Strategy Execution in an agile world Post 1

Strategy = Execution

Strategy Execution in an agile world.

Don’t confuse an Agile organisation with an Agile method.

Two posts, two messages:
Post 1: Don’t confuse an Agile organisation with an Agile method.
Post 2: Hybrids: can Agile methods and other methods work together? A false dilemma.

Antal Ruiter, director in the Financial Services Practice of Turner and Jacques Pijl, owner at Turner Strategy = Execution.

As consultants specialising in strategy execution, we often encounter confusion about agile terminology applied to large-scale change on the one hand, and as a framework for organisational models on the other. How do you approach large-scale change and transformation in agile organisations? Can different approaches work together? Why and how should one attempt to transform a traditional “factory-type” organisation into an agile organisation?

We thought it appropriate to set out our point of view and explain that using an agile methodology is not the same as organising yourself using an agile framework. We also want to demonstrate that, to execute a strategic agenda, practitioners should look beyond the limiting constraints of a particular methodology or framework, and aim to create lasting and meaningful change in organisations using a variety of methods at hand. Also, we want to explain why, when, and how organisations should attempt the fundamental transformation into an agile model.

This is the first part of two posts. In this first post we shall first try and dispel confusions about the term agile in relation to organisational models and frameworks such as the often referred to Spotify model. We shall then, in a second post, discuss how pragmatism should rule any strategy execution agenda, and how combinations of approaches, so called hybrid approaches, should be used when trying to change organisations.

Part I: Don’t confuse an Agile organization with an Agile method.

Key take-aways:

Agile organizations, the Spotify model, an old hype that is still too easily copied.
Fixed change capacity: the crucial point.
The when and why of aligning an organization according to the Spotify model is important

We often encounter clients that characterise their organizations as ’agile organisations’. Rather than departments and divisions, we find grids, squads, blocks, chapters, or guilds. But when we help these same clients to execute a particular strategic initiative, we notice that the underlying methodologies for approaching change are far from agile: they expect project initiation documents, steering committees, clarity on requirements before budget is allocated or anything gets built or changed. On the face of it, this seems contradictory. We argue however, that this confusion stems from a simple misunderstanding between, on the one hand, organising yourself using an agile framework, and on the other hand, using agile methodologies in executing a change or initiative. There are organisations that do both, and there are organisations that do not.

“Transitioning to an agile organization is complex and can only succeed if top management truly understands what this entails, comprehends what can and cannot be delivered, and fully supports it.”

Onno Zwaagstra, Former Agile Program Manager, Aegon

Agile organisations, the Spotify model, an old hype still too easily copied.

About 10 years ago in Northwest Europe, it became popular to use the Spotify model as an organisational framework to promote collaboration and innovation within a company. The model is often associated with agile methodologies, and at least in The Netherlands, being an ‘agile organisation’ is fairly synonymous with having implemented a variant of the so-called Spotify model, or, as in many cases, having adopted the Scaled Agile Framework (or SAFE, as it is known). Hence the confusion.

Numerous organizations adopted either the Spotify model or a framework (e.g. SAFe).

Here are a few examples:

ING and ABNAMRO, two Dutch multinational insurance, banking and financial services corporations, have implemented the Spotify model to improve communication and collaboration among their employees.
Aegon, a large Dutch Insurance company, has adopted SAFe.
LEGO, a Danish toy company, has used the Spotify model to structure its teams and foster a culture of innovation and experimentation.
Philips, a Dutch multinational technology company, has implemented the Spotify model in its digital product development teams to improve efficiency and agility.
Ericsson, a Swedish multinational telecommunications company, has used the Spotify model to create cross-functional teams that can work together to develop and deliver products more quickly.
SoundCloud, a music streaming platform, has adopted the Spotify model to structure its engineering teams and improve collaboration between designers, developers, and product managers.
Zalando, a German online fashion retailer, has implemented the Spotify model in its technology department to foster a culture of innovation and agility.

