Role of the Agile Leader in Reconfiguring the Business Israel Gat Agile 2009 Chicago, IL August 27, 2009

Israel Gat

Agile 2009

Chicago, IL

August 27, 2009

Agenda Techno-economic Cycles: The Past 11 Months The Past 9 Years The Past 238 Years Implications for Strategy Three Chasm to Cross Customers, Problems, Solutions The Agile Social Contract Cultural Duality Software as Oil

Techno-economic Cycles:

The Past 11 Months

The Past 9 Years

The Past 238 Years

Implications for Strategy

Three Chasm to Cross

Customers, Problems, Solutions

The Agile Social Contract

Cultural Duality

Software as Oil

Techno-economic Cycles

The Classical Techno-Economic Paradigm a la Perez A sequence of events characterizes each of the techno-economic cycles : Major technological innovation introduces new infrastructure The new infrastructure disrupts both industry, commerce, society In good time the new infrastructure gets harnessed and becomes a stabilizing force for a prolonged period: The technology gets understood Confidence builds in the new order that evolves around the technology Sufficient “runway” for investments to pay off

A sequence of events characterizes each of the techno-economic cycles :

Major technological innovation introduces new infrastructure

The new infrastructure disrupts both industry, commerce, society

In good time the new infrastructure gets harnessed and becomes a stabilizing force for a prolonged period:

The technology gets understood

Confidence builds in the new order that evolves around the technology

Sufficient “runway” for investments to pay off

Five Successive Technological Revolutions Source: Carlota Perez, Technological Revolutions and Financial Capital Revolution Name Country Initiation Year First The ‘Industrial Revolution’ Britain Arkwright’s mill 1771 Second Age of Steam and Railway Britain The Liverpool-Manchester railway 1829 Third Age of Steel, Electricity and Heavy Engineering USA and Germany The Carnegie Bessemer steel plant 1875 Fourth Age of Oil, the Automobile and Mass Production USA Ford Model-T 1908 Fifth Information/ Tele-communication USA The Intel Microprocessor 1971

Production Capital  Financial Capital We have witnessed a double bubble: Technological bubble: The Internet Mania and crash of the 1990s Financial bubble: The easy liquidity boom and bust of the 2000s Both are part of the assimilation of successive waves of technological revolution (*) Based on Perez, CERF Working Paper No. 31, April 2009

We have witnessed a double bubble:

Technological bubble:

The Internet Mania and crash of the 1990s

Financial bubble:

The easy liquidity boom and bust of the 2000s

Both are part of the assimilation of successive waves of technological revolution

(*) Based on Perez, CERF Working Paper No. 31, April 2009

Revisionist Theory* The historical pattern itself has been disrupted: Disruption followed by stabilization is no more the case The pace of change in Information and Telecommunication is exponential Uncertainty and instability are pervasive Sustained periods of prolonged equilibrium are unlikely Both business and social systems need to adapt on an on-going basis to turbulent changes (*) Hagel, Brown and Davison, Shaping Strategy in a World of Constant Disruption, Harvard Business Review, October 2008

The historical pattern itself has been disrupted:

Disruption followed by stabilization is no more the case

The pace of change in Information and Telecommunication is exponential

Uncertainty and instability are pervasive

Sustained periods of prolonged equilibrium are unlikely

Both business and social systems need to adapt on an on-going basis to turbulent changes

(*) Hagel, Brown and Davison, Shaping Strategy in a World of Constant Disruption, Harvard Business Review, October 2008

Implications for Strategy

Adapters and Shapers Two schools of thoughts to choose from: Adaptive: Winners are those that can react faster than their competition  Sense change and respond quickly within the techno-economic cycle Shaping: Winners use technology changes to create new business eco-systems  Alter the industry/market fast as part of non-cyclical universe Both strategies critically depend on end-to-end Agility

Two schools of thoughts to choose from:

