How to create a truly adaptive organisation

Variables are the new constants

It’s no surprise that the current annual dream-plan-execute model of organisational strategy is no longer fit for purpose. To work, it necessitated a world where there were many constants and few variables.

Today, there are very few constants, so those who operate their organisations in this manner might as well be injecting an arthritis-inducing pathogen into the business model.

There is much talk about agile organisations. Broadly the underlying philosophy, which emerged from the software industry circa thirty years ago, encourages a more responsive approach to delivery. Rather than a ‘big bang’ / large scale delivery of software five years from now, let’s get something to the users in say 3 months, albeit lacking much of the specified functionality. The upside being that organisations can yield value from the investment early on. If the market drivers behind the requirements change, they can be adapted accordingly with minimised wasted spend.

Agile at Scale

A continuous focus on what is important to the users / customers is to be applauded. However, I was a little concerned when I came across an article recently in HBR on the topic of agile, entitled, ‘Agile at Scale’. It struck all the right notes in respect of how the business could benefit from agile beyond the IT function.

However, the HBR article was unfortunately written with a bygone period in mind, namely the industrial era.

Thus, forward-thinking HBR-reading leaders are now exposed to an idea that will ensure that in due course they steer their business off a cliff.

My issue is with the idea that one can take the agile approach and replicate it in different functions across the business. Eventually you will have agile teams in finance, HR and so on. But this simply propagates the functional / departmental model of the industrial era, which evolved for management convenience, rather than the needs of the customer. I am not saying that the HBR guidance won’t be an improvement on the current sclerotic approach of many organisations. But it will likely have marginal impact on the customer and will certainly not protect the organisation from becoming a prime target.

Reality check

The first reality that organisations must face is that a great product or service alone is not enough for commercial success. It is only one of three pillars. The other two being the financial model and the ‘Go To Market’ model. The key is to get all three synchronised and optimised.

That will not happen with the HBR functionally-siloed approach.

The second reality is that these agile projects should not be perceived as incremental improvements to the existing business model, but rather alternative business models. Again, it is unlikely that past success will be an indicator of future success, so best to have a plan B ,C, D etc. for the day that the digital Grim Reaper arrives in your plan A reception.

Alt-business

So rather than thinking in terms of functional improvements, think of alternative business models. As mentioned, you can consider these as a portfolio of plans of which your plan A happens to be the primary source of cash. The sooner you have more than one plan in operation the sooner you will have significantly reduced your organisation’s existential risk. Another way of thinking of this agile approach is to imagine that you as a business leader are presiding over a portfolio of experiments / bets.

Each experiment is a hedge against each possible destiny your organisation might face.

The perfect scenario is for you to place a bet on each horse (ie. each future scenario) in the race.

With this approach to agile, it is not enough to have a project manager. There needs to be a senior executive team for each initiative. Remember we are experimenting with business models, one or more of which will eventually become operational. Ultimately a polymodal business model is critical to agility and adaptability in the digital age. One might say that the business of being in business in the digital age is being in the business of developing and operating multiple business models.

The Agility department

So the question emerges as to whether you should have an agility department. This would be an improvement on an innovation centre. But generally the focus is on product/service, rather than all three aforementioned pillars.

I think it would be better to see your business as a business incubator where your plan B, C, D etc. are nurtured, matured or destroyed.

Your plan A, with its existing cash flows, exists to fund the other plans. The aim is to build a portfolio of cashflows diverse and robust enough to absorb the shock of unpredictable threats.

The customer is not always right

Ironically, at a meta-level, this digital age business model is very industrial in nature. It will be underpinned by good old fashion process. However, it will be totally data-driven, will harness our full cognitive capacity and will operate like clockwork in the most turbulent of times.

Much of the business literature today is focused on applying the latest approaches and technologies to existing business models. I suspect in part because the business reader cannot countenance the scale of change required to thrive in the digital age.

This is an example of the customer being wrong. As Henry Ford once said, “If I had asked people what they wanted, they would have said faster horses.” It’s time to stop building faster factories. Adaptive organisations need adaptive leaders.

The industrial era is over. Period.