The document discusses how Rally, a cloud-based solutions provider, employs both lean and agile management methodologies to enhance customer collaboration and adapt to changing needs in software development. It emphasizes the importance of continuous customer feedback, innovation, and the alignment of development processes with business objectives to create a successful product lifecycle. Furthermore, Rally integrates structured planning and collaboration techniques to ensure that they effectively meet customers' requirements while fostering rapid learning and adaptation within their organization.

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PrinciPles
& PurPose
When
worlds
collide
the right management approach will always differ between
companies. lean has recently been breaking down barriers
in its application to a range of industries stemming from its
strong manufacturing background. But how does it compete
against similar, yet slightly different management practices
such as agile? and more so, can the two happily co-exist?
agile coach karl scotland, explains how cloud-based
solutions provider, rally, used both lean and agile practices
together to best meet its customer’s needs.
custoMer collaBoration
r a l lY a t a g l a n c e :
Rally is a provider of cloud-based solutions for managing
Agile software development. The Rally agile application
lifecycle management (ALM) platform aims to transform
the way organisations manage the software development
lifecycle by closely aligning software development and
strategic business objectives, facilitating collaboration,
increasing transparency and automating manual
processes. Companies use Rally to accelerate the
pace of innovation, improve productivity and more
effectively adapt to rapidly changing customer needs and
competitive dynamics.
Agile is best described by the Agile Manifesto, a
statement of values and principles created in 2001 by a
group of individuals who had all broken from traditional
ways of delivering software projects. They spent a
weekend together exploring similarities in the new ways
in which they were working and came out with the
following value statement:
We are uncovering better ways of developing software
by doing it and helping others do it. Through this work
we have come to value:
Individuals and interactions over processes and tools
Working software over comprehensive documentation
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2. RALL
Y
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ORL
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COLLI
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E
Daily
Scrum
Sprint
Backlog
Refinement
Sprint
Planning
Sprint
1-2 Weeks
Burndown
Chart
Product
Backlog
S
Sprint
Backlog
Sprint Demo & Review
Sprint Retrospective
Product Increment
Figure 1
Customer collaboration over
contract negotiation
Responding to change over following
a plan
That is, while there is value in the items
on the right, we value the items on the
left more.
This is backed up by 12 principles which
provide more detailed guidance to
follow to become more agile.
While the agile movement grew out of
the software development community,
its focus on empowering the people
doing the work, working directly with
customers, delivering product early and
continually improving makes it extremely
compatible with the lean mindset
and with wider applicability than just
software. What we have learned at Rally
is that agile execution combined with
lean strategy creates an organisational
capability to continually adapt to
meeting customer’s needs.
In particular, the common focus of
both agile and lean on the customer is
one of the aspects that ties agile and
18
lean together. At Rally we believe that
collaborating with our customers at all
levels of the business is necessary for us,
and them, to be successful.
A g i l e Ex e c u t i o n
When Rally first began developing its
ALM product, the most popular and
well-known agile approach was Scrum.
Partly inspired by Nonaka’s HBR article
The New New Product Development
Game, Ken Schwaber and Jeff Sutherland
created a process where a team worked
together to progress a software project
in the same way a rugby team passes
the ball back and forth to move up the
field together. As shown in Figure 1,
Scrum begins with a product backlog
containing functionality to be developed.
The Scrum team plans a small amount of
the highest priority work, just enough to
be able to complete within a timeboxed
Sprint, to create a Sprint backlog. They
then work collaboratively to “burndown”
that work, completing it as a product
increment that can be demoed,
reviewed and potentially released. At
the end of the Sprint, the team also
holds a retrospective meeting to reflect
on the process and what improvements
can be made.
In lean terms, Scrum can be viewed as a
way of reducing batch size and shortening
lead time. The Sprint, which typically runs
two weeks, forces a limit on the amount
of work that can be started. This in itself
encourages work to be broken down into
small valuable increments that can be
completed in the timebox. In software
development, and knowledge work in
general, the unit of inventory can be
thought of as the unproven hypothesis,
so having working software every Sprint
leads to reduced work in process by
continually validating ideas about how
the software will meet the customer’s
needs. Further, the fast feedback can be
used to continuously adapt and improve
both the product and the process.
