A lot of organizations are pursuing, or at least considering, agile transformation. It’s the latest evolution of the agile concept that, if you believe the hype, will single handedly ensure organizations are set up for success. But of course, things aren’t that simple. Agile transformation can benefit organization tremendously, or it can be a drain on resources and a barrier to the very success it is designed to enable. How do you get it right? How do you avoid the pitfalls? And how do you leverage it to help you deliver the best performance? That’s what we’re going to explore in this guide.
What is agile transformation?
Agile transformation means leveraging the right people, processes and software solutions in the right way to achieve strategic portfolio management to transform how the organization delivers results.
Every organization will interpret agile transformation a little (or a lot) differently. For some organizations it’s about embracing one of the formal strategic or scaled agile models into every aspect of their business and we’ll look at some of those models a little later. For others it’s about expanding agile execution and delivery to more projects in more business areas. For many, it’s a bit of both.
The lack of understanding of exactly what agile transformation needs to be in order to succeed is clearly a problem, and is an underlying cause of many of the challenges that agile transformations face.
3 Components of Effective Agile Transformation Strategy
To understand how to make an agile transformation effective, we have to go back to considering why agile transformation is pursued in the first place. It isn’t the key to success in-and-of-itself, it’s meant to supports the ability of an organization to achieve business agility and by extension, to aid in business transformation and optimal performance. So that is the context within which agile transformation must be delivered. And that all starts with strategic portfolio management.
- Integration of agile practices from strategic layers to execution
- Recognition that agile must coexist with other elements of the tri-modal reality
- Appreciation that agile transformation is only one element of a larger strategy
1. Integration of agile practices from strategic layers to execution
Scaled agile approaches such as SAFe can be valuable tools to help ensure that agile transformations align from planning, funding and governance through delivery and benefits realization. Initiating an agile transformation with consideration of these strategic agile approaches is far more likely to deliver the required outcomes, even if a complete scaled model isn’t selected or applied.
The key is to ensure there is consistency in approach – work is derived from strategic priorities to establish products as a funding and governance level before being broken down into epics that drive agile delivery. All of that has to happen while ensuring optimal alignment with the goals and objectives in an ever-evolving operating environment. And as noted in the challenges section above, financial governance has to be effective and drive adjustments when required.
2. Recognition that agile must coexist with other elements of the tri-modal reality
At the same time that strategies are being broken down into products and epics before being delivered using agile, other strategies, or other elements of the same strategies, will be broken down into programs, which will then be broken out further into projects and delivered using traditional approaches. A successful agile transformation must be able to coexist with this approach, and in today’s world that doesn’t simply mean exist in a parallel silo, it must be tightly integrated:
- Planning, funding, governance and work definition in the same strategic solution to support SPM with only execution managed through unique work delivery methods and tools
- Integrated funding, resource management and related capabilities to reflect that all work uses the same superset of organizational resources. This must apply to all portfolios, not just discretionary investments
- Consolidated performance reporting on all portfolio elements whether delivered using agile, waterfall or ad hoc work methods, to support optimized decision making and continuous and adaptive planning
- The ability to consolidate all work – operational and discretionary and each of the tri-modal realities into a single picture of what’s happening, and what needs to happen, in the business.
- Integrated benefits realization and outcome management. Investments only succeed when they deliver the required business outcomes and there must be clear metrics identified and measured to ensure that happens.
That last bullet merits further exploration. Organizations frequently struggle with benefits realization and we have produced a dedicated Guide to Benefits Realization to help. But agile teams in particular have historically not been focused on effective and objective benefits measurement and management.
Structured, strategic portfolio management approaches are needed to communicate all strategies across all business areas and work methods along with the objectives that need to be achieved for each of those strategies. There must then be an integrated measurement and management approach that ensures those objectives are achieved across all investments and delivery approaches.
These elements of agile transformation can be achieved in a number of ways – with or without SAFe, with or without another scaled agile approach, with different approaches for different business areas, or with the same combination of approaches for all functions. But it must be driven as part of an overall SPM strategy of people, process and tools if it is to be successful.
3. Appreciation that agile transformation is only one element of a larger strategy
Business transformation, not agile transformation, should be the hub of an organization’s focus these days. Achieving business transformation requires business agility and agile transformations, done well, support the creation of that business agility. But agile transformation shouldn’t be the end goal. Business agility shouldn’t even be the end goal. Everything must be implemented in the context of optimizing the ability of the business to deliver.
