Route to Enterprise Scale Agility

Of all the imperatives of digital transformation, the one success factor on which there is consensus is “enterprise-wide agility”. Agility not limited to IT services alone, but all enterprise services working together. Be it the “software development process” or the “employee on-boarding process” or “the procurement process” – agility is rapidly becoming a cornerstone of our digital world.

The method wars

There are several agile methods and variants, and most organizations experiment with a few, often supported by specialized advice and guiding tools. While Scrum is probably most prevalent in IT, Kanban and Lean are significant too. Without going into merits of each, it is pertinent to characterize each, albeit briefly.

Scrum provides a structured model, making it useful for transitioning from traditional development structures and methods. Where workflow is crucial as in service delivery, Scrum maybe constraining, but has value in its routines. Kanban enables evolutionary change, focusing on waste reduction and quality improvement, through visualizing and improving workflow. Kanban helps identify process bottlenecks, manage workloads, and predict output based on flow capacity. Lean adapted from lean manufacturing principles, focusses on fast and smooth flow of work, helping deliver value quickly and predictably, learning and improving through early feedback, using data evidence to make decisions.

Most agile frameworks reach their limit when aiming to “agilize” more than a few teams, let alone achieving agile collaboration of several hundred people across the business. The key reason is that most agile methods focus on team-level performance, often leading to local optimization but global sub optimization!

So what works best?

The challenge and approaches to achieving enterprise-wide agility is keenly conferenced (legitimate verb?), experiences shared and approaches evangelized.  Unanimity exists that competitiveness in our digital age requires businesses to achieve agility at scale, not in projects and portfolios alone, but across functions, across the business.

Given the context, it was a privilege to join the Lean Kanban India conference in Bangalore (Sept), the Agile Expo in London (Oct), and the Lean Kanban Central Europe conference in Hamburg (Nov) this year. At Bangalore and then again at Hamburg, I caught up with David Anderson.navin-anand-david-anderson-at-leankanban-india-2016-bangalore

David Anderson is a pioneer of the Kanban Method for knowledge work, having started with early experiments at Microsoft. A Scot living in Seattle, David is considered a pioneer, and is perpetually on the move – coaching and advising individuals and teams – on how to deliver greater productivity and quality using the Kanban Method, through and an evolutionary approach, using the Kanban principles.

For enterprise scale agile implementations, David advises Enterprise Services Planning, a system for scaling agility in large businesses that operate in complex environments. But, large businesses by their nature have built standardization to enable them to deliver on scale. This does put constraints on adaptability and all too often efficiency. While the path taken may differ, the end goal is business-wide agility.

The subject presents enough to consider and think about, so here are a few interesting excerpts from my exchanges with David Anderson:

Which framework offers the best opportunity and returns on enterprise scale agility initiatives?   

David – “Kanban has become commonplace in professional services work environments across the globe, with wide acceptance in Europe. There is increasing evidence of high returns on Kanban implementations. People are stopping to question its validity; they are simply doing it and finding it useful. It’s adding value in their lives and making work easier and more fulfilling.

On my recent trip to China, I visited some companies with large scale Kanban initiatives. Without naming them, to protect the innocent, three of largest companies I audited have ongoing Kanban implementations with 3000 to 5000 users each. They reported productivity improvements ranging between 10-50%, on average over 25%. One these implementations spans more than 10 product units at this electronics giant. They have already seen productivity gains equivalent to 1250 FTE engineering staff. The ROI at two of the firms audited demonstrated returns of $300-400 to every $1 invested. For obvious reasons they now intend to scale usage to 100,000 staff to drive even higher returns.

Larger scale implementations are producing significant productivity gains, minimizing the need for workforce expansion. The big economic gain apart, they also see that Kanban has enabled them to side-step the “war for talent” and the associated time and costs. Another key motivation for executives driving Kanban adoption has been their ability to enable a culture of collaboration and trust, which in turn is helping with attracting and retaining some of the best talent.”

What are the key risks in the adoption and scaling of Kanban to drive enterprise agility?

