Agility and digitalization seem to be the pillars of the future of successful companies. Or is it just a current bubble that will burst and everything is going on as usual? Honestly, these concepts do not really deal with new insights. The term agility has been around since the 16th century and what is associated with digitalization begins in 1980 at the latest, with the introduction of the first audio CD. So why are these terms so common in current management discussions?
It is not long ago that there were times where change was hard. We did not have email or social media — let alone video chat — to speed up communication. Our idea of checking out what’s “trending” required making a visit, in person, to the nearest retail store. We used snail mail. We met for lunch and worked in traditional office spaces. We managed from the top-down. And because of that, change did not happen overnight.
In today’s market, change is not only happening quickly, but also forcing businesses themselves to change quickly. It is a constant flow of innovation, disruption — and sometimes chaos — that is moving us ahead, even faster than we ever imagined. Many say agility is the key to surviving in the age of technological hairpin turns. In fact, 68% of companies identify agility as one of their most important initiatives. But what does agility really mean? And how can it help you survive in the current landscape?
The 4th module of the MIPLM program is about organization. Structure is key to implement strategies. Companies look for the structure-strategy-fit, which means, that their organization fits with their respective strategic objectives. Within the digital transformation it is a challenge for traditional companies to find appropriate organizational structures and processes for new business models. In addition, digitalization also demands different innovation and IP management.
Traditionally there are three different forms of organization distinguished: Structural, process and project organization. Structural organization describes the hierarchical and functional structure of a company. It is a static system to assign competencies and responsibilities to organizational entities like departments. Process structure represents the way how tasks are fulfilled within the necessary working steps. Structure and process organization represent a thinking style in constant and repeating activities and business transactions. Project management differs basically from this kind of thinking. A project has certain characteristic features: It is unique, it has clear objectives, it is timely limited, it is financially limited, it has dedicated and specific staff, it is separated from other ventures within the organization, it has its own organization and typically it is something new and to a certain extend something innovative.
Companies use project management to work on extraordinary tasks and challenges like innovation and business development. Project teams are a kind of third layer upon structural and process organization. Project organization is a special case of organization because it only exits for a limited time for the time the project exists. Members of the project teams are responsible to the project and at the same time they are anchored within the primary and secondary organization.
The classical or traditional way of project management is according to the waterfall concept. Waterfall project management is a sequential, linear process. It consists of several discrete phases. No phase begins until the prior phase is complete, and each phase’s completion is terminal. Waterfall management does per definition not allow to return to a previous phase. Along with the waterfall concept some issues are observed which are growing with the complexity of the project.
- One area which almost always falls short is the effectiveness of requirements. Gathering and documenting requirements in a way that is meaningful to a customer is often the most difficult part of development. Customers are sometimes intimidated by details, and specific details, provided early in the project, are required with this approach. In addition, customers are not always able to visualize an application from a requirements document.
- Another typical drawback of pure waterfall development is the possibility that the customer will be dissatisfied with their delivered product. As all deliverables are based upon documented requirements, a customer may not see what will be delivered until it is almost finished. By that time, changes can be difficult (and costly) to implement.
In contradiction, agile project management is a specific type of rapid product development. Agile is an iterative, team-based approach to development. This approach emphasizes the rapid delivery of a product in reasonable functional components. Rather than creating tasks and schedules, all time is “time-boxed” into phases called “sprints.” Each sprint has a defined duration (usually in weeks) with a running list of deliverables, planned at the start of the sprint. Deliverables are prioritized by business value as determined by the customer. If all planned work for the sprint cannot be completed, work is reprioritized and the information is used for future sprint planning.
As work is completed, it can be reviewed and evaluated by the project team and customer through daily builds and end-of-sprint demos. Agile relies on a very high level of customer involvement throughout the project, but especially during these reviews. Some advantages of the Agile approach are easy to see:
- The customer has frequent and early opportunities to see the work being delivered, and to make decisions and changes throughout the development project.
- The customer gains a strong sense of ownership by working extensively and directly with the project team throughout the project.
- If time to market for a specific application is a greater concern than releasing a full feature set at initial launch, Agile can more quickly produce a basic version of working software which can be built upon in successive iterations.
- Development is often more user-focused, likely a result of more and frequent direction from the customer.
Here is a short introduction to agile project management:
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In addition, the 4th MIPLM module gives an introduction into organizational economics which is the economic analysis and design of organizations. Organizational economics is primarily concerned with the obstacles in the coordination of activities inside and between organizational entities like firms, alliances, institutions and markets as a whole. Organizational economics can be divided into three lines of argumentations:
- Transaction cost theory: costs incurred to organize an activity, especially regarding research of information, bureaucracy, communication etc.
- Agency theory: dilemmas connected to making decisions on behalf of, or that impact, another person or entity.
- Contract theory: ways economic actors use to construct contractual arrangements, generally in the presence of asymmetric information.
Complementary, the 4th MIPLM module discusses also institutional economics. This perspective attempts to extend economics by focusing on social and legal norms and rules, which are called institutions. The concepts of institutional economics are used to analyze organizational arrangements like property rights, transaction costs, enforcement mechanisms, monitoring costs and bargaining strength. With these powerful tools in hand, students can analyze the fit between strategic objectives and organizational implementation of a strategy.