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Agile Strategy Manifesto

Posted by Yogesh Kumar on Aug 04, 2011 |

Agile product development is growing fast with intense focus on perfecting Agile execution. However, the business strategies developed by many organizations are still non-agile. For example, Agile product development teams push their business owners to prioritize the product backlog in order to deliver the highest value features in each iteration. However, business owners are not necessarily providing feature prioritization based on the organization's business strategy.

A successful business strategy involves making choices throughout the value chain that are interdependent. For an organization to realize the full benefit of it’s business strategies it must develop and maintain them using an Agile approach. The following are some key characteristics of a successful Agile business strategy:

Agile Mentality: An agile organization is a fast moving, adaptable and robust business. It is capable of rapid adaptation in response to unexpected and unpredicted changes and events, market opportunities, and customer requirements. Its mentality is founded on processes and structures that facilitate speed, adaptation and robustness and that deliver coordinated results that are capable of achieving competitive performance in a highly dynamic and unpredictable business environment.

Iterative Approach (Inspect and Adapt): In today’s competitive world, long-term strategies cannot be taken for granted. With technological advancement, time to market is shrinking which results in continuous validation of strategies through constant customer feedback and new competitor’s innovation. All elements of the strategic lifecycle need to be iterative. Strategic leaders must inspect and adapt on a continuous basis to remain competitive.

Unique Value Proposition: An organization’s strategy must enable it to deliver a value proposition, or a set of benefits, different from what their competitors offer. Robust strategies involve trade-offs. A company must abandon or forgo some product features, services, or activities in order to be unique at others. Such trade-offs, in the product and the value chain, are what make a company truly distinctive.

Mutually Reinforcing Value Chains: An organization’s business strategy needs to be reflected in a distinctive value chain. It also defines how all the elements of what a company does fit together. A strategy involves making choices throughout the value chain that are interdependent; all an organization’s activities must be mutually reinforcing. An organization’s product development, for example, should reinforce its approach to the IT processes, and both should leverage the way it conducts after-sales service. This not only increases competitive advantage but also makes a strategy harder to imitate. Rivals can copy one activity or product feature fairly easily, but will have much more difficulty duplicating a whole system of complementary and self-reinforcing value-chains.

Continuity of Direction: Continuous value delivery to the customers is a necessity and it must always be guided by an Agile strategic direction. Without continuity of direction, it is difficult for companies to develop skills and assets or build strong reputations with customers.

Agile Strategy Phases

The activities that characterize the Agile Strategy Manifesto fall into four distinct phases:

  1. Initiation - Unique value creation (usually radical innovation) through perceived usefulness or desirability
  2. Realization – Establish brand equity through incremental adoption of perceived value
  3. Retention - Value enhancement through iterative & adaptive value chains
  4. Transformation – Transformation (usually incremental innovation) through re-inventing value

Strategy (S)-Curve

Agile strategy manifesto can be visually represented in a strategy curve (S-curve). It depicts how a product, service, technology or business progresses and evolves over time. S-curves can be viewed on an incremental level to map product evolutions and opportunities, or on a macro scale to describe the evolution of businesses and industries.

On a product, service, or technology level, S-curves are usually connected to “market adoption” since the beginning of a curve relates to the birth of a new market opportunity, while the end of the curve represents the death, or obsolescence of the product, service, or technology in the market. Usually the end of one S-curve marks the transformation to a new S-curve – the one that displaces it.

Value Initiation

A new business strategy is the creation of a unique and valuable position, involving a different set of activities. This unique value is defined by the customer’s perception of the usefulness or desirability of a product, service, technology or business. Value is generally created by radical innovation and retained by value enhancements.

The challenge of developing or re-establishing a clear strategy is often primarily an organizational one and depends on its leadership. While nurturing innovation, the leaders must also provide the discipline to decide which industry changes and customer needs the company will respond to, while avoiding organizational distractions and maintaining the company's distinctiveness.

One of the leader's jobs is to teach others in the organization about their shared strategy and to guide employees in making choices that support that strategy. These choices arise naturally as individual activities lead to daily decisions about what to do. As you would expect, a business strategy also renders choices about what not to do, which is just as important as choices about what to do.

Value Retention

The goal of strategy execution is to minimize Value evaporation and maximize value retention. Strategy creates value but some of it evaporates due to poor execution and other organizational frictions. A good strategy cannot prevent the evaporation of value. Think of a tropical village that is perpetually short of water. So, the villagers come up with a strategy. It involves digging a big hole in the ground to create a reservoir of water from natural rain. The strategy works. The reservoir fills up. But the villagers forgot how mercilessly hot the tropical sun can be. The reservoir did not last very long. Evaporation returned its water to the atmosphere. For the villagers, what matters is not just how much water was there in the reservoir initially, but how much is retained after evaporation.

The same is true for any organization. Its goal is to come up with a strategy that maximizes value retention by incremental and mutually reinforcing execution of the value chain. A key for value retention is to inspect and adapt in small increments to utilize feedback from internal and external customers. The following diagram depicts how traditional execution differs from Agile execution. In traditional execution, value is stacked and only delivered in the end. On the contrary, Agile execution creates a value chain.

