A topic that has been itching me for quite some time, but I haven’t addressed it yet. Perhaps time before vacations is just right for such a general topic, so it can “settle” in our minds during the break.
Organizations often equate digital and Agile transformation. The expectation is that implementing digital tools will automatically lead to Agile transformation. The desire is, of course, to achieve better market responsiveness, more efficient development, greater employee satisfaction, and unstoppable market share growth.
What’s written in this article applies to both development and manufacturing organizations that want to optimize their processes according to Lean or Agile principles.
There are several reasons for the above assumption, but in my opinion, the most important ones are:
- Digital solution providers use modern marketing approaches that emphasize positive feelings when implementing their solution. Positive feelings are good, but they don’t guarantee necessary organizational changes. Digital solutions usually make work easier (happier?) for some employees, but they don’t address process bottlenecks. These are usually organizationally conditioned. Digitizing a non-critical activity won’t affect the company’s profit.
- Digital solution providers use modern marketing approaches that emphasize solving a specific customer problem without considering the broader organizational context. There’s nothing wrong with that, but the same applies as for the previous point. If we digitize an unnecessary process, we’re just wasting time more efficiently.
- Agile consultants resort to digital solutions due to the complexity of real Agile transformations. They somehow try to legitimize their proposals for necessary organizational changes this way. This approach doesn’t work. Agile transformation needs to start from within, not with external tools.
Since Agile transformation has the potential to trigger resistance from some employees, it can threaten the consultant’s relationship with the organization and indirectly their income. Hiding behind digital tools might extend the consultant’s time with the client, but it doesn’t change the organizational dynamics necessary for realizing Agile potential. Successful Agile consultants possess the knowledge and skills to work with employees at all organizational levels. These enable them to mobilize stakeholders toward a common goal and constructively involve (especially middle) management in the transformation process. - Internally led transformations are often considered as something that concerns employees and not management. The assumption is that if we enable employees to work easier and faster with digital tools, the company will be more profitable. This only applies to static industries, which are unfortunately becoming fewer each day. For development work and dynamic production, this assumption doesn’t hold true.
The Difference
Digital and Agile transformation are two different initiatives. As we’ll see, Agile transformation can be supported by digital tools, but not vice versa.
What’s the difference?
Agile transformation can be implemented independently, often as a precursor to effective digital transformation.
On the other hand, it’s also possible to implement digital transformation without Agile, but in this case, we risk maintaining inefficiencies in the system and poor process responsiveness. The reason for this is not addressing the fundamental inefficiencies of the organization and consequently investing in and automating unnecessary processes.
The sequence of Agile followed by digital transformation has been implemented by several large international companies such as:
- Ericsson (SW and HW)
- Bosch (SW and HW primarily in the automotive segment)
- Philips (in medical device development and manufacturing*)
- Wells Fargo (online banking, AI for detecting financial fraud)
- Thales (complex air defense systems)
- Target (procurement systems modernization)
All these corporations realized at some point that it’s worth digitalizing only optimized and proven effective processes. Therefore, they first implemented Agile transformation followed by digital transformation. This saved them significant resources through reduced digitalization scope while simultaneously securing the advantages of Agile approaches.
A Brief Tirade
At this point, I would warn against the SAFe (Scaled Agile Framework) initiative, which promises to miraculously make large corporations Agile without interfering with the existing hierarchical organization – entire management retains their positions.
Corporations don’t advertise the results of SAFe implementations, as these are extremely expensive and admitting failure would cost many people their jobs.
In my opinion, the success rate of SAFe implementations (in terms of activating Agile potential) is around 25%. Of the successful implementations, most have discarded the majority of SAFe commandments and are in practice closer to modified variants of the Scrum@Scale framework. Of course, they still call themselves SAFe – After all, the company spent millions on the initiative.
Conclusion
Cost-optimal digital transformation is only possible if Agile transformation preceded it. Since Agile transformations are typically not expensive (at least financially), the savings on the digital initiative alone are large enough to justify both.
A purely digital transformation makes sense in stable production environments where employees are not expected to be innovative, but rather to achieve efficiency through economies of scale, which are enhanced by better (digital) tools.
