Change, empowerment and the organisation of tomorrow

Reimagining Agility

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2Reimagining Agility

Change, empowerment and the organisation of tomorrow

© The Economist Intelligence Unit Limited 2021

Contents

3 About the research and acknowledgements

4 Executive summary

5 Introduction: A test of a tried-and-true method

7 Chapter 1: The great decoupling: agility and the agency of the individual

10 Chapter 2: The wider implications of reimagining agility

15 Chapter 3: A glimpse into the future: agility reimagined, reimagined

17 Conclusion: Nowhere to hide

3Reimagining Agility

Change, empowerment and the organisation of tomorrow

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About the research and acknowledgements

Reimagining Agility: Change, empowerment and the organisation of tomorrow is an Economist Intelligence Unit report, sponsored by Hitachi. It draws upon in-depth desk research and interviews with 13 experts in the field of agility and business transformation. We would like to thank the following for their time and insights:

• Mike Cohn, former chairman, Scrum Alliance

• Steve Denning, author and former director, World Bank

• Aldi Haryopratomo, former CEO, GoPay

• Simon Hayward, CEO, Cirrus (a division of Accenture)

• Susan Kahn, programme director, coaching psychology, department of organisational psychology, Birkbeck (University of London)

• Dean Latchana, consultant, TEKsystems Global Services

• Charlene Li, founder, Altimeter

• J.D. Meier, director of innovation, Microsoft

• Barry O’Reilly, co-founder, Nobody Studios

• Sumitra Pasupathy, global partnerships managing director, Ashoka

• Darrell Rigby, head, global innovation and agile practices, Bain & Company

• Gurvan Robineau, director, Sephora

• Takeshi Yoshida, chief coach, Agile Organization Development

Jeremy Wagstaff is the author of the report and Michael Gold is the editor. The opinions expressed therein do not necessarily represent the views of the sponsor.

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Executive summary

The business philosophy of agility has faced its sternest test over the past several years. It has proved its mettle in many areas but even its fiercest advocates have recognised the need for it to be reimagined. This report explores how agility is currently manifesting in a world rocked by digital upheaval, changing priorities for companies, workers and consumers, and an earth-shattering pandemic. The key findings are:

• Agility’s focus on the agency of the individual is providing the foundation for success amid profound changes in relationships between workers, companies, partners, customers and broader society. These changes extend far beyond recent media headlines about the rise of “remote working”. Frontline workers have struggled with psychological wear and tear, while also being entrusted with much greater say in determining customers’ needs and the right products and services to match them. At the same time, dispersed interactions mean counterparties now understand each other better and communicate more informally and more frequently.

• Agile companies have been able to respond quickly to the crisis of covid-19, rolling out new services more rapidly in response to shifts in demand. Companies have seen the value of supporting their teams with the right technology and, where possible, leveraging new ones. Some have spotted unlikely opportunities by shifting production lines or going direct-to-consumer. Others have used the crisis to boost agile adoption in departments not traditionally associated with such approaches, including human resources.

• Managers and the C-suite have had to examine their own roles and priorities, calling on their skills as enablers to drive their teams and organisations through a succession of challenges. Agility may not come naturally to many, but the uncertainty of recent times forced leaders to experiment, fail fast and iterate on the fly in order to keep their organisations afloat. Yet there is no cause for complacency as normalcy resumes. Executives fear a retreat to inertia if the creative chaos of the pandemic is not exploited to the fullest.

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Introduction: A test of a tried-and-true method

Agility as a movement is officially 20 years old, but its roots go back much further, to the Bell Labs of the 1930s and the post-war production lines of Toyota.1 Its modular approach can now be seen in the production lines of Tesla, where the company makes about 20 engineering changes a week, from battery packs to software that automatically adjusts the seat.2 As software grew in importance in the 1990s, competitive approaches to improve the development process united under the “agile” banner in 2001.3 But just as agility’s roots lay outside IT, so it has been adopted far beyond the world of coders.

