In this guide, we’ll learn about the importance of the agile, digital, hybrid organization. Then we’ll explore how these modern business ideas can help companies survive and thrive in today’s volatile marketplace.
As many business leaders have come to realize, new approaches such as these are not just advantageous in today’s fast-paced economy – they are necessary for survival.
To understand why, it is important to examine the state of the economy and how it will evolve in the coming years.
Trends Driving the Adoption of Hybrid, Agile, and Digital Models
Here are a few of the biggest forces driving organizational change in the modern economy:
Technology continues to evolve, opening up new opportunities for innovation.
When new innovations reach the marketplace, they frequently disrupt individual businesses, industries, and more.
Many in today’s business environment tend to focus on digital technology and the “digital revolution.”
Yet according to the World Economic Forum, there are three major trends underpinning the technology revolution:
- Digital technology. Digital technology refers to software and IT systems, which have become ubiquitous in the modern workplace. Without digital technology, companies will have a hard time competing in the modern economy – as we will see below, this fact should drive most companies to adopt new digital tools and processes.
- Physical technology. Physical technology includes technologies such as robotics, manufacturing technology, aerospace, and so forth. Though technology in this field takes longer to research and develop, it will have a very profound impact on the economy in the coming years.
- Biological technology. Biological technology, such as genetic editing and pharmaceuticals, will receive more investment in the coming years. When combined with the other two technology trends mentioned above, we can expect to see major changes in the marketplace, as well as our daily lives.
Though physical and biological technologies have yet to really impact the marketplace, in the coming years, we can expect to see more and more innovations in these areas. And as those innovations arrive, they will inevitably bring about more change to the business landscape.
The COVID-19 Pandemic
The pandemic has significantly impacted the modern economy, and its effects will undoubtedly be felt for years to come.
In fact, according to some experts, these changes will permanently alter the trajectory of the economy and the world as a whole.
McKinsey, for instance, suggests that it will bring about fundamental changes to the social and economic order of the world.
Research firms such as McKinsey predict that the COVID-19 pandemic will result in:
- Changes to customer needs, expectations, and behavior. Over time, it is only natural that customer expectations change. In part, these changes are due to long-term cultural changes and mindset shifts. Yet they are also driven by many other factors, such as digital innovation and disruption.
- The acceleration of digital transformation. During the pandemic, many industries suffered significantly. But certain fields, such as remote working software and telehealth, have experienced major growth. To keep up, it is important to seriously consider accelerating one’s own digital transformation agenda.
- More resilient business processes, practices, and models. The COVID-19 pandemic has revealed many vulnerabilities in current systems and processes. Supply chains around the world, for instance, experienced major disruptions during the pandemic, and steps are being taken to boost their resilience and performance in the future.
- A greater need for agility and adaptability. Change will become a constant in the post-COVID age. To survive and thrive in such a dynamic economy, agility will not just become advantageous, it will be essential for success.
“The next normal,” as McKinsey dubs the post-COVID era, will ultimately require new ways of thinking and conducting business.
For that reason, companies be prepared to undertake major organizational changes when preparing for the era after COVID-19.
People drive the marketplace, the workplace, the economy, and much more. In short, people lie at the center of the business world, and changes that affect people will inevitably affect the business environment.
Today’s business environment, for instance, is becoming more socially and environmentally conscious. This type of environment unsurprisingly fuels the growth of certain trends, such as hybrid organizations with a social mission.
In the coming years, business leaders will need to pay attention to shifting human dynamics, affected by trends such as:
- Customer expectations, needs, and behavior. Customer expectations will shift, as mentioned above, due to long-term cultural changes, technological advancements, and so forth. To adapt, organizations will need to adopt a number of approaches, such as implementing a hybrid organizational structure or agile workflows.
- Geopolitics, both globally and locally. Geopolitical relations always exert an influence on organizations’ ability to operate. Positive relations typically improve business prospects, while negative relations can disrupt supply chains, interfere with customer relationships, and more.
- The increasing role of digital and virtual technology. The more that people use digital technology to communicate, the more it will impact the way we behave and communicate. Social media, for instance, has significantly affected the way businesses relate to customers. In the near future, we can expect to see other technologies enter the mix, such as virtual reality and the Internet of Things (IoT).
