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How Software Developers Sparked Management Transformation

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In the week that Google’s parent, Alphabet, joined Apple, Amazon, and Microsoft, as the fourth of the world’s firms with a trillion-dollar market valuation, it is timely to note how rapidly and massively our world has been transformed.

Two decades ago, we sought knowledge by laboriously searching in bulky paper-based encyclopedias or dusty journals in libraries; today we have knowledge on-line at our fingertips at the tap of an app.

Two decades ago, a car was a metal machine with a couple of electric controls: today, a car is a multifunctional entertainment center on wheels, with which we can even hold conversations.

Two decades ago, a telephone was a mechanical contraption attached by wire to a physical system: now, a telephone is a handheld multifunction device that connects us to the world and serves an infinite array of complex purposes.

Two decades ago, an office was a physical building that contained people and machines: now, an office is a software network with people scattered around the planet interacting with it.

These transformations have obviously been enabled by developments in computer technology. Software, which now includes the digitization of most human and mechanical activity, as well as artificial intelligence, machine learning and cloud computing, has come to enable almost everything that humans and organizations do. Digitization is taking over everything.

The Poor Performance Of The Old IT Departments

Yet an equally important—and less noticed—enabler of these transformations is the change in how digital technology—and the organization—is being managed.

It’s hard to remember that twenty years ago, the IT department was usually the very worst performing unit of any organization. Software development initiatives were late and unresponsive to what was wanted, if they were even finished at all. Developers were seen as culprits and were punished. They blamed their managers who then made them work harder. They had nervous breakdowns. They were fired, but their replacements did no better. The software was still late, over budget, and full of bugs.

Big initiatives failed. Clients were upset. Billions of dollars were lost. Companies were desperate. Something had to be done. At the time it was difficult to think that these disrespectful incompetents would ever perform normally. It was unimaginable that their work would change the world.

Transformation In The Way Software Is Managed

But in 2001, a bunch of software developers, who refused to admit they were the problem, got together. They suspected that the very real problems flowed from the top-down bureaucratic way in which the firms were being managed. Under the banner of the Agile Manifesto of 2001, they set out to discover “better ways of developing computer software.”

And over the next decade, better ways of developing software did indeed emerge. When firms embraced an adaptive interactive mindset—obsessing over the needs of customers, working in small self-organizing teams working in short cycles, operating as a network rather than command-and-control hierarchy—software developers became capable of extraordinary improvements in performance.

An Agile approach to software development—under various labels—steadily spread and came to be seen as the normal way of managing software. It was a better fit with the bewildering complexity of software development and with the fact that the software developers often knew more about the problems—and their solutions—than the management.

The result—an exponential acceleration in the pace, and an improvement in the quality, of the software—shifted the reputational position of the IT department “from worst to first.” Software development went from being a drag on organizational performance to being the key enabler of mesmerizing success. Recruiting—and retaining—top talent in software, in turn, became a high priority.

The world was in effect turned upside down. Software developers were no longer the constraint on getting high quality products to market fast. Now it was the rest of the organization that couldn’t keep up with what the software developers could produce.

Top Management Discovers It, Not IT, is The Problem

This was a shock to top management. For several millennia, everyone knew that big organizations must be run from the top like an army. Big bosses are the generals who set the plans and goals. Little bosses tell the workers what to do. The workers are paid to do their job, not give their opinion. Power trickles down. Pay depends on rank in the hierarchy. That’s the way the world worked for thousands of years. Top management was not about to abandon the very things that had made them successful at the say-so of the worst performers in the firn.

It was preposterous that these disrespectful software developers were telling the top management how to manage. Software developers were the wrong people to have solved the problem: they weren’t academics in suits and ties at business schools or high-priced consultants.

Still, it was hard to argue with the trillion-dollar market capitalizations of Amazon, Apple, Alphabet, and Microsoft. By 2017, surveys by Deloitte and McKinsey had already shown that more than 90% of senior executives gave high priority to becoming agile, even though less than 10% saw their firm as highly agile at the time.

By 2020, a survey of several thousand executives, just published in strategy + business and carried out by PwC, indicates that around a quarter of the executives work in corporations that are actively trying to redefine their core business model and fundamentally change the way they operate. They have started making the shift from Agile software to organizational agility.

From Agile Software To Organizational Agility

“Agile software is not enough for agility,” says Evan Leybourn, founder and CEO of the Business Agility Institute, “Your transformation has reached diminishing returns when you limit your focus to Agile in your tech teams. Instead, you should be focusing on the entire system.”

In effect, Leybourn proposes applying the  Theory of Constraints to Agile. Just as in the Theory of Constraints, Leybourn’s Theory of Agile Constraints states that there will always be a constraint to business agility. “Twenty years ago, the constraint was IT. That was your software team. And that’s why it was logical for Agile… to emerge in that domain. Today the constraint to agility isn’t IT, but rather it’s the PMO, HR, finance, or legal department.”

 “In today’s economy,” says Leybourn, “these are the areas that are constraining the agility of an organization. In many ways, this is the definition of business agility: taking the mindset of agility, and the practice of Agile, and applying it across the organization. But it goes beyond that. It goes into the very culture and structure of the organization. Is the organization designed in such a way to be competitive in an ambiguous and unpredictable market?”

Agility In Non-Software Functions

Business agility thus isn’t just a matter of applying Scrum or some other process to these functions. (That approach notoriously risks generating “fake Agile.”) Functions like strategy, HR, budget, finance, and manufacturing usually have a lot of anachronistic assumptions embedded in them and they need to be fundamentally re-imagined.

Such changes often encounter cultural and experience barriers. They involve disrupting current ways of working, which have often been quite successful within the assumptions of top-down bureaucracy, which now are no longer operative.

“If we want to introduce agility to these divisions,” says Leybourn, “we need to communicate that this isn’t about fixing a problem. We’re fundamentally changing the way the organization operates in the market. To put this another way, we are improving the outcomes for the entire organization, not just a single division.”

What Does Business Agility Look Like?

Mastering business agility is thus a multi-faceted challenge. Strategic agility means going beyond Michael Porter’s approach of “coping with competition”, and mastering market-creating innovation. It means establishing and embracing real-time metrics. It means understanding how Amazon and Microsoft have tamed bureaucracy and have become, in the process, among the most agile firms on the planet, as well as the most valuable.

It means HR realizing that they not only have to adopt Agile practices and vocabulary: they need to reinvent their function with the external customer at the center. It means understanding why the budget function is usually a stumbling block to implementing Agile and understanding how to fix it.

Business Agility Conference

Those who want to learn more about organizational agility and discuss related issues can attend the Business Agility Conference in New York on March 11-12, 2020.. The conference, organized by the Business Agility Institute, includes speakers giving their experience in Amazon, Zappos.com, Inc, Riot Games, Menlo Innovations and Pacific Life, among many others. The conference sets out to identify and recognize excellence, not just in Agile software development, but in business agility generally.

And read also:

Explaining Agile

Understanding Strategic Agility

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