Agility = Responsiveness

According to a report by Tata Consulting Services (TCS) ,¹ the responsive enterprise can “shift rapidly to where customers want it to go next—the next buying experience they want, the new innovations they desire, or the new way they want to do business with your firm altogether.” My favorite definition, however, comes from Responsive.org, a member-run organization that believes the following²:

Responsive Organizationsare built to learn and respond rapidly through the open flow of information; encouraging experimentation and learning on rapid cycles; and organizing as a network of employees, customers, and partners motivated by shared purpose.

The consistency with agile and lean principles is clear. We exchange information quickly and openly, without regard to rank or title; we “fail fast” in order to learn what works and what the marketplace values ; we work as a collaborative network, including our customers, teammates, and partners, to deliver the most value to the ultimate consumer as quickly as is feasible.

Responsive.org has, through experimentation, developed a simple set of sliders that help enterprises diagnose their own level of responsiveness.

The elements of responsiveness versus efficiency depicted in Figure 12-1 should be familiar by now. The beauty of this scale is that it simplifies the components of responsiveness to a few traits, and allows the enterprise to grade itself, rather than having some outside consultant come in and make a pronouncement. Clearly organizations that are still following the Industrial Revolution model , in which predictive planning, economies of scale, and risk avoidance drive the business, will, if they are truthful, place themselves on the left, efficiency-focused end of the spectrum, while enterprises that have adopted an agile model across the organization will trend toward the responsive side.

Figure 12-1. The Responsiveness scale (Source: Responsive.​org)

As an agile consultant, I’d use this scale to lead a facilitated session with the leadership of the organization, use a survey to gauge the opinions of the entire enterprise, and then compare the two. This simple consulting exercise will yield invaluable information. Is leadership deluding itself about their level of responsiveness, or are their views in concert with those of their employees? Do certain teams perceive different levels of responsiveness? Do agile teams score their company differently than waterfall teams? The discussions driven by this dialog may be fraught, especially if leaders are defensive and hierarchical, but they are important to the consultant who must devise a plan for evolution.

Zara: A Case Study on Responsiveness

To illustrate the elements of responsiveness, let’s look at Zara , a “fast fashion” company that has upended its market with a responsive model. Highlighted in Responsive.org’s video “The Responsive Organization,”³ Zara focuses on one of the most competitive niches in the world, and one in which fashions and trends change and mutate daily. If a pop star wears a certain kind of leggings, all other leggings can go out of style in a week. I’m writing this chapter during the week that we learned of the death of pop star Prince, and I have no doubt that purple will be the color of the season, at least for a while. The typical fashion retailer has a six- to ten-month turnaround, from the catwalk or the street to the design, fabrication, and delivery of apparel to stores. By that time, sadly, the nostalgia and celebration of Prince will be over, and purple apparel will likely be overexposed and out of style.

Zara, on the other hand, has the unheard of turnaround of weeks, rather than months, to go through the entire cycle. As outlined in The New York Times,⁴ Zara uses a combination of human interaction, technology, empowered teams of designers, and a sleek supply chain to deliver its designs to a worldwide network of stores. The human interaction comes in the form of store managers who are trained to initiate conversations with their customers about why they select certain items of apparel, and why they return or shun others. This information is widely and quickly communicated to autonomous teams of designers, empowered to change style elements, like zippers and lapels, as well as colors, and order them into production and delivery.

Although some proportion of its garments are made in typical low-cost countries like Bangladesh and India, all of its design, and most of its manufacturing, is done in Europe or nearby Turkey. This a critical element in its speed to market; rather than shipping designs to China and waiting months for the turnaround, Zara can design, ship, and test-market a limited number of items to its many stores and see how customers react. Only when its feedback loop confirms that each item resonates with customers does Zara move to bigger batches.

The trendier the garment , the closer to its Spanish headquarters it’s produced. Due to its agility and customer intimacy, Zara can ship out the right number of garments to fit the demand, thus avoiding the “specials” and sales that most retailers must resort to to get rid of unwanted merchandise. Because of its fast turnover, and its cheap prices, customers buy on impulse, thus challenging the high-price, high-street brands like Gucci and Prada. Masoud Golsorkhi, the editor of Tank, a London magazine about culture and fashion, says, “With Zara, you know that if you don’t buy it, right then and there, within 11 days the entire stock will change. You buy it now or never. And because the prices are so low, you buy it now.”

