An Agile Approach, the Core of Corporate DT for Working Culture Innovation

The essential factors for BM innovation are various: Digital transformation, shared infrastructure, globalization, and seeking social values. However, at the backbone, they share the culture of innovation. The three methods for having a culture of innovation, which are design thinking, lean UX, and Agile, have been proven by growing ICT companies. Design thinking means problem-solving and a mindset based on customer-driven thinking. Lean startup is for minimizing risks and developing a product for users, and Agile focuses on moving quickly to develop services and conduct tests using the customers and the market to achieve gradual improvement. Among these things, an organizational system for promoting the Agile methodology has come into the limelight as a way to run an organization for business innovation. In other words, Agile organization means an organizational system with Agile business practices, and often is applied to development work for programming. This organizational system has been mainly applied to start-ups that require fast work momentum and Internet companies where technological innovation is an important success factor for business. More recently, however, agile organizational systems have permeated smokestack industries, such as finance, manufacturing, and energy, as well as large companies.

Organizational structure for corporate innovation, Agile

Agile draws attention as a methodology to run business among various business model innovation tools because the performances of companies run with the Agile structure have been high. ICT companies, including Google, Apple, Microsoft, and Spotify, and Korean companies, including, Kakao, Toss, and Baemin develop services and software using the Agile method. It is no wonder ICT companies use the Agile methodology because it proves its worth in software development. However, the expectation for Agile as a good tool for rapidly changing the industry and the ever-changing business model innovation required by companies has led to the growing attention of both traditional and smokestack industries. The Agile approach is applied from Netherlands ING Bank to SPA brands, including Zara, H&M, etc., and all industries, including manufacturing, telecommunications, construction, etc. In Korea, financial companies, including the Industrial Bank of Korea, and the Shinhan Investment Corp. have been alerted at the great performances of Toss, Kakao Bank, and others in the Fintech area and applied Agile, one of their tools for success. Other Korean conglomerates have introduced the method for rapid business innovation.

The biggest strength of Agile organization is to minimize risks and increase the potential for success during promotions. Any company can experience black swan events in their business, strategize in multiple steps, and inspect through sophisticated simulations to minimize the impact. However, one or two unexpected matters pop up, and whenever the businesses face them, they inspect them again and form a new strategy. During the process, the innovation decelerates and loses its meaning. Agile operations minimize such risks and enable rapid business innovation. In particular, companies with good performances in the digital industry have shown positive results in the past 20 years with the Agile methodology and operation, thus capturing the attention of traditional companies.

“People” lie in the heart of the Agile methodology, which is gaining attention from companies as a method for business innovation. All business changes are made by people. In a company, people unite into organizations, and people's performance varies greatly depending on the organizational structure. An organizational system that can quickly catch market changes and competitors' movements and respond quickly allows people to gather their wisdom and execute it agilely in an era of rapidly changing technology. Field-oriented and customer-oriented thinking is required to foster an agile business system and decision. Data-driven decision-making supports this, and agile organizations are attracting attention as the organizational system that makes this possible.

The Agile organization does not categorize departments depending on work responsibilities. Rather, it is a gathering of a single team that can handle self-fulfilling work based on tasks. Even employees in charge of planning, development, marketing, and operation, or developers for the same job, are gathered in a place they would be more focused on doing their work faster if they can process certain tasks in their team. Importantly, a team composed like this needs decision-making standards to perform tasks quickly. The standards are based on the data collected from customers in the field. It is necessary to make hard-headed judgments based on data. Team members make decisions based on customer data rather than team leaders’ or executives’ tastes or experience.

The existing business operating system is a method of establishing a strategy by conducting market research, obtaining approval from the supervisor for reports, and allocating budget and manpower to promote work. This decision-making structure takes a long time, and is possible to ruin the business with the wrong decision. Agile organizations already have a complete understanding of the market and customers within the team, so there is no reason to conduct market research and to report because they can make their own decisions. The budget and manpower are already authorized to be handled within the relevant team, so the communication that occurs during the approval process is skipped. However, in the business process, decisions are frequently made based on market and customer data on the service strategy, product planning, and marketing as a whole.

