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Agility to action: The agile operating model | McKinsey

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class="mdc-u-grid-col-md-start-2 mdc-u-grid-col-md-end-8 mdc-u-grid-col-lg-start-3 mdc-u-grid-col-lg-end-8 mdc-u-ts-9"><span> </span><span class="AuthorsByLine_mck-c-authors-byline__author__XdrlD"><span class="AuthorsByLine_mck-c-authors-byline__no-wrap__Ced0j"><a data-component="mdc-c-link" href="/our-people/santiago-comella-dorda" class="mdc-c-link-inline___7DRrt_2734c4f mdc-c-link-inline--secondary___YKoOK_2734c4f"><span class="mdc-c-link__label___Pfqtd_2734c4f">Santiago Comella-Dorda</span></a>聽</span></span><span class="AuthorsByLine_mck-c-authors-byline__author__XdrlD"><span class="AuthorsByLine_mck-c-authors-byline__no-wrap__Ced0j"><a data-component="mdc-c-link" href="/our-people/christopher-handscomb" class="mdc-c-link-inline___7DRrt_2734c4f mdc-c-link-inline--secondary___YKoOK_2734c4f"><span class="mdc-c-link__label___Pfqtd_2734c4f">Christopher Handscomb</span></a><span> 聽</span></span></span><span class="AuthorsByLine_mck-c-authors-byline__author__XdrlD"><span class="AuthorsByLine_mck-c-authors-byline__no-wrap__Ced0j">Ahmad Zaidi</span></span></div><div class="mdc-u-grid-col-md-start-8 mdc-u-grid-col-md-end-12 mdc-u-grid-col-lg-start-8 mdc-u-grid-col-lg-end-11 ArticleContent_mck-c-article-content__share-tools__kWRRw"></div></section><section class="mdc-u-grid mdc-u-grid-col-md-12 mck-u-animation-blur-in-400"><div class="mdc-u-grid-col-md-start-2 mdc-u-grid-col-md-end-12 mdc-u-grid-col-lg-start-3 mdc-u-grid-col-lg-end-11"><div data-component="mdc-c-description" class="mdc-c-description___SrnQP_2734c4f mdc-u-ts-5"><div class="mck-u-links-inline">To successfully transition to an agile operating model, business leaders should focus on four questions.</div></div></div></section><main data-layer-region="article-body" class="mdc-u-grid mdc-u-grid-gutter-xxl"><div class="mdc-u-grid mdc-u-grid-col-1 mdc-u-grid-col-md-12"><div class="mdc-u-grid-col-md-start-2 mdc-u-grid-col-md-end-12 mdc-u-grid-col-lg-start-3 mdc-u-grid-col-lg-end-11"><div class="mdc-o-content-body mck-u-dropcap"><div data-component="mdc-c-module-wrapper" data-module-theme="default" data-module-background="transparent" data-module-category="" class="DownloadsSidebar_mck-c-downloads-sidebar__iFmyt mck-o-xs-right-span"><div data-layer-region="downloads-right-rail"><h3 data-component="mdc-c-heading" class="mdc-c-heading___0fM1W_2734c4f mdc-c-heading--title___5qyOB_2734c4f mdc-c-heading--border___K8dj3_2734c4f"></h3><div><div data-component="mdc-c-link-container" class="mdc-c-link-container___xefGu_2734c4f"><a data-component="mdc-c-link" href="#/download/%2F~%2Fmedia%2Fmckinsey%2Fbusiness%20functions%2Fpeople%20and%20organizational%20performance%2Four%20insights%2Fagility%20to%20action%20operationalizing%20a%20value-driven%20agile%20blueprint%2Fagility-to-action-operationalizing-a-value-driven-agile-blueprint.pdf%3FshouldIndex%3Dfalse" class="DownloadsSidebar_mck-c-downloads-sidebar__download-link__fPqFQ mdc-c-link___lBbY1_2734c4f" target="_self" data-layer-event-prefix="Download Link" data-layer-action="click" data-layer-report-type="" data-layer-file-name="agility-to-action-operationalizing-a-value-driven-agile-blueprint" data-layer-report-name="agility-to-action-operationalizing-a-value-driven-agile-blueprint&gt;"><span data-component="mdc-c-icon" class="mdc-c-icon___oi7ef_2734c4f mdc-c-icon--size-md___yi5fA_2734c4f mck-download-icon"></span><span class="mdc-c-link__label___Pfqtd_2734c4f"> (PDF-411 KB)</span></a></div></div></div></div> <p><strong>Over the past few years,</strong> many <a href="/capabilities/people-and-organizational-performance/our-insights/the-five-trademarks-of-agile-organizations">companies have sought to be more agile</a>聽by reconfiguring their organizations into small, cross-functional teams. In most cases, such exercises start with a pilot, in which employees from across the organization come together to work on a common mission. Such missions might include a bank building a product for its customers, a retailer tailoring an assortment for shoppers, or a fast-food chain implementing a plan to comply with changes in labor regulations in a specific country.</p> <p>Moving beyond individual teams to <a href="/capabilities/people-and-organizational-performance/our-insights/the-journey-to-an-agile-organization">implement an agile operating model</a>聽requires that missions are loosely coupled but tightly aligned; teams should be able to execute their missions with minimum dependencies while ensuring the overall organization is geared toward generating value. Establishing such an operating model is intimately tied to the organization鈥檚 strategy and how it creates value. The process involves a blueprinting phase, in which an organization鈥檚 means of generating value for customers are mapped in a series of value streams, against which the operating model is then structured (Exhibit 1). While most organizations can design a logical blueprint, they struggle to understand and manage its implications.