Agile Manifesto Values add on for large enterprises

The Agile Manifesto was written in 2001 by a group of software thought leaders. It articulates a common set of beliefs based on empirical evidence of a better way of delivering software to add business value. One of it’s strengths is that it is articulating a mindset in the form of Values and Principles, which guide context specific decisions and practices.

Still relevant today

It has stood the test of time remarkably well. In particular for large enterprises, it is just as relevant today as it was in 2001. Today it is still common for large organisations to take an approach to change which is bureaucratic, slow and heavyweight compared to an agile and lean approach.

“It is not necessary to change. Survival is not mandatory.”, Deming

With the growth of ubiquitous computing, with increased availability of information, with reduced switching costs, with the current plentiful supply of VC funding, with government legislation increasing competition, living in a world with increasing VUCA characteristics, with firms orbiting customers rather than customers orbiting firms, it is easier than ever for large organisations to be disrupted either by traditional or non-traditional competitors.

Whilst agile and lean principles are not a silver bullet, and anything can be implemented badly, because of the above and with the rise of ‘digital’ (I’m not a fan of that word, we’ve been digital since the 1940s) more and more large organisations are looking to agile and lean principles to deliver better products faster with delighted customers and colleagues.

An evolution for large enterprises

The Agile Manifesto was written in the context of teams delivering software. With ‘software eating the world’, with the vast majority of change in organisations involving technology, the manifesto is as relevant now as it was in 2001. In addition the agile mindset is beneficial beyond technology change. Improving in technology only is a local optimisation, the Value Stream is much broader. The largest waste or impediment to productive, engaging, high quality, customer-delighting value may be elsewhere, for example in the financial, HR, control or internal audit practices and processes.

A fundamental shift in management model

In order for large organisations to avoid taking the same path as General Motors, a shift in management model and culture is needed. Many large organisations are still applying a 100 year old management model based on the Scientific Management approach articulated by Taylor in 1911, developed to extract greater productivity out of manual labourers in factories, with an us & them culture of managers and workers, command and control leadership style, role specialisation and no concept of an empowered team tasked with achieving outcomes.

The Agile Manifesto Values add on for large enterprises

To quote Martin Fowler and Jim Highsmith, two authors of the manifesto, from a 2001 article on the manifesto:

‘What of the future? We can confidently say that we don’t know. Agility is all about trusting in one’s ability to respond to unpredictable events more than trusting in one’s ability to plan ahead for them. One thing is clear: we’ve only just started.’

The agile manifesto should remain unchanged, as a historic document. As per this interview with one of the other authors, Alistair Cockburn:

What emerged was what these exact 17 people could produce together at that particular moment in history. We agreed at the end never to update the manifesto for that exact reason. (So don’t ask us to).

Hence this being articulated as an ‘add on’. View it as a bolt on for large, publicly traded, organisations. This articulation is a case of ‘working out loud’. There is no right and wrong. It’s not ‘finished’. It’s an articulation at this point in time. It will continue to evolve. It’s a case of sharing, use it if it adds value. It may work for your context, it may not. Also to work in the open and to get constructive feedback to strengthen it.

At this point in time, with learnings from leading on the adoption of agile and lean principles at scale across a large (130,000 people), public, global organisation founded in 1690, with learnings from industry forums, conferences and from the Learning Consortium, this is A view of Values for large organisations to deliver “Better Products Faster with Delighted Customers and Colleagues” and to improve the working lives of millions of people, where worker passion remains low at just 13% of the workforce. The intended audience are leaders at large organisations who have been used to working in a traditional manner. As per the manifesto it doesn’t refer to how to get there, which is an entirely separate topic.

