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What Is an Agile Organization Design?

An organization has a design, just like a car. Likewise, software systems have designs, too. Each design has specific optimization goals it intends to achieve. For example, a key optimization goal when Toyota was developing its Prius car model was fuel efficiency and aerodynamics—but not maneuverability at top speed. You could try to win a Formula 1 race with a Prius, but that probably won’t work.

The architecture that Amazon.com uses has as an optimization goal to be able to build many software components rapidly and independently. To make this possible, the company uses a service-oriented architecture.3

Another example is the Formula 1 pitstop team: Their configuration and process enable them to change the tires and refuel a Formula 1 car in less than 2 seconds (Figure 1.1).

Figure 1.1

Figure 1.1 Formula 1 pitstop team.

Many people are needed to achieve that goal. If you look closely at a pitstop in action, you will realize that each person spends most of the time waiting on others. You can observe that one person waits for the wheel nut to be removed so that he can then remove the old tire. Another person waits for the old tire to be removed so that he can then place the new tire; meanwhile, the person who removed the wheel nut is waiting for the new tire to be placed so that he can tighten the wheel nut again. The Formula 1 pitstop team process and the car it services are designed for speed, not for resource efficiency. But what happens if you bring a Formula 1 pitstop team and process to a big truck and ask them to change four tires in less than 2 seconds? You can try, but that probably will not work because the truck’s design is not optimized for doing that; instead, it is optimized to meet other goals.

What Does Your Organization Optimize For?

Organizational designs have optimizing goals, too. An organizational design is a combination of roles, responsibilities, reward systems, coordination and reporting lines, structures, processes, and policies intended to execute the business strategy. A few examples of possible optimizing goals could be the following:

  • Resource efficiency: Efficient use of people and other resources.

  • Ideation: Maximize the number of innovative ideas and creativity.

  • Learning: Gain knowledge about customers and their needs, the market, and new technology.

  • Security: Critical information protection.

  • Speed: Shortest time from idea to delivery.

  • Adaptability: Ability for an organization to change direction fast and at a low cost.

  • Reliability: Delivery with low deviations from the plan.

  • Safety: Protection from danger, risk, or injury.

  • Quality: Conformance to standards, product excellence.

Senior managers are organizational designers. They should pick a few optimization goals they believe are crucial for their organization to pursue so that it can reach its business objectives and communicate those goals to the whole organization. Alignment around optimization goals facilitates decision making and reduces ambiguity. In such a case, many management decisions about organizational design can be verified to see if they are in line with the chosen optimization goals.

Optimization Goals and Indirect Wishes

An organization should be aware of the difference between its optimization goals and its indirect wishes or business goals. Here are a few examples of the latter: reduce operational costs, increase revenue, or increase market share. Indirect desires are not influenced by the system of work directly, but rather are the intended outcome of working in such a system. For example, organizations often optimize for agility because they assume it will help them achieve their business objectives; agility itself is not the business objective, but rather the means to reach it. When an organization wants to optimize for agility, it needs a proper organizational design for that. But what does it mean to optimize for agility?

Optimizing Goals of an Agile Organization

According to Mike Beedle, agility is the capability of an organization to adapt to new conditions and to change its direction while creating maximum value and customer experience. We love this definition. This definition impacts an organization at two different levels. First, it addresses agility at the overall organizational level:

  • Flexibility is the ability and capacity to reposition resources and functions of the organisation in a manner consistent with the evolving strategy of management as they respond, proactively or reactively, to change in the environment.4

Such flexibility is useful for reacting to opportunities by starting, combining, or ending products or services in an organization.

The second level is about the adaptability of products or services themselves and addresses the following question:

  • How can we effectively adapt our product to changing market demands fast to cope with changing user needs?

An Agile organization can do both; however, in this book, we focus on the latter. An Agile organization is able to switch between working on one job to another both quickly and at low cost.

Changing direction is key, but you must also decide in which direction to go. How do you know in which direction to adapt? You need to have a feedback loop. Short feedback loops increase learning, so if you want to be Agile, you need an organizational design that optimizes for the following:

  • Learning about the value stream: Learning quickly about users’ needs, product features, and market trends. Speed of delivery is necessary but not sufficient. After shipment, you still need to gather feedback from the market, reflect on it, and act on it.

  • Learning about the product organization: Having short feedback loops for the processes used, organizational design, technologies, and team capabilities.

  • Adaptability: Being able to use both types of learning to change direction at the level of the product group by switching between jobs quickly and at a low cost while creating maximum value.

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