Those who needed quick access to information worked in the middle of the command center. Those who undertook projects with a longer time frame worked on its fringes so they could concentrate on their jobs. Regardless of rank or department, anyone could cross the room to consult with a colleague. Partner agencies like the CIA could use electronic communication to participate in discussions. McChrystal conducted daily briefings for all personnel. This reinforced the concept that leaders no longer created predetermined plans for others to follow. McChrystal delinked rank and responsibility. He sent “decision making and ownership” as low in the hierarchy as possible. This was a radical change for the US Army, a strictly hierarchical system. But McChrystal built his team – including top officers – of like-minded soldiers who prioritized the mission over personal status. This is a positive foundation of the agile management concept.
Survival Through Flexibility
Like the armed forces, businesses have come to realize that in an uncertain world, their best hope for survival lies in flexibility. Companies, including the largest and most admired, have quietly initiated changes that will have a profound impact on the world around them. They created an environment in which they can quickly and inexpensively create value. For example, Apple and Samsung have established platforms that can serve the requirements of millions of people. Tesla, Saab and Ericsson can now deliver software upgrades to their products over the Internet.
“The living customer with mercurial thoughts and feelings is now the center of the commercial universe.”
Across a variety of industries, businesses suffer when conventional good management practices stop working due to rapid change. To move ahead, many firms have adopted agile management methods that originated in the software industry. These tactics allowed companies to excel even during extraordinary change. They learned to manage technology and data more effectively.
The “Agile Manifesto”
In 2001, pioneers of the agile approach created the “Manifesto for Agile Software Development,” also known as the Agile Manifesto. It asserts that creating higher-quality software requires abandoning some of the traditional principles of 20th-century management. It prizes people and their cooperation over “processes and tools.” It considers functioning software more important than exhaustive documentation. The Manifesto says software developers should concentrate on “customer collaboration” rather than “contract negotiations.” It proposes that software developers should see responding to change as a more significant priority than following a set routine.
“Agile management is at odds with much of what is practiced in public corporations and taught in business schools.”
Many traditional managers have found these practices, commonly called “agile management,” difficult to understand and implement. Yet those who’ve put it into practice accrue substantial benefits. Take Spotify, the musical streaming service, which has used agile management since its debut in 2008. Its self-directed teams constantly seek to improve its offerings. In 2013, Spotify launched its News-Feed product, which gave users customized recommendations. In 2014, it upgraded the feature, calling it Discover. However it found that users still preferred to follow the service’s editors’ playlists. Two Spotify engineers then analyzed billions of customer-created playlists. They suggested that the service should use the results of this analysis to tailor playlists to meet the specific preferences of each individual user.
“Southwest Airlines…based its business on eliminating the very features the rest of the airline industry were trumpeting: meals, lounges and seating choices.”
With a series of quick iterations and little need to battle bureaucracy, Spotify staffers came up with the further enhanced Discover Weekly. Every week, more than 100 million users receive a playlist of music they’ll like. With this new feature, Spotify gained an edge over its rivals, which also had vast stores of music but lacked the ability to help users to discover music they’d enjoy.
Firms that embrace agile management follow its three organizing principles:
- “The Law of the Small Team”
Agile small teams follow this set of common practices:
- “Work in small batches”– Many large, complicated initiatives fail because businesses can’t change their plans fast enough amid conditions of uncertainty and rapid change. Businesses that use agile management change the way they manage. They shrink the scope of their projects and the size of their teams. At the same time, they enhance how swiftly they respond to customer feedback. By embracing these methods, businesses can efficiently track project development, even with large-scale, complex initiatives.
- Deploy “small cross-functional teams”– Agile management recommends the use of small independent teams of seven to twelve members each. Team members should bring a variety of skills to a project, and each team should have the capability to meet specific customer requirements.
- Limit “work in process”– Teams should focus on precisely targeted projects they can complete in a limited amount of time. Using this approach, businesses can ensure that work across the enterprise doesn’t slow down or get stuck in a bottleneck.
- Establish “autonomous teams”– Once businesses decide which tasks they must accomplish and what time frames they must meet, different teams – not executives – determine how to achieve those objectives.
- Focus on “getting to ‘done’”– Assessing how successfully teams complete their goals is one way of gauging the effectiveness of agile implementations. Teams must complete their assignments and not get bogged down in a state of “almost finished.” Big bureaucratic companies often react slowly and miss opportunities because they have so many unfinished tasks.
