Can big firms be entrepreneurial? Some speakers at last week’s Drucker Forum in Vienna Austria spent time talking about what firms could be doing, or should be doing to operate entrepreneurially. The panel in our session at the Forum spent most of our time discussing what some big firms are already doing. Our hypothesis was that the future is already here: it’s just very unevenly distributed. This two-part article is a deep dive into what we learned.
The panel began with the findings of the site visits by the SD Learning Consortium (SDLC) in 2016 to some large organizations that are implementing Agile and operating entrepreneurially at scale, including Barclays, Cerner, C.H.Robinson, Ericsson, Microsoft, Riot Games and Spotify. (The full report of the SDLC is available here.) The panel included Joakim Sundén (Spotify), Vanessa Adams (C.H.Robinson), Gary Hamel (Management Innovation eXchange) and myself.
The second part of this article will cover the fascinating discussion that ensued with Gary Hamel and the panel.
Some Examples Of Agile At Scale
Steve Denning: Some speakers at the Drucker Forum have been skeptical as to whether it is even possible for big firms to act entrepreneurially or become Agile. In a way, they are like those people who for thousands of years were convinced that all swans are white: a black swan was a contradiction in terms. Even when they learned that black swans did exist in the Antipodes, it took some time for them to accept that fact.
I’ll begin with a couple of examples of black swans that we encountered during the site visits over the past year.
The first is Ericsson—(a 140-year old Swedish firm with around 100,000 employees. Among many other things, it manages networks for the world’s telecommunications companies, covering 40% of the world’s mobile phone traffic. In 2011, this unit in Ericsson with several thousand people embraced Agile. Before 2011, Ericsson would build its systems on a five-year cycle, with a unit housing several thousand employees. When the system was finally built, it would be shipped to the telecoms and there would be an extended period of adjustment as the system was adapted to fit their needs. Now with Agile management, Ericsson has over 100 small teams working with its customers’ needs in three-week cycles. The result is faster development that is more relevant to the specific needs of the customers. The client gets value sooner. Ericsson has less work in progress. And Ericsson is deploying one to two years earlier than it otherwise would, so that its revenue comes in one to two years earlier.
The second example is Spotify a rapidly growing, 8-year old music streaming company with more than 2,500 staff and more than 100 million active users globally. In 2015, a small team in Spotify had an idea to solve a long-standing problem: how could users find the music they would really love in a library of millions of songs? What if, they asked, they could completely remove the friction for you as a user by using an algorithm to match your tastes with the several billion playlists created by other users and deliver a fresh playlist to you weekly? The team didn’t need a whole lot of ROI analyses or go up a steep hierarchical chain to get management approval to change the firm’s strategic plan. In an Agile setting, it was quick and easy for the team to carry out a series of tests. When the innovation, now known as Discover Weekly, was deployed just a few months later, it was a wild success—becoming not just a new feature but a global brand, resulting in an influx of millions of new users. The Discover Weekly team is just one of more than 100 small teams at Spotify, which has deployed Agile approaches to all work since its inception in 2008.
Barclays is a 326-year-old transatlantic bank with around 130,000 employees. In 2015, Barclays announced that embracing Agile was a key strategic initiative and encouraged hundreds of teams to become champions of an Agile transformation. There are now more than 800 teams that are part of an organization-wide Agile transformation that is aimed at enabling Barclays to deliver instant, frictionless, intimate value at scale.
Microsoft is a 41-year organization, parts of which implementing Agile and Lean. Earlier in the Drucker Forum, Gary Hamel mentioned the complaints of Microsoft’s own employees that emerged in 2007 when Windows Vista was offered to the public. In 2007, Microsoft was releasing Windows in three-year cycles with little possibility of feedback from users. Today, the situation is very different. Since 2014, Microsoft Windows10 has gone through a remarkable transformation. It is now getting feedback from an active user group of more than 7 million users and is issuing updates weekly—a game-changing acceleration. Quite apart from customers: when staff see their ideas implemented within days instead of years, it has a huge benefit for staff morale. Other parts of Microsoft such as the Developer Division and Skype are also implementing Agile.
These examples, which were identified in the 2016 site visits of the SD Learning Consortium (SDLC), are not isolated experiments in those firms. In each case, they are part of large-scale implementations of an entrepreneurial approach to running the organization with continuous innovation.