If Agile execution is done correctly, value chains start having spiral effects as explained in the following diagram. The spiral model is based on continuous refinement of a product's value; hence, it is also called "Value Spiral" (V-Spiral).  It allows for incremental releases of the product, or incremental refinement every time around the spiral. The spiral model allows for elements of the product to be added in when they become available or known. This assures that there is no conflict with previous requirements and design. This method is consistent with approaches that have multiple software builds and releases and allow for making an orderly transition to a maintenance activity. Another benefit of the spiral model is that it often necessitates early user involvement in the system development effort. For projects with heavy user interfacing, such as user application programs or instrument interface applications, such user involvement is helpful. With a good business strategy in place, a V-spiral for Product 1 will trigger a new V-spiral for Product 2 through the transformation process (e.g. Apple’s iPod V-Spiral trigged a new V-Spiral for the iPhone through transformation).

Value Realization

Organizations establish brand equity through incremental adoption of the perceived value. As specified in the five stages of the Rogers Model of Innovation–Decision Process, the adoption process can be summarized as follows:

  1. Knowledge - knowing what the innovation is, how it works and why it works
  2. Persuasion - forming a personal or professional attitude toward the innovation
  3. Decision - deciding to reject or adopt it on a partial basis for assessing its usefulness
  4. Implementation - putting it into use, experiencing problems with or uncertainty about its outcomes, re-inventing it for various reasons, integrating it into ongoing practices
  5. Confirmation - seeking reinforcement for previous decisions, which may involve reversing this decision because of conflicting messages

These adoption phases must be linked with execution in an effective feedback loop to deliver value as per the customer needs.

Value Transformation

An organization can outperform competition only if it can establish a difference that it can preserve. As explained in the S-curve, organizations must continue to deliver greater value to customers by transforming through incremental innovations, which is a result of tweaking existing technology to create the “next iteration” of products.  Sometimes, it also involves jumping S-Curves by creating or driving disruptive innovations.
In the absence of value transformation, value diffusion starts happening and product adoption starts to decline – as depicted in the figure below.  As per Rogers model, there are 5 distinct groups of adopters:

  1. Innovators” are venturesome and educated, have multiple sources of information and show greater propensity to take risks. They appreciate technology for its own sake and are motivated by the idea of being a change agent in their reference group. They are willing to tolerate initial problems that may accompany new products or services and are willing to make shift solutions to such problems.
  2. “Early Adopters” are the social leaders, popular and educated. They are the visionaries in their market and are looking to adopt and use new technology to achieve a revolutionary breakthrough that will achieve dramatic competitive advantage in their industries. They are attracted by high-risk, high-reward projects and are not very price sensitive because they envision great gains in competitive advantage from adopting a new technology. 
  3. “Early Majority” is deliberate and have many informal social contacts. Rather than looking for revolutionary changes to gain productivity enhancements, they are motivated by evolutionary changes. Their principal is “when it is time to move, let’s move all together”. This principle defines why adoption increases so rapidly in the diffusion process and causes a landslide in demand.
  4. “Late Majority” is skeptical, traditional and of lower socio-economic status. They are very price sensitive and require completely preassembled, bulletproof solutions. They are motivated to buy technology just to stay even with the competition and often rely on a single, trusted adviser to help them make sense of technology. 
  5. “Laggards” are technology skeptics who want it only to maintain the status quo. They tend not to believe that technology can enhance productivity and are likely to block new technology purchases. 

The strategy curve starts reversing when a “late majority” adopts the product because “innovators” and “early adopters” shift to a newer innovation by the competitors. In other words, market share eventually reaches the saturation level. This process results in value diffusion. This situation can be avoided by transforming business through incremental innovation.

A Case Study

Apple is a perfect example of an Agile strategy. It introduced value through radical innovation of the iPod and continuously increased adoption by incrementally adding features to the iPod series. When the market became saturated with countless mp3 players, Apple transformed by incrementally innovating one of their iPod devices into the iPhone. Adoption of the iPhone began with a good baseline and it kept growing in spite of a small decline in iPod sales. Before competition could catch up with Apple's iPhone, it transformed again by incrementally innovating and creating the iPad. Apple's continuous innovations are well supported by its incremental and adaptive execution, and a very strong value chain (vision, design, execution, delivery, and support). Many other organizations are able to copy their products but no one is able to duplicate its whole system of competing.

Conclusions

For an organization to realize the full benefit of it’s business strategies it must develop and maintain them using an Agile approach.  A successful business strategy starts from unique value creation with mutually reinforcing value chains. However, it requires the right Agile mentality and constant feedback provided by an iterative approach to fully realize and retain the value it creates. Finally, applying an Agile approach to your business strategy helps transform the value it produces into an everlasting and constantly improving business strategy.

For more information on the Agile Strategy Manifesto, an animated video is available at this location.