At Rally we have adapted and evolved
the development process over the years,
exploring alternative value streams,
cadences and synchronisation points.
One key aspect is now a weekly release
cadence, where as a cloud-based
product, we are able to make updates
to the product every week. Some
updates, such as minor enhancements
or fixes, become available to everyone
straight away. Other updates are larger
functional changes or significant new

3. principles
& purpose
features which we are able to make
available to only selected customers.
Further updates are changes which are
not yet ready for release, but which we
want to deploy early to manage risk and
reduce work in process.
…the common
focus of both agile and
lean on the customer
is one of the aspects
that ties agile and
lean together. At
Rally we believe that
collaborating with our
customers at all levels of
the business is necessary
for us, and them, to
be successful
By implementing an agile approach to
development, we are able to give our
customers rapid and early access to
new functionality. Techniques such
as feature toggles, which configure
how code is made available to users,
allow us the flexibility to be able
to manage what we release, how
often, and to whom. Often this new
functionality is available in both existing
and new forms, through a staged rollout. Thus selected, strategic customer
partners can opt in to new features,
providing us feedback through both
subjective survey results, and built in
objective diagnostics. This all combines
to start giving us an understanding of
whether we have built the right thing
for our customers.
High-Growth
Businesses
Today’s
revenue
growth +
tomorrow’s
cash flow
Current
Businesses
Generate
today’s cash
flow
Horizon 2
12-36 months
Disciplined
Exp l o r a t i o n a n d
Emp i r i c a l L e a r n i n g
As well as striving to deliver working
software to our customers as early as
possible to get feedback and validation,
we also need to understand if it is worth
any significant investment in the first
place. To help us with this, we have
adopted the McKinsey Three Horizons
Model, as described by Geoffrey Moore in
his book Escape Velocity.
From this perspective, most iterative and
incremental development using agile
techniques is Horizon 1 work.
This can be seen as optimisation of
our current business through interaction
with our customers. However, our
portfolio of work also needs to include
offerings which will meet future customer
needs in Horizon 3. For this we have taken
ideas from the lean startup movement in
order to learn what those future needs
might be. This can be seen as exploration
of our future business through
Horizon 3
36-72 months
Growth
Options
Options
on future
high-growth
businesses
Horizon 1
0-12 months
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4. RALL Y W H EN W ORL D S COLLI D E
True
North
Why
Mother
Strategy
How
What
Rock
experimentation with our customers. The
opportunities that we choose to pursue
are moved into Horizon 2 where we
enable the business in readiness for them
becoming Horizon 1 revenue generators.
The exploration of an idea starts by
forming a dedicated team with a
vision and funding in what we call an
innovation sandbox. That team identifies
a number of plausible offers, with
assumptions behind them that need
to be tested. Discovery work follows
to refine a set of possible offers by
understanding the problem space more
and identifying solutions with business
models. Those offers are further refined
into probable offers by validating that we
know we can go to market and sell them.
This is the point at which we transition
those offers through Horizon 2 until they
are proven and operating as part of the
core business in Horizon 1.
All the refinement is done through
empirical learning experiments that frame
the assumptions, build something to test
them, measure the results and learn from
the outcomes. Each experiment is run by
collaborating with customers in order to
get knowledge about what they value. As
a result, the offers that transition through
the portfolio into Horizon 1 are those that
are pulled by the customers as a result of
real demand.
Continual Learning
a n d Ad a p t a t i o n
Working out what will meet our
customers’ needs, and iterating to
ensure that we do, is still not enough.
20
Mother
Strategy
Rock
Rock
Rock
The third piece of the puzzle is how to
create a strategy and direction which the
whole company understands and follows,
in order to maintain a coherent customer
understanding. To do this we have a
quarterly organisational planning cadence
with which we collectively define and
review our goals and objectives
book Getting the Right Things Done,
True North is the single goal which sets
direction and guides all decision making.
