Agile working is a term that has become a social necessity for many teams. It seems to be more of a thing that you should have rather than something you strive to have. I don't know of any study that can verify this, but I would expect almost all business people to say they want to work in an agile environment. At the management level, maybe 90% would say they're trying to create an agile culture. The reality is that more than half of the people don't get to experience the core elements of agility in their daily business.
Agile has become a mindset. But it stems from software development.
It's an approach to working with other people based on trust, embracing freedom, and encouraging participation. Although I'm looking at agile management in a broader sense, Agile is a term that comes from the Agile Manifesto and has its roots in software development.
The manifesto was written by 17 different authors whose software development experience helped others do the same. Through these experiences, they all agreed on the following values and principles:
- Individuals and interactions over processes and tools
- Working software over comprehensive documentation
- Customer collaboration over contract negotiation
- Responding to change over following a plan
That is to say, the items on the left are valued more than the elements on the right. The Wikipedia article on agile software development has more info about this.
When we focus on business as a whole and scaling agile through the organization, some people call that business agility. All these things are just lofty terms that cannot be easily defined by a quick search.
Hopefully, I can give all of you a better understanding of these ideas and principles as this book goes on.
The Startup Way - Definition of a modern company vs. an old fashioned company
|An old-fashioned company||A modern company|
... is founded on steady growth through prescriptive management and controls, and is subject to tremendous pressure to perform in short-term intervals such as quarterly reports.
|... is founded on sustained impact via continuous innovation, and focused on long-term results.|
... is made up of experts in specialized functional silos, between which work passes in a stage-gate or waterfall process that sends projects from function to function with specific milestones tied to each handover.
|... is made up of cross-functional teams that work together to serve customers through highly iterative and scientific processes.|
|... tends to operate huge programs.||... operates rapid experiments.|
|... uses internal functions such as legal, IT, and finance to mitigate risk through compliance with detailed procedures.||... uses internal functions to help its employees meet their goal of serving customers, sharing the responsibility to drive business results.|
... includes managers and their subordinates.
|... includes leaders and the entrepreneurs who empower them.|
|... is being protected from competition through barriers to entry.||... leaves competitors behind because of implementing continuous innovation.|
... prioritizes even highly uncertain projects based on ROI, traditional accounting, and market share. To measure success, project teams track and share numbers designed to look as good as possible (“vanity metrics”)—but not necessarily to reveal the truth.
|... attempts to maximize the probability and scale of future impact. Project teams report and measure leading indicators using innovation accounting. In a for-profit context, this goal often follows Jeff Bezos’s advice to “focus on long-term growth in free cash-flow per share” rather than traditional accounting measures.|
... is full of multitasking: meetings and deliberations where participants are only partly focused on the task at hand. There are lots of middle managers and experts in the room to give their input, even if they don’t have direct responsibility for implementation. And most employees are dividing their creativity and focus across many different kinds of projects at the same time.
|... has a new tool in its arsenal: the internal startup, filled with a small number of passionate believers dedicated to one project at a time. Like Amazon’s famous “two-pizza team”—no larger than you can feed with two pizzas—these small teams are able to experiment rapidly and scale their impact. Their ethos: “Think big. Start small. Scale fast.”|
|... is composed of managers and their subordinates.||... is composed of leaders and the entrepreneurs they empower.|
... tends to pursue big projects that are expensive and slow to develop in order to make sure they’re “right,” using a system of entitlement funding that remains similar from year to year.
|... pursues a portfolio of smart experiments and contains the cost of failure by investing more in the ones that work, using a system of metered funding that increases as success is proved.|
... is one in which efficiency means everyone is busy all the time, making it easy to “achieve failure” by efficiently building the wrong thing.
|... is one in which efficiency means figuring out the right thing to do for customers by whatever means necessary.|
... believes that “failure is not an option,” and managers are skilled at pretending it never happens by hiding it. They may pay lip service to the idea of “embracing failure,” but their reward, promotion, and evaluation systems send a profoundly different message.
|... rewards productive failures that lead to smart changes in direction and provide useful information.|
... is protected from competition via barriers to entry.
|... leaves competitors in the dust through continuous innovation.|
GENERAL DIFFERENCES BETWEEN OLD AND NEW BUSINESS STRATEGIES
Modern times need modern strategies. This is because today's business strategies and processes are vastly different than the old ones. Here are the most notable differences between the old and new business strategies:
- Modern decision-making processes are more customer-oriented, while the traditional model is more company oriented.
