Many organisations have adopted agile but how many ask the obvious question: What is the ROI on our investment in Agile and how will we measure it?
There are two ways I’d like to explore this topic: from the perspective of delivering an initiative (a product or project) with agile, and from the perspective of scaling this to an entire organisational (Enterprise Agility).
The ROI of Agile Delivery
On a project or product level, the ROI on agile is without doubt orders of magnitude greater than traditional methods. There have been a number of studies, the most notable by the University of Maryland, all of which provide extremely compelling evidence.
The University of Maryland study found that agile projects were 20 times more productive, had five times better cost and quality and had a 7 times earlier breakeven point. Furthermore, agile projects had an 11 times greater ROI, 11 times higher NPV, and a 13 times higher ROA when expressed as a percentage.
This research has been backed up by several private studies. Without doubt, the ROI on agile projects is compelling and an order of magnitude improvement over traditional methods.
The ROI of Enterprise Agility
Naturally, this has led companies to want to scale these benefits beyond single initiatives and reap the organisation-wide benefits. Who wouldn’t want significantly improved breakeven, ROI, time to market, quality and NPV – and the ability to change course as required!
At an organisational level, the ROI becomes harder to measure. This is because Enterprise Agility is about improving the entire system for all future outcomes, not just one specific project. In other words, this is a core infrastructure investment, and these types of investments take many years to pay off.
An investment in Enterprise Agility tends to yield the following benefits:
Customer engagement – putting the customer front and centre of our efforts and testing the validity of our assumptions by regularly releasing work and obtaining their feedback.
Better solutions - when complex problems are solved by interactive, cross-functional teams, the solutions tend to be more robust and of higher quality. This is because we have taken in many different perspectives on the problem – technical, sales, marketing, quality, commercial, operational, plus we have baked quality in from the outset and tested it every iteration.
Culture and engagement - the research on intrinsic motivation is compelling – when teams can shape the work and work in a self-directed way, engagement, creativity and productivity go through the roof.
Adaptability – the ability to continually adapt our strategic direction, based on evidence of what we see in front of us. Agile brings transparency and empirical data. We can use this focus on only what is important and limit having too much work in progress, thus creating the ability to pivot.
Value - When the above four benefits are combined, we can focus on only delivering what is of value to both the customer and our business. While this seems obvious, what is often overlooked is our ability to cull a significant number of features we assumed customers wanted. Research into feature usage shows customers often only use 25-50% of the features delivered. Imagine if you could cut your investment in features by 50%!
Reduced Total Cost of Ownership – TCO accounts for the lifetime cost of the product, including maintenance, enhancement, and support. In many cases, this accounts for 60-90% of TCO, making the development cost looking minimal. By only developing features customers care about, we can repurpose investment into more product places.
Market share – combining all the above effectively tends to result in increased market share and eventually market dominance if done well.
Clearly, these are all long-term investments in the infrastructure of our businesses, based on designing it for agility.
ROI on this sort of investment take years to measure, not months. But this doesn’t mean we shouldn’t measure it. On the contrary.
One useful approach for measuring the ROI of Agile is Evidence Based Management (EBM). Many organisations lose sight of the real goal of agile ways of working as they get stuck focusing on improving activities and outputs instead of business outcomes. Agile is a means to an end, not the end itself! EBM helps prevent this by focusing on the value delivered to the organisation from an investment in agile. This enables organizations to make rational, fact-based decisions, elevating conversations from preferences and opinions to empirical evidence, logic, and insight.
Otherwise, you may find the approach and the metrics as a useful way of considering how you are going to measure your Return on Investment in agile.
Good luck!
Nobody really saw COVID-19 coming. Most people thought it would be similar to previous virus outbreaks and peter out without any meaningful impact on our daily lives. As the situation unfolded, we struggled to fully grasp the exponential nature of it.
In the business world, we continually face sudden disruption shocks in a similar way. Our senses tell us things are changing incredibly quickly, but like the COVID-19 situation, we fail to grasp the exponential nature of the change, leaving us ill-prepared to cope when it inevitably arrives.
More and more organisations are realising they need to be designed to cope with constant change. This article aims to outline 6 key principles necessary to build such a business.