Adaptive: Winners are those that can react faster than their competition

 Sense change and respond quickly within the techno-economic cycle

Shaping: Winners use technology changes to create new business eco-systems

 Alter the industry/market fast as part of non-cyclical universe

Both strategies critically depend on end-to-end Agility

Malleable Software As software is malleable, it can respond exceptionally well to the demands imposed by turbulent times: As an end to itself As embedded software As part of a business process/initiative The higher the embedded software content in a product/process is, the more malleable the whole product/process becomes: For example: cellular phones End-to-end: Development  Deployment  Operations

As software is malleable, it can respond exceptionally well to the demands imposed by turbulent times:

As an end to itself

As embedded software

As part of a business process/initiative

The higher the embedded software content in a product/process is, the more malleable the whole product/process becomes:

For example: cellular phones

End-to-end:

Development  Deployment  Operations

Agile Infrastructure Continuous Deployment Flickr updates its servers every 30 minutes [Kent Beck, Trends in Agile Development ] [Allspaw & Hammond , 10+ Deploys Per Day ] IMVU updates its servers every 9 minutes [InfoQ: Beyond Continuous Integration: Continuous Deployment ] Continuous Operations [ Shafer and Nasrat, Agile Infrastructure , today at 2:00PM, Grand Ballroom A] Aligning development with operations and business requires reconfiguring the business

Continuous Deployment

Flickr updates its servers every 30 minutes

[Kent Beck, Trends in Agile Development ]

[Allspaw & Hammond , 10+ Deploys Per Day ]

IMVU updates its servers every 9 minutes

[InfoQ: Beyond Continuous Integration: Continuous Deployment ]

Continuous Operations

[ Shafer and Nasrat, Agile Infrastructure , today at 2:00PM, Grand Ballroom A]

Aligning development with operations and business requires reconfiguring the business

Three Chasms to Cross

Chasm #1: The Customer, the Business and R&D The myth that the required features are known The myth that the required features are unknown Iteratively discover the customer and define the product in tandem Contained cost of experimentation The Lean Startup Steve Blank and Eric Ries

The myth that the required features are known

The myth that the required features are unknown

Iteratively discover the customer and define the product in tandem

Contained cost of experimentation

Chasm #2: The Broken Social Contract In 1942, the turning-point year of WWII, 833,000 person-days of coal mining were lost due to strikes in the UK coal industry. Even a world war in which the UK was fighting for its life could not compensate for a broken social contract.

In 1942, the turning-point year of WWII, 833,000 person-days of coal mining were lost due to strikes in the UK coal industry.

Even a world war in which the UK was fighting for its life could not compensate for a broken social contract.

A Social Contract for Agile “ Team, my overarching organizational objective is to preserve our team and its institutional knowledge for our corporation and its customers for years to come We will achieve this goal by enhancing our software engineering prowess to the level that the resultant benefits will outweigh the repercussions of the current financial crisis The state of the Agile art should enable us to attain hyper-productivity In the event that we fail to accomplish hyper-productivity and our assignments fade away, you will find the Agile skills you developed much in demand in the market Whether you will or will not be with the company in the future, I acknowledge your need to develop professionally as an Agile practitioner and commit to invest in your education/training”

“ Team, my overarching organizational objective is to preserve our team and its institutional knowledge for our corporation and its customers for years to come

We will achieve this goal by enhancing our software engineering prowess to the level that the resultant benefits will outweigh the repercussions of the current financial crisis

The state of the Agile art should enable us to attain hyper-productivity

In the event that we fail to accomplish hyper-productivity and our assignments fade away, you will find the Agile skills you developed much in demand in the market

Whether you will or will not be with the company in the future, I acknowledge your need to develop professionally as an Agile practitioner and commit to invest in your education/training”

Chasm #3: Cultural Duality By rolling out Agile, you create a cultural duality, possibly a conflict Culture =“how we do things around here in order to succeed” [Schneider, 1994] The Agile Manifesto =“how we do software in order to succeed” The cultural duality/conflict intensify at scale

By rolling out Agile, you create a cultural duality, possibly a conflict

Culture =“how we do things around here in order to succeed”

[Schneider, 1994]

The Agile Manifesto =“how we do software in order to succeed”

The cultural duality/conflict intensify at scale

Scale Up Likely to be least disruptive up to a point – you will probably stay within the culture in which you already demonstrated success Furthermore, you are likely to be able to use the same Agile infrastructure

Likely to be least disruptive up to a point – you will probably stay within the culture in which you already demonstrated success

Furthermore, you are likely to be able to use the same Agile infrastructure

Scale Out In this era you are likely to be adding local culture(s) into the mix – Bangalore, Beijing, Moscow, Sao Paolo, etc. Fully Distributed Agile might not be optimal, but their use is inevitable in an era characterized by off-shoring and outsourcing

In this era you are likely to be adding local culture(s) into the mix – Bangalore, Beijing, Moscow, Sao Paolo, etc.

