Why transform - Benefits of transforming - part 2 of 3
Updated: Jan 4
Introduction to this blog series on why transformation is needed
Many companies have proven that an Agile Culture Transformations done right has enabled their sustainable success. But change doesn’t come easy. It requires a comprehensive change of workflows and a major shift in corporate culture and mindset.
To justify the major investments required to successfully transform, it is essential to understand why a transformation is needed. What happens if a transition to an Agile Culture is not tackled and what are the benefits of successfully implementing these disruptive changes?
Therefore, in this blog series, we will uncover why an Agile Culture Transformation in today's volatile, uncertain, complex, and ambiguous times is essential.
We aim to provide well-founded information to be able to take the right decision on an Agile Transformation.
In the first part of this blog series we saw how the costs of not transforming can be horrendous. But as if that’s not enough reason to transform to an Agile culture, there are also clear added benefits of a comprehensive transformation. In this post we will highlight these and provide reliable sources to underline the arguments made.
Let’s first look at the different benefits of a successful agile transformation before concluding with a summary of the overall gains.
Improved employee engagement
One of the most apparent outcomes of a successful agile transformation is vastly improved employee engagement. This is very noticeable when talking to people who have been through such a transformation. According to a McKinsey study, employee engagement increases by +20 to +30 points when agile transformations are done right.
But employee engagement isn’t only a good thing for employees. It counts as a major factor to improved profitability of the organization, next to the wellbeing of the people in and around the organization. This shows in a 2020 Gallup study which finds that the 25% top companies regarding employee engagement have significantly higher profitability (+23%), productivity (+18%), better customer loyalty/engagement (+10%), organizational citizenship (13%) and employee wellbeing (+66%).
Better alignment of teams
Comprehensive agile transformations introduce agile values and principles on the organizational level. They approach the organization as a system. If the whole organization works agile, the teams can work more autonomously and satisfy customer needs more quickly.
When multiple teams work together, scaled agile frameworks support the cultural change through suitable processes, methods and artifacts, such as meeting formats (e.g. from holacracy) or methods for achieving goals such as OKR. This leads to an effective organization-wide collaboration between the teams without the need of command-and-control structures with their negative effects.
This has been perfectly framed in the SAFe core values: “Alignment occurs when everyone is working toward a common direction. Indeed, Alignment enables empowerment, autonomy, and Decentralized Decision-making, allowing those who implement value to make better local decisions.”
This alignment is essential to keep pace with fast change, disruptive competitive forces, and distributed teams.
Ability to cope with alignment to the market
Nowadays, markets are moving rapidly driven by technology, globalization, and other powerful forces.
As shown in Figure 1 from John P. Kotter’s book “Change” the curve for the external change is steeper than the slower internal change, resulting in an increasing opportunity gap. This visualizes clearly the problem that we need to cope with in regard to changing environments in today’s world.
The good news is that this opportunity gap can be seen as a chance for innovation and ability to grow in the market, shortening the distance between the internal change to the external one. This can be achieved by creating a working environment that allows the organization to respond quickly to external change and overcome preserving elements in the organization that hold back change due to human nature.
One of the main goals of an agile transformation is to overcome the inability to adapt to the external change. Therefore, organizations can grow by becoming aware of the change problem and the opportunities created, and actively work towards an environment where change is not only accepted but profited from.
Grow from failure
In jobs, that consist mainly of knowledge work today, it is of utmost importance that an environment is created where people are allowed to fail but learn from failure, so-called “fail-forward cultures”.
The concept of antifragility by Nassim Taleb shows this impressively. An antifragile system is a system that gains from disorder. The Idea behind this is that we do have an opposite to a fragile system that breaks from outside stressors. The goal therefore is to achieve antifragility to create the chance of infinite gain/benefit.
The idea behind this is to create an antifragile environment where through innovation and agile mindsets the benefit grows to infinite as seen in Figure 2.
With an agile transformation of an organization the journey towards antifragility is initiated. The main goal should be to create a system that can automatically and immediately respond to internal or external stressors without moving into survival mode - and even come out stronger from such situations.
Creating a balance between people and the organization
One of the main challenges of a healthy work-life balance is getting the organizational wants and needs balanced out with the individual wants and needs of all the people involved in the organization (see Being in Organizations).
The balancing act between these wants and needs mainly happens through the leadership team as illustrated in Figure 3. This means the leader within an organization needs to balance the interests of the organization with the interests of the individuals.
There is an asymmetry to overcome though. Organizations cannot perceive people, but people can associate with and perceive an organization as seen in Figure 4. This illustrates that an organization can only benefit from the ability and talent of an employee if it is fully recognizing and fostering its employee’s inputs.
By transforming organizations into a resonating system, people can fully integrate and identify themselves with the company. This enables the organization to be more efficient during day-to-day collaboration and generating output.
From static to dynamic strategy
By a static strategy we understand making a projection from a fixed point towards the future and pinning strategical goals formed to achieve the projected wishes. The problem with this approach is that nowadays strategic planning is mostly done in strategical meetings where time horizons are usually 3 to 5 years and 3-horizon models are used. This hinders seizing chances from opportunities that appear between these strategic planning meetings and leaves a big hole in opportunities not taken due to static planning, as nicely explained by G. Gupta in his post Strategic Planning is Dead.
Agile transformations are done on a holistic view of the organization and include approaching strategies in an iterative approach in regard to how strategic decisions are formed and revised. There is currently running research on how this can be achieved as for example a study from ZHAW on strategility.
The main ideas in these studies are to enable an organization to test and adapt quickly on hypothetical formed strategies and install roles which act in such ways. With an agile value mindset, the organization can foster strategic ideas throughout the organization and is not dependent on individuals, thus lowering the chance to miss a great idea.
All these benefits result in a major improvement of the organization’s financial performance and at the same time is sustainable and improves the wellbeing of all employees.
This is clearly shown in McKinsey’s study, where they conclude: “Highly successful agile transformations typically delivered around 30 percent gains in efficiency, customer satisfaction, employee engagement, and operational performance; made the organization five to ten times faster; and turbocharged innovation.”
With these impressive results, is anyone still claiming an Agile Transformation is not worth the effort?
In part three of this series, we describe the effects and reasons for an agile transformation in a distilled form.
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