Structure
Decentralised Decision Making
Goals and Objectives
Execution
Alignment
Leadership
Structure
Most businesses are designed for efficiency, not adaptability. The underlying philosophy is to obtain the maximum yield for an acceptable effort and to scale this as effectively as possible. Last century’s Scientific Management is the key influence. Such businesses, by design, are not built to suddenly change course. They are designed to do key activities efficiently.
In contrast, a start-up is designed to be incredibly adaptable. It’s structure is fluid as it continually pivots to find the right product-market fit in order to survive. It is fast and nimble and can easy out-manoeuvre larger organisations, but it isn’t efficient and it can’t scale.
Companies that push through the start-up phase and scale bemoan the resulting bureaucracy and structure. The original ethos and culture of the start-up is lost as it grows.
Our clients want the benefits of both. They want the innovation, speed and agility of a start-up combined with the size and scale of a larger firm. Often they are facing some sort of disruption, hence they must be able to change direction quickly.
A business that has embraced Organisational Agility can achieve this, however it requires a profoundly different structure and operating model. It is typically structured as a collection of autonomous, adaptive units working together in unison towards a common objective. They have the scale to compete, yet the agility to suddenly change course to navigate around an obstacle without the cumbersome sluggishness of centralised control. They resemble a fleet of boats, each with a crew, a mission and autonomy to sail towards an agreed objective.
If new conditions emerge, they can change course accordingly, based on the conditions each of them currently face. For instance, say a pod of whales suddenly surfaces for air. Each boat can change course to sail around the whales based on the conditions they observe. Those close to the pod might rapidly tack starboard. Those further back might take a different course of action to avoid the traffic heading starboard.
Contrast that to how a large freight ship would cope. It would struggle to change course fast enough, and likely plough straight into the whales.
A firm is similar. If we are structured as a “fleet” of smaller, independent units (teams), and something suddenly appears out of nowhere, say a new competitor, a change in regulations or a global pandemic, we can change course quickly by distributing control to the independent teams.
Structure enables agility.
Decentralised Decision Making
If we are to structure ourselves this way, we clearly need to change how decisions are made.
In a traditional firm (the freighter), intelligence and decision making is centralised. Decisions are made at the “top” of the firm and supporting directives cascade to the people doing the tasks. When decisions need to be made, they must flow back up to the centralised control and then back down again. The delay directly prevents agility.
In an adaptive firm, authority is pushed to the people with the information. In other words, the people at the coalface are empowered to make appropriate decisions as required. If the decision requires others, they find the people required and attempt to make the decision as quickly as possible.
But if we empower teams to make their own decisions, isn’t it possible they head off in random directions? Absolutely, which is why the other principles are equally as important. Read on.
Goals and Objectives
To make sensible decisions, teams must understand the broader outcomes the organisation is aiming to achieve. To support this, teams undertake planning collectively to break down larger objectives into ones their team can effetely own.
"Stay home to save lives" is a clear goal (although lacks measures). Set by the NZ Government for the COVID-19 crisis, it is obvious what is being asked, but more importantly, why. It turns out "why" is deeply important to humans.
The goal doesn’t have to be perfect with answers for all contingencies, but it does need to be clear, explain why, and needs to be supported by the ability for people to clarify the goal. To turn the goal into an objective, it needs to include tangible measures.
OKR's have recently become a useful way of expressing objectives.
Objectives are memorable qualitative descriptions of what you want to achieve. Objectives should be short, inspirational and engaging. An Objective should motivate and challenge the team.
Key Results are a set of metrics that measure your progress towards the Objective. For each Objective, you should have a set of 2 to 5 Key Results. More than that and no one will remember them.
The reason objectives are important is that they enable better execution.
Execution
Traditional management is based on humans being analogous to machines, whereas Organisational Agility is designed to bring out the chaotic, messy, creative brilliance of humans.
To demonstrate, let’s contrast two different organisations - Traditional Company and Modern Company.
Traditional Company
Traditional Company uses traditional management techniques. The Executive Leadership Team (ELT) develop long-range strategies and the Senior Management Team (SMT) turn those into annual plans and budgets and manage execution.
Decision-making is centralised in two different forums – the ELT for things that impact strategy and the SMT for execution-level decision making. Each forum meets fortnightly.
The culture tends to value conformance, adherence to plan and outputs. People tend to be rewarded for either tenure or delivering work on time and under budget. People have managers who allocate tasks and give appraisals of performance.
