In the world of business, the only constant is change. Outcomes cannot always be pre-determined, especially when businesses are continuously evolving in response to market trends, consumer behavior, and technological advancements. Companies are questioning the effectiveness of traditional approaches: if they build it, will customers come? And will employees engage with the systems and processes effectively? Is there any need for agile transformation?
Facing such uncertainties, a growing number of businesses are pivoting from the conventional “plan, build, operate” model to a more agile method. This strategy fosters quick decision-making, enhances transparency, and maximizes benefits like adaptability, iterative learning, and team collaboration. Agile has come a long way from its roots in software development, now being embraced as a business transformation tool across various industries. This blog examines how CFOs can better enable and sponsor agile transformation to resolve uncertainties and deliver tangible results quickly.
From software development to business transformation:
Initially, Agile gained popularity amongst software developers struggling with prolonged development cycles and ever-changing user requirements. They experimented with new ways to navigate uncertainty and boost responsiveness to sudden changes. The result was an arsenal of now-familiar agile approaches and tools, such as small cross-functional teams, short “sprints”, and iterative product improvements.
These principles now form the bedrock of Agile in business transformation. Agile replaces rigid policies and isolated silos with networks of autonomous teams that can execute quickly and flexibly. It’s not just about making decisions faster, but better. It allows management to swiftly allocate resources to critical business challenges for improved overall outcomes.
However, implementing Agile calls for a comprehensive reinvention of the business, often piece-by-piece. It requires finance departments to develop new models for distributing funds to transformation efforts—a change CFOs will need to sponsor.
Critical components of agile transformation:
Prioritizing outcomes and embracing continuous learning: the cornerstones of an agile journey
The initial and most pivotal responsibility of a sponsor embarking on an agile journey is to clearly outline the anticipated outcomes. Let’s say you’re a software firm transitioning from selling standalone software to subscriptions; your ambitious objective could be to generate 80% of revenues from subscriptions in the next three years. Or perhaps you’re a fashion brand traditionally sold through physical retail stores; your aim might be to attain over half of your revenues from e-commerce within three years. Clearly defining your transformation goals lays a solid groundwork for shaping tasks that propel you toward overarching outcomes.
These efforts can also yield near-term outcomes, which are delivered on a sprint-by-sprint basis. By gradually accruing value from the onset, teams can mitigate risk and ensure parts of the end deliverable are usable even before the entire project is completed. This approach illustrates the essence of an agile journey: a commitment to continual improvement and learning, allowing for the ongoing refinement of outcomes in a fast-paced, evolving environment.
Adopting dynamic allocation of fixed budgets for agile transformation
There’s a prevalent misconception suggesting a clash between agile methodologies and traditional annual budgets and planning. This misapprehension stems from the expectation that agile approaches, due to their flexibility and adaptability, cannot fit into a fixed budget structure. However, this assumption is not necessarily accurate.
Traditional methodologies rely on detailed roadmaps for precise budget forecasting, often leading to changes in scope that inadvertently stretch schedules and escalate the risk of soaring costs. The beauty of agile approaches lies in the acceptance that change is inevitable, but this doesn’t necessarily mean budgets cannot be somewhat fixed.
So, how does one reconcile agile methodologies with fixed budgets? By deploying steady teams dedicated to achieving specific outcomes within predetermined time frames. In this scenario, the budget remains constant unless there are hikes in technology costs or a significant increase in team requirements. With a fixed team and budget, leaders can adapt intermediate outcomes based on insights, choosing the optimal path toward overarching goals. This fusion of adaptability and fixed resources helps to effectively manage costs.
Suppose the work extends beyond the expected timeframe. In that case, it falls upon the teams to redistribute resources or negotiate trade-offs to achieve the best outcomes without budget overruns.
But setting a budget isn’t enough. It’s crucial for CFOs to ensure the finance function’s support aligns with an outcomes-oriented approach in backing agile initiatives. Any financial controller assigned to these teams should prioritize the role of budgets in facilitating intermediate outcomes leading to overall goals, as well as enabling teams to perform their tasks effectively. The controller’s focus should not be strictly centered on output, productivity, or cost, but rather on ensuring the budget fosters agility and the achievement of strategic outcomes.
Empowering high-performing teams for successful transformation
The cornerstone of any significant transformation initiative is to harness the right talent and empower it to navigate the change while maintaining stable cash flows. As financial stewards, CFOs play a pivotal role in making sure this happens.
