In the 1930s, this philosophy was based on the premise that organizations would be much more efficient if resources organized by specialization. This would allow functional oriented departments to focus on efficiency through highly standardized and repetitive activity.
Activities were planned and coordinated through the use of functional managers who ensured that individual employees receive adequate instruction and feedback on performance targets. Managers got their orders from executives who are responsible for determining the objectives of the organization.
In this approach, big ideas came from the executives and owners of the business, who determined what the organization should be doing and how it should be doing it. Managers were responsible for ensuring successful execution of plans. Individual tasks and activities were doled out to employees, and all coordination between functional departments required intervention by the management layer.
The majority of employees were essentially cogs in a well-orchestrated machine; they did the work and were not required to perform any meaningful thinking.
Scaling out an organization simply required the addition of another functional layer. Organizations could successfully increase in size by expanding out horizontally and vertically, creating a more nested hierarchical structure.
One reason this approach works well is that managers and leaders were able to optimize the execution of highly specialized and repetitive tasks. This allowed workers to leverage economies of scale, lowering total cost of ownership for both in process and complete inventory of goods.
This Traditional Thinking Is Suited to a Previous Era, One of Economic Scarcity
Traditional management methods were well suited to times of economic scarcity.
Success relied on maximizing efficiency and providing goods and services to customers at the lowest possible cost.
This low cost was achieved through a command -and-control approach, meticulous planning and coordination, and the development of robust standards and procedures that carefully lay out the most efficient way to complete a particular task.
Work was organized to leverage economies of scale; specialists were grouped together into functional
Departments, highly repetitive activities would be completed in large batches, and passed from one specialist group to the next. Customer demand was serviced in large quantities, again using a big batch approach.
In a market where customer wealth was low, this approach effectively serviced customer demand. Economies of scale were easy to leverage, as a small number of products could be introduced to a large and undifferentiated customer market. Product lifecycles were also extremely long, taking years or sometimes even decades before one product would be displaced by innovation.
Today's Business Environment Requires a Radically Different Approach
For many organizations today, market success is achieved through offering differentiated products and services to customers who can and are willing to pay a premium for the latest innovation.
In this environment, organizations can be incredibly efficient, follow plans to perfection, and be incredibly effective at coordinating thousands of specialists but still fail as a business.
In today's challenging business environment, the biggest risk has shifted from building products cheaply to building a product that nobody wants. To borrow a term from the lean startup community, the question becomes not "can I build it, but should I build it?"
Successful enterprises no longer provide a one-size-fits-all offering to their customers. Instead differentiated products and services are made available to a variety of well researched customer segments, in some cases products are offered as platforms to be uniquely customized to the individual end-users needs. Product lifecycles are now much shorter, with obsolescence coming in months, weeks, and even days.
In situations where organizations are still providing more commoditized goods and services with longer life cycles huge efficiency gains can be leveraged by taking advantage of the latest wave of technology innovation.
In this environment speed of execution becomes more important than cost of execution, and processes, organizational design, and management methods need to be designed to support speed.
The most fundamental change between traditional management methods and ones that leverage lean and agile methods is the shift from plan driven processes to learning driven processes. In an environment where customer demand as well as the tools used to service the customer demand are constantly shifting long-term plans, static processes, and economies of scale will work against you. Instead, organizations need to be designed to manage feedback, and be able to adapt to constant change.
Agile and Lean Provide a Vision for Success in Today's Complex, Customer Driven World
Lean and agile are concepts that cover a variety of principles, methods, practices and perspectives. Different approaches have unique and sometimes contradictory perspectives. Nonetheless there are some fundamental differences between how an agile or lean organization operates anyone using more traditional management methods.
Perhaps one of the most important characteristics is achieving business agility by creating a frequent feedback loop between the customer and the supplier. Agile methods do this by delivering work in short iterations, where working software is delivered in iterations that last between one week and one month. Organizations following a lean approach achieve this feedback using a just in time, pull-based approach, one that limits work in process to the organization's capacity.
This feedback loop provided by frequent delivery enables the organization to continually learn based on the success of the last delivery. This feedback allows organizations to delegate the majority of decisions to the team level without fear of the organization slipping into dysfunctional behavior.
Teams are better able to learn, and better able to deal with complexity when they are made up of a diverse set of individuals. Most lean and agile methods recommend that teams are truly cross functional and contain the majority of skill sets that are required to consume customer demand and create a finished product.
This diversity of skills within the team enables it to adapt and learn as necessary to process new and constantly changing customer requirements. In the modern economy no two customer requests are exactly the same; this is especially true for technology related work. A truly cross functional team will ensure that its members are able to maximize the chance of them making the correct decisions required to successfully deliver on diverse customer demand.
This leads to another key principle in both the lean and agile world. In this model workers are responsible for both doing the work and coming up with the good ideas around to complete the work. All team members are encouraged to be thoughtful about what they are doing, and challenge why things are being done a certain way, or why they are even being done in the first place. In this paradigm, workers are self-empowered and the teams are largely self-managed.
Because feedback is critical to enabling this learning system, work is deliberately processed in small batches. The whole notion of economies of scale is discarded in favor of working with the lowest possible level of inventory. What this means is that workers are encouraged to work on only a one or two business value tasks at a time, and work those to completion rather than trying to stay busy by working on many things in parallel.
Frequent client delivery, cross functional teams, empowered workers, and limited work in process all contribute to a system of continual self-correction and learning. Knowledge workers are able to get better insight into what customers want, but also learn how to optimize their internal methods, tools and processes to improve their own internal efficiency, speed and quality.
Another key difference is the way they lean and agile teams look at quality, processes, and standards. Workers in this environment need to be constantly learning, and adapting.
Poor quality interferes with this learning cycle. Both lean and agile methods recommend that quality be built into the process, rather than expected for after-the-fact. Whenever a problem in quality is found, root cause analysis is conducted to get you the source of the problem not only to fix it, but to make sure that it never happens again. Processes and standards are constantly changing and evolving based on the insight gained through discovering quality problems, performing root cause analysis on those problems, and implementing countermeasures to ensure that those quality problems do not happen again.
Many agile and lean methods recommend the use of information radiators to share information across the team, with management, and the customer. Information radiators often come in the form of Kanban systems, agile card walls as well as simple low fidelity dashboards and charts
The current body of agile and lean thinking has found expression in many forms, including a variety of principles, methods, and specific practices that provide guidance, inspiration, and advice for those wishing to operate successfully in a complex market taking advantage of self-organization, feedback and learning, frequent customer delivery, and excellence.
Organizations can scale by organizing teams into a value network. This value network typically employs peer-to-peer communication enabled by specific key members belonging to more than one team. The notion of teams actually being a set of overlapping concentric circles is a good metaphor. For the most part teams within a value network should be cross functional, having workers who possess diverse skill sets and perspectives.
Occasionally teams within a value network will be comprised of a single specialization, similar to the model found in the more traditional management methods. The specialist approach may be chosen when there is no stable demand for a specific skill set in any of the cross functional teams. This approach is also effective when communication requirements between specialists of the same skill set tends to be higher than those across skill sets. Functions like enterprise architecture, security, and infrastructure provisioning often remain in Click publish the specialized teams.
Check out the Rest of Lean Change - Chapter 1
- Why Today's Technology Organizations Need to Change
- Challenges with Current Organizational Change Methods
- Presenting the Lean Change Method