NOVEMBER 2018

BCG ON AGILE

• Agile Starts—or Stops—at the • Agile Meets Regulatory

Top Compliance
• Agile Traps • The End of Two-Speed IT
• Going All In with DevOps • Five Secrets to Scaling Up Agile
• Taking Agile Way Beyond Software • Taking Agile Transformations
• Nick Jue on Transforming ING Beyond the Tipping Point
Netherlands • Views from the Field

How CEOs
Keep Agile
Transformations
Moving
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Preface Contents

Simply put, agile works. But putting agile to work is no simple thing. FEATURE
How CEOs Keep Agile
As an organization becomes agile, it becomes more collaborative and Transformations Moving 2
creative. The effort yields so much: faster product delivery time, better
product quality, stronger financial performance, and greater employee PERSPECTIVE
engagement. The payoff is clear. Agile Starts—or
Stops—at the Top 5
Becoming agile doesn’t come easy, though. It requires big changes in cul-
ture, values, and behaviors. It means a rapid evolution of the enterprise. PERSPECTIVE
Agile Traps 8
An agile initiative delves deep, requiring new things of leaders and em-
ployees. Leaders need to signal change by adjusting their own behaviors, INSIGHT
and they must articulate both the particulars of change and the desired Going All In with DevOps 10
outcomes. Employees, for their part, need to know what the new ways of
working mean for them: why they are critical for mutual success and INSIGHT
how employees should adjust their behaviors accordingly. By uniting em- Taking Agile Way Beyond
ployees around shared objectives and a shared responsibility for results, Software 17
leaders can achieve the shifts needed for a successful transformation.
Q&A
The articles in this edition of BCG on Agile illustrate the adoption of agile Nick Jue on Transforming
practices. They highlight the factors that contribute to the success of ING Netherlands 22
agile initiatives and identify the situations that can get in the way. They
can guide your company’s agile transformation and help you deal with FOCUS
pain points. When Agile Meets
Regulatory Compliance 24
Whether you are an executive leading your organization’s agile transfor-
mation, a business head piloting a series of new projects, or just eager to PERSPECTIVE
learn more about agile, these articles will, we hope, provide the insights The End of Two-Speed IT 29
you need to make agile work for you. We look forward to hearing from
you. Contact us at Agile@BCG.com. PERSPECTIVE
Five Secrets to Scaling
Martin Danoesastro Up Agile 33
Senior Partner and Managing Director
PERSPECTIVE
Benjamin Rehberg Taking Agile Transformations
Partner and Managing Director Beyond the Tipping Point 39

Views from the Field 43

Boston Consulting Group | 1

FEATURE

HOW CEOS KEEP AGILE

TRANSFORMATIONS
MOVING
by Martin Danoesastro, Benjamin Rehberg, and Grant Freeland

H ere’s a complaint we’re hearing more

and more frequently from client CEOs.
“I’ve got a bunch of agile pilots going. Many
Start with Why
New ways of working are not goals in them-
selves: they are a means to an end. To mobi-
are actually working. I’m seeing results, but lize the troops and keep everybody on track
they’re not transforming the company. They’re when times are rough, leaders articulate why
not having the full impact I expected.” they want to change: What are the objectives
and desired outcomes? Changing is hard
There’s no question that making the transi- work, and in the face of difficulty, people
tion to agile ways of working, especially at tend to gravitate toward the old and familiar
scale in a large and complex organization, is ways. Moving beyond the tipping point in ag-
a tall order. Agile transformations that stall or ile transformations requires a shared convic-
fail to reach the transformational tipping tion that continuing the way the company
point are common. has always done things is not good enough.
Setting new standards in customer service,
getting products to market before competi-
Successful leaders do five tors, disrupting the industry, achieving step
changes in productivity, and winning the war
things consistently well to for talent are all examples of objectives and
outcomes that organizations can rally behind.
keep agile transformations People need to know why the new ways of
on track. working are critical.

Successful lighthouse projects can establish Adopt the Principles, Adapt the
momentum and achieve scale as the results Practices
roll in and the organization gains under- At its core, agile is a set of cultural values,
standing of what agile can accomplish. But principles, and behaviors, rather than a set of
the extra push from the CEO—and the specific practices. Adopting values, principles,
leadership team—can play a crucial role in and behaviors can be done successfully only
getting over the inevitable hurdles. On the by shaping the context in which people work.
basis of our experience, we have identified
five things that successful leaders do Depending on the nature of the underlying
consistently—and consistently well—to keep work, the contextual solutions will differ. New
their transformations on track. ways of working on the interface of business

2 | BCG on Agile
and IT will likely include elements of, for necessary changes has two benefits. Most im-
example, agile scrum and design thinking, portant, it puts the people who will help
while customer service and operations drive the transformation into critical roles. It
activities may benefit more from lean or the also sends an unmistakable message to others
self-management practices of Holacracy. who might be sitting on the fence of change:
they need to get with the program before
For an individual team or a startup, specific they encounter a similar fate.
practices and ceremonies go a long way
toward leading people to “live” the aspired-to
cultural values and principles. But spreading Align to Empower
values and principles across hundreds of Small, cross-functional, empowered teams are
teams in a large and complex organization at the core of every agile organization. The
requires addressing almost all elements of ability to act autonomously spurs ownership
the operating model to set the context in and creativity, enabling teams to make quick
which agile behaviors can take hold and decisions and move fast. But a high degree of
thrive. This level of change almost certainly autonomy works only when there is also a
needs to be driven by the CEO, as it often high degree of alignment in and among
includes widespread alterations in such areas teams. A key role of agile leaders is to ensure
as governance and funding models, strong alignment around overall company
organization structures, incentives and purpose, strategy, and priorities. Leaders
performance management, location and need to communicate their intent, explaining
sourcing strategy, measurement frameworks, both the why and the what, and they need to
and technological enablers. let go, releasing their teams to figure out how
to address their specific assigned challenge.
The more alignment that leaders are able to
Change Your Leadership establish, the more autonomy they can afford
Nothing leads like an example. Leaders to give. Leaders can spread and reinforce
should push themselves to adopt agile ways alignment in a variety of ways that include
of doing things and publicly demonstrate modeling their own behavior and strengthen-
their own changing behaviors. The public as- ing governance mechanisms, measurement
pect is important. To signal change at one frameworks, and performance management
company, executives in certain divisions gave practices.
up their offices so that the company could
create team rooms. At another, executive
team members committed to holding weekly Learn and Adapt—at Speed
“town hall” meetings in the company café. In Agile puts a premium on feedback and les-
addition to providing general business up- sons learned: adapting to change is more im-
dates and answering questions at these meet- portant than following a plan. This rule ap-
ings, individual executives spoke about their plies even to the agile transformation itself.
personal-development agendas. Of course, the transformation must be well
thought through and carefully planned, but
Getting experienced leaders to change their leaders must also be open to modification
behaviors is not easy. After all, agile behav- and adjustment along the way. Inevitably,
iors are not the behaviors that propelled there will be setbacks and challenges, but
most of them into senior leadership positions strong leaders are the ones who have the
in the first place. Many leaders find that they ability to learn, adapt, and change course
are required to unlearn what made them suc- when things go awry.
cessful, and for more than a few, this is a
bridge too far. CEOs need to recognize that Transformations, which are often described
agile transformations almost certainly require as journeys, can take two or three years. We
at least some changes in the composition of are seeing more CEOs tighten up that time
the leadership team. These are tough deci- frame—in some instances to less than a year.
sions because the executives in question hav- The biggest counterweight to resistance is
en’t done anything wrong. Still, making the momentum, and nothing builds momentum

Boston Consulting Group | 3

 like speed. Like loosening controls, moving Benjamin Rehberg is a partner and managing
fast can seem risky. But the bigger risk to the director in the firm’s New York office and the
transformation lies in not changing fast global coleader of agile at scale for the firm’s
enough. Technology Advantage practice. You may contact
him by email at rehberg.benjamin@bcg.com.
Martin Danoesastro is a senior partner and
managing director in the Amsterdam office of Grant Freeland is a senior partner and manag-
Boston Consulting Group and the global coleader ing director in BCG’s Boston office and the global
of agile at scale for the People & Organization leader of the People & Organization practice.
practice. You may contact him by email at da- You may contact him by email at freeland.
noesastro.martin@bcg.com. grant@bcg.com.