This is part of a much deeper shift, away from what management consulting pioneer Frederick Taylor called the “mechanistic organisation”.4 In such thinking, the corporation is the machine, the workers are components and leaders are the central processing unit. While attitudes outside the workplace have shifted in recent years towards a greater humanism, the organisation itself has been slow to change. “The deterministic way of doing things is sleek and easy to understand, while the messier, adaptive, iterative way, is not clean or easy,” says organisational coach Takeshi Yoshida.

Agility has been a key part of that transition, embracing flatter hierarchies, empowering individuals to influence the process and outcome, and recognising the need to adjust and adapt to change. This is not happening in isolation. Companies have been transforming

themselves digitally for years, ditching old analogue processes and embracing digital’s efficiencies, insights and competitive advantages. Artificial intelligence (AI) has come to power everything from chatbots to analysing customers’ creditworthiness; users have benefited from rapid, disruptive innovation in services from banking to e-commerce; the workplace has been vastly improved by robotic process automation and workflow streamlining tools. But the pace has been uneven, in part because of cultural resistance. Research by Gartner found that more than half of the organisations it surveyed “remain untested in the face of digital challenges” and concluded that their readiness for digital transformation was “therefore uncertain”.5

Coping with unprecedented change and uncertainty

The last year and a half has been the most significant test of this approach. Those who paid little more than lip service to such changes have been exposed, while those who found themselves frozen at the end of the diving board have acknowledged the push the pandemic provided that propelled them into adopting and embracing transformation. As part of that lesson, companies have also learned that hiring consultants and instituting so-called agile processes and titles were not in themselves transformative; it took a crisis to act in a way that might be considered agile, coupling mindset changes to accelerated digital transformation.

1 Darrell K. Rigby, Jeff Sutherland and Hirotaka Takeuchi, “The Secret History of Agile Innovation”, Harvard Business Review, April 20th 2016.

2 Ibid.3 Ibid.4 Frederick Winslow Taylor, The Principles of Scientific Management, 1911.5 “The IT Roadmap for Digital Business Transformation”, Gartner, 2020.

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The proof is in the pudding: the proportion of digital customer interactions rose globally from 36% in December 2019 to 58% in July 2020, according to data from McKinsey.6 This number rose almost in lockstep with the proportion of products and services that were partially or fully digitised.

But amid the noise there has emerged another reckoning: none of the business mantras of the past decade has been enough to prepare CEOs for the changes engulfing them, and forcing them to adopt flexibility and new approaches to steer their companies into a brave new world of business. Readiness to adapt in the face of crisis and rapid change cannot be imposed. True leadership comes from learning and reacting in real time.

The different flavours of agility

• Agile project management: an iterative development methodology that values human communication and feedback, adapting to change, and producing working results.7

• Agile workplace: a workplace that accommodates the changing demands of employees.8

• Agile workforce: one that mixes full-time, part-time and contingent workers, along with other flexible strategies that encourage workers (both existing and prospective) to be constantly engaged with the company.9

• Agile ecosystem: a number of practices used together to achieve a delivery team’s agility goals.10

• Agile enterprise: a fast-moving, flexible and robust firm capable of rapid response to unexpected challenges, events and opportunities.11

6 “How COVID-19 has pushed companies over the technology tipping point—and transformed business forever”, McKinsey, October 5th 2020.

7 Andrew Conrad, “3 Essential Project Management Methodologies to Run a Successful Project”, Capterra, December 9th 2019.

8 Jeff Revoy, “What is an Agile Work Environment, Really?”, SpaceIQ.9 Julia Fournier, “Ready to transition to an agile workforce?”, HCMWorks, May 8th 2020.10 Andrew Graves, “Agile ecosystem, it starts with why”, LeadingAgile.11 Curtis Franklin Jr, “8 Steps For Creating An Agile Enterprise”, InformationWeek, March 7th 2016.

