[McKinsey] How to create an agile organization

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On this subject, here is an article about management and agile organizations: Transforming companies to achieve organizational agility is in its early days but already yielding positive returns. While the paths can vary, survey findings suggest how to start.

Rapid changes in competition, demand, technology, and regulations have made it more important than ever for organizations to be able to respond and adapt quickly. But according to a recent McKinsey Global Survey, organizational agility—the ability to quickly reconfigure strategy, structure, processes, people, and technology toward value-creating and value-protecting opportunities—is elusive for most.1Many respondents say their companies have not yet fully implemented agile ways of working, either company-wide or in the performance units where they work,2though the advantages are clear. Respondents in agile units report better performance than all others do, and companies in more volatile or uncertain environments are more likely than others to be pursuing agile transformations.

Few companies are yet reaping these benefits, but that may soon change; the results also indicate that organizational agility is catching fire. For many respondents, agility ranks as a high strategic priority in their performance units. Moreover, companies are transforming activities in several parts of the organization—from innovation and customer experienceto operations and strategy—to become more agile. Finally, respondents in all sectors believe more of their employees should be working in agile ways. For organizations and their performance units that aren’t yet agile, the path to achieving agility depends on their starting points. But the results indicate some clear guidance on how and where they can improve, whether they are lacking in stability or dynamism.

Organizational agility is on the rise

Across industries and regions, most survey participants agree that the world around them is changing, and quickly. Business environments are increasingly complex and volatile, with two-thirds of respondents saying their sectors are characterized by rapid change. In such environments, the need for companies to demonstrate agility is top of mind: the more unstable that respondents say their environments are, the more likely they are to say their companies have begun agile transformations (Exhibit 1).

Respondents who describe their business environments as unstable are more likely to say their organizations have already begun agile transformations.

To date, though, few organization-wide agile transformations have been completed. Only 4 percent of all respondents say their companies have fully implemented one, though another 37 percent say company-wide transformations are in progress. When asked where their companies apply agile ways of working,3respondents most often identify activities that are closest to the customer: innovation, customer experience, sales and servicing, and product management.4This is not too surprising, since customer centricity is cited most often—followed by productivity and employee engagement—as the objective of agile transformations. Companies are also focusing on internal end-to-end processes. At least four in ten respondents say their companies are applying agile ways of working in processes related to operations, strategy, and technology, while roughly one-third say they are doing so in supply-chain management and talent management.5

Looking forward, the results suggest that companies have higher aspirations for agility. Three-quarters of respondents say organizational agility is a top or top-three priority on their units’ agendas, and more transformations appear to be on the way. Of those who have not begun agile transformations, more than half say plans for either unit-level or company-wide transformations are in the works. Respondents across industries also report a desire to scale up agile ways of working. On average, they believe 68 percent of their companies’ employees should be working in agile ways, compared with the 44 percent of employees who currently do. By industry, respondents in telecom and the electric-power and natural-gas industries report the biggest differences between their actual and ideal shares of employees working in agile ways—followed closely by respondents in several other industries: media and entertainment, the public sector, oil and gas, pharma, and advanced industries.

What’s more, the survey also confirms that agility pays off. Eighty-one percent of respondents in agile units report a moderate or significant increase in overall performance since their transformations began. And on average, respondents in agile units are 1.5 times more likely than others to report financial outperformance relative to peers, and 1.7 times more likely to report outperforming their peers on nonfinancial measures.6

Agile organizations excel at both stability and dynamism

In previous work, we have determined that, to be agile, an organization needs to be both dynamic and stable.7Dynamic practices enable companies to respond nimbly and quickly to new challenges and opportunities, while stable practices cultivate reliability and efficiency by establishing a backbone of elements that don’t need to change frequently. The survey scored organizations across eighteen practices (see sidebar, “Eighteen practices for organizational agility.”), which our research suggests are all critical for achieving organizational agility. According to the results, less than one-quarter of performance units are agile. The remaining performance units lack either dynamism, stability, or both (Exhibit 2).

According to respondents, less than one-quarter of performance units are agile.

Of the 18 practices, the 3 where agile units most often excel relate to strategy and people (Exhibit 3). More than 90 percent of agile respondents say that their leaders provide actionable strategic guidance (that is, each team’s daily work is guided by concrete outcomes that advance the strategy); that they have established a shared vision and purpose (namely, that people feel personally and emotionally engaged in their work and are actively involved in refining the strategic direction); and that people in their unit are entrepreneurial (in other words, they proactively identify and pursue opportunities to develop in their daily work). By contrast, just about half of their peers in nonagile units say the same.

Agile performance units excel most often at strategy and people-related practices, and they outperform all other units in stability and dynamism.

After strategy, agile units most often follow four stable practices related to process and people: entrepreneurial drive, shared and servant leadership, standardized ways of working, and cohesive community. When looking more closely at standardized ways of working, the agile units excel most on two actions: the unit’s processes are enabled by shared digital platforms and tools (91 percent, compared with 54 percent for others), and processes are standardized, including the use of a common language and common tools (cited by 90 percent of agile respondents and just 58 percent of all others).

Among the dynamic practices, process—and information transparency, in particular—is a strength for agile units. Within transparency, for example, 90 percent of agile respondents say information on everything from customers to financials is freely available to employees. Among their peers in other units, only 49 percent say the same. The second practice where agile units most differ from others is in rapid iteration and experimentation. More than 80 percent of agile respondents say their companies’ new products and services are developed in close interaction with customers and that ideas and prototypes are field-tested early in the development process, so units can quickly gather data on possible improvements.

The path to agility depends on the starting point

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