Agile organizations: advantages, challenges and methods

Since the early days of the industrial age, both people and companies have been constantly exposed to one circumstance: advancement. The old adage, “The rolling stone gathers no moss!” may refer in its meaning purely to people, but it can be equally applied to companies and their philosophies as well. Companies that fail to adapt to their market and customer needs will eventually fall by the wayside, regardless of how long they have been active in the market.

In today’s fast-paced world, agility in the organization of all corporate structures is more important than ever. That is why more and more companies are choosing to introduce this type of company design, from young startups to large enterprises.

In this article, you will learn the advantages of an agile organization, where the challenges are and the methods market leaders are using.

Content

  1. What makes an organization agile?
  2. Advantages of agile companies
  3. Challenges of agile companies
  4. Practical examples of agile organizations
  5. Methods of agile organizations - from Scrum to OKR
  6. Agile organizations and OKRs
  7. Agile working and New Work
  8. Agile organizations FAQ


What makes an organization agile?

Many companies in the job market are well aware of the importance of further development. With that said, however, many are also overwhelmed with the number of tasks that accompany it.

Agile companies, or those with agile leadership, address these problems directly with their organizational structure and ensure that all members of the company actively take part in its development. Accordingly, in an agile company, it is not just certain employees who are assigned to take part in the restructuring. Instead, every team member becomes part of the agile organization and makes important contributions with their work.

Definition: What are agile organizations?

By definition, an agile organization is characterized by its ability to adapt to new market requirements in a short amount of time. In doing so, the company always acts in a future-oriented manner and independently brings about changes that have a positive impact on productivity, customer centricity, flexibility and goal achievement.

The right mindset is one of the most important building blocks for agile work within a company. It is the basic prerequisite for creating agile working practices throughout the entire team and establishing a certain adaptability for new situations.

The agile mindset is characterized by features and principles such as:

  • Personal responsibility of each team member
  • Open communication with one another
  • Appreciation and fairness for all
  • Result and customer-oriented thinking and action
  • Flexibility

Open corporate culture as well as focus on personal responsibility, communication and exchange within the entire team are among the aspects lived by every individual within an agile organization.

In this context, strict openness is extremely important. Employees must be able to stand up for their values and goals within the team. This requires a stable culture in which both discussions and failures are allowed.

In this way, each person’s potential can be fully exhausted and agile work integrated. The same goes for feedback. If such openness in a company exists, it promotes a feedback culture and shortens each individual’s learning cycle.

You can find further characteristics of agile companies in our Workpath Magazine:

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New demands for the C-Suite—How agile leadership succeeds

Of course, such changes do not happen overnight and not all employees are able to internalize and implement new company values on their own.To successfully restructure into an agile organization, a role model at the management level is needed.
At this point, we are referring to agile management or agile leadership. But what does this actually mean?

Since every person has their own leadership style, it is not always easy to clearly define agile leadership. However, an agile leader in an agile organization is highly adaptable, making it possible to react to each problem situation in the best way possible.

To do so, agile leaders proactively provide, among other things, information that is necessary for team members to make appropriate decisions. In this way, employees are encouraged to make those decisions independently and fearlessly. Leaders create an environment in which employees feel safe and are not afraid of failure.
In this respect, agile leadership always meet their employees at eye level and work together with them to find solutions for current and future challenges.

In summary, agile leaders are characterized by:

  • Internalization of the defined values of one’s own organization
  • The ability to properly assess new and changing situations and to guide employees through challenges at eye level
  • Knowledge of the most important methods and models for agile leadership styles and agile working

You can find out more about agile leadership in our Workpath Magazine:

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Agile strategy development

Strategy development is an ongoing process in agile organizations.
Rigid, long-term strategic orientations give way to flexible goals that adapt to constantly changing enviroments.

As part of the process, every employee and every department should help determine the strategic direction of agile organizations and help identify changes quickly and to react to them.
This is the only way in which agile strategy development can develop its full potential.

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Advantages of agile companies

What advantages does this type of change in company culture bring with it? Or, in other words:
Where do agile organizations have an edge over conventional corporate structures?

  • The first and most obvious advantage, which the name suggests, is speed. Agile organizations can react spontaneously to certain circumstances and integrate them into their processes. This is particularly reflected in product development. With help from agile methods, small production cycles can be carried out, enabling a faster market launch. Any adjustments based on customer feedback can also be made in short sprints to improve the product.
  • This leads directly to the next advantage: customer centricity.Customer feedback is the greatest asset a company can have within product development. Thanks to agile working, opinions and feedback can be directly integrated into product management. This creates real added value for the customer, which in turn has a positive influence on customer satisfaction.
  • The result is a corporate culture characterized by adaptability and flexibility. Agile methods create teams that work cross-functionally, increasing communication and effectiveness across multiple departments. This leads to: better results, happier workers and more satisfied customers.

