I just finished reading “The Age of Agile’ by Stephen Denning. A very good book, not great, but very good and worth reading. I wanted to read the book because it comes close to a topic that I believe is important, which is how Agile (Introduced in the Agile Manifesto first targeted at software development organizations) can become a business management and leadership skill set for all. Stephen’s book revolves around three laws which he defines in the first part of the book. They are, 1) The Law of the Small Team, 2) the Law of the Customer and 3) The Law of the Network. These three laws form a new management paradigm, a paradigm influencing and driving how Agile changes organizations, their culture and management. His description of these laws is worth the read, as the laws provide hints to what Agile management and leadership will become outside of the IT organization. Note that Agile is today an approach to software development and not generally regarded as a business management skill set (see definition here)
Unfortunately, the book treads lightly when it comes to Agile and what specific business management and leadership skills are required in an Agile organization. The book covers how Agile is applied in large technology providers, such as Microsoft and in the IT organization of large global corporations outside of the IT industry, such as banks and manufacturers. However, as with most books and online material around Agile, it doesn’t really cover how Agile applies to the Head of HR, a Chief Supply Chain Officer, or for that matter of fact, a CEO. My point is that it does!
It does, because all business functions are now partially or soon to be fully based on software. Software encapsulates what the entire business function is about. So, if software is a key element of a business function and is increasingly unique to each business and business function, then the practices defining software development (Agile) has to become fundamental to each functional leader, such as the CHRO, the CSCO or the CFO. This means Agile has to become part of core business management and leadership skills. Unfortunately, most senior leaders, and even most middle management in functional organizations, do not have the educational background or the experience in dealing with IT industry inspired paradigms like Agile.
Take a supply chain function or more specifically the Chief Supply Chain Officer. He or she will increasingly be operating a business function fully run by software (and yes that’s more than the existing SAP system), producing products controlled by software algorithms, operating “digital twin” environments and with tasks or complete roles run by or taken over fully by AI and machine learning based environments. For that Chief Supply Chain officer, management and leadership will be different. For him or her, realizing and acting on that is critical now. Developing themselves and their leadership team is as important as understanding logistics or sales and operations planning. It is plausible that certain parts of the product development function are already using Agile together with the software development organization. However, Agile can be applied more broadly in the supply chain organization.
So, what are the skills required for a business executive?
Understanding and implementing the fundamentals of Agile: This would entail an understanding of the basics around agile and associated methodologies in order to not only manage software development projects, maintenance of software and data models, but also cross functional and multi-expertise teams. Especially important will be understanding how to scale and manage agile projects involving multiple teams. As a leader this will require different leadership skills and will involve new management practices.
Managing flatter organizations and teams with blended skills: A consequence of Agile environments is flat organizations with less direct managerial oversight over the teams. Furthermore, teams are often comprised of individuals with different skills, from different parts of the company. As a leader you will therefore need to understand how to lead in a flatter organization and how to influence teams that may include people that are part of another leader’s organization.
Dynamic budgeting: A more agile organization will be able to adopt a more dynamic budgeting processes, allowing for allocation of additional budget to projects and teams that are driving higher revenue, cost benefit and or tangible risk management projects (and consequently less budget to low performing projects or teams). While most organizations have to adhere to either quarterly or annual budgets, the ability to be more dynamic within an externally imposed budget period is elevated by agile practices. Leaders will need to understand how to operate in such an environment.
Operating with new business metrics: As the organization adopts more agile and real-time behaviors and software, algorithms and machine learning models become integral to the organization a senior leader manages. Consequently, metrics also must change or be augmented. Similar to more dynamic budgeting, the organization and each functional leader in the organization, needs to adopt metrics and objectives that reflect this change. Annual or even quarterly business metrics may be no longer enough. Metrics need to become real time, reflecting the Agile environment. If software algorithms, for example, are integral to the work of an HR organization, the outcomes of the organization will materially change. This requires different metrics to measure the HR organization’s performance.
Managing AI and people as one: Three changes will happen to all teams in organization. First, jobs that remain will be augmented with tasks that are performed by AI. Secondly, new jobs such as data science and AI trainers, will become part of teams. And third, some jobs in teams will be replaced by “AI jobs”. This means most managers in all functional organization (i.e. HR, Marketing, Finance, etc.) will manage more Agile teams of people, algorithms and machine learning models. Leaders with data science understanding will likely thrive. But equally leaders with the ability to inspire and show empathy in an increasingly complex and agile environment.
Pervasiveness of software and data in organizations will change the skills required to be a business manager and leader. Agile is one of these changes and it carries a set of derived changes to a senior leader’s skills such as in developing talent, budgeting, metrics, organization capabilities, etc. Since the pervasiveness of software and data is not a “big bang” but a slow creeping “take-over”, most leaders will not immediately see the need for new management and leadership skills. Personal recognition and attention to developing the new skills will be a requirement during this transition. CEOs need to recognize this for their personal development and for the success of their management teams in the digital transition that is happening.