Agile—Strategic, Portfolio, or Operational?

One reason organizations have difficulty implementing agile/lean methods is that they fail to tie the reasons for implementation to business strategy. My definition of is that “agility is the ability to both create and respond to change in order to profit in a turbulent business environment.” The degree of agility required by the business then indicates what level of agile transformation may be viable. While there are many strategic issues in companies, one basic one relevant to this discussion is whether they strive for “responsiveness” versus “efficiency.” While all businesses do both, for some responsiveness is a goal, while for others it is a constraint. Google’s strategy, for example, is fundamentally a responsive strategy, whereas Wal-Mart’s is basically efficiency. Based on this strategy distinction, it would probably very difficult to turn Wal-Mart into an agile company, but it might be advantageous to use agile methods on selected IT projects.

The figure shows three levels of agility that organizations may strive to achieve—operational, portfolio, and strategic. And, organizations need to be very clear about what level they aspire to and whether that level corresponds both to their business strategy and benefits they what to achieve. I’ve used this figure in several presentations recently and been surprised that out of quite a number of slides, several people thought this one was the most important.

The operational level focuses on improving the delivery of software projects. Regardless of the long-term goals, every effective agile transition begins at this level. IT projects are enhanced, but no wider organizational change takes place. If there isn’t a driving business need for responsiveness, then operational agility may be all that is reasonably achievable. There will, therefore, always be tension between delivery staffs who are agile and upper level project and line managers who operate as they did before.

The strategic level focuses on achieving responsiveness throughout the organization: within IT and/or software development, in other functional areas, and spreading up into management and leadership positions. There are a number of software companies who have achieved this strategic level of agility.

The portfolio level is in between. At this level agile practices have moved up somewhat in the IT or software organizations, but have not been fully embraced at the top and hasn’t spread outside IT. Projects that have certain characteristics are slated for agile development, but some traditional development still exists within the company.

While organizations can move from operational to strategic agility over time, there isn’t a right level—only a level that matches an organization’s strategy and business goals. If you don’t match business strategy and expectations with the appropriate level of agile transformation, you end up with a CIO who expects an agile implementation to cost $2-3 million and take 1-2 years, whereas a true organizational transformation might take ten times that much and take 3-5 years.

    Comments

    1. Dragan Jojic says:

      Hi Jim,

      Your blog above is one of those really annoying things: so obvious once I’ve read it so why haven’t I thought of it before.

      I have been grappling with ‘Agile organisational change’ at a large financial services organisation in the UK and I can see me using your categorisation in my work (I hope you wouldn’t mind). Have you written anything else on this topic that you would be willing to share? Alternatively, do you know of anybody else who has?

      Chief Agility Officer… Well, there’s a title that calls for a separate discussion.

      Best, Dragan

      • Dragan,

        Most of my material on this subject is in presentations, but the most important piece is just setting the right goals based on the business situation. I try to get people to really think thru their business rationale for agile in arriving at a transition strategy.

        Jim