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Chapter 1: The great decoupling: agility and the agency of the individual

At the core of agility is a shift from the supremacy of the team to the agency of the individual. The past year has revealed to leaders what Barry O’Reilly, transformation consultant, author and co-founder of Nobody Studios, calls “the manager myth”: the reality that employees can function, and function well, independent of command and control. When forced to rely on employees working, collaborating and delivering remotely, CEOs’ mindsets were forced to change. “It’s like a myth to them—they’ve never seen high-performance teams operate without specific orders—so they don’t believe it existed,” says Mr O’Reilly. “Covid-19 was a glimpse of that.”

This change was sudden and it affected nearly every company in the world. A survey by academics from three institutes in Italy, for example, found that before lockdown 54% of companies had not adopted smart working—flexibility about where their employees worked—while after lockdown that number had fallen to only 2%.12 It’s tempting to see this just as merely a shift in the “work-from-home” (WFH) paradigm, but it’s far more than that. WFH was not the real issue: it was about trust. Could CEOs trust themselves to allow their employees to play a greater role—to stand back and allow a more organic style of management to evolve?

The answer, for the most part, has been a resounding yes. But it meant overcoming a confidence crisis in the C-suite. A survey by

Accenture found that 94% of executives said this kind of operating model put their organisation’s growth and performance at risk, and 85% were not confident their operating model could meet shifting strategic priorities. But the reality proved different. Accenture itself said that 95% of its workforce had taken to remote working without any reduction in productivity.13 Companies found they could react surprisingly fast when they needed to. Britain’s Royal Mint, dedicated for centuries to just producing coins, was able to design a plastic visor in 48 hours and within a week was making one every ten seconds.14

This has only been possible when leaders realised they needed to play a different role—less leading from the front, more enabling from whatever vantage point worked best. It has been a humbling, but liberating, experience.

12 Giuseppe Riva, Brenda Kay Wiederhold and Fabrizia Mantovani, “Surviving COVID-19: The Neuroscience of Smart Working and Distance Learning”, Cyberpsychology, Behavior, and Social Networking, February 2021.

13 “Busting the myths of agile: How the pandemic accelerated the adoption of the intelligent operating model”, Accenture, August 2020.

14 Norman Miller, “How factories change production to quickly fight coronavirus”, BBC, April 13th 2020.

When forced to rely on employees working, collaborating and delivering remotely, CEOs’ mindsets were forced to change.

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While on the one hand they have had to make tough decisions, they must also now be able to admit uncertainty about matters they would once have been expected to be confident about—and for that to be OK. However far companies are on their transformative journey, there remains what Mr O’Reilly calls the “archetype of an industrial leader: the brains of the operation”. They see themselves, and are seen, as the one with the answers, while others execute. It’s this mentality which has held companies back, but which, in many cases, recent events have swept away. Once a leader acknowledges they don’t have all the answers, it naturally empowers the rest of the organisation, whatever their status, to be involved in finding those answers.

Agility in the new working reality

It’s not as if companies had shirked from trying to be more agile, but training programmes, rolling out frameworks and box-ticking transformation in many cases had little effect. And that, Mr O’Reilly believes, was because firms’ traditional structures largely remained in place. The potential for employees to exert greater freedom was locked, because they didn’t believe they would be supported. Remote working and a scattered workplace have altered that balance. Agility involves listening to your employees, allowing information to flow transparently through the organisation. Employees felt emboldened to speak up and navigate the uncertainty of the situation naturally. “Agile thrives on uncertainty—small steps, experiment, test and learn,” Mr O’Reilly says. “The folks who were shackled by the existing paradigm of process…were suddenly unshackled.”

There’s also been a shift in the way teams work. Running teams in an agile way has traditionally been seen as best done when all the members are in the same building, preferably the same room—collocating, in the jargon. That is not how many companies worked, even before covid-19. Most had at least a few team members working remotely, disrupting many of the steps and frequent meetings that agile prefers. This, says Gurvan Robineau, Singapore-based director of Sephora, created a compromise that left many leaders stuck halfway, caught in a negotiation with other departments about making the changes necessary to have all team members together. “That dispute has now disappeared,” says Mr Robineau. “We can run agile, non-collocated, and it’s fine.”