Work is usually delivered via projects. Projects break work down into smaller chunks and assign tasks resources who are managed to execute. Sometimes, resources comment that they are unsure of why they are doing the work, by just get on with the job.
If a project needs to change direction, it has to submit a change request for either the SMT or ELT fortnightly meeting. This is quite an intimidating process to go through so is generally discouraged. Sometimes the ELT discover “watermelon projects” – projects that have status reports that indicate green (everything is fine) but the project is actually red on the inside (in trouble). These projects are terminated. Traditional Company estimates that on an average year it wastes $72M on either watermelon projects or projects that require additional funding.
Overall, people at Traditional Company reasonably happy, although staff mention they are worried about the new competitors springing up and how quickly customers jump ship given the chance. Customers also seem to be more informed than they used to, often demanding new products and services.
Modern Company
Modern Company has embraced organisational agility. The Executive Leadership Team develop long-range strategies and communicate these via outcomes they would like to see the firm achieve, expressed as OKRs.
Decision-making is pushed to as close to the people with the appropriate information as possible. Sometimes this means decision making at “tribe” level (a tribe being a collection of teams). Other times it means decisions are made by the teams themselves.
Modern Company has invested in developing its culture. It values delivering amazing customer experiences ahead of following the plan. This often requires staff to be creative. People work in teams, each with its own style of sub-culture. Across all teams though, there is a culture of constant feedback and growth. Everyone is aware of the growth areas and openly pursue opportunities to address them.
Teams obtain work as part of Modern Company’s quarterly planning sessions. They use a technique called Big Room Planning out of which comes their Team OKR for the quarter. They then break this down into a number of “Sprints” (two-week chunks) that deliver a piece of the OKR. They regularly review progress and discuss whether they need to change direction.
They’re less concerned about following plans. At first, managers were anxious about this, but when they saw the results of focusing on customer outcomes they relaxed.
They don’t have people managing them to execute, but they do have people who are dedicated to helping them learn and grow. Their key role is to help develop their competence.
Work is delivered by teams. Some teams are part of a larger group called a Tribe. Work exists in a backlog – a prioritised list of things required to achieve their OKR. Each Sprint, Teams select work from their backlog.
If Teams need to change course, they have the freedom to do so, as long as they remain committed to their OKR. If throughout the courses of their work they find the OKR needs to change, they immediately engage whoever they require to discuss and re-plan. They success based on customer value and business value delivered, not time and budget.
Overall, staff at Modern Company say they feel highly engaged. The company has a really eclectic mix of people, from analytical to creative. Staff often say they are excited about what opportunities future technologies will enable and what this might mean for their customers. Customers rate Modern Company highly, even participating in the development of new products and services.
As you can tell, these two companies execute very differently because they are designed and structured differently.
Alignment
When work is being done by many small, autonomous teams, it is easy for them to drift off in random directions. There are a number of techniques to keep teams aligned without reverting back to centralised control.
Daily alignment - a 15-minute daily meeting to inspect progress towards our goal(s) and adapt accordingly. This is an opportunity to get our heads out of the weeds to ensure we heading in the right direction.
Scrum of Scrums - a simple way for teams to keep across progress of other teams and order to avoid overlaps and dependencies. After each daily alignment meeting, 1-2 representatives of each team go to a Scrum of Scrums meeting and share progress, obstacles and challenges.
Sprint Reviews are open meetings anyone in the company can attend. Teams demonstrate tangible progress and obtain feedback. Sprint Reviews occur at the end of every single Sprint and are a powerful way for a team to ensure what it is delivering is both of value and aligned to the organisational objectives.
Big Room Planning is a way of all teams planning the next stage of the journey together. We take the outcomes of last period as input and together plan out what we, as a company, aim to achieve for the next quarter, including which teams will be working on what and whether they think it is achievable. It is a combination of top-down and bottom-up planning that includes teams involved. It typically results in significantly increased buy-in and engagement.
Leadership
Clearly, this type of firm requires different leadership. Thankfully, one of the most successful nuclear submarine commanders in history who ran his vessel this way wrote an outstanding book on how he achieved this and it’s enduring impacts, tried and tested in numerous mission-critical situations.
He shares three critical principles leaders must embrace to be successful with Organisational Agility:
Clarity on the objective and why it is important
Control - delegating control & decision making as much as is practical
Competence - if we are going to decentralise decision making then we need to ensure the people doing the work are technically competent to make the decisions they need to make.
