Why is the Current Economic Crisis an Ideal Time to Adopt Agile?

I was talking with a friend the other day about Agile and her response was “we’re so crazy busy these days, I can’t imagine trying a new method of work”. We talked about this for a bit and I think it got her interested. With the current economic crisis, I think it is a perfect time to pause and reflect on how you develop your products. Are you getting what you want? Are your cycle times short enough that you can get new products to market fast enough to capture the limited money that people or companies are willing to spend? Are your employees turned on and engaged? Are you able to react effectively to the volumes of new legislation being written to respond to the crisis? Are you able to say that you have your portfolio of investments under control and you are investing in the right things?

A crisis is often one of the easiest times to make an organizational change. People know that something must be done and are less likely to cling to the status quo. Yes, it does take an investment to make a change, but perhaps less of an investment than it does during good economic times. In good economic times, people say “hey, we’re making a lot of money, we must be doing something right, why change”? In that environment, change can be very difficult.

Perhaps some our business results over the past few years have been good because there was so much capital being dumped into the marketplace due to the artificial inflation of property values. Maybe there was so much money, it was simpler to be successful. Well that isn’t the case today. It is difficult to succeed. And maybe it is time to retool some of those processes we thought looked so good when making money wasn’t as hard.

Agile is a resilient and rigorous process for building products that accommodates learning and changes as you go. It give you the ability to build high performance teams who focus on building the highest-value product features. It cuts cycle time and it cuts waste.

The sections that follow discuss the current conditions in more detail and expand on why now might be the time to start using Agile in your organization.

New Products are Needed to Capture Market Share

Hammered by the recession, some of the nation’s biggest retailers are seizing the moment to reinvent their business strategies. And the impact will mean both sweeping changes in the merchandise on their shelves and subtler alterations… Stephanie Rosenbloom, New York Times, June 19, 2009

It is a tough time to be in business. If you sell something that that was nice-to-have, you’ve probably noticed you customers deciding to do without it. High-end products and services are being passed over for lower-cost alternatives, or simply not being purchased at all. Perhaps your Software as a Service product was doing well at $49 per seat per month, but now it isn’t. You could simply offer the service at a lower price to see if that helps, or you could introduce a new product, with less functionality, at a lower monthly cost. Some experimentation might be needed to find the right mix of products that retains customers who were leaving your platform while continuing to capture the premium price from customers who want and are willing to pay for the full offering.

Experimentation to find out what sells is essential and Agile is a process that is conducive to experimentation. An Agile principle is to build working software in iterations lasting from one to four weeks. Since you regularly have working software, it is easier to put potential products in front of potential buyers to get feedback. Not prototypes or mock-ups, but real working products. Waterfall processes typically result in working software near the end of the project life-cycle and showing changes to customers on a regular basis, and making changes based on their feedback, is simply harder to do.

If you want to outmaneuver your competition, you need to have a shorter cycle time bringing products to market, and Agile is an ideal method for cutting cycle time.

The Need to do More with Less

Companies are reducing their staff. According to the Bureau of Labor Statistics,

The national unemployment rate in May was 9.1 percent, not seasonally adjusted, up from 5.2 percent a year earlier.” There are fewer people to do the work, and there are often skill gaps brought about by layoffs.

In many companies there is the desire to make progress on many fronts leads to too many projects simultaneously underway without the critical mass necessary to make meaningful progress on any. The problem is worsened by the silos of work, and the complexity of handing work between silos that requires complex and comprehensive documentation. The waterfall method of product development, as traditionally practiced, wastes people’s time.

Agile teams, on the other hand, are cross-disciplanary, with full-time staff. The waste associated with handoffs is limited because people are working side by side, not in silos, without the need for elaborate documentation.

