What is agile methodology?

Quick on your feet: think for a minute of your favorite athlete. Unless this person is a bodybuilder, strength and sheer power are only part of the story. For most sportsmen and women, real success on the playing field comes with a certain hard-to-teach nimbleness—the ability to quickly take in new information and adjust strategy to achieve a specific result. Part of the appeal of sports is the excitement that comes with constant change, and—discounting the vicissitudes of luck—the result comes down to how athletes apply their abilities in response.

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Aaron De Smet and Sherina Ebrahim are senior partners in McKinsey’s New Jersey office; Christopher Handscomb is a partner in the London office, where Shail Thaker is a senior partner. Other experts include Krish Krishnakanthan, a senior partner in the Stamford office; and David Pralong, a senior partner in the Charlotte office.

Change is also a constant in business (and, yes, life). Agile, in business, is a way of working that seeks to go with the flow of inevitable change rather than work against it. The Agile Manifesto, developed in 2001 as a way of optimizing software development, prioritizes individuals over processes, working prototypes over thorough documentation, customer collaboration over closed-door meetings, and swift response to change over following a set plan. In the years since its inception, agile has conferred competitive advantage to the organizations that have applied it, in and out of the IT department.

As our business, social, economic, and political environments become increasingly volatile, the only way to meet the challenges of rapidly changing times is to change with them. Read on to learn more about agile and how to adopt an agile mindset.

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What is an agile organization?

Let’s go back to sports for a minute. Maybe you’re a great free throw shooter in basketball. You make nine out of ten shots when you’re by yourself in your driveway, shooting around for fun. But when you meet friends for a pickup game at a nearby court, your shot is off. People keep jumping in front of you when you’re trying to line up, and maybe the sun is shining in your eyes from an unfavorable angle. You make maybe a couple of shots the whole game. The following week, disappointed by your performance on the court, you decide to make a change. Rather than doubling your practice time shooting in your driveway, you mix up your routine, practicing your shot at a couple of different courts at different times of day. Maybe you also ask a friend to run some defense drills with you so you can get used to shooting under pressure. Maybe you add a layup to your shot practice. This is a shift to an agile approach—and increases the likelihood that you’ll perform better the next time you play pickup.

Traditional organizations are—much like you shooting free throws in your driveway—optimized to operate in static, siloed situations of structural hierarchy. Planning is linear, and execution is controlled. The organization’s skeletal structure is strong but frequently rigid and slow moving.

Agile organizations are different. They’re designed for rapid change. An agile organization is a technology-enabled network of teams with a people-centered culture that operates in rapid-learning and fast-decision cycles. Agility adds speed and adaptability to stability, creating a competitive advantage in uncertain conditions.

What is kanban and what is scrum?

Kanban and scrum are two organizational frameworks that fall under the umbrella of agile.

Kanban originated in the manufacturing plants of postwar Japan. Kanban, which is Japanese for “signboard,” was first developed to prioritize “just in time” delivery—that is, meeting demand rather than creating a surplus of products before they’re needed. With kanban, project managers create lanes of work that are required to deliver a product. A basic kanban board would have vertical lanes for processes—these processes could be “to do,” “doing,” “done,” and “deployed.” A product or assignment would move horizontally through the board.

The idea of scrum was invented by two of the original developers of agile methodology. A team of five to nine people is led by a scrum leader and product owner. The team sets its own commitments and engages in ceremonies like daily stand-up meetings and sprint planning, uniting in a shared goal.

Scrums, kanban, and other agile product management frameworks are not set in stone. They’re designed to be adapted and adjusted to fit the requirements of the project. One critical component of agile is the kaizen philosophy—a pillar of the Toyota production model—which is one of continuous improvement. With agile methodologies, the point is to learn from each iteration and adjust the process based on what’s learned.

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What are the hallmarks of an agile organization?

A team or organization of any size or industry can be agile. But regardless of the details, all agile groups have five things in common.

