Organizations must be-come more agile – but how?

The last article in our series “Navigating Complexity” discusses the question: How might we best translate insights gained through strategic navigation tools into sustainable growth and business success? One key element of an answer is ‘Agile Organizations’. But what does this mean for companies? And which paths lead to agility? Which obstacles have to be overcome?

By Dr. Friedhelm Böttcher and Dr. Karl-Michael Schumann

Establishing Agile Organizations

Navigation the VUCA-World uncovers both needs to act and options for action. However, in a VUCA- World only agile companies can act appropriately. True agility of a company goes far beyond agile project management, SCRUM, innovation labs or “agile workplaces”. True agility implicates the ability of a company to recognize relevant changes, to initiate strategic change, and to generate sustainable competitive advantages based on change. This ability requires openness, flexibility, the right speed of consistent decisions and actions, as well as an unrestrained disposition to shape the future by changing traditionally accepted rules.

Although agile companies are stable organizations, they adapt their organizational structures flexibly to changing conditions. They understand the world as a process of continuous change and use the resulting challenges as opportunities to grow.

This requires decisions to be made by people (as individuals or as part of a team) who are directly confronted with the necessity of this decision, and also those who have the highest competence for assessing the situation [1]. These people must be identified quickly and integrated into the decision processes – a need that rigid hierarchies are not capable to meet. Agility thus presupposes a high degree of individual responsibility and self-organization to form new types of cooperation and patterns of behavior outside of defined structures. Agility of an organization enables individual abilities and organizational functions to be brought together in such a way that efficient, cooperative problem solutions are achieved through joint actions. These principles anchored in the organizational culture are more important than fixed rules and prescribed processes [2].

Agility needs to be anchored in operative actions as well as in strategic corporate leadership. It also includes the design and management of the surrounding business ecosystem. Project management and self-organized project teams are the supporting elements of agile companies. They unite different internal and external disciplines dynamically to form task-oriented ‘Power Teams’, which co-create even beyond enterprise boundaries. These ‘Power Teams’ (as part of agile project management) are characterized by …

  • almost daily cooperation of subject matter experts and developers during the project,
  • self-organizing teams that plan and execute the project,
  • self-reflecting teams that analyze and  optimize their own ways of thinking and acting to progressively improve their effectiveness, efficiency, and performance [3].

Design thinking and knowledge creation as core disciplines

Agile companies are creative companies in which success takes precedence over formal processes and efficiency. Acting in the VUCA world is understood as a design process that identifies the need for action and options for action at an early stage, initiates a continuous process of transformation and “reinvention” and is based on creative knowledge work. Agile design includes all levels of the company, i.e. the reproduction of the organization through the development and adaptation of the employee structure, the organizational structure, work processes, individual behavior patterns, roles and internal cooperative relationships, and also the design of relationships to the surrounding business ecosystem.

People and their interaction, if possible in face-to-face conversations, come to the foreground. The company as a whole assumes the responsibility of creating meaning, as well as of providing and supporting an environment that enables motivated individuals to live up to their challenges.

This implies that obstacles to innovation are identified and removed to reduce the workload of Power Teams by better recognizing the relevance and context of task, improve their selection and foster networking.

Establishing cooperative value creation systems

The trends described earlier are indicators of very real developments with far-reaching consequences for virtually all branches of industry. They offer companies new growth opportunities through offerings and business models that go far beyond the well-known and controlled fields of activity. However, companies will be less and less able to cover on their own all the required fields of competence to capitalize on these opportunities. At the same time, they all need to confront a general challenge: They are traditionally entangled with the existing logics of their industry and their customers. But now, they have to open up to non-traditional, sometimes alien external innovative triggers and forces in order to close their innovation gaps. It is getting less and less possible to handle the ever faster growing complexity of the tasks of a changing world on one’s own. For example, new business models often integrate service offerings that only different market participants can provide. Manufacturing and service-oriented companies, software and hardware providers, grow-ups and start-ups, large corporations and medium-sized companies, universities and R&D-driven companies must cooperate across the boundaries of their industries and sectors. In traditional value chains differentiated companies provide clearly differentiated elements of value. In many cases we see this model disappearing: “Solutions in the areas of performance contracting, demand response and supply chain management are becoming preferred business models for customers. Suppliers must develop service competencies and service capacities in order to operate in the most dynamic market segments and maximize value creation through co-creation. A business model that wants to represent a complete solution for the customer must include the convergence of service and solution-based industries” [4].