Many of the cascading effects of this bureaucratic “decoupling”—such as the innovation in business models and product development discussed in subsequent chapters—will depend on whether the trust granted to employees survives going forward. If employees have been empowered to speak up and lead, it’s partly because they are the ones who may best understand the problem. Technology may have brought dashboards to the corner office, but these data may not reflect the situation on the ground. Mr O’Reilly has seen how information is massaged to suit the taste of those higher up as it is passed up through the layers of an organisation. With technology advancing so much and customer demand changing so quickly, it’s the people closest to the problems who have the richest data—and most of the answers. By flattening hierarchies and giving frontline staff more authority to make decisions—even if they’re only incremental, cautious steps—companies have reaped benefits.

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Where managers have had to relinquish some control over their employees, workers who deal with clients have also had to adapt. Not being able to make trips to spend a full day with a client has been replaced with more frequent, shorter interactions. Mike Cohn, former chairman of Scrum Alliance, used to travel 200,000 miles a year to visit clients; that number is now zero. The inefficiencies of his previous working model only became clear in hindsight. “A two-hour phone call is not as good as a full day in person, but it’s really close,” he says.

The nature of these relationships is changing too. When partners met, the more traditional of the two companies would be likely to dictate the routines, frustrating other stakeholders hoping to set a faster, looser pace. The larger the organisation, the more formal the culture, requiring a long list of attendees and lots of questions and detailed meeting notes. Forced remote work has changed that, says Aldi Haryopratomo, an Indonesian social entrepreneur who until recently ran GoPay, one of Indonesia’s largest digital wallets. Team members now consult with their counterparts via message or email, where once such discussions needed to be postponed until a formal meeting took place. It’s not that meetings were unimportant, says Mr Haryopratomo. They perform an important role in helping counterparties get to know one another and in allowing one party to listen to and understand the problems of the other.

But now smaller, practical problems can be resolved asynchronously, speeding up projects. “I’m hoping for the end of the ‘ceremony’ of waiting until a formal meeting takes place to ask small questions,” he says. “Meetings will be more about getting to know each other.”

Key to maintaining the agility inherent in hybrid working will be whether the tools we have grown accustomed to using evolve quickly enough to meet our needs. Dean Latchana, a former agility consultant at Deloitte, has listed functions that have not proved easy to replicate online, from workshops using physical material to serendipitous exchanges and non-verbal communication. While there have been a host of software tools launched to address these shortfalls, the larger problem, Mr Latchana suggests, is that we don’t necessarily recognise when these elements are missing. “The way we collaborate now doesn’t have the richness when we can use all of our senses,” he says.

I’m hoping for the end of the ‘ceremony’ of waiting until a formal meeting takes place to ask small questions. Meetings will be more about getting to know each other.

Aldi Haryopratomo, former CEO, GoPay

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Chapter 2: The wider implications of reimagining agility

Out of the shifts have arisen some surprising outcomes and opportunities. It is now abundantly clear that agile companies have been able to respond more quickly to crisis. To take one example, a survey of the time it took 36 telecoms providers in Asia and Europe to launch services when covid-19 erupted found that those with an agile working model responded significantly faster than their peers. A similar result was found among banks.15

Where previously IT heads could use predominantly economic arguments to justify digital transformation, now they have a much more compelling one: keeping the lights on for themselves and their customers when a crisis hits. The past 18 months saw dramatic acceleration of digital transformation, and a surge in the funds to do it. One global study found that 67% of companies had sped up their digital transformation strategy because of covid-19, while 63% said they had increased their digital transformation budget.16

But by making those agility-related IT decisions out of necessity—for example, moving as much data and processing as possible to the cloud—companies found that other capabilities have

emerged. While business continuity might have been the driving factor, suddenly it’s much easier to scale up, adjust to new ways of working and develop new products. In public health, for example, firms such as BenevolentAI and Qventus have leveraged the cloud to build AI tools to identify better drugs and help hospitals model preparations for taking in patients.17

