9 The authors wish to thank the McKinsey Agile tribe, particularly Amit Anand, Esmee Bergman, and Olli Salo, for their contributions to this article. tab. Overall, our research indicates that agile transformation can reduce time to market by at least 40 percent. In a successful agile transformation, the teams need to operate with high standards of alignment, accountability, expertise, transparency, and collaboration, all in service of the customer. You can’t gain this experience by reading a book.” Today Bosch operates with a mix of agile teams and traditionally structured units. Building on the modular approach to product development pioneered by Toyota, Tesla meticulously designs interfaces among the components of its cars to allow each module to innovate independently. As Exhibit 4 shows, new ideas to meet customer needs went through countless handovers between departments with different customer value propositions and incentives. Although the five dimensions seen in Exhibit 2 provide a clear path to implementation and how to assess the level of enterprise agility, they offer no guidance on how to measure the impact of enterprise agility. This resulted in frequent delays and, consequently, low customer satisfaction. The Toyota Production System is a classic example of this. 7 Exhibit 1 shows the range in improvements resulting from agile transformations: the customer satisfaction score rose by ten to 30 points for customer satisfaction and by 20 to 30 points for employee engagement, operational performance (speed, target achievement, and other industry-specific metrics) improved by 30 to 50 percent; and financial performance (cost savings) improved by 20 to 30 percent.

(See “Embracing Agile,” HBR, May 2016, and “HR Goes Agile,” HBR, March–April 2018.). Start with the initiatives that offer potentially the greatest value and the most learning. Thus the bumper team can change anything as long as it maintains stable interfaces with the parts it affects. Few organizations have completed a full transformation across all dimensions of the operating model at the enterprise or business-unit level; most still work at team-level agility. Please try again later. 16. Or “trademarks.” See Michael Bazigos, Aaron De Smet, and Chris Gagnon, “Why agility pays,” McKinsey Quarterly, December 2015. But in principle there is no limit to the number of agile teams you can create or how large the initiative can be. Agility is not incompatible with stability—quite the contrary. The taxonomy is fully visible to everyone across the enterprise. Leaders plunge in to solve problems and remove constraints rather than delegate that work to subordinates. The last three obstacles -- slow decision-making, poor knowledge management, and unaligned business processes -- are more foundational in nature and correlated to lower organizational agility. A company can no longer hire purely for expertise, for instance; it now needs expertise combined with enthusiasm for work on a collaborative team. Technology is probably the biggest game changer of our time and what may seem science fiction today may very well be reality tomorrow. Having all the relevant numbers in due time will allow managers to make informed decisions a lot quicker and more accurately. We analyzed 22 organizations in six sectors, and our preliminary results identified three main outcomes of agile transformations: improved customer satisfaction, employee engagement, and operational performance. So they typically launch an initial wave of agile teams, gather data on the value those teams create and the constraints they face, and then decide whether, when, and how to take the next step. Performance assessments typically shift from an annual basis to a system that provides relevant feedback and coaching every few weeks or months. Companies have to be agile in order to stay relevant and be successful. The key to being agile is constantly being prepared.

They place more value on adapting to change than on sticking to a plan, and they hold themselves accountable for outcomes (such as growth, profitability, and customer loyalty), not outputs (such as lines of code or number of new products). Copyright © 2020 Harvard Business School Publishing. Capture 70,000 customers of a goal 100,000 new customers, and the TAR is 70 percent. Bosch, a leading global supplier of technology and services with more than 400,000 associates and operations in 60-plus countries, took this approach.

When measuring the impact on employee engagement of agile transformations, it is important to track changes over time. It leads to greater efficiency and productivity in some of the business’s big cost centers. The basic project planning steps that every project manager needs to know can be broken down as parts of the first two phases of project management: Initiation and Planning.While those phases give a broad outline of what should be happening at different stages of a project’s lifecycle, they don’t provide much of a clear picture of how to go about your project planning. Testing them, just like testing any prototype, should reflect diverse, realistic conditions. Instead of hiring somebody who has load of experience in managing one particular field, HR professionals should look for skills and enthusiasm rather than previous projects. Most transformations fail. Over time they have spread into functions such as product development, marketing, and even HR. You are, as team leaders. What should executives focus on, and what might they expect to change? The findings hold true for successful agile-transformation implementations across sectors and geographies.

Finally, purpose was created through an inspiring North Star translated in clear goals and missions Please email us at: McKinsey_Website_Accessibility@mckinsey.com. And departments such as legal may need buffer capacity to deal with urgent requests from high-priority agile teams. As the pressures mount to find innovative ways to remain competitive in today’s rapidly changing environments, agility is no longer just desirable but becoming essential. The annual budgeting process should be complemented with a VC-like approach to funding. although 37 percent said enterprise-wide agile transformations were in progress. If your business sells a subscription product, an important acquisition metric is the number of new sign-ups. As a result, funding procedures evolve to resemble those of a venture capitalist. Changes come on line faster and are more responsive to customer needs. Workstreams should be modularized and then seamlessly integrated. If not, they can pause, monitor the market environment, and explore ways to increase the value of the agile teams already in place (for instance, by improving the prioritization of work or upgrading prototyping capabilities) and decrease the costs of change (by publicizing agile successes or hiring experienced agile enthusiasts). A second area in which the impact of agility is clearly visible is in employee engagement. See Wouter Aghina, Aaron De Smet, and Kirsten Weerda, “, Or “trademarks.” See Michael Bazigos, Aaron De Smet, and Chris Gagnon, “, In the 2017 McKinsey Agility Survey, only 4 percent of companies surveyed had completed an enterprise-wide agile transformation,

A company’s early agile teams carry the burden of destiny. They require total leadership commitment, a receptive culture, enough talented and experienced agile practitioners to staff hundreds of teams without depleting other capabilities, and highly prescriptive instruction manuals to align everyone’s approach. VCs typically view funding decisions as opportunities to purchase options for further discovery. Product, Sales, Operational teams) Alternatively, functions might have little formal engagement with the teams after collaborating with them to establish certain boundaries. Practical resources to help leaders navigate to the next normal: guides, tools, checklists, interviews and more. Ideally, this puts responsibility for innovation in the hands of those who are closest to customers. If you’re implementing OKRs to help accelerate progress in a new strategic direction, the leadership team should participate in the pilot. Individuals have the power to escalate irregularities in production quickly to team leaders, who, in turn, have the power to stop the production line to rectify the issue.

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