Leading an Agile Transformation

Summary: What to Expect from This Article?

Agile Transformation is much more than a handy catchphrase for consultants and their respective agencies. Today, almost every organization is talking about the importance of embarking on an Agile Transformation. Very few are able to articulate what this actually means to them, and even less are able to say how they want to approach it.

With this – hopefully not too long article – we aim to help you understand what an Agile Transformation is, why it is important, and how you can approach it. Furthermore, we will share with you our perspective on the role of leaders and the importance of leadership in an Agile Transformation.

Finally, we will close with why most Agile Transformations fail incl. the biggest challenges from our perspective, some tips on how you can make your Agile Transformation successful, what kind of capabilities are needed, who can help you along the way, and last but not least we will answer the ultimate question: how long does an Agile Transformation take.

So, let’s dive in!

What Does Agile Transformation Mean?

For most companies that we (the Scrum Academy) have worked with, an Agile Transformation means to transform from an organization that is slow in reacting to changes in the markets to an organization that is more adaptive to changes and has the ability to seek opportunities fast – especially faster than its competitors.

Many of these organizations, large and small, have been really good at exploiting their existing business models e.g. building internal combustion engine cars (as BMW does), but are not fast enough in innovating towards new products e.g. electric cars (as Tesla does), let alone in exploring completely new business models e.g. ride sharing (as Uber does).

Many of these organizations are characterized by structures e.g. many layers of management resulting in a lot of bureaucracy which slows down the entire organization. In addition, there are policies and metrics that protect the cash cow, but do not allow for risk taking and experimentation to create new cash cows that would result in an organization that has the ability to constantly reinvent itself.

The current structures, policies, and metrics in many companies result in people being promoted that are not the most entrepreneurial, but potentially the best in managing the status quo. This might not be the best for building long-term stakeholder value.

What Other Terms Are Used to Describe Agile Transformation?

Organizations and of course consultants always try to coin something with their own words. So some people refer to an Agile Transformation as an Agile Transition, a Lean-Agile Transformation, an Agile Change Initiative, or an Agile Enterprise Transformation. Ultimately, most of these terms describe the same thing: an organization becoming faster in responding to changes in the marketplace.

Why is an Agile Transformation Important?

Back in 2011, Gary Hamel gave a great presentation about the need to reinvent management so that organizations can deal with the exponential pace of change.

Gary Hamel: Reinventing the Technology of Human Accomplishment

His talk did not only make a case for a fundamental change in leadership mindset e.g. “employees first, customers second”, but even more for a fundamental change what organizations should aspire to be: more adaptable, more innovative, and more engaging places to work. There is no doubt that change has become and is becoming faster. The lifespan of products is getting shorter (think about how long we used our telephones and how long we use our smartphones today), so is the lifespan of companies (see chart below).

Durchschnittliche Lebenszeit von Unternehmen

Organizations that cannot change as fast as change itself will ultimately die as every business model either becomes obsolete i.e. replaced by some other way to serve the same customer need (see Netflix killing Blockbuster or Amazon killing offline retail) or commoditized and based on the low margins uninteresting for investors (see original drugs becoming generics).

There is a long list of books, blogs, and podcasts that all cover the importance of innovation for companies to remain competitive and successful in the long run. There is also a list (much shorter though) of organizations that take innovation seriously – compared to others playing innovation theatre – and have changed their organizational setup i.e. structures, policies, and metrics to create an environment that allows innovation in processes, products, business models, and management principles to emerge.

How to Approach a Successful Agile Transformation?

Before we jump into the approach, we believe it is important to understand two things:

  • An Agile Transformation is characterized by high levels of uncertainty in terms of both what to do and how to do it. It is unclear on what our future organization looks like in detail and what path to take to achieve our goal. In this sense it is very similar to creating innovative products which means we need to use an empirical approach.

  • An Agile Transformation is not a transformation in the sense that you have a start and an end point. Due to the constant changes in our business environment, and the constant changes in our portfolio, we will experience the need for constant changes to our operating system. So we do not transform once e.g. from a caterpillar to a butterfly, we rather stay in constant transformation and through that hopefully achieve constant growth.

Based on the two points above, we do not believe in blueprints for Agile Transformations as many consultancies want to sell them. We do not believe in taking the operating model of one organization e.g. Spotify and applying it to another. We do not believe that you can plan your Agile Transformation – at least not in the way that traditional organizations define planning.

We do believe that you first and foremost need to embrace uncertainty and change. As the Navy Seals say:

“You need to be comfortable being uncomfortable!”
Navy Seals

Based on this you will understand that any Agile Transformation is ultimately a change of the operating system of your organization. It is a change of how decisions are being made, how teams are structured, how funding is given, how success is measured, and many more things.

Every Agile Transformation not only needs top management buy-in or support, it needs to be driven by top-management. If it is not the CEO, then it is someone else in the C-suite or someone reporting to the CEO. If an organization embarks on this journey it needs to be everyone’s number 1 priority otherwise it will fail – more on that later.