Companies have found opportunities in areas that either were previously ignored or weren’t considered economically viable. For business-to-consumer companies, this has meant “commerce everywhere” (see DFS case study, on the following page). For others, it has meant switching from a pure business-to-business model to a hybrid one: packaged food brands Kraft Heinz, General Mills and Kellogg have all started selling directly to consumers, gaining useful insights into consumer behaviour and allowing them to quickly test and learn what innovations work. E-commerce sales now account for more than 5% of Kraft Heinz’s global sales.18 Elsewhere, firms are making something completely different: luxury-goods maker LVMH quickly switched its perfume production lines in France to making hand sanitiser.19

15 “An operating model for the next normal: Lessons from agile organizations in the crisis”, McKinsey, June 2020.16 “Going digital, faster – Global survey into the impact of COVID-19 on digital transformation”, KPMG, January 2021.17 Aaron Rallo, “Reexamining Business Agility through the Lens of COVID-19”, AWS, January 27th 2021.18 Siddharth Cavale and Nivedita Balu, “Packaged food giants push direct online sales to gauge consumer tastes”,

Reuters, February 19th 2021.19 Weiwen Liao, Elizabeth Prejean and Carmella Parker, “Relying on Agile Management to Develop an International

Exchange and Dual Degree Program and Navigate the COVID-19 Pandemic”, International Research and Review, Journal of Phi Beta Delta Honor Society for International Scholars, Spring 2020.

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Case study: DFS goes virtual20,21,22,23,24

DFS, the duty-free retailer, created entirely new activities to adapt to the collapse in airport terminal traffic by selling online and through channels such as WeChat within a few months of covid-19 hitting. Last September, DFS reported a 20% drop in sales and a bottom-line loss as it was forced to close its showrooms, manufacturing sites and delivery networks, but said that online sales grew by 77% from the beginning of lockdowns to mid-July. DFS had already begun winding down some of its high-profile liquor concessions at airports in Singapore and Hong Kong, building online capacity instead. To cater to the needs of customers who want to try before they buy, the company developed thousands of 3D images to allow customers to use an augmented reality app to see what a product would look like in their home. It has also added video communications to allow them to speak to showroom staff and adapted its sales incentive model to ensure showroom staff are motivated to sell through any channel.

Case study: American Airlines’ touchscreens fly high25

American Airlines (AA) has for years struggled to deliver big programmes of work at the pace they desired, according to Barry O’Reilly, a business adviser who helped the firm with a unique experiment. The hardware of AA’s touchscreen check-in kiosks varies from airport to airport and country to country, making rolling out software upgrades painful, glitchy and slow. The solution: shift trust to the frontline team and, while still thinking big, start small via a design-thinking approach that puts the customer first. AA scaled down to updating one machine in one airport and watched customers use it, updating the software regularly in response and expanding the project piecemeal until they eventually felt confident enough to introduce rapid iterations company-wide.

20 Chloe Rigby, “DFS sees online sales grow as it reimagines selling sofas for a digital age”, Internet Retailing, September 26th 2019.

21 Robert Stockdill, “DFS Group starts winding down Changi Airport liquor business”, Inside Retail, May 18th 2020.22 “DFS launches online store selling alcohol after exit from Changi Airport”, SG Magazine, August 7th 2020.23 Chloe Rigby, “DFS sales and profits fall as a result of the Covid-19 lockdown, although online sales remain strong and

business now recovering”, Internet Retailing, September 24th 2020.24 Chloe Rigby, “How DFS has enabled shoppers to buy across digital and physical channels – as online sales top 25% of its

revenue”, Internet Retailing, March 9th 2021.25 Steven Leist and Barry O’Reilly, “How American Airlines is Transforming Its Culture by Transforming Delivery”,

Barry O’Reilly, March 25th 2021.

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The supremacy of technology

As legacy firms scrambled to adapt, tech giants stayed in pole position in part because of how they have leveraged technology and agility since their inception. For instance, Amazon “invested in the infrastructure to allow them to iterate, to make small changes and see what worked and what didn’t. Before he started Amazon, Jeff Bezos was a trader, meaning that he understood the power of fast feedback loops, because that’s the way you manage the market,” says Mr O’Reilly, who notes his clients are beginning to grasp this.

