Wednesday, February 23, 2011

Why isn't agile "winning"? (part 1)

Over the weekend I received a comment from John Rusk ( about one of my "Ahas" from 10 Years Agile. He thought that my musing about whether Agile really matters or not was more of a reflection on how companies do business as a whole as opposed to a question about Agile.

His comment (which I do agree with in principle) caused me to realize that I hadn't quite captured the essence of the thought that led to that "Aha". Since I believe that this is one of the key issues facing the ongoing adoption of Agile both inside and outside of software development, I think it's worthy of its own posting. Well, that plus this is my blog, so the voting on topics is a bit skewed...

Let's start with some ground rule assumptions:

  1. "It's a Dog Eat Dog World" - The capitalistic economic model creates an evolutionary "survival of the fittest" environment for companies.
  2. "Show Me The Money" - The measurement of success for companies operating in this environment is money (revenue / profitability).
  3. "Keeping Up With The (Dow) Joneses" - Business practices that have a positive impact on money tend to become adopted by other companies (akin to how beneficial genetic mutations spread through a population).
  4. "Blink And You Missed It" - The rate of propagation of these "mutations" can be exceedingly rapid (days and weeks versus years) so it is good business to pay attention to what others are doing.

Assuming all of the above is true, you have an environment that is highly tuned to detect, adopt and innovate business practices that directly influence the bottom line. A couple of examples for your amusement:
  • The Web - Say what you will about the insanity of the dot-com bubble, there was a solid business "mutation" at the root of it - the realization that the web provided a unique new channel to customers for companies. Two business behemoths of today trace their birth back to the heady days of the dot-com era - Amazon and Google.
  • Lean Manufacturing - Most discussions of the origins of Lean credit Toyota for taking earlier concepts espoused by Henry Ford and others and adapted them to the dynamic challenges of the modern manufacturing industry. Today you would be hard-pressed to find any manufacturer that does not use Lean practices to some degree. This practice has been so successful that it has actually "mutated" into the Agile movement.
Interestingly enough, both of these examples of business practice "mutations" also contain an important cautionary lesson that may inhibit adoption of Agile outside of software development. Consider the following:

Dot-bombs. For every success story coming out of the dot-com frenzy, there are hundreds of failures. In most cases the failures were entirely predictable in that they failed to "Show Me The Money". What would possibly motivate otherwise sane business minds to deviate from focusing on money as a measure of success?

Henry Ford's Lean - According to Taachi Ohno (Credited with developing TPS - principal progenitor to Lean), he "learned it all from Henry Ford's book". If that were truly the case, why did the company that Henry Ford founded fail to "Keep Up With The (Dow) Joneses"? You'd think somebody at Ford would have at least one copy of Henry's book around, right?

In both cases the underlying cause seems to be a lack of understanding of the complexity of the business "mutation" that they were either pursuing or ignoring. 

In the case of the Dot Com bubble, a few extremely high profile IPO's ( and company sales (Hotmail) demonstrated to the market that there was a vast new frontier of business opportunity on the internet. Unfortunately for the market as a whole, there was a lack of realization that the valuations of these high profile deals were based on a speculative model (% of market share) and not a traditional valuation formula (revenue times X). Establishing the value of a company based on market share alone is quintessential "betting on the come". This is not to say that it does not have it's place. In the case of Microsoft buying Hotmail this was a classic example of where this sort of valuation makes sense. 

But the larger business community simply saw that the valuation of internet companies was shooting through the roof and rather than taking the time to understand the complexity of this new frontier, companies settled for mimicking the outward appearance of moving to the internet. We all know how that played out.

With Ford and Toyota, the complexity comes from a different angle. Henry Ford was definitely on to something with his fledgling "Lean" practices. What Henry (and Ford as a company) failed to grasp is that the challenges facing manufacturers are not just static (waste in manufacturing processes) but also dynamic (supplier is late in delivering critical parts). Unfortunately for Ford and other US manufacturers, the next several decades would not provide them with the sort of environment that would force them to innovate to improve quality and productivity. This wasn't the case in Japan, where a weak post-war economy forced manufacturers away from reliance on mass-production economies of scale to remain in business.

When Japanese autos did show up on US soil, the US auto manufacturers initially failed to understand the different practices that Japanese manufacturers were following. By remaining at a low price point and steadily improving quality, the Japanese manufacturers stayed in the market when by US manufacturer standards they should have been out of business. US manufacturers like Ford failed the "Keeping Up With The (Dow) Joneses" principle, which set them up for being hit square by "Blink And You Missed It". By the time they realized that something was up, Japanese manufacturers had surpassed them in quality and were taking away significant market share - a state of affairs that persists to this day.

Hopefully by this point we have established that:
  1. The business community as a whole is quick to recognize and adopt practices that have a clear impact on "success", namely money.
  2. The business community as a whole is not so great at recognizing when a practice that has a clear impact on money is complex. As a result the tendency is to mimic the appearance of the practice as opposed to adopt the actual practice.
So what does that have to do with Agile? Good question. If you haven't already worked out where this is going, you'll have to wait until the next posting when I actually try to answer the question of "Why isn't Agile 'winning'?".

1 comment: