Why Agile

Transformations Fail
 While most of the world’s largest companies are attempting
an Agile transformation in one way or another, not all
“The greatest danger in
are succeeding. Only 4% of all respondents to a recent times of turbulence is
McKinsey&Company survey say their companies have completed
an Agile transformation, though another 37% say company-wide
not the turbulence – it is
transformations are in progress. to act with yesterday’s
Given the imperative for transformation, why are some organizations logic.”
so much slower and more resistant to change? Call it a lack of
confidence: While 66% of enterprise executives agree or strongly – Peter Drucker
agree that their organization needs to transform in response to
rapidly changing markets and disruption, (either in their core
offerings, business model, or both) only 15% say they feel “very
confident” about making that change.

There are several structural and cultural factors likely responsible

for this lack of confidence. The inherent complexity of enterprises
(compared to the small, scrappy startups disrupting them) could
be to blame. But global giants like Amazon seem to disprove the
notion that large, complex enterprises can’t thrive in our modern,
global economy.

WHY AGILE TRANSFORMATIONS FAIL | 2 |

 The reason many organizations fail with Lean and Agile is
the same reason many are successful:

Leaders might preach continuous improvement

but discourage using working hours to practice it. They might
allow teams to self-organize but refuse to adjust funding and
planning practices to allow for true autonomy. They might rely
heavily on terms, roles, tools, and rules of scaling practices
without a deeper understanding of the principles behind them.
These companies are unlikely to see performance improvements
through Agile, because they aren’t actually practicing it.

WHY AGILE TRANSFORMATIONS FAIL | 3 |

 Why Most Agile Transformations Fail: “If you want
Four Common Culprits something
We were already heading into a period of heightened volatility for leading you’ve never
companies, due to a complex combination of movements in technology,
culture, economics, and politics around the globe… and then a pandemic
had, you must
happened, forcing entire industries to adapt or die, virtually overnight. be willing to
The firms who have thrived in this volatile environment are fundamentally do something
different from the ones they’ve replaced – not just in the products and
services they provide, but in the way they structure, operate, and scale their you’ve never
businesses.
done.”
We’ve seen that agility is an essential survival skill for the 21st century
enterprise. And we’ve been able to learn from the shortcomings of those who – Thomas Jefferson
have failed to master it.

In studying why Agile transformations fail, we have found four culprits that are
consistently to blame:

1. The underlying psychology doesn’t change enough to give the

transformation momentum

2. A lack of executive sponsorship prevents the transformation from

taking root

3. Traditional planning and budgeting practices cripple Agile

transformation efforts

4. The organization is unable to align around shared objectives

Let’s examine each of these culprits further.

WHY AGILE TRANSFORMATIONS FAIL | 4 |

 The Culprit:

WHY AGILE TRANSFORMATIONS FAIL | 5 |

 Winning Strategy: Proactively Build a Lean-Agile Culture
In order to transform into a Lean-Agile culture, organizations have to openly evolve the underlying
psychological concepts on which they are built – consistently and transparently putting people and
progress over profits.

Organizations trying to “adopt Lean-Agile practices” without transforming the profit- Leadership Tip:
first, control-focused mindset on which they are built, are missing the point entirely. Become a Change
Agent
This means building a culture in which:
The most successful Agile
• Outcomes are valued over outputs transformations have executive
sponsors: People at the top
• Learning is celebrated as much as ‘winning’ who see, share, and are excited
by the vision of a more Agile
• The voice of the customer guides decision making
tomorrow. Set an example for
• Healthy conflict is welcomed your organization by becoming
an agent of change that provides
• Innovation is encouraged realistic, transparent, and supportive
communication throughout your
These cultural shifts are all rooted in one fundamental idea necessary for Agile Agile transformation. As strategy,
transformation: The idea that the best business outcomes occur when everyone in the structure, people, processes,
organization focuses on delivering customer value. Secondary to this is the idea that people and technology changes and the
want to do their best work and simply need the autonomy, mastery, and purpose to do so. organization undergoes growing
pains, it’s critical for executives to
Although both of these ideas might seem self-evident, the way our businesses are over-communicate their support and
structured, the way our leaders lead, the way we measure progress, the way we incentivize understanding of the larger vision
employees, the way we make strategic plans, are typically designed to make them to promote cultural and mindset
impossible to actually practice. change.

Link to: 3 Key Shifts Necessary for Scaling Agile

WHY AGILE TRANSFORMATIONS FAIL | 6 |

 The Culprit: Leadership Isn’t
Bought In
Because Agile includes a culture shift and a mindset
change, as well as funding, you need executives to truly
buy into the approach.

If you’ve gotten approval from leadership to embark on an

Agile transformation, you may be gaining momentum from
Agile teams embracing new ways of working and benefits
like faster delivery, better quality, and improved morale.

