September 30, 2016 Focus area: Scaling Agile

The enablers of business agility

Everybody is talking about agile, but mostly about Scrum and Kanban methods. For an organization to be truly agile, there are more factors to take into account. Organizations tend to measure their level of agility by the amount of agile teams or the velocity of the teams. In this blog I highlight the factors that significantly enable the business agility of organizations. These enablers are part of a model used to measure the agility level of organizations. This model is the result of my research conducted in 2015 on business agility. This model will be shared in a later blog, so keep posted.

What is business agility?

Organizations face business environments where changes occur rapidly and unexpectedly. Organizations need to respond quickly to these changes to gain or keep a competitive advantage. As a result, many organizations start to invest in their own business agility. Business agility can be defined as: “a set of processes that allows an organization to sense changes in the internal and external environment, respond efficiently and effectively in a timely and cost-effective manner, and learn from the experience to improve the competencies of the organization” (Seo and La Paz, 2008, p.136). Literature shows that business agility consists of different types of agility: customer agility, partner agility and operational agility. These types differ based on their focus. Both customer and partner agility are externally focused. Operational agility, on the other hand, is internally focused. Examples of internal events that require operational agility are new strategies, the restructuring of internal IT systems and support or mergers and acquisitions.

What are the enablers of business agility?

The factors or influencers of business agility have often been analyzed. Most research focusses on only a few variables. This research combines earlier research into one model and shows that business agility is not caused by one or a few factors. The agility of a business depends on many variables, which makes it difficult to determine the causal relations between the independent variables and business agility. A critical review of the literature shows several important factors that enable business agility.

Enablers of business agility

Human capabilities

Business agility is not just determined by the processes, networks, and policies of an organization. The skills and knowledge of employees are just as important. Employees need to be able to deal with changes and need to be flexible enough to adjust to unexpected changes. This is also referred to as workforce agility (Breu et al., 2002). Variables used to measure workforce agility are knowledge, skill variety and redeployability of the workforce, but also the speed of acquiring new skills (Goldman, 1995).

IT capabilities

IT can positively or negatively affect business agility. To determine the effect, we have to look at the technical and the human side of IT. The technical IT Infrastructure consists of both the hardware and software where IT tools are built on. Recent research acknowledges the effect of Technical IT Infrastructure on an organization’s agility (Oosterhout, 2010; Chen et al., 2014). Byrd et al (2004), indicate five components that positively influence the effect of Technical IT Infrastructure: connectivity; compatibility; modularity; reusability; and data transparency. The human side of IT is as important as the technical side, it refers to human interaction with the technical components of IT infrastructure (Broadbent et al, 1999). The reason for many IT projects to fail, is that the human side of IT is neglected (Oosterhout, 2010). Indicators for Human IT Infrastructure are the knowledge, skills, experience and policies of IT personnel.

Network Characteristics

Organizations no longer operate isolated, they collaborate with suppliers, customers and other parties in a network of organizations. An organization cannot respond to unexpected changes if their suppliers are unable to adapt. For example, if you require an urgent change in a system, but your supplier does not have the knowledge to adjust to this.  So an important factor to become agile is a network of agile partners (Power et al. 2001). If you want to make a change, your suppliers must be able to adjust as quickly as you.

Organizational Governance and Culture

Being an agile organization is not only created with agile processes and systems, but also requires an agile mentality and culture. Leadership in an organization greatly influences an employee’s ability to accept changes. and promote agility. The most important means by which managers can influence business agility is by using rewards, empowerment and performance measures. The organizational culture of a company is based on its history, strategy and vision (Crocitto & Youssef, 2003). Culture is fairly intangible but can be measured in terms of: leadership by coaching; fostering a culture of knowledge sharing and learning; and interaction among employees (Goldman et al., 1995).

Organizational Architecture

Organizations need to be able to swiftly change their business processes, this requires a well-structured Organizational Architecture. The Organizational Architecture consists of business processes and the structures of the operating system. Research by Van Oosterhout (2010) argues that the standardization and simplification level of processes and components; the modularity of an organization; and the customization of products and services, positively affect the business agility of an organization.

In conclusion, an organization cannot be truly agile when these 5 enablers are not taken into account. These enablers of business agility consist of several constructs. If you got interested after reading this, do not hesitate to contact me and I am happy to share these underlying constructs. 

References

Breu, K., Hemingway, C. J., Strathern, M., & Bridger, D. (2002). Workforce agility: The new employee strategy for the knowledge economy. Journal of Information Technology, 17(1), 21-31. doi:10.1080/02683960110132070

Broadbent, M., Weill, P., & Neo, B. S. (1999). Strategic context and patterns of IT infrastructure capability. The Journal of Strategic Information Systems, 8(2), 157-187. doi:http://dx.doi.org/10.1016/S0963-8687(99)00022-0

Byrd, T. A., Lewis, B. R., & Turner, D. E. (2004). The impact of IT personnel skills on IS infrastructure and competitive IS. Information Resources Management Journal, 17(2), 38-68. doi:http://search.proquest.com/docview/215884123?accountid=13598

Chen, Y., Wang, Y., Nevo, S., Jin, J., Wang, L., & Chow, W. S. (2014). IT capability and organizational performance: The roles of business process agility and environmental factors. European Journal of Information Systems, 23(3), 326-342.

Crocitto, M., & Youssef, M. (2003). The human side of organizational agility. Industr Mngmnt & Data Systems, 103(6), 388-397. doi:10.1108/02635570310479963

Goldman, S. L., Nagel, R. N., Preiss, K., & Dent, H. S. (1995). Agile competitors and virtual organizations Van Nostrand Reinhold New York.

van Oosterhout, M. P. A. (2010). Business agility and information technology in service organizations Erasmus Research Institute of Management (ERIM).

Power, D. J., Sohal, A. S., & Shams‐Ur Rahman. (2001). Critical success factors in agile supply chain management ‐ an empirical study. Int Jnl Phys Dist & Log Manage, 31(4), 247-265. doi:10.1108/09600030110394923

Seo, D. & La Paz, A.I. (2008) Exploring the dark side of IS in achieving organizational agility. Communications of the ACM, 51(11), 136-139. Doi:  10.1145/1400214.1400242