</p> <div data-component="mdc-c-module-wrapper" data-module-theme="default" data-module-background="transparent" data-module-category="" class="mck-c-inline-module-container mck-o-md-center"><div class="mdc-u-grid mdc-u-grid-gutter-lg mdc-u-grid-col-sm-1 mdc-u-grid--align-start mdc-u-mb-3 GenericItem_mck-c-generic-item__sGwKL"><div data-component="mdc-c-content-block" class="mdc-c-content-block___7p6Lu_2734c4f mdc-u-grid-gutter-xs GenericItem_mck-c-generic-item__content__gq1m0"><div class="mck-c-eyebrow mdc-u-ts-10"><span> 1</span></div></div></div><div class="mck-u-inline-module-border-top mck-u-inline-module-border-bottom"><picture data-component="mdc-c-picture" class="Exhibit_mck-c-exhibit__image__pyIDm"><source media="(min-width: 768px)" srcSet="/~/media/mckinsey/business%20functions/people%20and%20organizational%20performance/our%20insights/agility%20to%20action%20operationalizing%20a%20value-driven%20agile%20blueprint/svgz-agility-to-action-ex1.svgz?cq=50&amp;cpy=Center"/><img alt="The blueprint provides a clear vision of and design for a new operating model." src="/~/media/mckinsey/business%20functions/people%20and%20organizational%20performance/our%20insights/agility%20to%20action%20operationalizing%20a%20value-driven%20agile%20blueprint/svgz-agility-to-action-ex1.svgz?cq=50&amp;cpy=Center" loading="lazy"/></picture></div><div class="mck-u-sr-only"></div></div> <p>A blueprint should segment teams based on how they create value鈥攁 step many companies overlook in their haste to launch pilot projects. Teams that are central to value generation and lie on the primary organizational axis stand as first among equals. These core teams lead the way for the rest of the organization by setting the priorities that can help <a href="/capabilities/people-and-organizational-performance/our-insights/bridging-the-gap-between-a-companys-strategy-and-operating-model">accelerate value creation</a>, with the other teams enabling it (Exhibit 2). The definition of these teams depends on the organization鈥檚 industry, situation, and strategy. In a retailer that views supplier negotiations as a strategic differentiator, for example, these core teams might be aligned with merchandising. In another whose strategic differentiator is in-store experience, the teams might be focused on formats. This article explores four questions an agile organization must answer to develop an effective blueprint, put it into action, and create the most value.</p> <div data-component="mdc-c-module-wrapper" data-module-theme="default" data-module-background="transparent" data-module-category="" class="mck-c-inline-module-container mck-o-md-center"><div class="mdc-u-grid mdc-u-grid-gutter-lg mdc-u-grid-col-sm-1 mdc-u-grid--align-start mdc-u-mb-3 GenericItem_mck-c-generic-item__sGwKL"><div data-component="mdc-c-content-block" class="mdc-c-content-block___7p6Lu_2734c4f mdc-u-grid-gutter-xs GenericItem_mck-c-generic-item__content__gq1m0"><div class="mck-c-eyebrow mdc-u-ts-10"><span> 2</span></div></div></div><div class="mck-u-inline-module-border-top mck-u-inline-module-border-bottom"><picture data-component="mdc-c-picture" class="Exhibit_mck-c-exhibit__image__pyIDm"><source media="(min-width: 768px)" srcSet="/~/media/mckinsey/business%20functions/people%20and%20organizational%20performance/our%20insights/agility%20to%20action%20operationalizing%20a%20value-driven%20agile%20blueprint/svgz-agility-to-action-ex2.svgz?cq=50&amp;cpy=Center"/><img alt="Core and enabling teams work together to create value." src="/~/media/mckinsey/business%20functions/people%20and%20organizational%20performance/our%20insights/agility%20to%20action%20operationalizing%20a%20value-driven%20agile%20blueprint/svgz-agility-to-action-ex2.svgz?cq=50&amp;cpy=Center" loading="lazy"/></picture></div><div class="mck-u-sr-only"></div></div> <h2>1. Where should profit-and-loss ownership lie?</h2> <p>In a traditional organization, strategy determines which business units own the profit and loss (P&amp;L). Agile operating models typically redesign business units into cross-functional teams around end-to-end value streams, so P&amp;L ownership often needs to be revisited.</p> <p>In an agile organization, core teams own the P&amp;L and provide funding to other teams. For example, in a large North American retailer, the teams that are responsible for running the stores in line with a format鈥檚 value proposition have P&amp;L ownership. Other teams that have missions to get products on store shelves and develop and deliver an exceptional digital experience do not own a P&amp;L but contribute to the success of the core teams.