By Rebecca Muller | THRIVE
An IQ can help measure your intelligence, and an EQ can help measure your emotional intelligence — but you likely haven’t heard of identifying your AQ — also known as your “adaptability quotient.” According to tech investor Natalie Fratto, adaptability plays a vital role in success, and as the future of work continues to evolve, acclimating to change can be stressful when you’re not prepared for it.
“Adaptability refers to how well a person reacts to the inevitability of change,” Fratto says in a recent Ted Talk. “We’re entering a future where IQ and EQ both matter far less than how fast you’re able to adapt.” Fratto explains that with the accelerating rate of technological change, we’re facing more change than ever before, and we can train our brains to better adapt to those changes. “Adaptability itself is a form of intelligence, and each of us has the capacity to become more adaptable,” she adds. “Think of it like a muscle… It’s got to be exercised.”
There’s no question that change can feel stressful, but Fratto says you can stave off that stress by working on how your mind processes new information. Here are a few ways to improve your adaptability quotient:
Ask yourself “what if” questions
One of the most helpful ways to cope with change is to think about what could happen before it actually happens, Fratto notes. That’s why she suggests constantly asking yourself what could possibly shift going forward in your job. “Asking ‘what if’ instead of asking about the past forces the brain to simulate,” Fratto explains. “Instead of testing how you attain information, it tests how to manipulate a situation, given a constraint, in order to achieve a specific goal.” Not only does this exercise help you prepare for future changes, but it helps your mind adapt faster to those changes if and when they happen. “Change is inevitable,” she adds. “Practicing simulations is a safe testing ground for improving adaptability.”
Become an active un-learner
When change comes your way, it’s natural to feel overwhelmed by the idea of taking in new information while “un-learning” old information, but Fratto believes this process is key when it comes to managing your stress levels. “Our adaptability is not fixed,” she notes. “Active un-learners seek to challenge what they presume to already know, and instead, override that data with new information.” Fratto recommends returning to a beginner’s mindset when you’re notified of a change, and reminding yourself that you’re entirely able to let go of old information, and absorb new information. “It takes dedication,” she adds. “But each of us has the capacity to improve our adaptability.”
Prioritize exploration over exploitation
When you think about reaching a goal at work, you probably reflect on what has worked for you in the past, and try to mimic the same process that helped you achieve success beforehand. Fratto says this thought process is common, but it could be holding you back from adapting to potential changes. “Collectively, all of us tend to value exploitation,” she explains. “There’s a sort of natural tension between exploration and exploitation.” Fratto says we’re too focused on exploiting our current workflow, when we should be using exploration — “a state of constant seeking” — to see what’s around the corner. “Never fall too far in love with your wins,” she urges. “Our previous success can become the enemy of our adaptability potential.”
Most people reading this will want to be happy and successful, however you wish to define it. Fair enough.
So it stands to reason that most of us will need to ask the question eventually, what that actually takes, what are the actual building blocks.
And of course, there are many variables. Where one went to school, who your parents were, whether or not you do your homework, whether or not you let your vices get the better of you, whether or not they let you into Stanford.
But there’s one interesting thing we’ve noticed: that super successful people are never-ending, perpetual learning machines. Somewhere along the line, they got the learning bug, and it’s still with them to this day.
You meet these people and you can tell, be they seventeen or seventy. They’ve got the bug, they’ve got the vibe. You just know.
Whether their schtick was finance, or business, or science or the arts, they just allowed their minds to be open to the universe and take it all in. And they never stopped. Eventually, this led them to an idea or an angle nobody else had, and BOOM. Rockstardom followed.
We may not be rich, we not be pretty, but as long as we’re learning, as long as we’re determined to keep it this way, our lives are truly incredible things. So bear that in mind, and Godspeed to you.