Mother Strategies are the next level of
focus areas that will help us arrive at
the True North. We have learned to only
have 2-3 Mother Strategies, otherwise,
we lose focus too easily.
The cycle starts at annual planning
where we reset our direction by defining
True North and Mother strategies.
Inspired by the ideas in Pascal Dennis’s
The True North and Mother Strategies
guide the day to day departmental
work that is done, as well as crossdepartmental initiatives, which are
What
How
Why

5. principles
& purpose
knows as Rocks. Rocks are inspired by
techniques described in Verne Harnish’s
book Mastering the Rockefeller Habits.
The metaphor is based on the basic idea
that if you have a bucket, you should fill
it first with a few big rocks. These are
the big things you want to accomplish.
If there is more space, you can then put
pebbles in - medium-sized projects. With
any remaining space you can put sand
in - the tactical things. Finally, you can
still add water - any ad-hoc things that
arise. Now if you fail to put the big rocks
in first, you can inevitably fill your bucket
with just sand and water.
…we want to
understand our customers
in order to help our
customers be successful.
If they are successful then
we are confident that we
will be successful. We
believe that frequent and
regular collaboration
and interaction with
customers is key to
achieving this
True North, Mother Strategies and
Rocks nicely map into Simon Sinek’s
Golden Circle model, which he
describes in the book Start with Why. In
short, Sinek says that “People don’t buy
WHAT you do, they buy WHY you do it”
and he proposed the Golden Circle as
a natural law occurring in many forms,
in the same way as the Golden Ratio.
Thus, he suggests that we should start
with WHY, before determining HOW,
and finally WHAT, rather than starting
with WHAT.
Every quarter following annual planning,
we review our progress on the mother
strategies towards the True North. This
is known as quarterly steering. As well as
readouts of mother strategy status, we
ask each department and their teams to
work on strategy A3s, which roll-up and
are also brought into quarterly steering.
These strategy A3s are the means by which
we can enable everyone having some
input, when only a small subset of people
can attend in person. The similarities and
differences of the various perspectives and
experiences provides a context in which
we can reset or refocus our efforts by
changing plans or creating new Rocks.
What has this got to do with
understanding our customers? We
have learned that by inviting some of
our strategic customers into annual
planning and quarterly steering, not just
to observe but also to help contribute to
our work, we can gain from the unique
insights they bring. Our customers
are not just customers, they are our
partners in a mutual quest to learn how
to achieve a factor of four increase in
productivity and effectiveness.
Customer Success
At Rally, we want to understand
our customers in order to help our
customers be successful. If they are
successful then we are confident that
we will be successful. We believe that
frequent and regular collaboration
and interaction with customers is key
to achieving this, and I have described
some of the primary techniques which
we are currently using to understand
our customers. However, while we are
constantly striving to understand our
customers better, we will always be able
to learn new and improved approaches
and we will always need to adapt.
Our own organisation is changing, our
customer’s needs are changing, the
market is changing, and the competitive
landscape is changing. Thus, we will
continue to evolve as we seek to further
improve the ways that we work.
Working out what
will meet our customers’
needs, and iterating to
ensure that we do, is still
not enough.
We have learned a lot already over the
years, starting with agile and bringing in
lean, and more recently exploring areas
such as complexity and design thinking.
We also believe that just understanding
customers is not enough. We also need
to understand more about the category
of business we are in in order to learn
more about how we can continually
improve. One way we do this is to go and
spend time with other organisations who
are facing similar challenges or using
innovative approaches. Similarly, by
supporting industry bodies with similar
perspectives and goals, such as the Lean
Systems Society, we can keep up to date
with the latest thinking and help catalyze
new breakthroughs. As Ryan Martens
likes to say “If we want to be the best
surfer, we need to go to where the best
people are surfing.”
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