HBRs Embrace Of Agile


Steve Denning

May 7, 2016

The article, “Embracing Agile,” in the current issue of Harvard Business Review by Darrell K. Rigby, Jeff Sutherland and Hirotaka Takeuchi is a landmark in the history of management, not just the history of Agile and its major variant, Scrum.

In 2011, I wrote: “If there was a Nobel Prize for management, and if there was any justice in the world, I believe that the prize would be awarded, among others, to Jeff Sutherland, Ken Schwaber and Mike Cohn for their contributions to the invention of Scrum.”

Scores of books have been written about Agile and Scrum over the last decade, but most general managers have looked at software developers in general, and Agile in particular, as chaotic and unfathomable. For over a decade, Agile has been seen as something strange happening in IT in the basement. It was ridiculous, I was told by one guru, to think that any gains in management could come from such a place. Meanwhile HBR remained silent. Now HBR has finally recognized that Agile is something significant for management generally. But exactly what?

“Now agile methodologies,” says HBR, “involve new values, principles, practices, and benefits and are a radical alternative to command-and-control-style management—are spreading across a broad range of industries and functions and even into the C-suite.”

There are many wonderful things in the HBR article. It gives a full description of the Agile Manifesto of 2001. It describes the principal variants of Agile: Scrum, Kanban and Lean. It recognizes the amazing benefits of implementing Agile. And yet the article also raises certain questions.

Agile Is A Mindset, Not A Methodology

For those who live and breathe and implement Agile on a daily basis, Agile is a mindset. Agile isn’t just a methodology to be implemented within the existing management framework. Agile is a dramatically different framework for management itself. In the community of Agile practitioners, which now numbers in hundreds of thousands, Agile begins with a different view of the goal of the organization.

“The highest priority” as the Agile Manifesto states, “is to satisfy the customer.”

This is a revolutionary declaration. In most public firms today, the highest priority is not to satisfy the customer. The highest priority is to maximize shareholder value as reflected in the stock price.

Just this month, The Economist declared that “shareholder value rules business” and that shareholder value is “the biggest idea in business.” This is the case even though, as The Economist itself admits, shareholder value thinking has become “a license for bad conduct, including skimping on investment, exorbitant pay, high leverage, silly takeovers, accounting shenanigans and a craze for share buy-backs, which are running at $600 billion a year in America.” Ironically, the pursuit of shareholder value as reflected in the current stock price ends up destroying shareholder value.

Shareholder is thus not only the “the biggest idea in business.” It is also the worst. Even Jack Welch has called shareholder value “the dumbest idea in the world.” Many CEOs have denounced it. And yet shareholder value still rules business, in part because the C-suite is now given massive stock-based compensation to pursue shareholder value.

Agile Is The Antidote To Shareholder Value

Agile is the antidote to shareholder value. Agile aligns with Peter Drucker’s 1954 foundational insight: “The only valid purpose of a firm is to create a customer.” It is the management basis for the emerging Creative Economy. It is the foundation for continuous innovation. It is the key to the extraordinary success of firms in Silicon Valley, like Google, Facebook, Amazon and Apple with a combined net worth of some $1.3 trillion.

Agile is therefore at odds with “the biggest idea in business”—shareholder value.

Agile is a revolutionary challenge to the management status quo. It is a Copernican revolution in management akin to the Copernican revolution in astronomy. The center of the commercial universe is no longer the firm: it is the customer. Agile therefore has vast implications has to how an organization is run.

Viewing Agile as a methodology to be implemented within a culture of shareholder value misstates the revolutionary implications of Agile. It also risks missing most of its benefits with flawed Agile implementation. When Agile is viewed and implemented merely as a methodology within the existing management framework, Agile can become a travesty of the real thing. It can become what Jeff Sutherland himself has called “Scrum-butt” and what others have labeled “fake Agile.”

To get the benefits of Agile, managers not only have to “do Agile.” They have to “be Agile.”

In some respects, the HBR article is talking about “doing Agile.” For instance, when the HBR article says that “A number of companies have reallocated 25% or more of selected leaders’ time from functional silos to agile leadership teams” it is embracing the external forms of Agile, while missing the driving force behind it. It is talking about “doing Agile,” not “being Agile.”

The C-suite can’t have a customer-driven mindset, values and culture for 25% of its work, and then a shareholder value mindset, values and culture for the remaining 75%. It’s not possible for the C-suite to have two “highest priorities.” Even mathematically, it’s not possible to maximize two variables. Managers have to choose.