The Spotify model is an organisational framework that was developed by the music streaming company to promote collaboration, innovation, and agility within their company. The Spotify organisational model was not invented by any one person, rather, it was developed collaboratively by employees at Spotify over several years. The model evolved in response to the company’s rapid growth and the need to maintain a culture of innovation and agility in a rapidly changing industry.

Here are some key characteristics of the Spotify model[1]:

Squads are small, cross-functional teams that are responsible for a specific area of the product. Each squad is self-organising, meaning that they have the autonomy to decide how they work and what they work on. Squads are typically composed of 6-12 people.
Tribes are collections of squads that work together on a broader area of the product. Tribes are typically organised around a specific customer or business goal, and they have a tribe lead who is responsible for managing the overall direction of the tribe.
Chapters are groups of people who have similar skills or interests, regardless of which squad or tribe they belong to. Chapters are responsible for developing and sharing knowledge within the organisation, and they provide a platform for people to learn from each other.
Guilds are communities of people who share a common interest or passion, regardless of which squad or tribe they belong to. Guilds provide a forum for people to connect and collaborate on topics outside of their normal work.
Agile Methodologies: The Spotify model is built on agile methodologies, which emphasize collaboration, flexibility, and rapid iteration. This includes practices like continuous integration and delivery, test-driven development, and user-centred design.
Continuous Improvement: The Spotify model emphasizes continuous improvement and experimentation. Teams are encouraged to try new things, learn from their mistakes, and adapt their processes based on feedback.
A given change capacity: a given number and size of squads and tribes manage changes to the organisation, be it in IT systems or processes and products or services.

Overall, the Spotify model is designed to create a culture of autonomy, innovation, and collaboration. By organizing teams around small, self-organizing squads and fostering a culture of experimentation and continuous improvement, organisations can become more agile and responsive to changing customer needs.

The Spotify model draws on a variety of management and organisational theories, including agile methodologies, Lean startup principles, and Holocracy. The model is characterised by small, self-organising teams called squads that work together to develop and deliver products. These squads are organised into larger groups called tribes, and there are also communities of interest called guilds and chapters that provide additional opportunities for collaboration and knowledge-sharing

The Spotify model has become popular among financial and tech companies and other organisations that are looking to create a more agile and innovative culture. However, it is worth noting that the model is not a one-size-fits-all solution, and many organisations need to modify it to fit their specific needs and circumstances. , the Spotify model continues to evolve over time as new challenges and opportunities emerge, reflecting the company’s commitment to continuous improvement and experimentation. Remarkably, Spotify itself has moved away from the original model.

Fixed change capacity: the crucial point

The key drawing card to this model, at least as it has been implemented in many European multinational companies, is the given size or capacity of the change teams. One could even be a bit cynical and argue that the Spotify model’s popularity is in large part due to the potential savings it offers by reducing total cost of change. Whereas traditionally executing strategic change would’ve been organised separately from the organisation in a stand-alone project, this model forces all change to be done by the squads, grids or tribes themselves. If something more important comes along and there is insufficient change capacity, then something else must first be stopped.

This way of fixing the capacity for change therefore requires that a strong process of prioritization needs to be organised in order to choose the initiatives that are most important. In fact, forcing the organisation to make choices, is the single most important, but also the least well implemented, part of this model. This part often ends up creating barriers to change, as we shall see below in part two of this discussion.

‘’One could even be a bit cynical and argue that the Spotify model’s popularity is in large part due to the potential savings it offers by reducing total cost of change’’.

When and why to organize an organisation along the lines of the Spotify-model matters.