The SDLC members range in age from 8 years to 326 years. The firms, or large units within these firms, operate globally and have been on their journeys mostly for five years or more. Some of the firms were “born Agile” while others are engaged in transformation from top-down bureaucracy. Some of the firms are in fast-growing sectors like e-sports or music streaming, while others are in mature sectors like banking.
Each of the site visits included more than ten people observing what each company has done and then exploring in greater depth the issues that were uncovered. After the visits, the member firms got together for several days to review what had been learned and identify common themes. Those common themes and findings are reflected in full report available here. Each firm is sharing what is learned within its own organization in order to spur enhanced implementation of entrepreneurial goals, principles and practices on a continuous journey of discovery.
The Best-Kept Management Secret On The Planet
In some ways, Agile may be the best-kept management secret on the planet. It has been under way for over fifteen years. There are now hundreds of thousands of Agile practitioners around the world and tens of thousands of organizations implementing Agile. Yet many general managers know little about it.
One reason for that is that Agile movement got going in software development in 2001—an unexpected place for management innovation. The neglect of Agile is now changing as Agile is being embraced by all parts, and all kinds, of organizations, as noted in the Harvard Business Review article in April 2016, “Embracing Agile,.” which said:
“Now agile methodologies—which involve new values, principles, practices, and benefits and are a radical alternative to command-and-control-style management—are spreading across a broad range of industries and functions and even into the C-suite.”
The Agile movement is driven both by the passion of those who love working this way and by managers who recognize that survival in an unpredictable and rapidly shifting marketplace requires a capacity to adapt equally rapidly.
The Four Main Themes Of Agile
Although the SDLC site visits revealed many variations in managerial practices, and different labels applied to what was being done, SDLC members noted a striking convergence around four themes:
• Delighting customers: An obsession with continuously adding value for customers and users. Basically firms now have to generate instant, intimate, frictionless value at scale, anywhere, anytime, on any device. This is more than an increased attention to customers: it is a shift in the goal of the organization—a veritable Copernican revolution in management.
• Descaling work: A presumption that in a volatile, complex, uncertain and ambiguous world, big difficult problems need to be disaggregated into small batches and performed by small cross-functional autonomous teams, working iteratively in short cycles in a state of flow, with fast feedback from customers and end-users.
• Enterprise-wide Agility: A recognition that, to be fully entrepreneurial, the whole organization needs to embrace the entrepreneurial mindset so that the entire firm functions increasingly as an interactive network. Agile is not just for IT: it is a change in the way that the whole organization thinks, is led and managed.
• Nurturing culture: A never-ending commitment to actively nurture, and systematically strengthen, entrepreneurial mindsets and behavior throughout the organization.
The SDLC members believe that pursuit of all four themes is key to sustaining the embrace of Agile. Individually, none of the observed management practices are new. What is new and different is the way that Agile management goals, practices and values constitute a coherent and integrated approach to continuous innovation, driven by and lubricated with a pervasive entrepreneurial mindset.
For some critics of Agile, the passion with which both managers and staff pursue an Agile approach to management is confused with zealotry or with the mistaken belief that Agile is being presented as a panacea. As you will hear in the following presentations, Agile itself not only offers many implementation challenges. It also does what bureaucracy never even attempted: it mobilizes people’s energy and enthusiasm and generates meaning both at work and in work. It goes beyond the small-minded virtues of efficiency and reliability and draws on the large-hearted virtues of the human spirit: generosity and creativity.
Agile At Riot Games
One of the site visits was to Riot Games, the largest e-sports firm in the world. Joakim Sunden, a technical leader at Spotify, will tell us not so much about how wonderful Spotify is, but rather about the site visit to Riot.
Joakim Sundén: Riot Games is an e-sports company that aspires to be the most player-focused gaming company in the world. They currently have one game in production, League of Legends, a team-oriented action and strategy game or Multiplayer Online Battle Arena. The game has dominated the online market since at least 2012 and is the biggest online PC game in the world with more than 67 million monthly active users, 27 million per day, and over 7.5 million concurrently during peak hours.
E-sports is big business. There are professional leagues for League of Legends, just as in football. There are professional players with salaries. The world championship of League of Legends is now bigger than the US Super Bowl. The first prize is five million dollars. E-sports “athletes” can get visas to compete in the competitions and there are scholarships at universities. There are even issues of doping and the use of performance-enhancing drugs, just as in regular sports. For people under 35, e-sports is now more popular on television than live sports.