We’ve covered Clarity in “Goals and Objectives” above and we’ve covered Control in “Decentralised Decision Making”, “Execution” and to some extend “Alignment”. If you are interested in diving deeper on these topics, I recommend David Marquet’s website and book.
Competency
Over the years I’ve worked with many firms who have attempted to apply the principles I have outlined in this article. In my experience, one of the key reasons they fail is that they give too much control without developing competency. You cant simply transition from one culture to another overnight and expect to succeed. Building competency in people is utterly vital.
Many of us have been raised based on traditional thinking. It was the underlying principle in our schooling and careers. To work in this way we have a significant amount of re-wiring to do, which takes time. Learning new ways of working is one thing. Applying them is another. It requires patience and support from people who know what they are doing and can guide you.
Our approach is to first give a small amount of control to uncover the gaps in competence and clarity. The step is small and calculated to uncover gaps. Competence is developed through training, mentoring and coaching. If the step is too big, chaos will ensue. Equally, developing a highly trained team without giving them control will result in frustrations and departures.
The idea is to instil a culture of leadership that gives others the opportunity to grow by inviting them to the next level. For example, if someone wants to be told what to do, the best response is to ask them what they think or see, and so on.
If you are interested in understanding this better, please contact us.
Conclusion
COVID-19 will change the world. All of us will learn from this situation and make our businesses more adaptable and responsive. This can be significantly accelerated through a fundamentally different system of work based on distributed intelligence.
Once you have stabilised, please don’t forget to invest in your organisation to help avoid learning lessons the hard and expensive way. Together, let’s build better businesses that progressively shape the world for good.
One of the real highlights of 2019 for me was launch the Adaptive Leadership Collective. The ALC has been an ambition of mine for many years and it was an honour to be able to draw together business leaders in one space to support one another with modernising our businesses.
Forward thinking firms are realising that in order to thrive in a world of uncertainty they need to fundamentally rethink themselves beyond the tactical “doing” mindset (processes, frameworks and methodologies), to an adaptive mindset, based on a culture of collaboration and a team-centered approach to problem solving.
Culture, HR, intrinsic motivation & emotional EQ are converging with agile, servant leadership, the growth mindset & customer empathy to fundamentally reshape what it means to be a modern organisation.
The winners in the current climate are not just embracing modern technology; they are fundamentally redeveloping their core DNA in order to detect new opportunities. And this change is increasingly being led as a culture-first initiative.
Much of the work we are currently doing is less about responding to a particular crisis, rather it is more focused on creating new capabilities to enable our clients to continually adapt and respond to almost any situation. We call this agility. In practical terms, what does this involve?
From years of working at the coal face of adopting agile ways of working, we have learned that a holistic approach radically increases your chances of success. We therefore approach it as two interrelated pieces – Business Design and Transformation, with the overlap, validation, playing a vital role in road-testing the change.
Business Design
Business Design is about designing the business to help it best achieve its strategy. It is vital, yet in our experience many organisations skip this and leap straight into “implementing agile”. The result is a transformation with no real substance, no compelling call to action, no North Star. And firms wonder why so many transformations fail!
At Radically we take a very pragmatic view:
First, understand the core strategy. What space does the firm play in? What unique combination of drivers enable it to win in this space?
Design an Operating Model that will enable this strategy, empowering and aligning all the key business functions towards the same outcome.
Get explicitly clear on the target culture required to achieve this. What does it look and feel like? What will leaders do to role model this? How do we reward and recognise people demonstrating the desired behaviours?
Review and align the Organisational Structure to support the above. If our Operating Model is strongly agile based, then a different org structure is often required. What does this look like and what changes are required to get there?
Ways of Working – clearly design how we will approach our work. What work should be approached with an agile model? What work should be delivered by a traditional model? How will these interact? Who will do what? How will we measure success of this?
Funding & Governance – an agile enterprise tends to adopt an experimental mindset, delivering quick iterations of value that can be quickly tested with customers, resulting in continual course correction. Traditional funding and governance models tends to focus on adherence to a fixed plan. So how should a more modern funding and governance model work?
Leadership – given the above, what should our approach to leadership look like? How will we live the values as behaviours each and every day?
Sadly, most agile transformations we have seen in New Zealand completely fail to consider these fundamental building blocks. Instead, they tend to take an “agile practitioner” approach, focusing on frameworks, methodologies and processes. In our experience, these firms are unlikely to achieve their desired business outcomes.
