surprise!The world’s most valuable companies are agile

In the 1990s, software departments were often the worst-performing departments in large companies. Its output was often delayed, over budget, or often didn’t work at all. Alternatives were considered accordingly, culminating in his 2001 Agile Manifesto for Software Development, which proposed a combination of mindsets and methodologies for software development. This was fundamentally different from traditional management.

The Manifesto did not claim to be the harbinger of a new paradigm in management in general. Nor did its creators have any inclination to realize that the manifesto’s thinking could ultimately help create the world’s most valuable and fastest-growing companies (pictured below) 3).

Early days of agile software development

In the early 2000s, agile software development flourished as an underground movement that enabled software developers to create better software. This movement caused great enthusiasm and excitement among believers. Manifesto signatory Jim Highsmith said: “It was the era of the rogue team. Agile teams were allowed in large enterprises as pilots, even as mainframe legacy groups continued as before.”

Scrum, the most widely used agile methodology, was a collaboration framework that focused on methods and practices at the team level. There was little mention of customers, organizational goals, mindset or culture, or the broader impact on the company’s business. Scrum was a set of practices for creating software (see Figure 2 below).

Neither the software nor the Agile Manifesto received much attention from general management. In 2008, when management guru Gary Hamel gathered 35 academics and business leaders in the heart of California’s Silicon Valley to discuss the future of management, the group asked his Google CEO I received a detailed explanation from Eric Schmidt (you can read it here). Schmidt explained to the astonished audience that Google’s success came not from its methods or processes, but from its innovative culture. The group’s final report listed 25 major management issues. The report concluded that because management is a set of structures, tools, techniques and systems, change will inevitably be brought about by new tools and systems. The report does not mention any explanation from Google.

Agile methods become a management trend

In the 2010s, agile software development turned into a broader management fad.

· In 2010, the Department of Defense began mandating agile for subcontractors.

· In 2011, Marc Andreessen wrote an article in the Wall Street Journal about “Why Software is Eating the World.”

· In 2012, Apple became the world’s most valuable company.

· In 2015, Bloomberg Business dedicated an entire issue to the still strange world of software development.

· In 2016, London Business School professor Julian Birkinshaw proclaimed the arrival of the “Age of Agile” at the Drucker Forum.

· In 2016 and 2018, Harvard Business Review published two lead articles on “Embracing Agile” (2016) and “Agile at Scale” (2018).

· The dominant methodology was Scrum (see Figure 2)

· As the decade progresses, many successes of agile approaches at the team level have been cited.

· Agile proficiency certification has become a thriving business.

· Enterprise IT departments often took refuge in the Scaled Agile Framework, cleverly promoted as “SAFe.”

In effect, Agile has become the next big new thing in management, and there are hundreds of thousands of Agile practitioners around the world.

Obvious setbacks for agile methods

Then, suddenly, the bubble burst. Agile mania is gone. Many agile initiatives have been shut down or declared “failed” or “fake agile.” Or “Agile is only name.”

There are many confusing agile labels on the market, each claiming to be “real” agile (Figure 1).

Some companies declared that they had tried Agile and it didn’t work. In some cases, the lack of rigor in agile certifications resulted in team leaders being appointed without the necessary technical expertise.

It turns out that some agile “frameworks” are nothing more than standard business methodologies and practices under the agile label.

Interim steps toward “business agility” generally made little progress.

In 2018, the Department of Defense published a guide called “Detecting Agile BS.” This guide recognizes that although Department of Defense software development projects are currently declared to be “Agile” almost by default, this is often not the case. The Department of Defense guide provides “flags” to detect “Agile BS.”

How an agile mindset powers the world’s most valuable companies

On the other hand, by 2024, although agile methodology Agile may be seen as problematic, but the world’s most valuable and fastest-growing companies are Ideas and principles It has been an amazing success. Collectively, these companies’ management patterns, though different in name, embody the principles and ideas outlined in the Agile Manifesto for Software Development. To the surprise of most, agile principles and thinking won out, creating trillions of dollars in customer value.

Let’s take a look at the philosophy and ideas of the manifesto one by one.

a. “Individuals and interactions” are more important than “processes and tools”

In the 20th century, management was viewed as a set of processes, methods, tools, and systems.By declaring that individuals and interactions in software take precedence over processes and tools, the manifesto de facto Declaration of independence. Even more radically, the manifesto declared that software teams were more concerned with “reacting to change” than “following a plan,” thereby questioning a core tenet of 20th century management. did.

For traditional management, such anarchist thinking guaranteed chaos. But the world’s most valuable and fastest-growing companies, as Google CEO Eric Schmidt explained to an astonished audience at his 2008 Moonshots For Management gathering, are built on goals, values, We have achieved extraordinary financial success by deploying an agile way of thinking about culture.As explained here, this is exactly what makes companies successful: the management paradigms that drive the world’s most valuable companies, and how mindsets drive the processes of the world’s most valuable companies. Do you want to promote it?

b. “Our top priority is customer satisfaction”

The 2001 Agile Manifesto states that “the top priorities are: customer” In contrast, the Business Roundtable declared in 1997 that the sole purpose of corporations is to maximize profits. shareholder value. The manifesto here suggested a new rebellion.

However, by 2024, the rebellion was successful. The world’s most valuable and fastest growing companies (Alphabet, Amazon, Apple, Nvidia, Microsoft, Tesla) are all focused on creating value for their customers. What was once heresy became management orthodoxy.

c. “Build projects around motivated individuals…Trust them to get the job done.”

Similarly, the manifesto declares that companies should “build projects around motivated individuals” and “give them the environment and support they need and trust them to get the job done.” was heretical to traditional management, which assumed that workers had to report to their superiors. Who will make sure the work is done properly?

But the manifesto’s unorthodox thinking is what characterizes the management of knowledge work at some of the world’s most valuable and fastest-growing companies, as well as many other fast-growing companies. For example, at Amazon, teams are empowered to work backwards from customer needs and figure out how to meet those needs.

d. “Businesspeople and developers must work together every day throughout the project.”

Traditional companies are organized in vertical silos. As a result, despite growth in technology teams and investments, insufficient consideration is given to how technology can enhance the business, and software teams do not know enough about the company’s business to make smart recommendations. I often didn’t have one. As a result, many digital transformations have disappointed their sponsors.

In contrast, the world’s most valuable companies tend to operate as networks of capabilities rather than vertical hierarchies, reflecting the essence of the Agile Manifesto. Novartis is an example of that transition.

Companies grow when the entire company embraces agile thinking.

By 2024, the situation will become clearer.

· Agile methodologies alone can produce some benefits at the team level, but the results are even greater when agile mindsets, values, and culture drive and upgrade those methods.

· When an entire organization embraces an agile mindset, values, and culture and uses it to drive and upgrade an organization’s methodologies, it tends to bring significant benefits to the business.

· Approximately 20% of companies worldwide have embraced these insights and are growing faster than the S&P500.

· The remaining companies, which continue to operate under command and control and focus on maximizing short-term profits, generally grow slower than the S&P 500.

· The core curriculum of most business schools still largely reflects the traditional view of management as a set of processes, techniques, and systems. Attitudes, values, and culture are treated as secondary.

· Conferences, certification bodies, and consulting firms continue to reflect and promote agile methodologies and systems because that is what their customers primarily prioritize.

Read Part 2 of this article coming soon to see how this suboptimal situation develops in the future.

Also read:

The management paradigm that powers the world’s most valuable companies

How the world’s most valuable company mindset drives the process

Figure 3: World’s most valuable companies as of January 25, 2024