4 | BCG on Agile—Feature
 PERSPECTIVE

AGILE STARTS—OR
STOPS—AT THE TOP
by Deborah Lovich, Vikram Bhalla, Elizabeth Lyle, and Vinciane Beauchene

S ome leaders get it. Others need to. For

organizations to embrace agile ways of
working, their senior executives have to
For example, one European financial institu-
tion that converted its entire organization to
working in agile ways described the priorities
change their ways of working. This isn’t as for its leaders in these terms:
simple as it sounds: agile behaviors are not
the behaviors that propelled these people •• Openness. Be receptive to feedback on
into senior leadership positions in the first your own behavior and activities.
place. Unlearning what led to personal
success in the past is a tall order. •• Trust. Feel comfortable that not every-
thing will be planned; let trial and error
There’s a lot at stake. Entire companies, or di- show the right direction.
visions of companies, are making huge invest-
ments in transformation programs in pursuit •• Collaboration. Go for the greater good of
of agile’s many benefits. These include great- the company, which is not necessarily
er speed, better product and service quality, good for a particular unit.
lower costs, and heightened customer orien-
tation. But if leaders don’t change their own •• No Ego. Have everyone speak with one
behaviors, they will limit the return their voice—as an organization.
companies can realize on their agile efforts.
•• Transparency. Call out those unwilling to
There’s no one model for agile leadership, change or to reflect the “new world.”
but more and more, we see successful execu-
tives doing four things. •• Accountability. Hold one another
accountable.
They prioritize, focusing on the few agile
behaviors that they see as most important for The CEO of a North American bank instruct-
themselves and their organizations. There is ed his top-management team: drive results,
a general set of agile behaviors, but prioritiz- adapt and change, unlock people’s potential,
ing those that are most acutely needed for and speak up for the good of the company
the organization requires self-awareness of rather than your function or division.
the existing culture. Achieving organizational
alignment means being able to articulate the They commit themselves to personally acting
priorities in a way that the organization as role models of behavioral change. It’s
recognizes and can act on. easier to talk about what needs to change

Boston Consulting Group | 5

 than to make an actual public commitment to One of the most difficult agile behaviors, es-
new behaviors. The most effective agile pecially for those who have grown up in com-
leaders commit themselves to daily “work- mand-and-control and risk-averse organiza-
outs”—in full view of their colleagues and tions, is pushing decision making down to
team members—that involve individual and staff closest to operations, processes, and cus-
leadership team action plans. These plans are tomers. This is the essence of empowerment,
explicit about how leaders model new but it does not come easy. A senior executive
behaviors in their own work and routines, at a global automaker asserts that “the hard-
what and how they communicate, and how est thing is to learn to let go. It’s like when
they engage the organization. The plans are you raise kids: you need to decide when to let
specific and timely: for example, “I will push go and when to tell them what to do.”
decisions down to the front line, cancel
meetings, and instead attend team stand-up At the same time, good leaders reinforce
meetings to see how I can help every day or transparency and accountability. While they
week.” empower teams more, they also demand
more transparency in each team’s activi-
ties—a quid pro quo for agile leaders. A top
The shift to agile ways of executive at another European bank told us,
“Giving teams space takes discipline, but the
working adds urgency, short cycle times and guardrails of agile make
it easier.” A senior executive at an automaker
complexity, and challenge. gives her teams considerable autonomy and
empowerment to achieve their goals, such as
building an innovative self-driving car. But
At the European financial institution she also follows a venture-capital-style model
mentioned previously, all the executive team of accountability, returning to the team every
members committed to holding weekly “town few months to see results demoed and to pro-
hall” meetings in the company café. In vide outside-in feedback.
addition to providing general business
updates and answering questions at these They champion—and reward and celebrate—
meetings, they spoke about their personal- new behaviors. Leaders in an agile setting face
development agendas. In doing so, they a continuous change management challenge:
publicized their commitment to changing to encourage, reinforce, and model behaviors
their own behaviors. that are unfamiliar to most organizations.
These behaviors can include pushing for
They enable and empower themselves, each minimum viable products that test a value
other, and their teams. Effective leaders thesis over fully finished products, encourag-
recognize that behavior change doesn’t ing experiments (even those that most likely
happen just because they want it to. They will not work at first), and celebrating failures
seek help—in the form of coaching, feedback, as opportunities to learn and improve. Agile
and opportunities—for reflection and skill leaders need to change the ways that they
building. They don’t consider seeking assis- celebrate success and the ways that supporting
tance to be a sign of weakness. They under- systems, such as performance management,
stand that to achieve any operational im- reward desired behaviors. They may also need
provement, they need to invest to get results. to make some tough staffing choices, saying
Coaching and putting real time into changing goodbye to loyal leaders and high performers
personal and team behavior are just that—in- who have delivered results in the past but are
vestments in becoming a better agile leader. not exhibiting the required behaviors needed
Effective leaders recognize that others need for achieving success in the future.
help and often personally play the role of
coach—which is very different from the role
of decision maker—for their teams. And in
coaching others to work differently, they also
reinforce their own new behaviors.
A daptive leadership has always been
about change. The shift to agile ways of
working adds a new layer of urgency, com-

6 | BCG on Agile—Perspective
plexity, and challenge. For an organization to Elizabeth Lyle is a principal in BCG’s Boston
transform successfully, its leaders need to de- office. You may contact her by email at lyle.
velop their own agile capabilities and show elizabeth@bcg.com.
the way.
Vinciane Beauchene is a partner and manag-
Deborah Lovich is a senior partner and manag- ing director in the firm’s Paris office. You may
ing director in the Boston office of Boston Con- contact her by email at beauchene.vinciane@bcg.
sulting Group. You may contact her by email at com.
lovich.deborah@bcg.com.

Vikram Bhalla is a senior partner and manag-

ing director in the firm’s Mumbai office. You may
contact him by email at bhalla.vikram@bcg.com.

Boston Consulting Group | 7

PERSPECTIVE

AGILE TRAPS
by Grant Freeland, Martin Danoesastro, and Benjamin Rehberg

F rom industry to industry, agile is

spreading in fits and starts—from the IT
department to other functions and, in more
act with one other. It requires rethinking
structures, reporting, compensation, and ca-
reer paths.
and more cases, companywide. Or it is trying
to. Lots of companies attempt the transition But most established organizations like the
to agile ways of working but end up with status quo and fear change. So they try to kill
either something that is agile in name only or the transformation before it gains traction.
a hobbled hybrid organization that exacer-
bates the problems they set out to solve. Many management teams understand this, so
they’re hesitant to take on an agile transfor-
mation. Then one company in their industry
Most established gets agile right, others see the power of what
agile can accomplish when it’s done right,
organizations like the and naturally they want to do the same thing.
But they tend to overlook the fact that the
status quo and fear change. leader that made the successful agile trans-
formation spent years planning and execut-
ing its agile journey. Its top management was
There’s good reason for the interest in agile. fully committed to making the change and
When large companies get agile right, the re- was willing to experiment and learn from lots
sults can be stunning. Productivity can im- of failures along the way. When the followers
prove by a factor of three. Employee engage- don’t make the same commitment to plan-
ment, measured in quantitative surveys, ning and execution, they are likely to fall into
increases dramatically as well. New product one of three traps.
features can be released within weeks or
months rather than quarters or years. Rates
of innovation rise, while the number of de- Name Only
fects and do-overs declines. The name-only trap may be the most com-
mon: companies undertake an organizational
There’s equally good reason for the failures. change that they label agile, but they don’t
Agile is hard—really hard. Done right, the make the kind of fundamental shifts in ways
transformation affects everything from inter- of working—establishing cross-functional
nal processes to how employees spend their teams and institutionalizing a try-and-fail ap-
day to how people in the organization inter- proach, for example—that are the basis of ag-