What happens in practice of course is that the 75% of time devoted by the C-suite to shareholder value eventually overwhelms the 25% devoted to customer value and Agile. The message is clear to the rest of the organization: Agile becomes an option, not a necessity. When push comes to shove, the managers and the staff in the organization realize that satisfying customers would be nice to have, but not essential. When the highest priority is shareholder value, the primary focus is on cutting costs and boosting the share price. In due course, the innovative work of Agile teams gets sidelined. What it means is that the C-suite is paying lip service to Agile but missing the point. They are “doing Agile,” not “being Agile.”

A Different Kind Of Management

When the HBR article says that “The agile approach … is helping to create a new generation of skilled general managers,” it implies that Agile makes general managers better at what they currently do. What it misses is that Agile creates managers who are not just better but different. When managers truly embrace Agile, they have different goals, different ways of organizing work, a different role for management, different ways of coordinating work, different values and different ways of communicating. Agile changes the management game fundamentally.

The site visits of the Learning Consortium for the Creative Economy in 2015 showed that where Agile is seen merely as a set of methodologies to be applied within existing goals, roles and assumptions of hierarchical bureaucracy, few if any benefits flow. The full benefits of Agile only flow when the managers embody the Agile mindset.

The Gains Of Agile

The article correctly states that the Agile can lead to gains of up to 60%—and more—in new-product introductions, marketing programs, human resources, and employee engagement. The article suggests that managers are not taking advantage of these gains because of ignorance—something that can be rectified by training. What the article misses is that these gains only materialize if managers have the Agile mindset, values and culture. It’s not simple ignorance. Agile involves changes in deep-seated attitudes, values and the entrenched habits of hierarchical bureaucracy that will not change merely by taking a short training course.

This kind of magical thinking has led many big firms to embark on a wave of Agile training, only to find that the benefits of Agile don’t ensue. The organization remains unchanged and the organization concludes that “Agile doesn’t work.”  What they are missing is that Agile involves more than learning about a new management methodology. Agile is culture change for the whole organization.

The article correctly notes that “Innovation is what agile is all about” and that Agile is central because “these days most companies operate in highly dynamic environments.” Yet the article misspeaks when it says that Agile teams “can churn out innovations faster.” Agile teams don’t churn out things. Innovation isn’t something that can be “churned out” To suggest that it can is to adopt a 20th Century industrial mindset, which is the antithesis of Agile and innovation.

Six Agile Practices

The article describes “six Agile practices.”

1. Learn How Agile Really Works: The article describe the main Agile practices which “include scrum, which emphasizes creative and adaptive teamwork in solving complex problems; lean development, which focuses on the continual elimination of waste; and kanban, which concentrates on reducing lead times and the amount of work in process.” It describes the role of the product owner who represents the voice of the customer, and the cross-functional self-organizing teams, the prioritizing of tasks, the daily standup, the feedback from customers, the retrospective and so on.

It recites and explains the Agile Values from the 2001 Agile Manifesto,

• People over processes and tools

• Working prototypes over excessive documentation

• Respond to change rather than follow a plan

• Customer collaboration over rigid contracts

It documents the benefits of Agile: increased team productivity and employee satisfaction, minimizing waste, improving visibility, continuous adaptation to customers’ changing priorities, improved customer engagement and satisfaction, speed to market, reduction of risk, broadening organizational experience, building mutual trust and respect, and freeing up senior managers for higher-value work, i.e “creating and adjusting the corporate vision; prioritizing strategic initiatives; simplifying and focusing work; assigning the right people to tasks; increasing cross-functional collaboration; and removing impediments to progress.”

And yet the article fails to make clear is that these gains can only be achieved and sustained by adopting Agile as a consistent mindset, a set of values and an organizational culture throughout the organization.

2. Understand Where Agile Does Or Does Not Work: The article suggests that Agile is less relevant to areas where innovation is less central or even absent, such as “plant maintenance, purchasing, sales calls, and accounting.” In such areas, it leaves executives with the decision “whether the anticipated payoffs will justify the effort and expense of a transition.” suggesting that “it’s better to enlist passionate volunteers than to coerce resisters.”

What the article does not state is that the far more frequent example of where “Agile does not work,” is where there is a lack of a consistent and passionate commitment to Agile on the part of the senior managers. If managers themselves see Agile as “methodologies for their employees” to be deployed like any other management methodology, the chance of strong sustainable Agile implementation with full benefits is remote. Getting the full value of Agile depends on managers themselves consistently embodying the Agile mindset in all their own words and actions.

3. Start Small And Let The Word Spread: The article correctly suggests “most successful introductions of agile usually start small” and then spread, even though there are some exceptions, for example, Salesforce. “Each success seems to create a group of passionate evangelists who can hardly wait to tell others in the organization how well agile works.”

However, what we saw in the site visits of the Learning Consortium is that the spread of Agile only happens on a significant scale when the senior management act as explicit and consistent champions of Agile—100% of the time, not just 25%. That’s because strong and continuing support is key to achieving fundamental culture shift.