</p> <div data-component="mdc-c-module-wrapper" data-module-theme="default" data-module-background="transparent" data-module-category="" class="mck-c-disruptor1up mck-o-md-center mck-u-inline-module-border-top mck-u-inline-module-border-bottom mck-u-screen-only" data-layer-region="disruptor-1up"><div class="mdc-u-grid mdc-u-grid-gutter-md mdc-u-grid-col-lg-12 mdc-u-grid-col-md-12 "><div class="mdc-u-grid-col-md-span-12"><header data-component="mdc-c-header" class="mdc-c-header"><div class="mdc-c-header__block___i1Lg-_2734c4f"><h3 data-component="mdc-c-heading" class="mdc-c-heading___0fM1W_2734c4f"><div>Would you like to learn more about our <a href="/capabilities/people-and-organizational-performance/how-we-help-clients">People &amp; Organizational Performance Practice</a>?</div></h3></div></header></div></div></div> <h2>2. How does one create incentives for teams that do not own a P&amp;L?</h2> <!-- --> <p>If a team doesn鈥檛 own a P&amp;L, what incentives does it have to support other teams that do? This is where <a href="/capabilities/mckinsey-digital/our-insights/planning-in-an-agile-organization">objectives and key results (OKRs)</a>聽come into play. An OKR is a means of tying strategy to the actions carried out by teams. It consists of an objective that originates from the organization鈥檚 strategy (such as increase market share of a product) and one or more key results that measure performance against that objective (for example, sales growth of 10 percent).</p> <p>In an agile operating model, an enabling team will have primary OKRs of which it is the owner, in addition to a set of inherited OKRs<span class="FootNote_footnote-holder__tjRqy"><a aria-label="footnote" href="javascript:void(0);" class="FootNote_footnote-wrapper__AIRwL undefined FootNote_inactive__VZfCp" aria-describedby="7bcad204-7a5e-4db7-afe8-f1ec618fc47e"><sup class="FootNote_footnotesup__e73z_">1</sup><span class="FootNote_notch-wrapper__b_5NS"><span class="FootNote_notch__omKtY"></span></span><span class="FootNote_tooltip__QtrbA mdc-u-mt-2"><span class="FootNote_footnote-content__r2OVl"><span id="7bcad204-7a5e-4db7-afe8-f1ec618fc47e" aria-hidden="true" data-module-theme="light" class="FootNote_footnote-text__VjKgO mck-u-links-inline">An inherited OKR is one that another team is dependent on to complete its mission. For example, a team developing a technology product would need support from a sales team to ensure adoption.</span></span></span></a></span> it must achieve to support other teams in accomplishing their missions. To ensure that the inherited OKRs carry enough weight, some organizations consider making them mandatory for a team. In essence, for an enabling team to achieve its mission, it must meet not only the targets set in its primary OKRs but also a minimum target in its inherited OKRs.</p> <p>For example, an e-commerce player needed to optimize its expenditure in search, so a few core teams had a primary OKR to achieve a certain return on investment (ROI) on paid search. Those core team OKRs produce a large number of inherited OKRs for enabling teams to achieve to accomplish the goal. Specifically, digital merchandising teams had to create more compelling landing pages for keyword searches, other teams needed to develop financial reports to help determine ROI on a daily basis, and so forth.</p> <h2>3. What is the framework for coordinating among teams?</h2> <p>For an agile operating model to work appropriately, an organization must set up the right cadence to ensure coordination among teams. Several organizations handle this task through an annual strategy and planning process, which includes two primary elements:</p> <ul> <li>An annual exercise to define the objectives for the coming year in light of an organization鈥檚 strategy as well as strategic initiatives to achieve those objectives. A North American retailer analyzes major customer and market trends and defines its objectives based on those trends.</li> <li>A quarterly cadence (often called a quarterly business review) to evaluate performance against strategic goals and reprioritize based on changes in customer and market trends. Often in these cadences, the core teams set their priorities, which then guide enabling teams. For example, in a large North American service provider, the quarterly cadence takes place in two steps: the core teams determine their goals for the coming quarter, and then these goals are socialized with enabling teams, which make trade-offs based on their other priorities.</li> </ul> <h2>4. How does culture need to adapt to make this work?</h2> <p>On a fundamental level, an agile transformation is a cultural transformation. The operationalization of such a model, where the interdependence among teams must be managed to deliver value to customers, requires multiple mindset shifts. Three are of critical importance: empowerment, end-to-end ownership, and a service mindset in enabling teams.