8 | BCG on Agile
ile. In large and complex companies, speed- incentive programs. Employees adopt the
ing things up means reducing reliance on new ways of working only to encounter un-
hierarchies, and leveling hierarchies requires certainty about the impact these novel meth-
reliance on collaboration. For many compa- ods will have on them as individuals. The ini-
nies, this is a big organizational and cultural tial enthusiasm stalls. Organizational change
change, and implementation is difficult. Com- is not linear; companies need to reach a criti-
panies that get it right establish the boundar- cal mass of change in order to reap the bene-
ies within which empowered employees can fits. Rather than speeding up processes, deci-
collaborate and make great things happen. sion making, and results, the half-measures
But most companies continue making deci- trap—like the other traps—leaves the organi-
sions the way they always have—slowly. zation less productive than it was before.

G
Two Tier olfers will tell you that traps are easy to
A variation on the name-only trap is the slide into but hard to hit out of. The key
two-tier trap. There are a couple of manifes- to avoiding bunkers is good planning and bet-
tations. One is that the organization is rede- ter execution. That’s the only way to avoid
signed around agile ways of working, but se- agile traps too.
nior management continues to do things the
way they have for years. Another occurs Grant Freeland is a senior partner and manag-
when a company shifts some functions to ag- ing director in the Boston office of Boston Con-
ile while other functions continue operating sulting Group and the global leader of the firm’s
in the old ways of working. In either case, if People & Organization practice. You may contact
the transformation is successful, the organiza- him by email at freeland.grant@bcg.com.
tion, or parts of it, moves much more quickly
and nimbly. But the benefits are lost when Martin Danoesastro is a senior partner and
the results of agile teamwork—a product in- managing director in the firm’s Amsterdam of-
novation, for example, or a faster internal fice and the global coleader of agile at scale for
process—run hard into traditional processes the People & Organization practice. You may
and deliberate, drawn-out management ap- contact him by email at danoesastro.martin@
provals. The result is not dissimilar to a bcg.com.
sprinter running into a wall—pain and even
injury are inevitable. Benjamin Rehberg is a partner and managing
director in BCG’s New York office and the global
coleader of agile at scale for the firm’s Technolo-
Half Measures gy Advantage practice. You may contact him by
Companies that fall into the half-measures email at rehberg.benjamin@bcg.com.
trap get agile partially right. They are success-
ful at cross-functional reorganization. Multi-
disciplinary teams start to work in scrums
and sprints. But these companies do not fol-
low through with critical organizational en-
ablers such as redesigned career paths and

Boston Consulting Group | 9

INSIGHT

GOING ALL IN WITH

DevOps
by Andrew Agerbak, Kaj Burchardi, Steven Kok, Fabrice Lebegue, and Christian N. Schmid

F or too many companies, moving to agile

software development is like finding the
perfect new strain of grass seed—after
In many cases, there is. Agile does a good job
of breaking down silos early in the software
development process. But it can achieve only
months of searching—and then planting the so much on its own. To turn themselves into
new seeds in your old backyard. Your lawn digitally ready competitors, companies have
may ultimately look a little better, but it will to rethink the entire software development
take longer and the results won’t be as great life cycle. They need agile, but they also need
as they would be if you had first removed the DevOps.
hidden tree roots, put in new soil, and
rethought the irrigation system. DevOps is an approach that integrates critical
late-stage activities—like testing and
deployment planning—into the code-writing
When agile’s benefits don’t part of software development. (See Exhibit
1.) With its emphasis on running multiple
come quickly, some wonder if activities in parallel and on multifunctional
teams, DevOps represents a break from the
they’re missing something. old “waterfall” model, in which planning,
writing, testing, and deploying code were
discrete steps managed by separate
Many mainstream companies—in financial departments.
services, health care, manufacturing, consum-
er packaged goods, and other industries— While many software companies use some
have felt compelled to give agile software de- form of the continuous software development
velopment a try. And they have waited and release that are the hallmark of DevOps,
expectantly for the benefits. In theory, agile’s the approach (which continues to evolve and
assignment of a business leader to develop- is starting to be referred to as DevOps 2.0 or
ment teams ensures that the most important BizDevOps by some of its more advanced
software changes get done first, and its em- practitioners) is a lot newer outside the tech-
phasis on short coding sprints ensures that nology and internet services industries. Some
the changes are implemented quickly. The traditional companies, notably in financial
fact that the quick part doesn’t always hap- services, have some DevOps pieces in place,
pen has been discouraging. It has some agile such as automated testing and mechanisms
newcomers wondering if there’s something for provisioning hardware quickly. (See
they’re missing. “Leaner, Faster, and Better with DevOps,”

10 | BCG on Agile
 Exhibit 1 | Where Agile and DevOps Fit in the Software Development Life Cycle

Plan Code Build Test Deploy Release Operate Monitor

AGILE
Business units Integrated business • Teams “own” and are responsible for
development teams a software-based product or service

IT development DEVOPS
WHO DOES THE WORK

Application Continuous • Daily “builds” of error-free software

integration • Automated testing
development
Application Continuous • Ability to update applications
delivery automatically across environments
maintenance
IT operations Continuous • Self-service provisioning of hardware
deployment • Automated releases of new software

IT operations Continuous monitoring • Applications self-repair

and autonomic operations • Capacity adjusted automatically

Standardized and automated • Virtualization enables server and storage constraints to be addressed automatically
IT infrastructure infrastructure management • Modular architecture allows services to be provisioned quickly and cheaply

Source: BCG analysis.

BCG article, March 2017.) But the scope of Likewise, a control requiring multiple go-live
these practices is limited. The companies hav- approvals for new software may have been
en’t made the overarching changes that justified when there were only a few software
would allow them to capture DevOps’ full updates a year and each one involved a criti-
range of benefits. cal part of a monolithic system. But it
shouldn’t require two dozen people to ap-
prove a minor tweak—like changing the color
Making DevOps Work of the screen users see.
To get the most out of DevOps, companies
must make changes in controls and gover- With software now a key way of addressing
nance, IT organization roles, and operating fast-changing business and customer needs,
models. the prolonged delays caused by controls that
have become irrelevant put companies at a
Rethink controls and governance. Most big fundamental competitive disadvantage. The
companies’ approach to developing and delays can pose a reputational risk and even
releasing software reflects controls they put in a survival risk if a company is the target of a
place years ago to maintain quality and avoid cyberattack. (See “Develop a Cybersecurity
costly mistakes. The controls may have made Strategy as If Your Organization’s Existence
sense at the outset. But as the pace of techno- Depends on It,” BCG article, October 2017.)
logical change has accelerated, the controls
have lost their relevance. Now they’re just Governance is another area that requires ad-
obstacles. justments in the move to DevOps. This in-
cludes adopting new approaches to funding. In
For instance, a control about infrastructure agile, funding isn’t allocated on a project basis:
provisioning—one of the hurdles that must for a set period of time, against a defined set
be surmounted before a development team of deliverables. Instead, funding is allocated to
can begin its work—may have been imple- critical “products”—like a mutual fund compa-
mented in the days before virtualization. To- ny’s “my account” function or a retailer’s or-
day, virtualization makes computing and stor- der-and-ship system—that require the atten-
age capacity available with less operational tion of teams for many months or even years.
complexity than before and at far lower cost. DevOps adds complexity by forcing companies
But we still see companies taking a month to figure out how to allocate some application
and 50-plus emails just to provision hardware maintenance and infrastructure costs within
and gather all the necessary permissions. the product funding paradigm.

