“If at first an idea is not absurd, there is no hope for it.” —Albert Einstein
In June 2018, a time when “Agile at Scale” is emblazoned on the front cover of Harvard Business Review, the management journal with quasi-papal status, the era when managers could confidently ridicule agile management practices is fading fast. Instead, most managers have themselves grasped the need to be agile: a recent Deloitte survey of more than 10,000 business leaders across 140 countries revealed that nearly all surveyed respondents (94%) report that “agility and collaboration” are critical to their organization’s success. Yet only 6% say that they are “highly agile today.” So, what’s the problem? Why the 88% gap between aspiration and actuality
It’s not lack of knowledge as to what is agile management or how to implement it. Managers have access to myriad books and articles on it and a plentiful supply of coaches who stand ready to help. The three Laws of Agile are simple—first, an obsession with continuously adding more value for customers; second, small teams working on small tasks in short iterative work cycles delivering value to customers; and third, coordinating work in a fluid, interactive network.
The Laws of Agile are simple but their implementation is often difficult. That’s in part because they are at odds with some of the basic assumptions and attitudes that have prevailed in managing large organizations for at least a century. For example, Agile makes more money by not focusing on making money. In Agile, control is enhanced by letting go of control. Agile leaders act more like gardeners than commanders. And that’s just the beginning.
For the traditional manager, counter-intuitive ideas like these abound. This is not the way people say big firms are run. This is not by and large what business schools teach. Encountering these principles can be like visiting a foreign country where everything is different. Until travelers grasp the new language, master the new cues and ingrain them in behavior until they are second nature, they may feel disoriented and incompetent.
That’s one reason why merely training staff on Agile processes and practices by itself won’t make a firm agile. Implementing Agile requires a mindset that is fundamentally different from the traditional preoccupations with profit maximization and a philosophy of controlism.
Trying to implement Agile management with these 20th century preoccupations leads to hiccups, friction, dissonance, misunderstandings, and disappointment.
Let’s look at ten of the Agile axioms that leave managers apprehensive, agitated, even aghast.
First Law Of Agile: The Law Of The Customer
1. Firms Make More Money By Not Focusing On Making Money
For several millennia, the notion that businesses exist to make money was seen as one of the immutable truths of the universe. Milton Friedman, the Nobel Prize-winning economist, wrote in his article in the New York Times on September 13, 1970 that any business executives who pursued a goal other than making money for their firm were “unwitting puppets of the intellectual forces that have been undermining the basis of a free society these past decades.” Today, many public companies embrace maximizing shareholder value as their main goal, even though Jack Welch and many others have called it “the dumbest idea in the world.”
A growing number of companies have chosen a different goal. They have accepted Peter Drucker’s 1954 dictum that “there is only one valid purpose of a firm: to create a customer.” When delighting their customers through continuous innovation becomes the bottom line, making money is the result, not the goal, of the firm’s activities.
The interesting thing is that when firms operate this way, they make a lot more money than companies that focus directly on making money, including the five largest and fastest growing firms on the planet (by market cap): Amazon, Apple, Facebook, Google and Microsoft, now worth over $2 trillion. It involves a shift from a focus on inanimate things (money, products outputs) to a focus on people (human outcomes, experiences, impact)
Yet let’s face it: setting aside what many still see as immutable truths of the universe doesn’t come easily.
2. There Are No Internal Customers
It’s common in many big bureaucracies to talk of internal customers. One unit services another unit and regards the other unit as its internal customer, who in due course becomes a producer for the ultimate customer or end-user. The focus is internal and the silos often fight each other for influence and budget. Amid these internal squabbles, the needs of the internal customer risk becoming disconnected from the needs of the ultimate customer, and result in waste—producing something the ultimate customer doesn’t need or failing to produce what the customer does need.
In Agile management, there is no such thing as an “internal customer.” The only purpose of work is the ultimate customer or end-user. Under the Law of the Customer, the original producers not only meet the needs the internal customers: they are given a clear line of sight as to what value is being provided for the ultimate customer. Satisfying so-called internal customers is merely feeding the bureaucratic beast. It is a pretend-version of Agile.
