Ten Agile Axioms That Make Managers Anxious

Steve Denning , Contributor I write about radical management, leadership, innovation

& narrative. Opinions expressed by Forbes Contributors are their own.

“If at first an idea is not absurd, there is no hope for it.” —Albert Einstein

In June 2018, a time when “Agile at Scale” is emblazoned on the front cover of
Harvard Business Review, the management journal with quasi-papal status, the era
when managers could confidently ridicule agile management practices is fading fast.
Instead, most managers have themselves grasped the need to be agile: a recent
Deloitte survey of more than 10,000 business leaders across 140 countries revealed
that nearly all surveyed respondents (94%) report that “agility and collaboration” are
critical to their organization’s success. Yet only 6% say that they are “highly agile
today.” So, what’s the problem? Why the 88% gap between aspiration and actuality
Ten Agile Maxims
It’s not lack of knowledge as to what is agile management or how to implement it.
Managers have access to myriad books and articles on it and a plentiful supply of
coaches who stand ready to help. The three Laws of Agile are simple—first, an
obsession with continuously adding more value for customers; second, small teams
working on small tasks in short iterative work cycles delivering value to customers; and
third, coordinating work in a fluid, interactive network.
The Laws of Agile are simple but their implementation is often difficult. That’s in part
because they are at odds with some of the basic assumptions and attitudes that have
prevailed in managing large organizations for at least a century. For example, Agile
makes more money by not focusing on making money. In Agile, control is enhanced by
letting go of control. Agile leaders act more like gardeners than commanders. And
that’s just the beginning.
For the traditional manager, counter-intuitive ideas like these abound. This is not the
way people say big firms are run. This is not by and large what business schools teach.
Encountering these principles can be like visiting a foreign country where everything is
different. Until travelers grasp the new language, master the new cues and ingrain
them in behavior until they are second nature, they may feel disoriented and
incompetent.
That’s one reason why merely training staff on Agile processes and practices by itself
won’t make a firm agile. Implementing Agile requires a mindset that is fundamentally
different from the traditional preoccupations with profit maximization and a
philosophy of controlism.
Trying to implement Agile management with these 20th century preoccupations leads
to hiccups, friction, dissonance, misunderstandings, and disappointment.
Let’s look at ten of the Agile axioms that leave managers apprehensive, agitated, even
aghast.

First Law Of Agile: The Law Of The Customer

1. Firms Make More Money By Not Focusing On Making Money
For several millennia, the notion that businesses exist to make money was seen as one
of the immutable truths of the universe. Milton Friedman, the Nobel Prize-winning
economist, wrote in his article in the New York Times on September 13, 1970 that any
business executives who pursued a goal other than making money for their firm were
“unwitting puppets of the intellectual forces that have been undermining the basis of a
free society these past decades.” Today, many public companies embrace maximizing
shareholder value as their main goal, even though Jack Welch and many others have
called it “the dumbest idea in the world.”
A growing number of companies have chosen a different goal. They have accepted
Peter Drucker’s 1954 dictum that “there is only one valid purpose of a firm: to create a
customer.” When delighting their customers through continuous innovation becomes
the bottom line, making money is the result, not the goal, of the firm’s activities.
The interesting thing is that when firms operate this way, they make a lot more money
than companies that focus directly on making money, including the five largest and
fastest growing firms on the planet (by market cap): Amazon, Apple, Facebook, Google
and Microsoft, now worth over $2 trillion. It involves a shift from a focus on inanimate
things (money, products outputs) to a focus on people (human outcomes, experiences,
impact)
Yet let’s face it: setting aside what many still see as immutable truths of the universe
doesn’t come easily.