Boston Consulting Group | 11

 Another area where DevOps should trigger a ity of different departments touching the
governance change is in the decision rights same code simultaneously and working at
related to cloud solutions. In the past, these cross-purposes.
decision rights belonged to the IT organ-
ization, and no one questioned that. But Ultimately, the best test of governance practic-
that’s changing as more business units create es is cycle time. If companies can substantially
software directly using cloud-based tools. reduce the time between when they plan soft-
ware and when they release it in a reliable,
We saw questions about such decision rights high-quality form, that is a sign that their gov-
at a company where digital product ernance processes are working and that they
development teams were pushing for direct have the technical capabilities they need.
access to an Amazon Web Services account,
and the IT operations group, concerned Redefine the role of the CIO and the IT
about standardization and security, was organization. If DevOps is to succeed, there
resisting. In truth, there is no single right must be changes—some subtle, some more
answer to the question of where the decision dramatic—in the role of the chief informa-
rights should lie, for this company or any tion officer and the information technology
other. But it is an issue that must be tackled organization. In companies that adopt agile
in DevOps, which redraws the boundaries of models, the specifications for new software—
software development along multiple and the coding work itself—become the
dimensions. implicit responsibility of business units. If this
relieves the CIO of responsibility for individu-
al lines of code, in most cases he or she still
If DevOps is to succeed, shoulders the larger burden of quality. That
is, the CIO must still recruit and train soft-
there must be changes in ware developers. He or she must also put in
place a better delivery model, one that
the role of the CIO and the includes an operating environment—stan-
IT organization. dards, services, processes, tools, and infra-
structure—that allows developers to maxi-
mize their productivity. The CIO must also
DevOps should also prompt a change in how front-load more activities in the software
companies deal with buggy software. At com- development life cycle.
panies that haven’t fully adopted DevOps,
there isn’t a “you built it, you own it” gover- The term of art for this sort of front-loading is
nance philosophy. Instead, if an issue arises the “shift left,” referring to how one would di-
involving software that has been released, IT agram various activities on a software devel-
support teams report it through a ticket sys- opment life cycle chart. In DevOps, technical
tem (such as ServiceNow), and the issue be- staff that would once have sat in the IT opera-
comes the responsibility of an application tions function—whose work kicks in later—
maintenance team. But the original develop- are moved into the product development
er of the code, having gotten wind of a prob- teams, where they have a say in how the code
lem, may go back in and try to fix it. The net is built. There should also be input early on
result is that sometimes both the develop- from those responsible for a company’s data
ment and maintenance teams end up work- architecture and cybersecurity. The shift left of
ing on the same software, at the same time, activity and expertise is one way all the code
resulting in inconsistencies, integration prob- that’s being created—often in many different
lems, and stability issues. By contrast, at com- business units—can get to market quickly and
panies that adopt DevOps practices, issues with the necessary level of security.
with released software automatically register
on the backlog of the development teams, A particularly important CIO responsibility
which are expected to make the fixes. There with DevOps is the implementation of an op-
is no one further down the line who would timal infrastructure environment. The busi-
even think of fixing the code, and no possibil- ness-oriented development teams need infra-

12 | BCG on Agile—Insight
structure-independent platforms so that they paved road and the engineering operations
don’t have to worry about compatibility. In group have been instrumental in helping Net-
DevOps, managing this and providing the ap- flix release new code—secure, reliable
plication development toolkit are significant code—to multiple geographic regions within
parts of the IT organization’s responsibility. minutes.

Netflix, the global streaming video service, Assisting and speeding up software deploy-
provides an example of the kind of benefits ments in this way require IT staff to develop
that can come from embracing DevOps. Net- skills they didn’t need previously. For in-
flix captures these benefits through the ef- stance, enterprise architects must take a
forts of a central engineering operations much stronger hand in defining IT architec-
group (a sort of specialty IT team) whose ture strategy, especially with respect to plat-
mandate is to maximize the performance of form options. And IT organizations must
newly released software and to make soft- adopt technical mechanisms—like containers
ware development teams more efficient. and microservices—that allow coding teams
to write reusable software and to do it faster.
At Netflix, developers benefit from a com- (See the sidebar, “DevOps’ Technical Under-
mon set of tools, services, and infrastructure pinnings.”)
management capabilities—a “paved road,” as
Netflix calls it—to traverse the normally IT organizations must also acquire some
bumpy path to new software creation. The brand-new technical capabilities. For in-

DevOps’ TECHNICAL UNDERPINNINGS

IT staff must be familiar with various control issues. Among the open-source
technical tools and approaches in order to tools used for code repositories are
implement DevOps. Here are seven of the Bitbucket and GitLab.
most important.
Continuous Integration. A development
Containers. A type of virtualization that practice that promotes single-source code
keeps software running reliably when it is management and comprehensive automat-
moved from one computing environment to ed testing, allowing developers to add code
another. By bundling new code with every- to a common repository as often as several
thing needed to run it, a container makes it times a day, in a highly automated way.
possible for software development teams to This ensures that all development teams
ignore differences in operating systems and are using the latest version of an applica-
underlying infrastructure. Two open-source tion. Open-source versions include GitLab
technologies that help with containerization CI and Jenkins.
are Docker and Kubernetes.
Continuous Delivery. A discipline for
Microservices. A programming architec- building software that enables the software
ture that gives developers access to appli- to be moved to a staging area at any time.
cation functionality at a very granular level. Continuous delivery tools include Bamboo
Microservices make it easier to continually and Jenkins.
deliver and deploy large and complex
applications. Continuous Deployment. A practice that
allows tested software to be released,
Code Repository. A database containing sometimes with not much more than the
the source code of an application. When push of a button. Continuous deployment
centralized and actively managed, code sharply reduces overhead and can be an
repositories improve the consistency and invaluable tool for resolving issues quickly.
stability of code, and help avoid version

Boston Consulting Group | 13

 stance, they must hire or develop quality en- terfall and even sometimes with agile devel-
gineers. These engineers should be embed- opment, testing takes place once the code is
ded in the software development team and complete. Significant problems may be discov-
should ensure that rigorous testing happens ered just as the code is supposed to go live. By
early in the process. The IT operations staff contrast, in the DevOps paradigm, code is de-
must likewise acquire or develop new exper- veloped iteratively and tested regularly. This
tise, such as reliability engineering and infra- makes it less likely that coding issues will
structure service development. Without these emerge at the last minute. (See Exhibit 2.)
capabilities, continuous delivery and continu-
ous integration aren’t possible, making agile’s Valuable as it is, automated testing must be
promised speed and reliability benefits hard rolled out in stages. Companies should start
to achieve. with the parts of their architecture where
they have already begun to transition to agile
Remake the operating model through auto- models. After they’ve had some success, they
mation. There is a huge benefit if, instead can use automation to cover more of their
of going through a cumbersome approval code.
process that might last weeks or months, a
team can add a feature or plug a dangerous Some of the companies that have set the pace
security hole with relatively little organiza- in digital services, such as Google, have reli-
tional oversight, and in the best case with just ability targets well above 99%—meaning that
a few mouse clicks. Automation, one of the they expect the software they release, with
pillars of DevOps, makes that possible. But the help of automated testing, to work imme-
the decisions surrounding automation are diately and in pretty much all instances. Goo-
complicated, and there is always the chance gle, of course, was built to enable rapid soft-
that a company will take a while to gain its ware releases and service improvements.
footing. For this reason, the where and how Companies that aren’t digital natives don’t
of introducing automation is a key decision need to ensure reliability on the same scale,
for any company moving to DevOps. but when it comes to digital services they can
learn from Google and other digitally ad-
A good place to start is with test automation. vanced companies—and they must. After all,
In our experience, the benefits of covering a traditional company with a mission-critical
more new code through automated testing digital application—like a financial services
can on its own justify a move to DevOps. Con- company rolling out a smartphone payment
sider the ever-present risk of late-stage delays feature—can no more afford to release bad
and the costs they create. With traditional wa- software than Google can.