The ability to act in the VUCA-World demands, in addition to the agility of the company, to develop new models of cross-company cooperation. Today’s common forms of strategic alliances such as shareholdings, joint ventures and joint R&D projects are not sufficiently far-reaching. They do not provide the degree of flexibility needed to meet the challenges of the future. The companies’ actions in the market can no longer be reduced to largely static, linear customer-supplier relationships or competition. Traditional roles are being replaced by new images and models of collaboration in which companies see themselves as part of a complex business ecosystem. “A company is no longer to be regarded as a member of a particular industry. Rather, it is part of a business ecosystem that extends across the boundaries of a multitude of industries. Within this system, companies jointly develop competencies and capacities that serve an innovation and group themselves around it: the participants work in cooperative competition to promote new products, satisfy customer needs, and ultimately ring in the next round of innovation … Like its biological counterpart, a business ecosystem gradually evolves from a random collection of certain components to a more structured collaborative system. …. Business ecosystems condense out of an original, swirling pull of capital, consumer interest and talent that comes from innovation. Just as a successful new species rises from the natural foundations of life such as sunlight, water and soil nutrients” [5].

Business ecosystems describe in a new way the framework in which companies operate, in which all direct and indirect exchange relationships are made clear as interconnected system that mutually define each other. For companies, this results in new design options and a new understanding of competition and cooperation.

Figure 3: In cooperative value creation systems, the partners provide services for joint customers in mutual coordination.

A particular aspect of business ecosystems is the conscious and targeted establishment of cooperative relationships between different partners with the aim of generating joint added value. Partners with different competences, roles and interests work together to generate cooperative competitive advantages through WIN-WIN situations. “The fact that each participating partner contributes its specific core competencies … resolves the conflict between a high degree of specialization on the one hand and a broader, more diverse range of services on the other. In such an …. ‘Association’, advantages of a more flexible distribution of tasks and capacity utilization … can be combined with specialization advantages at the level of the value-added units” [6].

Management in the VUCA world requires management of complexity on the basis of a few simple principles and rules. Navigation systems, agile organizations and cooperation systems form their basis. The greatest challenge today is seems to be the continuous and simultaneous design of new or improved offerings and business models, processes and structures, and the business ecosystem at the level of the “Daily Business”, and of the medium-term oriented “New Business” to the same degree that often is already taking place in the development of the “Future Business”.

The path to an agile, sustainably growing business organization in the VUCA world is full of obstacles. It is necessary to implement cooperative value creation systems that go beyond the traditional and today’s forms of cooperation to cope with complex tasks. What does this mean for companies? How can obstacles and challenges be overcome?  Please read for example our article “How do we find the way to successful co-operative value creation systems? Your feedback and contribution to this important, future-oriented discussion is always welcome on www.futurebizz.de and in the social media.

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List of sources

[1] Weick,K.E.; Sutcliff, K.M.: “Managing the Unexpected”, Wiley, New Jersey 2015, p.115f

[2] Anderson. H.; Uhlig, J.: “The Agile Company”; Campus, Frankfurt 2015, p.16

3] Quoted from Wikipedia https://de.wikipedia.org/wiki/Agile_Softwareentwicklung

4] Frost&Sullivan: “Service Business Models and Chang-ing Competitive Landscape for Energy Management”; 9AAF-19, February 2015

[5] Moore, J.F.: “Predators and Prey: A New Ecology of Competition”; Harvard Business Review 1993

6] Bach, N.; Buchholz, W.; Eichler, B.: “Business Models for Value Creation Networks – Conceptual and Conceptual Foundations” in Bach, N.; Buchholz, W.; Eichler, B. (Ed.): “Business Models for Value Creation Networks”; ilmedia 2010

Picture credits: Title: iStock; graphic in text: Böttcher Consulting

 

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