The only problem may be that you’re getting little

engagement from senior management, and they hold
the keys to driving positive and enduring change in the
organization.

Senior leaders are a significant driver in the success

rate of an Agile transformation.

You need them on board, and fully. But how?

WHY AGILE TRANSFORMATIONS FAIL | 7 |

 Winning Strategy: Get Leadership on Board
Consider these tips to get leadership behind your Agile transformation and help them fully engage:

Get leaders to To buy into Agile, leaders need to understand what’s in it for them. Start by understanding how the approach can benefit
see the benefit to senior leaders, and focus on selling Agile to executives with benefits in mind. Their time can be spent more frequently and
them. fully on the work that matters most in their roles — leadership and strategy – and the payoff is significant.

Agile transformation requires a different type of leadership, which prioritizes guidance over direction and mentoring over
Give them proper managing.
training. Identify the functional leaders who will be willing to lead the mindset change and focus on training them through
coaching.

Think about a handful of skills or functions that will be needed to make your Agile approach work, and identify a leader
with each of those skills or from each of those functional areas. This team will focus on the change management part of
Form an Agile the transformation.
leadership team. The Agile leadership team should meet regularly, maybe an hour a week, to talk about the change and how it’s going. You
can weave coaching into those discussions in a hands-on way. Work to engage them in the transformation, as they are
responsible for leading the change.

Executives are results-oriented and accountable to a Board of Directors who also may need to be convinced that Agile is
the best direction.
Show them quick
wins. Start by finding a part of the organization that is able and willing to change quickly. Or identify a specific, critical initiative
that is a pain point for the business – such as the misalignment of product teams or sales and marketing teams — and can
be undertaken quickly.

Many organizations struggle to connect teams with strategy. OKRs are tools that can be used to guide teams,
encouraging alignment and focusing on outcomes, rather than outputs. Leaders can use OKRs to show teams the desired
Realize alignment outcomes and inspire them to action.
through OKRs
Agile measurement tools like this help both leaders and teams to stay aligned and focused on outcomes, while ensuring
accountability.

Read more: Selling Agile to Executives: 8 Ways to Get Buy-In

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 Leadership Tip:
Lead by Example

An executive’s biggest role in an Agile transformation is to

encourage groups of people to work together and, in essence,
force the conversation and change to happen. The goal isn’t
to force the outcome of the conversation but instead provide
guidance through servant leadership. Executives and leaders
cannot just accept the situation when everyone is just smiling and
saying, “Great, we’re going to do it.” It’s up to the executives
to push until a difference of opinions arises, and then leaders
sponsor the facilitation of conversations that actually get to the
uncomfortable points of this kind of a change. Leaders should
not accept the proposed path forward until those differences in
opinions are discussed.

Additionally, executives must recognize an Agile transformation is

a major change, and people are going to make mistakes. Modeling
the behavior of allowing people to fail and not falling back to
command and control when those mistakes inevitably arise, is also
a behavior to model. Ultimately, you’re trying to encourage your
subordinate leaders to do the same thing.

Read more: Become the Agile Leader Your Organization Needs

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 The Culprit: Traditional Budgeting and Planning Cycles
Cripple Agile Efforts
One of the hallmark benefits of Agile is being able to strategically Traditional portfolio management methods rely largely on a
pivot to meet the needs of your customers and the market. But work breakdown structure, which is a deliverable-oriented way
if your Agile teams are still operating under annual planning of structuring projects. Individuals are organized into projects
and budgeting, then you can’t be truly nimble – and you are and are often assigned to multiple projects (working on multiple
preventing your organization from achieving true agility. teams) at a time. Since teams are measured based on their
ability to deliver agreed-upon deliverables, they aren’t directly
Traditional budgeting and planning practices have two fatal aws incentivized to innovate. In fact, it’s the opposite: They’re
when it comes to Agile transformation: incentivized to stick to the plan at all costs, to earn gold stars
upon completion of each task. These gold stars do not necessarily
1. Work is budgeted and planned in annual cycles, a practice equate to customer value. In fact, they often don’t, since
which is philosophically and practically at odds with the requirements for projects are often gathered far in advance of
concept of business agility. when the work is being completed.
2. Work is budgeted and planned using a work breakdown
structure, which is oriented around deliverables instead of Success, then, becomes a measure of how well teams are able to
value. present deliverables in spite of market shifts, not how well they’re
able to incorporate those shifts into their plans and deliver a
First, let’s talk about annual budgeting cycles: It’s quite hard to desirable product. The root of this problem is the way projects
be Agile if everything that an organization is doing is planned up are funded. Project-based funding and cost accounting create an
front for a year or more. environment ripe for friction, inefficiency, and bureaucracy - and
hinder a shift to a truly Agile organization.
Without quarterly planning and funding decisions, Agile teams
can deliver in two-week cadences, but they are delivering work,
from a business perspective, that has been planned for one or
two years already. This is maybe Agile software development, but
it is not business agility.

