What Is the Agile Business Model?

With all the talk about business agility we’ve been hearing lately, it’s hardly a surprise that people are asking about the Agile business model. But the reality is that there is no specific “Agile business model” out there.

So what is there to learn about?

Actually, there are many useful insights that come from thinking about how business agility impacts business models. From how you can get the most out of your organizational structure to completely changing how you plan, agility should be embedded in every element of a great business model.

But unlocking that value begins with understanding how most business models function now.

Understanding The Old Paradigms

While it may be easily dismissed as a 19th-century relic at this point, much of the way many organizations function today is built on the old idea of the “organization as a machine.”

This way of thinking about organizations is all about hierarchy (often looking like a pyramid with the C-suite at the top, above several layers of bureaucracy, and with most people making up the base), siloes, and rigid structures and procedures. Decision-making largely begins at the top before being gradually filtered down.

Unsurprisingly, while this structure is highly stable and predictable, it’s also not very adaptable or responsive to change. It can be difficult for senior leaders to understand the realities on the ground and individual teams won’t have flexibility to respond to challenges as they arise.

While organizations today are pouring enormous resources into solving the ‘adaptability paradox’, in which difficult conditions like supply chain disruptions force us to adapt while also creating fear which, in turn, leads us to revert to old ways of doing things. But as strong as this paradox is, thriving in today’s world absolutely requires solving it. That’s why organizations need to address old paradigms by applying Agile principles to their business models.

How Agile Challenges These Paradigms

Agile thinking is built around thinking of organizations as organisms instead of machines. The differences evident in that metaphor are themselves important. Most machines are very good at doing one thing, but if a single part breaks, the entire machine often breaks down. Organisms, on the other hand, are much better at adapting, repairing, and finding ways to continue even when things break.

This carries through to how organizations built on each model function. Agile organizations aren’t just able to respond to change, they do so intrinsically because their entire structure is built around doing just that. By eschewing hierarchies in favor of flatter structures (in most cases at least, more on that later), building in feedback loops, and ensuring teams are accountable, the entire organization is able to grow and learn.

Machines vs Organisms

But what does an organization operating as an organism look like in practice? It comes down to following these principles:

  • Focus on getting things done above following rigid structures
  • Teams should be built around end-to-end accountability
  • Leaders should give guidance on direction while leaving teams to decide how to execute
  • The entire organization should build feedback loops into how it operates

Of course, this isn’t an exhaustive list, but it gives you an idea of what drives Agile organizations. The question then is how you can apply these principles to your business model.

Applying Agile to Your Business Model

Because there isn’t a one-size-fits-all Agile business model, the best way to understand how to apply it is by looking at specific examples.

Flattening Structures

As mentioned above, most Agile organizations work to eliminate multiple layers of middle management to ensure more efficient feedback loops between senior leaders and teams. This results in teams which can respond quickly to leadership directives and who can just as quickly provide real-world feedback to those leaders.

The idea is that the feedback loop between them should ultimately translate into leaders providing the “what” while teams provide the “how”. This avoids teams being asked by out-of-touch leaders to do things which don’t make sense to them, resulting in a harmful lack of trust.

You can also read more about how Agile org charts impact how an organization functions to better understand the impact structures have.

Enhancing Hierarchies

With all the advantages of flat structures, that doesn’t mean an organization has to completely overhaul its internal structure to be Agile. There are excellent ways to use Agile methods to make a more hierarchical organization more responsive.

The main goal is to use tools and culture to facilitate the kind of dynamics mentioned above in a more hierarchical organization. In our experience, one of the best ways to do that is through Portfolio Kanban. This system creates connections between Kanban cards at every level of the organization. This effectively automates the kind of connections between leaders, middle managers, and team members that flatter organizations aim to achieve.

By providing better visibility, ensuring information moves up to leadership and down to teams in an effective way, Portfolio Kanban is a relatively easy way to “flatten” an organization without the need for an expensive reorganization.

Improving How Functions Interact

Besides worrying about how information moves up and down an organization, an Agile business model should also ensure it easily moves laterally between teams and functions. One key way to address this is by eliminating silos and allowing for the free flow of information as much as possible.

But beyond simply allowing information to move, ensuring more of your functions embrace agility helps a tremendous amount. This is because Agile teams simply prefer working with other Agile teams. Instead of focusing on how to create a better flow of information between non-Agile teams (a difficult feat in most circumstances), transitioning teams to Agile ways of working tends to naturally lead to more information sharing in addition to all the other benefits Agile offers.

Overhauling How You Plan

Perhaps the single biggest misconception about Agile is that it doesn’t involve planning, that it’s reactive instead of proactive. However, this isn’t the case at all. Agile business models should avoid large-scale prescriptive planning which dictates in detail what should be done for months in advance.

Instead, planning should generate goals and directions before allowing teams to find the best way to achieve them. This is much the same way goal setting works between leaders and teams as discussed above.

However, you should also be willing to modify plans when circumstances change. Teams shouldn’t find themselves doing things which don’t make sense anymore simply because someone decided it was necessary 6 months ago. They should be empowered to adapt as they go and find the best way to deliver value.

So What Does an Agile Business Model Look Like?

In short, it should combine the general principles we’ve just laid out. Whether flat or not, it should encourage feedback loops between leaders and teams. It should get rid of silos to encourage information to flow between teams and functions. It should plan around goals while leaving execution up to teams in the moment.

Fortunately, these things can be incorporated into any number of business models. So the Agile Business Model, like Agile itself, isn’t a single prescriptive thing. It’s primarily a mindset.

If you’re interested in exploring the Agile business mindset further, we recommend starting with an introduction to business agility course. It will give you the fundamentals to understand the Agile mindset and how it can be applied to functions throughout an organization to ultimately unlock all the value Agile has to offer.

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