</p> <p>Empowerment is needed from the very beginning of an agile transformation. One of the biggest hurdles is when leaders have a lack of trust in their employees, which often arises when workers lack the required capabilities. For example, a medium-size US insurance carrier was in the aspiration-setting phase of its <a href="/capabilities/people-and-organizational-performance/our-insights/the-journey-to-an-agile-organization">agile transformation</a>. During conversations, leadership was clearly hesitant to empower employees to make decisions. Upon further examination, the underlying fear centered on the inability of teams to deliver on objectives. Consequently, the plans incorporated a robust capability-building agenda to ensure frontline employees had the required skills鈥攁n essential element in achieving the transformation鈥檚 goals.</p> <div data-component="mdc-c-module-wrapper" data-module-theme="default" data-module-background="transparent" data-module-category="" class="mck-c-disruptor1up mck-o-md-center mck-u-inline-module-border-top mck-u-inline-module-border-bottom mck-u-screen-only" data-layer-region="disruptor-1up"><div class="mdc-u-grid mdc-u-grid-gutter-md mdc-u-grid-col-lg-12 mdc-u-grid-col-md-12 "><div class="mdc-u-grid-col-lg-span-4 mdc-u-grid-col-md-span-5 Disruptor1Up_mck-c-disruptor1up__image___2Gc4"><picture data-component="mdc-c-picture"><img alt="To weather a crisis, build a network of teams" src="/~/media/mckinsey/business%20functions/people%20and%20organizational%20performance/our%20insights/to%20weather%20a%20crisis%20build%20a%20network%20of%20teams/organizations-5050-hero-1536x1536.jpg?cq=50&amp;mh=145&amp;car=16:9&amp;cpy=Center" loading="lazy"/></picture></div><div class="mdc-u-grid-col-lg-span-8 mdc-u-grid-col-md-span-7"><header data-component="mdc-c-header" class="mdc-c-header"><div class="mdc-c-header__block___i1Lg-_2734c4f"><h3 data-component="mdc-c-heading" class="mdc-c-heading___0fM1W_2734c4f"><div>To weather a crisis, build a network of teams</div></h3></div></header><div data-component="mdc-c-link-container" class="mdc-c-link-container___xefGu_2734c4f mdc-c-link-container--display-column___X0HDD_2734c4f mck-c-disruptor1up__content Disruptor1Up_mck-c-disruptor1up__content--links__VV4lE mdc-u-grid-gutter-md"><a data-component="mdc-c-link" href="/capabilities/people-and-organizational-performance/our-insights/to-weather-a-crisis-build-a-network-of-teams" class="mdc-c-link-cta___NBQVi_2734c4f"><span class="mdc-c-link__label___Pfqtd_2734c4f">Read the article</span><span data-component="mdc-c-icon" class="mdc-c-icon___oi7ef_2734c4f mck-link-arrow-right-icon"></span></a></div></div></div></div> <p>End-to-end ownership requires teams to focus on customer-centric outcomes, some of which might require coordinating with teams that sit beyond their own. For example, a medium-size North American software provider was developing the next version of its flagship online and mobile banking suite. While the core team had developed a robust business case and product road map, it had not taken ownership of how the product would be taken to market. Upon inquiry, most team members said developing this strategy was the job of the marketing and deployment teams: these teams had handled product launches in the past, and they had incentives to do so through the right key performance indicators. However, such thinking not only wasted precious time in bringing those teams on board but also meant several activities that could have been completed in parallel (such as drafting legal contracts) threatened on-time delivery. Solving the challenge required the core team leader to take end-to-end ownership of the product and pull in colleagues to complete all necessary activities to take it to market.</p> <p>Enabling teams in such organizations need to adopt a service mindset. The fact that certain priorities originate from a set of core teams does not mean that enabling teams are less important. However, helping them come to this realization can require significant change management. For example, in the case of the previously mentioned software provider, the cybersecurity group had historically set its own priorities. Now that the organization had been redesigned with a core team responsible for designing the flagship online and mobile banking suite, the cybersecurity group had to reprioritize its objectives based on the needs of the core team. This reprioritization required the cybersecurity group to shift its mindset, a process that happened gradually through a series of conversations between the group and the core team. The result was alignment on how critical the cybersecurity group鈥檚 work was to the successful development of the flagship suite.</p> <hr/> <p>Designing a blueprint is only the first step in reconfiguring an organization to create value through agility. Putting the blueprint into action requires a major shift鈥攃ategorizing teams as core or enabling. To make such a model work, the organization must reevaluate P&amp;L ownership and incentives for enabling teams to support core teams, ensure the deployment of a robust strategy and planning cadence, and instill a culture that encourages empowerment, end-to-end accountability, and a service mindset among enabling teams.