As part of our research, we set out to find where different organizations are regarding changing their operating model. In our 2017 global survey, we saw that organizations had started to move toward agile—a trend that has continued. Organizations have found it possible to change their operating model despite the COVID-19 pandemic and the rise of remote working. In addition to the 12 percent of organizations that consider themselves born agile, 44 percent have either completed an agile transformation or are now in the midst of their journey (Exhibit A). Thirty-six percent have scaled agility beyond the team level, with 22 percent having scaled agility to multiple units. It is still a smaller set of trailblazers—10 percent—that have transformed their entire organization, with an additional 4 percent that have changed their entire organization except for their operations.
Telecom and financial services (including banking and insurance) continue to lead the way (Exhibit B), reporting both a large share of transformations and high speed of turbulence in the industry. Indeed, these sectors are experiencing significant shifts through, for example, digitalization and new entrants, and are responding by radically changing their operating models. But agility does not end there: a majority of consumer, retail, pharma, and healthcare companies are also undertaking or have recently completed an agile transformation—driven by factors such as changing consumer channel preferences and increased need for speed. Within high tech, many consider themselves to be born agile (16 percent of respondents), while another 45 percent consider themselves transforming.
In addition to the usual suspects, we saw some new arrivals in 2021. Respondents from the oil and gas sector now consider their industry to be among the most disrupted—perhaps driven by the increased role of sustainability and the energy transition—and they are now starting to adopt agility at scale. Another sector that has shifted place since 2017 is advanced industry (including, for example, electronics, aerospace, automotive, machinery, and semiconductors). Four years ago, it was considered the most stable and slow-moving sector, but the pace of change is picking up. This is evident in advanced-industry subsectors, such as automotive, where trends like electrification, the increasing role of software, and changing ownership models have opened the door for new entrants and call for incumbents to speed up. Other trends such as digitalization, advanced analytics, and new manufacturing methods are also affecting the broader sector—which could mean advanced industry will be the next big sector to go agile.
Agility is also starting to gain ground in the remaining sectors. Interesting cases can be found in the public sector, for example, with the British Field Army shifting to agile. Similar early cases, experimentation, and success stories can be found across industries.
There is also a proliferation of different terms, frameworks, and concepts related to agility and new ways of working. When looking at what companies are actually deploying, cross-functional teams is the most widely applied agile concept (used by 74 percent), while application of self-managing teams (used by 49 percent), and application of lean (used by 44 percent), are also common (Exhibit C). Scrum and chapters are also being used at scale. 1 A chapter is a functional group, for example of data scientists or account managers, that come together to ensure consistency across teams, build capabilities, set the long-term direction for the domain, and drive people development. At the other end of the list, the least used methods are scaled agility frameworks (used by 21 percent), flow-to-work pools (used by 9 percent), and holacracy, sociocracy, and teal paradigms (used by less than 3 percent).
Of those respondents with no plans to transform, 52 percent stated that other priorities are higher on their agenda, 49 percent cited unfamiliarity with the concept of agile, 29 percent believed they lack the resources, and 19 percent were concerned that their organization would resist such changes (Exhibit D).
Within this second group, we identified a select set of organizations (represented by 10 percent of the entire sample) that were driving highly successful agile transformations. They were embracing agility at scale to create and capture value instead of treating agile as team-level experiments in discrete departments. This means reimagining the entire organization as a network of high-performing teams, each going after clear, end-to-end business-oriented outcomes, and possessing all of the skills needed to deliver, such as a bank boosting the performance of customer journeys; a retailer analyzing turns and earns of product categories; a mining company reviewing production- and safety-process steps; an oil and gas company planning wells; a machinery player undertaking full product management, from R&D to go-to-market; or a teleoperator simplifying products. The teams are essentially interconnected mini businesses, obsessed with creating value rather than just delivering functional tasks.
However, agility at scale goes beyond adding more agile teams and team-level practices. The broader operating model, the connective tissue between and across the teams, also needs to be transformed. The organizations driving highly successful agile transformations made sure to do that by building an effective, stable backbone. This means optimizing the full operating model across strategy, structures, processes, people, and technology by going after flat and fluid structures built around high-performing cross-functional teams, instituting more frequent prioritization and resource-allocation processes, building a culture that enables psychological safety, and decoupling technology stacks.
Enterprise agility is thus a paradigm shift away from multilayered reporting structures, rigid annual budgeting, compliance-oriented culture, separation of business and technology, and other traits dominating organizations for the past hundred years. If this is true, and not just hype, a discontinuity of this magnitude should provide an opportunity for organizations to turn their operating models into a competitive advantage—as did early adopters of lean in the 1990s.
While individual case studies and agile success stories have been plentiful, having quantifiable results and a larger sample allowed us to go beyond anecdotes for the first time. Two major findings emerged.
