Published in: Audit Committee Quarterly II/2019: KI und Kapital

The goal of agile methods is not to accelerate product development, but to improve the ability to react to market changes. Agile methods have been successfully used for decades in software development and the IT environment. However, the principles of agile development methodology can also be transferred to physical product development with its significantly longer development and procurement times, and therefore subsequently significantly improve the ability of companies to react to market changes. In addition to development areas, business areas far removed from development, such as marketing, controlling, service and human resources, can also take advantage of the benefits of agile methods. This creates speed: as a result of behavioural changes in members of the team and throughout the entire organisation - not by ordering an “agile way of working” or by quick training sessions on how to use the methodology. The acceleration of product development is therefore a result, rather than a direct lever. To achieve this, cultural change is necessary!

Agile methodology alone will not bring about any acceleration

Management often expects product development projects that are behind schedule to be significantly accelerated if the project team are trained in Scrum methodology. Publications, such as “The Art of Doing Twice the Work in Half the Time”, by Scrum co-founder, Jeff Sutherland, of which most managers are only familiar with the front page and from which they derive their expectations, also contribute to this nimbus. However, the real success factor of agile methods does not lie in training purely according to methodology. Scrum, Kanban and Co. are just tools to be found in the agile methodology toolbox. A profound change in company culture is pivotal for success and any associated efficiency gains, otherwise only limited, unsustainable improvements can be achieved. In order to be agile, the entire organisation needs to rethink how to deal with complex tasks. This change in mindset affects, not only employees, but middle and upper management in particular.

The advantages of agile methods can only be achieved with cultural change

The cultural change necessary requires three things:

I. A clear management decision to make the organisation agile and to communicate this clearly and to support it sustainably (e.g. when there are hurdles for the agile development team in the not yet agile organisation). The change can only be successful if it is also wanted and truly supported from above.

II. Top and middle management must delegate responsibility to teams and allow them to organise themselves and decide themselves how to achieve the objectives. Instead of fearing loss of status and power, it is the task of management to empower and offer support to teams accordingly. The role of middle management shifts from operational activities towards strategic and organisational management tasks.

III. Employees must also be willing to take on this responsibility.

Agile development processes

The agile concept can only develop once you have understood what customers really need. To do this, you first need to analyse customer processes and the contribution your own product makes to this. For this purpose, a team member - in the role of product owner - permanently represents the customer’s perspective and needs. After each development step, a check is made to ascertain whether customer benefit still exists; if not, a new solution is sought. This continuous feedback enables a much more specific reaction to market and customer requests. In the case of mechanical engineering companies, it is not the machines themselves that are optimised, but the upstream and downstream processes. As a result, mechanical engineering companies not only sell a great deal of steel, but now also software, advice and services etc. to optimise the process. Market demand is developing more and more in the direction of systems and solutions; stand-alone devices are becoming less attractive.

Advantages:  customer benefit, transparency and communication

One of the first noticeable effects when introducing agile methods is the transparency of processes and activities, so that tasks can be prioritised. Because during the daily in-depth team coordination, various tasks become visible and it is easier to decide what is really important for customer benefit. So far, decisions on importance and priorities - especially in large companies using traditional methods - have often been made and implemented individually and without coordination. Coordination and the detection of dependencies often take place too late. This leads to delays and wasted resources. Agile methods do not make us faster because we move faster and faster, but

because we use transparency to focus on the right things and achieve faster results. Agile processes are characterised by the need to continuously improve ways of working, processes, communication, collaboration, etc. Teams are required to organise themselves, be fully focused and work 100 percent on a topic and really be responsible for what they do. Work is carried out according to priorities derived from customer benefit. Fast feedback cycles and lower costs for changes, timely escalations and decisions, as well as early error detection and subsequent avoidance of unnecessary development loops are hallmarks of agile methods. All in all, it means that teams are more motivated and can deliver the right results faster. If it is still possible for the management of an organisation to act as an enabler and coach for employees and to refrain from the usual “command and control” behaviour, then the prerequisites for real change are there.

Suitable for all industries - especially with complex requirements and high levels of uncertainty

Generally speaking agile methods can be used across all industries. Agile is always particularly successful in complex project environments. If there are several uncertain factors, a high rate of change in the market, customer demands and competitive situations change dynamically etc., there is therefore a high level of complexity and uncertainty, and agile concepts are well suited. If a company only delivers light versions of an existing product, the advantage is rather limited. Examples of the successful use of agile methods in physical product development can now be found in many companies across a range of industries: Scrum and other agile methods are used in mechanical engineering, in the automotive industry, in medical technology, electronics and many more. Not only do development departments experience a change, but also all other departments that are involved in the product development process, right down to the suppliers.

A real-life example

In 2018, MAN presented two TÜV-approved trucks with innovative unique selling points at the IAA Commercial Vehicles; The vehicles were ready for the market after just 18 months of development - the usual time scale is 50 months!

Details are available at:

https://www.agileus-consulting.de/MAN

Effect on other areas

By looking at the end-to-end process, there is a great impact on the company as a whole. You start with customer needs in product management, continue with development and purchasing, manufacturing and finally delivery of the product. Classically, the research and development department is the start, because that is where the “greatest pain” and more complex tasks are often found. Often, you start off with a pilot project - sometimes supported by external specialists for agile methods. After the first few positive experiences and corresponding successes, the positive energy from this is sufficient to inspire other teams for this new way of working. Employee profiles will change as teams act more and more as a unit. As a result, a large number of super specialists are no longer required, but broader generalists are developing who can be used more flexibly. In order to achieve sustainable success, a change in behaviour and culture needs to take place in the company itself. The more company-internal drivers who want and support this change, the faster and more successfully can a corresponding change be driven forward. It is important to create this awareness, especially amongst management. The sole mechanical introduction of agile methods is only the first step. The actual change is decisive for success - and like any change in behaviour, this requires one thing above all:  time. But it is worth the investment. Agile methods are able to offer a solution when there is a need to react faster to market changes, technologies are becoming increasingly short-lived and internal processes have become difficult due to process regulations and controls which are too strict. With transparency, highly motivated employees, self-organised teams, quick decisions and continuous improvement of processes, economic success will increase. 

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