4. Allow “Master” Teams To Customize Their Practices: “Before beginning to modify or customize agile, a person or team will benefit from practicing the widely used methodologies that have delivered success in thousands of companies… Over time, experienced practitioners should be permitted to customize agile practices.”

5. Practice Agile At The Top: The HBR article suggests that “A number of companies have reallocated 25% or more of selected leaders’ time from functional silos to agile leadership teams. These teams rank-order enterprise-wide portfolio backlogs, establish and coordinate agile teams elsewhere in the organization to address the highest priorities, and systematically eliminate barriers to their success.” Here Agile is being misrepresented as a methodology, not a shift in mindset and culture. It implies embracing the external forms of Agile, while missing their essence. The reality is that a 25% commitment to Agile will not generate its full benefits.

6. Destroy The Barriers To Agile Behaviors: The HBR article cites the informal surveys that we have carried out at Scrum Alliance which show that “more than 70% of agile practitioners report tension between their teams and the rest of the organization.”

The explanation, says the HBR article, is that different parts of the organization “are following different road maps and moving at different speeds.” It cites as an example where the output of Agile teams needs to be integrated into much slower bureaucratic (“waterfall’) review processes.

However the far more frequent and important impediment for Agile teams comes from the behavior of the C-suite itself—its focus on maximizing shareholder value as reflected in the current stock price. This goal, with the resulting focus on cost-cutting and the boosting quarterly profits, is often pursued at the expense of the very innovative activities being pursued by Agile teams.

When the C-suite sees the problem of barriers to Agile as something occurring “down there” in the processes of the organization, it is usually mistaken. Instead the C-suite needs to look in the mirror and recognize the true source of the problem: its own commitment to shareholder value thinking. It’s their own values, words and behaviors that are creating the tension.

So it’s not enough, as the article suggests, for the C-suite to “get everyone on the same page,” “redefine roles and responsibilities” “deal with teams not individuals,” and “lead with questions, not orders.” The C-suite must go further and clarify that its “highest priority is to satisfy the customer” in accordance with the Agile Manifesto.

Bottom Line

Despite shortcomings, the article, “Embracing Agile,” is a landmark in the history of management, not just the history of Agile. It describes and honors the practices of Agile and recognizes Agile as something significant for management generally. The authors are to be congratulated for getting the article published in HBR, the very Vatican of management.

Nevertheless it is disappointing that the article falls short of recognizing the truly revolutionary nature of Agile. By implying that the well-documented gains of Agile will flow from adopting Agile as a methodology, the article risks setting up a trap of unsuspecting managers—inducing them to “do Agile”, without making clear that sustainable gains only come from “being Agile,” and embracing Agile as a mindset and a culture.

Jeff Sutherland, as one of the co-authors of the HBR article and one of the co-authors of the Agile Manifesto, obviously has a deep understanding of “being Agile” and the Agile mindset that represents a deep cultural change for most organizations.

The Role Of Consultants In Agile

The emphasis of the HBR article on “doing Agile” is more aligned with the approach of big consulting firms.

As Agile coach Robin Dymond has written: “Over the last few years we have seen really big consulting companies offering Agile Adoption and Agile transformation services to their clients. However the big consulting companies and most of the IVY league business universities have been absent in the Agile community. … In many ways Agile and Scrum is an anathema to big consulting companies. In waterfall projects big consulting companies would bill hundreds of millions of dollars each quarter for project managers, business analysts, governance experts, Earned Value consultants, and Senior Partners to generate millions of pages of documentation… Now these same Big Consulting organizations are selling Agile Adoption and transformation.”

For a consulting firm, showing organizations how to “do Agile” with large-scale training programs is likely to be an easier sell than getting involved in a long hard slog of changing management mindsets and transforming the organizational culture. In future, consulting firms could play a more constructive role by helping firms to understand what is involved in “being Agile.”

The current HBR article is thus as an uneasy compromise between Agile as seen in the Agile community—a different mindset with a new organizational goal and culture–and Agile as seen by firms merely as a management gadget to help pursue maximizing shareholder value.

The embrace of Agile by Harvard Business Review is welcome but it remains a partial embrace. “Doing Agile” is not enough. To get the full benefits of Agile, managers must recognize that Agile is a mindset, not just a methodology. They must learn to “be Agile.”

And read also:

The Economist defends the world’s dumbest idea

How to make the whole organization Agile

Surprise! Microsoft is Agile

Why Do Managers Hate Agile?

More On Why Managers Hate Agile

Follow Steve Denning on Twitter @stevedenning

This article was written by Steve Denning from Forbes and was legally licensed through the NewsCred publisher network.

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