By Gaping Void
Complexity, emergence, ambiguity, transformation, agility, etc., are words that have become more and more mainstream over the past few years. VUCA and #futureofwork are commonplace memes now. Organizations are trying to play catch-up as waves of technology take over our lives, work, attention, and energy. The human mind cannot keep pace with this change. Organizations are merely reflecting the confusion each one of us feels. There’s a scramble to “keep learning” — new skills, new technology, new business processes, new ways of interacting with the customers/consumers/co-creators. The learning curve seems endless; exhaustion and cynicism are replacing enthusiasm and enquiry. Fear of losing jobs to AI and Robots appear to be rapidly becoming a reality. Gallup’s Employee Engagement report is now well-known.What has all of this got to do with Organizational Learning? A great deal, I would say. And most organizations recognize this is critical; hence, the growing popularity of terms like “collaborative learning,” “continuous learning,” “agile learning,” “lifelong learning,” and so on. Against this backdrop of incessant change, advent of the uber-technology era, climate crisis, and socio-political upheaval, I would like to propose that organizations have to learn but learn differently. I propose a shift to “Transformative Learning.” This enfolds other forms of learning within itself but adds another dimension to the whole.Transformative Learning goes beyond the cognitive to integrate the heart, gut, body, and intuition. It is now scientifically proven that our gut and heart also have brains of their own, and send us critical information. However, our cognitive side is so over-developed that we habitually ignore what our heart is telling us and overlook our gut feel, often to repent later. Neither of these forms of sensing and sensemaking find a place in our current organizational setup. And this is to our detriment.Going back to the quotation above from Aftab Omer, there are two pieces which I feel are critical to shift from regular ways of learning to transformative learning — from information to imagination and from intended learning to emergent learning. For an in-depth understanding of Omer’s perspective, I recommend his article, Imagination, Emergence, and the Role of Transformative Learning in Complexity Leadership. In this piece, I’ll focus on the two aspects italicized above — imagination and emergent learning — and their relation to Transformative Learning.I have tried to capture the Organizational Learning shift that I am speaking about in a diagram below:
From Intended to Emergent Learning — Transforming how organizations learnThe lower two quadrants of the diagram illustrate the different forms of learning that typically take place in organizations today — this is Intended Learning. This kind of learning is based on information, knowledge (from the past), skills and competencies needed for the present, and learning programs designed to tackle the rise of new technology in the future. This happens through specific Training and different modes of Ongoing Learning supported by the organization and also driven by the learners themselves. This learning is crucial in maintaining business-as-usual, gives the organizations its competitive edge, helps to build new skills, and give rise to innovation. This kind of learning is perfect during conditions of stability and gradual change.But not when change is exponential, continuous, and ambiguous. When there are complete paradigm shifts and the world has to be re-envisioned. When the way we see ourselves and our relationship with the world around us need to be re-imagined. I recommend listening to this video by Tomas Bjorkman for a deeper understanding of these shifts.To deal with these shifts, we need to move from intended learning to emergent learning. Intended learning happens from a place of knowing and against a set of specific goals. Emergent learning happens from a place of reflection and sensemaking.In the upper two quadrants of the diagram above, I have shown some of the capacities and conditions necessary for emergent learning to take place. These are still very nascent ideas that I am mulling over even as I write.Imagination — In these times of Volatility, Uncertainty, Complexity, and Ambiguity, Imagination has a key role to play. I do not mean wild imagination here but the ability to envision possible futures even though the present situation is far removed from that possibility. (Man’s landing on the Moon was imagination once.) This kind of Imagination is a skill that requires honing and deliberate practice. It is aspirational in nature, sees and envisions new possibilities, and gives voice to what is wanting to emerge. (I have capitalized “Imagination” to distinguish it from imagination or wild flights of fancy and daydreaming.)Sensing and Sensemaking — The ability to “sense” is rooted in deep, non-judgmental, unbiased observation, feeling with all our senses, and the capacity to step back to see the connection between seemingly disparate situations, contexts, or challenges. “Sensemaking” is where Imagination and Sensing come together. It requires a leap of faith coupled with all that has been seen, heard, felt, and intuited. IMHO, in the VUCA world, organizations can no longer thrive without Imagination.Negative Capability — John Keats, the Romantic Poet, wrote about Negative Capability. And the words are as applicable today as they were during his times. I wrote a detailed post about