2. There Are No Internal Customers

It’s common in many big bureaucracies to talk of internal customers. One unit services
another unit and regards the other unit as its internal customer, who in due course
becomes a producer for the ultimate customer or end-user. The focus is internal and
the silos often fight each other for influence and budget. Amid these internal
squabbles, the needs of the internal customer risk becoming disconnected from the
needs of the ultimate customer, and result in waste—producing something the
ultimate customer doesn’t need or failing to produce what the customer does need.
In Agile management, there is no such thing as an “internal customer.” The only
purpose of work is the ultimate customer or end-user. Under the Law of the Customer,
the original producers not only meet the needs the internal customers: they are given
a clear line of sight as to what value is being provided for the ultimate customer.
Satisfying so-called internal customers is merely feeding the bureaucratic beast. It is a
pretend-version of Agile.
3. There Are No B2B Organizations
The situation is the same when a firm is providing products or services to another firm
which acts as an intermediary for ultimate end user. The customers are the end-users
who ultimately experience the products and services. Merely satisfying the needs of
the intermediary is not enough for sustainability. It’s only if the intermediary is
delighting the ultimate end user that the firm safe. This is why those doing the work
need to have a clear line of sight to the ultimate end-user and see the meaning in their
work and adapt their work to the needs of that end-user.
Thus for many years, Cerner Corporation which provides services to hospitals, looked
on hospitals as its customers. Over time, they increasingly saw that their services were
really directed at the doctors in the hospitals. More recently, under the influence of
Agile management, they are coming to see the patients as their customers. Cerner’s
ultimate success depends on making things better for the patients.
Similarly, Microsoft for many years saw the customers of its Windows program as the
big retailers like Dell and HP. More recently, they have come to realize that their
customer is really the end-user, not these intermediaries: there is now an immense
effort to reach out to, understand and interact with these millions of end-users.

4. Making Better Products May Not Make More Money

Making products better, faster cheaper, more convenient or more personalized is a
good thing. But in a marketplace where competitors are often quick to match
improvements to existing products and services and where power in the marketplace
has decisively shifted to customers, it can be difficult for firms to monetize those
improvements. Amid intense competition, customers with choices and access to
reliable information are frequently able to demand that quality improvements be
forthcoming at no cost, or even lower cost.
Making better products through operational Agility is an increasingly-necessary
foundation for the survival of a firm. But it’s not enough for the firm to thrive. To make
a lot of money, the company has to go further. It has to delight non-customers—those
who are not already customers. That’s because there are usually vastly more non-
customers than customers. They are non-customers for a reason: their needs are not
being met. If the company can find a way to meet their needs, then a whole vast new
ocean of potential customers opens up, in which there is usually very little
competition. If the firm can appeal to both customers and non-customers, it can make
a great deal of money. “Instead of being slightly better than everybody else in a
crowded and established field, it’s often more valuable to create a new market and
totally dominate it,” writes David Brooks in the New York Times. “The profit margins
are much bigger, and the value to society is often bigger, too.”

The Second Law Of Agile: The Law Of The Small Teams

5. Forget Economies of Scale: Your Market Is One Person
The 20th century firm tended to be focused on generic products to achieve economies
of scale. By contrast, Agile is about generating instant, intimate, frictionless
incremental value at scale. That’s the new performance requirement. When firms do
this, as shown by the experience of Amazon, Apple, Facebook and Google they make a
great deal of money.
Thus Agile organizations focus on providing intimate value, with an effective “market
of one”, i.e. a level of customization and customer service at which a customer feels
that he or she is an exclusive or preferred customer of the firm. For example, search
engines are used by billions of people every day across the globe. However, each user
gets customized search results based on their locations and refer to places nearby,
weather forecast, or traffic condition.
With the advent of latest technology like smartphones and high-speed internet, and
with the ever-increasing use of social media, companies can learn more about their
customers and can use this information to customize their services and products as per
user’s preferences and needs.

6. Don’t Scale Up: Descale Complexity Down

A key Agile theme concerns descaling work, i.e. a presumption that in a volatile,
complex, uncertain and ambiguous world, big difficult problems need to be
disaggregated into small batches and performed by small cross-functional autonomous
teams, working iteratively in short cycles in a state of flow, with fast feedback from
customers and end-users.
Trying to scale up the organization to cope with complex problems and leads to
unmanageable complexity. Big complex structures are inherently fragile and difficult to
change. The adoption of “agile scaling frameworks” is common, but they are often a
re-introduction of a philosophy of controlism in another guise.
Instead of constructing a big complex organization to handle complexity, the
organization disaggregates the problem into tiny pieces so that it can be put together
in minuscule increments and adjusted in the light of new, and rapidly changing,
information about both the technology and the customer.
Think of a truck that is made in a traditional way. It is welded together and cannot be
easily changed or upgraded. Compare that to a Scania modular truck where each of
the parts is interchangeable. Modular design brings easier customization.