Transformation
Transformation is the art of moving the business to the new model.
This is when the ‘people aspect’ of change truly kicks in. If you think about what we are actually transforming, it is people and people are the trickiest part to change; processes and models are relatively easy. The human shift must be designed with a human-centred approach. We find that by taking a leadership and mentoring approach, our job is to guide all levels through the change and build the capability and mindset within the staff to be self-sustaining into the future.
Validation
In our experience, no design is perfect. There is low value in trying to design a perfect design as no such thing exists, and secondly it will change as you implement it through transformation. Transformation validates design, yet transformation without design is folly.
Conclusion
In summary, we urge you to take a strategic focus when embracing agility. Are all the pieces of the firm aligned to the same vision, model and approach? Are we all completely clear why we are doing this and what outcomes we want to achieve? If you can’t answer yes to these foundational questions then it is time to re-think what you are doing.
Don’t “go agile”. Instead, design your business for agility, break the cycle of failed transformation and realise the true benefits from your investment.
Vodafone has accelerated their digital journey through the adoption of agile ways of working. In parallel, other parts of the business started to look at Agile to leverage new ways of working outside of IT with a firm focus on how to better win in the market, and better deliver strategic objectives. Vodafone engaged us to help achieve this by designing & embedding new ways of working for strategic business teams responsible for managing the key consumer products like broadband, mobile plans and pre-paid offers. In this webinar, we discuss how we use different tools, models and frameworks to help Vodafone’s business teams, along with the cultural & leadership changes needed to enable agile ways of working.
Throughout my career I have helped many leaders adapt their style to one that better supports teams reach a high-performing state. Across a wide range of different industries the patterns of high-performing teams, and how leaders help shape them, have some striking consistencies.
I can clearly recall one of the highest performing teams I ever worked in. It was during my first career as a chef. The Head Chef quit, and the owner of The Ruptured Duck (yes, that was the pizzeria name) asked me if I would take over. I was only 23 years old and felt totally daunted, but figured I had nothing to lose so gave it a go.
Throughout the following two years, I somehow helped shape an incredible team of people who felt they could literally achieve anything. The lines between work and fun blurred. We were all “in the zone” – that incredible space where everything around you seems to fade into the distance and you are utterly present. We were somehow there nearly 100% of the time.
The team could handle massive, unpredictable waves of customers and work under incredibly intense pressure for prolonged periods of time, often during extremely trying conditions. Yet we consistently delivered an incredible experience and regularly had customers commenting how obvious it was that we all loved what we were doing. I would regularly have staff coming to work early, working unpaid, just because they liked being there.
How on earth did we achieve this?
Reflecting back, I can see some clear patterns:
Goal: We had a clear objective – to provide the most awesome casual dining experience in Christchurch in a friendly, fun environment.
Leadership: at 23 years old, with less than a year of practical chef experience under my belt, I was not in a position to tell others what to do. I had never done this before, so how could I? All I could do was lead by example. I worked hard and expected others to also. We were largely self-managing.
Culture: we created a culture of extreme teamwork by always having each other’s backs. If the chefs got a lull in work, we helped the front of house staff, and vice versa. This was never questioned. It was how we rolled. When introducing new staff, we’d focus on the team culture and would only introduce one or two new people at a time. It created trust and courage as a core group value.
Continual improvement: we would hold what I would now call a retrospective every night. We’d have a couple of beers and talk through how the evening had gone, what worked, what hadn’t and what we could do better.
Transparency: the entire operation, kitchen, dishes and all, could be viewed by the public the entire time. Nothing was hidden.
Rapid experimentation – we would constantly try new ideas as “specials”, gaining valuable customer feedback as we went.
Fun – we had a lot of fun together as group.
The result was a team that could turn over an 80-seat restaurant 6 or more times in a single evening without a glitch. That’s close to 500 people and we could do this 7 days a week if needed.
Agile Ways of Working
Fast forward to my current world: helping knowledge workers achieve similar outcomes. Radically is helping organisations transform the way they work, applying new ways of working, autonomous teams, a high-performance culture and a relentless focus on customer value.
While the setting is different, the themes are the same. High-performing teams have those same characteristics: goals, appropriate leadership, culture, continual improvement, rapid experimentation, transparency, trust, courage and fun.
