Innovation and Agility

by Jim Highsmith, Director, Agile Project Management Practice

The cover story of the 11 June 2007 issue of Business Week, "3M's Innovation Crisis: How Six Sigma Almost Smothered Its Idea Culture," discusses the great difficulty companies and CEOs have in trying to balance "innovation and efficiency." "While process excellence demands precision, consistency, and repetition, innovation calls for variation, failure, and serendipity," the article states. The article points out the different philosophies of two CEOs: one who pushed Six Sigma -- improving initial results through efficiency, but damaging longer-term product innovation -- and the current CEO who is trying to bring back 3M's idea culture.

I have always maintained that one characteristic of a good agile leader is the ability to balance: up-front planning with on-going planning, early architecture with evolutionary architecture, and innovation with efficiency. It is a difficult balancing act. The article quotes Vijay Govindarajan, professor at Dartmouth's Tuck Business School, "The mindset that is needed, the capabilities that are needed, the metrics that are needed, the whole culture that is needed for discontinuous innovation, are fundamentally different." If CEOs can't seem to get the balancing right, how can a project manager or development manager?

As agile development moves into the corporate mainstream, more and more people are running into the question: Is agile a group of software development practices that anyone can use or is agile a mindset change that can reach into every part of an organization? The answer is "yes." Some people will never get more from agile methods than some benefits from test-driven development or building products in short iterations -- but even these benefits can be significant. However, more significant benefits can be obtained by combining agile practices with an agile mindset.

Defining an agile mindset is somewhat illusive; different people would probably describe it in different ways. However, the core ideas revolve around focusing on value; encouraging experimentation; embracing change; creating short-term, iterative results; building self-organizing, collaborative teams; and fostering frequent feedback and learning. The mindset is questing after new ideas, not striving for the lowest cost. However, I return to the posed question: Can you do both; can a good leader create an organizational culture to do both innovation and efficiency?

To a limited extent the answer is "yes." One can manage an agile project, be responsive to change, experiment, and so on, and be somewhat efficient. However, at a core level, innovation isn't efficient and if you do hard-core measurements for efficiency it will be difficult to cultivate innovation. One or the other has to be the focus and the other can only be "good enough." If you focus on efficiency, you can be somewhat innovative, but it will be a struggle. Similarly, if you focus on innovation, you can be somewhat efficient (actually, this is the easier alternative, as good agile leaders can stress efficiency in the right places in a project).

What about the focus when you have a portfolio of projects, some of which require efficiency and others that require innovation? While individual projects can be run with either an efficiency or innovation strategy, the overall organizational culture predominantly will be one or the other. In an innovative organization, running an efficiency-oriented project will be a special challenge and vice versa. I believe it is much harder to build an innovation culture and sustain it than it is to build an efficiency culture. One key problem is that most performance measures are built around efficiency, and they are easier (and not as fuzzy as innovation measures) to come up with. New managers -- new CEOs (as in 3M's case) -- can always come in and show where "efficiency" is suffering. It's much more difficult to measure where innovation is suffering.

Making the transition to using a group of agile practices is relatively easy and many companies seem to be moving in that direction. Making the transition to an agile, innovative culture will continue to be much more difficult, but in the end much more rewarding for those who struggle through the transition.

I welcome your comments on this Advisor and encourage you to send your insights on agile project management in general to me at jhighsmith@cutter.com.

Sincerely,
Jim Highsmith, Director
Agile Project Management Practice
E-mail: jhighsmith@cutter.com