Increasing business agility takes a system and a culture that fuels it

Experiences from an agile transformation at Microsoft with recommendations on the practices that enable business agility.

This article was first published on LinkedIn on October 27th 2017.

Continuous change is the new norm driven by new digital capabilities. Maintaining business agility requires the organisation to continuously adapt its products and services in response to changes in the business environment. That is easier said than done. Proposed solutions are plentiful, but many focus on a single aspect of enabling business agility, implementing agile development methodologies, or perhaps deploying new technology.

However, while such solutions can contribute, increasing and maintaining business agility requires a systemic approach and the right culture to fuel it. As leaders responsible for sensing and responding to new customer demands, we need to understand the enabling systems of work and the mindsets and behaviours that make them successful.

Increasing business agility is one of the top drivers of digital transformation. Yet organisations are struggling to successfully do so. Wipro Digital recently surveyed 400 Executives in the US about digital transformation efforts in their companies. Increasing agility was identified as one of the top three drivers. Nevertheless, 37% of the same executives found increasing agility to be a missed investment in their digital transformation strategy. The same study shows that only 1 in 10 Executives believe they are more than 75% successful in executing their strategy. Resistance to new ways of working is identified as the top barrier.

In my previous role as a product leader at Microsoft, a large part of my job was to implement strategies for increasing the business agility of our group. I worked in a small product group (by Microsoft standards), organisationally located outside of the core engineering organisation. The group more or less encompasses all product development functions. Our organisational location allowed us to adapt our systems of work more rapidly. We worked on setting the organisation up to function like a startup for several years. The outcome was a significant increase in responsiveness to new customer demands.

Resistance to new ways of working was the top barrier for us, as well as I suspect it will be for most organisations. In large organisations, this barrier is amplified by the need to partner with teams outside your own. A shift in mindset and related behaviours were what enabled the successful outcome. Reflecting on the journey, a system of interdependent disciplines emerges as the engine that drives business agility. Had we as leaders been more aware of this system and what operates it from the start, it would have helped us accelerate our transformation.

In this article, I am sharing my experiences from the transformation we underwent at Microsoft. In the context of those experiences, I am advocating that conscious and active development of your culture is required to make your efforts to increase business agility successful.

Agility cannot be achieved by focusing on a single discipline

Discovering new or changed customer demands, and adapting your products or services in response, involves multiple disciplines. I have chosen to focus on disciplines instead of organisational units due to the variety in organisational structures and how things are named. In my experience, the following disciplines are at play - at a minimum:

• Customer Experience Management: Development, measurement and management of all the touchpoints that make up the customer experience.

• Innovation: Ideation, Development, Solution Validation

• Strategy Development: Target Market, Business Outcomes, Vision, Product/Service Strategy, Value Proposition

• Product (needs) Discovery: Foundational Research, Market Research

Strategy Development and Product Discovery focus on defining the problem space, and Innovation and Customer Experience Management are about the solution space.

The four disciplines are interdependent and cannot function effectively and efficiently on their own. Together they form a system that drives business agility. It is not a sequential process but a system in which each discipline depends on others. The figure below provides a simplified view of the disciplines and the interdependencies that makes them function efficiently.

The importance of Strategy Development seems to be underplayed in much of the current literature on building products. In my experience, making the system that enables business agility work is essential. The way the strategy is developed can either enable or hinder business agility. The strategy should be defined based on a longer-term vision for the product or service.

The vision should serve as the compass for your strategy, representing how the vision is attained. The vision should guide decision-making when prioritising the many strategic options you will be presented with. Will this decision move us closer to our vision? Is this the business we are in? 

In our case, the strategy became the "switchboard" connecting our work to Business priorities, Business outcomes; Product goals (customer needs); Target customers and Learning. This proved extremely valuable because it enabled us to re-prioritize faster in response to changing needs; communicate more efficiently about our work, and provide everyone on the team a line of sight of their work's impact.

The strategy should be developed based on a clear understanding of the problem space. Product Discovery contributes to this understanding by informing on what problems to solve/needs to address. Assumptions around customer needs must be validated through research by Product Discovery to reduce uncertainty. Product Discovery uses known facts coming from the measurement of customer behaviour. This helps identify the unknowns posing the highest risk and to focus the research resources on those.

Customer Experience Management informs Strategy Development on customer feedback and perception of the user experience through the measurement of touchpoint performance. These inputs must be weighed against the product vision and business priorities to form an effective strategy. The strategy needs to provide constraints that help focus Innovation efforts. However, it needs to do so without inhibiting the ability to innovate. That can be done by ensuring the strategy only focuses on describing the "what" and avoids describing the "how". When developing solutions, the temptation to tell developers what the solution should be is almost irresistible. Hence, many of the questions coming to Innovation describe the "how", which, if acted upon, will inhibit innovation.