A key aspect of this is helping organisations unlearn last centuries management practices.
Ivy league business schools and the big management consulting firms pushed these practices for decades. “Good management” was based on planning, hierarchy and control. The mindset was that the top layers of the organisation would come up with the right strategy, and then the troops would execute. The focus was on coming up with the best strategy (which of course you would need help with) and on execution excellence, namely conformance to plan (i.e. control).
However, with business increasingly operating in a world of unknown unknowns, this approach increases risk, reduces responsiveness and ultimately results in the organisation becoming fragile. To adapt, we have to acknowledge the approach we have used for the last 30 years doesn’t work in all contexts, and then explore alternative approaches.
Instead, at Radically we help leaders focus on establishing a clear, compelling vision and then re-thinking how their organisations deliver on this, largely through the exact same characteristics as my Ruptured Duck team. It isn’t about Agile. It is about the mindset, the environment and the culture required for high performance.
Autonomous Teams
Autonomous teams are self-managing. Self-management requires two critical ingredients:
An absence of traditional management.
A light set of constraints. Constraints help balance autonomy with accountability. Constraints might be an iteration, a Sprint Review, a social contract or a facilitated meeting.
An absence of management is important as people cannot self-manage when they have a manager telling them what to do.
For many managers, creating an absence of management is truly frightening. How can you be accountable when the teams manage themselves? How does a manager approach this situation? Do they just let go of everything and hope for the best? We are seeing a lot of people struggle with this.
The art of it is choosing how much space to leave by actively stepping out, in order to allow others space to step in. You can’t just walk away, leaving a gaping hole, and expect everyone to magically self-manage. Yet if you don’t leave enough space, you will prevent them from self-managing.
We ask leaders to move their focus away from telling others how to do the work, to the following three areas (leveraging David Marquet’s experiences captaining a nuclear submarine with no knowledge of how it worked):
Clarity – what do you seek? What difference does it make and to who? Why is this important? What does success look like?
Competence – does the team/individual have the competence to deal with this situation (or at least the growth mind-set to learn what is required). Does the structure support them in their level of competence? What help might they need?
Control – delegate control to the people doing the work, once the platform of Clarity and Competence is in place.
This is precisely what I unwittingly established all those years ago as a chef at The Ruptured Duck!
Leadership and Culture
I believe one of the most critical factors for a high performing culture is leadership. The agile community has pushed servant leadership as the answer, but I don’t believe this is correct. I believe situation-appropriate leadership is the right answer.
To help organisations discover what this means, we prefer a discovery-based approach.
We use the Cynefin framework to first establish context. Collectively, we work through what it feels like to work in each of the four domains, what is different about each, and which approaches might work best for each domain. We then work through what sort of culture and leadership style would be required to support this way of working in each domain. Then, we review how we all currently think and lead compared to this.
The results can be quite profound.
These are some of my experiences helping create high-performing teams. What are yours? Have you ever worked in a high-performing team? What was it like? How did it compare to my pizzeria team? What was the predominant leadership style?
Many organisations are embracing agile ways of working in an attempt to build faster, more customer-focused and resilient organisations. They are redesigning themselves to create a culture where decision making is transitioned away from middle management towards those working with customers at the coal face. Ultimately, they seek engagement in order to create a culture where staff are empowered to truly delight customers. Autonomy is the critical ingredient; however, autonomy is often misunderstood. Many organisations think they just need to increase autonomy, however they forget to include the counter-balance of accountability, often with disastrous results.
Too Much Autonomy too Quickly
Recently, many senior leaders have shared with us a worrying concern. It is happening so much that it is becoming a pattern. They are telling us, often with hushed voices, that they feel they cannot ask important business questions such as “when do you think this will be done?” or “how is cost tracking?” or “will we hit our launch date?”. When they do ask these questions, they get proudly shunned and told that that these questions “aren’t agile”.
Perplexed, they feel stuck. Do they go back to their old ways and demand answers (which they know will be fabricated anyway)? Do they dare mess with the new agile culture and risk being seen as “a manager”, the evil conspirator who is secretly trying to stop agile and control everyone? Or do they try to manage the business without the vital information required to make decisions? The end result is managers on tip toes.
The problem is that they have increased autonomy without increasing accountability.
