collaborations give the enterprise the ability to align strategy to execution, meet existing commitments reliably, and enable innovation.

The Organizational Agility competency describes how Lean-thinking people and Agile teams optimize their business processes, evolve strategy with clear and decisive new commitments, and quickly adapt the organization as needed to capitalize on new opportunities.

Measuring the Business Agility Value Stream

These competencies work together to foster Business Agility.  But in order to achieve it, the right things must be measured at the right time. SAFe addresses this via three measurement domains that can be applied to any value stream. They are Flow, Outcomes, and Competency, as Figure 9 illustrates.

Figure 9. Three SAFe measurement domains support the goal of business agility
Figure 9. Three SAFe measurement domains support the goal of business agility

Flow metrics help determine how fast is the value stream at creating and delivering value and are represented by Flow Distribution, Flow Velocity, Flow Time, Flow Load, Flow Efficiency, and Flow Predictability (See Metrics for more detail).

Outcome metrics help ensure that what has been delivered, provides benefit to the customer and to the business. Value Stream KPIs are primarily used to measure these outcomes.

Measuring the level of organizational Competency is accomplished via two separate assessment mechanisms; each is designed for significantly different audiences and different purposes. The SAFe Business Agility Assessment is designed for the business and portfolio stakeholders to assess their overall progress on the ultimate goal of true business agility. The SAFe Core Competency Assessments are used to help teams and trains improve on the technical and business practices they need to help the portfolio achieve that larger goal. There is one for each of the seven core competencies. See the Measure and Grow article for more details.

The road to real business agility is long and never-ending. Measuring the business agility value stream helps enterprises understand where they are on their journey and reminds them to celebrate the small successes along the way.

Summary

Welcome to the age of software. An era where Business Agility will be the most significant single factor in deciding the winners and losers in the new economy. Lean-Agile commercial businesses will create higher profits, increase employee engagement, and more thoroughly satisfy customer needs. Lean-Agile nonprofits will build resilience, sustainability, and the alignment needed to fulfill their mission. Lean-Agile governments will deliver systems that better assure the safety, economy and general welfare of the general public.

All of these segments depend on the ability to deliver innovative business solutions faster and more efficiently than ever before. Each will employ a dual operating system: a Hierarchy for efficiency and scale and a second, customer-centric Network operating system that delivers innovative solutions. The seven core competencies of SAFe for Lean Enterprises instantiates this all-important second operating system. Those who master these competencies will be those who survive and thrive in the new digital age.

Learn More

[1] Kersten, Mik. Project to Product. IT Revolution Press, 2018.

[2] Perez, Carlota. Technological Revolutions and Financial Capital: The Dynamics of Bubbles and Golden Ages. Edward Elger Pubishing, 2002.

[3] Kotter, John. XLR8 (Accelerate): Building Strategic Agility for a Faster-Moving World. Harvard Business Review Press, 2014.

 

Last updated: 13 October 2021

 

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