Delighting Customers First over Shareholder Returns First

Focusing on delighting customers first leads to shareholder returns

• ‘The purpose of company is to create and keep a customer’, Peter Drucker. Delighted customers willing to pay a premium for the best customer experience will lead to shareholder returns.
• A focus on quarterly economic returns for shareholders first and foremost, destroys value in the long run, with short term decision making and executives compensated by share price, as explored by Steve Denning in this article.
• ‘Shareholder value is the dumbest idea in the world’, Jack Welch
• ‘Customers are number one, employees are number two and shareholders are number three’, Jack Ma, Alibaba.
• ‘The business of business is not just about creating profits for shareholders’, Marc Benioff, Chairman and CEO of Salesforce.
• Read more on the ‘world’s dumbest idea’ here

Enterprise-wide Agility over Agile for Software Development Only

Optimise for flow, learning and feedback, along the whole value stream

• Adopting agile principles and practices only in IT is a local optimisation. It leads to ‘islands of agility’ and a frustration with the rest of the firm, which will have an impedance mismatch. For example, an annual financial process which locks in budgets and change initiatives, making it hard to exhibit agility at a portfolio level. Or an internal audit department which adds controls which are not in line with agile principles.
• Optimise for Flow along the whole value stream from customer need to a product in customer’s hands, allowing for fast feedback, fast learning and reduced risk of delivery. This involves everyone in the value stream.
• Visualise and optimise the end to end value stream. Most of the waste is where the work isn’t, the waiting and hand offs between value adding activities. A tool such as Value Stream Mapping is useful here.
• Visualise and limit ongoing work in progress. See where work is blocked or is stacked up. Allow the team to swarm. ‘Stop starting, start finishing’. Less work in progress increases productivity (think cars on a motorway, the more cars the slower everyone goes).
• Ensure everyone in the value stream is lined up to hear customer feedback and to constantly reflect and improve. Tear down brick walls. For example, DevOps. Have build specialists and run specialists work together as one team. Minimise the distance between the Maker and the Consumer.

Empowered Product Teams over Command & Control Role Based Work Passing

Long lived multi-disciplinary teams with high Alignment, Autonomy and Safety aligned to value stream

• Long lived multi-disciplinary empowered small teams aligned to the value stream. Fundamental to the origins of agile and lean with roots in W. Edwards Deming’s and Taiichi Ohno’s people first approach vs. Taylor’s and Ford’s approach of people as cogs in a machine.
• The 1986 New New Product Development Game HBR article, heavily influenced Jeff Sutherland in the creation of Scrum and showed that self organising multi-disciplinary teams working together in a non-sequential manner led to better outcomes. This HBR article is in turn is a study of product development (outside of IT) in Japanese companies in the 1980s (with a heavy influence from Deming & Ohno)
• It was GM’s failure to move away from ‘us & them’, management and workers, with no concept of empowered teams focusing on outcomes, that led to their eventually bankruptcy, despite doing a joint venture with Toyota at the NUMMI plant (where Tesla’s are now made). Read more in a fascinating interview with ex-GM workers here
• Servant Leadership with high alignment and high autonomy. The culture of leaders needs to change from command and control, to providing clarity of purpose and desired outcomes (high alignment) and then getting out of the way of the teams, and supporting the teams by removing impediments. This is articulated well in a blog post by Henrik Kniberg on the Spotify Engineering Culture. Also worth watching is David Marquet’s video on Intent Based Leadership (source: IBLI.com), where David turned around a US Navy submarine from being the worst performing to the best performing in a year.
• An environment of psychological safety. As per this Google study on the characteristics of high performing teams, ‘psychological safety was far and away the most important of the five dynamics we found’. Teams members need to be willing to learn through failure in front of their colleagues, be willing to swarm and take a new role out of their comfort zone, to be able to say ‘I don’t know’. Also teams need to feel safe to learn through experimentation in front of their leadership. Where there is a culture of fear, what I’ve observed is learned helplessness. Team members know exactly what they can do next to solve an impediment but are frozen into inaction for fear of getting it wrong.