- Today's strategies and plans are more data-driven, while the old ones are opinion-driven.
- Modern businesses run on sophisticated systems, while the outdated ones involve cumbersome processes.
- The evolution of science and technology has helped the modern business to predict the near future and help us work towards long-term goals. The older systems of business were short-term-goal driven.
- New businesses focus on implementing small but significant changes, while old companies were prone to sudden and drastic changes.
- Today’s businesses close weak points and eliminate waste swiftly, while old businesses tolerate them.
- Modern businesses look for opportunities to improve, while older ones tend to change when needed.
- Improved collaboration between department and team is another attribute of new business.
- More employee involvement in the daily decision-making process and more customer contact have also increased with modern business strategies.
- Business managers in a traditional company try to manage their employees by imposing decisions; new managers focus on guiding their employees to make the right decisions.
5 Differences Between Old School and Modern Onboarding
1. Paper vs. Digital
Traditional onboarding consists of soul-sucking piles of paperwork. The paperwork can include everything from tax forms to the company benefits. Modern onboarding is a slick, digital experience with a mobile-first user interface. These factors make the onboarding process a breeze to complete. The new hire's information is saved in a central, secure, and cloud-based repository that's GDPR and Soc 2 Type 2 compliant. The data is now free to flow into other systems - such as the HRIS - to set up the employee's profile. This is as simple as ordering a package from Amazon, and no one has to worry about the security of the employee's sensitive being lost or improperly stored.
2. Manual vs. Automated
The days of a labored, manual process of entering the new hire's information into relevant systems are long gone. This is a welcome situation because it minimizes the chances of human error. Modern onboarding is an automated and guided process that begins when the new hire signs along the dotted line. Their journey can start on any mobile device, iPad, or laptop, which allows for seamless synchronization due to automatization.
3. Boilerplate vs. Curated
Old-school onboarding was designed to give every single new employee precisely the same experience. The modern approach to onboarding takes the standard rules that have to be in place but caters to each employee’s different needs - almost like customized add-on modules. Things such as role or location are taken into account when setting up the onboarding process.
4. One day vs. Ongoing
Onboarding used to be a one-day experience for new hires, but modern onboarding provides a much more long-term process. Companies recognize the importance of keeping the new hires engaged. Pre-boarding and continuous onboarding well into their first couple of months -sometimes even throughout their first year- is now commonplace.
5. Compliance vs. Integration
Traditional onboarding methods merely provided a means to an end. The process was in place to ensure the new hire was brought into the company, following all compliance requirements. The goal was, therefore, to meet all administrative provisions.
Onboarding is the company’s ideal opportunity to make new employees feel welcomed and like a valued part of the team. Productivity and engagement can result from a comprehensive program that includes the setting of expectations, social mobilization, and so on.
If your onboarding process includes any of the old-school components previously mentioned, it is time for you to modernize your new hire's experience. You will be able to experience first-hand the benefits of modern onboarding.
How you can gauge whether your company is agile and where improvements could be possible
Predictability and Strict Planning vs. Adaptability and Going with the Flow
At work, your management follows a formal process with predictable outcomes. This method has no room for flexibility and cannot adapt to surprises that may come up. Traditional organizations often seem to have a hard time accepting that change is inevitable and that we need to prepare and adjust. Following a strict plan isn't the way to go nowadays.
Short-term Thinking vs. Long term Strategy
We all encounter situations where we can optimize for the instant gratification (watching a good movie) or invest in something with an uncertain outcome (learning Mandarin or to code). Companies tend to lean toward short-term results, sometimes systematically - pushed by public trading and reporting cycles. If this describes your company, agile is probably more of a buzzword in your organization. The investment in Agile doesn't provide us with instant gratification - it's a long-haul thing.
Interdisciplinary teams that work together
A fact for the majority of companies today is that huge organizations consist of huge, specialized departments. Agility is a cross-functional methodology. You take one person from each department, and they then build a two-pizza-sized team. The pizza’s size may vary, but the idea is that one meal is sufficient for the whole group. Usually, agile teams have between three to nine people. How many people do you have in your team, group, or department?
Stage-gates are a sign of waterfall processes
If you break down the organization’s processes, you can see that a clear indication of a sequential and predictable approach is stage-gates. This means that teams hand over customers from one department or group to the next. Most companies employ stage-gates because it's an efficient way of separating tasks and specializing. This concept is at the core of Taylorism.
