Application of Organizational Agility to Enhance the Predictability of Costs and Increase the Probability of Creating Value

Abstract

In order to create any value, an organization needs to incur costs. This article builds on the original concept of the ‘Cone of Uncertainty’ for costs. However, the focus of an organization should mainly be on value. To visualize value, the concept of a ‘Double Cone of Uncertainty’ is introduced. Organizations often focus on reducing costs instead of enhancing the creation of value because costs are easier to measure and in control of the organization. Value is harder to measure, and here the customer is in charge. In addition, value creation lies further in the future. The article shows, with IT development as an example, how organizational agility and emergent product development can enhance the predictability of costs by time-boxing with stable, multidisciplinary teams. Although organizational agility cannot enhance the predictability of value, it can enhance the probability of value with emergent product development and quick and frequent feedback from customers. This evolutionary process of trial and error is essential in complicated and complex fast-changing environments.