Citizens, employees, and customers will all feel the effects of these changes – in order to deliver positive experiences and services, organizations must understand these shifting dynamics and plan accordingly.
Conclusion: Changing Environments Demand Organizational Change
There are many types of organizational change, such as:
- Business process redesign
- Culture change
- Organizational transformation
Since, according to many experts, we are entering a completely new economic paradigm, business leaders must be prepared to make major changes.
In some cases, organizations may need to make deep cultural shifts or even transform the company from the ground up.
In other cases, it may be enough to adopt new digital technology and make a strategic pivot.
Regardless of the depth of these changes, however, it is important to prepare for a “new normal” and adopt modern business practices – companies who do will stand a much better chance of leading in the coming months and years.
How Hybrid Models and Other Business Models Fuel Success
Digital technology has not only enabled new ways of working and communicating, it has also given rise to entirely new business models and structures.
Below, we will look at fusing three types of organizational models: hybrid, agile, and digital.
- Hybrid organizations implement missions and ideas from multiple sectors, pursuing, for instance, a social or environmental mission in addition to their commercial aim
- Agile organizations focus on business practices that are responsive and reactive, which are fundamental to swift reaction in today’s fast-paced world
- Digital organizations leverage technology to maximize organizational effectiveness, product value, employee productivity, and more
Each of these approaches has its own advantages, disadvantages, and considerations, and one is not necessarily better than another.
Instead, each company should understand its own needs and circumstances, then adopt the approaches most suitable.
Let’s start by examining the hybrid organization.
The Hybrid Organization: Frequently Asked Questions (FAQ)
To better understand the hybrid organization, let’s answer some of the most commonly asked questions about this business model.
What is a hybrid organization?
Many define a hybrid organization as one that pursues both financial and social objectives.
Social entrepreneurs, for instance, build for-profit companies that also aim to fulfill a social mission.
A company that employs and provides training to underserved communities, for instance, would be one such example. Its social mission would be to support underresourced areas, while it would also be obtaining profit through its central business model.
Most definitions are built around this idea of combining social missions within the main corporate mission, though there are other definitions.
A state-owned enterprise that competes in the marketplace, for example, could also be considered a hybrid organization.
What are the benefits and drawbacks of hybrid organizations?
The advantages and disadvantages will depend on the organization, its circumstances, its stakeholder groups, and which sectors are overlapping.
Disadvantages of this organizational structure include:
- Increased potential for tension and conflict
- Confusing messaging for customers and stakeholders
- Less efficiency
- Longer growth curves
Advantages, however, include:
- Having a positive impact on a specific area of society
- More job fulfillment for employees, resulting in greater engagement and performance
- A unique competitive differentiator, which can improve business performance
In some cases, hybrid organizations occur naturally, while in other cases, they are created deliberately.
Given the uniqueness of this organizational structure, it is important to understand the potential advantages and disadvantages, regardless of whether the hybrid structure is intentional or not.
When is it appropriate to adopt a hybrid structure?
Most business activities are viewed as investments.
Namely, business activities come with costs, risks, and rewards.
This perspective should also be taken into account when considering hybrid organizational structures.
A social mission adds a non-profit motive that must be implemented in concert with the profit motive.
In other words the two are interdependent and should not be viewed as mutually exclusive or in conflict – after all, an organization’s ability to execute its social mission depends directly on its profitability.
For that reason, it is important to examine other business models that enhance organizational effectiveness, whether or not the organization adopts a hybrid structure.
Below, we will look at a few other ideas that can enhance organizational effectiveness.
Before we do, however, it is important to clarify an important semantic detail about hybrid organizations.
Hybrid Organizations vs. Hybrid Organizational Structures
As with many business terms, certain words can be used interchangeably or ambiguously.
This is true for hybrid organizations and hybrid organizational structures.
Here are a few important points to keep in mind when using these terms:
- An organizational structure refers to the way in which business units are organized
- A hybrid organization refers to an organizational model that combines the characteristics of several sectors, such as non-profit and for-profit
- A hybrid organizational structure refers to a type of organizational structure that mixes two other organizational structures: functional and divisional
Also, it is worth noting that some people confuse hybrid organizations with social enterprises.
