AWS Cloud Enterprise Strategy Blog
The Seven S’s of Organizational Agility
We talk a lot about organizational agility. But what exactly does the term mean? By now, Agile software development and agile IT capability delivery have taken on a fairly precise meaning, even if it’s sometimes misunderstood. But one goal of IT agility is to support organizational agility, which is certainly a broader concept and more difficult to pin down. In this post, Dr. Saša Baškarada, a senior cloud transformation consultant at AWS, proposes a framework for organizational agility based on five organizational capabilities and two organizational characteristics.
By Dr. Saša Baškarada, Senior Cloud Transformation Consultant, Amazon Web Services (AWS) Professional Services
Now, here, you see, it takes all the running you can do, to keep in the same place. If you want to get somewhere else, you must run at least twice as fast as that!
Given the continuously evolving user needs and the ever-increasing pace of technological change, agility has become an essential prerequisite for organizational survival. A recent McKinsey study has found that organizational agility has the potential to significantly improve operational and financial performance, customer satisfaction, and employee engagement.
Although there are many definitions of organizational agility, most of them boil down to rapid, continuous, and systematic evolutionary adaptation and entrepreneurial innovation directed at gaining and maintaining competitive advantage. Conversely, organizations that adapt or innovate slowly, periodically, or in an ad hoc manner are not considered agile. Ad hoc approaches are problematic since they are generally not repeatable over time or in different contexts. On the other hand, a systematic approach to opportunistic adaptation and innovation will allow you to explicitly identify, assess, and mature relevant organizational capabilities so that you can be consistently agile.
While any number of factors may cause an organization to become unresponsive, all agile organizations share a common set of building blocks. The figure below, The Seven S’s of Organizational Agility, shows five capabilities and two characteristics that all agile organizations have in common. In this blog post, I’ll discuss how they can help you gain and maintain competitive advantage.
Before you can start adapting to changes in the external environment, you first need to be able to detect relevant threats and opportunities. This may include new technological and scientific developments, or unexpected changes in customer, competitor, or supplier behavior that may threaten existing business models or enable potential future ones. Effective sensing is underpinned by the ability to identify and acquire relevant information from the external environment; to analyze, interpret, and integrate it with your existing knowledge; and to understand it and infer the likely consequences of acting on it. Although all employees may contribute to sensing through an ongoing process of horizon scanning, staff with specialized expertise may be more effective at identifying relevant weak signals from the external environment. A range of cloud technologies may enable sensing, including Amazon Connect and Amazon Pinpoint for sensing changes in customer behavior, AWS IoT Core for sensing environmental changes from connected devices, and Amazon Kinesis for collecting, processing, and analyzing streaming data.
Searching leverages information gained through Sensing to shape activities aimed at internal knowledge generation through exploitation (incremental innovation) and exploration (discontinuous innovation). As such, both Sensing and Searching enable organizational learning, which is a key component of agility. Where Sensing allows you to learn from the external environment, Searching enables you to generate original ideas and intellectual property. Searching may also include forecasting and strategic foresight, the purpose of which is to challenge deep-seated assumptions and expand existing mental models by speculating about potential or probable futures. Searching generally requires staff with specialized skills, who are at the forefront of technological and scientific knowledge in their fields. A key prerequisite is psychological safety, which gives individuals (and teams) autonomy and the freedom to experiment. The cloud is a critical technological enabler, allowing organizations to experiment with advanced technologies—including machine learning, quantum computing, blockchain, and augmented and virtual reality—significantly faster than has traditionally been possible in on-premises environments.
Once you have acquired new information through Sensing, and generated original ideas through Searching, you then need to decide how this newly acquired knowledge will affect your current strategy and operations. For instance, you may choose to enter/exit markets, or develop/retire products and services. As such, Seizing, which is your ability to make unbiased decisions about your organization’s strategy, business model, and capability, is at the heart of any agile transformation. Seizing provides guidance on the scope of activities discovered by Searching. For instance, Seizing can identify strategic focus areas. Being focused on exploiting opportunities and minimizing threats, Seizing is primarily the responsibility of senior executives who may employ a range of strategic management approaches, including corporate portfolio management, value chain analysis, and balanced scorecards. Their decision-making under uncertainty should minimize cognitive biases and facilitate organizational ambidexterity by ensuring appropriate balance between exploitation and exploration. Seizing also takes input from Shifting and Scaling through ongoing monitoring of relevant transformational and operational activities, while providing continuous oversight and governance. Although primarily a human endeavor, Seizing may be enabled by a range of analytics cloud technologies.