it here, but I will repeat Keats’ quote:“The concept of Negative Capability is the ability to contemplate the world without the desire to try and reconcile contradictory aspects or fit it into closed and rational systems. …I mean NEGATIVE CAPABILITY, that is when man is capable of being in uncertainties, Mysteries, doubts, without any irritable reaching after fact & reason…” ~ John KeatsNegative Capability, as described by Keats, is a component of Imagination where we are willing to suspend judgement and immerse ourselves in the situation without a need to resolve it. If one can stay long enough with uncertainty and ambiguity, it is possible to reach a deeper place of knowing from where a more suitable and elegant solution emerges. I can think of no better capability to be cultivated, nurtured, developed, and honed in today’s organizations.Holding of Paradox — In our binary, “either this or that” approach, we forget to explore the space in between, the spectrum that holds all the interesting shades of grey. Or even the space completely outside of the spectrum. As Niels Bohr said, “the opposite of a profound truth may well be another profound truth.” Staying with a paradox requires us to slow down, listen deeply, and be comfortable with contradiction and ambiguity. This is not a cognitive skill that one can learn from a training program or by reading a book. Its an inner state that needs to be cultivated with curiosity, patience, and perseverance.Not seeking Closure — The human brain has a deep-seated need for closure. We cannot live with incomplete stories. And this very human pattern plays out in organizational decision making, and especially so when there is acute pressure to adhere to a timeline. Yet, this is often the enemy of deep, transformative learning and keeps us stuck in our old patterns, repeating the same mistakes, and facing the same crisis. This requires us to train our minds and hearts to stay open, and cultivate curiosity, courage, and compassion. Otto Scharmer’s Theory U is a powerful process that can help organizations move towards building “Negative Capabilities”.Letting go of Linear Logic — The scientific, mechanistic, Industrial Era has essentially built in us a love for linear cause and effect. However, the complexity of the VUCA world no longer lends itself to linearity; instead we live in a world where “everything is connected to everything else”. This requires us to step back, widen our perspectives, let go of our need for closure, and sense into the bigger patterns at play. This calls for us to hone our pattern-sensing skills, look beyond immediate connections, and stay with a situation in a mode of open observation.Holding Space for Self and Others — Holding space calls for us to stay in a facilitation mode — one that is characterized by openness, non-judgement, an awareness of one’s inner state, and an ability to listen deeply. Organizations today are characterized by speed, efficiency, and accuracy. However, as I have written earlier, complexity and uncertainty require us to slow down. It requires us to go from rapid-fire action to observation, reflection, and thoughtful response when the time is right. Again, this is not a cognitive skill that can be acquired over a couple of training sessions. This is an inner state of being where we learn (gradually) to slow down, become mindful, and aware. And it takes relentless practice, support, and working with other individuals on the same journey.Generative Conversations — Otto Scharmer speaks about Four Levels of Listening that leads to Four Levels of Conversation. Those who are Coaches and Facilitators know the importance of Listening at Levels 3 and 4 (refer to diagram below). It is Empathic and Generative Listening that hold and create space for something new to be born. This kind of listening is rarely practiced in organizations. However, it is precisely this that can truly transform organizations and the individuals who are collectively taking this journey.
Levels of ListeningBecause none of the capabilities mentioned above fall within the typical parameters of tangible, quantifiable, and measurable, they fall off the organizational radar. It’s well-nigh impossible to measure inner growth. Organizations desiring to step onto the path of Transformative Learning need to let go off the old paradigms, and embrace the new in the space of learning.
Agile organizations—of any size and across industries—have five key elements in common.This article was written collaboratively by the McKinsey Agile Tribe, a group of over 50 global colleagues bringing expertise from the digital, operations, marketing, and organization disciplines. They integrate their deep experience and thought leadership to extract the best from McKinsey’s global experience as it helps organizations transform themselves into agile organizations.
Experience and research demonstrate that successful agile organizations consistently exhibit the five trademarks described in this article. The trademarks include a network of teams within a people-centered culture that operates in rapid learning and fast decision cycles which are enabled by technology, and a common purpose that co-creates value for all stakeholders.
The old paradigm: Organizations as machines
A view of the world—a paradigm—will endure until it cannot explain new evidence. The paradigm must then shift to include that new information. We are now seeing a paradigm shift in the ways that organizations balance stability and dynamism.
What is an agile organization?