Fully Distributed Agile might not be optimal, but their use is inevitable in an era characterized by off-shoring and outsourcing

Scale Downstream Leveraging Agile success in R&D to drive change in downstream functions is an effective strategy… … as long as you are mindful of the cultural boundaries you are crossing Classical cultural clash between development and IT: Agile vis-a-vis ITIL

Leveraging Agile success in R&D to drive change in downstream functions is an effective strategy…

… as long as you are mindful of the cultural boundaries you are crossing

Classical cultural clash between development and IT:

Agile vis-a-vis ITIL

Software as Oil

Five Successive Technological Revolutions Source: Carlota Perez, Technological Revolutions and Financial Capital Revolution Name Country Initiation Year First The ‘Industrial Revolution’ Britain Arkwright’s mill 1771 Second Age of Steam and Railway Britain The Liverpool-Manchester railway 1829 Third Age of Steel, Electricity and Heavy Engineering USA and Germany The Carnegie Bessemer steel plant 1875 Fourth Age of Oil, the Automobile and Mass Production USA Ford Model-T 1908 Fifth Information/ Tele-communication USA The Intel Microprocessor 1971

Enormity of the Opportunity Software is becoming pervasive: 3 billion mobile devices nowadays touch the Internet [Joshua-Michele Ross, The Rise of the Social Nervous System ] Software is quickly becoming the biggest component in many products in which it is embedded Each of the aforementioned 3 billion mobile devices probably contains about 1 million lines of code

Software is becoming pervasive:

3 billion mobile devices nowadays touch the Internet

[Joshua-Michele Ross, The Rise of the Social Nervous System ]

Software is quickly becoming the biggest component in many products in which it is embedded

Each of the aforementioned 3 billion mobile devices probably contains about 1 million lines of code

© Copyright 1/11/2009 BMC Software, Inc. The New Economics of Software: Productivity Index Values by Application Type 0 2 4 6 8 10 12 14 16 18 20 22 24 Productivity Index (PI) w/ ±1 Standard Deviation Source: QSM Associates, July 2007 Business Information Command and Control Process Control Scientific System Telecommunications Engineering Avionics Microcode Real Time Real Time 28 26

Software as Oil In conjunction with Open Source Software, Agile software satisfies the four condition required for an input to become a key factor in a technological revolution: “ Clearly perceived low - and descending - relative cost Unlimited supply for all practical purposes Potential all-pervasiveness Capacity to reduce the cost of capital, labor and products as well as to change them.” (*) Source: [Perez, 2002]

In conjunction with Open Source Software, Agile software satisfies the four condition required for an input to become a key factor in a technological revolution:

“ Clearly perceived low - and descending - relative cost

Unlimited supply for all practical purposes

Potential all-pervasiveness

Capacity to reduce the cost of capital, labor and products as well as to change them.”

(*) Source: [Perez, 2002]

Continuing our Dialog Israel Gat [email_address] www.TheAgileExecutive.com

Auxiliary Slides

Taxonomy of Core Cultures 8 Actuality Impersonal Possibility Personal Collaboration Affiliation Family/Athletic team Nurse Control Power Military Surgeon Competence Achievement University Research scientist Cultivation Self-actualization Religious institutions Minister, priest, rabbi Source [Schneider, 1994]

Collaboration

Affiliation

Family/Athletic team

Nurse

Control

Power

Military

Surgeon

Competence

Achievement

University

Research scientist

Cultivation

Self-actualization

Religious institutions

Minister, priest, rabbi