References

  • “The Value Sphere” - by John A. Boquist
  • “Innovation Diffusion and Innovation Decision Process Model” - by Rogers
  • “Competitive Advantage: Creating and Sustaining Superior Performance” - by Michael E. Porter
  • “Innovation Lifecycles” - by Soren Kalpen

About the Author

Yogesh Kumar is passionate about some of the best things in the world—and Agile is one of them. As an Agile enthusiast, Yogesh has always been keen on engineering and process excellence, team and partner development, coaching and mentoring, and program and portfolio management. In the industry since 1997, Yogesh’s early days were spent in progressively more responsible engineering roles, first building complex software systems and later building and coaching teams. For more than ten years he has been proudly working with the industry leader Oracle. Moving through a series of engineering and management roles, Yogesh is currently the senior development manager responsible for team development, Agile coaching, and program management. You can reach Yogesh at yogesh@agilehelpline.com or read his blog.

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Thank you for non-video by Konstantin Ignatyev

Thank you Yogesh Kumar for writing article and not making another video which takes too long to watch, and nearly impossible to reference.

Keep up the good job!

Re: Thank you for non-video by Yogesh Kumar

That's a good feedback Konstantin. Thank you. I will write more often :).

The world doesn't need yet another pointless manifesto by Peter Evans-Greenwood

I'm interested in understanding how you can claim that Apple is the perfect example of an "Agile" strategy (note the capital A) when it is such a secretive company that you're only guessing at their product development process. Apple may or may not be Agile, just as Sony was (or wasn't) with the walkman in the 80s, but they were agile (little a) in their execution. Many company are quite nimble in their execution of a strategy (let's avoid the work "agile", is the Agile movement has rendered it largely meaningless) without the need to adopt some formalized manifesto or practice.

Just a you don't need to be religious to be a good person, you don't need to be "Agile" to be agile in your execution.

As with many of the manifestos floating around at the moment, you've simply repurposed some rather old thinking and added a dash of motherhood and apple pie while you were in the process of reinventing the wheel. The world has moved on since Porter et al laid the groundwork for strategy and innovation. Go read something recent, like Siezing the Whitespace and/or The Progress Principle, and get over this need to see the world through the Agile lens.

Re: The world doesn't need yet another pointless manifesto by David Key

@Peter world doesn't need a pointless reader either. BTW, why are you reading this? Go and enjoy Siezing the Whitespace and/or The Progress Principle and/or innovate something yourself. I can bet you have android and you hate apple.

Strategy is supposed to be secretive. Isn't it.. you expect apple to share it with you, google and rest of the world? Remember old is gold. Agile is re-purposed lean in a way. BTW, where did word "Agile" come from? I forgot you don't seem to like agile as well. Learn to appreciate and give constructive feedback.

Great article Yogesh.

Agility is the name of the game by Shamal Jayakody

Agile development methodology promotes adaptive planning, evolutionary development and delivery; time boxed iterative approach and encourages rapid and flexible response to change. It's a conceptual framework that promotes foreseen interactions throughout the development cycle. Among several agile development methodologies you may use SCRUM which is an iterative, incremental framework for Software Development.

Re: The world doesn't need yet another pointless manifesto by adam cassel

@Peter Evans-Greenwood

I fail to see the point, reason, or justification for your being so shrill and dismissive of another human being’s, and a professional colleague's, sincere (how could you know different?) effort, at what on the face of it is a hard won attempt at presenting Agile from a macro and micro perspective with intellectual integrity (again, how could you know different?).

Your points, divorced from their poor expression, are worth consideration, I would agree in the case of your Porter and strategy claim for sure, and open to debate and verification in the other case, your making the claim and slighting the effort as "derivative at best" <-- my words and interpretation of your 'charge', and I could be reading you wrong.

You do yourself and your comments, that would otherwise be welcome and seen as insightful, or at the least, an attempt to advance the dialog, a great disservice.

Not to mention the fact that your public display of rudeness will now follow you around forever without your consent or control. I shudder to think what being on a team, Agile or otherwise, with you, or with you as the lead, would be like if you can’t control yourself and present and express your professional opinions in a gentle, nurturing, and coaching manner.

And then it is quite telling to me that you have the audacity to sign your actual and full real name to this 'outburst'.

I for one would benefit from a person like you with opinions and experience that rise above the trivial, as these would have had you been more mindful of how you talk to people and the Internet.

I hope we can all look forward to you modifying your ‘coaching style’ for the benefit of other's learning and accepting, and giving consideration, to your views, be the characterized as applauding, or disagreement, or dissatisfaction with other’s work or other's efforts at educating and pedagogy.

Always and only the best,
AC

Thanks you for sharing your views!!!! by Thiyagu Gopal

Hi Yogesh, Thanks for your article. It gives a precise idea on the importance of business strategy for agile teams. Agile Is not about just implementing the requirements by iterative approach,it is more about strategic planning to realize the business values. In some organizations, Agile is mostly used for transforming the requirements in to product but the way the requirement collections doen is still in the traditional approach.

Keep Sharing!!!!

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