This research essay is authored by Max Heusgen, student in the master course Open Organizations and Organizing Openness at University of Innsbruck.
In today’s fast-paced business environment, organizations constantly seek methods that foster adaptability, responsiveness, and inclusivity in their strategic decision-making processes. One emerging trend is Open Strategy initiatives. Unlike traditional top-down strategies, open strategy promotes increased transparency, inclusion, and broad-based participation in strategic development, often facilitated by IT systems (Hautz et al., 2017; Tavakoli et al., 2017). However, as this openness scales, it becomes increasingly complex, leading to potential pitfalls that can hinder its execution, as evidenced by the Wikimedia Foundation (Laura Dobusch et al., 2019) and Premium Cola (Luedicke et al., 2017). Hautz et al. (2017) therefore outline the five dilemmas of process, commitment, disclosure, empowerment, and escalation. Interestingly, some companies are already reversing their open strategy approach in pursuit of greater control and profit from their innovations (Appleyard & Chesbrough, 2017).
Another prevalent trend is Agile working. Originating in software development, Agile methods prioritize flexibility, continuous improvement, and active stakeholder involvement. They are characterized by iterative development cycles and a swift response to change (Alsaqqa et al., 2020). Agile methods positively impact project success, efficiency, and stakeholder satisfaction in volatile and uncertain environments (Serrador & Pinto, 2015). The 15th State of Agile Report by Digital.ai (2022) reveals that 86% of Software Development and 63% of IT departments are working agile, with other departments like operations or production also seeing a significant increase from 2020 to 2021. Agile values align with Open Strategy on many occasions and provide tangible measures for their implementation.
The central thesis of this essay suggests that as open strategy is practiced more radically, its inherent challenges become increasingly pronounced. However, the principles and methods of Agile frameworks, known for their robust response to the complexities of software development and other areas, can offer valuable solutions to these open strategy pitfalls. This essay will introduce the values of Open Strategy and the challenges associated with scaling them in an organization. It will then explain how Agile methodologies handle these values and how Open Strategy could benefit from these practices.
Open Strategy is a concept with various interpretations. At its most basic, it could mean involving stakeholders in the ideation process for strategic decisions, such as brainstorming with employees. However, Vaara et al. (2018) offer a more comprehensive definition, suggesting that stakeholders should be integrated into the decision-making process itself. This could then extend to stakeholders creating the mechanisms that facilitate their participation in strategic decisions, representing the most extensive approach to Open Strategy. The core values of Open Strategy could be seen as transparency, participation and inclusion (Dobusch et al., 2017; Luedicke et al., 2017; Mack & Szulanski, 2017; Vaara et al., 2018). The extent to which these values are implemented can vary depending on how Open Strategy is practiced.
To begin, complete transparency implies that every stakeholder, both inside and outside the organization, has access to all documents and information related to the organization. This raises several complex questions: How is information provided and ensured to be always available? How does extreme transparency shape information? How is confidential information handled? How is data protected from misuse? How is information overload prevented, and how do stakeholders determine which information is relevant to them? Several case studies (Dobusch et al., 2019; Luedicke et al., 2017) suggest that total transparency may not be feasible or desirable. Agile methodologies, however, often advocate for transparency as well.
Agile teams aim to make their work as transparent as possible, sharing information and tasks regularly. All relevant information for stakeholders is shared at the appropriate time. The decision to share information rests with the teams, reflecting the value of trusting these domain experts to know what and when to share. The general rule is: if there is no reason against making information accessible, do it. Stakeholders should be proactively informed and their feedback sought. In an agile organization, silos and secrecy should be minimized (Beck et al., 2001; Brosseau et al., 2019; Moran, 2015). Open Strategy could benefit from these practices. Instead of making all information available to everyone, the goal should be to provide stakeholders with information relevant to them. This approach would enable stakeholders to make informed decisions on strategic topics that concern them. It could also address the confidentiality issue, as information could be shared with relevant stakeholders, with the experts trusted to decide what information is appropriate to share. By making all information transparent, unless there is a reason against it, transparency could be significantly increased. Stakeholders would not be overwhelmed as they would only receive information that concerns them and where their input could benefit the organization. This could also resolve the dilemma of process (Hautz et al., 2017), as information access would be increased without compromising speed, flexibility, and control, given there are clear reasons for information sharing. The dilemma of disclosure (Hautz et al., 2017) could be partly resolved as well, as agile teams responsible for information sharing could withhold sensitive information. However, stakeholders would still receive all the information relevant for their decision-making.
Next, extreme participation infers that every stakeholder can participate in all strategic decision- making within an organization. This raises several questions: How can everyone’s participation be ensured? Is it beneficial for everyone to participate in every decision? How is participation encouraged? How can stakeholders shape the decision-making process (Vaara et al., 2018)? Agile methodologies encourage participation through values of trust, respect, and openness. In an agile team, members are encouraged to express their opinions on all decisions affecting the team. If an agile culture is fostered organization-wide, it can reduce the perceived distance between stakeholders and hierarchical levels.
This doesn’t mean agile teams participate in every organizational decision, but they are involved in decisions relevant to them and are encouraged to voice their opinions. They can also decide how to shape their decision-making process, often through retrospectives. Another core agile idea is that agile teams are independent and experts in their domain, capable of making decisions for themselves while gathering information and feedback from stakeholders (Alsaqqa et al., 2020; Beck et al., 2001; Brosseau et al., 2019; Moran, 2015). For Open Strategy, this suggests moving away from every stakeholder participating in every decision, towards incorporating relevant stakeholders in the strategic process, thereby decentralizing decision-making throughout the organization. The Premium Cola case (Luedicke et al., 2017) shows that even when everyone can participate, only a small minority of stakeholders engage in the decision-making process due to reasons like information overload, insufficient information, or disinterest. Therefore, it might be more encouraging to have stakeholders participate in decisions relevant to them. Spreading this practice throughout the organization would lead to decentralized strategic decision-making, ideally with rules and practices shaped individually by stakeholder groups.
Using Agile practices as an example, this could result in meetings with all relevant stakeholders, organized by the Agile team responsible for the topic. For top-level strategic decisions relevant to most of the organization’s stakeholders, a different decision-making process would be needed, allowing everyone to participate. One example, not further elaborated here as it’s not an Agile practice, could be a circular organization approach (Romme, 1999). For the dilemma of commitment (Hautz et al., 2017), these practices could increase commitment as all relevant stakeholders are always invited to the strategy process. The impact of participation should also increase, as stakeholder feedback is an inherent part of Agile methodology and should be considered in decision- making. The dilemma of empowerment (Hautz et al., 2017) would be resolved, as no one is burdened with strategy creation for decisions not relevant to them, but a wider range of stakeholders would be incorporated into the strategy process.
Last, inclusion and participation are closely linked. While participation involves stakeholders providing input, inclusion concerns the diversity of those involved and their motivation to remain engaged (Mack & Szulanski, 2017; Quick & Feldman, 2011; Vaara et al., 2018). For Open Strategy, this raises the questions: How can it be ensured that the decision-making process is inclusive? How can diverse opinions be encouraged? How can diversity and inclusion in Open Strategy processes be maintained? Agile teams foster inclusion and diversity by creating cross-functional teams. Instead of a team of six IT developers with similar backgrounds, a cross- functional team might include three IT developers, a marketer, a project manager, and a designer. This mix encourages diverse opinions and perspectives, increasing the inclusivity of an organization. Trusting and assigning responsibility to agile teams also enhances their intrinsic motivation to contribute their ideas and shape the organization (Junker et al., 2022; Moran, 2015). In Open Strategy, cross-functional teams could also help to incorporate more diverse opinions. The culture fostered in these teams encourages diversity and openness, which could be beneficial at a general level.
Scaling Open Strategy via Agile Methodologies?
The analysis of the challenges associated with scaling Open Strategy and the potential solutions offered by Agile methodologies raises a question: Does the described approach still qualify as Open Strategy? According to Vaara et al. (2018), in Open Strategy stakeholders should be integrated into the strategic decision-making process, ideally even shaping this process. Based on this essay, the definition could be expanded: Open Strategy is about integrating stakeholders into strategic decision-making processes relevant to them. Simply involving all stakeholders in the strategic decision-making process without any benefit is not inherently valuable. By introducing a relevancy filter, many of the limitations of extreme Open Strategy can be addressed. While this essay has highlighted some potential solutions from Agile practices, there may be other viable approaches.
Research on the intersection of Open Strategy and Agile is scant, and studies on Open Innovation and Agile are just beginning (Anes et al., 2023). This essay explores how Agile practices can complement Open Strategy and mitigate some of its challenges. Given the growing trend of both Open Strategy and Agile in organizations, this combined approach could benefit many attempting to implement these paradigms. This essay could serve as a foundation for further exploration of the relationship between Open Strategy and Agile, as both concepts continue to gain relevance. It would be particularly interesting to examine the extent of overlap between Open Strategy and Agile in terms of values and practices. Another intriguing question is whether Agile is simply another name for Open Strategy. Finally, conducting a field study on the implementation of Agile practices in Open Strategy and its effectiveness in addressing the identified challenges would be highly beneficial.
References
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