The business case for an agile transformation

Why are organisations increasingly turning to agile? For some, it’s to become more innovative and respond to disruption. For others, it might be to cut out waste and streamline processes, or to attract top talent by fostering a more modern way of working. Most however are turning to agile for a competitive edge.

At its core, agile is about getting the right people working closer together, orientating around the customer and getting to value sooner, informed by continual feedback loops. Applying this concept at scale across an entire organisation however can be complex.

Businesses are increasingly undertaking ‘agile transformations’, going all in with agile across technology, business and support functions. This involves more than simply introducing new ways of working, and often incorporates new structures, processes and cultures — it’s a big shift for the workforce that can’t be underestimated.

In some cases, organisations are fortunate enough to have visionary leaders who will trail-blaze through internal politics and make the change regardless of cost or complexity, but for many others it’s more complicated. Leaders will want to know what the payback is for the investment, how it can be measured and when they will see results. And all too often, ‘cost out’ becomes the primary driver — after all, it’s easier to measure than intangible benefits such as the ability to respond more quickly to disruption.

Therefore, as management teams and boards try to understand the benefits of agile, it’s important to develop a more holistic case beyond just costs, and be more strategic in understanding and identifying the full spectrum of benefits.

Let’s talk about return on investment

Whilst an agile transformation may reduce some level of bureaucracy for teams and reduce levels of hierarchy, a much greater benefit lies in the more efficient use of company resources. More efficient means lower cost, right? Not always.

Consider the following scenario: an organisation manages to simplify their decision-making structures that in turn improve speed of delivery. However, If they want to realise this as a cost saving, many assume this means reducing headcount, and probably from the very team that was trying to deliver value in the first place.

Another way of looking at it, however, is that agile ways of working mean that teams are able to spend more time being productive, and therefore a greater share of the firm’s investment in new products or services is spent on creating value instead of internal bureaucracy and processes.

So how can you build a compelling case for change? And how can the cost of any ‘transformational’ effort be reduced? Let’s look at some pragmatic examples of measuring tangible benefits.

Measuring benefits that improve ROI

Reducing overhead and optimising the flow of work

• Reduce delays by empowering teams and simplifying decision making. Be realistic here: what are the longest and most frequent causes of delay? For example, how long does it take for projects to get approved, funding released, move through approvals and deployments? Look at the cost of the teams during that period. Whilst no one really downs tools in these times, chances are they’re involved in busy work or ploughing ahead at risk.
• Reduce formal meetings and documentation through cross functional teams. What documentation is required to engage other departments in the business? Detailed specifications, logging a work request, kick off meetings. Estimate the effort required to create these, then discuss and review them. How much of this effort could be cut down if it was a cross-functional team where people can just talk to each other?
• Reduce manual processes through software automation. Having the right technological foundations is a key enabler to agility. Where are highly manual processes that could benefit from a degree of automation and how could the savings be reinvested into value-adding activities? Remember to factor in implementation costs and ongoing costs as well such as new roles that are created for maintenance.
• Reduce labour spend by converting contractors to permanent staff, enabled by reducing peaks and troughs in demand. Work out your ideal permanent /contractor ratio if you could work with more fixed capacity teams and prioritise what they work on, rather than having to pay more expensive rates to flex your workforce up and down through peaks and troughs. This also has the intangible benefit of retaining more of the knowledge and IP within your workforce instead of within transient project teams that come and go.

Work on the right things: cost avoidance

• Avoiding failed projects by adapting more quickly. What are some of the high profile project failures in the past? Estimate what proportion could have been avoided if the project had released value incrementally, worked closely with end users throughout and changed course when required.
• Avoid building software that doesn’t get used. Apply human centred design and prioritise at a feature level. Speak to the architects and look at applications that are flagged for decommissioning or retirement. How many of these are investments that were not thought through, haven’t met user requirements and the business is now looking for the next best thing? What was the cost involved to implement the application and then to decommission?

Improve employee experience and reduce regrettable attrition

• Reduce hiring and attrition-related costs with a better working culture and environment. Examine the cost of hiring for some critical roles. How much are you paying recruitment consultants and your internal function for this? When did not having the right skills available mean you had to pay extra for contractors?

Keeping agile transformation costs down

We also need to be mindful of the cost of an agile transformation. With one of the promises of running an agile business being its return on investment, transformation budgets are often in the firing line. Here are a few strategies to leverage existing momentum in other areas and reduce the upfront investment ask.

• Start small to test and learn in a few specific areas. Keep your initial costs low and work out where to target first in the organisation, how to approach it, and the type of skills you need. You might land on an area of the business that is willing to try something new, or one that’s already hurting and needs support. This way you will be able to learn what works and build the foundations to scale more confidently to other parts of the organisation.
• Leverage and connect existing initiatives. Look for ways to align existing programs. Maybe you can piggyback on the latest ‘strategic project’ to introduce design thinking, align IT simplification initiatives to build out automation capability, or infuse some agile thinking into your company’s latest re-organisation. An agile transformation doesn’t have to be an expensive Big Bang, it can be a strategically coordinated set of initiatives that gradually build momentum.
• Leverage your disruptors. They’re out there. The ones who have great ideas but aren’t empowered to make the change. Find them, connect them and guide them to form your network of change agents. It’s amazing what people will do when they’re passionate about something and empowered.
• Use external help wisely. Work out what skills and capacity you need and use external help to plug the gaps and accelerate thinking in specific areas. The worst thing you can do is have the change done to you, so make sure that building your internal capability is a central part of any agreement.

An agile transformation is more than just a fancy new way of working. At the company level, it has the potential to streamline processes, reduce waste and ensure that investments are spent on value adding, not paper pushing and red tape. While the adoption process should be strategic, starting small and leveraging existing areas of innovation and forward-thinking staff, the return on investment can be well worth it. Optimised work flows will decrease overheads, reduce the rate of failed projects and transform the employee experience. Moreover, an agile transformation can ready a company to respond quickly, and resiliently to disruption. In today’s fast-paced world of technological and social change, such an agility should not be underestimated as a differentiator.

For more information on agile transformations, visit PwC Australia’s Agile Advisory practice.