On the Path to Business Agility: Assessing Progress

In my previous blog post on Agile Transformations, I highlighted the significance of large organisations structuring themselves in a way that facilitates the attainment of business agility, a crucial requirement in today’s fast-paced world. One of the common concerns that resonates across different organisations when deciding whether to transition to the setup I discussed is how to accurately measure progress toward this goal.

Let’s face it….it’s not easy for sizeable organisations to swiftly pivot to a new setup after operating in a certain way for many years. While, for example, the idea of forming cross-functional teams to deliver a project or product may appear straightforward, in practice, the execution of it is considerably complex. This is mainly because setting up cross-functional teams necessitates a departure from the siloed mindset that may have prevailed within the organisation for years. Consequently, the cultural change that must happen throughout the entire organisation before it can successfully establish high-performing, cross-functional teams is significant!

Hence, it is completely understandable that organisations question how to measure their journey towards achieving Business Agility before embarking on this challenging path.

Measuring Progress Towards Business Agility

Although several metrics are available to measure progress, organisations should exercise caution and refrain from prematurely selecting tools before gaining a clear understanding of “what” they want to measure. 

Organisations need to keep in mind that the core objective of business agility primarily revolves around the organisation’s ability to respond swiftly and effectively to market changes and emerging opportunities. Consequently, there are two crucial measurements to consider:

1. The Response Velocity
2. The Effectiveness of Outcomes

The Response Velocity

The speed at which organisations can react to market changes and emerging opportunities is highly influenced by the overall efficiency of their value chain. This efficiency spans across the entire journey, from the instance organisations identify an opportunity, to that moment when they listen and adapt to customers’ feedback.

Measuring this efficiency can take various forms, but if I had to narrow it down to three key metrices, my preferences would include:

Flow Velocity

Also known as system’s throughput, in its simplest terms, flow velocity measures the number of backlog items completed in a specific timeframe. The simplest way how to measure this is by counting the work items completed over several timeboxes and then determining an average once sufficient data has been collected.

Without delving into too much detail, the above represents a simplified method for measuring flow velocity. In practice, as not all work items demand the same level of effort for completion, flow velocity is typically quantified by considering the size of the completed items during that timeframe. For example, by examining the total story points completed within that period. 

Balancing Flow Distribution

Organisations don’t solely focus on developing brand-new products and services. They also maintain their current systems by addressing critical bugs and enhancing their existing functionalities. For example, forward-thinking organisations especially those with proprietary platforms, invest time and effort in improving their platform’s capabilities for future product development.

Hence, striking a balance among these diverse types of work is crucial to prevent organisations from focusing on one area of development at the expense of others. An excessive investment in bug fixing, for instance, might leave insufficient capacity for new product development, hampering the organisation’s ability to achieve its “respond rapidly to changes” objectives. All of this will impact the efficiency of the organisation’s value chain.

Much like Flow Velocity, one simple way for measuring flow distribution is to count the number of each work item type at any given time. However, as I mentioned earlier, a more accurate measure is one that also considers the size and complexity of these work items.

Flow Efficiency

Flow Efficiency is a common practice that measures the amount of time spent on value-added activities compared to waiting time. This process initiates with the identification of value-added activities within a value stream. The efficiency is then calculated as follows:

Flow Efficiency (%) = (Time spent on value-added activities / Total time spent) * 100

The Effectiveness of Outcomes

Achieving Business Agility is not only about speed but it’s equally about achieving the intended outcomes. Delivering solutions that do not align with the customer needs, or the organisation’s objectives, holds no value. As a result, measuring outcomes becomes a critical component of the organisation’s journey towards achieving Business Agility.

Some common metrics used include:

• The traditional Key Performance Indicators (KPIs) and Objectives and Key Results (OKRs) to measure progress towards achieving the desired business strategic results at both the organisational level and individual value streams.

• Employee engagement, measured through, for example, surveys and Employee Net Promoter Score. The higher the employee engagement, the more likely to have an organisation that is efficient and innovative.

• Measuring customer satisfaction is undoubtedly crucial. There are several metrics through which this can be achieved, including Customer Satisfaction Score (CSAT), Customer Effort Score (CES), Customer Retention Rate, Net Promotor Score (NPS) and Churn Rate.

Measuring the Organisation’s Proficiency in Attaining Business Agility

For organisations to respond swiftly and effectively to changes, they must become proficient in different areas of operations, including the way they adopt, innovate, and respond to customer needs.

For example, one of the most critical proficiencies for achieving Business Agility is the practice of lean portfolio management. Developing proficiency in this area allows organisations to swiftly fund Minimum Viable Products (MVPs) and based on the MVP’s outcome, either proceed with further development or accept sunk cost and move to another opportunity.

Another essential area of proficiency pertains to how organisations organise themselves into value streams, which involves establishing new teams and, in certain cases, though not preferable, modifying existing ones. 

Given the impact on achieving business agility, it becomes paramount for organisations to also measure their proficiency across various competencies. The method for doing so requires a deep understanding of the core competencies essential for business agility, which I intend to explore in future posts.

Business Agility is not a destination, but a journey, and it is therefore a necessity for organisations to continually assess their performance, learn from experience, and evolve. Embracing a culture of adaptability, data-driven decision-making, and ongoing innovation is crucial.

By doing so, organisations can improve their customer satisfaction while fostering a culture of collaboration and innovation across the board.