Niels Pfläging has taught me how to differentiate between blue for complicated things and red for complex ones. If you want to solve blue problems (like during times of Taylorism), scientific management and stage-gates are excellent. However, if your challenges are full of complexity, uncertainty, volatility, and ambiguity (VUCA), you're definitely in the red zone. Stage-gates are a problem in this area and need to go.
Experiments and failing fast
Telltale signs of a traditional approach are If your company has a lot of massive projects and programs, as well as change initiatives. Big companies have big businesses, in contrast to smaller companies. Even so, big companies still need to test, experiment, and fail fast. This process of trying things out is crucial to an agile approach. You will be spending a lot of time planning for success if failure isn't an option in your team.
Agile teams start small experiments and work fast. They also fail fast and seek out a different approach until they find a method that works. Small tests are not only relevant to small startup companies. Big organizations need the same rigor when they want to find their success in a complex world.
Internal roles as servants leveraging the success
If you look at legal, IT, purchasing, and finance, these disciplines live on compliancy and risk-mitigation in large organizations. Their default mode is to mistrust and use a command-and-control approach to try and avoid problems. Deviation from the norm is a bad thing in such an environment. A modern agile organization needs to rethink these internal functions’ goals and adopt the mindset of supporting business units, serving customers, and sharing responsibility to drive business results.
Does that sound ambiguous? Trivial? Lofty? It sounds so simple that it may trick you into thinking it's shallow, but actually, it's the exact opposite.
Legal matters shouldn't take a leading role, and IT should enable, not hinder progress. The digital transformation needed a shift from manual and analog work to a fully automated process. ( It may be that those internal functions have so little few people in their teams that they can’t even do simple control elements. But the mantra cannot be the mistrusting business cops that catch the failing experimenters. )
The role of internal steering, control, and audits
Traditional companies have a narrow focus on ROI measures. I highly recommend watching the talk on "How to Fix Your Failed Agile Transformation" that we hosted at our 2019 Annual Tools4AgileTeams conference. In this talk, Jurgen Appelo offers a fantastic metaphor:
When taking care of and working with humans, different strategies work best depending on the situation. For toddlers, the approach is different than for adolescents. For parents, it's different than for grandparents. We all know that each product has its own life cycle. Using ROI for the later stages of a product is perfectly fine, but not for the early startup and shiftup phases
Products need different metrics in the early stages. They should get a fixed amount of money, and the teams should have the freedom to spend it as needed. During and after spending the money, the KPIs that they report against should consist of learning and growth. It's an entrepreneurial decision to fund new ventures within an organization. The relevant KPIs should match your focus and be able to change with the phase of the product or solution.
It's probably even more challenging to cut off a project that can't demonstrate relevant learning and growth after spending money. There will always be countless reasons and explanations for this. However, letting go of ideas that don't work is a part of rapid experimentation. Teams that stop projects shouldn't be stigmatized but rather respected. Their learning experience should be propagated throughout the whole company. Admittedly, many companies are currently undergoing a massive shift.
The role of finance and innovation accounting
Part of finance’s role is to help teams find good and suitable KPIs in the early stages. Some coaches help to build a so-called "innovation accounting system" internally. In his book, Eric Ries writes that Innovation accounting (IA) is a way of evaluating progress in an established company when all the metrics typically used - revenue, customers, ROI, market share - fall short.
He continues with "innovation accounting enables apples-to-apples accounting comparisons between two or more startups to evaluate which of them is most worthy of ongoing investment. This method is employed to see a startup or innovation project as a formal financial instrument - an innovation option of sorts. This option will have a precise value and can reflect a wide range of future costs and financial outcomes. Innovation accounting allows an organization to quantify learning in terms of future cash flows and make the explicit tie back to the equity structure that I presented in Chapter 3.
In other words, IA gives finance a way to model the variables that go into making up a startup valuation - asset value, probability, and magnitude of success. Early numbers (like revenue) are likely to be small, maybe even with a negative ROI. This is quite politically dangerous for innovation projects, so we have to be able to explain, rigorously, how those smaller numbers can turn into bigger ones without doing naive extrapolation."
At this point, it's not relevant if you understand and apply innovation accounting in your company directly. The crucial element is the understanding that finance’s purpose is not to control early-stage corporate entrepreneurs but rather to help them succeed.