Empowerment
One firm wanted to increase autonomy by empowering their people to put forward initiatives that would be funded based on their ability to help deliver the strategy. The “how” (the execution of initiatives) would be entirely up to the proposer, giving the teams freedom and flexibility to focus on delivering the best outcome as the work progressed.
All sounds awesome right? Unfortunately, it wasn’t, as year after year they encountered the same problem: 9 months into the year they would run out of money and the entire organisation would then go into a capital freeze for the remainder of the financial year, causing significant disruption.
Why?
Firstly, those leading the initiatives were not being held accountable for actually delivering something of value. They were given a chuck of money at the beginning, based on forecast delivery of a business outcome. The intent was to give the teams autonomy, however without the counter-balance of accountability for how the investment was being spent, the teams failed to deliver.
The root cause was that they were still running a traditional governance model that didn’t understand agile. The teams weren’t being held to account to deliver “done” increments of value every iteration. This resulted in the illusion of progress (“we are doing iterations therefore we are be doing agile!”), however nothing could be shipped to the customer. The catch-up stabilisation and integration required a lot more budget.
The lesson – they decentralised decision making and control to provide autonomy but failed to establish the corresponding accountability. They went from centralised accountability, to no accountability at all.
Another firm wanted to embrace agile in order to build highly autonomous teams and attract the best talent in the market. They rapidly “delayered”, removing most middle-management positions and set the teams forth on a journey of self-organisation. Teams were taught new ways of communicating, sharing and collaborating. Each team had a facilitator – a servant leader who would help them teams as required.
Again – seems awesome doesn’t it? However, when the CEO asked how many more iterations would be required to deliver the release, she was shocked to find the teams had no idea. Nobody knew whether this was on track nor did they know cost to date and forecast completion cost. Again, they went from a small group of managers being accountable, to nobody being accountable in the new approach.
Cupcake Agile
Sadly, we often encounter this and the frustrating thing is that this is not (in our opinion) professional agile at all. One senior leader we talked to called it “Kindergarten Agile”, another “Cupcake Agile” and yet another “Jazz-hands Agile”. It is often the result of well-meaning people who simply lack the business acumen to understand the implications of changes they are suggesting. They recommend autonomous squads, that team have lots of fun and we will measure success by team happiness.
Balancing Autonomy with Accountability
Agile is based on transparency. When we have transparency, we can see what is going on change course accordingly. Accountability is very specific – in Scrum the Product Owner is accountable for value, the Team is accountable for delivering done increments and the Scrum Master accountable for the process.
Governance remains vitally important. It doesn’t disappear, it just changes, typically from a classical model where the focus is on schedule, scope, budget, quality and risk, towards a modern model that focuses on value, risk, learnings, and then the next optimal move.
Management remains important too. It doesn’t disappear. It just changes from a role that allocates work to people and then manages their progress, to a role that focuses on growing people, providing honest feedback and coaching them.
Business questions such as “when do you think this will be done?” or “how is cost tracking?” or “will we hit our launch date?” are completely fair and valid. The difference is that we are moving from a world where we pretended to be able to know all of this upfront and would lock it down in a plan and then govern to that plan regardless, to one where we accept we don’t know it all up front and instead forecast these factors and continually update the forecast as we progress, enabling regular changes in direction based on the information at hand.
Don’t accept Cupcake Agile. Yes, autonomy plays a critical role in reshaping our workplaces, but don’t forget to balance autonomy with accountability.
The NZ Productivity Paradox is one of the issues of our time. Our nation is poorer than it should be despite growth-friendly structural policy settings. We should generate GDP per capita 20% above the OECD average, but we actually generate more than 20% below average. Closing this gap would dramatically lift incomes and wellbeing for all New Zealanders. It would also mean we don’t have to trash our environment by trying to extract one-off value from the environment and could create a fairer society, based on social justice, liveable communities and high levels of education.
All very inspiring, lofty stuff, right? Yes – but it is also important stuff. In this post I aim to outline why Radically has chosen this problem as the thing to set our sights on.
Sir Paul Callaghan’s watershed presentation Sustainable economic growth for New Zealand brought an incredible amount of truth to table for many New Zealanders. “We are poor because we choose to be poor” remains etched in my mind for eternity.
Sir Paul brought up some painful myths we tout in NZ – “great place to live”, “relaxed lifestyle”, “clean and green”. The truth is actually quite the opposite.
