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January 10, 2017

SHORT-TERMISM DOES NOT MEAN BEING AGILE

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Over the past few years one of the “trendy” words in business has been “agile organisation“: we have to think agile, we have to be agile, we have to act agile. I wrote several posts in the past on the topic of agile – please see my blog – and how I believe that agile is not a panacea, especially if an organisation tries to implement an agile way of dealing with change without making sure that the culture of the organisation is ready and receptive to it.

However, I noticed that the term agile is often used as an “involuntary” synonyms of short-termism.

 

Let me explain. If we look at the average tenure of a CEO, we can see that it is quite short: research shows that 1 in 7 Executives moves on after an average of only 12 months as s/he has not succeeded in delivering shareholders’ value, with a higher percentage of Executives reaching the 3 years mark before they move to pastures new. It is not a long time, even in a ever changing and volatile economy like the one organisations operate in right now.

The pressure for delivering a lot in terms of financial results and very quickly tends to force Executives and Senior Managers to operate in reactive rather than proactive mode. They can look at how to improve the company strategy, but trying to implement it in 12 months is not easy, especially when change involves the company culture (it is unlikely that they will be able to implement such change successfully so quickly). Therefore, the default operating mode is often reactive, do it quickly and get results. This way of thinking and operating seems to be very close to agile: think quick, get prototypes quickly and implement successful solutions … quickly!

 

The problem is that doing things quickly is not a synonymous of agile. Actually, it is exactly the opposite.

In fact, I consider innovation closer to agile than “acting quickly”. What do I mean? In order to innovate companies have to test new solutions and – for example – instead of waiting 3 or 4 years to get a fully functioning prototype of a new product, they can get smaller projects/prototypes in place in a shorter time span that may lead to a successful finished product in the near future. But, they may not.

Being agile does not mean being necessarily successful at truly innovating, as this methodology and way of operating requires a lot of independence of the team that is implementing it and also the possibility to “fail”, a lot. However, as the tenure of Executives is on average shorter and shorter “failing” is not on the cards for them as it could well mean “being invited to move on” elsewhere.

 

The result is an oxymoron: companies need to innovate in order to stay competitive, but Executives often cannot make the mistakes required to innovate! The result is that many Executives focus on the short term and try to deliver value as soon as possible, focusing on the core business – “don’t try to fix what already works” –  rather than on innovaiton. But what works today, will be very likely obsolete in 12 months.

If we look at an Executive’s position, on the surface focusing on the short term makes perfect sense if they want to save their job. But if we look at the situation from a successful business point of view this short-termism does not make much sense. At all.

In fact, we see the new CEO getting in “office” and slash the workforce by 30%: this type of action is usually very well received  by the stock market and the share price typically goes up = quick win. But for how long? Is it really a deep cut in the workforce what the company requires or is it innovation?

 

Agile is a methodology that is part of a long-term company strategy. It is not synonymous of sort-termism

 

Innovation is not something that happens from one day to another: it takes time as it’s something that literally takes the market by storm: for example, the iPhone in 2007 was a true innovation; the iPhone 7 in 2016 is just a minor tweak that raises eyebrows as it is nothing particularly new.

Therefore we can see how agile is mistaken for the panacea: “I need quick results so I go agile”. But being agile requires a specific type of company culture that values team independence and the possibility to make mistakes. Making mistakes is not what an Executive that needs to prove himself/herself wants. What a conundrum!

How do we get out of this? By going back to basics and understating what is the company value proposition and what the company has to offer that is going to keep it ahead of the competition.

 

Agile can be a solution when you need to innovate, but if the right pillars are not in place (e.g. yours is a hierarchical organisation that wants things done perfectly the first time and requires 25 committees to make a decision) agile will fail. Not because it is useless, but because it is not the right tool for that type of company culture. Therefore, in terms of strategy Executives will have to make the decision on whether to change the company culture to facilitate innovation via agile (but culture change does not happen in a day) or drop agile and look for alternatives on how to deliver innovation (keeping into considerations that great ideas are seldomly developed in a short time span).

 

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