Social enterprises are organizations that explicitly pursue a social mission, and in many cases, social enterprises are hybrid organizations. And they may have hybrid structures.
However, despite the name and despite their social mission, some social enterprises operate much more like non-profits or commercial enterprises than they do hybrid enterprises.
These details may seem minor, but they are important – especially for any business interested in pursuing a social mission or restructuring the organization.
Hybrid Organizational Structures vs. Common Business Structures
Let’s see how the hybrid organizational structure compares to other organizational structures:
- Function. A functional structure is perhaps the most familiar and common organizational structure. In this model, employees and departments are grouped by their specialties, such as marketing, IT, and HR.
- Division. Divisions are geared towards a specific market, product, or service. For instance, a company with separate geographical divisions is following a division-based structure.
- Matrix. This structure combines both of the above structures into a grid. Decision-making is less centralized and teams often have more independence, which can improve many employee metrics. It opens the door, however, to increased conflict and overhead.
- Hybrid. Hybrid structures mix functional and divisional structures as needed. Some teams may be separated into functional units, while others may be grouped into divisions. This structure offers a great deal of flexibility for certain types of organizations, such as large enterprises with multiple locations.
Each model has its pros and cons, which should be weighed carefully when proposing a restructuring program.
In some cases, it may be beneficial to implement a hybrid structure – such as when the founders want to pursue a non-profit mission in addition to a for-profit mission.
In other cases, an organization’s leadership may decide that a more “traditional” organizational structure is best.
Whether choosing a hybrid structure or another structure, it is important to ensure that the business stays relevant to today’s fast-paced digital economy.
For that reason, it is important to incorporate agile, digital principles into the design of the business.
The Agile Organization Model
Hybrid organizations structure business processes around multiple stakeholder groups or missions, but agile processes and structures are built around a set of business principles.
Though agile is a business methodology and philosophy, it actually does share certain characteristics with hybrid.
Flat organizational structures, for instance, could be viewed both as an agile trait and a hybrid organizational structure.
Those who carefully examine the philosophical underpinnings of both frameworks may find other similarities – such as a greater emphasis on customers and collaboration.
However, it is important to note that agile is primarily a business approach.
Agile is a business methodology that can be applied to virtually any area of an organization, from individual departments to the entire organization.
Unlike business models that are older, more traditional, and more bureaucratic, agile emphasizes the need for adaptability.
Agile emphasizes the need for:
- Incremental, ongoing improvements
To achieve these goals, agile business processes follow a different workflow from, for instance, the waterfall approach (see below).
In agile software development, product creators will follow a series of steps such as planning, analysis, design, building, testing, and deploying.
These steps are then repeated as the product is refined and new features are released.
Agile Practices and Processes
Software developers who use the agile methodology will also implement mechanisms and processes such as:
- Scrum. Scrum is an experimental approach to product development or knowledge work, which is based on the development, testing, and adjustment of hypotheses.
- Extreme programming. This type of agile software development approach focuses on five specific values: communication, simplicity, feedback, courage, and respect. These are then applied through a range of practices and mechanisms, such as pair programming and continuous integration.
- Test-driven development. Test-driven development approaches include software testing as an essential step in the product development process. Tests are carried out, then coders will improve and refactor, then continue with testing in order to build out the product over time.
- Pair programming. Pair programming is a style of programming where two coders work together on a project. The aim is to improve collaboration, communication, and teamwork, while also enhancing creativity and efficiency.
- Stand-up meetings. Many agile development teams maintain a daily schedule of “stand-up” meetings, where every member of the team describes what has been completed, which obstacles need to be overcome, and their immediate plans.
- Sprints. A sprint represents a time frame, an iteration, or a “timebox.” These are set periods of time, often a few weeks, where the team focuses on building and testing specific parts of the product. Those iterations are then repeated throughout the product development process.
Agile became widespread and well-known within the software community, but it has been applied to many other areas of business, as mentioned above.
Among many other disciplines, for example, we can find:
- Agile manufacturing
- Agile change management
- The agile supply chain
- Organizational agility
Agile business methods can be applied in virtually any business context or situation, and they can offer significant benefits wherever they are used.