The help of IT, legal and HR functions for corporate startups via exceptions
The same is true for other internal functions. Instead of imposing rules and limitations, leaders should see to unblock and inspire corporate startups. It's straightforward: you allow a specific startup to deviated from the norm. This startup is asking the legal function for an ISO certification, or the IT function defines that all startups can also use whatever cloud software they want to in the early stages.
The magic is that you allow for small and safe exceptions to free the way toward learning experiments. Get rid of the urge to prevent these experiments just because it's what everyone else is doing. That's not even relevant. Anyone can ask for an exception, but you will be unlikely to give such freedoms if the team only wants to create more comfort for themselves. That won't suffice.
For a startup, the whole venture is so fragile that it is an excellent idea to free them from all burdens to concentrate on the investment fully, quick experiments, and fast learning. Once they've shown progress, there is still enough time to add the necessary rules and guidelines. As long as the team is small, they don’t have to follow the vacation policy or spend more on traveling costs. Only the business results matter - and as we've learned, revenue and expenses are inadequate KPIs in the early days.
Small teams with a focus on external references
Big corporations often have huge departments that work on routine tasks. These tasks are only a small part of what the customer wants as a result. Apart from the previously mentioned stage-gate process, the team size, and the myriad of different requirements often reduce the individuals’ focus. Middle managers have no direct responsibility but still give their input, causing employees to have too many other things that divide their attention.
In a modern setting, you don't have to have huge teams but smaller teams of between three and nine people. They work on one task or several smaller tasks with an external reference. This means that the result is something consumed by the market. An internal connection would be a manager or committee, or perhaps another department within the organization. These teams run rapid experiments and try to scale once they find things that work on the market. Their goal is to make a high impact while starting small. Scaling comes after a new and successful path has been found.
The power of automation
I hear you, but for some parts of your business, large departments are more efficient. That's true, and that's why managing within the norm often leads to functional departments. As long as your business is profitable and you don't expect negative results, this might be the right way for you to operate. Unfortunately, even if you're in the lucky position of running such a profitable business, let me warn you about something. Automation and your competition will come for you sooner than you think. Things that have little uncertainty, and no surprises are perfect for automated processes. Where people once needed a human as a clerk to help and guide them, websites and applications are what serve customers even better in many industries. I fear that if you look out of the window, you'll already be able to see those trends coming after your business. There is nothing wrong with exploiting what you have.
However, it's also a good thing to start innovation projects that protect you against your competitors’ disruption. In many cases, your innovation teams will begin to compete and disrupt the business from within. This is ultimately a healthy thing.
That is one of the goals of this effort - I want you to make your company what Alexander Osterwalder calls The Invincible Company. It's all about reinventing your existing business with experiments and continuous learning.
Portfolio map with experiments instead of big change projects
Big companies often pursue enormous projects to change the organization, its culture, or other aspects. That's often expensive and slow, so there is a lot of pressure to get it "right.” Also, the budgeting process usually works like an entitlement to funding: "We had the money last year, so we're entitled to it this year.". The more sound approach is a portfolio of smart experiments that start small, with minimal financial loss should they fail. Only operations that show evidence of success get follow-up investments. Your team's funding increases, and you can deliver successful results.
From: The Invincible Company, Page 18
Competition and integration with other companies
It's been a classic market strategy to build market entry barriers as a way to keep out the competition, securing your terrain. In a cloud software world with crucial infrastructure available to all, this has become a dangerous strategy. There are so many ways of getting into your company's market that it's incredibly difficult to protect it and keep others out.
A modern approach is to play well with others. Market players cooperate with their competition and work together for clients. Sometimes clients even mandate this. Every company is a software company today, so we'll use software as an example here. The right way to integrate your competition and your customers is to use Software APIs (application programming interfaces). Such interfaces systematically allow others to receive and send you data in a structured way that you can process. Your value-creation process - including pricing, payment, and delivery - can quickly become part of your competitors' offerings through APIs. It's a successful strategy that all big companies embrace. They become infrastructure providers for themselves and others. This makes it easy for competitors to compete (for example, with Amazon) in many areas using their infrastructure either for payment, delivery, or hosting.
The innovation vortex
Jurgen Appelo is a big fan of "The Lean Startup and Design Thinking.” His picture of the Innovation Vortex is more comprehensive and easier to understand. It takes the ideas above and builds on them.
Other good reads on "What is agile?"
I would love to stay in touch. Please contact me.
About the book
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