3. There Are No B2B Organizations
The situation is the same when a firm is providing products or services to another firm which acts as an intermediary for ultimate end user. The customers are the end-users who ultimately experience the products and services. Merely satisfying the needs of the intermediary is not enough for sustainability. It’s only if the intermediary is delighting the ultimate end user that the firm safe. This is why those doing the work need to have a clear line of sight to the ultimate end-user and see the meaning in their work and adapt their work to the needs of that end-user.
Thus for many years, Cerner Corporation which provides services to hospitals, looked on hospitals as its customers. Over time, they increasingly saw that their services were really directed at the doctors in the hospitals. More recently, under the influence of Agile management, they are coming to see the patients as their customers. Cerner’s ultimate success depends on making things better for the patients.
Similarly, Microsoft for many years saw the customers of its Windows program as the big retailers like Dell and HP. More recently, they have come to realize that their customer is really the end-user, not these intermediaries: there is now an immense effort to reach out to, understand and interact with these millions of end-users.
4. Making Better Products May Not Make More Money
Making products better, faster cheaper, more convenient or more personalized is a good thing. But in a marketplace where competitors are often quick to match improvements to existing products and services and where power in the marketplace has decisively shifted to customers, it can be difficult for firms to monetize those improvements. Amid intense competition, customers with choices and access to reliable information are frequently able to demand that quality improvements be forthcoming at no cost, or even lower cost.
Making better products through operational Agility is an increasingly-necessary foundation for the survival of a firm. But it’s not enough for the firm to thrive. To make a lot of money, the company has to go further. It has to delight non-customers—those who are not already customers. That’s because there are usually vastly more non-customers than customers. They are non-customers for a reason: their needs are not being met. If the company can find a way to meet their needs, then a whole vast new ocean of potential customers opens up, in which there is usually very little competition. If the firm can appeal to both customers and non-customers, it can make a great deal of money. “Instead of being slightly better than everybody else in a crowded and established field, it’s often more valuable to create a new market and totally dominate it,” writes David Brooks in the New York Times. “The profit margins are much bigger, and the value to society is often bigger, too.”
The Second Law Of Agile: The Law Of The Small Teams
5. Forget Economies of Scale: Your Market Is One Person
The 20th century firm tended to be focused on generic products to achieve economies of scale. By contrast, Agile is about generating instant, intimate, frictionless, low-risk, incremental value at scale. That’s the new performance requirement. When firms do this, as shown by the experience of Amazon, Apple, Facebook and Google they make a great deal of money.
Thus Agile organizations focus on providing intimate value, with an effective “market of one”, i.e. a level of customization and customer service at which a customer feels that he or she is an exclusive or preferred customer of the firm. For example, search engines are used by billions of people every day across the globe. However, each user gets customized search results based on their locations and refer to places nearby, weather forecast, or traffic condition.
With the advent of latest technology like smartphones and high-speed internet, and with the ever-increasing use of social media, companies can learn more about their customers and can use this information to customize their services and products as per user’s preferences and needs.
6. Don’t Scale Up: Descale Complexity Down
A key Agile theme concerns descaling work, i.e. 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.
Trying to scale up the organization to cope with complex problems and leads to unmanageable complexity. Big complex structures are inherently fragile and difficult to change. The adoption of “agile scaling frameworks” is common, but they are often a re-introduction of a philosophy of controlism in another guise.
Instead of constructing a big complex organization to handle complexity, the organization disaggregates the problem into tiny pieces so that it can be put together in minuscule increments and adjusted in the light of new, and rapidly changing, information about both the technology and the customer.
Think of a truck that is made in a traditional way. It is welded together and cannot be easily changed or upgraded. Compare that to a Scania modular truck where each of the parts is interchangeable. Modular design brings easier customization.
7. Agile Is A Mindset, Not A Process
Traditional managers typically approach Agile saying, "Show me the process so that I can implement it." The problem is that Agile is a mindset, not a process. If it is approached as a process with the old mindset, nothing good happens.