Challenges of agile companies

Transforming into an agile organization, however, is not easy and is not always crowned with success. According to a survey from Harvard Business Publishing, only 20 to 30 percent of management surveyed said they had successfully completed their intended transformations. But why is that?

Once the decision as a company has been made, there are several challenges that executives and employees face.

The first is know-how. It cannot be assumed that all employees have the same level of expertise regarding agile organizations. To successfully shape the agile organization accordingly, team members should be brought to the same level of knowledge, if possible.

Conviction and consistent willingness from the executive level is also necessary for implementing the agile transformation. If there are doubts from the beginning, it will be difficult to motivate employees for the upcoming journey. The transformation will only be successful if everyone pulls together. The study shows, for example, that only 58 percent of those from top management exemplify agile approaches.

To go one step further, the expectations of decision-makers are also important. In the minds of many company decision-makers, efficiency is the driving factor for change. In the course of agile transformations, however, this is the wrong approach. At the beginning, it is not about increasing efficiency. Instead, it is about other aspects, like effectiveness, adaptability and speed. A higher efficiency will be the inevitable result of such improvements.

Finally, didactics is also an important aspect of agile organizations. In workshops, training sessions and the like, it is equally as important for team members to be encouraged to incorporate agile working into their everyday routine. Only in this way will the respective person be able to successfully be a part of the agile transformation.

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Practical examples of agile organizations

Many large companies have used agile transformations to adapt to the demands of the market and their customers. Likely the most well-known representative that has embedded agile working methods into its own organization’s DNA is Spotify.

The Spotify Model

Since its founding in 2015, the Swedish music streaming service Spotify has grown into a global player with more than 5,000 employees and annual revenues of more than $7.8 billion. It is, therefore, no surprise that other companies, such as ING Bank, are orienting themselves towards the “Spotify Agile Model” and applying it to their own operations.

The Spotify Agile Model consists of squads, tribes, chapters and guilds.

Spotify Agiles Modell

Squads form the foundation. Each squad organizes itself and has the nature of a small startup. The respective team is made up of experts from a variety of fields, who are necessary for the development of the respective product.

A tribe is a group of squads working on either the same product, service or a related product. Each tribe has a lead person responsible for ensuring the optimal working environment for the squad.

A chapter is the gathering of team members within a tribe who have the same expertise. In regular meetings, members discuss the challenges they face in their daily work and the knowledge they have gained since the last meeting.

In a sense, a guild is the same gathering of team members with the same expertise, except that they are not limited to their own tribe. Instead, they involve the entire organization. Guilds also meet regularly to share their experiences and drive the entire company forward with their knowledge.

The great advantage of the Spotify Agile Model is that employees with the widest range of expertise come together in a small team (squad) to work independently on a project. In addition, the agile model allows for team members with the same expertise to share experiences and develop themselves accordingly. Not only does this help each individual, but the entire organization as well.

Further examples of companies and their agile transformations

Of course, Spotify is not the only company that has adopted an agile approach. In addition to the music streaming service, the following big players are also responding to the call for agility.

They include:

  • Deutsche Bahn
  • Adidas
  • Hilti
  • Daimler
  • Zalando
  • Metro
  • Audi

Every company approaches the agile transformation in a different way.

In 2016, for example, Deutsche Bahn launched their “Railway of the Future” program. The HR department for DB Sales worked exclusively in agile teams. In addition, a new compensation system for the management board, new career rules and a more efficient meeting culture were introduced.

The German sporting goods manufacturer Adidas has been following the agile path since 2015 to increase its speed and innovative strength. For this, however, no “classic” agile project management methods, like Scrum, are used. Instead, all agile principles can be broken down into four factors:

  • Increase in employee skills
  • Speed
  • Flexibility
  • Responsiveness

In the course of its agile realignment, hammer drill manufacturer Hilti increased its focus on customers and introduced an open fleet management system. The system makes it possible to not only buy devices but rent them as well.

A few years ago, former Daimler chairman Dieter Zetsche announced the establishment of a “swarm organization.” This includes, among others, networking across departmental boundaries, flat hierarchies and startup-like working practices.

The fashion platform Zalando calls its agile concept “Radical Agility.” The company’s technology is the foundation for this. The concept is intended to link social structures and self-organized teams with technological structures and a service-oriented architecture.

The wholesale company Metro relies on product teams, usually consisting of seven to twelve employees. These teams are responsible for the technical and business aspects of their IT solution, such as the web shop’s search function.

The German automaker Audi even established its own place for maximum agility—the Audi Think Tank. This deals with the development of digital business models, focusing solely on specific customer needs.

Methods of agile organizations - from Scrum to OKR

The question is: How did Adidas, Hilti and others become agile organizations? What methods were used to implement their ideas?

Various methods can be used depending on the company and its objectives. Each has its advantages, and each has an impact on different agility levels.

