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 coöpe­ration 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, coöpe­rative 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 coöpe­ration 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 coöpe­rative 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 coöpe­rative 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 coöperate 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 coöpe­ration. 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 coöpe­rative 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 coöpe­ration.

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

A parti­cular aspect of business ecosy­stems is the conscious and targeted estab­lishment of coöpe­rative relati­onships between different partners with the aim of generating joint added value. Partners with different compe­tences, roles and interests work together to generate coöpe­rative 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 coöpe­ration 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 coöpe­rative value creation systems that go beyond the tradi­tional and today’s forms of coöpe­ration 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