The dominant “traditional” organization (designed primarily for stability) is a static, siloed, structural hierarchy – goals and decisions rights flow down the hierarchy, with the most powerful governance bodies at the top (i.e., the top team). It operates through linear planning and control in order to capture value for shareholders. The skeletal structure is strong, but often rigid and slow moving.In contrast, an agile organization (designed for both stability and dynamism) is a network of teams within a people-centered culture that operates in rapid learning and fast decision cycles which are enabled by technology, and that is guided by a powerful common purpose to co-create value for all stakeholders. Such an agile operating model has the ability to quickly and efficiently reconfigure strategy, structure, processes, people, and technology toward value-creating and value-protecting opportunities. An agile organization thus adds velocity and adaptability to stability, creating a critical source of competitive advantage in volatile, uncertain, complex, and ambiguous (VUCA) conditions. First, the old paradigm. In 1910, the Ford Motor Company was one of many small automobile manufacturers. A decade later, Ford had 60 percent market share of the new automobile market worldwide. Ford reduced assembly time per vehicle from 12 hours to 90 minutes, and the price from $850 to $300, while also paying employees competitive rates.1 1.“100 years of the moving assembly line,” Ford Motor Company, ford.com. Ford’s ideas, and those of his contemporary, Frederick Taylor, issued from scientific management, a breakthrough insight that optimized labor productivity using the scientific method; it opened an era of unprecedented effectiveness and efficiency. Taylor’s ideas prefigured modern quality control, total-quality management, and—through Taylor’s student Henry Gantt—project management.Gareth Morgan describes Taylorist organizations such as Ford as hierarchical and specialized—depicting them as machines.2 2.Gareth Morgan, Images of organization, Beverly Hills, CA: Sage Publications, 1986. For decades, organizations that embraced this machine model and the principles of scientific management dominated their markets, outperformed other organizations, and drew the best talent. From Taylor on, 1911 to 2011 was “the management century.”
Disruptive trends challenging the old paradigm
Now, we find the machine paradigm shifting in the face of the organizational challenges brought by the “digital revolution” that is transforming industries, economies, and societies. This is expressed in four current trends:
- Quickly evolving environment. All stakeholders’ demand patterns are evolving rapidly: customers, partners, and regulators have pressing needs; investors are demanding growth, which results in acquisitions and restructuring; and competitors and collaborators demand action to accommodate fast-changing priorities.
- Constant introduction of disruptive technology. Established businesses and industries are being commoditized or replaced through digitization, bioscience advancements, the innovative use of new models, and automation. Examples include developments such as machine learning, the Internet of Things, and robotics.
- Accelerating digitization and democratization of information. The increased volume, transparency, and distribution of information require organizations to rapidly engage in multidirectional communication and complex collaboration with customers, partners, and colleagues.
- The new war for talent. As creative knowledge- and learning-based tasks become more important, organizations need a distinctive value proposition to acquire—and retain—the best talent, which is often more diverse. These “learning workers” often have more diverse origins, thoughts, composition, and experience and may have different desires (for example, millennials).
When machine organizations have tried to engage with the new environment, it has not worked out well for many. A very small number of companies have thrived over time; fewer than 10 percent of the non-financial S&P 500 companies in 1983 remained in the S&P 500 in 2013. From what we have observed, machine organizations also experience constant internal churn. According to our research with 1,900 executives, they are adapting their strategy (and their organizational structure) with greater frequency than in the past. Eighty-two percent of them went through a redesign in the last three years. However, most of these redesign efforts fail—only 23 percent were implemented successfully.
The new paradigm: Organizations as living organisms
The trends described above are dramatically changing how organizations and employees work. What, then, will be the dominant organizational paradigm for the next 100 years? How will companies balance stability and dynamism? Moreover, which companies will dominate their market and attract the best talent? McKinsey’s article “Agility: It rhymes with stability” describes the paradigm that achieves this balance and the paradox that truly agile organizations master—they are both stable and dynamic at the same time. They design stable backbone elements that evolve slowly and support dynamic capabilities that can adapt quickly to new challenges and opportunities. A smartphone serves as a helpful analogy; the physical device acts as a stable platform for myriad dynamic applications, providing each user with a unique and useful tool. Finally, agile organizations mobilize quickly, are nimble, empowered to act, and make it easy to act. In short, they respond like a living organism (Exhibit 1).Exhibit 1
When pressure is applied, the agile organization reacts by being more than just robust; performance actually improves as more pressure is exerted.4 4.We include in our sense of agile the idea—coined in the work of Nicholas Taleb—that it is “anti-fragile.” Research shows that agile organizations have a 70 percent chance of being in the top quartile of organizational health, the best indicator of long-term performance.5 5.Michael Bazigos, Aaron De Smet, and Chris Gagnon, “Why agility pays,” McKinsey Quarterly, December 2015. Moreover, such companies simultaneously achieve greater customer centricity, faster time to market, higher revenue growth, lower costs, and a more engaged workforce:
- A global electronics enterprise delivered $250 million in EBITDA, and 20 percent share price increase over three years by adopting an agile operating model with its education-to-employment teams.