NZ has some of the worst statistics in world relating to families. We are the bottom of the heap (or close to it) in child poverty, teen suicide, jobless households, environmental awareness, teenage birth rate, inequity in education, inclusive economy, and child murder. But does the lifestyle in New Zealand makes up for that? No, unfortunately it doesn’t. We are the second hardest working country in the OECD, yet the lowest in terms of productivity. The lifestyle isn’t so relaxed after all.
But we are so clean, green and 100% pure! We know this is not true to the point where it has become a bit of an embarrassment. With the 2017 OECD report finding NZ is reaching its ecological limits, we can no longer stake this claim. We simply can’t continue to haul money out of the ground (milk, meat and forestry). It is what Sir Paul labelled egregious hypocrisy.
So what’s going on? Our education system is as good as anyone’s in the world. We are a stable economy with all the right basics. Why have we continued to slide?
The answer is relatively simple: we choose to engage is low wage activities.
In 2011 our per capita GDP was $40k/year. To maintain that, we need about $120,000 per job. On average, tourism earns us $80,000 a job. That drags the average down. The wine industry drags it down too – $90,000 a job. If it is wasn’t for dairy farming, NZ would be extremely poor.
And therein lies our paradox: how do we increase our GDP AND be more sustainable when so much of our success is based on an industry that is pushing the limits of our environment?
The NZ Productivity Commission did some great work to try an answer this question. Their key findings are available to all in glorious detail, but the key aspects are:
Our physical distance from key markets
New Zealand’s low R&D investment
How we use information and communication technology
Our managerial practices – i.e. how our companies are run.
It is a significant issue. The empirical studies show that these factors combined account for 17 – 22 percentage points of the 27 % productivity gap.
But there are two key points that stand out for us.
Firstly, there are significant gains available to us by lifting our investment in ICT (as a key driver of innovation). However, “in order to maximise the return on this, our firms must adopt business practices that better exploit the new technology”.
In other words, there is no point in blindly investing in technology without understanding how to exploit it. Practices such as Agile, Lean and Design Thinking help test and validate assumptions and risks early, leading to higher tangle ROI.
But practices alone are not enough. Agility and customer-centricity are more a mindset than a set of processes and methods. As the 11th VersionOne Annual State of Agile Report shows, the top 7 challenges in adopting these practices are all about the organisation and its leadership.
This aligns with our experience. Unless transformation is aligned to organisational strategy, and is led and modelled from the top, its chances of success are low. In order to thrive, organisations need to find better ways to lift their game to increase productivity to more competitive with what they currently have.
The second finding is curious: poorly managed firms survive better in NZ than in high-productivity countries (such as the US). While this isn’t a surprise, it is alarming. In a globalised marketplace, NZ firms have gotten away with complacency only because of low levels of competition. In other words, sleepy old NZ is wide-open for disruption. We need to lift the capability within organisations, as well as those of our leaders and our managers. Leadership and management is drastically different in this day and age, and most organisations have under-invested in the right kind of capability uplift.
You can see this happening now. Companies from highly competitive marketplaces (such as the US or China) decide to expand into NZ sending shockwaves throughout our local companies. Just look the pressure in the retail sector right now with the arrival of Amazon. Media has been experiencing it too – just look at Sky TV’s recent challenges after it’s bid to join forces with Vodafone was rejected.
Yet all of this was predictable and predicted. In 2015 I presented Deloitte’s Digital Disruption Map to a range of clients across NZ in exactly these industries, as well as at various conferences, suggesting this was coming and that organisations needed to become more adaptable in order to respond. I suggested developing a capability in organisational agility – what I refer to as “the ability to change course without penalty”. Yet here we are…
And Accenture recently released a major study showing nearly two-thirds of large companies face high levels of industry disruption, and 44% are highly susceptible to disruption. And Accenture’s report mirrored findings of the Deloitte report – “disruption is continual and inevitable – but it’s also predictable”.
From the report – “incumbents need to radically transform the core business while scaling new businesses. But pivot too quickly, and they will likely stretch themselves too thin financially; pivot too slowly, and they risk becoming obsolete.”
This is why we started Radically. To help organisations leaders transform their organisations to achieve radically better outcomes. Not small, cosmetic changes. The time for that is over. It is time for Radically better outcomes.
Our mission is to help New Zealand organisations thrive and succeed on a global stage. This is what we strive to achieve.
