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Agility in practice: The swarm organization at Daimler

Part 5: Agility in practice: The swarm organization at Daimler

In our conversations with 30+ senior executives from global corporations about their digital transformation challenges, Daimler’s approach to agility stood out – not only because it is extremely well designed and emphatically promoted by the very top of the organization; it’s also remarkable in light of the high stakes and the very traditional context within this organizational innovation is taking place.

Industry leaders often have the hardest time to re-invent themselves, as a culture of success and top reputation can be major change inhibitors.

When Gottlieb Daimler and Karl Benz built the first viable automobile in 1895, they laid ground to one of the most iconic global corporations that has been shaping the forefront of technological and product innovation in the automotive sector ever since. Industry leaders often have the hardest time to re-invent themselves, as a culture of success and top reputation can be major change inhibitors.

However, in light of the massive disrupting forces that are transforming very foundations of the industry, the company realized that it needs to act more swiftly and more radically than ever before.

To address these challenges, Daimler launched in 2016 a strategic transformation project named “Leadership 2020”, with the goal to achieve a new level of creativity, flexibility, and speed. In this context, the company identified working in “swarms” as one of eight major game changers.

Drawing from principles of agile sprints, scrums and squads, the swarm concept is designed to transform the traditional working culture by pulling in expertise from different departments and creating cross-functional teams that collaborate in the development of new products and processes.

As in most traditional corporations, product development processes at Daimler have been usually linear, with each function delivering their input and then passing it to the next team in a pipeline fashion. By using swarms for innovation, all elements of the development process are discussed and managed simultaneously, which allows for far greater team buy-in and swifter turnaround times.

Most important, a Daimler swarm has the budget and decision power to operate, so whatever is necessary can be done in real time.

The interplay of social and organizational architecture results in the release of more freely flowing creative energy, more speed, less bureaucracy, more engagement, and more fun.

The organizational design of swarms makes them silo-busters as they emphasize cross-boundary collaboration and autonomous decision making – uprooting the deeply ingrained culture of this 125-year-old company.

With their informal, adaptive work practices, swarms challenge formal structures and procedures and transform the culture of work in their way. This combination of radical process redesign, horizontal collaboration – often beyond the boundaries of the firm, and the relative autonomy of the teams creates an ecosystem that favours influencers who do not need a formal leadership role.

The interplay of social and organizational architecture results in the release of more freely flowing creative energy, more speed, less bureaucracy, more engagement, and more fun.

Daimler uses swarms not just to experiment with innovative ideas at the fringe – swarm-led projects also include the redesign of processes that touch the core and include many stakeholders across the value chain, such as the development of a new global procurement system or the creation of Digital Twins for each vehicle.

Realizing the benefits resulting from a flat hierarchy, self-organization, and the abolishing of traditional leadership required clearly communicated top management commitment.

This is a very different approach to organizing compared to the one Daimler is used to, and it comes as no surprise that it leads to significant friction. Realizing the benefits resulting from a flat hierarchy, self-organization, and the abolishing of traditional leadership required clearly communicated top management commitment. Daimler CEO Dieter Zetsche has done this by giving the swarm idea high visibility within and beyond the corporation – at town halls, shareholder meetings, and in the company’s annual report.

In addition, it was critical to provide a professional support infrastructure for swarm initiatives that sets transparent and easily understandable agile principles and facilitates the swarm team, particularly in its early stages.

Daimler addresses this need through a dedicated online platform that provides guidance and FAQs for anybody who wants to establish a swarm. While every swarm is different in its final approach to self-organization, they all follow agile principles that are fostered through coaches, a peer consultant network, and co-called SwarmHubs.

Agile Consultation

The geographic location of these hubs – two in the US and one each in Latin America, China and India – notably dilutes the Stuttgart centricity that has often occurred in the past – a cultural innovation of its own.

Due to the friction they can create, swarms appear to work less well in known contexts; they are best for complex, unpredictable environments that require significant innovation. As a senior Daimler executive noted – “the greater the uncertainty, the more swarm-suitable”.

As of today, there are over 180 swarms in Daimler with the explicit intent to have 60,000 of the company’s 300,000 employees to be active in swarms eventually.

In the course of our investigation about digital transformation challenges, we had the opportunity to speak with a number of Daimler executives who are involved in the swarm organization in various roles. While they all embraced the overall concept, it became also clear that this new way of working also comes with its issues:

  • Freedom vs. control. People who are now enthusiastically engaged in their mission sometimes tend to lose their objectiveness, e.g. by forgetting about the commercial side. One executive emphasized that, ”…to make this new freedom to operate work, you need to be distinctive, you need control points, milestones, where people still need to report, and still they need to show their results – like a start-up must report to its investors from time to time – it’s absolutely necessary.”
  • Corporate vs entrepreneurial mindset. Most of the people in swarm cells are people who have been working for years within the traditional organizational context; they have internalized cultural imperatives which are difficult to shed. Even those who come from outside have consciously joined a large global corporation – not a start-up. Agile teams are urged to be entrepreneurs, break the rules, disrupt – but their members tend to have a corporate mindset, and their output needs to be coordinated or even integrated with the mainstream organization. Finding the right balance between the entrepreneurial mindset and the corporate setting is a major challenge.
  • Funding dynamics. Some teams that would not get financed that easily as a start-up in the outside world still get significant funding from the company – which means that also weaker ideas can survive a long time. On the other hand, projects that are about to take-off are in danger of being underfunded, as – once they are successful – the standard corporate financial governance kicks in.
  • Friction. Deploying swarms on a larger scale causes structural friction with the mainstream organization. People that work for swarm projects leave a potential void in the linear organizational process and working in swarms runs counter to many – especially older – employees’ experiences and routines. To improve the odds for success, swarms require an infrastructure that fosters individual and organizational learning, such as “swarm coaches”, facilitators, a mentoring system, and an overall commitment of the very top of the organization. Such a learning architecture must not only be designed to support individuals and teams; it must also be able to connect the swarm’s innovation energy with the mainstream organization in a constructive way.

Each and every one of these mentioned issues is a major challenge not only for swarms and their members but also – and especially – for the senior leadership of the company who is tasked with orchestrating a diverse portfolio of working cultures. When introducing principles of an agile organization, it’s important not to be overly enthusiastic and throw out the baby with the bathwater.

The goal is not to overcome the friction between agile and legacy organization; it’s rather about leveraging this friction productively as a continuous process of organizational learning and innovation, a process that must include employees, customers, and other relevant players of the company’s value creation universe.

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This article is the fifth part of a LinkedIn series about Digital Transformation Challenges in Large and Complex Organizations. It is based on a qualitative study conducted by the Center for the Future of Organization at the Drucker School of Management at Claremont Graduate University.

If you would like to get immediate access to the entire analysis of our findings, you may download an electronic copy of the report at no cost hereor get it as a physical booklet here. In return, we’d love to learn about your perspective – feel free to comment and/or share your experience with the subject. Thank you!

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