- A global bank reduced its cost base by about 30 percent while significantly improving employee engagement, customer satisfaction, and time to market.
- A basic-materials company fostered continuous improvement among manual workers, leading to a 25 percent increase in effectiveness and a 60 percent decrease in injuries.
As a result agility, while still in its early days, is catching fire. According to the results, few companies have achieved organization-wide agility but many have already started pursuing it in performance units. For instance, nearly one-quarter of performance units are agile. The remaining performance units in companies lack dynamism, stability, or both. However, while less than ten percent of respondents have completed an agility transformation at the company or performance-unit level, most companies have much higher aspirations for the future. Three-quarters of respondents say organizational agility is a top or top-three priority, and nearly 40 percent are currently conducting an organizational-agility transformation. High tech, telecom, financial services, and media and entertainment appear to be leading the pack with the greatest number of organizations undertaking agility transformations. More than half of the respondents who have not begun agile transformations say they have plans in the works to begin one. Finally, respondents in all sectors believe that more of their employees should undertake agile ways of working (on average, respondents believe 68 percent of their companies’ employees should be working in agile ways, compared with the 44 percent of employees who currently do). The rest of this article describes the five fundamental “trademarks” of agile organizations based on our recent experience and research. Companies that aspire to build an agile organization can set their sights on these trademarks as concrete markers of their progress. For each trademark, we have also identified an emerging set of “agility practices”—the practical actions we have observed organizations taking on their path to agility (Exhibit 2).Exhibit 2
The five trademarks of agile organizations
While each trademark has intrinsic value, our experience and research show that true agility comes only when all five are in place and working together. They describe the organic system that enables organizational agility.Linking across them, we find a set of fundamental shifts in the mind-sets of the people in these organizations. Make these shifts and, we believe, any organization can implement these trademarks in all or part of its operations, as appropriate.
1. North Star embodied across the organization
Mind-set shiftFrom:“In an environment of scarcity, we succeed by capturing value from competitors, customers, and suppliers for our shareholders.”To:“Recognizing the abundance of opportunities and resources available to us, we succeed by co-creating value with and for all of our stakeholders.” Agile organizations reimagine both whom they create value for, and how they do so. They are intensely customer-focused, and seek to meet diverse needs across the entire customer life cycle. Further, they are committed to creating value with and for a wide range of stakeholders (for example, employees, investors, partners, and communities).To meet the continually evolving needs of all their stakeholders, agile organizations design distributed, flexible approaches to creating value, frequently integrating external partners directly into the value creation system. Examples emerge across many industries, including: modular products and solutions in manufacturing; agile supply chains in distribution; distributed energy grids in power; and platform businesses like Uber, Airbnb, and Upwork. These modular, innovative business models enable both stability and unprecedented variety and customization. To give coherence and focus to their distributed value creation models, agile organizations set a shared purpose and vision—the “North Star”—for the organization that helps people feel personally and emotionally invested. This North Star serves as a reference when customers choose where to buy, employees decide where to work, and partners decide where to engage. Companies like Amazon, Gore, Patagonia, and Virgin put stakeholder focus at the heart of their North Star and, in turn, at the heart of the way they create value. Agile organizations that combine a deeply embedded North Star with a flexible, distributed approach to value creation can rapidly sense and seize opportunities. People across the organization individually and proactively watch for changes in customer preferences and the external environment and act upon them. They seek stakeholder feedback and input in a range of ways (for example, product reviews, crowd sourcing, and hackathons). They use tools like customer journey maps to identify new opportunities to serve customers better, and gather customer insights through both formal and informal mechanisms (for example, online forums, in-person events, and start-up incubators) that help shape, pilot, launch, and iterate on new initiatives and business models. These companies can also allocate resources flexibly and swiftly to where they are needed most. Companies like Google, Haier, Tesla, and Whole Foods constantly scan the environment. They regularly evaluate the progress of initiatives and decide whether to ramp them up or shut them down, using standardized, fast resource-allocation processes to shift people, technology, and capital rapidly between initiatives, out of slowing businesses, and into areas of growth. These processes resemble venture capitalist models that use clear metrics to allocate resources to initiatives for specified periods and are subject to regular review.Senior leaders of agile organizations play an integrating role across these distributed systems, bringing coherence and providing clear, actionable, strategic guidance around priorities and the outcomes expected at the system and team levels. They also ensure everyone is focused on delivering tangible value to customers and all other stakeholders by providing frequent feedback and coaching that enables people to work autonomously toward team outcomes.