Exhibit 2 | With DevOps, Bugs Are Spotted Earlier and Fixed More Economically

Plan Code Build Test Deploy Release Operate Monitor

Bug identified by a programming buddy

(pair programming)
Bug identified
Requirement or design defect identified through in production
close business and IT collaboration

COST OF Design defect or bug identified by having

quality as part of the design process Design flaw identified through
DETECTING QA testing
Requirements defect identified through
a test with a real-world user
ERRORS Bug identified during Bug identified during
an automated user test independent testing

Bug identified during Bug identified during systems

an automated integration testing
performance test
Bug identified during a
QA review or inspection

ERROR DETECTION ZONE USING BOTH

AGILE AND DEVOPS ERROR DETECTION ZONE USING AGILE ONLY

Sources: Puppet, 2016 State of DevOps Report; BCG analysis.

14 | BCG on Agile—Insight
With traditional companies’ legacy systems, digital natives, both approaches are core to
such as payroll or enterprise resource plan- software development, and a digital native
ning, the dynamics are necessarily a little dif- may already be thinking about other ways of
ferent. Companies can still do automated test- enhancing the software release process. This
ing of their legacy systems, and in many cases explains why developers at the most digitally
they already do. But in order to support the adept companies often see their code fixes go
faster release cycles agile development teams live within days, hours, or even minutes.
expect, the tests should be synchronized with
batch processes, including prescheduled data The DevOps pilot needn’t go on indefinitely.
transfers and transactions. Since batch pro- Within six months, it should be possible to
cesses are often designed to take place over- see benefits. These typically take the form of
night, the IT organization may want to run agility, which translates into more software
the automated tests overnight, too. releases per week; quality, which stems from
increased testing coverage; and efficiency, in
the form of lower costs of rework and an
Getting Started overall increase in the number of automated
Companies can’t just brush aside their cur- processes. After an introductory period like
rent software development practices and this, the company can create a roadmap to
make a wholesale move to DevOps; it in- start applying DevOps practices to other
volves too much change and training and software and infrastructure platforms and to
would create too much disruption with exist- other parts of its technology environment.
ing systems and products. DevOps needs to The roadmap should include a decision about
be phased in. the suite of tools to be used and the sequence
in which DevOps will be implemented in
other parts of the company and for other
It should be possible to see platforms.

benefits from a DevOps pilot

DevOps and the Customer
within six months. The example of a European travel company
helps demonstrate why DevOps is turning
into a must-have.
The first step should be to find an application
that has low levels of dependency with other The company was unable to make pricing up-
applications—perhaps a procurement portal dates to its core booking system at the height
for a manufacturing company or a savings of its main selling season. Previous updates
platform for a bank—and run a pilot project had exposed the fragility of the system, and
to learn the DevOps model and fine-tune the business managers had imposed a policy of
practices. no changes during peak periods.

In the pilot, a team of developers and IT en- There was nothing unusual about the compa-
gineers lays out a technical plan—establish- ny’s monolithic software infrastructure or the
ing a central code repository and creating a policies to accommodate it. However, the de-
testing framework so that testing automation liberate approach to software development
can start. Once this is in place, continuous in- had left the company unable to respond, at
tegration and continuous delivery can begin. the most important time of year, to new pric-
These processes make it possible for the de- ing or product propositions from competitors.
velopment team to focus on writing code and If a seven-day trip to Belize was suddenly be-
not on manually checking for bugs and func- ing discounted to $1,800 on other travel web-
tionality problems. sites, it would still be going for $2,100 on the
company’s site. Dynamic pricing updates re-
At companies with complex legacy systems, quired a software change, but the company’s
continuous integration and continuous deliv- release process limited the speed at which
ery are two separate phases. By contrast, at such changes could be made.

Boston Consulting Group | 15

 Recognizing that its software development Andrew Agerbak is a director in the London of-
processes were hurting the business, the fice of Boston Consulting Group. You may contact
company adopted some DevOps practices, him by email at agerbak.andrew@bcg.com.
including continuous integration. As it did so,
the quality of its software releases and the Kaj Burchardi is a managing director of BCG
overall resilience of its system improved to Platinion in Amsterdam. You may contact him by
such an extent that management lifted the email at burchardi.kaj@bcgplatinion.com.
change freeze. Thereafter, the company was
able to be much more responsive to com- Steven Kok is a project leader in BCG’s London
petitors’ moves during the industry’s peak office. You may contact him by email at kok.
selling season. steven@bcg.com.

Sooner or later, most companies are going to Fabrice Lebegue is a managing director of BCG
find themselves in a similar position. That is, Platinion in Montreal. You may contact him by
they are going to see that one of their com- email at lebegue.fabrice@bcgplatinion-maya.
petitors is doing something faster, with fewer com.
security and quality issues, and at lower cost.
And they are going to need to take action to Christian N. Schmid is a principal in BCG’s Mu-
narrow the gap. nich office. You may contact him by email at
schmid.christian2@bcg.com.
DevOps is a way to do this. The implementa-
tion of DevOps involves organization and
process changes that take place well out of
sight of most customers. But customers will
be expecting the benefits. For companies that
don’t deliver, there may not be a second
chance.

16 | BCG on Agile—Insight
 INSIGHT

TAKING AGILE WAY

BEYOND SOFTWARE
by Michael Sherman, Stephen Edison, Benjamin Rehberg, and Martin Danoesastro

F or most companies, agile is confined to

software development—but it doesn’t
need to be. Increasingly, forward-thinking
•• Rework. Each time there’s a handoff from
one specialized worker to another, the
chance that rework will be required
companies are taking advantage of the same increases because individual employees
agile techniques that have transformed responsible for a single isolated task have
software development. Now they are success- little understanding of how their work fits
fully deploying these techniques in other core into the larger whole. This rework culture
business units, from marketing to human can be especially problematic in complex
resources to finance. When companies environments where errors in the details
implement agile across their entire organiza- can create big problems later in the
tions, ways of working improve dramatically. process.
Agile methods are more collaborative and
creative and can be more efficient than other
business models. But companies must first
understand why their current business
Agile techniques don’t have
structures need to change. to be confined to software
development.
The Downside of Traditional,
Specialized Roles
Most large, hierarchical organizations are •• Lack of Ownership. When individuals
structured around silos and specialized func- are assigned only discrete tasks, no one is
tions. It’s not uncommon to see companies or- ultimately responsible for the customer
ganized in such a way that a single customer outcome. This generates frustration for
need (such as processing an order) requires ac- customers because finding the right
tion from more than ten distinct units. But this person to fix a given problem may be
model introduces a number of inefficiencies: nearly impossible.

