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What Every Company Must Understand

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I have called Agile the best-kept management secret on the planet and I have declared Scrum—which is the most popular of the Agile processes—a major management discovery.

That’s because Scrum resolves a conundrum that stumped 20th Century traditional management: how to create combine continuous innovation with disciplined execution, while also generating a stimulating environment for those doing the work (workers) and frequent delight for those for whom the work is done (customers).

For executives trained in management at top business schools or steeped in the pervasive hierarchical bureaucracy of the Fortune 500, the world of Scrum can be puzzling. The job titles—ScrumMaster, Product Owner—are unfamiliar and the processes—backlogs, sprints, technical debt, user stories—sound bizarre. The apparent lack of hierarchy can feel disorienting. The self-discipline involved in setting priorities in advance of a sprint and not interrupting work during a sprint can be difficult.

While the basic ideas of Scrum are fundamentally simple, they are so different from the ideas, values and practices of traditional management, it can be hard for executives with a traditional background to make sense of this world.

It’s therefore good to have Kenny Rubin’s new book Essential Scrum: A Practical Guide to the Most Popular Agile Process (Addison-Wesley, 2012). It explains in clear and simple terms what exactly is Scrum, how and why it works and where and how to implement it. The book is well-written and engaging. What I particularly like are the many illuminating and elegant images.

All firms are software firms now

Why should executives bother to learn about something as arcane as software development? For one thing, they need to recognize, as my fellow Forbes contributor has pointed out, that Now Every Company Is A Software Company:

Ford sells computers-on-wheels. McKinsey hawks consulting-in-a-box. FedEx boasts a developer skunkworks. The era of separating traditional industries and technology industries is over—and those who fail to adapt right now will soon find themselves obsolete.

If anyone wanted recent proof of the centrality of software, just look at what happened to the financial services firm, Knight Capital [KCG], which lost over $400 million last week from a computer software error that drove the firm to the very edge of bankruptcy. Knight Capital had rightly seen software development as the key to creating competitive advantage—being first in a new marketplace—but poor execution turned potential competitive advantage into a vast financial disaster.

Thus software development which used to be a low-value backroom activity is now at the center of competitive victory or defeat. Just as war is too important to leave to the generals, so having a basic understanding of what's involved in managing software has become a key to business success.

When to use, and not to use, Scrum

I particularly like the section in Rubin’s book which discusses the situations where Scrum is appropriate and where it isn’t. Scrum can deliver working, integrated, high-quality, reliable, business-valuable features every iteration and deliver those results fast. It can quickly adapt to a rapidly shifting marketplace. But it’s not suitable everywhere.

Using the well-known Cynefin framework, Rubin says that Scrum is at its best in complex environments where solutions emerge and where we only know the right answer in retrospect. Scrum is a good fit here because it generates creative and innovative approaches, rather than the routine cookie-cutter solutions of traditional management.

Scrum is less suited to predictable linear contexts, whether simple or complicated. Here, expert-driven application of known solutions may work better.

In chaotic or disorderly domains, taking bold, decisive hierarchical action to end the chaos may be the best approach.

In what he calls “interrupt-driven work”, where it is difficult to develop meaningful plans even for short iterations, a Kanban approach, in which work in process is limited and work flows are visualized and optimized, may be better.

Rubin presents Scrum not as a panacea to all management problems, but rather as a pragmatic solution to the specific context of complexity.

The complex domain is now pervasive

Where the book may understate the importance of Scrum is in not emphasizing how pervasive the context of complexity has become in today’s organization. The predictable linear domains of known solutions and cookie cutter approaches are becoming less and less relevant.

Why? The epic shift of power in the marketplace from seller to buyer as a result of global competition and the availability of reliable instant information to all customers means that “pre-ordained right answers” and “viable cookie cutter solutions” are now rarer than hen’s teeth. To thrive in the newly mercurial marketplace, customers must not only be satisfied: they must be delighted with a continuous stream of added value delivered sooner. “Cookie-cutter solutions” generally won’t get the job done.

Using initiative to find ways to delight customers is not something that can be programmed. No one knows in advance what will delight customers—even customers themselves. The only way to succeed is proceed iteratively, finding out what works and do more of it.

Success here means everyone in the whole organization must be continuously striving to find new ways to delight customers. As at Starbucks [SBUX], even someone who is sweeping the floor can contribute. In this world, there is no such thing as unskilled labor: there is only work to which intelligence has yet to be applied.

The shift in management polarity

As a result, the main task of management today has become the opposite of what it was in the 20th Century.

In the 20th Century, managers did their utmost to turn all work into routinized work, i.e. tasks in the simple and complicated domains, with linear pre-determined activities and cookie-cutter solutions. When big firms were in charge of the marketplace, as they were for most of the 20th Century, this approach worked reasonably well, even though the workers were becoming less and less engaged.

In the 21st Century, the task of management is mostly the opposite: turning all work into activity that delights customers, which in turn requires fully engaged workers. In effect, all work becomes complex and requires skill and initiative. For this, Scrum and its cousin Kanban are well-adapted.

Managers must learn management from software developers?

For much of the 20th Century, the question for managers was: how do we make the management of software more like the management of the whole organization with ever-greater top-down control? When that didn’t work, the approaches of Agile, Scrum and Kanban emerged.

For the 21st Century, the question for general managers has become the opposite: now that the overall context for the organization has become unpredictable and complex, how do we take advantage of what has been learned in software development to cope with complex environments and apply that to the organization as a whole?

We are thus in an epic phase change in the economy from a linear predictable world in which top-down control was the secret to success to a new complex Creative Economy, in which innovation and creativity are drivers. In this world, an understanding of the management practices of Scrum is vital and Rubin’s book can help everyone understand and do it better.

And read also:

The Best-Kept Management Secret On the Planet: Agile,

Why Can’t The C-Suite Grasp Agile?

The Case Against Agile: Ten Perennial Management Objections

Scrum is a major management discovery

The five surprises of radical management

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Steve Denning’s most recent book is: The Leader’s Guide to Radical Management (Jossey-Bass, 2010).

Follow Steve Denning on Twitter @stevedenning