Foreword

We met the founders of Iterate in April 2007. Three of them had attended our first workshop in Oslo and invited us out to dinner. There, we learned they had just quit their jobs at a consulting firm and founded their own, so they could work in a place they loved using techniques they believed in. I thought to myself, “Good luck with that.” After all, they were just a couple years out of college and had no experience running a business. But I kept my skepticism to myself as we talked about how to find good customers and negotiate agile contracts.

We visited Iterate many times over the next decade and watched it grow into a successful consulting firm that was routinely listed as one of Norway’s best places to work. They had a few dozen consultants and evolved from writing software to coaching companies in Test-Driven Development to helping companies innovate with design sprints. So I should have seen it coming, but when they decided to transform the company in 2016, I was surprised.

We decided to change course, they told us. We want to be a great place to work, where people can reach their full potential, but our best people are limited as consultants. They are always pursuing someone else’s dream. We want to create a company where people can follow their own passion and create new companies. We want to nurture startups and fund this with our consulting revenue.

Once again I thought to myself, “Good luck with that.” This time I did not keep my skepticism to myself. We talked about the base failure rate of new ventures and the mantra from my 3M days: “Try lots of stuff and keep what works.” That’s a great motto if you have a lot of time and money, but they had neither. One of the founders was not comfortable with the new approach and left the company. The others did what they had always done—move forward step-by-step and iterate toward their goal.

It was not easy and there were no models to follow. Warry of outside funding, they decided to merge the diametrically opposed business models of consulting and venture funding by limiting the amount of profit they could make from consulting to 3%, pouring the rest back into funding ventures. They had to make sure that consultants did not feel like second-class citizens and those working on new ventures were committed to the success of the consulting business. And they had to learn how to successfully start up new businesses when all they’d ever started was a consulting business.

It’s been five years. Every year we visited to brainstorm ideas as the company struggled to make their unique approach work. When the pandemic hit, not only did their consulting business grind to a halt, but the farm-to-restaurant business they had nurtured for three years had no restaurants left to buy local farm goods. But think about it: Iterate had top talent with nothing to do and a venture that was poised to collect and deliver perishable goods. It took two weeks to pivot—they offered the food to consumers for curbside pickup—and the venture took off. While most Oslo consulting firms suffered in 2020, Iterate saw one venture (last-mile delivery) exit through a successful acquisition and three others spin off as separate entities, including a ship-locating system and a three-sided platform for knitters, yarn suppliers, and consumers. As a bonus, Iterate was number 50 on Fast Company’s 2020 list of Best Workplaces for Innovators, ahead of Slack and Square and Shopify.

So how did Iterate succeed against all odds? They started by realizing that a consulting approach to software development did not give them the freedom to take a lead role. With software becoming a strategic innovation lever, they felt it was time to claim a seat at the decision-making table. This was scary, because it involved taking responsibility for results—something consultants generally avoid. But they were confident that their experimental approach to solving challenging problems would work for business problems as well as technical problems, so they forged ahead.

You might wonder what Iterate’s transformation has to do with the enterprise transformations that are the subject of this book. There is nothing in Iterate’s story about Monoliths or Microservices or agile practices—but these are not the essence of a transformation. As this book points out, a transformation begins with the articulation of a new and innovative business strategy, one that provides real, differentiated value to a market. The pursuit of that strategy will be a long and challenging journey, requiring excellent people, deep thinking, and plenty of learning along the way. For those who are starting out on such a transformation, this book provides a lot of thinking tools for your journey.

For example, as you head in a new direction, you probably do not want to blow up the structures that brought your current success, however outmoded they might be. You need that old Big Ball of Mud Monolith (or consulting services) to fund your transition.

Another example: The first thing you want to consider is the right architecture for your new business model, and it probably won’t be the same as the old one. Just as Iterate moved from having a pool of consultants to having clearly distinct venture teams, you will probably want to structure your new architecture to fit the domain it operates in. This usually means clarifying the business capabilities that fit the new strategy and structuring complete teams around these capabilities. So instead of having a layered architecture, you are likely to want one based on the natural components and subcomponents of your product (also known as Bounded Contexts).

Think of SpaceX: The architecture of a launch vehicle is determined by its components—first stage (which contains nine Merlin engines, a long fuselage, and some landing legs), interstage, second stage, and payload. Teams are not formed around engineering disciplines (e.g., materials engineering, structural engineering, software engineering), but rather around components and subcomponents. This gives each team a clear responsibility and set of constraints: Teams are expected to understand and accomplish the job their component must do to ensure the next launch is successful.

As you clarify the product architecture in your new strategy, you will probably want to create an organization that matches this architecture because, as the authors point out, you can’t violate Conway’s Law any more than you can violate the law of gravity. The heart of this book is a large set of thinking tools that will help you design a new architecture (quite possibly a modular Monolith to begin with) and the organization needed to support that architecture. The book then offers ways to gradually move from your existing architecture toward the new one, as well as presents ideas about when and how you might want to spin off appropriate services.

Over time, Iterate learned that successful ventures have three things in common:

• Good market timing

• Team cohesion

• Technical excellence

Market timing requires patience; organizations that think transformations are about new processes or data structures tend to be impatient and generally get this wrong. Transformations are about creating an environment in which innovation can flourish to create new, differentiated offerings and bring them to market at the right time.

The second element of success, team cohesion, comes from allowing the capabilities being developed (the Bounded Contexts) and the relevant team members to evolve over time, until the right combination of people and offering emerges.

The third element, technical excellence, is rooted in a deep respect for the technical complexity of software. This book will help you appreciate the complexity of your existing system and future versions of that system, as well as the challenge of evolving from one to the other.

The Iterate story contains a final caution: Your transition will not be easy. Iterate had to figure out how to meld a consulting pool with venture teams in such a way that everyone felt valuable and was committed to the organization’s overall success. This is something that every organization will struggle with as it goes through a transition. There is no formula for success other than the one offered in this book: highly skilled people, deep thinking, and constant experimentation.

There is no silver bullet.

—Mary Poppendieck, co-author of Lean Software Development