2. Network of empowered teams
Mind-set shiftFrom:“People need to be directed and managed, otherwise they won’t know what to do—and they’ll just look out for themselves. There will be chaos.”To:“When given clear responsibility and authority, people will be highly engaged, will take care of each other, will figure out ingenious solutions, and will deliver exceptional results.” Agile organizations maintain a stable top-level structure, but replace much of the remaining traditional hierarchy with a flexible, scalable network of teams. Networks are a natural way to organize efforts because they balance individual freedom with collective coordination. To build agile organizations, leaders need to understand human networks (business and social), how to design and build them, how to collaborate across them, and how to nurture and sustain them.An agile organization comprises a dense network of empowered teams that operate with high standards of alignment, accountability, expertise, transparency, and collaboration. The company must also have a stable ecosystem in place to ensure that these teams are able to operate effectively. Agile organizations like Gore, ING, and Spotify focus on several elements:
- Implement clear, flat structures that reflect and support the way in which the organization creates value. For example, teams can be clustered into focused performance groups (for example, “tribes,” or a “lattice”) that share a common mission. These groups vary in size, typically with a maximum of 150 people. This number reflects both practical experience and Dunbar’s research on the number of people with whom one can maintain personal relationships and effectively collaborate.7 7.Drake Bennett, “The Dunbar Number, From the Guru of Social Networks,” Bloomberg, January 2013, bloomberg.com. The number of teams within each group can be adapted or scaled to meet changing needs.
- Ensure clear, accountable roles so that people can interact across the organization and focus on getting work done, rather than lose time and energy because of unclear or duplicated roles, or the need to wait for manager approvals. Here, people proactively and immediately address any lack of clarity about roles with one another, and treat roles and people as separate entities; in other words, roles can be shared and people can have multiple roles.
- Foster hands-on governance where cross-team performance management and decision rights are pushed to the edge of boundaries.8 8.David S. Alberts and Richard E. Hayes, “Power to the Edge: Command and Control in the Information Age,” Command and Control Research Program Publication Series, April 2005 reprint, dodccrp.org. It is at this interaction point that decisions are made as close to relevant teams as possible, in highly-productive, limited-membership coordinating forums. This frees senior leaders to focus on overall system design and provide guidance and support to responsible, empowered teams that focus on day-to-day activities.
- Evolve functions to become robust communities of knowledge and practice as professional “homes” for people, with responsibilities for attracting and developing talent, sharing knowledge and experience, and providing stability and continuity over time as people rotate between different operating teams.
- Create active partnerships and an ecosystem that extends internal networks and creates meaningful relationships with an extensive external network so the organization can access the best talent and ideas, generate insights, and co-develop new products, services, and/or solutions. In agile organizations, people work hands-on and day-to-day with customers, vendors, academics, government entities, and other partners in existing and complementary industries to co-develop new products, services, and/or solutions and bring them to market.
- Design and create open physical and virtual environments that empower people to do their jobs most effectively in the environment that is most conducive to them. These environments offer opportunities to foster transparency, communication, collaboration, and serendipitous encounters between teams and units across the organization.
Like the cells in an organism, the basic building blocks of agile organizations are small fit-for-purpose performance cells. Compared with machine models, these performance cells typically have greater autonomy and accountability, are more multidisciplinary, are more quickly assembled (and dissolved), and are more clearly focused on specific value-creating activities and performance outcomes. They can be comprised of groups of individuals working on a shared task (i.e., teams) or networks of individuals working separately, but in a coordinated way. Identifying what type of performance cells to create is like building with Lego blocks. The various types (Exhibit 3) can be combined to create multiple tailored approaches. Exhibit 3
The three most commonly observed agile types of performance cell today include:
- Cross-functional teams deliver ‘products’ or projects, which ensure that the knowledge and skills to deliver desired outcomes reside within the team.These teams typically include a product or project owner to define the vision and prioritize work.
- Self-managing teams deliver baseload activity and are relatively stable over time. The teams define the best way to reach goals, prioritize activities, and focus their effort. Different team members will lead the group based on their competence rather than on their position.
- Flow-to-the-work pools of individuals are staffed to different tasks full-time based on the priority of the need. This work method can enhance efficiencies, enable people to build broader skillsets, and ensure that business priorities are adequately resourced.
However, other models are continuously emerging through experimentation and adaptation.