The realisation that tech companies aren’t just selling tech, but are using tech to constantly improve and reinvent themselves, has now become evident to leaders in other industries. This is now reflected in numbers that show technology as key to every role. Despite a wrenching economic contraction, in the first three months of the crisis companies devoted $15bn more a week to IT compared with pre-pandemic levels, according to one study.26

Many companies are now thinking even longer-term: Ricoh Americas, for example, accelerated its three-year plan, announced in 2018, to become a digital services company into a three-month sprint. The lessons learned during rapid transformation have had an impact on priorities for the next five years, from better contingency planning to appreciating the need for both more security and faster access to information.27

Reimagining an agile society

Deeper trends point to wider societal implications of agility’s reimagining. The rapid development, testing and preparation of distribution channels for multiple vaccines is likely to provide fodder for agility studies in years to come, demonstrating all the hallmarks of agile models and paving the way for agility to play a broader role in provision of public services in future. “The pharma response and the vaccine production process has been extraordinary and owes quite a bit to agile thinking, rapid prototyping and testing,” says Simon Hayward, founder and CEO of Cirrus, a unit of Accenture.

Another example is the rise of entrepreneurship, which is agility at its most raw and a logical next step for many who have felt unshackled by the shift in agency. There is already evidence that the changes imposed by covid-19 have loosened the bonds between between workforce and employer. Business-formation data from the US census show a marked increase in the number of companies being set up—far more than can be accounted for by employees laid off and forced to fend for themselves.28

Yet the changes have also left scars. The impact of the pandemic on disenfranchised groups has been disproportionate, fostering extremes of experience. For all those who have been liberated by greater responsibility and

26 “Harvey Nash/KPMG CIO Survey”, Harvey Nash & KPMG, 2020.27 Joji Tokunaga, “3 ways COVID-19’s uncertainty will impact business in the future”, SmartBrief, February 12th 2021.28 “Business Formation Statistics”, United States Census Bureau, retrieved May 2021.

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agency, there are others who have struggled to adjust. The impact, says Susan Kahn of the University of London’s Birkbeck College, has fallen disproportionately upon women, many of whom have found themselves juggling roles of employee, housewife and home-school teacher.

While some leaders have been forced to develop greater empathy, listening more carefully to employees and bringing those with different strengths into the team, they have also missed opportunities to engage these “left-behind” groups that may come back to haunt them.

Reimagining agility in financial services

There is some evidence that recent waves of disruption in conservative industries such as financial services (FS)—where consumers have long demanded more from their banks—have prodded players into adopting agile strategies. While some of these trends were evident before covid-19—such as the rise of tech players in payments and fintech start-ups in insurance—the pandemic has accelerated their impact, forcing some players to speed adoption of agile approaches, beyond the usual redoubts of software and IT.

Gone is much of the sense of FS being a protected species and the common refrain that their hands are tied by regulation. Banks, like central banks, have been forced to be agile and creative in the way they respond to the changes of the past 18 months. The rise of payment companies is a major part of this evolution—2020 was the first year in which the market capitalisation of the top three fintechs eclipsed the market cap of the world’s top three banks.29 Simon Hayward, founder and CEO of Cirrus, a unit of Accenture, has seen clients accelerate a shift across the whole operation—including functional

and operational areas such as back office, processing and cash management.

Some banks have embraced the customer-first approach wholeheartedly. The Connecticut-based People’s United Bank, for example, sent staff through malls to ask members of the public about proposed changes to its mobile banking app, identifying 182 customer pain points that it is now addressing. The bank considers its approach a “product owner model”, recognising that those closest to the customer should make decisions on what the product looks like and how to make it fit their needs.30 Other banks have responded to change in similarly nimble ways (see the case studies on the following page).