This structure is hard for the existing companies with work-based hierarchies to apply. You can try it for some projects, but it is difficult to apply it to enterprise organizations, and even if you do that, it is not easy to get results quickly and work well. Because the structure alone cannot make the members of it work autonomously. This is because people who have been immersed in the corporate culture of the past are unable to set responsibilities and authority on their initiative in the new organizational system, make customer-oriented decisions that meet the market's eye level, and perform business processes due to their past habits.

Creating the agile work culture

Therefore, do not expect a successful short-term performance with the sudden application of the Agile structure for all work areas. It should be applied only to new innovative projects or tasks that can perform a single task based on a clear goal in the short term, and a new change management method must be found in the experience of overcoming problems. Thus, it should be small enough to tolerate failures in this process. If you take on the risk of failure by doing this on a project that is too big, you may not even want to try similar challenges in the future, so you should apply them to tasks within the scope of allowing failures and experience success and failure.

Furthermore, these organizations must operate flexibly so that they can be dismantled and merged freely at any time. A single team composed of agile organizations should be able to be easily dismantled and put into another task based on work performance or after the task is completed. In other words, it must be able to gather and disperse freely like an amoeba. If such a structure is settled, employees will not have a silo mentality and will focus on the work itself, enabling a work-oriented culture.

In addition, the strengths of the agile organizational system can be properly demonstrated only when the output of the project is checked frequently, verified from a customer- and market-oriented perspective, and improvement measures are derived. Instead of launching the final version completed after a long period of development to the market, the way to maximize an agile organization's performance is to divide the process into small tasks so that each product can be tested and verified, and to improve quickly by checking the response of these results. The quickness of being agile is not just about making it fast, but it also creates optimal efficiency in improvement by collecting and analyzing data on market responses in between.

IT companies and startups that create fast innovations build their organizations this way and do their business focusing on their customers. The well-known Korean companies are Toss, Baemin, and Kakao Bank, and the foreign companies are Google, Spotify, Netflix, Alibaba, and Xiaomi. In addition, among large corporations, this organizational system is being introduced, and companies using the system include Orange Life, Allianz Life Insurance, Hyundai Card, Chinese home appliance maker Haier, and Japanese electronic device maker Kyocera.

Manufacturers and conglomerates should introduce an adapted version of the Agile structure for their companies to use properly. In the process, it is necessary to analyze the data collected in the field and draw implications to use as the basis for decision-making.

The key is to create customer-driven culture

Agile organizations enable quick and agile work processes through field-driven decision-making. What should we then do to enact field-driven decision-making? Eliminate unnecessary layers and minimize reporting and meetings. In a nutshell, grant the rights to the working members as much as possible to allow them to promote their projects with their judgment.

It is too obvious, but why do we find it difficult to realize?
Because we are afraid of failure with little faith in them. So, the president, managing director, vice president, and manager try to review and check all matters. This makes the working-level members spend more time reporting and getting approval and less time on the actual work. In addition, they had to rely on superiors’ determination and decisions instead of customers and market responses. Therefore, the voices from the field may not be properly heard and increase risks, if anything.

So, creating a field-driven decision-making structure needs a horizontal work culture and a sufficient delegation of rights. Avoid an authoritative atmosphere and create an environment anyone can express their thoughts and opinions in to hear the voices of the field. More than just giving the right to make decisions to the working members, creating an environment where anyone can argue their opinions well and share their thoughts, then the genuine Agile structure will be established.. That's why you should remove addressing systems and minimize approvals and reporting from superiors. So, many Agile organizations use the name without titles or use English nicknames to refer to each other.

