Click the link to learn more
about the author
Preface
As more and more companies in industries begin to pay attention to agility, business agility (Business Agility) has become a new hot spot. After all, most industries and organizations have nothing to do with software, but they still need to achieve business agility, so this series will mainly talk about two points:
-
The first is: “What is business agility?”
-
The second one is: "How to approach business agility from a business architecture perspective?"
The second part introduces business agility from the most basic part of business architecture - value stream (value) and capability (capability). This part will be explained with a case of Air France KLM Cargo Procurement .
What is business agility
According to the mainstream views in the industry and combined with my own experience, I believe that a more comprehensive definition of business agility is as follows:
“Business agility is an organizational-level approach that helps the business respond quickly to changes within and outside the market. Such organizations apply agile principles extensively, enabling the entire company to respond to changes faster, accelerate time to market, and Reduce unnecessary costs without sacrificing quality.”
Therefore, to measure whether an organization has achieved business agility, there are several key points -
1. Responsiveness To Change and Time To Market
This term is the key to measuring whether an organization is business agile. First of all, responsiveness means that the organization can sense any changes internally or externally and can make necessary adjustments. The adjustments here may occur in all aspects of the organization, not just the business or digital department, but also HR. , finance, supply chain, even suppliers. Secondly, the results of business agility will definitely be reflected in the shortened time to market of products or services. In other words, if the changes within the organization are only to reduce costs, then the organization cannot be said to have achieved business agility.
2. Reduce costs without sacrificing quality
We all know that to enhance responsiveness or shorten time to market, the traditional approach is to increase resource investment. For example, VIP customers can set up dedicated services and add special service channels, so that they can quickly respond to the needs of VIP customers; for example, increasing manpower for R&D and increasing resources for production can improve responsiveness and shorten time to market to a certain extent. But these are not the scope of business agility we are discussing here.
Another way to speed up Time To Market is to reduce a certain amount of quality. This is especially true in the software and Internet industries. The first product on the market usually has bugs in order to compete for time. The reasons behind may be insufficient time for requirement analysis, insufficient development time, insufficient testing time, etc. But by reducing quality and increasing costs (relative to industry average), this is not what we call a business agile organization.
3. Apply agile principles broadly
So how to do it? Here are the so-called basic principles of business agility, which are the 12 principles for applying agile broadly within an organization (see below). I have slightly adjusted the expression of the 12 principles of agile to adapt to business agility scenarios, replacing "software" with "projects" and "products". At the same time, the meaning of "design" and "architecture" here is expanded, not only referring to software architecture design, but also "product design", "project design", "product architecture", "project architecture" and so on.
During the implementation of past projects, we found that these principles can be applied to all types of organizations without any violation.
Of course, achieving business agility is by no means an easy task. McKinsey once conducted a study and found that speed and stability are mostly contradictory. For many organizations, once they increase their speed, their stability will decline and their stability will no longer be good. Only 12% of organizations can achieve both fast, good and stable performance, which are so-called agile organizations.
How to achieve business agility
Therefore, business agility is actually not that easy to do. It is even a process in which various elements of the organization restrict each other. It is a contradiction. So what should we do?
Before answering this question, let me give you a question: Is business a machine or an organism?
I once saw a similar question: "Is an organization a machine or a living body?" These two similar questions trigger similar thinking. There is actually an extended question behind this question, that is, "How is the business generated? Is it strictly manufactured according to the design, or is it grown?" Different answers will determine the agile transformation strategy of your organization. , design (desgin) and roadmap (roadmap), this is the so-called "top-level design".
We look back at the development of many large organizations, such as Apple, from a two-person startup to various businesses around the world. Over the course of several decades, Apple has released at least dozens of series of products, large and small (see figure below).
At the same time, you will find that Apple is adjusting its organization with new products and new businesses to meet its business needs and promote its business development. These adjustments usually occur before new products and new businesses are introduced to the market (the following table shows several major changes at Apple).
Macintosh was released in 1984, Steve Jobs left in 1985, and product and business adjustments were made;
NeXT was acquired in 1997, Steve Jobs returned, a large number of products were suspended, and iMac was developed and released;
In 2000, the product strategy was adjusted, some products were cancelled, and the company focused on the development of iPods and Mac computers. The iPod was launched in 2001 and was a major success;
The iPhone was released in 2007, and the company name was changed from Apple Computers to Apple Inc., a strategic adjustment;
After Steve Jobs passed away in 2011 and was succeeded by Tim Cook, the organization was restructured;
In 2018, it acquired a chip company, and in 2021, it began to use self-developed chips including Mac.
…
Therefore, if an organization wants to develop a certain business, it needs to undergo major or minor restructuring from top to bottom. These adjustments include organizational structure, resources, processes, etc.). Just like any building, it has a basic structure. In order to support a certain business, an organization also needs a certain architectural support, which is business architecture support.
Looking at business from a business architecture perspective
1. What is business architecture
Business architecture is defined as "the blueprint of an enterprise that provides a common understanding of the organization and is used to coordinate strategic goals and tactical needs" - excerpted from "BIZBOK® Guide v11"
Business architecture includes customers/users, products, strategies, metrics, policies, etc., and the basic parts to support all of these are inseparable from 4 aspects (see the figure below) including "Capability, Information Information, Value Stream" ,Organization”. In other words, if you want to carry out agile transformation, you cannot do without them. Today we will focus on two points, capability and value stream.
2. What is ability?
Capability is "a special ability possessed by an enterprise to achieve a specific purpose or result." It defines what a business does, not why a business does something.
The following example shows the capabilities that an enterprise or organization needs to have in order to complete a certain business, and these capabilities can be further divided.
Sample: Transportation Industry Level 1 Capability Map 摘自《BIZBOK® Guide v11》
3.What is value stream?