Innovation takes direction on what to build from the strategy. In collaboration with Customer Experience Management, Innovation iterates from a Minimum Viable Product to a solution that serves the customer's need. Forming the Lean Startup Build, Measure, Learn cycle. When potential new customer needs are uncovered in the innovation process, they are passed on to Product Discovery to be prioritised for validation. Once validated, new customer needs are fed into Strategy Development, and the system continues.

Understanding the interdependencies between the disciplines involved in maintaining business agility will help leaders lead more effectively. The system depicted above can help provide an overview of which disciplines are involved and how they interact to drive business agility. With the system in mind, you can assess if your organisation is set up for the system to work? Are roles and responsibilities aligned? If the disciplines are in place, do they serve other disciplines in a way that makes them efficient? If they don't, are the issues related to the ability to sense new customer demands or respond to them? The system above provides an understanding of what is needed for the system to work and a way to pinpoint where to focus if it doesn't. 

Efficient collaboration is necessary

The disciplines outlined above span multiple functions across the organisation. You might even have multiple instances of the same function in large organisations. Enabling meaningful and fast responses to new customer demands is about speed. It requires efficient interaction between the disciplines. In a startup or a small company, that might be easy, but in a large organisation, it takes effort. Forming small cross-functional teams is the most effective way to achieve efficient collaboration. As stated by Jeff Gothelf & Josh Seiden in their excellent book Sense and Respond: "Sense and respond in practice is about small, autonomous teams experimenting and learning in pursuit of a vision or strategy". Unfortunately, that is not always a feasible option.

The figure below shows the many functions involved in the continuous development of products and services, using my previous group at Microsoft as an example. As mentioned earlier, several functions were internal to our group, but others were not. Having multiple functions in the same group gave us autonomy in those areas, while in others, we needed to find efficient ways of collaborating with our partner teams.

Autonomy enables a team to move quickly, but boundaries are required to keep it focused. The way we crafted our strategy helped us focus our innovation efforts AND work efficiently with our partner teams. The strategy was framed as a structure of business outcomes, product outcomes and initiatives. The business outcome represents how to measure internally focused business results. Each business outcome has one or more product outcomes representing the value attained from using the product. The product outcomes have associated initiatives for how we would deliver the product outcome.

The strategy should guide collaboration without inhibiting innovation. The strategy provided the team with a clear set of initiatives to work on. The initiatives were defined in the problem space, describing the "what" and refraining from going into the "how". Using the initiative descriptions and product outcomes, Engineering has the freedom to innovate on the solution without being restricted by opinions on what it should be. At the same time, the structure enabled us to focus most of our collaboration with partner teams on outcomes and initiatives. It helped us to keep the discussions in the problem space, which provided the freedom to innovate. Separating business and product outcomes helped ringfence the dialogues with different stakeholder groups to what was important to them. Think of it as a layered collaboration that allows other stakeholder groups to collaborate effectively, using a structure that keeps it all connected. 

The right culture is required to make the system work

Culture is the glue that ties it all together. Making this system work took time. And just like the products and services it produces, it needs to continuously evolve. The thing that made the "systems of work" we put in place work was the culture we managed to create.

The cultural change within our team was fuelled by the more significant cultural change that Microsoft was going through. Satya Nadella and other senior executives helped tremendously by instilling the importance of a Growth Mindset and the communication and behaviours to support it. However, how we as leaders made Growth Mindset specific to our work was important because it became part of our dialogue and how we did things.

In retrospect, specific mindsets made the system work. Your beliefs and attitude determine your behaviours. Hence, instilling the mindsets that suit the outcomes you want to achieve impacts your ability to succeed. In our transformation, we were not explicitly aware of the mindsets we needed from the start. However, they emerged as our learnings made us more mindful throughout the journey. The following figure shows the mindsets that drove our business agility. You can use different names for them, but at the end of the day, I believe these are the core mindsets needed to maintain business agility. The figures' mindsets are located next to the disciplines they mainly impact. 

Being Purpose Driven is about connecting the work of the team to the meaningful benefit of others. Having a sense of purpose in what we do at work is linked to believing that what we do makes a meaningful difference to others and potentially to the world around us. The vision and strategy need to express that purpose and enable someone contributing to developing or delivering the product or service to see how her work helps serve the purpose. Having a clear purpose helps lead to a sense of fulfilment.

Having an Outside-In mindset means being able to put yourself in the shoes of the customer. View the solution from the customer's perspective. Fully understand the need your product is addressing and build the best possible solution to serve that need.

Continuous Learning directly ties back to the Growth Mindset. Challenges and failures are an opportunity to learn and grow. Hence Learning from the work you do, is essential across all disciplines. Designing experiments that can help reduce uncertainty is a core part of that.

