Agile doesn’t have to be small

An innovative approach that originated in software development is now finding large-scale applications in other business fields. By Darrell Rigby, Andrew Noble, Tony May and Alessandro Cannarsi

Grab buys out Uber in Southeast Asia. Takeda Pharmaceutical buys Shire. Disney buys most of 21st Century Fox. Around the world, the news these days seems to be all about industry consolidation — the big getting bigger.

But what’s happening inside some of these large organisations is exactly the opposite. More and more companies are relying on small, entrepreneurial, selfmanaging teams to run their businesses. They are adopting the philosophy and tools known as Agile.

Agile originated in IT departments, where it was used in software development. But as it seeped out into other areas, teams began using the same approach to create new radio programmes, new farm machines, even new humanresources procedures.

Today, however, some companies are applying Agile on a much larger scale and using it to manage big chunks of their operations. Saab’s aeronautics business runs its entire Gripen fighter-jet programme with 100 Agile teams. SAP has more than 2,000 Agile teams. Spotify and Netflix run most of their business with Agile.

How is it even possible to manage a large global enterprise with a philosophy based on small, self-managing units?

Bain & Company studied how Agile is being scaled up at hundreds of companies, including early adopters such as Spotify and recent converts such as Bosch. Not everything we found was positive. For example, one prominent industrial company tried for five years to operate like a “lean startup” using Agile techniques. The effort failed to generate the results sought by the board, and several executives resigned.

JET-POWERED INNOVATION

But when Agile works, it can lead to remarkable results. Take Saab. The Gripen fighter jet, at US$43 million each, is one of the most complex products in the world. Saab coordinates production through daily gettogethers known as stand-ups. At 7.30am, each front-line team holds a 15-minute meeting to resolve any impediments and flag those that require coordination at a higher level. The latter are assigned to a team of teams, where leaders work to either settle or further escalate issues.

By 8.45 the executive action team has a list of the critical issues it must resolve to keep progress on track. The company also coordinates its teams through threeweek “sprints”, a project master plan that is treated as a living document, and the co-location of traditionally disparate parts of the organisation — all hallmarks of the Agile approach. The results have been dramatic: The Gripen has been deemed the world’s most cost-effective military aircraft by IHS Jane’s.

Successful scalers of Agile have learned several lessons about how to make it work. The first is that everyone in the organisation has to learn the values and principles of Agile. Otherwise, internal bureaucracies will erect all kinds of impediments. When Bosch embarked on its transition to Agile, its leaders fanned out to make sure that people throughout the organisation were on board.

A second lesson: though Agile may sound loosey-goosey, in fact it entails rigorous accountability. USAA, the American financial services company that focuses on a military clientele, has hundreds of Agile teams. Chief operating officer Carl Liebert told us, “I want to walk into an auditorium and ask, ‘Who owns the member’s changeof-address experience?’ And I want a clear and confident response from a team that owns that experience whether a member is calling us, logging into our website on a laptop, or using our mobile app. No finger-pointing. No answers that begin with ‘It’s complicated.’”

CYCLES UNDER SCRUTINY

A third lesson is that many elements of the organisation must change their ways of working. Operating architectures, talent acquisition and motivation, annual planning and budgeting cycles — all need to adapt to the new Agile philosophy.

In traditionally organised companies, for example, annual strategy sessions and budget negotiations determine the company’s priorities and objectives. Funds flow to high-priority areas and projects over a 12-month period.

But companies adopting Agile see that customer needs change frequently, and that breakthrough insights can occur at any time. In their view, annual cycles constrain innovation: Unproductive projects burn resources until their budgets run out, while critical innovations wait in line for the next budget cycle to compete for funding.

So they structure the investment process in the manner of a venture capitalist. Funders recognise that for two-thirds of successful innovations, the original concept will change significantly during the development process. They expect teams to drop some features and launch others without waiting for the next annual cycle.

Agile doesn’t work everywhere. It is best suited for situations where problems are complex, solutions are at first unclear, requirements are likely to change, and close collaboration with end users is feasible.

Today, however, those conditions describe more and more of the marketplace — which may be why so many leading companies are learning to scale up such a transformative approach.

Companies adopting Agile know that breakthrough insights can occur at any time. In their view, annual planning and budgeting cycles constrain innovation.