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Building the Agile Business through Digital Transformation (Scaling Agility)

This excerpt from Building the Agile Business through Digital Transformation by Neil Perkin and Peter Abraham is ©2017 and reproduced with permission from Kogan Page Ltd.

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Scaling Agility

Big is a collection of smalls. 
~ Nigel Bogle

New ways of working such as Agile, Lean, and Scrum and operating in small, multi-disciplinary teams are not only the domain of startups. With rapidly shifting contexts every company needs to become more adaptive, iterative and emergent, and work to combine functional expertise horizontally across the organization in smarter, more fluid ways. As Silicon Valley entrepreneur and academician Steve Blank has pointed out a startup is not a smaller version of a large company.

As an organization scales, functional groups are an excellent way to optimize efficiency and craft. As it scales and diversifies further to become multi-product, divisions (which each house their own functional groups) allow these efficiencies and expertise gains to be extended. But this comes at the expense of structuring for the benefit of the organization, not for the customer. Customers are horizontal. They don’t care about the differences between sales, customer service, or marketing. They don’t care about how company divisions are structured. They just want products that work, and to be able to find solutions to problems easily and quickly. So the need for more seamless customer experience and greater agility creates a heightened horizontal tension and obligation to counteract the constraining impact of organizational silos. Adept collection and application of data can mitigate this (utilizing a ‘single customer view’ in order to join up customer touchpoints and help interaction to be more personalized and intuitive, for example). But the organizational response needs to stretch deeper into processes, culture and, of course, structures.

This means finding better ways to combine the benefits we can derive from unifying expertise in functional groups (HR, finance, sales, marketing, operations), with the ability to capitalize on the agility and momentum that can come from small, multi-disciplinary pods. Organizational systems and ideology are weighted heavily towards optimizing efficiency through functional groups. We need to find a new balance, one that reflects a greater emphasis on learning, velocity, focus and flexibility through agile, iterative, multi-functional pod working.

More commonly iterative methodologies and pod working seeds first in technology teams, centralized digital units, innovation or product development labs and incubators, or standalone catalyst brands that are established to enable a large organization to experiment with new approaches. But confining these ways of working to small units or single teams misses the huge opportunity that companies have to scale agility far more broadly across the organization. We can represent this progression of agility through several distinct stages:

1 Dispersed mavericks: Restless change agents in dispersed areas of the business recognize the need for different approaches and start to question the status quo and agitate for change. This may initiate pilot projects or minor revisions in local areas efforts are not joined-up and substantive change is difficult in the face of a lack of senior support, and wider organizational complacency.

2 Focused agility: As the strategic imperative for change takes root at senior levels, investment and resources are allocated towards digital capability development and innovation. New agile ways of working

become established in specific areas such as innovation units, catalyst brands, technology teams and digital centres of excellence. Centralization brings focus, a visible statement of intent, easier prioritization, efficiency,

better governance and commonality of approach. Iterative, sprint working in small, multi-disciplinary teams enables faster learning and greater experimentation, agile culture and behaviours are nurtured and protected through senior backing and ‘translator’ roles.

3 Scaling agility: As the need to scale agility becomes more pressing, small multi-functional pod working, and iterative experimentation is expanded beyond tightly focused innovation, technology or digital areas more broadly into the wider organization. This is accompanied by senior vision, communication and support, along with a clear link between corporate and team strategy, objectives, execution and measures. Over time the proportion of the workforce that is working in this way increases.

Digital Transformation

4 Dispersed agility: As agility naturally scales ever wider, it becomes essential for the business to manage the ever-fluid proportion of staff that are working in multi-functional pods, and continually balance that with the efficiency and craft benefits gained from functional groups. Ongoing sensitivity to the type, scale and scope of customer needs, and the ability of the business to respond to these and other contextual challenges is key.

The stage when we are looking to scale agility can be particularly challenging. It is at this point that we are expanding new approaches, behaviour and culture beyond an isolated area, so a senior mandate, permission to fail-safe but to orient to learning becomes critical to success. Initial focus may be on setting up small multi-functional teams to address key business challenges through iteration and experimentation. Or establishing areas at a divisional level that can enable the introduction of these new ways of working focused on divisional priorities – more of a hub-and-spoke model to scaling agile working. Exposure to agile working and culture can support wider adoption over time. This might come via staff, functions and teams that interface regularly with already agile areas (osmosis). Or wider assimilation through deliberately including an ever-wider coterie of staff to experience agile working and be included in pod team working (diffusion). Or encouraging the larger organization to learn from catalyst brand initiatives (mother-learns-from-baby).

Businesses cannot go from a rigid, functionally oriented state to a highly fluid, agile, learning-oriented organization overnight. The staged approach allows for proper establishment of supporting structures and cultures, and the proportion of workforce that is ultimately working in pod-like structures is likely to be fluid.

To see an exemplar of scaling agile structures, we can look at Spotify. Agile and organizational coaches at Spotify, Henrik Kniberg and Anders Ivarsson, have detailed an approach that the company has adopted successfully, focused on what they call Squads, Tribes, Chapters and Guilds.1 Spotify has scaled more rapidly than most companies but the structure that they have adopted in their engineering teams is specifically designed to maintain an uniquely advantageous level of agility across 30 teams and three cities.

The basic unit of development at Spotify is the ‘Squad’, a small, nimble, multi-disciplinary, autonomous self-organizing team that is designed to feel like a mini-startup. Squads are co-located and focus on specific areas of the product or service, incorporating all the tools and skills they need to take an idea from design to test to release and production. Much like Amazon’s two-pizza teams, Squads are clearly focused on a specific task and KPI.

Squads are grouped together into related product areas called ‘Tribes’. Tribes are like the incubator for the squad mini-startups and designed to be no larger than 100 people. Specific processes help minimize the potential of dependencies to slow things down.

‘Chapters’ and ‘Guilds’ link Squads horizontally together, enabling some economies of scale without sacrificing autonomy, and acting like the glue that binds the company together. Chapters group together people with similar functional expertise and meet regularly to share learnings. The Chapter lead is the line manager for chapter members and has more traditional staff-management responsibilities, but is also a member of a Squad themselves so stays in touch with the work. Guilds are looser, more organic and widereaching communities of interest that can stretch across the whole company (rather than just how a Tribe like a Chapter does). They enable knowledge and tool-sharing across a wider group.

As Kniberg and Ivarsson describe it, it is like a matrix organization but one that is weighted towards delivery. The structure is a departure from typical organizational approaches in that rather than people being grouped into vertical silos defined by function, the vertical dimension is customer and product focused, and defined by those multi-disciplinary, self-organizing, co-located Squads, while the horizontal dimension is all about sharing knowledge, best practice, learning and tools. The risk in having a looser organizational structure focused around small, nimble teams is that an increased level of complexity is created through a greater number of dependencies, coordination issues, a possible lack of focus on developing vertical functional expertise, and the difficulty in effectively sharing learning horizontally across the organization. What’s interesting about Spotify’s approach is that it specifically finds ways to avoid those potential pitfalls, while making for a customer focused structure that is far more flexible and empowering, and one that can be far more adaptive at scale.

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“A fantastic guide to conquering the challenges of continuous and accelerating change in today’s digital world…..a highly actionable book and a must-read for modern leadership” (Scott Brinker, Author, Hacking Marketing)

Save 20% with free P&P to the UK and US when you order the Building the Agile Business through Digital Transformation by Neil Perkin and Peter Abraham from www.koganpage.com/agilebusiness and use discount code PHRBAB20

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