•• Queuing Delays. Handoffs from one Companies that rely on overly specialized
specialized employee to another create roles create meaningful inefficiencies that
internal queues; each order or task slowly can damage the customer experience. (See
churns through the system in a linear Exhibit 1.) Customers forced to endure delays
fashion, delaying the speed of end-to-end owing to multiple handoffs or rework will
customer service. soon take their business elsewhere. Yet many

Boston Consulting Group | 17

 Exhibit 1 | Specialized Roles Create Rework and Delays

SPECIALIZED
SKILLS AND A B C D E F
ROLES

SPECIALIZED
TASKS 1 2 3 4 5 6

WORK TIME 2 hours 2 hours 2 hours 2 hours 2 hours 2 hours = 12 hours of work to
process a single request
WAIT TIME 2 days 2 days 2 days 2 days 2 days = Up to 10 days of waiting

REWORK RATE + Unplanned rework

20% 20% 20% and further delays

Source: BCG analysis.

large companies find restructuring difficult overall work time and avoid the delays that
because their organizations are bogged down come from excessive context switching. With
by a large and highly customized product cat- brief, regular interactions, the teams resolve
alog, disparate IT systems, or poorly integrat- questions quickly rather than throwing issues
ed M&A activity—all of which bolster the back over the wall.
need for specialized resources. While displac-
ing deeply entrenched processes and practic- Because many companies are still organized
es can be difficult, companies that successful- around highly specialized functions, however,
ly incorporate agile beyond software see the shift toward agile often requires consoli-
transformative results. dation—from large numbers of specialists to
small teams of cross-trained individuals. In a
cross-functional team, for example, one em-
Getting Started ployee may tackle tasks A and B, which were
To implement agile across an entire business, previously handled by two employees. (See
teams need to work together differently than Exhibit 2.) Over time, as employees undergo
in the past. Siloed employees no longer per- additional cross-training, roles can be further
form discrete, predefined tasks in isolation. In- consolidated. Of course, role consolidation
stead, cross-disciplinary, collocated teams col- has its limits. In some areas, specific expertise
laborate in innovative ways to enhance the is required (in the case of a lawyer or special-
customer experience. By working iteratively ized engineer, for example). But these special-
and incorporating feedback to continually im- ists should work with cross-functional teams
prove, agile teams across all functions have the to support customers. By reorganizing into
potential to transform the business from the in- these more productive teams, organizations
side out. To capitalize on the many benefits of can dramatically reduce the number of em-
agile, companies need to take four key actions. ployees necessary to fulfill a request, elimi-
nate inefficient handoffs, and improve visibil-
Create cross-functional teams. To get started, ity into their customers’ needs.
organizations should create cross-functional
teams of approximately five to ten employees Recently, an international telecom company
each—small enough to collaborate closely transitioned to cross-functional teams in its
but large enough to possess the necessary enterprise order-processing function to help
skills to execute successfully. These agile improve customer satisfaction while reducing
teams perform a given process from begin- costs. Historically, the company had routed
ning to end, batching tasks to increase customers through 12 specialized groups,
productivity and parallel processing to each dedicated to a discrete task, but this pro-
maintain forward momentum. Individual cess led to costly delays and frustrated cus-
employees handle multiple steps to reduce tomers. And to make matters worse, the spe-

18 | BCG on Agile—Insight
 Exhibit 2 | Agile Teams Are Cross-Trained to Manage End-to-End Processes

CROSS-FUNCTIONAL APPROACH TO TASKS:

CROSS-FUNCTIONAL AGILE TEAMS USE PARALLEL PROCESSING AND TASK
TEAM ROLES BATCHING TO REDUCE DELAYS AND REWORK

AB Number of tasks
managed in parallel 1–2 4–5
by cross-trained
FA Individuals BC individuals
manage 3 6
multiple roles
and tasks
EF CD Work time 4 hours 3 hours 2 hours = Fewer work hours

DE Wait time 2 days = Less wait time

Rework rate ~0% ~0% ~0% = Less rework and fewer

delays

Source: BCG analysis.

cialized groups were located in different parts Adopt—and tailor—standard agile methods.
of the world, which only exacerbated delays One of the most valuable benefits of agile is
and rework. Instead, the organization created that it encourages teams to iterate quickly,
small agile operations teams responsible for learn from feedback, and shift course as
end-to-end customer service. Each operations needed, rather than adhering to a strict plan.
team comprised three smaller groups: order The following agile methods, among others,
administrators, technical staff, and billing and can be used to reinforce the right behaviors
customer service personnel. and maintain strong forward momentum:

These teams were not just an oversight layer. •• Agile ceremonies—such as standups (daily
They performed the full scope of work—in- meetings), sprints (brief work efforts
cluding ordering, provisioning, billing, and designed to deliver a minimum viable
support—that previously had been fragment- product), and retrospectives (reflections
ed across the organization. By holding the on prior sprints)—allow teams to identify
teams accountable for outcomes, the compa- critical customer needs, brainstorm
ny gave them strong incentives to reduce solutions to challenges, and target areas
complexity, eliminate handoffs and rework for improvement. By tracking processes all
cycles, and continually streamline the cus- the way through to the customer outcome,
tomer experience. organizations can enhance operations at
all stages—from R&D to launch to
Cultivate servant-leaders to drive value. As customer care.
teams shift their focus toward the overall
customer experience, leadership styles need to •• Agile backlogs and dashboards can be
shift as well. Leaders should no longer assess used to organize work and track progress,
individuals on their ability to complete tasks enabling teams to prioritize tasks, elimi-
but on their effectiveness in delivering end-to- nate bottlenecks, and identify automation
end outcomes for customers. (See the sidebar.) opportunities.
To support this new structure, companies
would do well to cultivate servant-leaders— •• Agile techniques, such as A/B testing and
that is, leaders who focus first and foremost on a test-and-learn approach, encourage
helping their employees perform optimally teams to analyze user data and focus their
and collaborate effectively. The goal of these priorities accordingly.
leaders should be to foster a motivated and
empowered workforce and to help remove Many best-in-class marketing organizations
impediments to rapid progress. They may set a have begun to use agile techniques to expe-
direction, but they don’t delegate or microman- dite the development of new initiatives. (See
age day-to-day decisions. The Agile Marketing Organization, BCG Focus,

Boston Consulting Group | 19

 A EUROPEAN BANK DELIVERS AGILE END-TO-END
SOLUTIONS
A European financial services company customer calls and handling operational
created a new organizational model, tasks. The company empowered them to
inspired by Zappos, that empowered small, self-schedule availability as a team and
autonomous units to deliver end-to-end closely track output metrics related to
solutions for all nondigital customer customer satisfaction. Traditional manager
service requests, particularly phone calls. responsibilities were redistributed to CLT
leads, agile coaches, and the team as a
Instead of optimizing the call center and whole. To support the new way of working,
customer service operations for scale and the bank also addressed talent develop-
efficiency (with a focus on average handling ment in areas such as recruiting, training,
time, for example), the bank focused on and performance management.
enhancing customer satisfaction. It created
customer loyalty teams (CLTs)—autono- As a result, the company improved its net
mous, multidisciplinary, collocated teams promoter scores, reduced handovers and
of 10 to 12 members—and gave them a repeat call volume to achieve 25% efficien-
mandate to resolve issues on the spot. cy gains, and significantly boosted employ-
ee engagement.
CLT members were assigned broad roles so
that they could switch between answering

October 2015.) For example, some leading or- tomers use various digital channels and
ganizations appoint a scrum master, who develop self-service options to streamline
leads rapid sprints to develop integrated mar- interactions. Automation not only reduces the
keting initiatives, apps, and websites. Each overall volume of work that needs to be
day, the team holds a 15-minute standup, in completed, it allows teams to become more
which members brainstorm ways to unblock productive, freeing up capacity for more
activities and keep one another on track. innovative endeavors.
Along the way, team members test and learn
from experiments and, finally, determine The international telco described earlier cre-
what they can accomplish in the next sprint. ated a group focused exclusively on automa-
These techniques can dramatically accelerate tion. By dedicating a team to automation, the
the pace at which marketing organizations company identified obstacles that slowed cy-
innovate—and teams have much greater cle times and discovered numerous opportu-
awareness of their overall impact on the busi- nities to automate processes, enhance sys-
ness and its customers. While agile ceremo- tems, simplify products, and introduce
nies alone won’t make an organization agile, self-service tools.
they can certainly encourage the right behav-
iors on a daily basis.

