I thought this study of Agile was fascinating and enlightening because, not only does it explain concepts behind successfully implementing agility, but it deep dives into the economic factors that have led to a stalemate of innovation in the traditional enterprise. This part of the puzzle is extremely interesting, especially because it gives an insight into why the agile advocate might experience so much resistance from traditional executives and managers. Denning is an Agile expert and a former World Bank executive. I want to include some highlights from the book in this review, but I really recommend reading the whole book – the research behind it is so thorough and it’s as much a study of corporate economics as agility.
Three Laws for implementing agility
There are three basic concepts that Denning discusses which he believes are key to implementing agility successfully:
The law of the small team. “Big and difficult problems should – to the extent possible – be disaggregated into small batches and performed by small cross-functional autonomous teams working iteratively in short cycles” (p.29).
The law of the customer. “Power in the marketplace shifted from seller to buyer. Instead of the firm being the stable center of the commercial universe, now the customers was the center. For firms to be successful, customers had to be not only satisfied, they had to be delighted” (p.52).
The law of the network. “An organizational network is a set of teams that interact with and collaborate with other teams with the same connectivity, interaction, and passion as they do within their own small team” (p.90). Denning comments that, whilst many managers see agility as being totally opposed to discipline, discipline is actually crucial to agility to prevent the organisation from becoming an ‘adhocracy’.
Changing the organisational culture, without talking about “culture change”
Denning talks about three layers of organisational tools “Leadership tools – inspiration”, “Management tools – information” and “Power tools – intimidation”. He notes that, far too often, companies lean on Power and Management tools to bring about change, but true cultural transformation requires inspiration. Leaders who use storytelling, vision, and role modelling the new world are far more likely to achieve success than those who bully and coerce. From a change management best practice point of view this makes total sense – minds might be won by facts and figures, but hearts must be inspired. One interesting example Denning uses is Curt Carlson, CEO of SRI International, who says he never used “demoralising” language like ‘culture change’, ‘fail fast’ or ‘work harder’ when bringing agility to SRI. Instead he talked about agility’s positive impacts – ‘working smarter’, ‘learning faster’.
Management traps
The second part of the book is dedicated wholly to economics and financial theory. Denning discusses four traps: “shareholder value”, “share buybacks”, “cost-orientation” and “backward looking strategy”. “If agile management is to thrive in an organization on a sustained basis, leaders need to understand why such a question has arisen, why it has become pervasive, and how it can be dealt with in a proactive fashion” (p.161).
Denning argues that business strategy has long focused on creating short term value for the shareholder, which means that investments in the business and its long term viability have been neglected. He argues that shareholder value – in fact profit in general – is a byproduct of a successful company, not its goal.
Another common practice that Denning discusses is that of companies buying back their own shares in order to drive up value in the remaining share pool and increase investor satisfaction. This practice, which Denning notes is poorly regulated by the SEC in America, cannibalises value within the business and leaves the customer, the business and – ultimately, the shareholders themselves, worse off. In the decade between 2006-2015, Denning notes that public companies in the US spent $5 trillion on share buybacks.
The cost-oriented trap occurs when business leaders, and particularly CFOs, focus on cost cutting as the primary driver but neglect to look at a TCO calculation. For example, when making the decision to offshore production, companies will look at production cost but ignore other costs – technical debt, brand debt and regulatory debt for example. Ultimately the cost of offshoring might be far higher than the gains in less obvious ways.
The final trap, backward looking strategy, occurs when companies focus on past performance as an indicator of future performance, and fail to pay attention to changing market conditions. Some of the most successful companies have come into being by creating totally new markets (Apple, for example, who democratised access to personal computers by making them cheap enough for the average person to consume).
Denning concludes by commenting that Agile management represents a cultural shift in our world, by offering a practical, financial, legal, economic, moral, political and philosophical critique of our society.
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