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More than 90% of CEOs give high priority to being agile, according to surveys by Deloitte and McKinsey and most large firms are exploring business agility, at least in their IT departments. Yet these efforts are often limited in scope, and most of the potential gains are unrealized, owing to the lack of agility elsewhere in the firm.
As a result, despite the proliferation of Agile software development initiatives in firms around the world, relatively few are generating the extraordinary profitability or market capitalizations that can come when the whole firm embraces business agility, as at Amazon, Haier, Microsoft, Netflix, and Tesla. Many mid-level managers are painfully aware of the chasm between what their firm is currently doing and what it could be accomplishing.
Even the founders of the Agile movement worry that things have gone astray. As Agile Manifesto signatory Kent Beck said recently about Agile software development: “It’s a devastated wasteland. The life has been sucked out of it. It’s a few religious rituals carried out by people who don’t understand the purpose that those rituals were intended to serve in the first place.”
Some ask what would it take to put the life back into it? What would it take to make the whole firm Agile? To use a baseball analogy, what would it take to get from being “stranded at first or second base” to “reach home plate”? This four-part article will explore seven central questions.
1. What are the seven telltale signs that your Agile transformation has stalled?
2. What does 21st century management and leadership look like?
3. How to keep 20th century management at bay?
4. Where is your firm now and why?
5. How do you put together a coalition to unblock progress?
6. How do you re-frame and re-energize he journey?
7. Where do you start?
1. Seven Telltale Signs That Your Agile Journey Has Stalled
Let’s start with the tell-tale signs of a stalled Agile journey.
At the most basic level, if teams don’t get work completely finished at the end of each short cycle, partially completed work full of bugs will be piling up, like snow in front of a snow-plow. This occurs when the firm has failed to grasp the fundamentals of Agile management: work is not being done in self-organizing teams or not being done in short cycles. In such a case, the firm is not even at first base.
But even when these issues are resolved and the software developers are routinely finishing work in each short cycle, completed software development may start to pile up in some holding area, while manufacturing or marketing catch up. These stock piles of completed work can amount to hundreds of millions of dollars. The firm is now at first base, but still a long way from home plate.
In effect, the firm has begun to master no more than the second law of business agility—working in small self-organizing teams in parts of the firm—but it has yet to complete to embrace the other two laws: customer obsession and operating as a network. Many individuals are still reporting to bosses, not the customer. Customers see little if any benefit from what is going on. It is likely that much work being done is on products, services or features that customers do not currently need or want.
Meanwhile, activities that are unrelated to any benefit for customers continue unabated; unproductive business processes are retained for no reason other than this is the way things have always been done. Worse, such activities may be back-office functions working at cross purposes with operations, sometimes trying to eliminate “the chaos of Agile”. One survey showed that 40- 50% of a firm’s work is what David Graeber called “bullsh*t work” i.e. work that is pointless. (In the case of a small firm, entrepreneur Andrew Holm and his partner found that the useless work was as high as 80%.
One reason for the lack of progress in delivering more value to customers is that real-time measures of customer benefits for each activity are not in place. Management attention is mainly on measures of internal outputs, not external outcomes. The focus is still on internal efficiency rather than enhancing customers’ lives. Financial gains, if any, are mostly achieved by cost cutting.
In terms of the firm’s transformation journey, the top management is often AWOL. CEOs are s spending most of their time attending to internal issues and concerns. Customers are scarcely in the picture. Typical CEOs, according to a comprehensive survey, highlighted in Harvard Business Review, spend only 3% of their time with customers.
Even when the firm has come to terms with all three laws of Agile, there are still a host of Agile processes that the firm has to master.
2. Recognizing What Good Looks Like
If you see these signs in your firm and suspect that the firm’s Agile journey is stalled, the next step is to refresh understanding of what an enterprise embracing the spirit of the Agile Manifesto and practicing 21st century management and leadership looks like. Business agility is not merely about having a few teams labeled “agile” and implementing Agile processes, or holding quarterly big-room planning meetings as part of the SAFe methodology. It’s not only a different way of running an entire organization. It’s a different way of thinking about how work gets done—the very opposite of the management that was ubiquitous in the 20th century and is still common in large organizations today.
One confusing aspect of the subject is that there are many labels for what good looks like. A vast amount of experimentation by thousands of firms has taken place under the aegis of “Agile” and “business agility.” At the same time, Google talks about “Project Aristotle, and The Google Model. Haier speaks of Rendanheyi. Vinci calls it “the Vinci Way.” The U.S. military calls it a “mission command”. Professor Julian Birkinshaw follows Alvin Toffler’s book, Future Shock (1984) and calls it “adhocracy”. A neutral way of describing these convergent efforts is simply “21st century leadership and management.”
Many books tell the detailed stories of individual firms that are successfully practicing 21st century management and leadership, including those I cited recently such as Working Backwards (Amazon), No Rules Rules (Netflix). Tesla, Innovation For Impact (SRI International) and The Silicon Valley Model (Google et al). Yet it’s easy to be overwhelmed by the diversity of these firms
One issue is comparison shopping. Comparison shopping sabotages our judgment by subtly shifting our attention. When we examine these exciting case histories, we don't always separate the features and attributes that would be for our own firm. Instead, we are distracted by the almost infinite differences among the firms. The more aspects we start comparing, the more difficult it is to choose which aspects to emulate. As psychologist Barry Schwartz. author of the Paradox of Choice: Why More Is Less, explains in his TED Talk, when we have many options to choose from, we may find it difficult to choose at all.