Shifting is the ability to effectively implement new strategy, a new business model, and new capabilities. As such, it is ultimately about moving an organization from a current state to a planned future state. This may relate to productivity enhancements through technology adoption, planned provision of new products and services, adjustments to the current operating model, and vertical or horizontal integration. Being focused on creating and reconfiguring capabilities, Shifting is the responsibility of executive and middle management who may employ a range of change management and organizational transformation tools and techniques. It is important to note that Shifting does not operate in isolation, but through interplay between Seizing and Scaling. While Seizing provides oversight and direction, Scaling provides a baseline and data on current operations. Thus, Shifting also contains a component of experimentation; it delivers incremental changes, which are tested through Scaling and adjusted via Seizing. Shifting is enabled by a flexible workforce, processes (e.g., DevOps), and technologies, including infrastructure as code (e.g., AWS CloudFormation).
In addition to being able to transform your strategy, business model, and capabilities, you also need to be able to scale your operations quickly and effectively when required. As such, Scaling differs from other capabilities discussed in this post since it is largely about your ability to quickly accelerate and decelerate, whereas other capabilities are largely about your ability to quickly change direction. For instance, you may choose to pilot test any new products or services, and if they turn out to be successful, you will need to scale your production and operations quickly so that you can meet the demand and delight your potential customers. Alternatively, you may be forced to scale up or down due to unexpected changes in the external environment. The current pandemic has provided us with plenty of examples of successful responses to rapidly changing demand conditions. The cloud, with its virtually unlimited capacity and ability to scale on demand, is a key enabler through various serverless and autoscaling technologies.
Being able to transform a greater part of your organization will make you more agile. This is again where cloud technology is a key enabler. For instance, let us compare an organization that has migrated most of its on-premises workloads to the cloud with another organization that operates a large on-premises IT estate in a hybrid-cloud setup. It is highly likely that the organization with a higher proportion of cloud-based workloads will be able to more quickly transform a larger proportion of its IT estate, which would make it more agile. Another example is Bimodal IT, which advocates maintaining two operating models in parallel: Mode 1, a model that is optimized for ensuring reliability and efficiency of legacy workloads, and Mode 2, a model that is optimized for experimentation and flexibility. It follows that a greater proportion of Mode 1 reliance on the first model is likely to make you less agile.
Similar to scope, speed is another important characteristic of agility. All other things being equal, being able to transform in less time will make you more agile. However, it is important to note that speed is a critical characteristic of all organizational capabilities discussed in this article. This means that you have to be able to quickly and efficiently Sense, Search, Seize, Shift, and Scale. While ideal timeframes depend on many factors, including organization size and the external context, it is likely that in most situations Sensing, Seizing, and Scaling may be undertaken more quickly than Searching and Shifting. This is because Searching involves innovation and experimentation, while Shifting involves transformation of organizational capabilities, both of which are time-consuming activities.
In a world of ever-accelerating change, organizational agility is becoming ever-more important. To be truly agile, organizations need to address all five capabilities and both characteristics discussed in this post. They are all important building blocks of the agility puzzle, and neglecting any one may result in an unbalanced outcome. For instance, addressing Sensing while neglecting Searching may allow you to quickly copy competitors’ products and services, which may be suitable if you adopt a market follower strategy, but will not necessarily help you gain or maintain competitive advantage (which requires innovation). Similarly, focusing on Shifting over Scaling may enable you to quickly develop new product or services at the expense of your ability to adjust your operations based on fluctuating market demand. While the building blocks discussed in this article depend on a range of underpinning factors, including organizational structure and governance mechanisms, processes, leadership, and culture, the cloud is nevertheless a clear technological enabler.