But surely, people ask, there must be some model that we can follow. There is much allure for instance in the Spotify model as presented in the charming videos prepared by Henrik Kniberg. So there is a cry: "Let’s implement the Spotify model!" There’s just one problem: as former Spotify coach, Joakim Sundén, often explains, not even Spotify implements the Spotify model. For one thing, the videos are several years old. Second, Spotify continues to rapidly evolve and improve its model. In a pair of visits in 2016, we noticed significant differences even within a period of several months.
8. Talent Drives Strategy, Not Vice Versa
“The central premise of a talent-driven company is that talent drives strategy, as opposed to strategy being dictated to talent.,” says the book, Talent Wins: The New Playbook for Putting People First (HBRP, 2018) by Dominic Barton, the global managing partner of McKinsey & Company, and his colleagues Dennis Carey and Ram Charan, “The wrong talent inevitably produces the wrong strategy, and fails to deliver. Numbers like sales and earnings are the result of placing the right people in the right jobs where their talents flourish and they can create value that ultimately shows up in the numbers.”
The Third Law Of Agile: The Law Of The Network
9. Control Is Enhanced By Letting Go Of Control.
In Agile management, there’s a presumption that in a volatile, rapidly changing world, big difficult problems should—to the extent possible—be disaggregated into small batches and performed by small self-organizing teams. The thought of self-organizing teams tends to make managers worry about losing control. What they need to understand is that they are giving up the illusion of control, rather than actual control. In a complex, rapidly changing environment, explicit efforts to impose control and predictability are doomed. Detailed reports may create the semblance of control, but the reality is often very different from what is in those reports.
The solution to reconciling disciplined execution and innovation lies in giving greater freedom to those people doing the work to exercise their talents and creativity, but doing so within short cycles so that those doing the work can themselves see whether they are making progress or not.
Success in today’s marketplace requires nimbleness, flexibility, adaptability and agility—everything that the 20th century corporation was not. These firms were built for strength, with high walls and moats for the defense of the status quo. Their very raison d’être was to prevent change.
Turning a top-down pyramid into a flexible network is tricky. At the heart of 20th Century management thinking is the notion of a corporation as an efficient steady-state machine aimed at exploiting its existing business model. “Traditional, MBA-style thinking,” as Google executives Eric Schmidt and Jonathan Rosenberg write in their book, How Google Works, “dictates that you build up a sustainable competitive advantage over rivals and then close the fortress and defend it with boiling oil and flaming arrows.”
By contrast, when the whole organization truly embraces Agile, the organization is an organic living network of high-performance teams. In these organizations, managers recognize that competence resides throughout the organization and that innovation can come from anywhere. The whole organization, including the top, is obsessed with delivering more value to customers. Agile teams take initiative on their own and interact with other Agile teams to solve common problems. In effect, the whole organization shares a common mindset in which organization is viewed and operated as a network of high-performance teams.
10. Lead Like A Gardener, Not A Commander
In Team of Teams, by General Stanley McChrystal and his colleagues (2015, Penguin Publishing Group), McChrystal explains had to unlearn what it means to be a leader. A great deal of what he thought he knew about how the world worked and his role as a commander had to be discarded.
I began to view effective leadership in the new environment as more akin to gardening than chess,” he writes. “The move-by-move control that seemed natural to military operations proved less effective than nurturing the organization— its structure, processes, and culture— to enable the subordinate components to function with ‘smart autonomy.’ It wasn’t total autonomy, because the efforts of every part of the team were tightly linked to a common concept for the fight, but it allowed those forces to be enabled with a constant flow of ‘shared consciousness’ from across the force, and it freed them to execute actions in pursuit of the overall strategy as best they saw fit. Within our Task Force, as in a garden, the outcome was less dependent on the initial planting than on consistent maintenance. Watering, weeding, and protecting plants from rabbits and disease are essential for success. The gardener cannot actually ‘grow’ tomatoes, squash, or beans— she can only foster an environment in which the plants do so.”
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