Scaled Agile: a journey with different starting positions
As new market entrants keep appearing, incumbents are faced with ever growing challenges and looking for efficient solutions in what could, in time, become a fight for survival. Research shows that Agile product development is exactly that: a competitive advantage with concrete and tangible results. However, too often when reacting to those new competitors, instead of making the most of these possibilities, the large players’ approach is limited to an attempt to copy them. While the target state of both sides is very similar, the route will be very different. The reason is straightforward: a huge difference in the starting position. The Financial Services sector represents a good example of these trends
Advantages of Agile
Numerous business cases show the advantages of developing in an Agile methodology. Those advantages can be classified in three big dimensions, with spectacular results to be seen:
— stakeholder motivation: up to 33% better employee motivation
— market responsiveness: 75% decreased time to market
— cost control: on average 45% avoidance of budget overspent
One can argue whether all advantages can be fully exploited in parallel and definitely opposition can be made on the exact numbers of the stated business cases. Nevertheless, they show that applying Agile product development enables happier stakeholders in bringing value faster with an increased control on spending.
Lowered entry barriers
The number of new entrants in technology-driven sectors is growing dramatically… and they are often applying an Agile way of working. This trend is especially visible in the Financial Services sector.
For the first time in History, financial market incumbents are challenged on nearly each aspect of their value proposition on a vast scale. Market entry has become relatively easy, by leveraging technology to innovate financial processes and customer experiences. A successful entry in the financial market is often linked to the idea of putting customer value first. It is in their DNA to offer solutions covering the core requirement of their target audience. Optimizing the usage of their limited start-up budget is a necessity for survival. Every day spent developing without releasing code to the market is burning money. If Frank Robinson had not coined the term “minimum viable product”, people could think it was first produced by the technology start-ups, called FinTechs in the financial services market.
Common reactions
It is clear that most incumbents lack the above qualities of rapid delivery on a constricted budget. This is even reinforced by a huge legacy built over the past fifty years.
As a result, it is no surprise that banks and insurers are looking towards Agile product development to bring some of the qualities on which they are that heavily challenged. FinTech behavior is then copied or acquired, and partnerships are made. Deutsche Bank Innovation Labs, Barclays Accelerator, and UBS Innovation Spaces are just a few examples of banks which are setting up a start-up like environment or incubator.
Different starting point
Although the results of these incubator models are often very promising, reality shows that the core problem was actually not tackled but just avoided. And indeed, how can they leverage the incubator practices towards the rest of the organization? Incubators commonly work on projects with isolated teams and without any interaction with legacy solutions. Furthermore, HR processes and technology constraints are tackled through totally separate ways of working.
The same concerns are valid for banks and insurers which are acquiring market entrants.
The incumbent’s huge asset of scale is thus left out of the incubator model and not exploited for acquisitions, while this is the primary strength of traditional banks and insurers compared to their smaller competitors. Their challenge is to integrate an Agile way of working, all while safeguarding their scale.
In comparison, the FinTechs’ challenge is to be sustainable by reaching scale. Both are heading towards the same target state, nevertheless the starting point is totally different. By consequence, the route they take should be different as well…
Complex answer
How to gradually grow the organizations’ Agile maturity is a question with a complex answer which should be tailored to the organizations’ starting position. A transformation is defined by the target state, however always fundamentally impacted by the starting point. In general, one should gradually grow Agile maturity on different levers like pace, value, quality, talent and collaboration. Based on the as-is situation on each lever, intermediary steps should be defined to grow maturity and increase scale:
- Start with one initial project to try Agile
- Later on, apply Agile methods on the full product lifecycle (not only on projects anymore)
- Once you are mature in applying Agile methods on the full product lifecycle of one isolated product, you can do a roll-out towards all products of one domain
- Once one domain is fully Agile, you can do a roll-out towards the entire organization. At each maturity level, impediments for an Agile way of working are gradually removed to enable an efficient and sustainable scale-up.
Conclusion : First-scaler beats first-mover
As stated by Reid Hoffman, the competitor that gets to scale first nearly always wins. This will also apply to the renewed financial sector. The ability to react quickly to changing customer needs will be imperative, but who will reach this scaled ability first?