7. Agile Is A Mindset, Not A Process

Traditional managers typically approach Agile saying, "Show me the process so that I
can implement it." The problem is that Agile is a mindset, not a process. If it is
approached as a process with the old mindset, nothing good happens.
But surely, people ask, there must be some model that we can follow. There is much
allure for instance in the Spotify model as presented in the charming videos prepared
by Henrik Nyberg. So there is a cry: "Let’s implement the Spotify model!" There’s just
one problem: as former Spotify coach, Joakim Sundén, often explains, not even Spotify
implements the Spotify model. For one thing, the videos are several years old. Second,
Spotify continues to rapidly evolve and improve its model. In a pair of visits in 2016, we
noticed significant differences even within a period of several months.
8. Talent Drives Strategy, Not Vice Versa
“The central premise of a talent-driven company is that talent drives strategy, as
opposed to strategy being dictated to talent.,” says the book, Talent Wins: The New
Playbook for Putting People First (HBRP, 2018) by Dominic Barton, the global managing
partner of McKinsey & Company, and his colleagues Dennis Carey and Ram Charan,
“The wrong talent inevitably produces the wrong strategy, and fails to deliver.
Numbers like sales and earnings are the result of placing the right people in the right
jobs where their talents flourish and they can create value that ultimately shows up in
the numbers.”

The Third Law Of Agile: The Law Of The Network

9. Control Is Enhanced By Letting Go Of Control.
In Agile management, there’s a presumption that in a volatile, rapidly changing world,
big difficult problems should—to the extent possible—be disaggregated into small
batches and performed by small self-organizing teams. The thought of self-organizing
teams tends to make managers worry about losing control. What they need to
understand is that they are giving up the illusion of control, rather than actual control.
In a complex, rapidly changing environment, explicit efforts to impose control and
predictability are doomed. Detailed reports may create the semblance of control, but
the reality is often very different from what is in those reports.
The solution to reconciling disciplined execution and innovation lies in giving greater
freedom to those people doing the work to exercise their talents and creativity, but
doing so within short cycles so that those doing the work can themselves see whether
they are making progress or not.

10. Lead Like A Gardener, Not A Commander

In Team of Teams, by General Stanley McChrystal and his colleagues (2015, Penguin
Publishing Group), McChrystal explains had to unlearn what it means to be a leader. A
great deal of what he thought he knew about how the world worked and his role as a
commander had to be discarded.
I began to view effective leadership in the new environment as more akin to gardening
than chess,” he writes. “The move-by-move control that seemed natural to military
operations proved less effective than nurturing the organization— its structure,
processes, and culture— to enable the subordinate components to function with
‘smart autonomy.’ It wasn’t total autonomy, because the efforts of every part of the
team were tightly linked to a common concept for the fight, but it allowed those forces
to be enabled with a constant flow of ‘shared consciousness’ from across the force,
and it freed them to execute actions in pursuit of the overall strategy as best they saw
fit. Within our Task Force, as in a garden, the outcome was less dependent on the
initial planting than on consistent maintenance. Watering, weeding, and protecting
plants from rabbits and disease are essential for success. The gardener cannot actually
‘grow’ tomatoes, squash, or beans— she can only foster an environment in which the
plants do so.”
11. The Top-Down Organizational Pyramid Is Finished
Success in today’s marketplace requires nimbleness, flexibility, adaptability and
agility—everything that the 20th century corporation was not. These firms were built
for strength, with high walls and moats for the defense of the status quo. Their very
raison d’être was to prevent change.
Turning a top-down pyramid into a flexible network is tricky. At the heart of 20th
Century management thinking is the notion of a corporation as an efficient steady-
state machine aimed at exploiting its existing business model. “Traditional, MBA-style
thinking,” as Google executives Eric Schmidt and Jonathan Rosenberg write in their
book, How Google Works, “dictates that you build up a sustainable competitive
advantage over rivals and then close the fortress and defend it with boiling oil and
flaming arrows.”
By contrast, when the whole organization truly embraces Agile, the organization is an
organic living network of high-performance teams. In these organizations, managers
recognize that competence resides throughout the organization and that innovation
can come from anywhere. The whole organization, including the top, is obsessed with
delivering more value to customers. Agile teams take initiative on their own and
interact with other Agile teams to solve common problems. In effect, the whole
organization shares a common mindset in which organization is viewed and operated
as a network of high-performance teams.