Another important factor in building an Agile organizational system is constructing a self-fulfilling organization. If you want to let a single team make their decisions and do their business, it is recommended to run a team with diverse members with various responsibilities, including strategy making, planning, development, design, operation, marketing, and sales. In short, create a structure where your team members are all in the same boat. Working with dispatch laborers who return to their original organization after a short time or external outsourcing employees wouldn’t allow you to create fellowship among the team. Organize one united team. Then, the team members think, empathize, and do the work at the same level.br>
In particular, the biggest characteristic of an Agile organization is in that it sets and reviews goals and repeatedly modifies and corrects the outcomes according to market responses. To do so, all members should connect to the same data, share their thoughts, and quickly recognize and respond to all situations. To that end, they should be in the same team, discussing and mutually controlling without information gaps, and take responsibility for their expertise.

In addition, the evaluation method alone is different from that of traditional organizations. Agile organizations choose multi-dimensional and absolute evaluations rather than one-sided, relative evaluations through managers. The evaluation cycle is short or long depending on the projects rather than yearly. The team members gather or disassemble for a project, so the team is dissolved when a project is finished or a goal is achieved. So, the Agile organization has a flexible structure. It is like a flexible amoeba, changing its morphology to adapt to changes in its surroundings, repeatedly dividing and coalescing.

Creating agile leadership and running system

The Agile methodology is a bottom-up method to repeatedly make field-driven decisions to bring gradual improvements and seek a horizontal self-fulfilling organization. However, field-driven decision-making means the company will be customer value-driven. It means team members working in the field do not make one-sided decisions but rather make judgements based on customer value.

In fact, if the horizontal work culture and field-driven decision-making are misinterpreted, then, as the old saying goes, "too many cooks spoil the broth," and the decision-making process may get delayed or be in confusion. You may also make wrong decisions, too focused on the field and end up forgetting the company-wide vision and goals. That's why decision-making needs a milestone. That milestone is customer-driven judgment.

Business initiatives require a major benchmark for quick decision-making and flexible responses to strategies. The benchmark is the customer response and customer value-driven decisions. To make such a benchmark, customer's perspectives and opinions should be collected and analyzed. You should know the customer response to judge or make decisions based on customer value. For that reason, another thing you should consider when running an Agile organization is seeking out and checking customer response. You should retain a way to read customer’s minds and translate them into data to make decisions based on the data.

How should we apply the Agile methodology to our organizations? In fact, Agile is not a one-size-fits-all, good-for-all-conditions method for all companies and businesses. Depending on how it is applied, it can be an orange, mandarin, or hardy orange.

Organizational structures differ for each industry, company, business’s developmental stage, and business type. Also, no organizational structure stays the same once established. We have to change and correct the structure to suit the situation and nature of work and the work culture. The great system becomes useless when the organization changes, but its members do not change, or the work culture fails to support the new system.

In consideration of that, the Agile structure cannot be applied in the same type of form to all organizations.

When conglomerates and traditional companies adopt the Agile structure, it may be categorized into four types.

First. Break the boundaries between organizations and create a large team or talent pool to form a structure that facilitates collaboration.
Second. Reorganize the addressing system and innovation processes, such as the evaluation and reward system for works away from the existing practices and stereotypes.
Third. Change the leader's behaviors from one-way to two-way communication leadership.
Fourth. Improve the working environment with increased autonomy for working hours and workspace.

Many companies have partially or fully introduced the Agile structure while making efforts to modify it to suit their unique characteristics.

Of course, there occur small issues and difficulties during this process.

