At Agile Strategies, we apply the lessons of both Agile software development and organizational learning to the whole enterprise, particularly the process of formulating and deploying strategy. Here are the guiding principles we work with:
#1: Sense and respond
An agile organization senses and responds to disruption and opportunity in real time. This is the only way to address the high levels of complexity and uncertainty in today’s business environment. Strategy is treated as a hypothesis about the future, not a prediction, and the process of strategy management is one of continuously identifying and testing opportunities while reducing risk and uncertainty.
#2: Minimum Viable Strategy
Rather than a detailed plan, Minimum Viable Strategy™ is a short, high-level statement of strategic intent. It is shared and discussed widely in the organization. It includes the elements of Mission or Purpose, Vision, Core Values, Customer Value Proposition, and Strategic Themes. Everything else is iterative. Rather than setting out goals, metrics or initiatives for a multiyear planning horizon, these are set, reviewed and reset much more frequently.
#3: Disciplined Experimentation
Strategy is considered a hypothesis about the future, not a prediction. Rather than being “executed,” strategy is “validated” through a process of disciplined experimentation. Experiments are designed to address uncertainties, risk, and hypotheses about customer value. Failure is not considered a problem and is “safe” as long as results are discussed and documented as learning.
#4: Objectives and Key Results (OKR)
These experiments are framed as OKRs. Objectives are aspirational, qualitative statements of direction, while Key Results are measurable, quantitative business outcomes. OKRs are stretch targets and should be transparent to everyone in the organization. The Key Results are not specific actions, tasks or milestones – these are left for individual teams to determine iteratively on a more short-term basis. At the Enterprise level, even the “Vision” can be stated as an OKR, with supporting OKRs cascading through the various levels of the organization. Typically, OKRs are set annually for the enterprise and quarterly for teams.
#5: Strategic cadence
Information, conversations, and feedback about strategy should flow efficiently up and down through the organization. This cadence should reflect the rhythm of the individual business – not necessary the calendar or fiscal year. The cadence serves two purposes. One is to optimize the flow of information to support well-informed decisions and feedback. The second is to create a pace that allows individuals and teams to focus on their work with a minimum of external distraction. Combined with the shared strategic awareness that comes from understanding the strategic intent and OKRs, this enables relevant information and external signals to “feed up” freely.
#6: Radical customer focus
As Peter Drucker said, “The purpose of business is to create a customer.” Everyone in the organization should be aware of how their work provides value for a customer. Joshua Kerievsky describes this as “Making People Awesome” – delivering innovative value that makes life better for your customers, your employees, your suppliers, your shareholders, and everyone else your organization touches.
Time is treated as a scarce and highly valuable resource, far beyond the usual concept of the “time value of money.” In a highly competitive environment, delays in introducing new products or services cause irrecoverable losses of revenue and prolong other risks. “Concept to cash” is a key metric. When prioritizing initiatives in an agile portfolio, estimating Cost of Delay, as well as Duration of the project, is critical. If the Cost of Delay of two initiatives is equal, do the shortest job first. If the Duration is equal, do the initiative with the highest Cost of Delay first. Otherwise, prioritize based on Weighted Shortest Job First, which is calculated as Cost of Delay divided by Duration.
#8: Small batches of work
Big problems or initiatives need to be disaggregated into small batches. And, a minimum number of tasks should be in progress at a time in order to reduce “initiative overload.” Small batches of work can be completed and provide customer value faster than big projects, and generate faster customer feedback for course correction. This reduces the risk that your assumptions are incorrect. Don’t assume you can predict what customers want and spend a long time building a solution before testing it. As customers, we either a) don’t really know what we want until we see it, or; b) formerly knew what we wanted but that changed while we were waiting for a solution.As Henry Ford said, “If I’d asked my customers what they wanted, they would have said ‘A faster horse!’”
#9: Persistent, cross-functional teams
Work is performed by and accountable to collaborative teams, not individuals. Agile teams measure the velocity of workflow through the team rather than individual utilization as the basis for productivity metrics. Teams that are used to working together, with clear authority to get the job done, reduce communication errors and decision delays because there are fewer handoffs between teams. The ideal team size is 7+/- 2 people. Agile teams have a culture of engagement, autonomy, psychological safety and continuous learning.
#10: Healthy dialogue
Ideas and information drive value creation. As Larry Bossidy and Ram Charan put it: “Dialogue is the core of culture and the basic unit of work. How well people talk to each other absolutely determines how well the organization will function.” There are different kinds of conversations that need to happen at various stages in the strategic cadence, including conversations for learning, for brainstorming, for commitment, for status reporting, and for feedback.
Open sharing of objectives, desired results, and progress updates improve communication and innovation. At the OKR level, surprising innovations come from multi-directional sharing of goals – top down, bottom up and especially horizontally. At the task level, agile teams often use a Kanban board to display work status. The Kanban board clearly shows which tasks are prioritized in a backlog, which are in progress, and which have been completed.
#12: Continuous performance management
In keeping with the culture of experimentation, stretch goals, and learning from failure, many progressive corporations are abandoning the backward-looking annual performance evaluation. Instead, the emphasis is on frequent, forward-looking feedback and goal setting conversations, using OKRs. The emphasis is on what people are learning and how they are focusing their efforts – helping to build future performance rather than judging the past. In practice, there is a looser coupling between performance appraisals and compensation decisions.
Dan Montgomery lives in Boulder, Colorado. Dan is a leading expert, coach, and trainer on OKR and Strategic Agility. www.agile-strategies.com