That goes beyond just discretionary investments and strategic priorities. Every part of an organization, everything it does, every asset it owns, every person who works there must be viewed as part of a connected whole where everything is aligned to deliver success. Agile transformation must be implemented in that context – not just transforming a subset of work delivery items; not even transforming a subset of strategic approaches; but enabling the organization to work more tightly together to drive transformation.
That starts by recognizing where agile transformation is appropriate, and where it’s not. Organizations must become capable of continuously evolving and adapting to changing environments, and that can make those adjustments to all business areas and all functions with minimum disruption and maximum speed – all while remaining tightly aligned between strategy, execution and benefit realization. Unless agile transformation is undertaken within that context, and unless everyone involved in the process understands and supports that context, the ability to deliver success will be severely impeded.
What is the purpose of agile transformation?
Transformation looks set to be this decade’s corporate buzzword. There’s business transformation, digital transformation, digital business transformation, and of course agile transformation. At the heart is the undeniable fact that the pace of business is accelerating, fueled by technology and the ability to leverage that technology to innovate everything from customer offerings to internal operations. For the most successful enterprises, technology is enabling not just greater effectiveness and efficiency, but fundamentally different ways of doing business.
This is true transformation of the business, and it is occurring as a continuous evolution – stable operational windows interspersed with major and disruptive changes are giving way to ongoing and gradual evolution of every aspect of how an organization operates. While ever advancing technological capabilities are the fuel for this continuous transformation, the engine driving it is the concept of business agility.
Can PMOs Be Too Agile To Orchestrate Business Transformation?
Some think Agile execution is a panacea to fix all their problems. But it takes more than just a new execution methodology to align execution with strategy and address the challenges of becoming an agile business.
Business agility is the ability to understand the evolutions and changes that are happening in an organization’s operating environment; to distinguish between those changes that are threats, those that are opportunities, and those that are simply noise; and then to respond effectively, efficiently, and with minimal disruption to the business. A well implemented agile transformation, as part of an overall strategic approach to business, can help achieve that business agility. In fact, supporting an enterprise’s ability to achieve business agility should be the only reason to pursue an agile transformation. The problems start when that doesn’t happen.
Challenges of agile transformation
Like every other major trend in business, there are a number of challenges that can create barriers to success with agile transformation. These include:
- Execution driven agile transformation
- Attempting to make everything agile
- Focusing exclusively on strategic / scaled agile approaches
- Ignoring financial governance
- Failed resource management improvements
But there is one primary challenge that causes problems at a great many organizations. So, before we look at other challenges, let’s focus on that one first.
1. Execution-driven agile transformation
Not only is this the most common challenge organizations face when seeking to implement an agile transformation, it is also the most dangerous. That’s because it appears at first to be delivering exactly what the organization wants. Execution-driven agile transformation is the expansion of the use of agile project delivery techniques across more projects and more business areas. The theory is that if agile is a better way of delivering work within software development environments in IT, then it will also be better in the rest of IT. And if it’s better in IT then it will also be better in other departments and functional areas.
In the short term, it works. Delivery and work teams embrace the concept of agile execution and enjoy greater autonomy and freedom to operate in an agile environment. Agile is perceived to be an improvement, and that fuels greater expansion and adoption, accelerating this frontline agile transformation. But within 12 to 18 months the process runs into the brick wall that is the disconnect between strategy and delivery.
The key to success in modern business is the successful implementation of strategic portfolio management or SPM. This is the combination of technology, processes and cultural commitment that ensures all work aligns with the organization’s strategic priorities. Execution-driven agile transformation is directly at odds with that concept for several reasons:
- It makes it harder for leadership to gain insight into what is happening at the execution layer, which in turn makes it harder to ensure the right initiatives are being funded to ensure there is always optimal alignment with the strategic priorities.
- It doesn’t support the top-down approach that requires all investments to be aligned with one or more objectives and derived from that alignment.
- It assumes that agile is the right approach for all work, which impacts the ability to optimize benefits and impacts organizational performance.
This last bullet is critical and is an additional challenge in its own right.
2. Attempting to make everything agile
When the concept of agile execution as we understand it today first appeared around two decades ago, it rapidly gained traction as a delivery method because it was fundamentally different to the traditional, plan-driven or waterfall approach that had dominated delivery up to that point. It allowed organizations to look at the work they needed to carry out and decide which approach was better suited – agile or waterfall. By doubling the number of methods available there was a greater chance that the way the work was done was able to improve the chances of a successful outcome.