A web search for “Zara responsiveness” will turn up thousands of master’s theses, magazine and newspaper articles, and case studies, as well as the New York Times article I cited. The reclusive owner, Amancio Ortega Gaona, is one of the world’s richest people, displacing Warren Buffet in the list. Zara uses no advertising, marketing, or promotions to power its brand; it expects its customers, and its street presence, to speak for it. Zara has become the world’s largest fashion retailer by following an innovative business model that exemplifies all the characteristics that agilists esteem. Zara is not a technology company, but it uses technology to enable the high-touch, data-driven, team-autonomy model that every enterprise seeking responsiveness should emulate.

Moving Toward Responsiveness

A business model like Zara’s doesn’t evolve overnight. It requires a mission that generates enthusiasm in both customers and enterprise teams. It requires a firm technological foundation, simple and effective processes, and an ‘innovation engine’ that enables the firm to refresh and adapt both the products and the business model. An efficient supply chain is also key. Zara moves the sliders away from predictive planning, hierarchical control structures, and secrecy or exclusivity of information. Experimentation, autonomy, and transparency are all inherent in Zara’s model, and agile consultants should be leading every willing enterprise to evolve in that direction.

As an agile consultant, I’ve seen successful and failed transitions. Even in transitions considered successful, each enterprise threw up unique challenges and deficiencies. One of the elements that derails many attempts at transition is disjointed, disconnected, and cumbersome technical architecture. I’ve lived through sprints in which every team member sincerely committed to delivering backlog items, and dove in head-first to create the promised products, only to be derailed by systems that were constantly failing. If the team can’t load its test cases because the quality assurance (QA) server is down, or can’t run its tests because the core database is not responsive, it’s pretty hard to commit to delivery. I’ve also seen organizations whose technical architecture is solid but which have so many process hoops to jump through, ostensibly to mitigate risk, that innovation, creativity, and speed are all discouraged.

The native Internet giants, like Google and Facebook , are in a constant development cycle, rolling out incremental changes in a continuous stream. Google developers, during peak times, make a code change every second.⁵ For this to occur, they need an IT architecture that enables the business, system development, and IT operations to partner, removing silos and providing an integrated, robust, and holistic technological foundation. DevOps, ⁶ the effort to bring development and operations together, is a great start down this path, but, for many rookie agile organizations, it’s an ambitious goal. Even for those who realize this ambition, it only solves part of the problem. While developer and operations teams may achieve better collaboration and a more coherent vision and mission, the problems of architectural agility and business participation can be left out of the conversation.

Tata Consulting Services , in the paper cited in footntote 1, recommends an approach it calls “BizDevOps .”⁷ This approach strives to include all corporate players in the IT development and rollout function, from business leaders to process designers, security experts, and quality assurance, as well as the developers and operations teams. In this scenario an agile enterprise transitions to an integrated approach along a path that TCS calls “Initiate, Walk, Run.” In the initial stage, teams adopt agile practices and some automated tools for testing and build environments. As the enterprise gets ready to “Walk,” teams have internalized the agile mind-set, and have developed their skills to the point that they can be the “generalizing specialists” that agility requires. They’ve begun on their DevOps journey, and have built a robust toolset that enables quick build, test, and integration. When ready to “Run,” they’ve achieved integrated teams, blown up remaining silos, and adopted a kaizen attitude to improvement. Their technology is an integral element of their competitive advantage, and their processes evolve to meet the needs of the customer and market.

It should be obvious that guiding enterprises to the objective of a “BizDevOps” structure is an incremental, iterative project, and that the path will be long and daunting. Our previous discussions regarding the agile mind-set required of leaders and customers, and the differences between development and operations, should remind us that mind-set and practices come before enterprise agility but are not the end goal. Ever-closer collaboration and integration in the IT team, leavened with a kaizen attitude, is the destination.

Simplicity: Maximizing the Work Not Done

Most large enterprises with which I have engaged are anything but simple. From complex and obscure processes and overly broad product lines to complicated organization structures, enterprises, as they grow, build empires that reinforce the siloed, process-bound hierarchies of old, and then add extensions every time they sense an opportunity or detect a problem. Processes grow to encompass every move or error an employee could possibly make, entrenching a risk-averse culture that stifles innovation. New departments spring up to address every trend of the moment, from chief digital officers to chief social officers to chief innovation officers, and then each C-level hire proceeds to create his own empire and process rulebook. At the end of all this expansion, the company often can’t get out of its own way, as every decision needs to run up and down an endless flagpole, smothering morale and decision speed.