In our experience, dedicated product teams do no need to be nearly as large as traditional managers would predict, and the smaller they can be kept the better all around. A host of narrowly skilled specialists are not needed because most marketing, engineering, purchasing and production professionals actually have much broader skills than they (1) ever realized, (2) ever admitted, or (3) have ever been allowed to use. When a small team is given the mandate to “just do it,” we always find that the professionals suddenly discover that each can successfully cover a much broader scope of tasks than they have ever been allowed to previously. They do the job well and enjoy doing it. (Womack, James P., and Daniel T. Jones. Lean Thinking, Banish Waste and Create Wealth in Your Corporation. 2003 ed. New York: Free Press, 2003. Print.)

While it is culturally very challenging for companies to commit to working on fewer simultaneous project with dedicated staff, it is a much more efficient way of working. Companies who make the change will get more done with less.

You Need to Invest Your Limited Funds Wisely

Agile enables you, iteration by iteration, to determine how you want to use your capital and your people’s time.

When you have to full specify all of your requirements up-front, it is likely you’ll be investing in writing requirements, designing and building things that should never be developed. Some ideas for the new product will be the most important ideas, the ones that will capture new customers or meet a regulatory need. Others will be less valuable, some a complete waste of money. The problem is that at the beginning of a project is when you know the least about what you want – you learn a lot when people get hands-on with working software.

In a waterfall project, once the requirements are agreed-upon, the most important and least important features are handled in a similar manner. Contrast this with Agile – the most important ideas, the most valuable ideas – receive the earliest attention of the product development team. At any point in the life cycle, you can discard requirements that are no longer considered valuable or add in requirements that you didn’t know or think about at the beginning of the project.

With the limited amount of money you have to invest in product development, Agile is a good method for making the most of your investment.

New Legislation Demands new Products and Product Upgrades

When there’s a crisis people expect their elected officials to do something about it. That something is usually in the form of new legislation, programs and funding. Right now, there are a lot of things going on that people would like fixed, including unemployment, affordable health insurance, foreclosures, the credit crisis, corporate abuse, terrorism and wars.

When legislation comes out, business have to respond in accordance with the legislative timeline. In organizations following a traditional waterfall product development process, legislation often leads to tiger teams, formed by pulling people off of existing strategic projects. The rapid switching between strategic initiatives and tactical response to legislation can sap an organizations capacity for work. When people are pulled off of a strategic initiative, the remaining staff often lack the critical mass to be effective.

For a Agile teams, legislated changes can simply be though of as changes to the product backlog. Instead of working on features from the product roadmap, stories associated with the legislation are added to the backlog near the top of the list, depending on the timeframes required. The team stays intact. Critical mass is maintained.

Your Employees are Scared

Lack of direction and the fear of being laid-off are both sources of anxiety. Anxious employees spend time speculating which people, products, project and business units are going to be cut. It is a natural reaction, but it doesn’t add a lot of value to the company. When LinkedIn becomes a top destination site for employees, there’s probably not much great product being built.

Prior to the current recession most companies had a strategy in place for how they planned to grow the business, address competitive pressures, manage costs and introduce new products. The strategy certainly wasn’t static, but it had a reasonable shelf-life. With the recession many companies have been forced to go through a radical rethinking of their strategy, discarding significant pieces and undergoing significant reinvention.

To an employee, the way that looks is that the senior team and many of their reports disappear for days, weeks or even months of re-planning. Normal meetings are canceled. Communication flow drops. Project sponsors say “keep going, what you are doing is important”, but they are not making their time available to the project team, sending the message that the project may not be all that important.

Reorganization during these times are common. Layers of managers are eliminated. Staff is eliminated. Often the reorganizations are incomplete, having been hastily through through and executed, leaving the normal flow of work in disarray.

Face it: your employees are probably scared, demotivated, uncertain about their job, their career, their future and the company’s future.

Adopting Agile is a way to reinvigorate your employees and get them focused on doing something that may enable them to retain their jobs – building products that customers will buy. In my experience, teams adopting agile rediscover their interest in their work. I’ve hear a number of people say “I’m excited to come to work every day”.