In contrast, however, hybrid organizational structures are often a matter of personal choice and can only be applied in specific circumstances. Organizations with two stakeholder groups or who want to include a non-profit motive, for instance, can benefit from a hybrid structure.
Many experts feel, however, that organizational agility is a basic requirement for success in the modern era and that it will become even more essential moving forward.
Since agile methods are compatible with the other approaches covered here – and since agile offers so many advantages in a volatile economy – business leaders should seriously consider applying these concepts in the coming months and years.
Digital Organizations 101: Key Concepts and Definitions
Digital organizations are built around, as the name suggests, digital technology.
Like agile, digital-first business approaches do affect the organization’s processes and its structure.
However, like agile, digital is compatible with the hybrid organization. This means that an organization can be built around all three principles: hybrid, agile, and digital.
Finally, to reiterate, hybrid organizational structures are often a matter of choice or context, and they are often not necessary for many organizations.
Digital technology, however, drives the modern economy and acts as the machinery of the modern enterprise – businesses that don’t adopt digital technology will find it very difficult to succeed.
A digital organization does more than just implement new software. Becoming digital requires deep organizational changes that impact every area of the business, from strategy to processes.
To become a digital-first company, it is important to focus on multiple dimensions, such as:
- Digital transformation. Digital transformation refers to the use of technology to enhance existing business processes, products, or services.
- Digital adoption. In order to realize technology’s value and drive transformation, it is important to fully adopt, utilize, and integrate tools in the workplace.
- Digital maturity. Digital maturity refers to an organization’s overall digital capabilities, including not only its tools, but also its processes and its people.
- Digital culture. A company’s culture directly affects employee productivity and performance, which is why it is important to create a culture aligned with both the company’s values as well as its digital tool set.
- Digital savviness. The wider the digital skills gap, the less productive employees are, which is why it is important to train employees and maintain digital savviness throughout the workplace.
Becoming a digital company is not the same as becoming a tech company, of course.
Organizations don’t need to specialize in software, but they do need to learn how to integrate digital technology at every level of the organization.
“Going Digital” Is Necessary for Success
However, since digital technology runs the entire economy, businesses have little choice in the matter – they must “go digital” in order to succeed and stay profitable.
There are several reasons why digital transformation must become a top priority for the modern business:
- Digital maturity will be a prerequisite for success in the digital economy
- Digital organizations are more efficient, effective, resilient, and profitable
- The most digitally savvy companies will become leaders in their space
Since volatility and change characterize today’s economy, it is more important than ever to begin digital transformation efforts sooner rather than later.
How to Become a Digital Business
All of the concepts covered above should take center stage when developing a digital transformation strategy.
Here are a few tips to follow when formulating a plan:
- Set digital maturity as the strategic north star
- Create a digital adoption function
- Develop a roadmap for agile transformation
- Accelerate change to keep pace with the evolving economy
With a solid strategy and organizational change plan, it will be possible to improve organizational effectiveness, agility, and resilience.
When discussing such change agendas with business leaders, however, advocates for change will often run into resistance. That resistance is often understandable, since change involves risk and uncertainty – yet in today’s dynamic economy, not changing is usually the riskier option.
Tips for Building Agile, Digital, and Hybrid Organization Structures
Restructuring or designing an organization is no easy task, which is why it is so important to plan carefully.
This is especially true with hybrid organizations, which, as mentioned, bring about both a unique set of opportunities and challenges.
Let’s look at a few ways to maximize organizational performance when developing new structures.
Tips for Building a Hybrid Organization and Structure
Here are a few tips to keep in mind when designing a hybrid organization – or a hybrid organizational structure:
- Flatten the organizational structure. Top-down organizational hierarchies are common, but flatter structures can improve autonomy, decision-making, speed, and innovation.
- Adopt missions that support customers’ needs. When pursuing a social mission, one important area to focus on is the customer base. Correctly matching a social mission with the customer base can produce positive results, while mismatching the audience with the mission can have the opposite effect.
- Fully align the organization’s values. Hybrid organizations, as mentioned, can produce conflict when command structures or organizational priorities are in conflict. It is therefore important to fully align internal values by, for instance, improving organizational communication and cultivating an appropriate organizational culture.
