In order to achieve true Agility in your organization you need to properly design the organization itself.
I have the privilege of training and teaching ambitious students at Northwestern University’s Farley Center for Entrepreneurship in how to design and operate a truly 21st Century Agile company. While many entrepreneur courses focus on merely developing a product and its related markets, my course called “Radical Entrepreneurship” trains students how to participate in, and operate an Agile enterprise. What many entrepreneurs like Steve Jobs have learned as far back as 1985 when he was founding NeXT computers (pictured above) is that today the true competitive advantage is in how one architects the company itself. Products pivot, or they come and go entirely, today even faster than ever.
Take for example that a generation ago only 20% of profits were derived from newer products–today that is over 70%!
One of the profound lessons Steve Jobs learned after he was kicked out of Apple in 1985 and went on to found NeXT Computers is that the design of the company itself is even more interesting and important than the products the company designs. This is because if you have an Agile organization you can continually discover new opportunities.
“I discovered that the best innovation is sometimes the company, the way you organize a company.” -Steve Jobs
When Jobs was just forming NeXT he conducted a retreat with the dozen or so folks that followed him from Apple. Watch here where he clearly articulates that even more important than designing great products, is making a great company, one with smarts and heart, which I would say are at the core of what it means to be a truly great Agile company.
Advanced Agile practitioners understand that you must start with the organizational design, or if you already have an organization, you may need to redesign it, that is if you truly want Agility. Recently I spent time with one of the Agile movement’s founders Mike Beedle and discussed his Enterprise Scrum framework for org design. Beedle advocates for descaling a company and ruthlessly eliminating dependencies. Steve Denning calls this time that we now find ourselves in the ‘Age of Agile‘ (the title of his forthcoming book). However up until this Agile Age the prevailing concept was that we would train specialists (finance, HR, supply chain, etc.) who would work in departments to complete individual tasks.
Conway’s Law as it Applies to the Whole Enterprise
Instead of the traditional organizational structure Mike Beedle suggests we must forget the concept of departments and move to cross-functional teams (or groups of teams) that own a customer segment and they develop products that serve that segment. “Conway’s Law” which has now been validated by MIT and Harvard states that: “Any organization that designs a system will produce a design whose structure is a copy of the organization’s communication structure.” For example, a product constructed by four separate teams will be mirrored in its four parts. In Beedle’s Enterprise Scrum framework we see that he is really taking the lessons from Melvin Conway and expanding it to the enterprise itself. Just as Conway’s Law is true when developing products, it is true when designing the whole organization, that an organization’s function will be a reflection of the organizational design. Therefore if we want true Agility we have to be intentional about the organizational architecture itself. A company with four departments will do work on a waterfall basis as one department is dependent on another and hands off the work to the next department. A company with teams that are capable of what Beedle calls “all at once management” and are able to initiate and complete work for a particular customer group, they can be Agile.
Make sure the organization is compatible with the product architecture. –Jim Coplien on Conway’s Law
Since Conway’s Law shows how “form has to fit function” what experienced Agile practitioners do not recommend are approaches such as the Scaled Agile Framework (SAFe) which purports that you can have Agility without substantially changing the organization or anyone’s role in it. SAFe’s promises of safely implementing Agile is a recipe for an incomplete or ineffective change. Many SAFe practitioners admit in private that they actually are more what I would call “SAFe Crackers” in that they come in under the guise of implementing something “safe” that requires little change but then they go on to make the necessary changes in order to conform to what is actually needed.
Smart CEOs know that the switch to true Business Agility is not likely to be safe. In fact quite the opposite, everyone’s role may change and some may not even be able to adapt. Joining other leading banks such as Barclays that have started their Agile transformation journey, Australia’s largest bank ANZ has recently committed to a complete Agile re-org. ANZ chief executive Shayne Elliott points out that such a change “radically changes the way you assign work, fund work, manage things, what you measure, what you reward and what kind of capabilities people need in order to succeed,” Mr Elliott told The Australian Financial Review describing how virtually everything must change.
Echoing the exact recommendations of Mike Beedle’s Enterprise Scrum, ANZ’s CEO goes on to say that “Hierarchies in a sense disappear… very quickly the way of work changes. So instead of having departments that are heavily specialised and functions and heads of those things, you organise yourself around customer outcomes. That might be about being the best bank for people who buy and own a home. So what are the skills we need there? So the hierarchy disappears very quickly. That has big implications for how we pay people, how we reward them.” CEOs like Shayne Elliott are beginning to understand that Agile transformations are not for the weak of heart and that they are anything but “safe.”
Smart CEO’s like Shayne Elliott and Steve Jobs have known for a long time it is about the mindset of how one approaches the company’s overall organization. When forming NeXT Jobs demonstrates in the above clip what many call an Agile mindset. Over the past few years Agile thought leaders, and practitioners of Agile practices such as Scrum, have come to the conclusion that effective Agile companies require not merely adopting Agile methods, but that Agile is an entire shift in mindsets among everyone involved. I had the privilege of helping form a Learning Consortium with several leading Agile practitioners inside their respective companies in order to observe and learn from each other’s organizations at Magna International [MGA], Ericsson [ERIC], Solutions IQ, Microsoft [MSFT], Riot Games, CH Robninson [CHRW], agile42, Brillio, and Menlo Innovations. One conclusion that clearly emerged which we published was that Agile at its core is a mindset and without the proper mindset it did not matter the “Agile” methods that were attempted. Without the right mindset you would not get effective Agility.
Becoming Agile is not merely an improvement or addition to traditional management. It requires a thorough change in order to be able to lead Agile organizations. I have identified these changes as “The Five Shifts.” Such a comprehensive change of perspective can even be considered a true paradigm shift similar to the great mindset changes in the past like the Copernican Revolution, except this time it is a great shift in the theory and practice of organizations, a major shift for the first time since the invention of modern management nearly a century ago, and what some are now calling the Copernican Revolution in Management.
So if we truly want Business Agility we have to apply an Agile mindset to look at the organization as whole system and be willing to take bold steps and design accordingly.
J. Stanton Goldstein, MBA, CSM, CSPO, CSP, is the founder and managing partner of Jabbok River Group, a Chicago-based Agile training and coaching consultancy. As a practicing Agile professional, Jay has held senior leadership positions in B2B and B2C tech companies in computer, commercial electronics and cloud software. Certified by Scrum Alliance, the International Consortium for Agile, Large Scale Scrum (LeSS), and Enterprise Scrum, Jay has operated, consulted, coached, facilitated and trained over a hundred Fortune and early stage tech companies and entrepreneurs. Jay holds an MBA from Kellogg School of Management at Northwestern University and serves as Adjunct Faculty at McCormick School of Engineering at Northwestern where he developed and taught the first course at a major university on Radical Entrepreneurship.