</p></div><div class="container-placeholder"></div></div></div><div class="mdc-u-grid mdc-u-grid-gutter-xl"><section role="contentinfo" data-layer-region="article-about-authors" class="mdc-u-grid mdc-u-grid-col-md-12 AboutAuthor_mck-c-about-author__nRJzu"><div class="mdc-u-grid-col-md-start-2 mdc-u-grid-col-md-end-12 mdc-u-grid-col-lg-start-3 mdc-u-grid-col-lg-end-11"><h5 data-component="mdc-c-heading" class="mdc-c-heading___0fM1W_2734c4f mdc-c-heading--title___5qyOB_2734c4f mdc-c-heading--border___K8dj3_2734c4f mdc-u-align-center"></h5><div data-component="mdc-c-description" class="mdc-c-description___SrnQP_2734c4f mdc-u-ts-8 mck-u-links-inline mck-u-links-inline--secondary mdc-u-mt-5"><div><p><strong><a href="/our-people/santiago-comella-dorda">Santiago Comella-Dorda</a></strong> is a partner in McKinsey&rsquo;s Boston office, <strong><a href="/our-people/christopher-handscomb">Christopher Handscomb</a></strong> is a partner in the London office, and <strong>Ahmad Zaidi</strong> is an associate partner in the Chicago office.</p></div></div></div></section><section class="mdc-u-grid mdc-u-grid-col-md-12 mck-u-screen-only"><div class="mdc-u-grid-col-md-start-2 mdc-u-grid-col-md-end-12 mdc-u-grid-col-lg-start-5 mdc-u-grid-col-lg-end-9"><h5 data-component="mdc-c-heading" class="mdc-c-heading___0fM1W_2734c4f mdc-c-heading--title___5qyOB_2734c4f mdc-c-heading--border___K8dj3_2734c4f mdc-u-align-center">Explore a career with us</h5><div data-component="mdc-c-link-container" class="mdc-c-link-container___xefGu_2734c4f mdc-c-link-container--align-center___ar3mu_2734c4f"><a data-component="mdc-c-link" href="/careers/search-jobs" 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href="/capabilities/people-and-organizational-performance/our-insights/revisiting-agile-teams-after-an-abrupt-shift-to-remote" class="mdc-c-link___lBbY1_2734c4f"><picture data-component="mdc-c-picture" class="Card_wrapper-image__8b4P6"><style>.picture-uniqueKey-revis-0 { aspect-ratio: 16/9 }</style><img alt="Revisiting agile teams after an abrupt shift to remote" class="picture-uniqueKey-revis-0" src="/~/media/mckinsey/business%20functions/people%20and%20organizational%20performance/our%20insights/revisiting%20agile%20teams%20after%20an%20abrupt%20shift%20to%20remote/revisiting-agile-teams-1536x1536.jpg?cq=50&amp;mw=767&amp;car=16:9&amp;cpy=Center" loading="lazy"/></picture></a></div><div class="Card_wrapper-text__U6Y3k"><div data-component="mdc-c-content-block" class="mdc-c-content-block___7p6Lu_2734c4f Card_content-block__pF6Z1"><span>Article</span><h6 data-component="mdc-c-heading" class="mdc-c-heading___0fM1W_2734c4f mdc-u-ts-6"><a data-component="mdc-c-link" href="/capabilities/people-and-organizational-performance/our-insights/revisiting-agile-teams-after-an-abrupt-shift-to-remote" class="mdc-c-link-heading___Zggl8_2734c4f mdc-c-link___lBbY1_2734c4f"><div>Revisiting agile teams after an abrupt shift to remote</div></a></h6></div></div></div></div></div></div></div></main></div><script id="__NEXT_DATA__" type="application/json">{"props":{"pageProps":{"locale":"en","dictionary":{},"sitecoreContext":{"route":{"name":"Agility to action Operationalizing a value driven agile blueprint","displayName":"Agility to action Operationalizing a value driven agile blueprint","fields":null,"databaseName":"web","deviceId":"fe5d7fdf-89c0-4d99-9aa3-b5fbd009c9f3","itemId":"001fa432-9e5b-4158-a511-2d28aaa0afda","itemLanguage":"en","itemVersion":1,"layoutId":"ae753eb4-a035-40b4-83bf-4b4438df6742","templateId":"683910db-02ba-40ba-92e7-726c880160a9","templateName":"ArticleJSS","placeholders":{"jss-main":[{"uid":"232bb7e9-289f-492d-a916-2b6185e44a84","componentName":"ArticleTemplate","dataSource":"","fields":{"data":{"articleTemplate":{"title":{"jsonValue":{"value":"Agility to action: Operationalizing a value-driven agile blueprint"}},"sEOTitle":{"value":"Agility to action: The agile operating model"},"description":{"jsonValue":{"value":"To successfully transition to an agile operating model, business leaders should focus on four questions."}},"sEODescription":{"value":""},"displayDate":{"jsonValue":{"value":"2020-06-16T00:00:00Z"}},"body":{"value":"[[DownloadsSidebar]]\n\u003cp\u003e\u003cstrong\u003eOver the past few years,\u003c/strong\u003e many \u003ca href=\"/capabilities/people-and-organizational-performance/our-insights/the-five-trademarks-of-agile-organizations\"\u003ecompanies have sought to be more agile\u003c/a\u003e\u0026nbsp;by reconfiguring their organizations into small, cross-functional teams. In most cases, such exercises start with a pilot, in which employees from across the organization come together to work on a common mission. Such missions might include a bank building a product for its customers, a retailer tailoring an assortment for shoppers, or a fast-food chain implementing a plan to comply with changes in labor regulations in a specific country.