North Star embodied across the organization

Agile organizations set a shared purpose and vision for the organization that helps people feel personally invested—that’s a North Star. This helps align teams with sometimes wildly varied remits and processes.
Network of empowered teams

Agile organizations typically replace top-down structures with flexible, scalable networks of teams. Agile networks should operate with high standards of alignment, accountability, expertise, transparency, and collaboration. Regardless of the configuration of the network, team members should feel a sense of ownership over their work and see a clear connection between their work and the business’s North Star.
Rapid decision and learning cycles

Agile teams work in short cycles—or sprints—then learn from them by collecting feedback from users to apply to a future sprint. This quick-cycle model accelerates the pace throughout the organization, prioritizing quarterly cycles and dynamic management systems—such as objectives and key results (OKRs)—over annual planning.
Dynamic people model that ignites passion

An agile culture puts people at the center, seeking to create value for a much wider range of stakeholders, including employees, investors, partners, and communities. Making change personally meaningful for employees can build transformational momentum.
Next-generation enabling technology

Radical rethinking of an organizational model requires a fresh look at the technologies that enable processes. These include, for example, real-time communication and work management tools that support continually evolving operating processes.

Agility looks a little different for every organization. But the advantages in stability and dynamism that the above trademarks confer are the same—and are critical to succeeding in today’s rapidly changing competitive environment.

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How should an organization implement an agile transformation?

According to a McKinsey survey on agile transformations, the best way to go about an agile transformation is for an entire organization to transition to agile, rather than just individual departments or teams. This is ambitious but possible: New Zealand–based digital-services and telecommunications company Spark NZ managed to flip the entire organization to an agile operating model in less than a year.

Any enterprise-wide agile transformation needs to be both comprehensive and iterative: comprehensive in the sense that it addresses strategy, structure, people, process, and technology and iterative in its acceptance that things will change along the way.

Transformations vary according to the size, industry, and scope of the business, but there are a common set of elements that can be divided into two components.

The first phase of an agile transformation involves designing and piloting the new agile operating model. This usually starts with building the top team’s understanding and aspirations, creating a blueprint for how agile will add value, and implementing pilots.
The second phase is about improving the process and creating more agile cells throughout the organization. Here, a significant amount of time is required from key leaders, as well as willingness to role model new mindsets. The best way to accomplish this phase is to recognize that not everything can be planned for, and implementation requires continuous measurement and adjustment.

Culture is a critical part of any agile transformation. Agile is a mindset; it’s not something an organization does—it’s something an organization is. Getting this transition right is key to overall success.

Learn more about McKinsey’s People & Organizational Performance Practice.

Agile is a mindset; it’s not something an organization does—it’s something an organization is.

Who should lead an agile transformation?

The single most important trait for the leader of an agile organization is an agile mindset, or inner agility. Simply put, inner agility is a comfortable relationship with change and uncertainty. And research has shown that a leader’s mindset, and how that mindset shapes organizational culture, can make or break a successful agile transformation.

Leaders need three sets of capabilities for agile transformations:

Leaders must evolve new mindsets and behaviors.

For most of us, the natural impulse is to react. Research shows that people spend most of their time in a reactive mindset—reacting to challenges, circumstances, or other people. Because of this natural tendency, traditional organizations were designed to run on the reactive.

Agile organizations, by contrast, run on creative mindsets built on curiosity. A culture of innovation, collaboration, and value creation helps nurture the ability to flexibly respond to unexpected change. Creative mindsets also help members of an organization, at all levels, tap into their core passions and purposes.

Roche, a legacy biotech company, recognized the importance of a mindset shift at the leadership level. When the organization decided to build an agile culture, it invited more than 1,000 leaders to a four-day immersion program designed to enable leaders to shift from a reactive mindset to a creative one. Today, agility has been widely deployed within Roche, engaging tens of thousands of people in applying agile mindsets.
Leaders must help teams work in new and more effective ways.

Agility spells change for both leaders and their teams. Leaders need to give more autonomy and flexibility to their teams and trust them to do the right thing. For their part, teams should embrace a design-thinking mentality and build toward working more efficiently, assuming more responsibility for the outcomes of their projects and being more accountable to customers.
Leaders must cocreate an agile organizational purpose, design, and culture.