That continues to this day, the tri-modal reality of work delivery through waterfall, agile and ad hoc approaches is what fuels execution of discretionary investments the world over and supports the achievement of the best possible performance. But too often, agile transformations are too narrowly focused to recognize that.
They see agile as a fundamentally better approach for all work, and seek to replace all other delivery methods with agile, leaving it as the only choice for all execution. This takes organizations back to the situation that led to the rise of agile in the first place – a one-size-fits-all approach that wasn’t up to the job. Agile is an exceptionally effective and efficient way of delivering some forms of work, it may even be the only method necessary in some business areas, especially those that are focused predominantly on technology. But it isn’t the right approach for every initiative in every department and trying to transform 100% of work delivery to agile is going to hurt performance, not help it.
3. Focusing exclusively on strategic / scaled agile approaches
In recent years a number of models have come to the fore that seek to address the first challenge that we considered here – the tactical, execution driven agile transformation. SAFe, Scaled Agile Framework, is probably the best known of these models but there are a number of others. By helping organizations to apply agile concepts to the more strategic activities of an organization, they enable a number of the pitfalls of execution based agile transformations to be avoided.
At the same time, the fact that these models are designed to directly address the strategic planning elements of a business and translate that strategy into execution, help to support the concept of business agility that is so essential to organizational success. However, in isolation, these models still create at least as many challenges as they solve.
They still prioritize agile execution for all work, creating the same situation where all work is expected to be delivered using the same approach, even if that approach isn’t the best one. They marginalize and potentially eliminate traditional planning, funding and execution approaches that are still critically important to many departments across virtually every organization. These methods are important, but only in the framework of a larger enterprise approach.
4. Ignoring financial governance
Agile transformations often result in the elevation of funding models to the program or product level rather than the team or project level. That’s appropriate and this bulk funding approach can make financial management both more effective and more efficient. However, it shouldn’t mean giving agile teams a blank check, it’s not the freedom to consume the allocated investment without any form of control.
Investment stakeholders still need insight into the expenditure and value being achieved by those teams and they need the ability to adjust funding and reallocate investments as the operating environment evolves and forecasts are replaced with actual data. Unless organizations are able to balance this lean funding with appropriate financial oversight the ability to optimize performance will be lost.
5. Failed resource management improvements
One of the common promises of agile transformations is that it will simplify the ability to manage resources and improve resource utilization percentages by establishing stable, dedicated teams in place of the fluid resource demands of serial project delivery. However, this doesn’t happen for a number of different reasons:
- Work still has to be balanced across the tri-modal reality of different delivery approaches and in this context dedicated team can potentially make resource management more difficult by removing dedicated team members from the pool.
- Organizations still have to balance the complexity of operational and discretionary work. Nominal allocation of resources to different pools can occur, but ultimately there is only one set of employees available for all the work that has to be delivered.
- Different business areas and delivery methods use different resource management approaches and cadences, adding to the complexity of managing resources across the entire enterprise.
- Dedicated teams still face the need for specialist functions at certain times and must still have a degree of turnover in order to prevent stagnation and lost productivity.
Resource planning is different in an agile transformation environment, and those differences can be accommodated with flexible resource management tools combined with an integrated approach to all investment and work types. But agile transformations cannot realistically claim that they will improve resource management, simply that they will change how it happens and the variables that need to be considered.
The agile transformation roadmap
Agile is a powerful tool in today’s enterprise toolkit. But it is only one tool. Organizations must never lose sight of the big picture that they need to achieve – sustainable success through business transformation. That must be enabled with the framework of SPM, and agile transformation is an element of that framework – as are all the other tools available to businesses. Agile transformation enables business agility which in turn drives performance and eases the successful achievement of business transformation. Agile transformation doesn’t require 100% agile delivery, in fact very few organizations will, or should pursue only agile execution as the tri-modal reality provides greater flexibility to ensure the right approach is used for every piece of work.
Using agile principles and practices to optimize strategic performance through a combination of people, processes and tools.
– Integrate agile practices at all levels of the business
– Embrace agile in conjunction with traditional, hybrid and ad hoc approaches
– Recognize that agile transformation must lead to more – it is not enough on its own
The goal should be to optimize strategic performance consistently. That means business agility, strategic portfolio management, and continuous improvement.
It is a stepping stone toward achieving business agility which in turn helps achieve effective strategic portfolio management.