Agilitäts-Ebenen

Scrum

With the Scrum method, a team of various, self-organized specialists come together and are able to react to changing demands quickly and flexibly. With Scrum, the goal is set but not the execution. The team can decide this for themselves. The flow of the work process is characteristic of the Scrum method. Specifically, this is a series of multiple sprints, whereby each sprint is structured by a series of different sprint meetings.

This method helps at the daily working level, or in other words, the operational level.

Kanban

Kanban is an agile method for evolutionary change management. This means the current process is improved step by step instead of bringing about a major change in one fell swoop. For this, the current workflow is visualized in steps with the help of a whiteboard and Post-its. The advantage of Kanban is that visualization quickly makes current problems and progress transparent.

This agile method is also used at the operational level.

Design Thinking

In Design Thinking, the focus is on customer needs. The basic assumption of this agile method is that problems are better solved in a creative field. A team of experts from different disciplines work out a user-oriented problem. This method takes place, for example, in software development to design systems that focus on interaction with the end user.

The method can be used on an operational level as well as business or technical level. While communication with the end user is found at the business level, everything at the technical level revolves around the technical circumstances needed for interaction with the end user in the first place.

Of course, there are plenty of other agile methods used in everyday business. One of them, whose roots go back more than 50 years, is OKR.

Agile organizations and OKRs

Another popular agile method is “Objectives and Key Results,” or OKRs. With OKRs, companies can manage their services and goals at all organizational levels, resulting in faster growth and process optimization.

How do OKRs work?

OKR is an agile leadership and goal-setting framework that involves all company employees in the formulation of goals.
The Objectives formulate the ambitious goals, while the Key Results are the key figures subordinate to the Objectives. In contrast to the Objectives, Key Results are measurable and clearly state whether or not a goal has been reached.

An example:

The Objective:

  • Our product website is search engine optimized so potential customers can easily find our product portfolio.

Die Key Results:

  • Improved SEO score from 0.4 to 0.7 (SEO Score Tool).
  • Improved share of our target group clicking on our homepage (Google Analytics).
  • Decreased organic bound rate on the landing page from 80 percent to 65 percent.
  • Increased average session time on the landing page from 1:40 to 2:00 minutes (Google Analytics).

With help from OKRs, the coordination and planning process as well as communication between departments is improved, and transparency with regard to a common path is created. They combine strategies with the targeted results and clearly show how they can be achieved. In this way, employees can see the big picture behind the goals and quickly recognize the impact their own work performance has on achieving the target goal. This automatically helps employees develop intrinsic motivation to work towards other company goals.

To make accomplishments measurable and tangible, specific tools and software that show exactly whether or not a Key Result has been achieved are very helpful. The visualization of individual accomplishments can motivate employees even further to want to successfully close out other Key Results.

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Agile working and New Work

The term New Work is closely related to agile work. Both concepts have their roots in the current, structural change of the working world.New Work describes the way employers deal with new demands made by employees on their workplaces. This includes flexibility in the design of one's own work (home office, flextime, etc.) and the desire for self-fulfillment through, for example, further training or sustainable work processes.Agile working, on the other hand, describes the integration of agile behaviors into the daily work of teams and their projects or initiatives. Both areas are symptoms of the modern labor market. They behave in a complementary manner and pave the way to an agile, attractive company.

If the agile mindset is integrated in all areas of daily work (e.g. through frameworks such as SCRUM), all levels of the company can react quickly to new environmental factors and changing priorities and correspond to the core idea of ​​agile organizations.

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Agile organizations FAQ

What are agile organizations?

An agile organization can adapt to new market demands in a very short amount of time. Agile organizations are particularly characterized by a high speed of work, high flexibility and customer centricity.

What companies are agile?

The most well-known company that has integrated agile working practices into its daily routine is Spotify. The often-cited Spotify agile model is known worldwide and is now being adapted by other large companies, such as ING Bank. Additional well-known companies using agile methods include Deutsche Bahn, Adidas, Hilti and Netflix.

What methods do agile companies use?

The most well-known methods used by agile companies include Scrum, Kanban and OKRs. Each method functions in its own way and is used in its own scenarios. With Scrum, the goal is specified, but the execution is decided by the team. With Kanban, individual processes are improved step by step after they have been visualized in all their parts.

Additional agile methods include:
Lean Startup, which is about minimizing the cycle time from the idea to the feedback;
SAFe, which is a method with a clear focus on IT and software organizations;
or the Spotify Model, in which an entire company is essentially divided into small, autonomous teams. Employees who have the same subject area but are from various teams also meet regularly to share their work experiences and improve their skills.

You can find more methods in our Framework Guide.

What exactly is OKR?

OKR is a goal-management framework in which both management and employees from the company are involved. OKRs are formed from “Objectives” and “Key Results.” Objectives formulate ambitious, overarching goals, while Key Results are the key figures clearing stating whether a goal has been achieved.
If you want to learn more about the OKR Framework, you can visit our article "Objectives and Key Results  (OKR) - A Definition".