The Age of Agility
Read this story in Portuguese | Leia este texto em português
Agility means: “try everything, but never repeat the same mistake twice.”
A key concept of agile methodology is systematic innovation. At first glance, that term almost sounds like a paradox. Innovation does not easily develop with systematic approaches, and systematic approaches rarely produce innovation. Resolving this apparent paradox is the biggest productivity challenge of our time. In the era of agility, a successful organization needs to create environments, networks, teams, methods and practices that make creative thinking systemic. After all, that’s the main path to innovation.
Systematic innovation is based on a long history of changes in business management. It began and evolved in the US in the past hundred years, reaching across several decades. In his book Growing Up Fast: How New Agile Practices Can Move Marketing And Innovation Past The Old Business Stalemates, Kevin Fann lists the following eras: the Age of Efficiency, the Age of Social and the Age of the Stockholder. And now, we’ve arrived at the Age of Agility.
Pre-Historical Agility
In the Age of Efficiency, business management focused on maximum efficiency. It was all about process engineering, production lines and heavy industrial mechanization. The large industrial monopolies of the end of the XIX century begin to appear.
The Era of Social was one of great prosperity and hope, and businesses began transforming into a collective mechanism that consolidates social reform, with widespread improvement in living standards after World War II.
The Age of the Stockholder began with the economic de-regulation in the 1980s. US businesses went through a period of idolatry of the stockholder, the dissemination of “good greed”, the rise in great income disparity between leadership and other workers.
The Age of Agility represents a sort of combination between all of the previous eras. It is marked by a growing need of systematic innovation, and inaugurates a new management ethics framework. It promotes networks above hierarchy and creativity above standardizing. Companies are concerned with efficiency and maximizing profits, but also with worker satisfaction and social impact of the products and services they sell.
Now let’s dive a little deeper on each of these eras to understand how we got to where we are today.
1880–1940: Age of Efficiency
Historians typically point to a specific event as the symbolic birth of business management. They say it all began in Chicago in May 1886, at the American Society of Mechanical Engineers.
At this famous event, Henry R. Towne, co-founder of Yale Lock Manufacturing Company, proposed the idea of “scientific management” as a way to apply the principles of civil engineering to industrial production.
Towne’s presentation was meaningful because it was the first formalization of two of the most important principles of modern business management:
- Management consists of a set of practices that can be studied and improved; and
- Management must be rooted in classical economy and in the efficient use of resources.
The audience at this event was made up of engineers who are extremely rational, literal and logical people. These characteristics can be observed as the way management was thought about.
The first decades of modern business management were dominated by dreams of scientific exaction.
Some notable companies of this period were: American Sugar, American Telephone and Telegraph Company, General Electric, Allied Chemical, International Harvester, US Steel, Union Carbide, Sears Roebuck, Western Union.
The Age of Efficiency was born in the period of rich American barons of capitalism, in a climate dominated by monopolies, corruption and exorbitant wealth, owned by famous names such as Carnegie, Vanderbilt, Rockefeller, Morgan, Mellon, Stanford, Astor.
These political leaders were called upon to adopt progressive ideas and to bring scientific wisdom to their businesses.
In 1911, Frederick Taylor wrote The Principles of Scientific Management, in which he defended applying the scientific method to managing companies.
Taylor first outlined the difference between “people of exact sciences” and “people of human sciences” and pointed to this division as a key tension at the workplace. He affirmed that the differences between the quantifiable and the human should not be adversaries, but instead, complementary opposites.
There was a general belief that all companies could be operated in the “best way” if scientific processes were followed, but studies discovered the mysterious force of human psychology at work.
A study of productivity conducted during the Age of Efficiency showed that turning on strong lights at a factory raised production line worker’s productivity. The curious thing about this study is the discovery that it wasn’t the fact that the light was on that impacted productivity. It was the workers’ perception that management was watching them. Any management attention was good for productivity.
Later studies further proved this thesis. Productivity is enhanced when:
- Workers are organized in groups; and
- Management asked for feedback and suggestions.
