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Why Agile Transformations Fail – and how you can navigate the most common pitfalls By Andreas Fricke Møller & Claus Elmholdt Agility is often referred to as an organizational panacea, a solution to every competitive problem and a way to fight off the looming disruptions that are ever-present in the minds of CXOs when designing organizational strategies. And there shouldn't be any doubts that, if implemented and executed properly, the application of agile methodologies can unlock enormous value. According to research from Accenture Strategy, agile organizations have, on average, 16% long-term EBIDTA growth compared with only six percent for non-agile organizations. Additionally, research by McKinsey reveals that successful agile transformations can lead to an increase in operational performance by up to 50% and an up to 30% increase in financial performance. The prospects are appealing for organizations seeking out competitive advantages, and as a result they initiate agile transformations on a pendulum ranging from the application of small-scale scrum teams and processes within IT departments to full, agile-at-scale organizational transformations. The purpose of this article is to focus on the latter type of transformation, investigating a common denominator for many of these large-scale initiatives, namely that they lose momentum and fail to capitalize on the panacean promise of true agility, the ability to adapt to rapid market changes. Finally, the article will point out five central landmarks to navigate the most common pitfalls.

Breaking down 'Agility' There's plenty of heat around defining what being 'agile' really means. As this article sets out to investigate agile-at-scale transformations, it looks at agility from both a systems perspective and people perspective, the latter being the main focal point in the explanation of why agile initiatives fail. Beginning from a top-line systems perspective, agile is:

1. An organizational structure meant to break down silos and facilitate networked, cross-functional collaboration.

2. A set of tools and processes designed to enable end-to-end delivery while reducing risk and enabling experimentation through iteration, removal of impediments, and a relentless focus on improving efficiency.

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The above models what we could call 'hard agile', and include various setups such as SAFe, Nexus and the Spotify model as well as tools and processes like Scrum or Kanban. Using the top management brute force approach, as is typical among agile-at-scale transformations, it's relatively easy to restructure the organization and introduce a new set of tools and processes and make employees use them. It might be important here to emphasize the word 'relative', as this initial step is not without complications either. However, making it this far is only the first step in a long-term process of making agile stick and avoid falling back into old habits. The most important step of the transformation, which is often overlooked or given attention as an afterthought, is the organizational culture and the associated mindset and behaviors among managers and employees. The 'soft agile' if you will. From a top-line people perspective, agile is:

1. An organizational culture valuing autonomy, diversity, differing opinions, psychological safety, fact-based arguments over hierarchical positions, and decentralized servant leadership.

2. A mindset and a set of behaviors embracing proactiveness, opportunism, abundance, and non-zero sum thinking.

To truly utilize the value of an agile setup, as is illustrated below, organizations engaging in agile transformations must continuously work to ensure that the organizational structure, tools and processes develop to reflect the organizational culture, mindset and behavior. In fact, research shows that the top three barriers towards successfully scaling agile stems from issues related to misalignment between agile practices and organizational culture.

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What most agile transformations fail to realize in a timely manner, if at all, is that while systems and people can change, they don't change at the same pace. It is much easier to learn a new method or way of working than it is to learn to think, feel and behave in a completely different manner. Additionally, it is more straight-forward and concrete to start the implementation of agile by addressing the 'hard' systems perspective than it is to address the 'soft' people perspective. As a result, the root cause of why agile transformations fail stems from the way in which organizations approach the transformation itself. To exemplify why starting with the 'hard' aspects of agile without giving attention to the 'soft' aspects of agile is a critical misstep, let's look at the difference between organizations that are 'born' agile and organizations that 'transform' into being agile through the case of Spotify.

Why organizations want to be Spotify - and why most don't get there Spotify is often hailed as being one of the most successful cases of making agile work at scale, and their structure is often referenced to as being among the best-practice models for agile setups. But, and this is an important 'but', Spotify had one major advantage, namely that it was born agile, and as a result did not have to deal with what we can call 'cultural debt', the deeply-rooted and ingrained habitual perceptions, beliefs and conceptions about how the organization worked before the transformation began. Spotify, and other agile-at-birth organizations were created, built and grown with an agile culture, mindset and their associated behaviors as an outset, building out and adopting agile tools, processes and structures from there. In comparison, organizations that transform into an agile setup cannot escape their 'cultural debt’ and failing to address this crucial difference in a timely manner is one of the main drivers of failure in agile transformation processes.

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In essence it's a classical change management issue, but when engaging in an agile-at-scale transformation, organizations are not just tweaking their business setup, they are forcing the whole organization, managers and every employee to re-think more than 100 years of classical, hierarchical management practices. While this is a big ask, it is not impossible to overcome 'cultural debt' and make agile stick, but it requires you to think through the whole transformation process from the beginning, addressing the development of both systems and people in parallel while putting checking systems in place to ensure long-term organizational anchoring.

5 steps to overcome 'cultural debt' and make agile stick long-term:

1. Acknowledge that changing culture, mindset and behavior takes longer than organizational processes and structures.

2. Provide HR with a strategic role and mandate from the outset and form culture and processes in parallel.

3. Build learning journeys for relevant managers and employees and model them after concrete situations where the new cultural values and mindset can be applied. This step can be heavy on time and resources but will be immensely valuable in making agile stick in the long term.

4. Emphasize continuously why the shift in culture and mindset is an improvement from 'the old normal' and link improvements directly to business outcomes.

5. Ensure organizational anchoring using change management approaches such as mentoring programs, peer learning and/or shadow coaching. The key is focusing on ensuring transfer between learning and applying the new mindset and behavior to the corresponding new processes.

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Building a truly agile organization has the potential to unlock tremendous value, but the road there is complex and full of obstacles and making agile stick in the long term requires extensive change management efforts. As established organizations wishing to take the leap and become agile-at-scale can't escape their 'cultural debt', they must start by acknowledging that changing culture and mindset is the hardest step in the transformation, and must be given equal priority to ensure that systems and people develop in unison.

About the Authors

Leadership Consultant, Cand.Merc.Int Academic Director, Cand.Psych.Aut

Profile: Lead.eu / LinkedIn Profile: Lead.eu / LinkedIn Afm@lead.eu / +45 27 57 73 84 Ce@lead.eu / +45 26 14 51 57

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References • Accenture Strategy, 2019 - Move fast to thrive: Intelligent operating model.

o https://www.accenture.com/nl-en/insights/strategy/move-fast-thrive • Kanbanize – Kanban Explained for beginners:

o https://kanbanize.com/kanban-resources/getting-started/what-is-kanban • McKinsey & Company, 2020 – Enterprise agility: Buzz or business impact?

o https://www.mckinsey.com/business-functions/organization/our-insights/enterprise-agility-buzz-or-business-impact

• Scaled Agile, 2019 - SAFe for Lean Enterprises 5.0: o https://www.scaledagileframework.com/

• Scrum.org - Scaling Scrum with Nexus: o https://www.scrum.org/resources/scaling-

scrum?gclid=EAIaIQobChMI7cWG3tOZ6QIVjbh3Ch17RQ2vEAAYASAAEgJ2OfD_BwE • State of Agile, 2018 – 12th Annual State of Agile Report:

o https://explore.versionone.com/state-of-agile/versionone-12th-annual-state-of-agile-report

• State of Agile, 2019 – 13th Annual State of Agile Report: o https://explore.versionone.com/state-of-agile/13th-annual-state-of-agile-report

• The Spotify Model, 2017 – Spotify Engineering Culture: o https://www.youtube.com/watch?v=4GK1NDTWbkY