Trust Data, not Assumptions, is about encouraging a scientific approach to decision-making. It's about making it OK to challenge requests not founded in data, to reduce the risk of building something no one wants (except the person asking for it). 

Leadership behaviours shape the culture 

Performance in achieving the desired outcome is ultimately determined by your behaviours. Leadership behaviours are significant as they help shape the culture of the organisation. Our behaviours as leaders were what solidified our mindsets and helped instil them in others. In general, there are many ways to achieve a specific outcome. When it comes to defining the most effective behaviours for applying the mindsets above, it will be different from organisation to organisation. So, while I believe the above mindsets will help increase business agility in all organisations, the most effective related behaviours must be determined. I want to highlight some of the ones that were effective for us.  

Think Outside-In mindset - Very early on, we decided to invest in learning how to apply methods to increase our customer focus. Customer Journey Mapping was one such method. It proved valuable in assuming the customer's perspective and as a basis for researching and prioritizing product improvements. Later it was beneficial when working together with teams outside of our own that were part of delivering the customer experience. We put different feedback mechanisms in place and enforced responding to the feedback as part of our business rhythm. Mandating customer visits for everyone on the team was also important. Learning directly from the customer how products are used, and being required to report back on the learnings, is a great learning experience, especially for someone in a non-customer-facing role who is part of creating the customer experience.

Continuous Learning mindset - We invested in developing a research function. We integrated customer co-creation and experimentation into our agile development practice. The latter was kicked off by bringing Jeff Gothelf to run a Lean UX workshop. We set up a practice of running weekly research studies to keep us in the habit of continuous discovery and learning. The value of which is well described by Product Discovery expert Teresa Torres in her newsletter. We did retrospectives to continuously reflect on and improve how we worked. Retrospectives were done at multiple levels as part of our engineering practices and leadership team. Later we made learning part of the way we measured our performance. Learning is so fundamental to business agility. Business agility is really about adaptability. If you do not learn, you can only guess how best to adapt. Research by Lindsay McGregor and Neel Doshi shows that most organisations only measure tactical performance, whereas adaptive performance is needed for creativity, problem-solving and innovation. Setting learning goals prepares people to adapt (McGregor & Doshi, 2017). 

Trust Data, not Assumptions mindset - This mindset mostly expressed itself in behaviours around how we approached requirements for new work. Is this something you know or something you assume? Do you have data to back that up? Those were the questions we made okay for everyone to use to challenge work requests. This is easier when such requests come from outside your group but more problematic when combatting the Highest Paid Persons Opinion (HiPPO) syndrome in your own management chain. However, as leaders, we made it okay to challenge requests in those situations as well, hard as it may be.

Purpose Driven mindset - As a leadership team, we had a strong focus on understanding and communicating the outcomes of our work to our customers and the business. This was supported by a performance management system focused more on impact than activity. Coupled with how we created our strategy, it enabled everyone on the team to have a line of sight from their work to its effect. Having a line of sight positively affected team members at all levels to challenge the value of a piece of work: "What goal is that driving; How will we measure success; If we did X instead, I believe it would drive a better outcome". Those were some of the questions keeping us all on our toes in achieving our goals. 

Make the development of culture an explicit part of your digital transformation

I recommend making the development of culture an explicit part of your digital transformation. Resistance to new ways of working will not go away, but you can reduce the time it takes for your people to get through the Change Adoption Curve. Whether your transformation is about becoming more agile, as is the focus of this article, or it is about doing business differently, the enabling culture needs to be established. It should be done as part of your business transformation project and not as an afterthought.

As sexy as it is to speculate about new technologies such as AI, robots, and the internet of things (IoT), the focus on technology can steer the conversation in a dangerous direction. Because when it comes to digital transformation, digital is not the answer. Transformation is." (Westerman, 2017)

References:

A Crisis in Digital Transformation: https://www.slideshare.net/WiproDigital/digital-transformation-roi-survey-from-wipro-digital-76561582

Gothelf J., Seiden J. (2017). Sense and Respond: How Successful Organizations Listen to Customers and Create New Products Continuously. Harvard Business Review Press

McGregor L., Doshi N. (2017). There Are Two Types of Performance — but Most Organizations Only Focus on One. Hbr.org, https://hbr.org/2017/10/there-are-two-types-of-performance-but-most-organizations-only-focus-on-one

Ries E. (2017). The Startup Way: How Entrepreneurial Management Transforms Culture and Drives Growth. Portfolio Penguin

Torres T. (2017). This Keystone Habit Will Fuel the Rest of Your Continuous Discovery Habits. https://www.producttalk.org/2017/10/keystone-habit/

Westermann G. (2017). Your Company Doesn't Need a Digital Strategy. MIT Sloan Management Review: http://sloanreview.mit.edu/article/your-company-doesnt-need-a-digital-strategy/