On Strategic Agility and Organization Design
Agile has taken project management by storm since the Agile Manifesto’s publishing in 2001. It promised self-managing, cross-functional teams iterating rapidly in response to customer needs. Companies listened as 94% of companies believe agility and collaboration are critical to their organization’s success. Yet only 32% of organizations are working to become agile, and only 6% are agile today.
There is a significant gap between theory and execution in implementing strategic agility, as shown by the 90% failure rate for new products. The purpose of this article is to bridge this gap through a model named Innovation Teams, which explains how to organize people to systematically create customer value.
Agile is just one of the many organizational models worth exploring, including the Viable Systems Model, Requisite Organization, Open Organization, Holocracy, and Teal. However, no one model is flexible yet powerful enough to rapidly organize people to address complex, pressing challenges.
The Innovation Teams model pulls elements of all these models to create a set of principles and organizational structures that integrate innovation practices across the entire organization.
Principles of Innovation Teams
- Small Teams: Teams should be small enough that each member can collaborate simultaneously on a task. Jeff Bezos calls these “two-pizza teams.” If every member can’t collaborate on one task, the team is too large.
- Networked: In a hierarchy, information flows up and down. Innovation Teams overcome bureaucracy and engage anyone in the organization who holds the needed skills or knowledge. Teams organize around broader initiatives through governance meetings with agendas and methods for discussing specific issues.
- Sprints: Work is done in short, rapid cycles. Usually, around two weeks. Each sprint is bookended with feedback. Daily or weekly check-ins, often called scrums, keep people aware. If multiple, simultaneous sprints are going on, Kanban boards can keep things contained. The product of each sprint is finished work, that’s packaged and useful to other teams.
- Value-centric: Every team has direct contact with their customer or client—whether it’s an internal team or a customer. Their metrics and accountabilities are tied directly to the delivery of value to that customer. This creates a value constellation where the organization is built of teams supporting each other’s success and focused on delivering value to the customer. One approach is each team having its own profit/loss statement.
- Cross-Functional: Rather than functional silos, where the sales folks are on one floor and the communication folks on another. Teams are composed of T-shaped individuals who have a variety of skills and a deep specialty. Teams look to have a mix of experience levels to promote growth, informal mentorship, and guidance.
- Mix and Match: Teams are fluid in response to opportunities to create customer value. They’ll reform and shift as member’s needs and the present challenges dictate.
- Self-Managing: Teams form and direct themselves within broader organizational mandates, and through governance structures. Transparent knowledge channels permit widespread transparency of where each team is headed. True self-managing teams should be able to fulfill the organization’s mission without any help from the broader organization.
- Organizational Functions: Rather than strategy or culture being top-down initiatives, they’re instead broken into sprints and done on an iterative, responsive basis. This builds resilience to disruption and complexity by responding to the environment’s emergent properties. Further, it avoids alignment debt—or the gradual disconnect between organizational direction and practices.
How to Build Innovation Teams
Building your organization around Innovation Teams is challenging. It can start top-down and be rolled out in a sweeping wave, as with Salesforce. Or it can start bottom-up as in the Dutch healthcare company Buurtzorg. Both approaches risk being crushed by bureaucracy and begin at the team level.
As Tim Kastelle says, “hierarchies are overrated.” Yet, most organizations are organized into rigid hierarchies. As Francesca Pick points out, it’s not that power dynamics cease to exist in Innovation Teams, it’s that they become dynamic and merit-driven—as those with the skills and experiences to address challenges adopt informal leadership. In Innovation Teams, each team becomes a complete subsystem capable of adding value to their primary customer. In a sense, each team is a microcosm of the entire organization’s competencies and objectives and can fulfill the organization’s mission on their own without external support.
Think of these teams as white blood cells, responding to crisis situations while simultaneously regulating the body to maintain homeostasis with the environment. Rather than thinking of the organization as a brain, think about it as a set of common practices, beliefs, and goals that are embedded in every team. Overall, Innovation Teams are like a school of fish, each an independent, self-sustaining entity yet together able to better achieve their objectives or survival and procreation.
Each Innovation Team is self-sufficient, yet simultaneously coexists in an ecosystem embedded within organizational objectives and practices and in response to the environment.
Each team shares a common boundary with the other teams, which we can think of as the organization. Embedded in the legal and psychological entity are sets of commonly understood objectives, strategies, processes, cultural norms, and structures. Teams collaboratively respond to the present and future environment, which blend amorphously and are seen through trends, drivers, and in collaboration with a dense network of stakeholders who cooperate or compete towards common purposes such as mutual success, social well-being, and profit.
In this model, competition loses meaning, and instead, the threats come from alternatives or blockades that prevent or outperform the value being offered by the organization to customers.
This level of responsiveness can seem intimidating, but as we approach the most turbulent decade in modern history, in which half of today’s S&P 500 firms will be replaced—suddenly responsive, flexible and aligned team coordination becomes essential.
Firms such as Nokia, Blockbuster, Xerox, and Yahoo have all experienced misalignment and decline firsthand. The information was available, and in Kodak’s case, they even helped birth the driver of their downfall. The Innovation Teams model is a framework for organizing resources, people, and processes to help organizations remain viable in the face of rapid, unpredictable change.