This state occurs when the enterprise shows the ability and adaptability needed to sense the market and quickly change strategy when necessary.
CHARACTERISTICS OF STRATEGY AGILITY
Market sensing represents the culture and practice of understanding changing market dynamics based on: market research, analysis of quantitative and qualitative data, direct and indirect customer feedback, direct observation of the customers in the marketplace.
Ignoring Sunk Costs
Sunk costs are expenses incurred during the course of business operation. As a result, they cannot be recovered or changed and are independent of any future costs a business may sustain. Because strategic decision-making affects only the future course of business, sunk costs are absolutely irrelevant.
Innovating Like a Lean Startup
After sensing opportunities, the Lean enterprise visualizes and manages the flow of new initiatives and investment via a ‘build-measure-learn’ Lean startup cycle. These initiatives are often new digital solutions, but they may also be new business processes and capabilities that use existing solutions. Testing the outcome hypothesis via a Minimum Viable Product before committing to a more significant investment reduces risk while generating useful feedback.
Reorganizing Around Value
Organizing around value guides enterprises to align their development efforts around the full, end-to-end flow of value. This principle introduces a dual operating system, one that leverages the benefits of hierarchy but also provides a network directly organized around value. That network assembles the people who need to work together, increases quality, and minimizes delays and handoffs.
Implementing Changes in Strategy
Finding and defining a new strategy is only the first step. Certainly, significant changes to strategy affect the enterprise’s products and services. Most require new Epics to assure the work is performed. These changes make their way through the various visible backlogs and systems used to manage the work of creating and supporting these systems.
Traditionally contracts are based on parameters that are assumed to be stable over time, reason being that it’s hard to negotiate expectations for requirements, deliverables, and service levels if those things are unknown. That’s logical. But when it comes to strategy agility, therein lies a trap, because as strategy changes these contracts can become enormous encumbrances that lock the enterprise business model into the assumptions of a prior strategy. In order to achieve true business agility, a more flexible approach to all these types of contracts is required.
It takes a long time to evaluate the results of a strategy. Unfortunately, traditional financial and accounting metrics have not evolved to address the need to support investments in innovation. Innovation Accounting uses leading indicators — actionable metrics focused on measuring specific early outcomes using objective data, which is available before it’s too late. This becomes an essential part of the economic framework that drives Business Agility.
Measure and Grow
In order to provide further insights, each competency needs to be individually assessed. The assessment can be used to provide additional specificity as to prowess in that competency and implications as to how to improve.
Lean Budgets provide effective financial governance over investments, with far less overhead and friction, and supports a much higher throughput of development work.