Updated: Aug 26, 2020
Uncertainties and complex markets shape the internal and external company environment to an extent where business development can no longer be based on expectations and certainties. Therefore, managers need to be flexible and quick in decision making and steering to adjust to changes. The solution: agile strategizing.
The agile manifesto describes agile development as a process where individuals and interactions are more valuable for success than processes and tools. Through communication within the company and with customers, problems can be identified faster while management can in response change processes to adapt easily and work cost-efficiently.
In addition, it is more important to respond to change than follow a plan. This is exactly where agile processes work in an uncertain business world. Cycles are shorter and changes happen more often, businesses have to be more adaptable. Agile development helps especially when leaders have to react to digital disruption to make fast changes.
In a complex business world, as we have now, it is more and more essential for managers to make quick decisions. An agile approach supports quick actions and makes your company more adaptable to an uncertain future.
We have reached the end of the waterfall model
Strategy planning is often a very linear and long-term oriented process to execute the vision of a company. It is a very top-down planning with a linear execution and an annual evaluation. These strategies are based on certainties in development and do not allow adjustments to react to outside changes. This approach, the waterfall methodology, is suitable for large projects with a linear structure focusing on milestones and projects with a large interchange of employees during the life cycle of the project.
However, changes are difficult to implement later in the process and software or products can become obsolete before even finishing the cycle. Testing needs to be done very early in the planning and it takes time until the first results are visible. Moreover, it is not easily possible to implement feedback to adjust your product or initiatives. This could lead to wasting time and money on developing an unsatisfying product that could have been easily avoided with early on user testing. In addition, uncertainty can create a lack of confidence regarding strategy planning.
Therefore, the waterfall model is not adjustable to uncertainty and quick business changes and we have reached the end of it.
Agile strategy development and short cycles
To be more adaptable to different events and to react in a shorter time to change it is better to think in short cycles for development and strategy. Companies need, therefore, to be more agile to enhance their business development; agile strategies are therefore becoming the drivers for organizational agility.
Organizational agility is the ability of a business to rapidly adapt while being cost-efficient in response to the business environment and its changes. This allows companies to raise their flexibility, speed, adaptability, awareness, and preparedness. This again, makes companies more compatible and can create great value and progress.
In addition, short cycles offer the opportunity to easily change products, goals, initiatives, etc. and to include feedback from the customer and employee side. This enhances companies’ adaptability and helps against competitors.
Agile strategy development is based on a short-cycle approach and follows similar rules as agile software development. In the beginning, managers will work closely with the collaboration team and collect their strategies in a Strategy Backlog. These strategies are loosely formed goals that are interlinked with the vision and explain the Why. Non-strategic goals will be removed and time will be freed-up. After that, goals that contribute the most to the strategy will be selected first, go to the Goal Backlog and will be redefined in different teams to define the success of this goal. Hereby, it is advised to let teams work on a maximum of three goals at a time.
Once the goals are redefined, the next step is to execute the goals and define sprints. Goal sprints are aiming for around 120 days, while teams meet weekly to evaluate the progress of the execution process. Those meetings serve the purpose to keep a steady track of the goal, align the teams with the overall strategy, and to adjust the goals if necessary. This way teams can react fast to unexpected changes and work cost-efficiently. At the end of the sprint, these goals will be evaluated and archived.
Stability is still important
To achieve agility is it essential to combine elements that enhance stability and dynamism. While dynamism delivers flexibility through frequent planning meetings and providing teams with support to increase their confidence in using funding, stability is the vision itself that grounds the agile development.
Every short-cycle development is based on a larger long-term goal- the vision of the company. This is necessary to check and evaluate if the execution is following the “right path”. The vision provides security and makes it easier to align the strategy and goals of different managers and levels. “In an agile environment, strategy gets more agile, but it also provides stability.”
Strategic Agility vs. Operational Agility
When planning strategies, different managers and leaders also have different approaches and areas for agile development - strategic and operational agility. Strategic agility focuses on C-level leaders and describes the flexibility and adaptability to create new markets with new products when the opportunity appears to reach new customers. Operational agility means, on the contrary, to improve existing products and making them better, faster, cheaper, etc. This type is the most common and a requirement to stay in business but also the foundation for strategic agility.
However, in a fast-paced industry where competitors can add changes quickly, it is difficult to monetize those adjustments. Firms need to pursue market-creating innovation to make a lot of money which forces management to make decisions on a higher level. Agile strategizing becomes hereby a necessity to achieve changes and a development on this level and to create valuable progress for the company.
The waterfall model is worn out and a more flexible approach is necessary to be able to keep up with the uncertain changes and complex structure in the business environment. The agile strategizing methodology supports adaptability, flexibility, speed, and preparedness to make companies more compatible and enhances an innovative progress development. Especially market-creating, a required and essential element in today’s business world, is facilitated through this approach. Agile strategy development helps to align teams, to be more cost-efficient, and to react quickly to changes and external developments.
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