Articles

The case for Agile Strategy

In February 2001, 17 people met at a ski resort in Snowbird, Utah to discuss lightweight development methods. What emerged was the Manifesto for Agile Software Development, also known sometimes as the Agile Manifesto. This manifesto went on to reshape the entire software industry and has become the defacto standard for creating software. Years later, it’s starting to reshape how we approach strategy.

 

Strategy’s shortcoming

Strategy exercises can be ethereal. Executives walk out of a strategic retreat bearing commandments that get passed on to the rest of the organization. The only issue with this is that it has been proven to not work. 61% of leaders (1) acknowledge that their firms often struggle to bridge the gap between strategy formulation and its day-to-day implementation.  90% of the executives responded that their organization had failed to meet all of their strategic objectives because of flawed or incomplete strategy implementation.

Moreover, in the last three years an average of just 56% of strategic initiatives have been successful. Only a small minority say that their business model is extremely well aligned with strategy. Not surprisingly, companies that are poorly aligned with strategy also report weaker financial results than their peers.

 

Opaque choices

At a high level, strategy exercises are broken down into two components: design and implementation/execution. Design tends to be the fun part where all the important decisions are made. Enthusiasm is typically not lacking! Big ideas, big goals. This is the fun part of strategy. That being said, we’ve come across several hurdles with classical strategy exercises during the design phase:  

  • poor awareness of the environment in which the company operates
  • fragmented understanding of the organization’s competitive advantage
  • unbound to the organization’s capacity to execute

These issues hamper the design of a proper strategy. This stems from the fact that most strategic plans are simply resource allocation plans. This weakness in strategy frequently presents barriers for a successful implementation.

 

This ties into the execution plan, e.g. the reality of getting the plan to work. The challenges we’ve seen here are just as daunting:

  • cultural attitudes that impede implementation
  • resources, including time and money made available for implementation were insufficient or poorly managed
  • insufficient speed and agility in making changes to the implementation plan when you really need to change
Research (2) is starting to support that strategy design and execution cannot be handled in silos. They need to inexorably linked together, but how?

 

Bridging the gap with Agile

When we launched our firm, we were not satisfied with the existing frameworks that existed for strategic planning. They were simply too static and would not evolve quickly enough with the customer. Often times the best ideas come from different fields, we started searching for ideas in adjacent industries. By looking at the technology sector, a simple realization came to light. Most technology companies employ the principles of Agile to create their products. If implemented properly, the benefits have been widely proven: autonomy, alignment, velocity and continuous improvement. If it works for software, why can’t it work for strategy?  We drew upon the widely recognized principles of Agile to propose a new way of planning, it is called Agile Strategy.

 

It is not the strongest of the species that survives, nor the most intelligent that survives. It is the one that is most adaptable to change.

By employing an agile strategic approach, we’re helping organizations become more adaptable. We’ve seen first hand how it can work during hundreds of strategic planning sessions and subsequent sprints. With several years of learning and experimentation, we created a method that helps organizations move faster, become more adaptable and focused. I’m not suggesting that this approach is a panacea, it will not magically solve the issue of organizational perennity. What it does help to resolve is alignment, accountability and velocity.

 

To bridge the strategy execution gap, agile organizations create an ongoing strategic loop. Deliberate and appropriate changes are made to the strategic plan on an ongoing basis.  For this to occur, strong situational awareness is needed at all times to survey the market as well as evaluating progress on execution. Below is a visual representation of the process:

The case for Agile

Why do we believe in these principles? There are three key reasons: transparency, velocity and alignment.

During an annual post-mortem, it’s not wholly apparent who is to blame for a failed plan. With an Agile strategy method, the issues delivering on schedule are thrown up in your face month after month. This makes course adjustments obvious and critical.

In software development, it has been proven that the best scrum teams move significantly faster than teams employing waterfall with higher customer and developer satisfaction. The same applies to executive teams using an Agile strategy method.

You’ll often hear a CEO say that the team needs to “row in the same direction”. This becomes easy to do when the strategic priorities are tied to the execution plan. Everyone on the team knows exactly where they are headed and also the road to get there.

 

Impact on competitive advantage

It is a bit pretentious to state that this process can impact an organization’s competitive advantage but it is not far fetched either. The creation of a feedback loop provides timely and effective feedback to those implementing the strategy. This allows the leaders on the team to rapidly respond to a changing landscape. If nothing else, this is a huge boon for decision makers. Execution is no longer an afterthought but an integral part of the strategy process.

For instance, during a retreat with a retail customer, we identified several important strategic priorities that focused on ecommerce. When it came to create the backlog (i.e. the agile execution plan), it became clear that the organization lacked the talent to be able to execute on these priorities. The focus thus shifted towards human capital and hiring a senior ecommerce leader. This is the type of concrete result that can emanate from an agile plan. Having strong situational awareness on an ongoing basis is another.

 

Need for speed

Given the increased speed of technological innovations occurring, many people still talk about “digital transformation” as an important strategic imperative. This, I believe, is shortsighted. Every single organization is adapting digital technologies and those that aren’t, are being left behind. This is pretty clear as we enter the third decade of the millenium. Rather, I conclude that the key tenet for organizational success is moving quickly and adapting to the market. This is what Agile can help an organization achieve.

 

Notes

1) Why good strategies fail Lessons for the C-suite, The Economist, 2013

2) Testing Organizational Boundaries to Improve Strategy Execution, Harvard Business Review, 2018