Whoever offers the best customer experience will win in the market. Online companies and agile startups serve as an example.
Product and software development of major online companies (Amazon, Google, Netflix, etc.) is seamless and tirelessly produces new software and releases. Everything is focused on customer centricity and customer experience; in fact, the success of their digital business models and data platforms is largely based on these values.
The winner takes it all
Of course, online companies and startups were able to invest in agile structures from the very beginning, almost eliminating legacy IT and relics of other eras. They also don’t have to consider decades of structures and processes or numerous management levels.
Companies founded in the old economy have to face the challenge of digitalization. Before they can digitally transform, however, they have to undergo an agile transformation. Why is that so important? Because digital products cannot come of old mechanisms and structures.
The number of software components in machines, tools, appliances, and vehicles is steadily increasing. Customer experience should therefore be the focus of software development. Furthermore, the software has to be constantly updated to stay relevant.
Consequently, release management is growing ever more important. If customers are supposed to use a product, they have to enjoy it; pure necessity is not enough anymore.
This means that companies who want to make money with digital products have to follow the lead of online companies and startups. For example, some of them produce new releases every week thanks to DevOps.
State of agile transformation
But how far have companies already come in their agile transformation efforts? It’s not as bad as some articles and reports make you believe. According to a study by Luenendonk and BridgingIT, 23 percent of respondents have already switched to agile business models.
Banks and the automotive industry are way ahead of others. 65 percent of respondents, however, said that they were only just starting to implement new processes, using agile methods only in some departments.
Especially in IT application development, agile methods have been widely adopted, because agile software development is not just a symptom of digitalization. That’s why agile projects often start in IT departments and then gradually expand to every part of a company.
Development of digital products and digitalization of customer interfaces require agile methods more than other areas.
Traditional project management approaches soon reach their limits in these customer-centric areas because requirements of different departments have to be considered in software development (e.g. after usability tests); and these processes have to be fast.
In agile companies, processes can be sped up by highly prioritizing a common goal (e.g. a new e-business strategy, digital products, etc.). Furthermore, it can help to have high levels of transparency inside and between agile teams to monitor progress regularly (usually daily).
Agile all the way?
However, there still exist many deficits in the implementation of agile methods. 23 percent of respondents stated that using agile methods has not yet had the desired effect of more speed in development and quicker time-to-market. At least 41 percent of respondents of the Luenendonk study said that they were able to significantly speed up development.
The study also found that many companies still do not leverage DevOps because it is tied to organizational and cultural challenges and changes.
Many companies struggle with using agile methods to their advantage. 80 percent of respondents said that suitable frameworks and necessary skills for implementing complex projects are lacking. Furthermore, the underlying cultural change often goes unaddressed.
Orders are out, coaching is in
It’s not enough to just create teams and tell them to work with agile methods. The biggest change has to happen on the executive level.
Agile teams are a democracy; standing in stark contrast to traditional corporate hierarchies. Decisions are up to the teams themselves. Consequently, every team member has to shoulder more responsibility – but also has a lot more freedom.
Mangers will take on the role of product owner. They bear the overall responsibility for the products (e.g. digital factory, e-shop, etc.). They need competency, know-how, and soft skills to manage agile teams.
More often than not, product owners cannot be found inside the company. Some lack competency, others soft skills. That’s why candidates looking to fill product owner positions are in luck. The increasing demand is making for many interesting and appealing offers.
One step forward, two steps backwards
Sometimes, agile projects are transformed back into traditional ones because they are unsuccessful; meaning the projects go back to hierarchies and old governance processes.
This development is only accelerated by other departments wanting to join the discussion about past agile successes. Consequently, agile teams become part of the traditional organization again.
For this very reason, many companies decide to implement strategic digitalization initiatives outside of the organization. This guarantees for an almost trouble-free, unobstructed working environment in the first few phases of the project.
However, companies have recognized the need to combat these developments and are actively trying to do so. With frameworks like SAFe, LeSS, Scrum@Scale, or Spotify method, agile teams are supposed to be able to better work together.
Which framework fits which company? Well, it depends on size, department, number of teams, and organizational structures. Because of that, many companies come up with their own individual frameworks.
Communication and empathy
The most important factors for successful agile transformation are central change management, top management mandates, communication, and empathy for employees.
Consequently, 67 percent of respondents of the Luenendonk study stated that change management and behavior transformation are becoming increasingly important. However, only every second company has already implemented a change management team.
This lack of central responsibility and coordination can be easily explained. Top management is still unsure about how they should tackle digital and agile transformation. For that reason, many companies still think in information and data silos and have no intention of stopping soon.
Taking this into consideration, it becomes obvious why only every second company has already initiated a change in corporate culture coordinated by one central management. This change in corporate culture will take a while, too. Only 45 percent of respondents leverage new positions or different personalities to increase heterogeneity and interdisciplinary teams.
Existing staff or digital natives?
This means that existing employees have to adopt agile methods and adapt to them. This takes time, but many companies simply cannot afford to tackle agile transformation with new personnel.
However, it is still important to look for employees and managers with agile competencies to add to the team one by one. Not every existing employee will have the necessary skills and traits to master agile transformation. To start recruiting digital natives early on makes sense, therefore.
Besides recruiting new employees, existing employees and managers have to be put to the test as well to see significant changes. 58 percent of respondents said they are already investing heavily in training capacities to support their employees through agile change.
Only implementing agile methods and processes is not enough. Organization, corporate culture, and management will have to change radically as well.
This takes a lot of time, leads to tensions and upheavals. But there is no alternative.