3. Rapid decision and learning cycles
Mind-set shiftFrom: “To deliver the right outcome, the most senior and experienced individuals must define where we’re going, the detailed plans needed to get there, and how to minimize risk along the way.”To: “We live in a constantly evolving environment and cannot know exactly what the future holds. The best way to minimize risk and succeed is to embrace uncertainty and be the quickest and most productive in trying new things.”Agile organizations work in rapid cycles of thinking and doing that are closely aligned to their process of creativity and accomplishment. Whether it deploys these as design thinking, lean operations, agile development, or other forms, this integration and continual rapid iteration of thinking, doing, and learning forms the organization’s ability to innovate and operate in an agile way. This rapid-cycle way of working can affect every level. At the team level, agile organizations radically rethink the working model, moving away from “waterfall” and “stage gate” project-management approaches. At the enterprise level, they use the rapid-cycle model to accelerate strategic thinking and execution. For example, rather than traditional annual planning, budgeting, and review, some organizations are moving to quarterly cycles, dynamic management systems like Objectives and Key Results (OKRs), and rolling 12-month budgets.The impact of this operational model can be significant. For example, a global bank closed its project-management office and shifted its product-management organization from a traditional waterfall approach to a minimal viable product-based process. It moved from four major release cycles a year to several thousand-product changes monthly; it simultaneously increased product development, deployment, and maintenance productivity by more than 30 percent.There are several characteristics of the rapid cycle model:
- Agile organizations focus on rapid iteration and experimentation. Teams produce a single primary deliverable (that is, a minimal viable product or deliverable) very quickly, often in one- or two-week “sprints.” During these short activity bursts, the team holds frequent, often daily, check-ins to share progress, solve problems, and ensure alignment. Between sprints, team members meet to review and plan, to discuss progress to date, and to set the goal for the next sprint. To accomplish this, team members must be accountable for the end-to-end outcome of their work. They are empowered to seek direct stakeholder input to ensure the product serves all the needs of a group of customers and to manage all the steps in an operational process. Following this structured approach to innovation saves time, reduces rework, creates opportunities for creative “leapfrog” solutions, and increases the sense of ownership, accountability, and accomplishment within the team.
- Agile organizations leverage standardized ways of working to facilitate interaction and communication between teams, including the use of common language, processes, meeting formats, social-networking or digital technologies, and dedicated, in-person time, where teams work together for all or part of each week in the sprint. For example, under General Stanley McChrystal, the US military deployed a series of standardized ways of working between teams including joint leadership calls, daily all-hands briefings, collective online databases, and short-term deployments and co-location of people from different units. This approach enables rapid iteration, input, and creativity in a way that fragmented and segmented working does not.
- Agile organizations are performance-oriented by nature. They explore new performance- and consequence-management approaches based on shared goals across the end-to-end work of a specific process or service, and measure business impact rather than activity. These processes are informed by performance dialogues comprised of very frequent formal and informal feedback and open discussions of performance against the target.
- Working in rapid cycles requires that agile organizations insist on full transparency of information, so that every team can quickly and easily access the information they need and share information with others. For example, people across the unit can access unfiltered data on its products, customers, and finances. People can easily find and collaborate with others in the organization that have relevant knowledge or similar interests, openly sharing ideas and the results of their work. This also requires team members to be open and transparent with one another; only then can the organization create an environment of psychological safety where all issues can be raised and discussed and where everyone has a voice.
- Agile organizations seek to make continuous learning an ongoing, constant part of their DNA. Everyone can freely learn from their own and others’ successes and failures, and build on the new knowledge and capabilities they develop in their roles. This environment fosters ongoing learning and adjustments, which help deliverables evolve rapidly. People also spend dedicated time looking for ways to improve business processes and ways of working, which continuously improves business performance.
- Agile organizations emphasize quick, efficient, and continuous decision making, preferring 70 percent probability now versus 100 percent certainty later. They have insight into the types of decisions they are making and who should be involved in those decisions.9 9.Aaron De Smet, Gerald Lackey, and Leigh Weiss, “Untangling your organization’s decision making,” McKinsey Quarterly, July 2017. Rather than big bets that are few and far between, they continuously make small decisions as part of rapid cycles, quickly test these in practice, and adjust them as needed for the next iteration. This also means agile organizations do not seek consensus decisions; all team members provide input (in advance if they will be absent), the perspectives of team members with the deepest topical expertise are given greater weight, and other team members, including leaders, learn to “disagree and commit” to enable the team to move forward.