Surely the key driver in any movement to simplicity is the threat of small, nimble startups like Uber or WhatsApp that can gain billion-dollar scale with a few hundred employees and a smartphone app. Companies that are getting sucked dry by constant investment in legacy architectures, or by support and marketing of too many products across too many segments, are striving to simplify their operations by divesting certain assets and reinventing many of their processes. The last few years have seen a large uptick in corporate divestitures,⁸ as companies from Weyerhaeuser and Roche to Proctor & Gamble⁹ and HSBC have decided to sell off brands. When Jack Welch, celebrated chief executive officer (CEO) of General Electric (GE) , took over the reins at that venerable company, one of the first moves he made was to sell off businesses in which GE could not compete. In January 2016, GE continued the trend started by Welch; it divested its $157 billion GE Finance business in what current CEO Jeff Immelt called a “pivot” to a “simpler, more valuable GE.” GE also sold off $27 billion in GE real estate assets. Immelt also notes, as we’ve been arguing in this chapter, that “as we build the next industrial era, customer focus is more important than ever.”

Simplification is about more than divesting assets. For most enterprises, process and business model innovation plays a larger role in simplification than do asset sales. Traditional functional departmentalization, designed to enhance industrial efficiency, now inhibits work flows and has become a barrier to responsiveness. This is the problem that the Business Process Reengineering (BPR) movement of the 1990s¹⁰ was trying to solve, but that was before the wholesale disruption brought by the Internet. Still, the base idea is the same: reduce costs and increase quality by radically rethinking the entire set of organizational structures, processes, and technologies that drive the business. Although the “radical” element of the BPR movement became self-defeating in many enterprises, some of the ideas are directly compatible with agility, such as customer focus, cross-functional teams with ownership of the complete product, and the use of IT to rebuild outmoded processes. These ideas, revolutionary in their time, are now just a standard tool in the pursuit of a different objective, simplicity or, as Bain & Co. call it, “complexity reduction .”¹¹

Agile consultants who are engaged at the enterprise level often find that their sponsor companies are shackled by intricate processes, which often have evolved from decades of workarounds or process-checks that resulted from errors or personalities long gone. I engaged at a large bank that had built its reconciliation process around the skill set of one individual, relying on faxes and phone calls rather than technology because “Charlie’s not a technical guy.”

At Charlie’s inevitable departure, these inefficient processes lingered on because they became “the way we do it.” Mature consultants , with their objective eye, are in a perfect position to observe these legacy dysfunctions and diplomatically call attention to them. This, of course, is just the opening move in the drive to rethink the process and work flows of an organization. The consultant who can convince her sponsor to invest in a process management professional, or can herself map and optimize processes for responsiveness, can have a larger impact than simply building agile teams. Again, our intention is not to offer a tutorial, so check the bibliography for some great resources on BPR and process reengineering.

Moving from the theoretical to the pragmatic, the migration to simplicity requires the enterprise, and its agile advisors, to address four key elements of complexity:

• Organizational: The complex organizational structures, siloed departments, and complicated value chains of many organizations must be analyzed and simplified.

• Product proliferation: The breadth of offerings, if too wide and varied for the enterprise to manage, and outside its core competencies, is a critical target for simplification. While agile consultants probably won’t have much influence in this area unless they’re engaged at the highest levels, our drive toward agility in the rest of the organization can make these challenges more visible and encourage lean thinking.

• Process Improvement: The legacy processes, that attempt to standardize and channel work flows and actions, must be revisited to ensure that they aren’t stifling innovation or treading worn cowpaths that exist because they exist.

• Leadership: Leaders are often enablers rather than resisters of complexity. Multiple detailed reports that require too much information and too much time, rather than simple dashboards that focus on the key indicators, can waste hours of time for employees who should be delivering customer value rather than digging out obscure numbers; agenda-less meetings that reach no conclusion; empire building rather than collaborative behavior. All of these managerial predilections must be driven out if the organization is to simplify.