\u003c/p\u003e\n\u003cp\u003eMoving beyond individual teams to \u003ca href=\"/capabilities/people-and-organizational-performance/our-insights/the-journey-to-an-agile-organization\"\u003eimplement an agile operating model\u003c/a\u003e\u0026nbsp;requires that missions are loosely coupled but tightly aligned; teams should be able to execute their missions with minimum dependencies while ensuring the overall organization is geared toward generating value. Establishing such an operating model is intimately tied to the organization\u0026rsquo;s strategy and how it creates value. The process involves a blueprinting phase, in which an organization\u0026rsquo;s means of generating value for customers are mapped in a series of value streams, against which the operating model is then structured (Exhibit 1). While most organizations can design a logical blueprint, they struggle to understand and manage its implications.\u003c/p\u003e\n[[Exhibit 1]]\n\u003cp\u003eA blueprint should segment teams based on how they create value\u0026mdash;a step many companies overlook in their haste to launch pilot projects. Teams that are central to value generation and lie on the primary organizational axis stand as first among equals. These core teams lead the way for the rest of the organization by setting the priorities that can help \u003ca href=\"/capabilities/people-and-organizational-performance/our-insights/bridging-the-gap-between-a-companys-strategy-and-operating-model\"\u003eaccelerate value creation\u003c/a\u003e, with the other teams enabling it (Exhibit 2). The definition of these teams depends on the organization\u0026rsquo;s industry, situation, and strategy. In a retailer that views supplier negotiations as a strategic differentiator, for example, these core teams might be aligned with merchandising. In another whose strategic differentiator is in-store experience, the teams might be focused on formats. This article explores four questions an agile organization must answer to develop an effective blueprint, put it into action, and create the most value.\u003c/p\u003e\n[[Exhibit 2]]\n\u003ch2\u003e1. Where should profit-and-loss ownership lie?\u003c/h2\u003e\n\u003cp\u003eIn a traditional organization, strategy determines which business units own the profit and loss (P\u0026amp;L). Agile operating models typically redesign business units into cross-functional teams around end-to-end value streams, so P\u0026amp;L ownership often needs to be revisited.\u003c/p\u003e\n\u003cp\u003eIn an agile organization, core teams own the P\u0026amp;L and provide funding to other teams. For example, in a large North American retailer, the teams that are responsible for running the stores in line with a format\u0026rsquo;s value proposition have P\u0026amp;L ownership. Other teams that have missions to get products on store shelves and develop and deliver an exceptional digital experience do not own a P\u0026amp;L but contribute to the success of the core teams.\u003c/p\u003e\n[[disruptor1Up dis1]]\n\u003ch2\u003e2. How does one create incentives for teams that do not own a P\u0026amp;L?\u003c/h2\u003e\n[[MostPopularArticles 5]]\n\u003cp\u003eIf a team doesn\u0026rsquo;t own a P\u0026amp;L, what incentives does it have to support other teams that do? This is where \u003ca href=\"/capabilities/mckinsey-digital/our-insights/planning-in-an-agile-organization\"\u003eobjectives and key results (OKRs)\u003c/a\u003e\u0026nbsp;come into play. An OKR is a means of tying strategy to the actions carried out by teams. It consists of an objective that originates from the organization\u0026rsquo;s strategy (such as increase market share of a product) and one or more key results that measure performance against that objective (for example, sales growth of 10 percent).\u003c/p\u003e\n\u003cp\u003eIn an agile operating model, an enabling team will have primary OKRs of which it is the owner, in addition to a set of inherited OKRs[[footnote 1]] it must achieve to support other teams in accomplishing their missions. To ensure that the inherited OKRs carry enough weight, some organizations consider making them mandatory for a team. In essence, for an enabling team to achieve its mission, it must meet not only the targets set in its primary OKRs but also a minimum target in its inherited OKRs.\u003c/p\u003e\n\u003cp\u003eFor example, an e-commerce player needed to optimize its expenditure in search, so a few core teams had a primary OKR to achieve a certain return on investment (ROI) on paid search. Those core team OKRs produce a large number of inherited OKRs for enabling teams to achieve to accomplish the goal. Specifically, digital merchandising teams had to create more compelling landing pages for keyword searches, other teams needed to develop financial reports to help determine ROI on a daily basis, and so forth.\u003c/p\u003e\n\u003ch2\u003e3. What is the framework for coordinating among teams?\u003c/h2\u003e\n\u003cp\u003eFor an agile operating model to work appropriately, an organization must set up the right cadence to ensure coordination among teams. Several organizations handle this task through an annual strategy and planning process, which includes two primary elements:\u003c/p\u003e\n\u003cul\u003e\n \u003cli\u003eAn annual exercise to define the objectives for the coming year in light of an organization\u0026rsquo;s strategy as well as strategic initiatives to achieve those objectives. A North American retailer analyzes major customer and market trends and defines its objectives based on those trends.