Why companies need organizational digital agility (ODA)

John Hill, chief digital information officer for MSC Industrial Supply, received his Doctor of Business Administration degree in May. His dissertation research examined the question: After years of investment in project management, change management, and more recently, agile principles, why do most companies still have a stunningly high failure rate for digital initiatives? 

Hill’s conclusion was that companies need to do a better job with organizational digital agility (ODA), which is a business’s ability to create digital capabilities quickly and efficiently.

“My hypothesis was that in many companies, there are organizational behaviors that impede project and change management practices,” says Hill. “You cannot deliver anything with terrible project and change management, but excellence in those areas alone is not sufficient for developing digital capabilities.”

What is organizational digital agility?

ODA, says Hill, is made up of three components: slack, alignment, and speed.  

ODA defines “slack” as resources that you can move from one project to another without losing any value. “When you have everyone fully engaged in an operations project, but you have to pull them off that project for something more urgent, you pose risk to the first initiative,” Hill says.

With slack, CIOs do not allocate all their resources to operational issues. They allocate some to innovation, education, or continuous improvement, which they can pause to move those resources to something more urgent. “The key to slack is that moving resources off of innovation to a high-priority project poses little operational risk,” says Hill. “Those resources can then return to the innovation activity without losing productivity.”

The second component of ODA is alignment. Hill points out in his research that most companies have a governance process through which executives align on the top list of projects for the year. But if you ask the management team which project is No. 5, 6, or 7, they will likely not know. “When conflict of resources occurs among those top projects, no one knows how to resolve it, because the prioritization is not granular enough,” Hill says. “Without clear alignment, you lose efficiency when those resources move from project to project. You increase the likelihood that the squeaky wheel gets the resources.”

The last component of ODA is speed, which is becoming critically important at a time when the rate of technology change in the market is so high. 

For his research, Hill conducted a study of 132 CIOs from companies ranging from $300 million to over $10 billion in annual revenues, and he was able to demonstrate a correlation between a firm’s ODA and its creation of digital capabilities. His research further demonstrated the connection between a firm’s digital capabilities and its ability to compete in the marketplace. “The impact of ODA is pretty stunning,” he says.

Advice for CIOs looking to improve ODA

For slack, Hill suggests setting aside sprints for innovation, education, and reducing technical debt. “This way, if you need those resources to fight a fire, you are not posing a risk to the organization,” he says.

For alignment, Hill has three recommendations:

1. List more than just your top priorities, and be sure to create an ordinal ranking. At MSC, the executive team has taken that first step.
2. Develop processes to understand the true capacity in the organization. Hill likes the enterprise Kanban board, so you “see who is available and who is tapped out,” he says.
3. Create end-to-end teams and reduce the number of resources that move from project to project. “Call them squads or product teams or scrums, but you want all the resources necessary to build a new digital capability on one team,” says Hill. “An end-to-end team could be made up of business analysts, BI analysts, data engineers, developers, and QA, with a few traveling shared resources.”

Hill acknowledges that speed is the trickiest component of ODA because it can be very difficult to find the root cause of why you are not moving faster. Here, Hill suggests shifting your emphasis from old-school steering committees to a product management model and the “end-to-end teams” concept.

“At the heart of improving speed is empowering the product owners to make decisions about the backlog and execute,” he says. “Having to wait for steering committee meetings can really slow things down.”

To increase speed at MSC, Hill is working on the concept of portfolio allocation. With an ordinal ranking of investment priorities, he aims to allocate spend to the product owners in each business unit or functional area. Those product owners then prioritize that spend within their product team. “The teams are closest to understanding what new capabilities are needed in each platform,” says Hill. “They don’t need to slow down the work by asking for direction.”

How ODA impacts the CIO role

During his first five months at MSC, which distributes metalworking and other industrial products, Hill has been reducing the time it takes to review team activity. “When I spend time with the team, I just want to know about any blockers, issues, and risks and how they are being delt with,” he says. “The team should not spend time building project status presentations. I want them to be fast and use Jira, not PowerPoint. Our meetings should last 15 minutes.”

Finally, Hill suggests acknowledging that ODA does not come from changing a few processes. It is an entirely new way of working for the IT team.

“IT leaders are used to functionally and operationally managing the people that work for them,” Hill says. “Now, the person taking a squad leadership role must work across the entire organization to bring together business analysists, data scientists, developers, and operations people to ensure we are not duplicating work. At the same time, some associates who functionally report to them may be taking work instruction from another squad leader. Changing the behaviors of IT leaders is a big challenge.”

But an even greater challenge than changing behaviors in IT is getting executives to embrace the prioritization process. “When C-level executives try to squeeze in a new priority, rather than recognizing that other work needs to stop, they usually compress everything else. When you have too much work in progress, you reduce efficiency,” he says.

To Hill, ODA is a perfect example of how the CIO role is evolving away from technology expert and toward an orchestrator role. “CIOs are not the people who need to be technology experts” says Hill. “Today’s CIOs are the designers of organizations who can keep 25 balls in the air at the same time, and know how all those balls fit into the digital vision years from now.”

Change Management