A critical organization-level skill for leaders is the ability to distill and communicate a clear, shared, and compelling purpose, or North Star. Next, leaders need to design the strategy and operating model of the organization based on agile principles and practices. Finally, leaders need to shape a new culture across the organization, based on creative mindsets of discovery, partnership, and abundance.

For tips on how to develop agile leaders, see “Leading agile transformation: The new capabilities leaders need to build 21st-century organizations.”

How can we build inner agility?

Inner agility can feel counterintuitive. Our impulse as humans is to simplify and solve problems by applying our expertise. But complex problems require complex solutions, and sometimes those solutions are beyond our expertise. Recognizing that our solutions aren’t working can feel like failure—but it doesn’t have to. To train themselves to address problems in a more agile way, leaders need to learn to think beyond their normal ways of solving problems.

Here are five ways to build inner agility:

Pause to move faster

This can be tough for leaders used to moving quickly. But pausing in the middle of the fray can create space for clearer judgment, original thinking, and purposeful action. This can take many forms: one CEO McKinsey has worked with takes a ten-minute walk outside the office without his cell phone. Others do breathing exercises between meetings. These practices can help leaders interrupt habits to create space for something different.
Embrace your ignorance

Being a know-it-all no longer works. The world is changing so fast that new ideas can come from anywhere. Competitors you’ve never heard of can suddenly reshape your industry. As change accelerates, listening and thinking from a place of not knowing is crucial to encouraging the discovery of original, surprising, breakthrough ideas.
Radically reframe the questions

We too frequently interrogate our ideas, asking ourselves questions we already know the answers to—and worse, questions whose answers confirm what we already believe. Instead, seek to ask truly challenging, open-ended questions. Those types of questions allow your employees and stakeholders to creatively discuss and describe what they’re seeing, and potentially unblock existing mental frameworks.
Set direction, not destination

In the increasing complexity of our era, solutions are rarely straightforward. Instead of setting a path from one point to another, share a purposeful vision with your team. Then join your team in heading toward a general goal, and in exploring and experimenting together to reach common goals.
Test your solutions—and yourself

Ideas may not work out as planned. But quick, cheap failures allow you to see what works and what doesn’t—and avoid major, costly disasters.

In times of stress, we often feel ourselves challenged. Rather than falling back on old habits, inner agility enables us to embrace complexity and use it to grow stronger.

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What is deliberate calm?

Deliberate calm is a mindset that helps leaders keep a cool head during a crisis and steer their ships through a storm. It’s not something that comes naturally: in times of uncertainty, the human brain is wired to react rather than stay calm. The ability to step back and choose actions suited to a given situation is a skill that must be cultivated. In their 2022 book Deliberate Calm, McKinsey veterans Jacqueline Brassey, Aaron De Smet, and Michiel Kruyt describe their personal self-mastery practices to offer lessons in effective leadership through crises.

One important lesson? Not all crises are created equal. Inspired by the thinking of Harvard Business School professor Herman “Dutch” Leonard, De Smet differentiates between routine emergencies and crises of uncertainty. Routine emergencies can be dealt with using past experiences and training. But crises of uncertainty are different. In these moments, where you don’t know how deep the rabbit hole goes, you can’t fall back on what you know. “If you are in an uncertain situation,” says De Smet, “the most important thing you can do is calm down. Take a breath. Take stock. ‘Is the thing I’m about to do the right thing to do?’ And in many cases, the answer is no. If you were in a truly uncertain environment, if you’re in new territory, the thing you would normally do might not be the right thing.”

For more from De Smet and his coauthors, check out their discussion on The McKinsey Podcast, their Author Talks interview, or order Deliberate Calm.

What is an agile transformation office?

Establishing an agile transformation office (ATO) can help improve the odds that an agile transformation will be successful. Embedded within an existing organizational structure, an ATO shapes and manages the transformation, brings the organization along, and—crucially—helps it achieve lasting cultural change.