\u003c/li\u003e\n \u003cli\u003eA quarterly cadence (often called a quarterly business review) to evaluate performance against strategic goals and reprioritize based on changes in customer and market trends. Often in these cadences, the core teams set their priorities, which then guide enabling teams. For example, in a large North American service provider, the quarterly cadence takes place in two steps: the core teams determine their goals for the coming quarter, and then these goals are socialized with enabling teams, which make trade-offs based on their other priorities.\u003c/li\u003e\n\u003c/ul\u003e\n\u003ch2\u003e4. How does culture need to adapt to make this work?\u003c/h2\u003e\n\u003cp\u003eOn a fundamental level, an agile transformation is a cultural transformation. The operationalization of such a model, where the interdependence among teams must be managed to deliver value to customers, requires multiple mindset shifts. Three are of critical importance: empowerment, end-to-end ownership, and a service mindset in enabling teams.\u003c/p\u003e\n\u003cp\u003eEmpowerment is needed from the very beginning of an agile transformation. One of the biggest hurdles is when leaders have a lack of trust in their employees, which often arises when workers lack the required capabilities. For example, a medium-size US insurance carrier was in the aspiration-setting phase of its \u003ca href=\"/capabilities/people-and-organizational-performance/our-insights/the-journey-to-an-agile-organization\"\u003eagile transformation\u003c/a\u003e. During conversations, leadership was clearly hesitant to empower employees to make decisions. Upon further examination, the underlying fear centered on the inability of teams to deliver on objectives. Consequently, the plans incorporated a robust capability-building agenda to ensure frontline employees had the required skills\u0026mdash;an essential element in achieving the transformation\u0026rsquo;s goals.\u003c/p\u003e\n[[disruptor1Up dis2]]\n\u003cp\u003eEnd-to-end ownership requires teams to focus on customer-centric outcomes, some of which might require coordinating with teams that sit beyond their own. For example, a medium-size North American software provider was developing the next version of its flagship online and mobile banking suite. While the core team had developed a robust business case and product road map, it had not taken ownership of how the product would be taken to market. Upon inquiry, most team members said developing this strategy was the job of the marketing and deployment teams: these teams had handled product launches in the past, and they had incentives to do so through the right key performance indicators. However, such thinking not only wasted precious time in bringing those teams on board but also meant several activities that could have been completed in parallel (such as drafting legal contracts) threatened on-time delivery. Solving the challenge required the core team leader to take end-to-end ownership of the product and pull in colleagues to complete all necessary activities to take it to market.\u003c/p\u003e\n\u003cp\u003eEnabling teams in such organizations need to adopt a service mindset. The fact that certain priorities originate from a set of core teams does not mean that enabling teams are less important. However, helping them come to this realization can require significant change management. For example, in the case of the previously mentioned software provider, the cybersecurity group had historically set its own priorities. Now that the organization had been redesigned with a core team responsible for designing the flagship online and mobile banking suite, the cybersecurity group had to reprioritize its objectives based on the needs of the core team. This reprioritization required the cybersecurity group to shift its mindset, a process that happened gradually through a series of conversations between the group and the core team. The result was alignment on how critical the cybersecurity group\u0026rsquo;s work was to the successful development of the flagship suite.\u003c/p\u003e\n\u003chr /\u003e\n\u003cp\u003eDesigning a blueprint is only the first step in reconfiguring an organization to create value through agility. Putting the blueprint into action requires a major shift\u0026mdash;categorizing teams as core or enabling. To make such a model work, the organization must reevaluate P\u0026amp;L ownership and incentives for enabling teams to support core teams, ensure the deployment of a robust strategy and planning cadence, and instill a culture that encourages empowerment, end-to-end accountability, and a service mindset among enabling teams.