The ability to assemble the right teams, equipped with the right talent, is a vital part of this equation. Top-notch talent is often sought-after within an organization, so it’s essential to ensure that these highly valued individuals can contribute effectively to critical agile teams. This often involves liberating them from certain pre-existing responsibilities so they can dedicate themselves fully to the transformation initiative.
To put it succinctly, the key to transformation is not just about having good teams, but about enabling them to perform at their best. CFOs, as sponsors, must be active participants in creating a conducive environment that allows high-performing teams to thrive and steer the organization towards its transformation goals.
Foster psychological safety, autonomy, and transparency:
Agile teams should be able to voice their concerns and problems openly without fear. Transparency is crucial, and team members should feel safe to make mistakes as they serve as learning opportunities.
CFOs role in agile transformation:
As key enablers of Agile transformation, CFOs should ask several critical questions:
What are the desired outcomes of an Agile approach?
Initiating discussions with stakeholders must begin with consensus on the essential outcomes. These top-tier outcomes should then be decomposed into more specific sub-goals, forming a mutual understanding among all stakeholders. To ensure these goals are actionable, they must be quantifiable. To monitor the progression of these outcomes, CFOs alongside their principal stakeholders can create a collective scorecard, populated with leading indicators to track progress effectively.
What are initiatives that need to be Agile?
Agile transformation doesn’t have to be an all-or-nothing proposition. It’s important to partner with stakeholders to pinpoint the areas with the highest degree of uncertainty, where the implementation of agile methodologies can most effectively mitigate risks and enable key outcomes. This approach ensures that you’re not adopting agile for the sake of it, but rather strategically implementing it where it can provide the most value in your transformation journey. Thus, choosing where to apply agile is as crucial as the methodology itself.
As key enablers of Agile transformation, CFOs should ask several critical questions:
What are the desired outcomes of an Agile approach?
Initiating discussions with stakeholders must begin with consensus on the essential outcomes. These top-tier outcomes should then be decomposed into more specific sub-goals, forming a mutual understanding among all stakeholders. To ensure these goals are actionable, they must be quantifiable. To monitor the progression of these outcomes, CFOs alongside their principal stakeholders can create a collective scorecard, populated with leading indicators to track progress effectively.
What are initiatives that need to be Agile?
Agile transformation doesn’t have to be an all-or-nothing proposition. It’s important to partner with stakeholders to pinpoint the areas with the highest degree of uncertainty, where the implementation of agile methodologies can most effectively mitigate risks and enable key outcomes.
This approach ensures that you’re not adopting agile for the sake of it, but rather strategically implementing it where it can provide the most value in your transformation journey. Thus, choosing where to apply agile is as crucial as the methodology itself.
Do we know the key teams?
Parallel to the importance of employees with certain skills for successful transformation, it’s equally essential for CFOs and stakeholders to collaboratively discern which teams are crucial, along with their optimal composition, to achieve the targeted results.
Do the teams focus on the highest value and difficult problems?
Direct your top-tier agile teams to tackle the most challenging issues and highest-value opportunities. Doing so allows you to rapidly determine whether these problems are manageable and resolvable. Moreover, insights gleaned from these initiatives can pave the way for enhancing routes to the envisioned outcomes.
Is the information transparent?
On a routine basis, either monthly or quarterly, it’s essential to assess the vital agile projects your organization has undertaken. Focus on the outcomes (not the mere outputs) that have been achieved and identify the lessons learned that can enhance the likelihood of future success. This evaluative process should also include a self-reflective component: ask yourself, ‘In what ways can I further contribute to the success of these teams?
Committing to Agile Transformation
Adopting Agile promises faster outcomes and better control over budgets, but it’s not an easy switch. Scaling Agile calls for alignment across all functional groups around a shared mindset. Silos need to be dismantled, collaboration practices shared, perspectives challenged, and stakeholder commitments obtained.
To lead an Agile transformation, CFOs can break up the task into smaller chunks, call upon their talented leaders, and demonstrate success with key projects to establish credibility. More than a methodology, Agile is a commitment to adaptability. In today’s competitive marketplace, those who adapt faster will thrive. Agile methods can help CFOs make their companies more responsive to their environments and deliver the outcomes they require.
