Agile is about value creation, not cost reduction

14 August

As many companies make the move towards a more agile approach to working in an attempt to reap the many benefits, it's important to remember that it is not a quick fix. Announcements such as those by The Warehouse CEO, Nick Grayston, who said that “the company was adopting an agile working structure, which could see more than 1000 jobs cut across the country - nearly 10 percent of the workforce” send the wrong message about the benefits of agile. 

While agile certainly minimises time wasted on unnecessary activity, it is not an efficiency optimisation discipline; it is a value creation discipline, which is very different. The ‘father’ of efficiency was Frederick Winslow Taylor, who published The Principles of Scientific Management in 1911, one of the most influential management books ever written. Taylor argued that efficiency arose from rigorously enforced processes based on the optimal time and motion of a task. In Taylor’s model, the workers did all the execution work (manual work) and the managers did all the job design and control work (mental work). The separation between manual work and mental work was clear and deliberate.

110 years later and managerial thinking about efficiency, as echoed in Nick Grayston’s quote above, has not changed much. It's still about finding a way to get the same output with less labour. This is the opposite of agile. Agile does not separate ‘manual work’ and ‘mental work’. In an agile organisation ‘workers’ are deeply involved in their own process design and self-management. They take responsibility for the creation and delivery of value themselves, without supervision. 

Is this efficient? Not necessarily. It may take an agile team longer to deliver an output that a waterfall team but the key to the riddle is the outputs. Agile teams are focussed on delivering outputs that customers truly value. Waterfall teams typically produce outputs that are dictated by management, often after a lengthy requirements gathering process. Sometimes waterfall outputs are good, but often they are not — the requirements were wrong in the first place or the product took so long to deliver that the customer no longer needs it. 

With agile, the success of outputs is much higher because of the iterative and adaptive nature of product delivery. Agile is not about efficiently delivering something a customer will be unhappy with, it is about optimising work to create something the customer will be delighted with. A company that implements agile has a greater chance to delight customers and therefore a better chance to fuel growth. 

The benefits of agile are so much greater than increased efficiency. The latest State of Agile report qualifies that agile's success is mostly contributed to better business outcomes, namely better customer/user satisfaction, increased business value, increased quality, organisational culture and moral improvement and much more. I urge all CEOs (and boards) to properly understand the real benefits of agile and not to lump it with cost reduction and efficiency gains. 


Posted by John Dobbin.

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