Those who master large-scale software delivery will define the economic landscape of the 21st century.
—Mik Kersten, Project to Product
Business AgilityBusiness 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,  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
- 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  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.
How We Got Here
“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 of these 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 an organizational researcher and author John Kotter illustrates in his recent book, Accelerate: Building Strategic Agility for a Faster-Moving World , successful enterprises don’t start as large and cumbersome. Rather, they typically began as a fast-moving, adaptive network of motivated individuals aligned to a common vision and focused on the needs of their customers. 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 towards a shared, customer-centric purpose (Figure 2).
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 3).
To achieve increasing economies of scale, the hierarchy continues to grow. And grow. However, by assuming the practices and responsibilities incumbent on large business, it begins to conflict with the entrepreneurial network. With the authority of current revenue and profitability needs behind it, the hierarchical organization collides with the faster-moving, more adaptive network. The result? The network gets crushed in the process. Customer centricity is one of the casualties. (Figure 4.)
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.
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 5), restores the speed and innovation of the entrepreneurial network while leveraging the benefits and stability of the hierarchical system.
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 6).
Moreover, this 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.
But to achieve this, the organization requires a significant degree of expertise across seven core competencies, as illustrated in Figure 7.
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.
The remainder of this article summarizes each of the seven core competencies
Team and Technical Agility
It all starts with Agile development, the cornerstone of Business Agility. The Team and Technical Agility competency describe 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. It consists of three dimensions, as illustrated in Figure 8:
- Agile Teams – High-performing, cross-functional teams anchor the competency by applying effective Agile principles and practices.
- Team of Agile Teams – Agile teams operate within the context of a SAFe Agile Release Train (ART), a long-lived, team of Agile teams that provides a shared vision and direction and is ultimately responsible for delivering solution outcomes.
- Built-in Quality – All Agile teams apply defined Agile practices to create high-quality, well-designed solutions that support current and future business needs.
Agile Product Delivery
Business Agility demands that enterprises rapidly increase their ability to deliver innovative products and services. To be sure, the enterprise is creating the right solutions for the right customers at the right time; they must balance their execution focus with a customer focus. These capabilities are mutually supportive and create opportunities for sustained market and service leadership. Agile Product Delivery is a customer-centric approach to defining, building, and releasing a continuous flow of valuable products and services to customers and users.
There are three dimensions to Agile Product Delivery, as illustrated in Figure 9.
Customer Centricity and Design Thinking – Customer centricity puts the customer at the center of every decision and uses design thinking to ensure the solution is desirable, feasible, viable, and sustainable.
Develop on Cadence; Release on Demand – Developing on cadence helps manage the variability inherent in product development. Decoupling the release of value from that cadence ensures customers can get what they need when they need it.
DevOps and the Continuous Delivery Pipeline – DevOps and the Continuous Delivery Pipeline creates the foundation that enables enterprises to release value, in whole or in part, at any time it’s needed.
Enterprise Solution Delivery
Building and evolving large, enterprise solutions is a monumental effort. Many such systems require hundreds or thousands of engineers. They demand sophisticated, rigorous practices for engineering, operations, and support. Moreover, over the decades that these systems are operational, their purpose and mission evolve. That calls for new capabilities, technology upgrades, security patches, and other enhancements. As true ‘living systems,’ the activities above are never really ‘done.’ Instead, they are released earlier and further developed over time.
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. It consists of three dimensions. (Figure 10).
Lean System and Solution Engineering applies Lean-Agile practices to align and coordinate all the activities necessary to specify, architect, design, implement, test, deploy, evolve, and ultimately decommission these systems.
Coordinating Trains and Suppliers coordinates and aligns the extended set of value streams to a shared business and technology mission. It uses the coordinated Vision, Backlogs, and Roadmaps with common Program Increments (PI) and synchronization points.
Continually Evolve Live Systems ensures both the development pipeline and the large systems themselves support continuous delivery of value, both during and after, release into the field.
Lean Portfolio Management
The three competencies above provide the technical practices needed to build and deploy meaningful business solutions. But none of them directly address the more significant issue of why those solutions are required, how they are funded and governed, and what other solutions are necessary to deliver complete enterprise value. For that, we need to address portfolio concerns. However, traditional approaches to portfolio management were not designed for the impact of digital disruption. These factors put pressure on enterprises to work under a higher degree of uncertainty, and yet deliver innovative solutions much faster. Portfolio Management approaches must be modernized to support the new Lean-Agile way of working. The Lean Portfolio Management competency aligns strategy and execution by applying Lean and systems thinking. As Figure 11 illustrates, it accomplishes this through three collaborations for strategy and investment funding, Agile portfolio operations, and Lean governance.