Instability Enables More Rapid Change

When you try to make an organizational change during ordinary times, when there isn’t a crisis, you have to work through the all of the structures the organization has put in place to maintain the way things are done.

Bureaucracy exists for a purpose. They are a conservative force in the sense that its job is to conserve, or reenforce, the values, structures, processes and standards that are perceived as enabling your company to survive. Bureaucrats’ job is to support the bureaucracy – your company hired them for that. Bureaucrats, because they are human, are also concerned about maintaining the status quo because it helps keep their jobs intact. When you try introducing change into an organization, you are challenging both the bureaucrats themselves and the institutions they were hired to support.

In his book Presence Based Coaching: Cultivating Self-Generative Leaders Through Mind, Body and Heart, Doug Silsbee writes:

The deep biological needs for self-preservation, adaptation, and conformity tend to habituate us, rather than accelerate the development of ways of being that are responsive to the emerging political, economic, social, and natural environment.

The value of a crisis is that it makes it somewhat easier to introduce new behaviors than it would be normally, when it becomes clear to people in the organization that survival is not guaranteed by following the well-established path. Note that motivation to change (in this case, fear of survival) is a necessary condition for change but it isn’t the whole story.

Summary

Your organization will respond to the economic crisis one way or another. For those that view this time of crisis and an opportunity, introducing Agile may help you build new products faster, better meet customer needs, increase your revenue, respond rapidly to changes and empower your employees.

VN:F [1.9.1_1087]
Rating: 10.0/10 (2 votes cast)
Why is the Current Economic Crisis an Ideal Time to Adopt Agile?, 10.0 out of 10 based on 2 ratings

4 Responses to “Why is the Current Economic Crisis an Ideal Time to Adopt Agile?”

  • While I agree with all things said, and introduced agile to my organization during a local crisis, I believe that during a crisis, achieving the real mindset change required to really become an agile organization is very hard.

    The main reason is that in order to drive change, people need to be open to it, and less worried about their personal safety. Maslov’s hierarchy of needs (http://en.wikipedia.org/wiki/Maslow%27s_hierarchy_of_needs) is one way to look at this.

    Change needs to be managed very effectively, communication plan needs to take the personal lack of safety into account, and managers/leadership need to go overboard in building safety and cultivating openness and trial and error culture.

    With this in mind, Agile is indeed a great way to reinvigorate an organization.

  • I agree completely. The crisis provides you with the ability to unhook from organizational conventions, but that isn’t sufficient to get you to the other side. Without leadership, negotiating a path through these times will be very difficult.

    Thank you very much for the comment.

  • Great post, Bob. Oddly enough, I am just putting the finishing touches on a presentation on this exact same topic. I agree with Yuval, somewhat, that asking for organizational change when people are more in a survival mode can be a difficult proposition. This requires vision, insights, compassion and trust at the executive level.

    Israel Gat has some great advice about executives building a Social Contract with teams during this economic downturn: http://theagileexecutive.com/2009/04/11/addition-to-the-social-contract/ that fits in so nicely with what you recommend. I found it both powerful and comforting.

    My simple formula seems to fit directly with what you are sayin here so I am glad about that! I believe that Agile helps organizations cut costs simply by requiring prioritization of features; delivering to market faster so that you reduce your feedback loops; reducing the amount of resources spent on fixing defects by not allowing defects to accumulate; and, doing everything your power to tool your teams to be more productive.

    Oh, and I really like your Doug Silsbee reference!

    Jean

  • Hi Jean. Thanks for your comments. I assume you’ll be at Agile 2009 so I’ll try to meet you in person there.

    Since you and Yuval have both mentioned the issue of safety, I may blog about that next. I worked in an organization where the President did an extraordinary job under very trying circumstances moving the organization in a new direction, and I’d like to share what he did.

    On another note, I’ve been given the gift of David Spann for the next six months (he moved to Providence) and we’ve been getting together once or twice a week to work on things together. I’m enjoying the creative process.

Leave a Reply