For experienced consultants, the tools for these efforts are well known. The redesign of organizational structures is a common consulting practice, with principles, from the McKinsey “Seven S” organizational design framework¹² to Jay Galbraith’s “Star Model ,”¹³ to guide us along the way. Process mapping and optimization tools, from simple flowcharts to swim-lane process mapping to task-on-arrow diagrams and other techniques, are all useful to help visualize the bottlenecks that restrain effectiveness and responsiveness. The tools of lean, which we¹⁴’ve been reviewing in regard to their relevance to agile, are also a set of diagnostic tools. DMAIC (design, measure, analyze, improve, control), provides an improvement and simplification roadmap to start the journey away from complexity.

Innovation : From the Product to the Business Model

Is innovation a flash of brilliance, a nagging idea that springs forth in a dream or a flash of insight, or is it the outcome of a process that can be defined and managed? Is it possible to create an enterprise “innovation engine,” an extension of the research and development department that encourages the entire company to develop new ideas for products, processes, and even new business models? Is innovation a core competency only of companies like IDEO , the vaunted Silicon Valley design firm, or is it a value that can be instilled across an entire organization, or even automated?

When I think of innovation, the process that comes to mind involves a group of smart people in a room with a whiteboard, tossing ideas around to solve a specific problem or to improve a process or business model. The classic demonstration of this type of interactive brainstorming is illustrated in this video from Ted Koppel’s Nightline episode,¹⁵ which examines the creative process employed at IDEO. In a large group setting, designers tackle the problem of creating a “new wave” shopping cart, defying all the common knowledge about what a cart is to completely revamp a familiar object.

Management theorists, from Joseph Schumpeter and his “creative destruction”¹⁶ concept to Michael Porter and his theories of strategic advantage, have stressed the importance of innovation. Porter suggests that firms have two main mechanisms of competition: innovative differentiation or high efficiency. In our current business environment, many firms are looking for ways to systematize innovation, rather than the anonymous “suggestion box” of yore or hoping for the random brilliant insight.

The agile twist on innovation is that it’s neither a lone genius and her flash of insight nor an internal activity performed by a group of “creatives” but rather an interactive process that requires sensing the changing market, listening to customers, watching the competition, and then innovating toward a specific strategic goal. We all know the story of Post-it notes, the poster child for an innovative idea that came from a failed attempt to solve a completely different problem. In the new world of innovation, firms, like Apple with the iPod or Amazon with its cloud services, make a strategic decision to tackle a defined new market and then innovate deliberately to get there. The ubiquity of data, and the analytic resources available, enable the responsive enterprise to pay attention to signals emanating from its employees, its customers, and the social media channels that explode with valuable feedback all day.

I recently interviewed my friend Ludwig Melik,¹⁷ who told me that he was investing in an innovation management software platform, Planbox. My immediate reaction was, “How do you automate innovation?” Innovation management software, Melik educated me, is not a replacement for the “team swarm” approach of brainstorming employed by IDEO and many other firms.

Our client enterprises still want to meet in small teams, to innovate in many different ways, but if you don’t have a process and community to develop these ideas they just walk out the door. It’s not about some individuals submitting random ideas, but instead a sustainable source of great ideas that can transform the business. Innovation management is about creating a central repository where ideas are kept, and then developing a consistent process and community to test and execute the right ideas.

Melik also made an explicit connection between innovation management and agility:

There’s an obvious connection between innovation management and agility. Many of our corporate clients want to apply an agile process, iteratively prove out the concept, and fail fast, to ultimately become more successful and innovative. The output of the agile experimentation loops directly back into the innovation management tool, so you track the results and plan subsequent iterations and funding for the right ideas. If you don’t have a feedback loop that cycles from ideas to experimentation to iterative development, you won’t be successful in the turbulent market environment we live in.

The agile consultant needs a special set of skills and experiences to advise the entire enterprise on these revolutionary practices. In Chapter 13, we’ll explore the consulting skill set required to facilitate, persuade, and guide firms in their pursuit of the responsive, agile enterprise.

Summary

From product to business model innovation, the responsive enterprise is monitoring the signals from the entire environment, from internal teams all the way to the ultimate customer, and all the social channels in between. Responsive companies have the ability, from their IT systems to their supply chain, to respond to those indicators, innovate and develop new products, target unique niches, and stymie the competition. New business models, like Uber, or the improvement of existing models, like Amazon’s AWS self-provisioning cloud offering, are examples of strategic, targeted innovation that ­promotes creative destruction, which pushes traditional businesses to ­extinction but ­creates valuable new enterprises that displace them.