A related difficulty is that we may be dazzled by the idiosyncratic characteristics of each of these firms. The personalities of Jeff Bezos at Amazon, Satya Nadella at Microsoft, Reed Hastings at Netflix, and Elon Musk at Tesla, are obviously very different, as are the companies they lead. But the underlying, or core, management principles that are driving the success of these firms are remarkably convergent. The idiosyncratic characteristics of each firm constitute the unique culture of firm, which is, as Edgar H. Schein explained in Culture And Leadership, “a set of basic assumptions defines what to pay attention to, what things mean, how to react emotionally to what is going on, and what actions to take in various kinds of situations.”
The core management and leadership characteristics that drive performance are a much narrower set of elements than the firm’s culture. These are the characteristics that enable Amazon and Microsoft to be worth more a trillion dollars while former titans, like GE and IBM, operate on 20th century modus opeandi and continue to struggle. The difference doesn’t lie in the idiosyncrasies of the different firms or the heroic personalities of their CEOs or the technology that they all use The difference lies primarily in the different principles and processes of management and leadership that the respective firms and their executives are pursuing.
Thus it’s important to get to the underlying core principles and processes of management and leadership that they have in common, of which the table in Figure 1 gives a short summary.
Principles, processes and practices of 21st century management and leadeishp
One reaction to the table’s description of 21st century management and leadership is that this is utopian. But it is not utopian in the sense of “an impractically ideal social and political scheme.” It is the reality in many organizations around the world, including the most financially valuable firms on the planet. It only sounds unrealistic to those who have suffered under constraints of bureaucracy for their whole working life and never learned that other ways of working are possible.
Those who have experienced 21st century management and leadership, or observed it first-hand, the experience unfits you for working in any other way. When workers are respected for their ideas and their expertise and have a clear line of sight to those for whom the work is being done, work becomes meaningful in a way that isn’t possible in a bureaucracy. They are spoiled for life. The spaciousness of it, the clarity, the energy, the excitement, can make it an experience of a lifetime. They undergo the thrill of adding value to the lives of others. Once having experienced this, they never want to let it go. Of course, when a traditional managers hear such talk, they worry that they are dealing with a cult. It is therefore important to understand what are the detailed practical elements that lead to this kind of workplace and these kinds of feelings.
The foundational principle—or first law—of Agile and 21st century management is the goal of the firm—i.e. delivering value to customers. Everything flows from this. Because delighting customers is a complex task requiring the efforts of multiple kinds of expertise, the structure of work has to draw on the talents of everyone, typically with self-organizing teams, working in short cycles with a clear line of sight to the ultimate customer. To enable ideas to come from anywhere, the dynamic of the firm has to take the form a horizontal network of competence, rather than a vertical hierarchy of authority. These three elements—customer, teams and network—constitute the core principles—the three laws—of 21st century management.
These principles reflect what the management does, not just what it says. Often what management declares for public consumption is merely window dressing. For instance, in August 2019, more than 200 chief executives of major corporations signed a statement of the Business Round Table (BRT) on the purpose of a corporation and publicly renounced the goal of maximizing shareholder value. However, analysts have found little change in corporate behavior in the year since. Harvard law professor Lucian Bebchuk concludes that the BRT statement was signed “mostly for show.” Despite the highly publicized BRT announcement, 20th Century management principles in these firms remain unchanged and continue to drive corporate behavior.
The principles drive the processes. The principles are assumptions that are deeply embedded—even unthinking beliefs—and shared by almost everyone inside and outside the organization. They are not only taken as given. They are often non-negotiable criteria of organizational membership. Any who do not share the assumptions are likely to be viewed as “not one of us,” and systematically disparaged, sidelined, and eventually eliminated from the organization unless they are willing to go along.
Yet the explicit processes of the firm are also important. They ensure the stability and maintenance of the firm’s principles. Thus in the 21st century firm, leadership has to be inspirational rather than transactional, and, given the distributed nature of work, it is required throughout the organization. Strategy tends to include not only coping with competition but also creating new businesses that attract new customers. Innovation encompasses systematic efforts to find new needs and new ways of meeting them, including the creation of interactive ecosystems. Sales and marketing involve making a real difference in the lives of customers and users. Given the key role of talent, people management must attract and enable the best people required to deliver value to customers. Because the firm operates as a network of teams tightly focused on creating customer value, the budget typically reflects decisions already taken in strategy.
The tell-tale signs of genuine 21st century management include:
· The management lives and breathes the three core principles of busines agility: customer obsession, self-organizing teams, horizontal network of competence;
· Teams get work completely done at the end of each short cycle
· All teams have a clear line of sight to the external customer. (There is no talk of “internal customers.”
· External measures for all work are in place before work starts.
· Activities that are yielding no benefit to customers are systematically eliminated.
· Back-office functions are in sync with, and enhacing, operations
· The firm is seeing major financial gains already accomplished or at least clarity as to how they will be attained
Yet establishing and keeping the core principles in place throughout the organization generally requires an unexpected step that I will discuss in Part 2 of this article: “Defeating The Disease Of 20th Century Management”.
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