Riot was founded in 2006 and has 2,500 staff with 15 offices all over the world, from their biggest main office in Santa Monica in the West to Tokyo in the East. Riot Games is a popular employer (e.g. #13 on Fortune’s list of 100 “Best Companies To Work For”), they were Agile from the start and have a trusting culture and decentralized way of operating.
The Riot Games culture: Culture is one of the most important factors why people work at Riot Games. One Rioter explained that Riot culture comes from the experience of being burned by a different culture where managers would say, “You have to do this”. “Here at Riot, you can’t tell anyone to do anything. And that’s not a joke!” Instead, you have to sell it to them. Instead of telling them what to do, it’s all about the mission and player focus.
Mission and player focus: Another key aspect of the Riot Games culture is the laser-sharp focus on their number one target user: “We are defined by our audience: core gamers.” That is also expressed in the company mission statement, “To be the most player focused game company in the world”. You can wake up any Rioter in their sleep and they can repeat it. People typically mention it 10-15 times a day in conversations. It’s actually so important that it’s a requirement when hiring for almost all roles to be a hardcore gamer, although exceptions are made for those with a particular expertise.
People we met at Riot Games often made reference to the mission and the players:
• “This is part of our player promise, so we need to…”
• “If you put something in front of players, you should…”
• “We got to get it into players’ hands before pre-season!”
• “If it doesn’t have a consequence for the player we shouldn’t do it!”
• “How player focused is she?” (Asked in Performance review)
The culture at Riot Games is a sharp contrast with the bureaucratic culture that Gary Hamel was talking about earlier in the conference, where people are just following rules and filling in roles. When Rioters are asked to do something, even follow new policies or guidelines, they will ask themselves if it’s going to help them deliver value to the player. If you can convince them that it is, they will probably do what you say. Otherwise they are likely to speak up and say: “I don’t think that will help the player experience.”
One example is that they don’t do budgeting, only forecasting exercises. If you need to hire people you just go ahead and do it. If you’ve done your homework, and can answer all questions, you’re fine, even if you have already “used” all your forecast headcount.
Another example of this trust and autonomy is how the development manager coordinator we met had produced a video explaining the Development Manager role by internally recruiting people and procuring what she needed without having to seek approval.
Here is the way one Engineering Director puts this: "Your good idea must survive the crucible of socialization to become great. What this means in many cases is that we take a Product Management stance for organizational development: we must understand who is the arbiter of value and how to realize that value.”
To really get to know the players in one of their biggest markets, Riot has installed Korean style Internet cafés, complete with vending machines with Korean snacks, where they encourage everyone to play. Through this, they discovered early on that some features that they thought were important didn't make sense, (e.g., online chat), or proved difficult to use in that environment, (e.g., because players were using a shared computer.)
Crowd-sourcing ideas: It was interesting to hear Gary Hamel talk about crowd-sourcing ideas. Riot Games has a well-defined “Request For Comment” (RFC) process. Anyone can make a proposal for a change. It could be a technical or architectural change, but also an organizational or process change. An RFC is submitted to a central repository. There is an open comment period. Depending on the type of decision, it can either automatically pass, if there are no objections, or it will go to a small group of people who would make a final decision informed by the process. The decision is then communicated across all development teams.
The RFC process is a way to leverage wisdom of the crowd while at the same time socializing change and empowering all. The actual structure and governance depends on the type of interaction you desire and the mechanism for formalizing the decision. In a well-crafted system, the best ideas will survive regardless of whose brain they emerged in. Yet, for organizational governance, there may be a small group that harvests these ideas for operations and final approval.
All recently-approved and ongoing RFCs are published in their Engineering Weekly newsletter. These newsletters are also put up in all bathroom stalls.
Overall, the mission clarity and customer focus at Riot is compelling. It gets people to rally around. The user empathy and customer focus is remarkable. The socialization philosophy of change is pervasive throughout this remarkable organization.
Agile At C.H. Robinson
Steve Denning: Now let’s hear from Vanessa Adams about the Agile transformation at a seemingly very different organization: C.H.Robinson. C.H.Robinson is s not a fresh young firm like Riot Games or Spotify. It’s 111 years old and was born in the mid-West of the USA.
And what’s its business? Well, if Uber is a firm that arranges the transport of people even though it doesn’t own any cars, C.H.Robinson is a firm that arranges the transport of goods, even though it doesn’t own any trucks or ships or plans. It’s a transport brokerage firm. It connects people who want to ship something with people who want to receive something. It does that on a very large scale and it has had a large Agile transformation under way for about five years.