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 Winning Strategy: Leadership Tip:
Embrace Lean Budgeting Evaluate Regularly

The key to successfully scaling Agile is to align budgeting It’s important to periodically reassess how funds are allocated
and funding practices with the business outcomes the across the portfolio. This process requires analysis at the portfolio
organization is trying to drive. Enter: Lean budgeting. and value stream/product levels. Establishing a regular cadence
to assess portfolio performance, using the desired outcomes
as metrics to reallocate budgets accordingly, is a critical part of
Agile transformation requires organizations to shift from
Lean budgeting. This creates a regular opportunity to, across the
measuring outputs, to measuring outcomes. Work is
portfolio, adjust investments in various value streams based on
planned, prioritized, and executed in a continuous flow:
real-time performance metrics and customer feedback.
Teams continuously collect data about the performance of
their products and services, as well as the market in which
their customers (both internal and external) operate.

This continuous flow of Lean budgeting and planning

includes space for incorporating new data, feedback, and
information, and pivoting plans accordingly. As plans are
executed, more data is collected about these and other
ongoing initiatives to determine priorities for the near
and distant future. As conditions change, teams adjust as
necessary.

Lean-Agile budgeting practices help to decrease

funding overhead and friction, while maintaining financial
governance, and aligning budgeting practices with Lean-
Agile goals.

Learn more Lean budgeting in this series of posts.

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 The Culprit: Objectives
Haven’t Been Established
and Shared
Our final culprit for why Agile transformations
fail is that organizations don’t have a sustainable,
shared way to visualize and track progress
towards objectives.

As organizations start to evolve the way they

plan, budget, and fund they also must change
the way they measure the delivery of value.
Successful execution of enterprise strategy
in an Agile environment requires alignment
across Agile teams – which starts with a shared
understanding of objectives, and requires a way
to measure progress toward those objectives.

Measuring progress serves two purposes for

Agile organizations: It indicates if you are headed
in the right direction and radiates a shared
understanding of what you want to change.
Without a way to establish, but also continuously
align around these objectives, an Agile
transformation can start to unravel.

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 Winning Strategy:
Measure Progress with OKRs
Successful Agile organizations use
Objectives and Key Results (OKRs) to Leadership Tip:
standardize and measure progress. Increase OKR Visibility
Unlike KPIs and other business metrics, The primary reason for using any
which measure financial performance OKR solution is to have greater
after work has been done, OKRs offer visibility into OKRs. What does this
a proactive approach to setting and mean exactly? Visibility, for the
achieving targets. modern knowledge worker, means
not having to dig information out of
This framework can be used to align the various tools. It means providing a
centralized place to create, visualize,
objectives and tasks of teams, release
store, and track OKRs.
trains, and the organization as a whole.
Many of the best-known companies
The ideal solution will either work
around the world use OKRs to align their
well alongside the tools your teams
teams’ efforts around ambitious, big-
already use, or will be a feature
picture goals. OKRs guide organizations
included in your team’s primary
through the process of turning big- execution tools.
picture dreams into real, actionable
plans at every level.

The OKRs framework complements the structure, function, and goals of Lean and
Agile transformations. Often, organizations get stuck when trying to evolve their
traditional funding and planning practices to meet the needs of their new cross-
functional Agile teams. OKRs provide an actionable way to create the transparency
and accountability needed to fund and launch Agile teams, while arming teams
with a better way of setting and tracking their progress toward goals.

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 Lead Your Agile Transformation
to Success
Undergoing an Agile transformation directly correlates to
opportunities for better market share, position and dominance.
And, this shift often increases morale throughout the organization,
as people feel more connected to the work delivered.

But there’s a caveat. Businesses who scale too quickly or try to

scale aggressively, without a clear goal in mind, are more likely to
fail. That’s because there’s “no one-size-fits-all approach” to Agile
transformation. Not every department benefits from going all-in
with Agile. At the very least, organizations need to understand
Agile to its fullest and then determine the parts or pieces of Agile
to implement first. It’s the job of the Agile leader to recognize this
when scaling Agile across the organization.

As you embark upon your Agile transformation journey, remember

these winning strategies:

• Proactively build an Agile culture (and recognize that this

might take time)

• Get leadership on board by helping them see the benefits of

Agile firsthand

• Make the switch to Lean budgeting to align the way work is

planned, funded, and executed

• Use the Objectives and Key Results framework to set

ambitious goals and track progress towards them while
keeping everyone aligned

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