The Agile Approach in Business – What It Is and Why You Should Get Interested
I became interested in Agile because everyone seems to be talking about it these days. I tried to implement the principles of the Agile methodology to the marketing department I’m running at Deviniti and the results quickly exceeded my expectations. That’s why I’ve spent the last few months on trying to understand more about the Agile approach, both from the theoretical and practical standpoint – as reflected in my academic and business activities.
Thinking about Agile, I constantly ask myself this question: if the entire IT sector where my company is located is growing at an increasing pace, why do some companies match that growth while others go bankrupt? I don’t have the final answer to that question. But I believe that one of the contributing factors is the implementation of the Agile approach to business.
Now, generally I’m rather skeptical when it comes to miracle business methodologies. That’s why in this article, I will define Agile and show its impact on organizations in the most objective way.
Even while I’ve been looking through the literature on the topic, I noticed that there exist many interpretations of the Agile approach. These might sometimes almost exclude each other. So I decided that the best thing I could do is define Agile on my own.
Here is what I learned in my quest to find out what the Agile approach really is about and why so many people believe that the method is the new big thing in IT business management.
What is Agile?
Many people believe that the beginning of the Agile method (as employed in software development) can be traced back to the Manifesto for Agile Software Development published in 2001. One of the authors of the manifesto, Dave Thomas, explained that the Agile approach has been defined during a workshop and surprisingly became instantly popular. Once published on the website, it was spread by millions of Internet users.
Here are the main principles of Agile software development as defined in the manifesto:
- Individuals and interactions over processes and tools
- Working software over comprehensive documentation
- Customer collaboration over contract negotiation
- Responding to change over following a plan
Consider this idea: Working software is the primary measure of progress.
But how does of all that relate to the Agile approach to business as applied to the entire organization?
Two years ago, Dave Thomas gave a talk during the GOTO 2015 conference where he criticized the ways in which people use the term Agile.
He explained that Agile is not a framework that can be implemented at organizations and instantly boosts their operational performance. In fact, the implementation of the Agile approach for business is nothing else than a specific philosophy. He also pointed out that new solutions are emerging dedicated to large organizations on the basis of the Agile method employed in software development. These solutions aim to show the way toward a more productive company organization.
However, according to Thomas in order to boost the agility of an organization, we should assume a cycle of simple, intuitive activities:
- Find out where you are
- Take a small step toward your goal
- Adjust your understanding based on what you learn
Looking at this cycle, you’re bound to note that only working software determines progress. When applied to business, it works in the same way: Only a product that sells matter.
Now, we’re not only concentrating on the IT sector, but on all activities undertaken at organizations. Agility is a concept that connects all these different elements into a coherent whole.
Agility is based on taking small steps and constantly checking whether we are headed in the right direction.
Together with my colleague, Igor Perechuda, we recently submitted an academic article for publication where we defined the Agile approach to business as opposed to the classical linear approach.
Here is a table that presents the comparison of Agile and linear approaches to business organization:
Source: Idzikowski W., Perachuda I., Organisation transformation in agile approach, a comparative analysis of IT and other sectors (under review), based on on Cooper R. G. (2016, 21-29), Dikert K. et al. (2016, 87-108), Ignatius A. (2016, 10), Pope-Ruark R. (2015, 112-113), Wendler R. (2013, 148-169).
Working on the topic together with Dr Robert Stephens, I concluded that it is necessary to differentiate the Agile approach to software development, as defined in the Agile manifesto, from the Agile approach to organizations.
We decided the Agile approach can be implemented on three different levels in organizations:
- Strategic – that’s where organizations aim to verify their business model as quickly as possible. In some industries, the cycle might last 5+ years. The agile approach in this area implies the conscious emergence of the organizational strategy that depends on the verification of a hypothesis.
- Tactical – that level refers to the management of periodical objectives where the implementation of the Agile approach is carried out in project teams with the help of methodologies such as SCRUM.
- Operational – the Agile approach is implemented in particular small steps, for instance on an Agile Board.
That line of thought is continued by Jimmy Janlén in this video presentation where he defines the Agile approach and the creation of an organizational structure based on Agile teams.
In such an organization, the the role of the management board is not based on controlling workflows and issuing orders, but supporting teams on an equal level in the organization’s hierarchy.
Examples of Agile in Action
Here are two examples of such organizations. What they have in common is the lack of hierarchical structures. These organizations are based on Agile teams that aim to achieve the highest level of agility:
A leading organization in the nursing sector in Holland. Nurses are able to manage their activities on their own, and the role of the management is purely integrative. Strategic initiatives are carried out from the bottom up.
- The Atlassian ecosystem
Atlassian is the company behind Jira and other products that allow companies to easily track and manage tasks. Atlassian allows its partners to create add-ons on their own and publish them on the Atlassian Marketplace so other companies may purchase them. That’s how Atlassian allows for an Agile team management in the developer companies that are located outside of the organization. The individuals in the Atlassian ecosystem are responsible for their results, creativity in solving problems, and the generated revenue. Software is developed in small steps within self-managing teams.
Agile in a Nutshell
The Agile approach is closely related to the lean startup methodology. In this methodology, the aim of organizations is defining and adopting a specific cycle of building, measuring, and learning. Following that cycle is necessary to introduce a new product to market. I believe that this cycle perfectly represents the Agile approach to business management because it illustrates two main rules of Agile:
- Small steps – product development is based on constant experimentation and checking whether product components work or not. If the solution is received well by the market, the product and organization can be easily scaled. Product development is organized in a way that allows to make a pivot toward the right direction.
- Self-management – applied wherever it is possible.
The Agile Approach: What’s Next?
There are several approaches and methodologies that correspond with Agile. Looking at their development and implementation in contemporary business shows what might happen the Agile approach in the future.
One of such approaches is based on reinventing organizations, and idea put forward by Frederic Laloux who in his influential book presented the historical evolution of organizations.
The very last iteration of organizational culture mentioned by Laloux possessed defining characteristics that are closely related to the Agile principles:
- Evolutionary purpose
Other approaches that are somewhat close to Agile are the lean startup methodology, the customer development, and customer lifetime value.
Lean startup methodology (Ries, 2011)
In the lean startup methodology, the critical objective of the newly created company (startup) is to verify the hypothesis for growth. This basically means that a business needs to create enough iterations for its business model to make sure that scaling is the right course of action. The main goal of the management is to reduce the time required to verify a new idea, as conducted in the cycle of build, measure, and learn.
Customer development (Blank, 2006)
The idea of customer development is also somewhat related to the Agile approach. It starts with the search phase that features customer discovery and validation. What follows is the execution phase where customers are created and company built. Blank postulates that these two phases should be separated. The objective of the first phase is to verify customers’ behavior as related to the business model. The second phase is dedicated to scaling the profit gained thanks to the scaling of the business.
Customer lifetime value (Kumar, 2008)
In the 21st century, companies manage customers with three main strategies in mind: acquisition, maintenance, and outflow. The critical objective of customer lifetime value approach is to measure and increase the customer lifetime value. What is the customer lifetime value? It’s the sum of the future forecasted profit gained from a single customer, a segment, or an entire market.
The evolution and implementation of these approaches on the contemporary business scene indicates that Agile has a bright future in front of it – not only as a set of principles regulating software development projects, but also an approach toward organizing the work of entire departments and companies – as we practice at Deviniti.
That’s why it’s worth trying out and checking that your organization’s approach will translate into tangible business results.
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