In a time of rapid change and unprecedented complexity, only the nimble survive!
In 1935, the life expectancy of an S&P 500 company was 90 years. By 2010, it was 14 years and studies show that it’s getting even shorter. No wonder more and more companies, who are tired of change fatigue and endless restructuring, are looking at how they can become a moreagile organizationand retain their competitive advantage.
Agility, as defined by McKinsey Senior Partner,Aaron De Smet, is the “ability of an organization to renew itself, adapt, change quickly, and succeed in a rapidly changing, ambiguous, turbulent environment. Agility is not incompatible with stability – quite the contrary.Agilityrequires stability for most companies.”
In short, agility is an organizational model designed for the age of the iPhone and offers a future without major restructurings. Adopting the agile way of working generates up to three times higher shareholder returns, develops better products faster and cheaper, and keeps customers and employees happy.
Our recent experience makes us believe that this is possible at an enterprise-level. Based on our research and experience with agile organizations, they universally exhibitfive trademarks:
A clear North Starto which the entire organization, from management to employees, works toward. Think of Amazon: it is a massive conglomerate of businesses by any measure, stretching from technology to groceries and employing more than 350,000 people. Yet, every employee would attest to one common north star: they are obsessed with the customer.
Cross-functional teams aligned to a specific missionthat can be deployed rapidly and have as few layers as possible. Spotify, with its popular app for listening to music, is not a small organization. It spans multiple countries across two continents and employs over 1,600 people. However, it is organized across cross-functional teams comprising all the necessary technology and business resources for working against a clear mission that can be changed rapidly based on business outcomes. And all of this is donewithin three layers.
The ability to work in rapid iterationsand react to learnings based on those iterations. Consider Tesla: while today it is recognized for creating futuristic, self-driving vehicles, its first car was little more than a typical vehicle with a battery and one of its later models even caught on fire! In less than a decade, Tesla has delivered multiple iterations of its vehicle, and one that is designed based on learnings from customers.
A reimagined people modelhas the “boss” making fewer top-down decisions and rather, acting as a servant leader who helps removes roadblocks, provides coaching and feedback, and empowers teams to make decisions within their mission. Also, career progression is reconsidered as a more expertise-based model with clear symbols of progression. Zappos, the online retailer, embodies such a people model.
Re-envisioned technology, which leverages the power of the Cloud and makes use of the latest DevOps practices, lets companies react rapidly to business needs. Netflix, for instance, releases new features to its customers a couple of times a day. Contrast that to some of the large incumbents that release annually.
Given the scale of change required, we believe agile transformations must be comprehensive and iterative, carried out in short repetitions. Above all, they require a leadership team committed to change and organizations with missions strong enough to sustain the change needed.
This article was originally written by Christopher Handscomb and Shail Thaker. Christopher leads McKinsey's work globally on organisation for players in the energy industry and supports companies across sectors on enterprise-wide agile transformations. Shail leads McKinsey’s Northern European hub of the Pharmaceuticals & Medical Products Practice and the firm’s global healthcare organisation and enterprise agility work. Full credit goes toMcKinsey, who published this article over a year ago. This article has been reprinted for the purpose of education.
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