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Adding Agile to Lean at Toyota Connected

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Adding agility to Lean Product Development enabled Toyota Connected to deliver faster, with higher quality, and reduced costs. Nigel Thurlow presented "Lean is NOT enough" at Lean Digital Summit 2018 where he showed how they embraced agile for colocated teams and outsourcing, and how portfolio planning evolved to an executive prioritization model to increase business agility.

The needs of our customers are changing much more rapidly than ever before, and with the move towards MaaS (Mobility as a Service), a four-year development lifecycle is not quick enough, said Thurlow. We need to look beyond just the two pillars of Lean, Jidoka (built in quality through automation with the human touch) and JIT (elimination of waste) in our ever-changing world of technology in the automotive space. He stated: "We build our products the right way, but we asked ourselves, are we building the right product?"

Thurlow argued that the need to be more flexible, adaptable, and nimble is now a necessity, and no longer an option. Toyota needed to add agility into Lean Product Development. As Thurlow stated: "We took the best of breed agile learning and combined that with decades of lean thinking from the creators at Toyota and established an approach we currently call Scrum The Toyota Way." Every team member has had formal training, followed by continuous coaching in the workplace through a dedicated team of Scrum Masters and Coaches who are independent from the product delivery teams, he said. Coaches are embedded with the teams, but report externally ensuring they have checks and balances.

Toyota Connected is building a pattern library of tools and techniques they have created or identified that work in various contexts. Just as The Toyota Production System never stops improving, Scrum The Toyota Way evolves endlessly, said Thurlow.

There is no Agile transformation, argued Thurlow. Agility is an outcome, not a goal. An organization must transform the way it works to better deliver value to their customers, and as a result, it will become agile. Just adopting some tools and words isn't going to help much, he said.

InfoQ is covering the Lean Digital Summit 2018 with summaries, articles, and Q&As. InfoQ spoke with Nigel Thurlow, chief of Agile at Toyota Connected, after his talk.

InfoQ: How do you apply agile and Scrum for outsourcing?

Nigel Thurlow: The truth is colocation and insourcing is best. We do still outsource, and at times that is both sensible and necessary, but we have had to evolve our approach to this. Some outsource teams are actually colocated onsite with us, while others are remote yet colocated as a holistic group. Communication is key for the successful rapid creation of value, and being in the same physical space is optimal. We avoid fragmented teams at all costs.

We also have teams that are offshore in many locations. As a global development company, this is inevitable. The approach is to have in each location a fully enabled delivery organization to minimize communication delays. By using various patterns we enable cross-organization communication to ensure each group stays aligned.

InfoQ: What does business agility demand, and how does that impact funding and contracting?

Thurlow: The fundamental change is a move away from funding projects to funding capacity. That is, we establish a delivery capacity and a skills capability and fund that annually. The size of that capacity can and of course does change, but it is stable and available.

We have evolved portfolio planning to an executive prioritization model where we constantly review what work should flow into the delivery teams until we reach our capacity. Monitoring empirically our capacity utilization we are able to make adjustments to meet demand, although demand will always outweigh supply, so having a robust prioritization approach is essential.

We review priorities weekly at the executive level, and most importantly change them if key indicators suggest we should. That might mean we pause or stop an initiative if we deem greater value is needed elsewhere. This is also when outsourcing can be a useful tool in the toolbox.

The other major change is moving away from fixed bid approaches. Most organizations are cost and time constrained. One by budgets, the other by market commitments to deliver products by promised deadlines. This leaves scope as the only real lever you can pull. Some budget and time flexibility may exist, but in reality managing the scope of the work is the easiest way to be agile. This can be at the portfolio level by adjusting priorities as mentioned above, or by trimming the tail on a product release or overall development. The key aspect of agility is continuous communication with your customers and stakeholders, and allowing them to decide with you what to adjust to ensure a successful product delivery. After all, are they not the best judge of when enough value has been delivered?

Constraining yourself in a fix bid can be, and often is, costly as time ebs away and budget is all but eaten, the rush to make the date with 100% of the scope becomes insatiable with inevitable and undesirable consequences. As we race to 'get it all done' we start losing site of a key pillar of Lean, Quality! Level 1 defects become Level 2, and Level 2 become Level 3, and so on. The race to finish creates behaviors that are counterproductive as we 'kick the can down the road'.

The need for agile contracts is real and urgent, and models such as per sprint pricing are a useful starting point.

InfoQ: Which benefits has agile brought to Toyota?

Thurlow: We are delivering much faster, with higher quality, and reduced costs. Our products are meeting our customer needs better, and agile is bringing us much closer to the real users.

Our team members are working in a collaborative way, and breaking down the silos and barriers of traditional organizations.

Executives and senior leaders are much more engaged than ever before, and participate daily in enabling an agile organization to thrive.

Management hierarchy has been flattened, resulting in rapid decision making.

The key benefit is we are better able to meet our founding principal of Customer 1st.

InfoQ: What have you learned up to now on your agile journey?

Thurlow: Change is hard in any organization, and the bigger the organization the harder the change. Solving the political challenges as well as the human behaviors are major aspects of a successful organizational change to enable agility. And that is a critical point.

The other key aspect, and I do labor this point, if your executive leadership is not engaged then your chances of success are greatly diminished. Engaged means participating, not blessing, observing and then blaming. This has been a key success factor at Toyota Connected.

Finally, there is ' NO ONE SIZE FITS ALL' approach. Agility is about responding more rapidly to your customer's needs, and your rapidly changing marketplace. That means different things to different people. Define the tools and processes that work for you, and follow them. The best way to ensure that happens is for the executives themselves to follow the process. This enforces it through active leadership rather than telling others to do it as they do something else.

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