Achieving Big Through Small over Achieving Big Through Big

Small teams, hypothesis driven investment, optimise for flow, for better outcomes faster

• Douglas Hubbard, author of ‘How to Measure Anything’ writes here that Expected Opportunity Loss (EOL)= chance of a loss x opportunity loss. With a large batch of work, with a big bang delivery, we know that the chance of a loss is high. We can’t predict the future. And the opportunity loss is high as the sunk cost is high. Hence the EOL is high. With small batches of work, the change of loss is low, as we are learning and getting feedback quickly. The opportunity loss is low as we’ve not bet the house, we’re maintaining real options. Hence EOL is low.
• Hubbard goes on to say how the data with highest information value for an investment in a change initiative is (1) whether a initiative will be cancelled and (2) how soon it will be used. More reason to get products into the hands of customers to get feedback sooner rather than later.
• For Complex unique work, where we need to probe, sense and respond (see Cynefin), it is incorrect to assume, as we have done, that we can predict the future. We used to think we could achieve big outcomes with big everything: big teams, big up front planning, big requirements gathering, big build, big deploy. For example, a 1,000 day count down programme with key milestones printed and stuck on the back wall of an office. There is a growing awareness that this is not a high success strategy, that we need to probe, sense and respond, early and often.
• Small teams: multi-disciplinary, long lived, ideally co-located, product aligned teams are covered above. This leads to an important competency of large organisations. The ability to achieve big outcomes with a networked organisation. Not ‘owning’ all resources in a large top down hierarchy, instead a competency in orchestrating across teams, some which are in a leader’s immediate remit and some of which are not. Increasingly there will be teams outside of the large enterprise, start ups, aggregators, niche providers where there is mutualism.
• Small investment: the goal is to maximise value within a budgetary constraint. Rather than a sunk cost, committing large amounts of capital (even if that is then implemented in an agile manner), as referenced above, we need to be maintaining optionality and learning at the portfolio level. We’ll have a rough idea, a hypothesis, of the order of magnitude of the expected investment and it’s expected benefits. However, we can’t predict the future. So, we need to take a hypothesis driven investment approach, investing a small amount of money to test the hypothesis.
• The hypothesis is articulated as business outcomes, not activities or a predictive plan. If we can’t prove the hypothesis wrong (as we can’t prove it’s right), we carry on. This is central to the Lean Startup approach. It is maintaining optionality in the portfolio. It’s enabling the organisation to optimise business value within a budgetary constraint.
• For large organisations an approach at the portfolio level such as quarterly rolling wave investment governance, looking at the business outcomes (not a predictive plan) is preferable to an annual process. In terms of choosing what to do and what not to do, it is important to look at the Cost of Delay.
• In the context of Regulatory, mandatory work with a fixed scope and a fixed delivery, working with small teams and small work batch sizes is even more important. The Cost of Delay is very high. A large fine or not being able to do business. Learning and feedback needs to maximised. A big batch, big bang delivery is too risky. Coming in on scope and date can be tracked via a burn up. In reality there are many ways to implement the fixed scope, running vertical spikes helps to de-risk. Also, from first hand experience, it enables lobbying of the legislative rule writing based on empirical evidence
• Small work batch size & flow: fundamental to the agile and lean mindset is economies of flow over economies of scale. Reduce the batch size of work, visualise and limit work in progress and swarm. For example, David Anderson’s Kanban Method, pulling work with single piece flow. Similar to cars on a motorway, the more work that is in play at any one time, the slower the traffic goes. By focusing on smooth flow, it’s like the tide going down, the rocks, the impediments are surfaced. Applying the Theory of Constraints, by tackling impediments one by one, flow, throughput and productivity improves significantly.

Beyond this level of thinking are Self Managing Organisations, which is a step further. Matt Black Systems is a great example of a company where each person has their own balance sheet and their own P&L, taking market forces and applying them within the firm. According to Prof. Gary Hamel, excess management is costing the US $3 trillion a year.

For many firms, adopting the values above is a big step, time will tell which firms are able to learn and act on the learning or not, as in the case of GM, Kodak and Blockbuster.