When the Ground Shifts, It Pays to Be Agile

Related Expertise: Digital, Technology, and Data, People Strategy, Organization Strategy

When the Ground Shifts, It Pays to Be Agile

By Martin DanoesastroBenjamin RehbergDavid RitterAnanth KrishnaPeter Hildebrandt, and Mehran Islam

The companies that emerge stronger from the COVID-19 crisis will be the ones that address three critical factors in the coming months: cost, speed, and resilience.

For many companies, the need to reduce costs while doing minimal harm to key capabilities is axiomatic. Revenues, profits, and cash flows are plummeting. If costs don’t follow suit, dire consequences are inevitable.

The ability to react quickly to changed circumstances will have a major impact on companies’ ability to contain the damage and make the most of new opportunities. For example, BCG’s retail banking research found that since the crisis struck, the use of digital channels in Italy, the US, and the UK increased by 33%, 20%, and 14%, respectively. These customers, or a significant portion of them, are unlikely to go back to their old ways of doing things.

As our colleagues Rich Lesser and Martin Reeves recently pointed out, companies have been made painfully aware of the fragility of the critical systems upon which they depend and of the need for resilience. Resilience will determine how many of today’s Fortune 100 companies are still in the ranking in 2022.

Agile Moves the Needle

Agility at scale is the corporate capability that can move the needle on all three factors simultaneously. Strong alignment around purpose, strategy, and priorities means teams can work independently more easily, improving resilience. Stronger connection between teams and business goals, combined with fewer handovers and better coordination of roles, improves both efficiency and effectiveness. And streamlined decision making and governance enable faster responses to new conditions and shorter time to market.

Consider the speed with which an agile organization can reprioritize product or service development, adapting to a massive shift—or temporary evaporation—in demand. Or the strength to be gained from higher employee engagement and commitment to the company that come from a strong sense of purpose and of belonging to a team and an organization with transparent goals and strategies.

To be sure, starting an agile transformation now can be a major challenge. But many companies have been on an agile journey for a while, and they have not moved beyond making incremental progress. For them, this could be the right moment to accelerate. In times of crisis, all the things that are difficult to address in the “normal” course of business—such as titles, committees, power structures, governance—are open to question. Sacred cows can be attacked, third rails can be touched. As former White House Chief of Staff Rahm Emanuel famously observed, “You never want a serious crisis to go to waste.”

What the New Normal Can Look Like

There are strong reasons to consider acceleration. Here are a few examples of what our clients have achieved.

A European bank facing changing customer needs and pressure on margins undertook a comprehensive agile transformation of the marketing, product design, analytics, digital, and IT functions in its largest market. It achieved a workforce reduction of more than 20% in these areas, accelerated time to market, and increased employee engagement over a period of six months.

A global pharmaceutical company facing changing health care markets launched a companywide reworking of its operating model, including its R&D, go-to-market, and support functions across dozens of countries. It accelerated its processes by up to 80% in some cases and reduced middle levels of management by up to 50%.

A global automotive OEM facing challenging market dynamics and the long-term shift to electric vehicles and new mobility models embarked on a full, enterprise-wide agile program, encompassing engineering, sales and marketing, and IT. It adapted agile ways of working to individual functional contexts and achieved a 20% to 30% improvement in capital efficiency and a 30% to 40% acceleration in R&D and engineering speed within one year. 

A global asset management firm needed to improve its resilience and efficiency in the face of increasing market uncertainty. It accelerated its agile transformation across both its B2C and B2B business units, improving time to market by 300% to 400% and reducing costs by 15% in about six months.

Is the Timing Right?

In our work on agile transformations across multiple industries over the last few years, we have seen an interesting pattern emerge. In about 80% of ultimately successful transformations, the company was already several years into its agile journey when senior management decided to push the pedal to the metal. Agile had already been adopted in parts of the organization, but it was siloed—typically in IT, and sometimes because a bottom-up group of self-taught scrum teams showed results that took hold. But these individual efforts could not gain traction in the wider business, would-be product owners failed to come forward to start new pilots and spread the experience, and the control and support functions were neither prepared for nor supportive of a major organizational change. As we have described before, more and more CEOs complained, “I’ve got a bunch of agile pilots going. Many are actually working. I’m seeing results, but they’re not transforming the company. They’re not having the full impact I expected.”

Then, often unexpectedly, the company faced some new and serious threat—a nimble new competitor attacking the core business, rapid changes in customer behavior, a major market shift, or the need to radically adjust the cost structure, for example. In the successful transformations, management saw the threat as a catalyst for moving agile past the tipping point. The company already had many of the basic building blocks in place and used the moment to accelerate past the barriers and implement agile at scale, end to end throughout the organization.

Setting the Stage

Sound familiar? We see a good number of companies that may be ready to accelerate agile transformation as part of a comprehensive response to the coronavirus crisis. There are a few prerequisites, however. The first is an aggressive aspiration that necessitates radical change, such as a structural cost reduction on the order of 10% to 20%—not 5% here and there, or an indeterminate productivity increase. (If your target is 5%, don’t bother with agile; there are easier and quicker ways.)

Second, the organization must already have some experience with agile, such as in IT, covering at least a quarter of its FTEs. If the company has not started an agile journey, it needs more time to prepare through pilots and experimentation. The third prerequisite is top leadership’s commitment to drastic and structural change, because scaling agile ultimately requires addressing the entire operating model, including all the enablers that are critical to making it work (such as governance and funding, organization structures, systems and processes, leadership, career paths, incentives, and coaching).

Hitting the Gas

If these cornerstones are in place, a company can move over six to nine months to redesign and rebuild the organization, driving out cost, improving resilience, and making itself better, faster, and stronger in the process. It will be better able to adjust to whatever “new normal” emerges from the current crisis. The transformation can be a standalone initiative, or it can be part of a bigger cost reduction or delayering program to which it adds a critical focus on improving R&D and new-product development and delivery.

Implementation follows in four steps:

  • Develop a new structure. Management develops a new leadership structure to orchestrate the move to an organization built around agile teams and principles, such as customer satisfaction, collaboration, and simplicity. It executes a fair, transparent selection and staffing process and charters teams with clear purpose and objectives and a backlog of projects.
  • Embed new behaviors. The company builds the capabilities to support behavior change and initiates the relevant training (at all levels). Do You Have the Courage to Be an Agile Leader? is an essential component of an agile transformation.
  • Prepare the MVP operating model. Working closely with HR, corporate and business unit management design new roles, career paths, and review systems as well as funding and resource allocation approaches. The company then rolls out the enablers and embeds them into new ways of working. A key aspect is developing practices to engage agile and nonagile teams.
  • Accelerate data and tech transformation. Most companies need to launch or accelerate their technology transformation in parallel with other moves, making a transition to next-generation modular architecture that leverages platform concepts, decouples software capabilities using APIs, and provides access to data for teams that need it. They will also need to introduce DevSecOps and continuous delivery and build an engineering culture.  To enable these vital shifts, companies must raise the bar for technology talent, developing “full stack” engineers who can operate in cross-functional teams through training and mentorship. Clearly, the technology transformation will extend beyond nine months. It’s essential to prioritize the biggest bottlenecks.

A senior executive at a large US regional bank recently told us, “At our bank, the teams and colleagues that are materially more productive and motivated during the COVID-19 crisis are those that had already been, or are now, using agile principles in the way they work.”

Is it time to accelerate your agile transformation?

Subscribe to our Digital, Technology, and Data E-Alert.

Subscribe to our Digital, Technology, and Data E-Alert.