Value is the basis for all activities of an organization. The value stream connects stakeholders and value items to ultimately form a value proposition.
Excerpted from "BIZBOK® Guide v11"
4. Value Stream, Capability and Business Agility
We have just mentioned that all businesses need architectural support, the basis of which includes value stream (Value Stream) and capability (Capability). ** All true business agility transformations will essentially reshape the value stream and rebuild capabilities around the value stream. **
Business Agility Case Analysis
Let’s first look at a relatively simple business agility case, Air France Cargo’s case of changing the procurement and bidding value stream to achieve local business agility.
——Note: The content of this case comes from the Agile Business Consortium community, and the analysis comes from the author
In 2018, Air France Cargo urgently needed a new business reservation system to support its growing door-to-door business. This system can significantly help improve output and control costs, and it is hoped that the system will be deployed and online within 6 months. The existing team came from multiple suppliers and did not have enough skills to complete the project. The challenge posed by this was the selection and contracting of the best supplier (one that could deliver the system within a very challenging timetable) that had to be completed within 6 weeks. The move could even change procurement rules.
Pictures from Air France Cargo website https://www.afklcargo.com/
1. Traditional procurement process
1) Requirements definition: Clarify the needs and goals of system development. This includes discussion and validation with stakeholders.
2) Market research: Investigate and evaluate the vendors and system solutions available in the market. Understand the products, technologies, services and prices of different vendors and evaluate their capabilities and reliability.
3) Preliminary screening: Conduct preliminary screening of suppliers based on demand and market research results. This can be done by assessing the supplier's technical capabilities, experience, reference customers, financial stability, etc.
4) Issue a request: Issue a request to the initially screened suppliers, requiring them to submit detailed system development plans, implementation plans and quotations. These requests are usually sent in the form of a Request for Proposal (RFP).
5) Evaluate proposals: Evaluate and compare received supplier proposals. Assessments can include technology assessments, solution assessments, implementation plan assessments, price assessments, and assessments of communication and collaboration capabilities with vendors.
6) Screen suppliers: Based on the results of proposal evaluation, select the most suitable supplier. This may involve sessions with the supplier, such as interviews, demonstrations or laboratory testing to gain a more complete understanding of its capabilities and suitability.
7) Contract Negotiation: Conduct contract negotiations with selected suppliers to clarify the responsibilities, delivery time, payment terms, service support and other details of both parties. Ensure contract terms meet expectations and protect interests.
As you can see, this is a long process. All links may require repeated communication and confirmation. The business department is the demand side, but the procurement department is the execution side. It is often difficult to completely align the demands and priorities of the two parties. At the same time, due to the numerous links, the approval alone may take weeks or even months, resulting in a very long procurement process.
2. Air France’s agile solution
Step 1: Establish a cross-functional LAP (Lean Agile Procurement) team, including everyone who has a say in the supplier selection process and those who have to work with the future team on a daily basis => 12 people. This is the first time that business team representatives have participated in the IT supplier procurement process.
Step Two: Align the LAP team on a common goal through a half-day workshop.
Step 3: Introduce the new selection process to four pre-selected suppliers via a one-hour webinar.
Step 4: Conduct a two-day “POCAthlon” selection workshop. All four suppliers took part in the workshop with their core team (the people who will actually work with Air France in the future, rather than pre-sales or sales), produced proposals and decided on prices. They (45 people in total) gathered in a great location at Amsterdam Schiphol Airport (right above the cargo dispatch facility) to work for two days. The aim is to assess business fit by co-creating proposals with each vendor, as well as through hackathon-style team work to assess the tricky features of future systems.
Step 5: Choose the winner. The final decision is announced to all vendors at the end of the workshop.
Step 6: Start the project. One week after supplier selection, the new team is established.
In the case above, we see an unusual procurement value stream and changes in procurement capabilities.
The value stream was transformed from the original 7 steps to 6 steps, and the time was greatly shortened.
The original value items are not canceled, but integrated into new value items. For example, due to the formation of a LAP (Lean Agile Procurement) team (including all decision-makers), the original three links can be integrated into a single link, all occurring within the LAP team.
The steps of "inviting RFP", "evaluating proposals", and "screening suppliers" were all integrated into the POCathlon session, and the time was shortened to 2 days.
Capability changes:
Newly added: The ability to form a cross-department LAP team - it needs to be able to open up the working modes of various departments and bring all decision-makers together to speed up collaboration and decision-making.
Newly added: POCAthlon workshop capability - Not only do suppliers need to come up with proposals within 2 days, but Air France's team must be able to co-create with suppliers and jointly explore solutions to existing problems. Therefore, it can be said that the final proposal is not the output of the supplier alone, but also incorporates the capabilities and wisdom of the Air France team. During POCAthlon, since the suppliers participating are team members who will actually participate in the project in the future, it also gives both parties an opportunity to get in touch in advance. The combination of supplier solution selection and team selection is more comprehensive and scientific than the original solution-only approach.
Enhancement: The ability to work more closely with suppliers based on mutual trust - During the workshop, all four preferred suppliers need to lead real teams to participate, which requires greater costs than traditional methods; at the same time, Air France also needs to bring more internal System information, including strengths and weaknesses, is exposed in advance; these require a more trusting cooperative relationship.
Summarize
Since the businesses of different industries and companies vary greatly, it is difficult to find a standard path to business agility. But the core part of all companies is the same, which is to deliver value to customers. So the value stream, and the capabilities built around it, are a common perspective for every organization. To achieve business agility, you need to own the value stream and the capabilities behind it, and then transform it around the three key elements of business agility mentioned in the first part (see below).
1) Responsiveness To Change and Time To Market;
2) Reduce costs without sacrificing quality;
3) Apply agile principles extensively.