While it was specifically designed for Spotify’s unique context, other organizations may consider implementing the Spotify model for several reasons:

Managing constant change: an organization that has a constant stream of improvements and renewals to be made[i] and both business and IT require constant change and are inherently intertwined.
Clear value streams: the creation of clear value streams where run and change can be managed coherently.
Scalability: The Spotify model is known for its ability to scale agile practices across large organizations. It provides a framework that enables collaboration and coordination between multiple teams while maintaining a sense of autonomy and ownership.
Agile principles: The Spotify model aligns with the principles of agility, such as iterative development, continuous improvement, and cross-functional teams. It promotes adaptive planning, faster delivery of value, and increased customer focus.
Collaboration and communication: The model emphasizes the importance of communication and knowledge sharing between teams, fostering a culture of collaboration and reducing silos. It encourages the formation of communities of practice and promotes transparency and visibility across the organization.
Autonomy and alignment: The Spotify model balances autonomy and alignment by organizing teams into smaller squads that have a clear mission and are empowered to make decisions. These squads are then grouped into tribes, chapters, and guilds to ensure alignment with the organization’s goals and facilitate learning and growth.
Continuous learning: The model emphasizes a culture of continuous learning and improvement. It encourages experimentation, risk-taking, and learning from failures, allowing teams to adapt and evolve their practices based on feedback and insights.

There are, however, high costs to implementing this model, and even higher costs to implementing it badly, which, unfortunately, we see all too often. We find that the organisations benefiting most from the Spotify model are those that have some clear unifying principle organising their work. It is what we mean by the creation of clear value streams where run and change can be managed coherently (see point 2 above). An example will explain this concept best: Spotify for instance, is a music streaming platform. Teams oversee a part of the processes and systems that require the platform to run smoothly. Everyone understands their place in the whole, the streaming platform is the unifying principle.

A bank on the other hand, may be made up of a few, often competing organisational units, e.g. commercial banking, private banking, retail banking, all competing for a limited set of resources. There are parts that are shared across these organisational boundaries, and parts that are unique to each. Run and change programs run across these organisational divisions.

’’Forcing the organisation to make choices, is the single most important, but also the least well implemented, part of this model. This part often ends up creating barriers to change.’’

This makes it hard to point out a single unifying principle, and as a result the balancing or alignment between autonomous teams suffers. We do not argue that it is unwise to implement the Spotify model in these instances (see the above list of examples for a large number of Financial Services companies that have implemented it), but that if you do so, one must work harder to clarify everyone’s role and part in the whole, as well as to implement a very robust prioritization process, which, by its very nature, will limit the autonomy that teams have over their own work.

It is therefore important to note that the Spotify model is not a one-size-fits-all solution. Each organization should carefully evaluate its own context, culture, and specific needs before considering the adoption of any agile framework. Organizations may choose to take inspiration from the Spotify model and adapt it to suit their unique circumstances and goals. Looking at many organizations that have adopted Agile models reveals a resemblance to the Spotify model, but gladly always tailored to their specific context.

In our second post, we will discuss how pragmatism should rule any strategy execution agenda, and how combinations of approaches, so called hybrid approaches, should be used when trying to change organisations. We will also argue that there are instances in which an agile methodology does not make sense: if you know what you want and know how to get there, using a sequential, ‘waterfall’ approach may be faster and cheaper and lead to better results, even if it is within the confines of a squad or chapter.

We would like your input on and/or questions regarding other perspectives on how to make Agile work in strategy execution. E.g.

How organisational context matters: becoming an agile organisation should be approached differently depending on the type of organisation you want to change: as with many things in life, one size does not fit all.
‘Agile in name only.’ In conversations with our clients and various professionals, another issue came to light. Sometimes methods are chosen without being professionally and implemented in a tailored way, ‘Agile in name only.’ Low maturity in both the Agile approach, using an Agile framework, and in program and project management does not lead to results, and making combinations of approaches work becomes even more challenging (‘spot on spot’). Especially when it is casually stated that ‘we work Agile,’ but it lacks substantial understanding. A topic in itself.
Any suggestions? Contact us. Antal Ruiter, director in the Financial Services Practice of Turner (aruiter@turner.nl) and Jacques Pijl, owner at Turner Strategy = Execution (jpijl@turner.nl).

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