Values and Metrics Drive Emergent Strategies

This is part of my ongoing series on Lean Disruption. Where I write about combining Innovation, Lean, Lean Startup, Agile, and Lean product development methodologies.

Clay Christensen argues that there are two types of strategies corporate leaders engage with, deliberate and emergent. Porter’s 5 Forces analysis is an attempt to use tools to pull emergent strategies based on changing environmental landscape into the corporation’s deliberate strategy. A deliberate strategy is the strategy that leaders have vocalized and intentionally invested money and resources into. Emergent strategies on the other hand are strategies that develop through metrics and actual organizational behavior. While a leader may intentionally push resources one direction another metrics that has much more value to lower level managers may require those resources to be redeployed in another context. Resulting in a different strategy to develop than what executives had originally planned.

Hoshin Kanri (Policy Deployment) plays a similar role to the 5 Forces in the Toyota Production System where leaders start with their stated 3-5 year goals and turn those into annual goals, projects, and finally the metrics by which those projects will be measured. However, the process isn’t done after a single meeting, this policy is reviewed monthly and if conditions change enough can be completely reworked or modified based on what conditions are emerging. This is important because it can, in fact, feed changes the whole way back at the the 3-5 year goal levels where if serious issues are occurring in multiple projects associated with a goal, such as lack of resource commitment, that goal must be re-evaluated or there needs to be other changes to incentivize resource commitment to those projects.

The Lean Startup and Agile approaches are likely the most closely tied to emergent strategy development. The Lean Startup approach values experimentation and customer engagement above all else which can result in initially a great deal of change in project/corporate strategy. In the Running Lean the author uses the Lean Canvas as a tool to maximize the power of emergent strategy develop and smooth the transition from emergent to deliberate strategy development. In many cases that transition is relatively easy anyway, however it is possible to see that transition occur as a corporate leader iterates through versions of the Lean Canvas resulting in less and less changes to the Canvas.

Agile similarly promotes engagement with customers and using iteration to eliminate uncertainty. In this way Agile is closer to Lean Startup than traditional Project Management and leads to emergent based products. Where the customer need is truly met. Which, over time, results in a deliberate strategy to maximize the resulting product. This product is still, likely, within the initial deliberate strategy of the leaders of the company, but may be very different than what the leadership had initially wanted or planned. This is the best of both worlds as the leaders get a product that fits their strategy, but is more effective in serving market needs than what they ever could have planned.

The values and metrics the organization uses to manage the work that it does heavily influences the direction any project or product develops. The tighter the control over metrics with less flexibility for innovation leads to more tightly aligned products to deliberate strategies. However, this can come at a cost of less innovative ideas and poor-market fit. In the case where something might significantly change the direction of the company, for that product to survive it is best to move that into a skunkworks or protected space where funding is secure with appropriately aligned staffing levels. This will allow the metrics and values to coalesce around the product, the customer, and the market needs.

Adoption of Agile compared to Lean

This is part of my ongoing series devoted to understanding the connection between Disruption Theory, Lean Startup, Lean product development, and Agile software development.

In many organizations the adoption of Agile software development techniques have been adopted rather quickly. For those unfamiliar with Agile software development, the point is to focus on user experience through developing software that is created through user stories (there’s a lot more to it obviously). Agile grew out of an understanding of Lean practices, where there is a strong focus on learning, daily standups, and understanding where and why things went wrong. This includes the use of the 5Whys which was highlighted in the Lean Startup. In away the company becomes a learning organization as there is a set meeting every sprint to reflect on the last few weeks of work. Agile was initially conceived around the turn of the century and has seen steady adoption over the past 15 or so years.

Many of these ideas came from Lean. While retrospective isn’t specifically called out in Lean, it happens consistently through a Plan Do Check Act cycle. Furthermore it happens through Root Cause analysis which happens on nearly a daily basis whenever issues arise. Much of the most ardent Lean practitioners are found in manufacturing, however it is making headway in other areas of the organization over time. Lean was Popularized in the early 90’s by the book “The Machine that Changed the World” but is much older than that and had been adopted by Toyota competitors as early as the 70’s.

So, then why, when Lean is the inspiration for Agile (as well as the Lean Startup), has Agile been heavily adopted while Lean has not? I do not mean to say that Lean isn’t used; it’s used a lot of places. However, it’s not used in the bulk of companies around the world or used uniformly throughout an organization. Agile has been adopted as a methodology across many industries and within many different types of companies. It is also not possible to say that one works while the other doesn’t. Both have been shown to improve processes and drive cultural change within an organization. I think that Agile has been more quickly adopted in broader corporate America than Lean because, similarly to Lean, it was made by and for the people that use it the most; Corporate IT. IT/Software development has owned the deployment of Agile practices which has made them much more successful at adopting them than those same corporations adopting Lean practices.

Agile has had the luxury of being successful in many organizations in a very public manner. Which has lead to a lot of top down support and required adoption of the methodology. This makes adopting specific methods for project management significantly easier for adoption of any given methodology. In fact, Lean and Six Sigma deployments are only successful whenever those deployments are attached to specific strategic initiatives. With IT any project that is funded for development is by definition strategic resulting in clear alignment between the Agile deployment and the execution of the project. Lean typically does not have this luxury.

Furthermore, Lean is not well regarded in many leadership circles as it is not typically taught in high level MBA courses. Agile on the other hand has made it into Masters programs for both IT and Computer Science. Meaning that the leaders responsible for owning processes and project results learned about how to deploy Agile in their education and it was a highly stressed practice. On the other hand Lean is part of Industrial/Manufacturing Engineering and to specific business niches. Which means that there’s a clear misunderstanding of Lean and the management practices that accompany the tools.

Coming to Agile from the Lean perspective, I believe that Lean practitioners have a lot to learn from the Agile community around adoption. Much of the actual practices are extremely similar and anyone with a strong Lean background will be able to transition into an Agile environment easily. The transition the other direction will be only slightly harder, mostly because of the broader range of performance metrics associated with Lean compared to a handful with Agile.