David – “Kanban initiatives seem to do no harm, and tend to take root with minimal resistance and coaching. There are few stories of the aborted implementations or early failures.  The root lies in the Kanban principle that you “start with what you do now”. This evolutionary approach, when contrasted against traditional approaches to change and agility management, dramatically improve the potential of success. But having said that, we know that greater transparency and visibility comes with its own organizational and behavioural challenges.

In my observation, adopting Kanban at scale across the entire businesses is becoming an easy decision, and I certainly expect to see much wider adoption globally over the coming years.”

Would you say that the Kanban method is achieving all it can?  

David – “Kanban provides massive ROI for knowledge work, with almost no downside. It is a truly a low risk, high impact approach to improving business performance. While the results we’ve seen globally are tangible and significant, reality is that nearly all of these are scratching the surface, and are yet to fully achieve the essence of the method that we first implemented at Microsoft’s IT department in 2005.

Even the better implemented Kanban’s are yet to implement a true “pull” system, thus limiting the full benefits we might expect. Sure 10-50% productivity improvement at a scale of 5000 people needs to be congratulated but when organizations fully embrace Kanban they can achieve 100-700% productivity gains, while dropping delivery times by greater than 90% in many cases.

The broad adoption of Kanban that we see around the world is in fact shallow when compared with the real thing. We often refer to such implementations as “proto-Kanban” – usually an early step in adoption, but just a step in the longer journey to enterprise scale. Enterprise scale implementations are characterized by end-to-end “pull” systems, which offer a far greater reward than merely visualization and relief from individual overburdening that we observe in early stage Kanban implementations.

Not to take anything away, broad Kanban adoption is a blessing, with individuals and organizations seeing enough benefit – enough to be forgiven for thinking they are done, and that Kanban has delivered on its promise to improve their workplace. Our challenge, then, is to make them see that there is a lot more that can be done. We need to see broad Kanban adoption as a platform on which to build success at the next level – a platform for “pull” at enterprise scale!”

Flow is the crux of agility. Any method deployed must focus on transparency, balancing, unblocking and managing flow.

Can you explain what this “pull” system is? What are its evident characteristics? 

David – “The evidence really lies in the focus of managers, the planning and prioritization of work. Instead of managing people, planning deterministically, focusing on utilization levels the focus shifts to customer work orders, flow rates, flow efficiency and balancing demand against capability. If this hasn’t happened yet, it is unlikely that you have a true pull system in operation. It also impacts the way you interact with customers, the way work is selected, sequenced and scheduled. If the planning methods and prioritization logic is unchanged, you are not yet looking at flow, its imbalances, variations and balancing demand against capability.

Finally, if you’ve truly moved to pull you can understand business risks such as the cost of delay, offering different business services models, based on urgency and risk, with service delivery implemented through capacity hedged classes of service.

In short, if you don’t have deferred commitment, replenishment meetings to decide what to work on now, what to leave until later (and, if so, how much later), and what to discard altogether, together with service level agreements and classes of service, you most certainly haven’t made the transition to a “pull” paradigm.

You are still doing things the same old way, just with more visibility and some sustainable pace for individuals, which has improved quality, reduced rework, shortened delivery times, and given you up to 50% productivity improvement as a reward. If you can build on this established base, you could enable further improvements of 4 to 8 times your existing achievements.”

It sounds awfully hard to achieve “pull” at enterprise level. What have been your observations?

David – “If Kanban has already helped us with better visualization, better quality, more collaboration, a higher trust workplace, and a more sustainable pace of work, and given us gains of 10-50% why would we care to take it further?

The bottom line is that even in early Kanban implementations a decade ago we were seeing gains of 200%+ in productivity and drops in delivery times of 90%+. By failing to implement “pull”, Kanban adopters are leaving gains of at least 4 to 8 times more than they’ve already achieved.

The first Kanban system at Microsoft in 2005 produced productivity gains of 230%. It was replicated at Robert Bosch’s South Bend, Indiana facility in 2006. In the same time-period, a Lean implementation at Hewlett Packard’s Laser Printer Firmware facility in Boise, Idaho produced 700% productivity gains with half of that being directly attributed to the Kanban system inspired by the example at Microsoft.