1. Agility results in a step change in performance and makes it possible to overtake born-agile organizations. Highly successful agile transformations typically delivered around 30 percent gains in efficiency, customer satisfaction, employee engagement, and operational performance; made the organization five to ten times faster; and turbocharged innovation. While conventional wisdom sometimes sees these targets as contradictory (for example, efficiency at the cost of employee engagement), our results show otherwise. The respondents, on average, reported gains across four dimensions of performance, out of seven included in the survey.
This step change also showed up as a competitive advantage. Organizations that achieved a highly successful agile transformation had a three times higher chance of becoming a top-quartile performer among peers than those who had not transformed. And they also overtook the born-agile organizations: they not only had a higher chance of becoming a top-quartile performer, but also had a greater chance of achieving a more mature operating model across all dimensions.
2. Instead of waiting for agility to happen bottom-up, organization leaders need to take charge. Our survey asked respondents in detail what actions they took before and during their agile transformations. Our analysis then compared the close to 300 highly successful transformations with the 580 less successful ones to distill what they did differently. Four elements stood out in our logistic regression model, and together these formed a recipe that raises the chance of success from an average of 30 percent to 75 percent:
The essence of an agile transformation is reimagining the organization as a network of high-performing teams, supported by an effective, stable backbone of strategy, structure, processes, people, and technology. Imagine working on such a team—having the right people working together, all with different capabilities, enables organizations to move with unprecedented speed. This can increase customer satisfaction and boost operational performance. It can also provide a safe place to experiment with the authority and funds to do so, helping organizations drive more innovation. Employees will feel more engaged and enthused by a clear and common purpose, the autonomy to make decisions, and an ability to develop mastery in their craft. On the organization level, agile emphasizes prioritization and reduces overhead roles, which leads to more efficiency.
Defining successIn our sample, we identified 838 transforming organizations among the 2,190 respondents. And among those 838, we classified 264 organizations (31 percent) as “highly successful.” To determine whether a transformation achieved this level, we set two criteria. First, the organization had to consider the transformation a success (such as leading to improved and sustained performance); and second, we cross-checked their assessment with the degree of performance improvement they had achieved across the categories set out in Exhibit 1. The respondents had to achieve an average impact between “significant” and “major” across their objectives to be considered highly successful in their transformation (for example, for productivity we defined significant as achieving 20 to 40 percent gains in efficiency and major as achieving over 40 percent gains in efficiency to enable comparison).
All well enough in theory—but does it work in practice? Pioneers in the field have proved that significant impact is possible, and we have documented many such examples. With this research we wanted to provide hard facts, so we asked each organization that underwent a transformation about the quantifiable improvements they achieved. Exhibit 1 shows that highly successful agile transformations achieved a step change in performance and greater impact across multiple dimensions than the less successful transformations (see sidebar “Defining success” for details on the methodology used).
Consider Spark, an incumbent telecom operator in New Zealand that completed the first phase of its agile transformation in 2018. The operator sought to raise customer centricity, employee engagement, and speed while improving efficiency. The company cut customer complaints by 30 to 40 percent, reached a market-leading customer Net Promoter Score (NPS), received an employee NPS score in excess of 70, and launched new services faster. This led to an increased market share and sector-leading returns. The company now operates more like a digital services provider than a traditional telecom.
We find similar stories across sectors, from slower organizations starting to work with the speed of a born agile to digital native organizations to successful organizations moving up a gear. These gains in speed, customer centricity, operations, innovation, employee engagement, and productivity manifest themselves on the bottom line: 65 percent of highly successful transformations reported they had also achieved significant impact on their financial performance.
Some think that focusing on one issue naturally comes at the expense of others, for example, restructuring to cut costs (customers will suffer) or focusing on employee engagement (at the expense of efficiency). Agile transformations are different because the improvement of one dimension reinforces the improvement of another dimension: the highly successful transformations we studied showed impact across four dimensions on average.
Our research further showed that a highly successful agile transformation manifests itself directly by measures such as operating-model maturity and performance against peers.
Measuring operating-model maturityWe used a calibrated scale with descriptions of “gaps,” “good,” and “great” for each of the 17 dimensions, and asked the respondents to rate their organizations’ operating model against the scale based on which descriptor best matched their perception. An example of the scale for the first dimension, “purpose,” is shown in Exhibit E.
For each of the 2190 organizations, we also collected their relative performance against peers and compared how the maturity of their operating model (defined as the average across all 17 dimensions) was linked to the likelihood of being a top-quartile performer. Our research revealed that there is a performance threshold at 3.5: going from a good operating model toward a great one rapidly doubles and then triples the chances of being a top-quartile performer among peers (Exhibit F). Only successful transformations manage to get past this threshold.
Using the calibrated 17-dimension scale thus provides a way to determine whether an organization’s operating model is holding it back, keeping it at par with peers, or giving it a competitive advantage. Top teams in various stages of their transformations have used this instrument to give them a quick check on where they are, and which dimensions to focus on.
To measure the maturity of each organization’s operating model in terms of agile working, we devised a calibrated scale for the different sub-elements of the five trademarks of agility—in total, 17 dimensions across the strategy, structure, process, people, and technology elements. For each dimension we used our earlier findings and casework to define a scale for what gaps, good, and great looks like. We asked all 2,190 respondents to self-rate how they experience their organization against the grid, then compared averages depending on where their organization was on its journey (see sidebar “Measuring operating-model maturity” for details on the methodology used).
As shown in Exhibit 2, highly successful transformations reported significantly higher operating-model maturity (scoring on average 3.8 out of 5, where 5 is “great”) compared with those that had not undergone a transformation (scoring 2.5 on average), or those 580 organizations that had done a less successful transformation (scoring 3.2 on average). This was, of course, expected. What was surprising, however, is that the highly successful transformation also scored higher than those that classified themselves as born agile (scoring 3.6 on average). This is highly encouraging because it means that a highly successful transformation allows an organization to overtake born-agile organizations by measures such as operating-model maturity. For example, when it comes to architecture and infrastructure, those organizations that had completed a highly successful transformation believed that their technology setup placed them at a competitive advantage, while many of the born-agile organizations, with decades of legacy in their IT setup, had to make conscious efforts to stay ahead.
Next, we studied the link between completing an agile transformation and achieving a competitive advantage. To judge performance, we asked the respondents to assess how their own organization was doing compared to their peers across financial results, customer satisfaction, speed, operational performance, employee engagement, and innovation. What we discovered was that 57 percent of those that had completed a highly successful agile transformation were in the top quartile of performance—a nearly three times higher likelihood than for those organizations that had not yet transformed (Exhibit 3).
Enterprise agility enabled those who succeeded to make their operating model a competitive advantage, with one caveat: for every highly successful transformation there were two others that missed the opportunity. Despite good intentions, high hopes, and considerable efforts, the less successful transformations achieved only incremental impact (for example, 10 percent improvement in customer satisfaction) and did not materially tilt their likelihood of being a top-quartile performer.
We next turned to the question of what sets the highly successful apart: How does an organization increase its chances of success?
To identify the factors that lead to success, we collected information on more than 60 variables (different transformation actions and decisions) for each of the 838 transformations in our sample, for example, duration, approach used, use of piloting, frameworks deployed, who was leading, specific changes made, and so on. We first identified the lift of each single variable, for example, those that used front-runners had a one and one-half times higher chance of success than those that did not.
To study the combined effect of factors and the resulting odds, we constructed a logistic regression model. This allowed us to estimate the probability of a transformation being successful, conditional on the combination of the actions taken to complete it. A logistic regression model estimates both the base chances of success, interpreted as the chances of success if you do the opposite of all other factors, in our case 10 percent, and the individual increase in the log odds of each action you perform. When following the four-part recipe in full, an organization has a 75 percent chance of achieving a highly successful agile transformation.
There is a lot of anecdotal, often contradictory advice on how to succeed with an agile transformation. To separate fact from bias, we compared the highly successful agile transformations with the less successful ones to figure out what they had done differently across more than 60 transformation actions and decisions (see more details in the sidebar “Distilling the recipe that leads to success”). Putting it all together into one logistics regression model, we identified a four-part recipe that, when followed correctly, raises the chances of success from 30 percent to 75 percent (Exhibit 4).
What do those driving highly successful agile transformations do, and what should you do?
A detailed description of each of the four elements and their stand-alone impact on chances of success is shown in Exhibit 5. Following this recipe brings you to a 75 percent chance of success; in practice, your success will also depend on company-specific unique factors, context, quality of execution, and even a bit of luck.
Going beyond the numbers, what does it look like in practice to follow the recipe?
Preparation is key to executing a successful transformation, and so is full commitment from the top team, which must be ready and thoroughly understand what agility at scale means.
One of the large retail groups operating in Oceania recently completed a two-year turnaround—during a COVID-19 lockdown, with teams working remotely—in which it delivered significant quick wins. It knew the next wave of performance gains would depend on local execution, cross-functional initiatives, and rapid testing and learning cycles; thus, the organization shifted to agile working. To prepare for the journey, the CEO engaged with peers in companies that had made similar changes. The top team visited agile companies in the Asia−Pacific region and Europe. The chief human resources officer (CHRO), chief technology officer (CTO), and CEO each worked with an executive from outside their own organization to guide and inspire them and also received monthly coaching. The top team mapped the impact of the changes, knowing they would also need to be reshaped. This preparation phase took several months; when the organization decided to shift, its leaders knew intimately what they were signing up for.