- Leverage the other practices covered in this article to improve outcomes. Agile and digital-first business approaches can offer significant performance benefits to any organization, including hybrid organizations, social enterprises, and commercial-only companies.
This last point is important, since the best organizations – hybrid or not – will be those that can stay current and relevant in the digital era.
How to Improve Organizational Agility
As with the other organizational changes covered here, it takes time, planning, and effort to become an agile organization.
Let’s look at a few ways to improve a change program aimed at improving agility within a business:
- Pilot test, then expand. A traditional company with no experience in agile should not attempt a rapid overhaul. Instead, it can be useful to adopt a methodical, test-driven approach. By piloting programs in small increments, managers can gather data, learn, and then expand their efforts across the company.
- Manage organizational change. Managing change can significantly improve the rollout of agile processes, as discussed below. A properly managed program can get better results in less time and at a lower price tag.
- Continually adapt and learn. Agile thinking should become a fundamental principle at every level of the organization. This means that managers should continually learn from their efforts and make adjustments as needed.
Adaptability not only improves an organization’s ability to react well to external circumstances, it also improves the company’s ability to adjust to internal needs and demands.
In a hybrid organization, this adaptability can prove essential when resolving potential tensions or conflicts. And in a digital organization, that agility can help workers adopt new tools and processes more easily.
Best Practices for the Digital Enterprise
Fully digital enterprises build digital capabilities across multiple dimensions, as mentioned above. Not only is it important to implement tools, it is crucial to adopt new workflows and train employees on how to use those tools.
Here are a few points to keep in mind when pursuing digital transformation agendas:
- Focus on the workforce first. Software ROI depends directly on the workforce. To keep the workforce engaged and productive, for instance, it is important to train employees and cultivate a digitally-friendly workplace culture.
- Maintain a digital-first business strategy. Digital technology will continue driving the economy in the foreseeable future. To survive and thrive in that economy, it is important to leverage digital technology as much as possible. This means that businesses should not only stay digitally mature and digitally savvy, they must also put technology at the forefront of their strategies.
- Become a digital leader. Digital leaders have the opportunity to become dominant in their industries, outshine competitors, and build great relationships with their customers. By focusing on digital transformation and adoption, companies will fare much better in tomorrow’s technology-driven future.
Change rarely comes easy, and if change is improperly managed, it can very easily result in failure.
Change management is one of the best ways to avoid that problem, as we’ll discuss next.
Change Management to Achieve Organizational Change
Change management is a business discipline dedicated to improving the outcomes of organizational changes and transformations.
Among other things, change managers focus on:
- Designing, managing, and leading organizational change programs
- Monitoring and adjusting change projects as they are implemented
- Overcoming barriers to change, such as employee resistance
- Improving the efficiency and effectiveness of a change program
- Developing change management communication strategies
There are clearly a number of benefits to managing organizational change programs.
Perhaps the most important, however, is the fact that change management can improve a project’s chances of success. Not all change projects succeed, after all, and failed change programs can be very costly.
Given the risks and rewards associated with major changes, such as organizational restructuring, it is important to take a structured approach to change.
Organizations that have no enterprise change management can find several ways to introduce this function into the business:
- Hiring an experienced change manager
- Outsourcing change management to a consultancy
- Training existing employees
Large enterprises or high-growth companies may choose to adopt several approaches at once.
By hiring consultants and training existing staff, for instance, the company can take advantage of outside expertise while simultaneously building in-house talent.
Regardless of the exact method taken, what is most important is taking a structured approach to change, as mentioned. Structured change management can dramatically improve an organization’s chances of becoming hybrid, agile, digital, or all three.
Final Thoughts: Which Is the Best Organizational Structure?
No organizational structure is “best,” per se.
Instead, organizations must develop a structure that works for their mission – or missions – then adopt the business models that are most suitable.
A hybrid organization with a social mission, for instance, may find that a flattened hierarchy works best. Other organizations may prefer a structure that is more traditional.
Regardless of the organization’s mission or its hierarchical structure, however, every business can benefit from implementing agile methods and digital-first business practices.
In the coming years, the world will change more quickly and it will become more and more technology-driven, fueling the need for organizations that are both digital and agile.