When managers are willing to embrace “pull”, to take on the leadership required to adopt new ways of thinking, new ways of managing, and to go and re-negotiate the interface and contract with the customer, the results are beyond their wildest dreams. So great, in fact, as to seem unobtainable and mythical. But they are not! These improvements are real, historical, well documented and repeatable!

It’s easy to see why Kanban adoption is almost universally so shallow, and it is easy to explain why the Agile software development community was content, even determined that Kanban should be viewed as just a visual board and not a pull system featuring a virtual signal card system for deferred commitment as it was originally implemented and documented.

Getting to “pull” is a paradigm shift. It is a discontinuous (or disruptive) innovation in management thinking within the enterprise. If you merely adopt a visual board and relieve your workers of overburdening with some personal work-in-progress (WIP) limits, you don’t have to change paradigms. Shallow Kanban implementations represent continuous innovation within the existing paradigm. Managers don’t have to change their behaviour. People don’t need to be re-trained. It isn’t necessary to negotiate new interfaces and contracts with existing customers. Customers aren’t impacted at all. In fact, they may never be aware of the changes.”

So what does it take to implement end-to-end pull at large scale? What is needed to unleash the potential 800% productivity gains? How can we actually achieve business agility at scale?

David – “The challenge is how to take it to the next level. Agile transformation requires deep commitment from management, but even large-scale change can usually be managed incrementally.

It would be all too easy to say, “Get a coach!”. While this may be important, it isn’t enough. There needs to be managerial sponsorship for the change, understanding of why it is necessary and what the benefits will bring, and the willingness to take on the leadership risk to make it happen. The personal career and corporate political risks are tangible.

Switching to “pull” and abandoning determinism for a more probabilistic style of management is foreboding. But evidence is strong that better results come from training and tools. The reality is that to unleash the benefits of up to 8-fold productivity improvements, not to mention the economic improvements from selecting the right things at the right time and managing risk quantitatively across entire product portfolios, managers have to change their behaviour.

Managers need the knowledge, the confidence and the tools to use the techniques that enable “pull”.  Businesses need to commit to training their managers and providing them with the right tools. By embedding most of the algorithms in the tooling, managers can trust the decision advice being offered and authorize commitments and schedules without having to recall all the fine-detail and intricacies of the training.

Meanwhile leaders need to make it safe for the management team to experiment in the use of their new knowledge. There needs to be a culture of “failure tolerance” as managers with years or decades of old behaviour to unlearn, gradually feel their way into a new way of decision making.

Managers can be trained in the risk assessment techniques, the mathematical literacy and the ability to use a dynamic reservation system, demand shaping, and capacity allocation to facilitate selection, sequencing and scheduling appropriately. These techniques and the decision supporting analytics are embedded in Enterprise Services Planning tools such as SwiftKanban ESP.”

Clearly then large-scale business agility isn’t just about technology. It is a new way of thinking and managing with a more open, creative, transparent and collaborative approach. There is of course an enterprise service planning method and tool that is required to improve the potential of success while minimizing risks. Is there a way to learn more, without selling the farm?

David – “I run classes, speak at events and occasionally get invited to chair webinars. On 15th Dec at a webinar sponsored by Digite, I discussed the key challenges faced by large scale agility implementations, suggesting pragmatic approaches when shifting to “pull” and leveraging economic benefits that at scale. Well, if you found this conversation interesting, you can find the webinar recording here.”

Contributor: Navin Anand


IT service providers: SMEs going global

Published in Outsource Magazine

As the media never tires of pointing out, the axis of world economic power is speedily shifting to the East, both in terms of working-age population and GDP. As many of our SME-sized IT service provider clients have discovered, in order to compete in tomorrow’s world they need to think about the feasibility of building a global presence if they haven’t already. But what does this involve?