\u003c/p\u003e"},"isFullScreenInteractive":{"boolValue":false},"hideStickySocialShareBar":{"boolValue":false},"desktopID":{"value":""},"mobileID":{"value":""},"desktopURL":{"value":""},"mobileURL":{"value":""},"desktopPaddingPercentage":{"value":""},"mobilePaddingPercentage":{"value":""},"desktopOverrideHeight":{"value":""},"mobileOverrideHeight":{"value":""},"cerosOembedURL":{"value":""},"cerosRenderMode":{"targetItem":null},"cerosBackgroundColor":{"targetItem":null},"hideByLine":{"boolValue":false},"tableOfContentsTitle":{"value":"TABLE OF CONTENTS"},"accessStatus":{"targetItem":{"key":{"value":"RegisteredUsers"},"value":{"value":"Registered Users"}}},"articleType":{"targetItem":{"displayName":"Article"}},"hasSpecialReport":{"boolValue":false},"contentType":{"targetItem":{"displayName":"Article"}},"sourcePublication":{"targetItem":null},"externalPublication":{"value":""},"mobileReady":{"boolValue":true},"forClientsOnly":{"boolValue":false},"excludeFromClientLink":{"boolValue":false},"originalPublishDate":{"jsonValue":{"value":"2020-06-16T00:00:00Z"}},"footnotes":{"value":"\u003col\u003e\n \u003cli\u003eAn inherited OKR is one that another team is dependent on to complete its mission. For example, a team developing a technology product would need support from a sales team to ensure adoption.\u003c/li\u003e\n\u003c/ol\u003e"},"contributoryPractice":{"targetItems":[{"displayName":"McKinsey Digital"},{"displayName":"People \u0026amp; Organizational Performance"}]},"aboutTheAuthors":{"value":"\u003cp\u003e\u003cstrong\u003e\u003ca href=\"/our-people/santiago-comella-dorda\"\u003eSantiago Comella-Dorda\u003c/a\u003e\u003c/strong\u003e is a partner in McKinsey\u0026rsquo;s Boston office, \u003cstrong\u003e\u003ca href=\"/our-people/christopher-handscomb\"\u003eChristopher Handscomb\u003c/a\u003e\u003c/strong\u003e is a partner in the London office, and \u003cstrong\u003eAhmad Zaidi\u003c/strong\u003e is an associate partner in the Chicago office.\u003c/p\u003e"},"authors":{"targetItems":[{"template":{"id":"3FBABDB63A094F68B1F8E1BBE1BA124E","name":"Author"},"id":"49DD3586F3B4468887858EA15FDF847F","name":"Santiago ComellaDorda","authorTitle":{"value":"Santiago Comella-Dorda"},"description":{"value":""},"thumbnailImage":{"alt":"","src":null},"profile":{"targetItems":[{"standardImage":{"src":"/~/media/mckinsey/our people/santiago comella dorda/santiago comella-dorda_5983-1_fc-mask_profile_1536x1152.png","alt":"Santiago Comella VI"},"emailLinks":{"value":"Santiago_Comella-Dorda@mckinsey.com"},"linkedInUrl":{"value":""},"description":{"value":"Works with clients to define, develop, and implement digital solutions to succeed in an ever-accelerating world. Helps large organizations to become more agile, empower teams, create nimble structures and accelerate innovation."},"locations":{"targetItems":[{"name":"Boston","displayName":"Boston"}]},"firmTitle":{"value":"Partner"},"thumbnailImage":{"alt":"Santiago Comella VI","src":"/~/media/mckinsey/our people/santiago comella dorda/santiago comella-dorda_5983-1_fc-mask_headshot_988x741.png"},"url":{"path":"/our-people/santiago-comella-dorda"}}]}},{"template":{"id":"3FBABDB63A094F68B1F8E1BBE1BA124E","name":"Author"},"id":"2F30607924294E12BFF18C6B10506C57","name":"Christopher Handscomb","authorTitle":{"value":"Christopher Handscomb"},"description":{"value":""},"thumbnailImage":{"alt":"","src":null},"profile":{"targetItems":[{"standardImage":{"src":"/~/media/mckinsey/our people/christopher handscomb/christopher-handscomb_profile1_1536x1152.jpg","alt":""},"emailLinks":{"value":"christopher_handscomb@mckinsey.com"},"linkedInUrl":{"value":"https://uk.linkedin.com/in/handscomb"},"description":{"value":"Leads our work globally on organisation for players in the energy industry, and supports companies across sectors on enterprise-wide agile transformations."},"locations":{"targetItems":[{"name":"London","displayName":"London"}]},"firmTitle":{"value":"Partner"},"thumbnailImage":{"alt":"","src":"/~/media/mckinsey/our people/christopher handscomb/christopher-handscomb_headshot1_988x741.jpg"},"url":{"path":"/our-people/christopher-handscomb"}}]}},{"template":{"id":"3FBABDB63A094F68B1F8E1BBE1BA124E","name":"Author"},"id":"EE69F8B1DC8F4E94BD26274F2ED8BFD9","name":"Ahmad Zaidi","authorTitle":{"value":"Ahmad Zaidi"},"description":{"value":""},"thumbnailImage":{"alt":"","src":null},"profile":{"targetItems":[]}}]},"nonPartnerAuthors":{"targetItems":[]},"interactiveToUse":{"targetItem":null},"enableArticleComponents":{"boolValue":false},"relatedArticles":{"targetItems":[{"sourcePublication":{"targetItem":null},"publicationSource":null,"externalPublication":{"value":""},"title":{"value":"Enterprise agility: Buzz or business impact?"},"url":{"path":"/capabilities/people-and-organizational-performance/our-insights/enterprise-agility-buzz-or-business-impact"},"eyebrow":{"targetItem":{"name":"Article"}},"articleType":{"targetItem":{"name":"Article"}},"contentType":{"targetItem":{"name":"Article"}},"description":{"value":"Many organizations are racing to become agile. 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