∙ Which division should adopt the Agile method?
∙ Leaders are too familiar with the previous top-down approach. Will it be possible to change that?
∙ How to apply KPIs and evaluations to business performance.
The current structure is to achieve certain revenues and sales goals. If we change the structure to a new one, then doesn't the existing business get harmed?
∙ Business strategies and management have their own roles. If we grant all rights to the working members in the field, how can we overcome potential business risks in the future?
∙ How should leaders make decisions on various issues, from conflicts between customer values and KPIs?
∙ Is it okay to leave enterprise-wide business planning and performance reviews wholly for working members in the field? Then, what is the role of the management?
∙ Is it desirable to apply the Agile structure to all tasks?
∙ Do current leaders have the right leadership for the new way of operation? Is that something that can be taught?
∙ What can we learn from underperforming businesses and projects with the Agile structure? Just continuing to do it will bring good results?
∙ What should the management give up to change into an Agile organization?

All of these are concerns during the promotion. None of these questions do not have a definitive answer and vary depending on the company, leaders, businesses, and circumstances.

The thing is, all information and knowledge generated during work in the Agile structure should be open to any team members and used as a prime pump for operating the next organization structure. Transparent information disclosure can bring more knowledge and lessons. Also what’s important is that the decision-making process should be transparent on the foundation of customer values, figures, and data. So we need to consider how to measure and collect customer value, use it in decision-making, and share the information on customer values. When a project is terminated or a team is dissolved, minimize hasty opinions, doubts, speculations, and rumors from spreading through transparent information disclosure of such processes and principles. The more such a culture is formed, the better the Agile structure fits for our company.

There are things to keep in mind when applying an Agile model: You shouldn't hurry. Turning to an Agile organization alone wouldn’t give you the expected results right away or end the potential need for organizational change for good. The actual performance of an Agile organization is what the management, employees, and partner organizations should make together. The agile structure may be a practical help for performance or not depending on various variables, including the work culture, the leader’s personality, the nature of the business, and the external competitive environment.

Therefore, the newly introduced Agile structure should be constantly reviewed and corrected for improvements. In addition, follow-up measures on other systems and cultures and evaluations for well-functioning organizations are important. We need to create our own structure that is suited for our companies that has the strengths of the Agile structure by frequently reviewing, correcting, and improving problems found in running an Agile organization.

Recommendations for agile policies

The purpose of an Agile structure is to remove inefficiencies for an organization's agility and make decisions based on customer value. To do so, we should focus on finding and boldly removing the inefficiencies in work. We should focus on disruptors to achieve agility, including disruptors like a particular leader's stubbornness, existing stereotypes, time-consuming reporting, unproductive meetings, etc.

In fact, the organization becomes healthy when finding and removing the causes of inefficiencies in work without changing the organization's entire structure by grandiosely trying to implement the Agile organizational system. Do not focus too much on managing higher-level structural changes of the Agile structure. Finding the inefficient in work and ways to remove it alone is simple enough to apply to your organization or team for BM innovation.

To this end, I suggest three measures to practice. These measures are basic ones in Agile organizations and could be used for your team before creating an Agile organization to change your organization.

First, spend the least time in the armchair theorizing. Try to find only a few what-ifs and variables and advance and elaborate on the business strategy. Simply try the structure and make corrections while doing your business.

Second, try to draw a roadmap with manageable goals and long-term plans. Rather, achieve small goals to realize the next goals, like how a snowball becomes a snowman.

Third, introduce amoeba-like organization so that the team members can gather from the talent pool and work together at any time depending on the task, rather than a part-time team focused on work.

If you apply these three practice instructions in team operation and simply try the method and run your organization, the work culture will become healthy amid the trials and errors, and the strengths of the Agile structure can be applied to your organization.

To really implement the Agile structure and the methodology, getting professional consulting is one way to minimize trials and errors. To build an Agile system for your needs, it is effective to use a professional consulting firm to diagnose your organization and find the Agile process and organizational operation system for the nature of your business. Samsung SDS' Agile approach consulting provides customized solutions for the Agile mindset and processes, the main driver of the digital transformation process, based on more than 10 years of know-how. When you get this kind of consulting service, you can minimize the difficulties and problems during the introduction of the Agile structure.

[Figure 1] Samsung SDS Agile approach (Source: Samsung SDS)

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