Automate relentlessly. While all the actions

outlined thus far can improve the customer
I n the digital era, every aspect of business
needs to move faster than ever before.
Companies need to accelerate implementa-
experience, they won’t necessarily lower tion of initiatives, eliminate costly delays, and
costs. To do that, teams need to find ways, continually improve the customer experience.
where possible, to automate the end-to-end Agile has a proven track record in all these
process. Every time team members must crucial areas. By taking agile way beyond
perform a high-frequency manual task, they software, organizations have the opportunity
should explore options for automating the to enhance their understanding of customers’
process to eliminate inefficiencies. Agile needs. As a result, they not only reduce the
teams can also analyze the ways in which cus- complexity of internal operations but also

20 | BCG on Agile—Insight
create powerful opportunities to win custom- the People & Organization practice. You may
er loyalty and significantly outperform their contact him by email at danoesastro.martin@
peers in the marketplace. bcg.com.

Michael Sherman was a partner and managing

director at Boston Consulting Group.

Stephen Edison is a principal in the firm’s Dal-

las office. He is a member of the Technology, Me-
dia & Telecommunications practice. You may
contact him by email at edison.stephen@bcg.
com.

Benjamin Rehberg is a partner and managing

director in BCG’s New York office and the global
coleader of agile at scale for the firm’s Technolo-
gy Advantage practice. You may contact him by
email at rehberg.benjamin@bcg.com.

Martin Danoesastro is a senior partner and

managing director in the firm’s Amsterdam of-
fice and the global coleader of agile at scale for

Boston Consulting Group | 21

Q&A

NICK JUE ON
TRANSFORMING ING
NETHERLANDS
AN INTERVIEW WITH THE CEO OF ING GERMANY

With fintechs and other new players In every transformation, one of the Another element is having a fact-
disrupting the financial services sec- key elements is having a very in- based case for change. You have to
tor, traditional institutions need to spiring vision, because you have to know what it means for your
be faster and more flexible than ever explain exactly what this transfor- margins and your volumes, and
before. ING Netherlands is one bank mation will bring to employees what it will bring in different
that responded to the new market dy- and customers. They have to un- economic scenarios. Facts make
namics by adopting agile practices, derstand why it’s important to do your case for change very
completely changing the way it works. it and be inspired by it. powerful.

Nick Jue, who has been with ING

since 1993, is currently the CEO of NICK JUE
ING in Germany. In his previous role
as CEO of ING Netherlands, he intro-
duced an agile way of working in or- At a Glance
der to best position the company to • Year born: 1965
respond to new competitors and find • Married, two daughters
new sources of advantage in a rapid-
ly changing world. Education
• Cedep, INSEAD at Fontainebleau
Nick spoke with Martin Danoesastro, • Master of marketing, Tilburg University, the
a senior partner and managing Netherlands
director in Boston Consulting Group’s • Master’s degree in business administration,
Amsterdam office, about the Erasmus University Rotterdam, the Netherlands
reasoning behind and the results of
the company’s transformation, and Career Highlights
the key success factors. The following • 2017 to present, CEO, ING-DiBa AG; head of ING in Germany, Austria &
is an edited version of their Czech Republic
conversation. • 2010–2017, CEO, ING Netherlands
• 2006–2010, CEO, ING Retail Netherlands
You successfully led ING Nether- • 2005–2006, general manager, corporate communications and affairs,
lands through three different ING Group
transformations. What were the • 2003–2005, head of corporate communications, ING Group
key success factors across those • 2002–2003, board member, ING Insurance Belgium
transformations?

22 | BCG on Agile
Last, you need a strong team to get But as the world around you is completely transform to an end-
through a transformation. You can changing so rapidly, how do you to-end agile way of working.
have a lot of discussions and a lot know which direction to take? What advice do you have for
of debates throughout the process, companies who want to change
but when you get into execution That was exactly the question we their way of working as well?
mode you need a team that fully asked ourselves. If you don’t know
supports the vision and really goes the direction, which one do you BCG took us to Zappos and Spoti-
for it. take? Do you jump on every new fy, companies completely outside
development? Do you pick one our own industry, and they in-
In your most recent transforma- and just go for it? spired us in the way they did
tion, you completely changed
the culture and way of working
to agile. And I remember that “Look outside for inspiration, think boldly, and
you used the analogy of a large
elephant racing against grey- dare to change.”
hounds to illustrate what ING
Netherlands had gone through.
Why is that? Alternately, you can adapt your or- things. Subsequently, BCG helped
ganization in such a way that us by designing and implementing
This picture of an elephant being you’re flexible if trends change, a model based on the inspiration
chased by greyhounds is exactly and you can adapt very quickly. I we got from those companies.
how people look at banks. People think we came to the conclusion
view banks as big, inflexible ani- that the only way to do this is to Next to that, I would say: think
mals, and they are chased every become agile, to start the agile way boldly and dare to change. When
day by “greyhounds” such as fin- of working. This was the only way you start a change process to be-
techs and other new companies. to be able to adapt very quickly to come more efficient and improve
trends and developments. the company and you aim for 5%,
What I try to do is train our orga- at the end the outcome will be in-
nization, the elephant, to be as fast What did you try to change cremental. If you start the whole
and as flexible as a greyhound. I about the way of working in the change process with the idea of
want to remain an elephant, be- organization? improving by 50%, then you proba-
cause I want to keep the power of bly will end up around 40%—but it
the elephant. But I also want to be There are a few things. One of will be much more than the out-
fast and flexible. them is collaboration, and what I come from the other approach.
mean by that is removing obsta-
Why would a bank want to be as cles so that teams and individuals So my advice to anyone going
fast as a greyhound? can work more effectively together. through this process would be to
look outside for inspiration, think
The world around us is changing Another thing is empowering boldly, and dare to change.
rapidly. We’re not competing just people, giving people a higher
against the traditional institutions, level of responsibility. People can Martin Danoesastro is a senior
so to stay relevant to our custom- decide things themselves, so they partner and managing director in
ers we need to innovate. With the feel more empowered and more the Amsterdam office of Boston Con-
switch to internet banking and mo- passionate. sulting Group and the global coleader
bile banking, the preferred chan- of agile at scale for the People & Or-
nel for customers has changed, And last but not least, I would say ganization practice. You may contact
and the number of customer con- culture. Next to structure and him by email at danoesastro.mar-
tacts has exploded. organization, you need a strong tin@bcg.com.
culture—and you need to
So with new technology and new implement it in every detail in the
competitors, we really had to organization.
change very quickly. Clinging to
the past was not going to make us ING Netherlands was one of the
future-proof. first traditional companies to

Boston Consulting Group | 23

FOCUS

WHEN AGILE MEETS

REGULATORY COMPLIANCE
by Norbert Gittfried, Erik Lenhard, Walter Bohmayr, and Claus Helbing