29 Eli Rosner, “Accelerating through change - how banks are responding to the challenges ahead”, Finextra, April 26th 2021.30 Bill Streeter, “Lessons from a Bank Chief Transformation Officer”, The Financial Brand.

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Case study: Tesco Bank gets customer-centric

Tesco Bank responded to the challenge of covid-19 by realising early that it needed to make changes to the way it traditionally operates, according to business adviser Barry O’Reilly. By ensuring the outcome was clear, the leadership was better positioned to get behind teams and listen to what those teams needed. For example, service representatives were encouraged to share what they needed to get up and running at home. The result was that entirely remote call centres were set up in three and a half weeks. At a time when there was uncertainty about how the virus is transmitted, the bank also shifted emphasis to ask what consumers need in order to feel safe. For a bank, the risk of fraud from contactless cards is not trivial, so transaction limits for customers were traditionally low, but covid-19 tipped that thinking: embrace more risk to keep customers safe. The outcome: raise tap-and-pay limits for customers beyond those previously regarded as limiting the company’s exposure to fraud, to help reduce the need for physical contact.

Case study: Banco Santander empowers HR32

The locus of change is not always the expected one. Banco Santander, like many financial services companies, has long been facing disruption from online banking, shifting regulations and demand for a seamless customer experience. But progress had been slow and covid-19 forced their hand. Yet the key department to their transformation was not IT—the usual hub of change—but human resources (HR), which found itself at the centre of upskilling staff to learn new skills while also working remotely. With classroom training and peer-to-peer coaching no longer an option, and the pandemic forcing the bank to shut down 70% of its branches, cashiers needed to be retrained as contact centre agents—most likely a permanent role.

31 “The Future of HR in the New Reality”, KPMG, October 2020.

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Chapter 3: A glimpse into the future: agility reimagined, reimagined

Agility has proven itself—when stripped of its rigid association with management theory and practice—to be a surprisingly adaptable philosophy, perfect for the times. Agility is not only tailor-made for the fast-moving changes of lockdowns, it is well-suited to the uncertainties of “what happens next?” Probably its greatest sign of success is that in some milieux “agility” is a term no longer used or heard—it just is. But it’s not without its critics, even among those who advocate it. How agility adapts to these challenges will shape the future of how leaders embrace and respond to change.

First and foremost, the fact that agile management is now an industry in itself is not an unalloyed good. As agile methodologies have gained momentum, people have made them more bureaucratic, building orthodoxies and frameworks around them. As a result, a multimillion-dollar industry has emerged around consultancies, training, certification and job titles.

“All this creates activity,” says Mr O’Reilly, “but nothing changes.” This has led to “islands of agile”, where the overall numbers might look good, but a closer look highlights just how uneven the landscape is. While 95% of companies surveyed in a recent study said their organisations were practising agile methods, only a third said this was true of more than half of their teams.32 Mr Yoshida says he finds himself called in when a consulting firm’s approach has failed—largely because it was built around top-down interventions. Instead, he says, he focuses on small pilots first and then expands gradually.

A CEO can be a catalyst for change, but it does not readily follow that bringing in fresh blood can automatically kick-start agility. The larger the organisation, the larger the legacy, and the more deep-seated resistance one is likely to encounter. Yet companies need to avoid relying on charismatic leaders or individuals to carry transformation on their shoulders. At best, the

32 “14th Annual State of Agile Report”, Digital.ai, May 26th 2020.

Agility has proven itself—when stripped of its rigid association with management theory and practice—to be a surprisingly adaptable philosophy, perfect for the times.

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individual takes that leadership elsewhere, leaving little of it instilled in those they leave behind; at worst, the individual becomes frustrated and abandons their efforts. Steve Denning, a former programme director at the World Bank and author of The Age of Agile, sees the answer in instilling a different mindset throughout the organisation—one that is the opposite of an industrial-era mindset. The agile mindset is obsessed with delivering value to customers, rather than internal efficiency; doing work in small self-organising teams, rather than individuals reporting to bosses; and structuring work as a horizontal network of competence, rather than a steep hierarchy of authority. “This leads to a different way of arranging work that can be repeated over and over again, so that it’s not just one brilliant person who achieves wonders and then vanishes,” says Mr Denning.

