Why the Agile Enterprise must be an Innovation Network

First published on Scrum.org, 9 March 2017. Republished in The Agile Zone, 12 April 2017.

“…Innovation Networks; those networks that involve the interplay of people, ideas, and organizations to create new, technologically feasible, commercially-realizable products.” – Ahrweiler & Keane, “Innovation Networks”

As an agile coach, I find that organizations often have a narrow and constrained view of where agility ought to be practiced. They frequently see it as an IT thing, where development teams must optimize their way-of-working to deliver value more quickly and cheaply. In truth of course, if agility is to be attained then it must be enterprise-wide and not just focused on technical delivery. The idea of what constitutes stakeholder value in the first place must be open to challenge, and acknowledged to be ever-changing and emergent. The ability to deal with that change in a measured and managed fashion is where true agility lies. It isn’t just about delivering localized efficiencies, where the wrong thing might be built at less cost. it’s about building the right thing at the right time, inspecting and adapting progress in a controlled way, so that uncertainty is both expected and managed.

In short, organizational agility is really about how to be innovative at enterprise scale. That’s the challenge. The problem large organizations face is that they are typically representative of an established orthodoxy. They have become vested in exactly those products and services which have made them great. Unfortunately though, this also makes them vulnerable to disruptive innovation, where people with new ideas and new value propositions whip out the carpet of old certainty from under their feet. Startups with vision, ambition, and comparatively little to lose can slay the century-old company by redefining the market, often by delighting customers in paradigm-shifting ways that they never thought possible. Who really thought they “needed" Amazon and its cloud services or even a digital camera, until entrepreneurs with vision and capability gave substance to these ideas, and made them real? What did these innovations mean for retailers and mainframe manufacturers, to say nothing of Kodak? To survive they find themselves having to respond to change as best they can instead of driving it. They must deal with the emergence of new markets which completely redefine or extinguish the old ones. The suited inhabitants of walnut-paneled offices are outsmarted by sweatshirt-hooded monopolists from a university dorm room.

For large organizations, this is an existential challenge and not merely an embarrassing situation. How can they frame their response? They aren’t garage startups themselves. They don’t have that innovative outlook, or the values, or the culture. They are versed in terms of continuity and stability, not in the disruption of value streams and the seizing of an initiative before it is fumbled and lost. Ironically, that’s why they resist the very change which could save them. They are staffed with personnel, especially in middle management, who defend the current way of working and the practices which have brought home the bacon. To the “frozen" middle layer of management, the established order can seem like nothing so much as plain common sense. Hence they view innovators and agile change agents with great suspicion. Anyone who would deliberately entertain disruption must be either a madcap misfit and a zealot, or a simple-minded fool who must be stopped before they genuinely become a threat.

This is where agile transformation, and the harnessing of innovative potential, is stifled. Without clear and sufficient sponsorship from the top, the organizational antibodies will kick in, and the virus of change will be expunged. The process of "killing agile" can be as surreptitious as re-defining its practices to fit the old order. For example, a “sprint”, which should address risk in a time-boxed way by producing an increment of value, may simply be redefined as a stage-gated decision which the organization is already accustomed to make. Inspect-and-adapt opportunities may be conflated with the meetings which are already held. The threat of change recedes as organizational gravity takes over. Stability is re-established until the external forces of the garage innovators take over, and the redundancy notices drop through the door.

The hard and unpalatable truth is that agile transformation requires deep and pervasive change, and hence must be a strategic goal. It can’t be reduced to a tactical manoeuvre, or even a series of manoeuvres, which can be handled by middle-management in terms of the orthodoxy they are trained to defend. In short, to “SOLVE" the innovation problem at scale, executives must:

• Sponsor change. Sponsorship must come from the top, and be sufficient to overcome organizational gravity at the point of change. Having an empowered transformation rollout team can help.

• Order a transformation backlog. A large organization cannot change all at once. Certain value streams will need to be prioritized over others, and particular areas of weakness or opportunity focused on.

• Localize action. Change must be focused on delivery teams, where empirical evidence of improved value can be fostered.

• Validate improvement. The transformation which an organization undergoes must result in a demonstrably improved innovation capability.

• Enable self-organization. Change is sponsored from the top, but innovative agile teams will inspect-and-adapt their own way-of-working.

In effect, this means closing the feedback loop so the organization becomes a disruptive innovation network in its own right. Each agile team is aligned to corporate strategy, but is able to find and exploit opportunities for itself. The IT capability is joined up with an enterprise business capability in a “virtuous cycle” of validated learning.