As an Agile Transformation is in its essence a constant development of the organization’s operating system, it needs to be driven internally. This is not something one can hand-over to consultants. It can be supported by external entities, but in the end, every organization needs to build the capabilities to internally drive this constant change.

What is the Role of Leaders in an Agile Transformation?

The creation of a new operating system and the migration from the old operating system do not just happen out of nowhere. As in product development this takes a significant effort. From our perspective, it is the role of leaders within the organization, starting at the top (including the Board of Directors), to not only enable the creation but to actually create the operating system itself. 

Leaders work ON the organization not only IN the organization.
Sohrab Salimi

So it is absolutely mission critical that leaders are not only on board, but actually steering the ship. There are a countless number of things that need to change. An Agile Transformation is not as simple as introducing a few Scrum Teams, a few Kanban Boards, and tons of Post-its in an organization. It actually goes deeper than that. And only leaders can change the structures, metrics, and policies to make an organization more adaptive, to make an organization more inventive, and to make an organization a more engaging place to work.

Our recommendation is to apply the same approach for the development of complex products to the development of an agile organization. It always starts with one question: what do we want our organization to BE like? Not what do we want it to look like, but what kind of OUTCOMES do we aspire to achieve.

Based on the aspired outcomes e.g. faster time to market we can then think about what kind of behaviors e.g. faster decision making we want to see. This ultimately leads to the question of what aspects of our current operating system block the emergence of behaviors e.g. centralized decision making, long budget approval processes and what features of a new operating system will enable the emergence of the desired behaviors e.g. 20%-time or real product owners with decision making authority. A useful tool to think about that systematically and visualize it is The Culture Map from Strategyzer.

Why Do Agile Transformations Fail?

The top five reasons why Agile Transformations fail were evaluated by Version One a few years back (see picture below). Any transformation that does not seek and is not willing to change the existing culture of an organization has a high probability of failing as the Agile Values (see Agile Manifesto) will be at odds with the existing culture. So understanding your existing culture and deliberately working towards a new one is actually the biggest challenge towards mastering your Agile Transformation.

Warum scheitern agile Transformationen?

In addition, there needs to be a clear commitment from management to the change itself. That commitment is the foundation for dealing with resistance. Too often do we see organizations embark on their Agile Transformation with no clear commitment and even worse, some even say: “if it does not work, we will try something else… we are agile, right?”. This is food for everyone resisting change as they believe if they wait long enough they do not have to change after all.

Based on our experience, one will only get management support if the change is mandated by the Board of Directors. Almost no one talks about the role of Boards, but ultimately it is them who drive an organization’s strategy. Do they want the organization to deliver short-term results? If yes, probably no CEO will embark on the difficult and long-term journey of an Agile Transformation. But if the Board wants the company to be successful in the long-term, and creates the compensation package for the CEO accordingly, the chances for a successful transformation increase significantly.

The last two challenges being a lack of agile skills and inconsistencies across teams can be dealt with fairly easily. It sounds absurd that many organizations are not willing to spend money on training their employees in a new way of working and expect them to just make it work. Have you ever heard of someone mastering any sport without proper training and coaching? We have not. Actually the best athletes tend to have some of the best coaches. The same applies to individuals and teams within organizations. They need proper training and coaching support through vetted trainers and coaches. If you want to play in the champions league (a metaphor from European soccer) then you need to invest into a great squad of trainers and coaches.

How Can You Make Your Agile Transformation Successful?

An Agile Transformation is ultimately a huge organizational change. Hence, many of the insights from ‘traditional’ change management e.g. Kotter’s 8-Step Process for Leading Change are valid. We do not have to reinvent the wheel on this one for an Agile Transformation. The 8 steps are:

  1. Create a Sense of Urgency
  2. Build a Guiding Coalition
  3. Form a Strategic Vision And Initiatives
  4. Enlist a Volunteer Army
  5. Enable Action by Removing Barriers
  6. Generate Short-Term Wins
  7. Sustain Acceleration
  8. Institute Change or Never Stop Changing

1. Create a Sense of Urgency

Covid-19 and the way organizations responded demonstrated really well that when there is a will, there is a way. Suddenly, all employees had to work from home and yes organizations were mostly able to provide them with the necessary tools and infrastructure. Things that took years, suddenly happened in a matter of days, because there was no other way. This sense of urgency is critical and if it is not sensed by everyone in the organization, it is the job of leaders to make everyone sense it.

2. Build a Guiding Coalition

From an aligned leadership team (including the Board of Directors) to a team mandated to drive this change, the guiding coalition is mission critical. We have had the best experience when senior leaders (directly reporting to the CEO) were in charge of driving the Agile Transformation. The team built around them was a cross-functional team with all the expertise necessary to make the changes happen in the organization.