This may mean that at some point once transformative, agile organisations show signs of inertia and complacency. For Mr Cohn, agility is partly about spurring on new companies, or new practices in older ones, but it’s also about helping older companies that were once small, plucky underdogs recover some of that agility that once made them lean and hungry. Mr Denning has been road-testing various terms that capture the fundamental shifts and exponential changes that are occurring, including “21st-century management” and “digital-era leadership”. The 20th century, he says, was basically bureaucracy, individuals reporting to their higher-ups. Everything revolved around big plans, everyone followed the rules, everyone knew what they were supposed to be doing. But in an unstable, fast-moving world, with astonishing new digital technologies at hand,

companies need to be in a radically different mode, which includes establishing a crystal-clear goal and then working in a network, rather than a steep hierarchy of authority.

Most important is to ensure agile practices do not squeeze out all other approaches. Darrell Rigby, a retail consulting expert at Bain & Company, has been studying management fads for 30 years and has helped Bain build the largest and longest running database on management tools and trends in the world. The lesson for him: beware of fads. He sees a danger of zealots taking agility into the scrap heap of management manias, because they see it as a zero-sum game, replacing traditional management entirely and reinventing the system. Traditional management does a lot of things well, yet CEOs must change their firms constantly to keep up with customers, competitors and changing technology. The secret sauce: harmonising the two, as with natural selection, so that the good traits endure and the obsolete ones vanish.

The agile mindset leads to a different way of arranging work that can be repeated over and over again, so that it’s not just one brilliant person who achieves wonders and then vanishes.

Steve Denning, former programme director at the World Bank and author of The Age of Agile

17Reimagining Agility

Change, empowerment and the organisation of tomorrow

© The Economist Intelligence Unit Limited 2021

Conclusion: Nowhere to hide

Handovers between old and new ways of doing things have been the hallmark of business and management strategies for decades. In recent years, however, the challenges of an epochal pandemic and increasing technology-driven hyper-competition have exposed weaknesses in companies settling for nominal transformation, while creating huge opportunities for those that have already completed a transition to more agile methods. The disruption of the last 18 months has also unlocked latent talent and removed obstructions that prevented deeper changes, freeing up employees to make a difference.

Employees will have been changed by the experience, and many will not easily or readily switch back to how things were done before. J.D. Meier of Microsoft says he has seen many people reimagine their future by shifting occupations and lifestyles. Those personal changes will leave a deep mark on companies, as individuals look around them and see others

making significant alterations. Executives need to be ready for this. “The big lesson right off the bat is how to embrace change,” he says.

At the same time, the opportunities are immense for leaders and companies who can build on the momentum and appetite unleashed by this new competitive environment. Weaknesses in a company and in a market have been exposed, raising alarm but also new roads forward. As Charlene Li, founder of consultancy Altimeter, points out, covid-19 has “shone a big, shining light on all things that were wrong in an organisation. There were very few places to hide.” The key to future success lies in whether leaders can capitalise on these changes and fresh resources or whether the tug of old habits proves irresistible. In the end, it will come down to how deeply the lessons of crisis have been learned, and how quickly they are applied. As Mr Rigby puts it: “The companies that learn the greatest lessons in adverse times rebound the fastest.”

The opportunities are immense for leaders and companies who can build on the momentum and appetite unleashed by this new competitive environment.

18Reimagining Agility

Change, empowerment and the organisation of tomorrow

© The Economist Intelligence Unit Limited 2021

While every effort has been taken to verify the accuracy of this information, The Economist Intelligence Unit Ltd. cannot accept any responsibility or liability for reliance by any person on this report or any of the information, opinions or conclusions set out in this report. The findings and views expressed in the report do not necessarily reflect the views of the sponsor.

19Reimagining Agility

Change, empowerment and the organisation of tomorrow

© The Economist Intelligence Unit Limited 2021

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