Three Ways to Make Your Organization Agile

Rethinking traditional ways of working

Published: Tuesday, May 22, 2018 - 12:02

Your competition is no longer what it used to be. In this age of information at our fingertips, same-day delivery, and seamless payment options, customers now expect more from business than ever before. Companies must adapt to thrive.

Agile, the flexible way of working, has spread from software development to organizational change—for small startups and even large, traditional organizations. The Agile software methodology is iterative and collaborative; it ensures that small, autonomous groups work together to align with customer needs.

This methodology is the underpinning for the transformation of large banks, such as ING and Sberbank with the expertise of change architect Bart Schlatmann. During a recent visit to INSEAD, Schlatmann, the former COO of ING and chief transformation officer at Sberbank, discussed the shift to the collaborative environment of Agile from the old organizational model of command-and-control. For organizational transformation, Agile describes the way firms are created around flexible, customer-focused, and often self-managed teams, empowering employees to make decisions.

In 2014, reflecting on challenges facing the bank, ING executives understood that change was necessary, and that putting the customer journey at the center of the business would lead to growth. For them, the Agile methodology, which had been employed in its IT department since 2010, was the answer. Executives visited Spotify, the Swedish music streaming startup, for a look into its Agile organization.

Established industries tend to focus on their direct competition rather than companies in other industries that excel at capturing the interest of customers. For example, if customers expect a quick turnaround on an online order, they also expect a quick decision or result from a bank. By delivering packages the same day, Amazon changes clients’ expectations. According to Schlatmann, your direct competitor is no longer the benchmark for customer satisfaction: Amazon is. “The behavior of clients is actually set by digital innovators,” he says.

In our case study “Embracing Digital: ING’s Journey to a New Way of Working,” my co-authors Yves Doz, Lucia Del Carpio, Nancy Brandwein and I investigated the organizational transformation of the bank with Schlatmann’s guidance. We looked at how ING’s success in completely integrating with another entity in 2007 spurred the bank to rethink traditional ways of working, which in turn led to the Agile transformation.

Breaking eggs to make an omelet

At ING, the Agile change affected most divisions simultaneously. Teams had to become smaller and less hierarchical. Everyone had to reapply for a place in the new organization. Because 30 percent of senior managers didn’t fit in the new culture, they left.

Managers no longer assigned team or individual objectives. They were set at the small group or “squad” level to meet the needs of customers. ING employees were thereafter more likely to meet directly with customers as their needs informed the squad’s priorities.

Schlatmann believes that adapting an organization to Agile delivery requires a complete change in mindset. One example of this is how IT is positioned in the organization. IT support typically sits outside of the “business” or client-facing functions. In the Agile environment, IT and customer-facing professionals are on the same squad, typically in a group of no more than nine members.

Del Carpio and I ran five surveys tracking objectives and analyzing the squads’ success over almost two years. We found that engagement and team efficiency increased significantly as the transformation went on. Schlatmann said employees were able to tell us “the story without any politics” in the surveys.

Each squad at the bank needed a technical person who could examine the customer problem with her teammates and work toward a digital solution. For example, a developer working with a loan team could create an app designed for a select group of customers.

Getting IT into every squad required acquiring tech talent. Although banks generally have a huge amount of data for engineers to mine, they were seen as staid and boring places to work. According to Schlatmann, ING’s move to Agile turned the bank into the No. 1 preferred employer of software engineers in the Dutch market. It didn’t need to advertise or put together a marketing campaign about working at ING. Positive word-of-mouth attracted the new tech talent because ING engineers were excited and “telling the story of what they were accomplishing on a day-to-day basis,” he said.

Advice from the trenches

Schlatmann has now overseen Agile transformations at two major banks, ING and Sberbank. He recommends starting an Agile change in one division and moving outward. In the banking industry, one could start with a mortgage area or a business lending area. “It’s a very important product for the banks,”says Schlatmann. “But on the other hand, it is also pretty independent.”

First, he says executives should ask themselves whether their competitors are driving customer behavior, or whether clients’ expectations are being fuelled by companies in another industry. If companies in another industry are driving change, look there for answers and adapt accordingly.

Second, Schlatmann emphasizes “measure and measure and measure. Because objective measurements will provide you with the real data.” Surveys of how employees are performing throughout the transition can, in conjunction with objectives, give real measures of progress.

Third, turn from a command-and-control management style to a goal-oriented, time-delimited, and customer-focused one. Agile as an organizational methodology works not only for small tech companies but also for large established firms. Schlatmann recommends starting small, showing good results, and extending the methodology to the whole company.

About The Author

Maria Guadalupe

Maria Guadalupe is an associate professor in the Economics and Political Science department at INSEAD, the academic director of the INSEAD Randomized Control Trials (RCT) Lab, and a member of the European Competitiveness Initiative at the school.