To set up an ATO for success, an organization has to make three design decisions:

Agree on the ATO’s purpose and mandate

An ATO needs a purpose just as an agile organization needs a North Star. This step links an ATO specifically to the “why” of the transformation. An ATO’s mandate can include driving the transformation strategy, building capabilities, championing change, coaching senior leaders, managing interdependencies, and creating and refining best practices.
Define the ATO’s place within the organization

While an ATO’s reporting lines will depend on the organization, usually the leader of successful ATOs reports to the CEO or one of the CEO’s direct reports. This ensures tight alignment and support from top leadership.
Determine the ATO’s roles and responsibilities

Regardless of an ATO’s size or mandate, the following core capabilities should be managed by a strong transformation leader:

Execution leaders own the transformation road map, assessing and adjusting it on an ongoing basis.

Methodology owners gather lessons from the transformation and refine and evolve agile practices and behaviors.

Agile coaches guide teams through their transformations, helping to instill an agile culture and mindset.

Change management and communications experts maintain lines of communication through periods of change.

As agile principles become the norm across industries, an ATO can help usher in an agile transformation regardless of the design choices an organization makes in setting it up.

Can remote teams practice agile?

Agile teams typically rely on the camaraderie, community, and trust made possible by co-location. The remote work necessitated by the COVID-19 crisis has put this idea—along with many other assumptions about work and office culture—to the test.

While the shift was sudden, talented agile teams working through the crisis proved that productivity can be maintained with the right technology in place. Here are some targeted actions agile leaders can take to recalibrate their processes and sustain an agile culture with remote teams.

Revisit team norms

Tools to ease teams into remote work abound—these include virtual whiteboards, instant chat, and videoconferencing. But they still represent a change from the in-person tools agile teams usually rely on for ceremonies. Team members need to help one another quickly get up to speed on how best to shift to virtual. Teams also need to make extra effort to capture the collective view, a special challenge when working remotely.
Cultivate bonding and morale

In the absence of in-person bonding activities, like lunches or spontaneous coffees, team members can bond virtually, such as by showing each other around their homes on a video call, introducing pets or family members, or sharing music or other personal interests. Being social is important in the virtual space, as well as in person, to nurture team cohesion.
Adapt coaching and development

Team leaders who normally do one-on-one coaching over coffee should transition as seamlessly as possible to remote coaching—coffee and all.
Establish a single source of truth

In person, agile team processes are usually informal. Teams make decisions with everyone in the room, so there’s not usually much need to record these discussions. In the virtual space, however, people might be absent or distracted, so it’s important to document team discussions in a way that can be referenced later.
Adjust to asynchronous collaboration

Messaging boards and chats can be useful in coordinating agile teams working remotely. But they should be used carefully, as they can also lead to team members feeling isolated.
Adapt a leadership approach

When working with remote teams, leaders need to be deliberate in guiding team members and interacting with external customers and stakeholders. Simply put, they need to show—in tone and approach—that everyone is in this together.

Now that it seems likely that remote work is here to stay, it’s all the more important that teams reinforce productivity by purposefully working to sustain an agile culture.

Learn more about McKinsey’s People & Organizational Performance Practice.

How can public-sector organizations benefit from agile?

The pandemic era and its attendant sociopolitical and economic crises have placed new pressures on public-sector organizations. In these situations of urgency, agile can help public-sector organizations better serve citizens by being more responsive.

Compared with the private sector, where agile has had a clear impact on the overall health of organizations, the public sector doesn’t immediately seem to be a great candidate for agile methodology. Government processes are often slower moving than their private-sector counterparts, and agencies are frequently in competition for funding, which can discourage collaboration. Finally, public-sector organizations are usually hierarchical; agile methodology works best in flat organizational structures.

But according to McKinsey analysis and experience, agile tools can still have an impact on public-sector productivity. As with any agile transformation, the approach should be tailored to each specific department, team, and organization.

Government entities, for example, might focus on short-term, results-driven management styles. OKRs and quarterly business reviews (QBRs) are agile concepts that can transform planning and resource allocation for governments. Agencies, for their part, can benefit from increased collaboration and cross-pollination made possible by agile operating models.

For a more in-depth exploration of these topics, see McKinsey’s People & Organizational Performance Practice. Also check out agile-related job opportunities if you’re interested in working at McKinsey.

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