3. Form a Strategic Vision And Initiatives

One can use a tool for that e.g. the Salesforce V2MOM or not, in any case one needs to be very clear on the strategic vision of the Agile Transformation. This is not only why we are embarking on the journey (sense of urgency), but also how are we going to do it and what do we want to ultimately achieve? Is it about creating an environment for fast-paced innovation? Is it about accelerating our time-to-market? What is it and how can we measure whether we are successful?

4. Enlist a Volunteer Army

The change itself is hard enough, do not make the mistake of trying to convince the laggards in your organization to move along. The same principles that help us in product development e.g. focusing on the innovators and early adopters, can also help us succeed in managing our Agile Transformation. If you are setting up your first agile teams ask for volunteers. Let them experiment with this, create initial success stories, and share those stories and learnings within the organization.

5. Enable Action by Removing Barriers

Any team in any change will face barriers and impediments. It is the team’s job to make those impediments transparent and it is the responsibility of the leaders to help remove those barriers. If the team needs training, provide funding for training. If the team needs changes in structures, help them change the structures. If a change in policies is needed e.g. the team wants to invite customers for feedback or collaborate with competitors, then help them change the policies. Any organization that is not willing to change the environment for a few teams to enable them deliver better products in a better way, will most likely not be able to change the organization as a whole either!

6. Generate Short-Term Wins

The longer a change takes, the more fuel you need for the fire to burn. Every win, every success story adds fuel to the fire. Never underestimate how important this can be. One team seeing another team succeed gives them not only hope, but also willpower to make their own change happen. Focus on generating these short-term wins the same way an agile team tries to get an MVP (Minimum Viable Product) out fast in order to learn and in order to deliver value for their customers.

7. Sustain Acceleration

Too often do teams and organizations declare victory too soon. Doing that results in things not only slowing down, but ultimately going back to how they were before the change. Never underestimate the power of habit especially within organizations. So once you achieve the early wins, double-down, press harder, be relentless with initiating change after change after change… until the whole organization is set in motion.

8. Institute Change or Never Stop Changing

Use the momentum, use the new habit of constant change to establish a culture of continuous improvement not only for WHAT you build, but also for HOW you build things. Create an organization that changes faster than change itself.

What Kind of Capabilities Are Needed for an Agile Transformation?

“Work beats talent, if talent doesn’t work!”
Michael "Air" Jordan

There are many capabilities needed for a successful Agile Transformation. The vast majority of them can be learned. One does not need to have them before embarking on the journey. An Agile Transformation should result in an Agile Organization which in its essence is an organization that is willing to learn fast, hence build up capabilities fast. One can start demonstrating that by building the capabilities needed for the transformation itself.

As you have read in this article, one needs a good understanding of the organization’s objectives and the ability to articulate that in an inspiring vision. One also needs a decent understanding of change management tools and techniques. None of this is hard, especially as there are many external consultants and coaches out there that can help with all of that.

But external experts can not help in creating the willingness to change. They can create awareness for the changing world around us, show us data, and talk about case studies. They can present to our Board of Directors, to the management team, and at an all-hands-meeting. But it is not their commitment to the change that makes the change successful, it is the commitment of the leadership within the organization.

Who Can Help You with Your Agile Transformation?

There are many external consultants and coaches that refer to themselves as ‘enterprise agile coaches’ or ‘agile transformation experts’. To what extent that is true we cannot judge. We know that we as the Agile Academy are exceptionally good at helping leaders (starting with the Board of Directors) and teams understand the fundamental concepts of agility and what it takes to not only build products in a better way but to make a transformation successful.

We also believe that our approach is sustainable for our clients as we never aim to sell our teams for a long period of time. As stated above, we believe that the change needs to be driven by the internal leadership team. Our role is to initially educate, coach, and act as sparring partners along the way. Not more, not less. So if you share that philosophy, if you want to be in charge of your organization’s Agile Transformation, then we are probably a better fit for you than large consulting companies trying to sell you thousands of days.

How Long Does an Agile Transformation Take?

Every Agile Transformation takes exactly 42 months! Just kidding 🙂 If you have read this far, you know what the answer is: an Agile Transformation is never done as the changes in the market will never end. As organizations we need to seek continuous improvement in how we operate to be able to continuously deliver value for our employees, customers, communities, and shareholders. The moment we believe we are done, our journey to the graveyard starts. This is what Jeff Bezos refers to as Day 2. 

Jeff Bezos: Why it's always Day 1 at Amazon
“Day 2 is stasis. Followed by irrelevance. Followed by excruciating, painful decline. Followed by death. And that is why it is always Day 1.”
Jeff Bezos

The same way we constantly improve WHAT we create e.g. our products and services, we need to improve HOW we create those products and services. It’s about improving the machine that builds the machine. It’s about constantly building a better operating system so that we stay ahead of our competitors.

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