Vanessa Adams: Yes, C.H. Robinson is logistics and supply-chain services company. We manage the transportation of freight globally for 110,000 customers; moving goods via truck, rail, ocean and air around the globe. I am in the upper middle layer of management there, and I participated in all the site visits to Spotify, Riot Games, Barclays and the other firms and I am thankful for that.
I joined C.H. Robinson in 2000 when our IT shop was smaller. In those days, we were on a first-name basis with our business leaders.
Since then, we have grown our IT department tenfold and software has become central to our business. With that growth came the challenges of scaling. At first, we did what many organizations have done to cope: we added bureaucracy. As usual, innovation slowed, buried under the weight of the added processes. Our once-close partnership with the business suffered and we began to fall behind. The magic I felt early on with Robinson faded. I began to wonder whether this company that I loved so dearly could possibly get back to the way it was when I joined in 2000.
This is where Agile enters the story. In 2011, I attended a conference. The main topic was Agile. I started to see why we were having some of the issues we were having. I left the conference with the belief that a journey to Agile could be the cure for what was ailing us. I immediately brought in coaches and consultants and they began to teach us how to “do agile.” I thought this was going to lead us to a better place. In reality it was a lot of pushing and pulling.
Change in a large organization is never easy. We started to see the benefits of Agile but instead of the door being kicked open, it was only open a crack. Despite the Agile practices that we had introduced, we were bogged down once again in more practices and procedures. I still believed in Agile, but I could see that we weren’t realizing the full benefit. But we couldn’t see where or why we were stuck.
In 2015, we heard about the Learning Consortium and we decided to join. Initially I was curious but skeptical. I wasn’t sure that what we could learn about the challenges we were facing from companies that were very different from us.
But after our first set of site visits, I changed my mind. I was really excited. At Ericsson, I was impressed with the amount of transparency that they were willing to share with us. We didn’t sit in a conference room all day. We met with people who were actually implementing Agile and they were very open with how they were dealing with the same kinds of problems that we were concerned about. I walked away with renewed confidence, knowing that we could aggressively move forward with some of our ideas. I was now armed with the shared knowledge of what to avoid and what would work.
This was just one of the IT groups at Ericsson with over a thousand people and their progress was inspiring. They were able to execute some of our ideas even though they were almost twice our size, and I saw it first-hand. It actually worked!
From the site visits, I could now see why C.H.Robinson was stuck. We were in the beginners’ rut of “doing agile” instead of “being Agile.” We were going through the motions; training, education, processes, tools, ceremonies, and iterating over and over again. That was where we needed to start our journey. But let me be honest: it was far from our destination. We still needed break through and solve the complexities we were facing. Our IT department was 600 strong and we had large multi-year projects and commitments. All of our problems came back to one basic issue: we needed more of a shared Agile mindset across the whole group.
I couldn’t wait to share the Ericson story with my peers and the CIO. So I decided to get him on board to join the next site visits of the Learning Consortium. I explained the opportunity that it represented. As I expected, I immediately got an eye-roll followed by a big sigh and several more eye-rolls. At one point, his pupils fully disappeared in an eye-roll. I stuck to my guns and I got agreement, or more precisely, a begrudging “Fine.”
A month later, I found myself on a plane to California with our CIO for the next round of site visits. I have to be honest: I was really nervous. Here I was, visiting Microsoft and Riot Games with my CIO. But after all, Microsoft? I hadn’t thought of them as being Agile. And Riot Games? A gaming company, what could we possibly learn from a gaming company?
I am not a gamer. I didn’t know anything about Riot Games. I was somewhat encouraged when a good friend asked where I was traveling to. I said Riot Games, and he said, “You mean, The Riot Games?” That reassured me that that maybe we were on to something really special.
The site visits to Microsoft and Riot had a profound impact on us. We were amazed at what Microsoft had accomplished in terms of of agility and I would encourage you read the Forbes article, “Surprise: Microsoft is Agile,” which lays it all out.
In addition to a great Microsoft visit, we were astonished at how a gaming company like Riot Games could actually bring a lot of value to our 111-year-old logistics company. We learned that Riot doesn’t even talk about Agile: they focus on their culture and putting the customer in the center of everything they do. As a result, the same CIO who was rolling his eyes at me and assuming it was a waste of time was the same CIO who ended up hugging the Director at Riot Games for giving us the time. In Minnesota we don’t hug, so that tells you something.