- “Work without interruption”– Once teams begin a cycle, they complete their work without taking on new tasks or shifting to other, ongoing projects.
- Facilitate “daily stand-ups” – Teams hold daily meetings – or stand-ups – to discuss the work they’ve completed and the challenges they face. Teams undertake these meetings to enhance their internal communication, not to provide information to senior management.
- Practice “radical transparency”– Agile teams share information publicly so anyone can understand the status of the project, the progress made, likely stumbling blocks and any obstacles the team faces.
- Collect “customer feedback for each cycle”– Customers provide feedback at the end of each short work cycle. In collaboration with management, teams decide how to incorporate this new information into their project.
- Conduct “retrospective reviews”– Teams regularly evaluate what they’ve learned on each project and how they can apply that knowledge to the work in process.
“Rapid horizontal communications were more important than vertical consultations and approvals.”
Agile management successes demonstrate that teams are the most effective approach, even for big, complex projects.
- “The Law of the Customer”
The customer’s increasing centrality in business is another major impetus forcing changes in corporate strategies. In 1954, management expert Peter Drucker pointed out that a business must consider creating customers as its prime objective. At that time, most companies felt they should focus their energy on making profits. In the 1970s and 1980s, academics justified this argument, which “hardened into a formal economic doctrine…that firms must maximize shareholder value.”
“There is no longer a choice to be made between disciplined execution and innovation through teams. The new way of operating enables the firm to do both at the same time.”
Businesses offered their products and services and expected customers to buy them. Globalization, the growing importance of knowledge work, and changes in technology and in the regulatory framework mean that customers now dominate the firms that serve them. The law of the customer places your buyers at the center of your universe. Firms that adhere to this axiom follow these practices:
- “Target”– Businesses must select their “primary customers.” Companies that try to address everyone spread themselves too thin.
- “Constantly experiment”– Try options without deciding at the outset which ones are best. This works best in industries like software that can experiment cheaply.
- “Partner with start-ups”– Your established characteristics could hinder what you need to do to change. You don’t have to do everything by yourself.
- “Increase product malleability”– Changing from physical to digital products – for instance, “from hardware to software” – enables easier customization and upgrades. This works only if you can adopt your customer’s perspective.
- “Focus”– Design your product to be the simplest version your customers like.
- “Innovate in short stages”– Bring your offering to the market with the main attributes customers want, and then gradually enhance it.
- “Evaluate”– Make sure that every enhancement adds substantial benefit.
- “Be willing to disappoint”– Identify the customers you want to please, and don’t worry about satisfying the others. Amazon tries to please its customers; it “does not delight book authors, publishers or brick-and-mortar retail product sellers.”
- “Deliver value faster”– Offer enhancements as rapidly as you can.
- “Customize”– Let customers tweak your products to their individual requirements.
- “The Law of the Network”
Aim to create a network of teams that work together with the same energy and commitment as the members of your small teams. Organize your network according to the law of small teams.
“The ability to adapt to complexity and continuous unpredictable change was more important than carefully prepared plans.”
Most traditional managers regard large, effective networks as contradiction, believing that networks can’t be both large and effective because it’s “not managerially possible.” From time immemorial, human beings have believed that only hierarchies can manage large organizations. However, several large agile organizations have functioned effectively as networks since the early 2000s. These include Riot Games, Spotify and the Developer Division at Microsoft. Some organizations with more than 1,000 employees manage through teams, not hierarchical structures. In these companies and others, groups in effective networks make up the organization, as opposed to functioning within it. In true networks, competence beats legal frameworks as an organizational principle.
“Complexity responded to competence, not authority.”
Organizations that want to transform into networks can consider three tactics Some have tried the drastic “top-down big bang” approach of suddenly ripping out the bureaucracy. “As with Mao’s Cultural Revolution, the collateral damage here can be significant.” If organizations don’t transform correctly, they can suffer substantial costs. The second approach, a gradual “bottom-up” transformation effort, can fail unless it has senior management’s unswerving commitment. The third option – which can work well – is a “combination of top-down and bottom-up” change – as exemplified by the success of Microsoft’s Developer Division. The agile movement itself began as a grassroots initiative that garnered “genuine enthusiasm” at all levels.