There are the quantifiable elements like staffing, premises and the local vs. remote management of an overseas operation. But there are harder to define, or ‘soft’ requirements: the skill sets that enable the company to understand another culture and respond to the needs and psychologies of a different market. Without this ability, a lot of time and investment may be wasted. With it, an SME without the resources of a multinational can still punch above its weight.

Consider a smaller IT service provider with typically a few overseas customers, partners and/or suppliers. They may have a lean outpost operation or two dotting the map which report back into headquarters. From our experience, this profile fits millions of SMEs across the world which do not typically have the specific intercultural skills, resources or overseas relationships of a multinational. They may have a reputation for quality goods and services, operational excellence and efficient management, but what else do they need to make a success of overseas expansion?

Setting-up issues

First is the question of staffing: who do they hire and how? Is it better to hire a strong local professional to lead or should they relocate one of their best performers from the domestic operation? Will they be able to attract the most suitable candidates from within the local market? And if they succeed, will the new hire be able to integrate into the organisation’s corporate culture? And what are the cost differentials between a local hire and a relocation? If they decide to relocate existing staff, how much time and what effort will be required to gain sufficient insights and understanding into the new market? And though they may have a track record in sales and/or operational set-up, will they have the skills needed to build relationships of trust with potential customers, partners and suppliers, which may require a different approach than they are used to?

Having set up the new location, the question is then how best to manage the operation remotely. How does the organisation reflect the flavour of its new market and gain a unique focus without finding itself at odds with the overall corporate mission? Will distance and different timezones increase operational and management costs, and if so what kind of technology platforms and other procedures need to be in place to minimise these costs?

Credibility challenges

Then there are those of our IT service providers who have already bitten the bullet and established an overseas presence: they face another set of challenges. While they may be making inroads into the new market, they may still be struggling to build trust and credibility within the market and find themselves inexplicably overlooked in significant bids even if they are competitively priced compared to local suppliers. They may also find that while they are expected to outperform and take a creative approach, they are nevertheless omitted from strategy and solution planning. Most frustratingly, while these IT service providers are expected to solve problems proactively, deliver to a high standard and work relentlessly, they are often not paid for this extra effort (although outsourcers can just as easily face this problem in their home market). With all of these challenges they have to ask “Are customers’ expectations simply unfair and non-viable, or is it that we don’t yet fully understand their needs, ways of working and psychology?”

Considering the time, resources and investment involved in establishing an overseas operation – especially in today’s economic climate – it is not surprising that many hesitate to take the step, even when it’s the obvious, and perhaps the only, road to growth. We have found there are no easy answers, nor a single-bullet solution. To judge whether it’s feasible, one must first have enough pieces of the jigsaw to form a coherent picture, which include: a suitable strategy; a viable go-to-market model; professional execution; best practice management teams in place and strong locally tuned marketing, sales and relationship building practices.

Global Proficiency

The foundation block upon which all these elements rests is something we call Global Proficiency, which comprises cultural intelligence and diversity skills and without which one’s investment can easily prove ineffective. This proficiency isn’t about memorising “culture maps”, it’s about understanding and appreciating the typical barriers, baggage and perceptions involved in penetrating a new market. It’s also about building a greater awareness of self and others, communicating in a way that reaches a new audience and, most critically, being able to accurately judge a situation within the context of a foreign environment – crucial to effective strategic planning and crisis management.

Because all this is a ‘soft science’ which can be subtle, complex and somewhat abstract, it is often ignored. Usually it is left to the common sense and maturity (or lack thereof) of the staff on the ground, with mentoring and training seen as a non-essential cost. The problem is that this oversight can actually lead to steep order losses, customer exits, project reworks and wastage, team conflict, poor relationship and engagement management, failed alliances, ineffective collaborations, and ultimately a negative bottom line.

Once an organisation has faced some or all of these failures when launching into a new market, they rarely have the stomach for another attempt. And yet despite its challenges, outreach to global markets is becoming an increasingly urgent business requirement, especially for Western companies. It becomes then a matter of not whether to invest, but what foresight, planning and training is needed to ensure success.