Sunday, October 14, 2012

Achieving Escape Velocity with an Agile Transformation – Part 1

One of the things I always look forward to when attending a conference is hearing about the books which are inspiring the people who inspire me.  I can just about rate the conference by the number of books I’ve added to my reading list.   On that basis, the Colorado RallyOn conference in April scored highly.  I headed for the long flight back to Australia loaded up, and chose Geoffrey Moore’s Escape Velocity as the opening dish.

Given that the customer I was working with at the time was pushing strongly into agile portfolio management using the Scaled Agile Framework, I was hoping for rich new insights on the application of investment themes.  As I read, I was far from disappointed on the insight front but struggling with application.  It was easy to see how Rally was applying his thinking, and by extension I could see how to apply it in the small to medium enterprise space.  The trouble was that I primarily work in the large enterprise space but rarely far enough up the food chain to be influencing the kind of foundational business strategy the book addresses.

Nonetheless, I read on.  The material was so fascinating I couldn’t put it down, and resigned myself to filing the insights for future clients.  Unfortunately, I’m not very good at resigning … my subconscious kept searching for some way to apply it.  Eventually, I started to feel like I’d escaped the box.

In July, Rally’s Ronica Roth was in town and we got to talking about her recent internal coaches’ conference.  They’d had a half-day workshop on accelerating agile rollouts, and enjoyed some animated debates.  The key topic on the table was the tension between clients “wanting to be agile at scale, and wanting it now” and their preferred model of nurturing a core agile capability for clients before attempting to ramp up.   The moment seemed ripe, so I tried my thinking on Ronica.  What about applying Escape Velocity thinking to Agile transformations?  Her response was encouraging enough to send me putting pen to paper.

Moore’s book is focussed on addressing the imperative for companies to be constantly exploring new markets, products and services in response to the threats to existing offerings from global economy competitors.   He offers a framework for selecting, initiating and nurturing growth opportunities.  The “escape velocity” analogy lies in comparing the power of the earth’s gravity to prevent “escape to orbit” with the effect of procedural inertia on company’s attempts to seize on opportunities for radical transformation in the market.  His premise is that you need to incorporate specific “inertia counters” in your strategic portfolio planning model to achieve “escape velocity” for your company.

Underpinning his thinking is the application of Mehrdad Baghai’s “Three Horizons” model to portfolio planning.   The three horizons are as defined as follows:
  • Horizon 1 investments are expected to contribute to material returns in the same fiscal year in which they are brought to market, thereby generating today’s cashflow
  • Horizon 2 investments are expected to pay back significantly, but not in the year of their market launch
  • Horizon 3 investments are investments in future businesses that will pay off in the out years beyond the current planning horizon. 

Moore explores in compelling detail the financial and operational tension between the three investment horizons.  In short, Horizon 1 investments tend to focus on preserving market life of existing products and generally fight an inevitable decline rather than targeting significant growth.    They dominate cashflow, and thus inevitably dominate demand for operational and financial support.  Horizon 2 investments, on the other hand, represent tomorrow’s reasonably sure opportunity.  They suffer from ‘making material demands on go-to-market resources … without generating corresponding material returns’.  In contrast, Horizon 3 investments are ‘long-bets’. 

The contrast Moore focuses on between Horizon 2 and Horizon 3 investments is the weight of expectation.  Based in large part on the contrast between their drain on resources and lack of realised returns, there is significant pressure on Horizon 2 initiatives to rapidly mature, whereas there is an acknowledged ‘experimental air’ to Horizon 3.

So, let’s pull this back to Agile Transformations.  Moore defines three types of innovation: Differentiation, Neutralisation and Productivity.  Agile falls neatly into the productivity category, although there is also an argument that for some companies it is necessary to neutralise the advantage gained by competitors who have already succeeded with agile adoption. In essence, it is a deliberate investment in a company’s ability to support business innovation through a mobilised, responsive and aligned IT delivery capability

There is an almost universal pattern to a corporate Agile adoption.   It begins with a nervous ‘toe in the water’ set of pilot projects.   Carefully selected for Agile suitability and given special privileges with corporate IT processes, these are used to test the water.  We can treat these first pilots as the “Horizon  3” phase of the investment.

By and large, the pilots are radical successes and the backers breathe a sigh of relief as they discover that ‘this Agile stuff’ is not just hype.  The transformation then moves into Horizon 2 and begins the bridge to the mainstream.  An Agile Working Group is formed to champion corporate adoption, coaches and trainers are engaged, aggressive ‘Agile adoption targets’ are set and the Agile Transformation is off.  

At this point, the tension between Horizons 1 and 2 sets in.  Governance, support, management and vendors are torn between supporting the still mainstream waterfall delivery processes and the burgeoning demands of more significant Agile initiatives.  It’s a little like contrasting dancing on the edge of the surf in bare feet to the shock of diving through that first wave.

Companies that successfully navigate this phase then move into Horizon 1 – Agile is the de-facto approach and optimisation begins. 

What I’ve both experienced and repeatedly heard is that the transition through Horizon 2 is often protracted, painful and eventually unsuccessful.   Moore has a great deal to offer on both the construction of Horizon 2 & 3 initiatives and more importantly the transitions between the 3 levels, and it is this that I will explore in Part 2 of this post.

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