Another large telco company made the preparation phase even more intense for its top team. First, they undertook a tour (both virtual and physical) across a dozen agile companies worldwide. Then, convinced of the potential, they devoted three days to figure out what agility meant for their 7,000 employees, making note of what they referred to as the “scary stuff”:
This preparation stage should be as practical as possible. Visits to other companies, talks with peers, and case examples shared by experts help explain what agile working means at the enterprise level. Equally important are immersive simulations and leadership exercises that allow a top team to experience what enterprise agility asks from them as individuals leading in the new operating model.
By intentional, we mean that the transformation should be bold, deliberate, and executed as a coordinated, concerted, and consistent effort. It does not mean ivory-tower command-and-control style. The top team needs to be clear on where the value is and mobilize the entire organization to pursue it in a planned way.
Consider an oil and gas major undergoing a yearlong experiment with agility in its upstream organization. The journey started bottom-up, with hundreds of cross-functional teams across the business coming together to crack issues. The business value this unlocked and the positive employee feedback from the teams whet the company’s appetite, but scaling up would not be successful by simply doing more of the same: rather, the next stage needed to be intentional. After thorough preparations, the top team did three things. First, they delved into value creation, identifying the core end-to-end value chains in the organization, and determining the opportunities for simplification, agility, centralization, and digitization. They would form new teams around these value-creation opportunities, not based on functional boundaries or where people were most eager to try new things. Second, they articulated what it would take to be successful in the new environment: productivity and cost-effectiveness, flexibility to shift resources quickly to evolving priorities, and attracting different kinds of talent—and made sure all actions supported these goals. Third, they made a plan for scale-up: a front-runner in production operations, the part of the organization that required most integration and most immediately impacted value while, in parallel, kicking off the transformation at scale in all other value chains, engaging over 7,000 people across their global portfolio.
Some larger organizations drive top-down change through senior leaders. For example, Roche, a biotechnology company with 94,000 employees in more than 100 countries, launched its change efforts through a personal change program for its senior leaders. More than 1,000 leaders took a four-day immersive program that introduced them to the mindsets and capabilities needed to lead an agile organization. The intent of the program was to help leaders recognize the ways in which their individual mindsets, thoughts, and feelings manifested in the organizations they led and how to drive agility within their domain. Today, agility has been embraced and widely deployed within Roche in many forms and across many of its organizations, engaging tens of thousands of people in applying agile mindsets and ways of working.
The intentional approaches taken by these organizations and in other highly successful agile transformations contrast with those seen in many less successful transformations. In purely bottom-up transformations, there is a proliferation of good pilots and experiments, which typically run into systemic barriers (for example, culture, funding mechanisms, incentives, structures, or something else) that prevent scaling beyond the embryonic stage. As a result, benefits will fail to materialize, leaving cynics to dismiss the whole concept as a fad.
As more agile teams are launched, the structures and support around them also need to be rewired—and it needs to be done comprehensively. The operating model is a system, and if we change just one element without addressing the others, we will cripple it. Organizations must therefore pay constant attention to the strategy, structure, processes, people, and technology dimensions of the operating model. Those organizations that change only one part (for example, introduce new technology or launch culture initiatives) often encounter friction between the old ways and the new.
In 2019, Denmark’s 140-year-old incumbent teleoperator, TDC, decided to change course. It separated the network part of the business from the commercial operations and launched the strategy of transforming the latter into a digital service provider able to stand on its own feet. This 4,400-employee unit already had hundreds of people working successfully in agile teams for the digital part of the business, and scaling agility beyond teams to the entire business would best help it thrive in the new competitive arena. The company launched the “Good Rebellion”—a determinedly “go all in” change effort that resulted in clear improvements in customer results, employee engagement, and effectiveness.
In addition to defining new focus areas, such as TV and entertainment, changes in the organization’s strategy went deeper: it defined a new purpose, overhauled the entire identity, and rebranded itself as Nuuday. It changed its structure: a hierarchy gave way to flatter structure of three layers consisting of a top team, 30 unit leaders, and over 200 cross-functional teams. Reporting took place through chapters; chapters focused on consistent and scalable capabilities; and the best talent was deployed to business opportunities instead of internal coordination roles. To ensure alignment among teams, Nuuday introduced a quarterly prioritization and resourcing process, as well as a biweekly rhythm for teams to follow. To help teams continuously improve their performance and maturity, 40 agile coaches were hired (largely internally) and trained.
Nuuday made the people elements—culture, talent, leadership, and career models—a priority. It started by involving hundreds of people across the business to define the behaviors expected from everyone (for example, challenge the status quo). A new career model rewarding craftsmanship and contribution instead of hierarchical roles were also introduced, and dozens of training and communication events for the different roles and teams ensured a smooth transition. The technology setup was overhauled to allow distributed parallel development across hundreds of teams.