4. Dynamic people model that ignites passionMind-set shiftFrom:“To achieve desired outcomes, leaders need to control and direct work by constantly specifying tasks and steering the work of employees.”To:“Effective leaders empower employees to take full ownership, confident they will drive the organization toward fulfilling its purpose and vision.” An agile organizational culture puts people at the center, which engages and empowers everyone in the organization. They can then create value quickly, collaboratively, and effectively.Organizations that have done this well have invested in leadership which empowers and develops its people, a strong community which supports and grows the culture, and the underlying people processes which foster the entrepreneurship and skill building needed for agility to occur.Leadership in agile organizations serves the people in the organization, empowering and developing them. Rather than planners, directors, and controllers, they become visionaries, architects, and coaches that empower the people with the most relevant competencies so these can lead, collaborate, and deliver exceptional results. Such leaders are catalysts that motivate people to act in team-oriented ways, and to become involved in making the strategic and organizational decisions that will affect them and their work. We call this shared and servant leadership. Agile organizations create a cohesive community with a common culture. Cultural norms are reinforced through positive peer behavior and influence in a high-trust environment, rather than through rules, processes, or hierarchy. This extends to recruitment. Zappos, the online shoe retailer acquired by Amazon changed its recruiting to support the selection of people that fit its culture—even paying employees $4,000 to leave during their onboarding if they did not fit.10 10.David Burkus, “Why Amazon bought into Zappos’s ‘pay to quit’ policy,” Inc., June 2016, inc.com. People processes help sustain the culture, including clear accountability paired with the autonomy and freedom to pursue opportunities, and the ongoing chance to have new experiences. Employees in agile organizations exhibit entrepreneurial drive, taking ownership of team goals, decisions, and performance. For example, people proactively identify and pursue opportunities to develop new initiatives, knowledge, and skills in their daily work. Agile organizations attract people who are motivated by intrinsic passion for their work and who aim for excellence. In addition, talent development in an agile model is about building new capabilities through varied experiences. Agile organizations allow and expect role mobility, where employees move regularly (both horizontally and vertically) between roles and teams, based on their personal-development goals. An open talent marketplace supports this by providing information on available roles, tasks, and/or projects as well as people’s interests, capabilities, and development goals.
5. Next-generation enabling technology
Mind-set shiftFrom:“Technology is a supporting capability that delivers specific services, platforms, or tools to the rest of the organization as defined by priorities, resourcing, and budget.”To:“Technology is seamlessly integrated and core to every aspect of the organization as a means to unlock value and enable quick reactions to business and stakeholder needs.” For many organizations, such a radical rethinking of the organizational model requires a rethinking of the technologies underlying and enabling their products and processes, as well as the technology practices needed to support speed and flexibility.Agile organizations will need to provide products and services that can meet changing customer and competitive conditions. Traditional products and services will likely need to be digitized or digitally-enabled. Operating processes will also have to continually and rapidly evolve, which will require evolving technology architecture, systems, and tools. Organizations will need to begin by leveraging new, real-time communication and work-management tools. Implementing modular-based software architecture enables teams to effectively use technologies that other units have developed. This minimizes handovers and interdependencies that can slow down production cycles. Technology should progressively incorporate new technical innovations like containers, micro-service architectures, and cloud-based storage and services.In order to design, build, implement, and support these new technologies, agile organizations integrate a range of next-generation technology development and delivery practices into the business. Business and technology employees form cross-functional teams, accountable for developing, testing, deploying, and maintaining new products and processes. They use hackathons, crowd sourcing, and virtual collaboration spaces to understand customer needs and develop possible solutions quickly. Extensive use of automated testing and deployment enables lean, seamless, and continuous software releases to the market (for example, every two weeks vs. every six months). Within IT, different disciplines work closely together (for example, IT development and operations teams collaborate on streamlined, handover-free DevOps practices).
About the author(s)
Wouter Aghina is a partner in McKinsey’s Amsterdam office; Aaron De Smet is a partner in the Houston office; Gerald Lackey is a senior expert in the Washington DC office; Michael Lurie is a senior expert in the Los Angeles office, and Monica Murarka is a senior knowledge manager in the San Francisco office. The authors would like to thank the following contributors: Karin Ahlbäck, Clemens Fahrbach, Christopher Handscomb, Olli Salo, Elizabeth Seem, and Jannik Woxholth.MeasureMeasure