1940–1980: The Age of Social
This era directly followed World War II. It was marked by global confidence, public support and generally good feelings about the potential of businesses to improve collective quality of life, with jobs directly relating to social stability, health, housing and social contracts with unions.
Notable companies from this era were General Foods, Eastman Kodak, Proctor & Gamble, United Aircraft, Chrysler, Woolworth e Goodyear.
The Age of Social saw the rise of important business scholars, most remarkably, Peter Drucker. Many considered Drucker the father of modern management, with several important publications throughout his life, such as: Concept Corporation (1946), The Practice of Management (1954), and Managing for Results (1964).
Concept Corporation was the first book to dive deep into the theme of large corporations and how they affect society in a broad sense. Managing for Results may have been the first book on commercial strategy. In it, Drucker claims that “business exists to produce results”, and management’s job is to search for opportunities.
Drucker saw the corporation as a social network and believed businesses had two prime objectives: innovation and marketing — ideas that continue to be fundamental to commercial practices today.
Also of great influence in this era was Mary Parker Follett, social worker, management consultant and pioneer in organizational behavioral theory. Her ideas about “constructive confrontation” and “win-win” strategies have remained relevant to this day. Follett hated micromanagement, calling it “boss ideology”.
Douglas McGregor was another scholar who saw the force of opposites at work. He developed his “Theory X / Theory Y” to represent philosophical extremes: pure control versus pure autonomy. Theory X stated that people are lazy and need to be policed at the workplace. Theory Y responded that people search for meaning at work and contribute based on positive incentives. These two extremes fight each other constantly.
1980–2010: The Age of the Stockholder
In the 1980s, companies moved away from social preoccupations in favor of professional specialization. With the decay of union power, and growth in globalization, dissemination of MBAs, and the new obssession of creating value for stockholders, moral ambitions became less and less important to business management.
The Age of the Stockholder inaugurated deregulation especially for transport, telecom and finances. There was a drastic boom in auto, steel and electronic imports.
Mergers and acquisitions became standard practices, without much control or restrictions. Gordon Gekko’s famous line “Greed is good” in the movie Wallstreet (1987) is a great summary of the mentality in this era. Management began to change, with a strong emphasis towards stockholders.
Creating wealth for stockholders: that was the clearest goal for corporate management at that time. Managers who followed through on this mission were rewarded with stocks and other incentives. In other words, the ultimate prize was to become a stockholder.
In 1985, the term “value creation” was coined to justify exorbitant corporate payouts. The biggest reward to a worker who had “created value” was to participate in the results, and that only occurred when stock prices climbed. To receive a part of the profits, the worker had to become a stockholder and then benefit from rising stock prices, as he continued to “create value”.
In1999, stock options represented 50% of executive directors’ salaries. CEO compensation was over 500:1 when compared to average workers in the US in 2000, according to research from the Institute for Policy Studies.
Agile Transition
As we reach the end of the Age of the Stockholder, two words begin to step into the spotlight: leadership and innovation.
The Age of the Stockholder enthusiasts still cling to the price of the stock. That’s what orients their decisions. They know wether they’re right or wrong according to price oscillations. It’s an objective number, directly measurable. It’s tough to change that culture.
However, new publications and studies start to come out tying leadership and innovation directly to corporate success. The value of a company is subordinate to its capacity to innovate and produce strong leadership.
Some argue that “agile” management is already a mere cliché — something everyone uses just to sound modern. That’s not quite right. By definition, agile management holds a safe space for innovation to occur. It promotes creativity and human intuition beyond analytic calculations, although in some ways oriented by them. “Agile” is a process, not a slogan.
In the past hundred years, we saw how professional business management contributed to the fall in poverty rates, to the rise in food production and in median quality of living. However, as Walter Kiechel III wrote in The Management Century, there are huge challenges ahead, challenges that the discoveries during the Age of the Stockholder are not capable of solving.
How will we create qualified jobs for all? How will we adapt to environmental change? How will we deal with constant change? How do we maximize returns in a world where there is no “best way” of doing things? How to reconcile worker satisfaction with profit and social responsibility?
Those are the questions that taunt the Age of Agility.
In our next post, we’ll talk specifically about software in a world before agile.