So you may be asking yourself what our participation in the Learning Consortium has done for us. We made changes by creating smaller cross-functional teams that could deliver value with minimal cross-team dependencies. We went from an average of eighteen teams needed to accomplish milestones to cross-functional teams that were able to deliver something of value without complex dependencies. We are now consistently delivering value to our branch offices and our customers on a regular basis vs a multi-year timeline. We went from quarterly releases to releases each day.
Our newly-released mobile app was designed for and built by our customers: the carriers. We constantly met with carriers them to get their feedback and ensure that we delivered into their hands an app that would truly make a difference in how they work and live. We stopped talking about the tools and processes of Agile and we focused more on constantly learning and evolving and adding value to customers.
In the process, we found that we were recapturing what we had lost: the elements that had originally made Robinson a truly special place for me. We were back to the close partnership with our business and the immediate feedback showing that we are making a difference.
Agile is not just for IT: We also saw that Agile isn’t just an IT thing. This past May, C.H. Robinson leaders around the world joined us for a two-day conference in which the director of Riot Games spoke and facilitated a group discussion focused on the Agile mindset. Our business leaders who used to meet with us quarterly—if we were lucky—are now meeting with us on every two to four weeks and our entire planning process has changed. It’s not that we have arrived or that we have no skeptics. But we are continually inspecting and adapting and making progress. So I now know that Agile transformation at scale is possible.
Agile for HR: Furthermore, our HR department was highlighted in the Harvard Business Review entitled, “Embracing Agile.” They looked at the successes that we were having in IT and decided this powerful new way of working would help them move faster and deliver their services better and sooner. They understood the way organizations have traditionally managed large personnel initiatives is too slow and rigid in today’s hyper-competitive business environment. They have broken their work down into smaller pieces that can be delivered incrementally.
Agile for marketing: Also, our marketing department is undergoing their own Agile transformation as we speak. Our business executive leadership, HR, and marketing teams are all on their own journey to Agile. Agile is not an IT-only thing. This is a movement that transcends departments and roles. In the end, it’s about making the whole organization Agile.
Perhaps the two most important things that I have gathered from the site visits of the Learning Consortium are these.
First, the Agile mindset. Agile isn’t about the tools or processes or frameworks. It’s about having a different mindset and descaling the work. It’s important that the Agile mindset is instilled throughout the culture. We had set out to figure out how to “scale” Agile to meet the issues facing our large our department. We came to see that this was the wrong way of approaching things. As Jonathan Smart at Barclays said, “Every time you think you need to figure out a solution for scaling, you should start figuring out how to descale. Remember that: flip the script, challenge yourself and descale. Don’t scale your problem up! Break your problem down!” We are now continually looking for ways to strengthen this mindset and descale problems in order to find solutions to complexity through simplicity.
Second, relationships. The relationships I have formed in the site visits to these companies have been far more valuable for our Agile journey than all the conferences, books, seminars, and Agile coaching I have been involved in combined. I have had the opportunity to interact with Agile thought leaders and practitioners on a consistent basis, even outside of the site visits and we are able to discuss openly the challenges we are facing. These opportunities give us the ability to distinguish theory from practice. When none of us are worried about selling or making our team or our company look good, we are free to learn from each another. This is when great conversations occur. Member companies share what’s s working and what isn’t. Their challenges are as valuable to hear about as their triumphs.
What I found was that an understanding of how other companies were working through articles or conferences could only take us so far. It’s the ability to see things first-hand that has made the difference for us. So my advice is, if you want to know what the Agile movement is about, go and see for yourself. Find opportunities to network or go see companies in person. Doing it in a group helps you learn more than doing it alone because it deepens and reinforces the learning. Overall, doing this in the context of the Learning Consortium has been one of the most rewarding experience both professionally and personally.
Agile Is A Journey
Steve Denning: One of the interesting things about the site visits is that all of these firms are on journeys. None of them have arrived. None of them present themselves as having “the solution.” None of them see Agile as a panacea. All of them are facing challenges, even the most famous of them. That can be a reassurance to firms that are earlier in their own journey. Now they realize that they are not alone in encountering implementation issues. And some of the things that they are doing have proved useful to the firms that are further along. So this is very much an collective set of Agile journeys, a set of journey that is inspired by “inspect and adapt” as we continue to learn.
Coming in Part 2: Gary Hamel On Agile
And read also:
The Case against Agile: Ten Perennial Objections
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Follow Steve Denning on Twitter at @stevedenning
Disclosure: I am an unpaid pro bono adviser and director of the SD Learning Consortium.
