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LONGREAD: the origins of agile

Agile. It’s the must-know management model of the moment. Yet while coverage of the agile methodology is growing, this way of thinking about how a company operates has a much-longer history.

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The migration and adoption of agile methodology started from humble beginnings in the software industry before the rapid expansion to a broader set of industries across all enterprise functions. 

"In recent years, agile has been recognised as mainstream management thinking."

View from the top

In the 20th century a company’s organisational structure was mostly hierarchical and bureaucratic with top-down management discipline. Employees had to follow a clear chain of command.  

An employee’s tasks and responsibilities were confined within a well-defined job description with limited autonomous decision making. Few roles required a high level of creativity and most functions were repetitive, administrative or sales-focused.

The new product development cycle was slow and creative roles were confined to either the marketing department which focused on finding new ways to capture consumers’ attention or research and development.

Most companies had a mechanistic approach to work design in order to maximise efficiency as a large proportion of the work was repetitive in nature - especially in the manufacturing industry.

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Pic: Neil H. McElroy – credited to be the founder of modern product management with a memo written in 1931 at P&G

Nor are some of the key roles in Agile new. The origin of the role of the ‘product owner’ can be traced back to fast-moving consumer goods (FMCG) – where a product manager role was first created by Procter and Gamble in the 1930s.

P&G was one of the first companies to focus on the process of understanding customer needs and finding a way to fulfil those needs using the now-classic marketing mix, the four Ps (product, pricing, promotion and placement).

Because of this, product managers were initially confined to the marketing function which had the closest touch-point to customers.

In the late 90s, the rapid emergence of the internet enabled a faster delivery channel and new forms of outbound (direct email marketing) and inbound (real time user feedback) communication.

At the same time, new programming languages were making it easier for developers to build prototypes and accelerate the speed of the product development cycle.

Software companies were the first to capitalise on this revolution by changing their organisational network structure, moving to a more-organic design and distributed management style. The key innovation was greater reliance on self-organising teams to make decisions.

More than a game

In 2001 a group of software developers codified a new way to develop software in a more iterative, less process-laden way. It appeared in an ‘agile manifesto’ as a rejection of the traditional waterfall development method.

Although agile became associated with software development its historical roots actually lie in manufacturing – the most commonly known movement of agile was in Japan at the Toyota production system.

Applying iterative thinking to develop new products had also already been alluded to in 1986 in the Harvard Business Review article The New Product Development Game.

Agile was quickly adopted by software and technology companies and gained momentum between 2001 and 2010. Tech companies such as Microsoft had pockets of agile in various functions in the 2000s and decided in 2011 to move the whole enterprise to agile.

Meanwhile some new tech companies decided use agile from the onset. Spotify was founded in 2006 and used agile from the get-go as a way of working across the whole company by setting up autonomous cross-functional teams to encourage experimentation of new ideas with laser focus on creating customer value. 

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In Australia, most early adopters were internet-based companies such as Seek, Real Estate Australia and Atlassian.

Real Estate Australia was one of the pioneers, embedding the agile methodology as early as 2010 to renovate its online site and accelerate product delivery.

Hitting the mainstream

By 2010 agile had been widely adopted by technology departments within large companies, while the supporting business functions were mostly unaware of the shift and continued to operate in traditional hierarchical command and control systems.

Since then, agile adoption accelerated and started to gain traction with non-technology functions such as product development, marketing and human resources across a broad range of industries.

In recent years, agile has been recognised as mainstream management thinking – including at ANZ.

As stated in the Embracing Agile article by Harvard Business Review, agile is “now poised to transform nearly every other function in every industry”.

The reasons agile has been so widely adopted across enterprises are linked to the rise of the internet and the increasingly digital world we live in. These shifts have created a more unstable market environment impacting all industries - not just software or tech.

Suddenly, industries such as banking are being attacked by small, more nimble companies who are cherry-picking the most profitable segment of the value-chain. Consumers are also shifting their behaviours so companies need to be more digital to match higher expectations in service delivery.

The pace of change is accelerating, forcing companies to radically re-think their organisation in order to gain flexibility, adapt and react more quickly to changes in market conditions and consumer needs.

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In Europe, ING Netherlands was one of the first large banks to move to agile, gradually expanding this new way of working through the whole enterprise from 2015. This included call-centres, sales forces and wholesale banking divisions.

Job types changed drastically, introducing new key roles (product owners, chapter leads and agile coaches) and shifting the whole organisation from being product-centric to customer-centric which accelerated new product development through a test-and-learn approach.

In Australia, Insurance Australia Group and Suncorp have been early adopters of agile working. More recently, agile ways of working have started to appear in more of Australia’s major companies.

In 2017 ANZ, announced an agile transformation to the Australian division of the bank and supporting functions. A number of other banks have since announced changes and are in the process of going through similar transformations.

While relatively new in the non-tech business world, the adoption of agile is quickly being embraced by a number of large high-profile companies across the world. 

Why agile?

1. Move faster to respond to market changes

Creating faster decision-making systems and breaking down functional silos with multidisciplinary, autonomous teams working together faster in a more collaborative manner speeds up the development cycle in an iterative fashion.

2. Be more innovative

Empowering teams to unleash their inner creativity allows each member to contribute and challenge the status quo from the bottom up.

3. Create a more adaptive organisation

Self-organised teams working on short cycles (known as sprints in Agile-speak) enables flexible adjustments to internal user request and external market need changes.

4. Drive a more accountable (and motivated) workforce

Employees in squads create, prioritise and own their work decisions with transparent accountabilities – in a true egalitarian and collaborative environment.

5. Improve flow of internal communication

Agile ‘rituals’ generate more internal and intra-team communication through daily stand-ups, product owner synchronisation and showcases - what is being worked on or the roadblocks faced are more visible for collaborative action and resolution.

6. Focus the whole organisation on delivering value to customers

The purpose of each team is solely focusing on developing specific customer related solutions from end-to-end, responsibility is shown through continuous test and learn and user feedback loop.

7. New roles

The product owner holds a key role in orchestrating and communicating the flux of initiatives or activities to maximise team performance and drive optimum customer outcomes.

Agile may not be an easy transformation process for traditional companies as it shifts power away from the top and puts the decision ownership with squads, which are closest to the end customers.

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Source: McKinsey article: The Agile Manager, July 2018

Agile is quickly escaping its original domain and spreading into broader business functions across many industries - transforming how employees work and interact by creating flatter and more egalitarian organisations.

Agility is becoming the new source of competitive advantage for companies as the most effective way to understand and adapt to rapidly evolving markets and customer needs, as time and innovation are the new essence of corporate success.

Jean Dieudonne is Product Owner, Business Owners Tribe ANZ

The views and opinions expressed in this communication are those of the author and may not necessarily state or reflect those of ANZ.

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