“How did you go bankrupt?” Bill asked. “Two ways,” Mike said. “Gradually and then suddenly.”
This exchange takes place between characters in Hemmingway’s The Sun Also Rises, sitting outside a cafe in 1920’s Spain. But it could just as easily describe how large established companies like Toys “R” Us, Nokia and Yahoo! were caught flat-footed in today’s Digital Age. In fact, only 54 companies remain today from the original 1955 Fortune 500 list.
As customer needs evolve at a rapid pace and technology pushes the boundaries of the possible, “organizational agility” is increasingly critical. Organizational agility is the ability to sense and respond to the market quickly. And companies without a finger on the pulse of customer needs will see their businesses suffer – first gradually, then suddenly.
With the global pandemic, economic downturn and social justice movement, organizational agility around your purpose is more relevant than ever before. And there are a number of approaches and frameworks – from SAFe to LeSS – that are helping large organizations become smarter, faster and more responsive at scale. But while they’re helpful, they’re not enough. To transform, companies need more than just an upgrade to their org structures and processes (what we call an organization’s “Body.”) They need to reach deep into their DNA. They need purpose.
Truly agile organizations measure success in terms of their purpose – higher level goals that are meaningful both to the company and to its customers. Purpose doesn’t just make an appearance in ad campaigns or lobby walls – it’s infused into employees’ day-to-day work. Purpose enables employees to deliver better experiences, attract talent, and create platforms for growth through new products, services and business models. And as a result, it gives these organizations a competitive advantage in the Digital Age.
Using purpose to drive organizational agility
To drive agility, an organization’s purpose needs to be more than just lip service. It needs to play an active role in the business. Prophet’s research report Becoming Purposeful found that successful, “purposeful” organizations apply their purpose to everyday operations. This helps create faster, smarter, more nimble enterprises in three important ways:
- Purpose can help distributed teams navigate decisions quickly. One of the principal differences of agile methods is a focus on self-organizing, autonomous teams. Spotify, for example, published a two-part overview of how its own “pods and squads” organizational structure works. Unlike traditional command-and-control or hierarchical organization structures, agile teams are empowered to make decisions and take action quickly. This helps them get solutions to market faster by avoiding the game of telephone as information flows up and down the chain of command. Purpose can create a “north star” for decentralized decision-making by clarifying the outcomes and experiences the organization aims to create.
- Agile teams thrive on top talent, and purpose plays a critical role. In a recent study of Millennial attitudes by American Express, 74 percent believed that successful businesses in the future would need a genuine purpose that resonates with people. And 62 percent said that they are motivated by making a positive difference in the world. A clearly articulated purpose helps create a more compelling employee value proposition for potential recruits. And it helps retain existing top performers. A study by Indeed found that top performers were 46 percent more likely to be attracted away by a new company’s mission, and at the same time were 10 percent less likely than others to switch for compensation reasons.
- Purpose creates agile business models. Simon Sinek’s now famous TED talk “Start with Why” explained how purpose-driven brands transcend boundaries and credibly enter new markets. Patagonia’s commitment to sustainability is central to its brand in the outdoor apparel business. But it’s purpose has enabled it to extend into an entirely new product category: packaged food. In 2017, the company launched Patagonia Provisions, to “repair the chain” of how humans grow and consume food. It is now one of Patagonia’s fastest growing businesses, in part because its purpose gave it consumer credibility.
Putting purposeful organizational agility into practice
Aligning on a brand’s purpose is hard enough; it takes even more effort to put it into action. Creating purposeful organizational agility requires sustained attention to significant changes at all levels of the organization.
To start, leaders need to be clear about what the organization and its brand stands for. It needs to be authentic, unique, and differentiating in the market. It needs to resonate with both customers and employees. Top to bottom, inside to out, internal and external messaging needs to be aligned.
But purpose can’t just be communicated; it needs to be wired into the operating model. This means a sustained change management effort that looks at organizational structures, roles, policies, processes, incentives, and governance models. For example, restructuring how product teams develop and bring new solutions to market. And these changes need to be adopted by employees so that they become “business as usual.” Digging into the operating model signals that the company is indeed serious about change.
And finally, purposeful agility requires leadership. One might assume autonomous agile teams require less of senior leaders. In fact, it’s the opposite. While there is less day-to-day interaction from senior leaders, agile teams require greater clarity and strategic framing. Senior leaders are the torchbearers for the company’s purpose and strategic direction. This means that senior leaders need to be more visibly active coaches, “spiritual” leaders, and storytellers – and less of order givers and decision-makers.
Recommit to Purpose
Businesses new and old are experimenting with organizational agility in exciting ways: some out of necessity, some out of opportunity. In our experience, there is no one-size-fits-all approach to organizational agility. It’s a matter of trying different techniques, with different teams in different contexts, until operating with agility becomes the new way of working. But in all cases, leadership must recommit itself to its purpose and make it the lingua franca of the organization. In this way, teams have a clear North Star when they are traversing unchartered territory, and always know the way home.