Strategy and Investment Funding ensures that the entire portfolio is aligned and funded to create and maintain the solutions needed to meet business targets. It requires the cooperation of Business Owners, portfolio stakeholders, technologists, and Enterprise Architects.
Agile Portfolio Operations coordinates and supports decentralized program execution, enabling operational excellence. It requires the cooperation of the Agile Program Management Office/Lean-Agile Center of Excellence (APMO/LACE) and Communities of Practice (CoPs) for Release Train Engineers (RTEs) and Scrum Masters.
Lean Governance manages spending, audit and compliance, forecasting expenses, and measurement. It requires the engagement of the Agile PMO/LACE, Business Owners, and Enterprise Architects.
Even with the competencies above, the enterprises must be able to change quickly to respond to the challenges and opportunities that today’s rapidly evolving markets present. This requires more flexibility and adaptability than the hierarchical operating system is likely to be able to muster. Again, we turn to the second operating system for help. SAFe helps businesses address these challenges with Organizational Agility, which is expressed in three dimensions (Figure 12):
Lean-Thinking People and Agile Teams – This state occurs when everyone involved in solution delivery is trained in Lean and Agile methods and embraces and embodies the values, principles, and practices.
Lean Business Operations – Teams apply Lean principles to understand, map, and continuously improve the business processes that support the business’s products and services.
Strategy Agility – This state occurs when the enterprise shows the ability and adaptability needed to sense the market and quickly change strategy when necessary continuously.
Continuous Learning Culture
And even with mastery of the above, there can be no steady-state. Startup companies will continue to challenge the status quo. Juggernaut companies like Amazon and Google are entering entirely new markets such as banking and healthcare. Expectations from new generations of workers, customers, and society as a whole challenges companies to think and act beyond balance sheets and quarterly earnings reports.
To address the demand for continuous learning, growth of its people, and improvement in processes, the Continuous Learning Culture competency describes a set of values and practices that encourage individuals—and the enterprise as a whole—to continually increase knowledge, competence, performance, and innovation. It is expressed in three dimensions, as shown in Figure 13.
The three dimensions are:
Learning Organization – Employees at every level are learning and growing so that the organization can transform and adapt to an ever-changing world.
Innovation Culture – Employees are encouraged and empowered to explore and implement creative ideas that enable future value delivery.
Relentless Improvement – Every part of the enterprise focuses on continuously improving its solutions, products, and processes.
Finally, we recognize that an organization’s managers, executives, and other leaders provide the foundation ultimately responsible for the adoption and success of Lean-Agile development and mastery of the competencies that lead to Business Agility. Only they have the authority to change and continuously improve the systems that govern how work is performed. Only they can create an environment that encourages high-performing Agile teams to flourish and produce value. Leaders, therefore, must internalize and model leaner ways of thinking and operating so that team members will learn from their example, coaching, and encouragement.
By helping leaders develop along three dimensions, as illustrated in Figure 14, organizations can establish the core competency of Lean-Agile Leadership.
Leading by Example – Leaders gain earned authority by modeling the desired behaviors for others to follow, inspiring them to incorporate the leader’s example into their development journey.
Mindset and Principles – By embedding the Lean-Agile way of working in their beliefs, decisions, responses, and actions, leaders model the expected norm throughout the organization.
Leading Change – Leaders lead (rather than support) the transformation by creating the environment, preparing the people, and providing the necessary resources to realize the desired outcomes.
Measure and Grow
The road to real business agility is long and never-ending. The SAFe Business Agility Assessment helps enterprises understand where they are on their journey and reminds them to celebrate the small successes along the way. It is built directly around the seven core competencies; each competency is further split into the three competency dimensions. Applying the assessment, reasoning about the results, and following the recommendations will help assure the best possible outcomes for the enterprise. See the Measure and Grow article for more details.
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 its mission. Lean-Agile governments will deliver systems that better assure the safety and economy 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 hierarchical model intended 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 Perez, Carlota. Technological Revolutions and Financial Capital: The Dynamics of Bubbles and Golden Ages.  Kersten, Mik. Project to Product. IT Revolution Press.
Last updated: 10 February 2021