D elivering regulatory projects is

always a high-stakes proposition for
banks. Faced with an ever more demanding
scope, the traditional model of regulatory
compliance is less effective and is looking in-
creasingly outdated. For most companies, a
compliance environment, banks today are rigid, sequential approach to software design
investing extraordinary amounts of time and and development is commonplace, but it
money in such projects. The average bank leads to extraordinary waste in a large major-
spends approximately 40% to 60% of its ity of regulatory projects.
change budget on regulatory compliance—
but squanders a significant portion of this
investment on inefficiencies. As regulations
continue to expand, companies need to
Using the agile approach
fundamentally change their approach. could cut banks’ IT spending
A new agile model offers banks a promising
by 20% to 30%.
alternative approach. The perception among
bank executives—and among their board
members—is that using agile methods on Take the European Union’s Markets in Finan-
multiyear, multi-million-dollar regulatory cial Instruments Directive (MiFID) 2. This di-
compliance projects is both risky and imprac- rective—which aims to change how stocks,
tical. From our experience with clients, we bonds, derivatives, and commodities are trad-
believe this perception is false. We estimate ed, cleared, and reported—began as an 80-
that using the agile approach could cut page level 1 piece of legislation. The legisla-
banks’ IT spending by 20% to 30% and could tive process has faced numerous delays, and
significantly improve their ability to deliver the level 2 requirements for MiFID2 bal-
regulatory projects on time. looned to more than 5,000 pages. The tradi-
tional approach to regulatory projects is not
ideal for implementing this type of directive
An Outdated Model because its inflexible methods can result in
Banks are naturally conservative in their ap- waste. Banks get bogged down in the require-
proach to regulatory compliance—and with ments phase, attempting to address every
good reason. Serious failures can result in possible contingency, when they don’t have
fines, regulatory constraints, legal action, and all the information necessary to do so effec-
damage to a bank’s reputation. But as regula- tively. As new requirements are announced,
tory requirements continue to expand in scope creep becomes impossible to avoid, and

24 | BCG on Agile
teams must go back to the drawing board to members who aren’t needed on a regular
reframe the requirements—all while pushing basis, which wastes time and diminishes the
to create interim solutions so that they don’t team’s focus. Instead, a small but fully
fall too far behind on deadlines. dedicated core team of experts can work
much more effectively, drawing on business
and IT resources only when needed. With a
A New Model stable, core team—led by a strong product
The new agile model can be an extremely ef- owner—all stakeholders gain much greater
fective tool to help banks navigate the unex- transparency into the areas where the team
pected twists and turns that come with regu- has made progress, tasks that remain to be
latory projects—and these large-scale IT done, and impediments to completion.
endeavors cry out for agile:
To provide support to the core team,
•• The projects are expensive and high risk. companies should consider establishing a
separate acceleration team that focuses on
•• They have tight, indisputable deadlines. resolving conflicts and addressing barriers to
implementation (by ensuring that teams have
•• Regulatory requirements are unclear at the proper tools to work efficiently, for
the beginning, open to interpretation, and example). Particularly with large, complex
evolve over time. regulatory projects, rapid issue resolution is
essential.
•• Each new regulation requires a novel tech-
nical solution that touches many applica-
tions, systems, and departments.
A small but fully dedicated
•• Overdelivery is common—and costly to core team of experts can
organizations.
work effectively.
But agile is not a quick fix. It introduces new
ways of working that some employees may
find uncomfortable at first, such as short Prioritize and groom the backlog. Over the
iterations that enable teams to spot errors past five years, the number of new regulatory
and react to changes quickly, collaboration in requirements has tripled globally. (See
multidisciplinary teams, and full transparen- Exhibit 1.) While this number can easily
cy and accountability. Nonetheless, these reach into the hundreds per day, companies
principles can be extremely effective in must prioritize the top 20 or 30 items in the
transforming banks’ responsiveness to backlog. By doing so, they can quickly build
regulatory changes. (For an overview of agile an end-to-end plan for incremental delivery.
principles, see the sidebar.) And they can easily determine which features
are essential to meet the regulatory require-
To use agile successfully on complex regulato- ments. Prioritizing the backlog to eliminate
ry projects, organizations need to give special nonessential items can produce substantial
attention to several key aspects of the imple- savings. In our work with one bank, we
mentation. Companies that can master these discovered that only 40% of the hundreds of
best practices have an opportunity to acceler- millions of euros that project teams request-
ate ahead of their competitors and improve ed for regulatory projects were essential to
the effectiveness of their approach to regula- compliance.
tory compliance.
Divide requirements into clearly identifiable
Create a core team. When planning for and pieces. Teams should break down regulatory
implementing regulatory projects, many requirements into clearly defined, manage-
organizations make the mistake of creating able chunks that can be delivered inde-
an overly large project team. In most cases, pendently. In this way, they can continually
this group includes many business and IT deliver key portions of the requirements

Boston Consulting Group | 25

 AGILE PRINCIPLES IN PRACTICE
So what does it look like to apply agile prin- work in close collaboration with one
ciples to regulatory projects? another, minimizing time-consuming
hand-offs to accelerate end-to-end
•• Iterative. Instead of creating an delivery of workable solutions. Teams
exhaustive list of requirements and also continually improve their process-
detailed action items upfront (which are es, which increases their productivity
bound to change over time anyway), over time.
agile teams implement key functional-
ity as an iterative process—drastically •• Accountable. The single most import-
reducing the delivery risk and maintain- ant element of a functional agile team
ing flexibility in scope as the require- is the product owner, who has the
ments evolve. power to make decisions about scope,
timing, budget allocations, and product
This doesn’t mean companies should features. (See “Agile Development’s
not gather and detail requirements, but Biggest Failure Point—and How to Fix
they should identify the specific action It,” BCG article, August 2016.)
items just before implementation
because this is where agile teams can Designating a product owner is particu-
achieve meaningful efficiencies. larly important for managing the
extremely complex requirements
•• Value Focused. Relentless, continual inherent to regulatory compliance
prioritization of features according to projects. Because the product owner
transparent and fact-based criteria can serves as a single touch point for key
help teams focus their time and effort units, such as operational risk, financial
on mission-critical elements first. This risk, and legal teams, this person plays
approach allows them to deliver the a critical role in the overall success of
minimum viable product as early as any regulatory project.
possible and to supplement it over time
as needed while minimizing costs. A strong product owner who is dedicat-
ed to the agile team will immediately
Keeping the focus on value is particular- boost the team’s productivity.
ly advantageous for regulatory projects,
where companies tend to devote •• Flexible and Incremental. With
substantial resources to excessively regulatory projects, a hard deadline and
large, overly expensive solutions when a fixed budget may be mandatory, but
simple, quick fix would suffice. maintaining flexibility is critical to a
successful implementation. As regulato-
•• Cross-Functional. Agile teams include ry requirements shift, agile teams priori-
members from all the relevant func- tize features that offer the most value,
tions, such as business, IT, risk manage- launch short iterative development
ment, and legal. Each individual is fully cycles, and deliver incrementally.
dedicated to the team’s mission. They

rather than attempting to deliver the entire the backlog. This approach benefits the agile
project in one massive push. Some organiza- team because the design authority analyzes a
tions have established a central design regulatory requirement just once, streamlin-
authority to manage the backlog of require- ing the overall effort.
ments by identifying new ones, breaking
them down into individual items for each Stay in sync with the regulator. It’s a fact of
impacted area, and incorporating them into life for financial institutions that regulations

26 | BCG on Agile—Focus
 Exhibit 1 | Over Five Years, Newly Published Regulations Tripled

Number of
regulatory
changes ~60 ~75 ~100 ~150 ~200
per day

Number of regulatory
changes per year
50,000

40,000
+37%

30,000

~51,600

20,000 ~40,600

~27,000
10,000 ~17,800
~14,200

0
2011 2012 2013 2014 2015

Sources: Cost of Compliance, Thomson Reuters; Financial Times.

Note: Data covers regulatory changes worldwide.

imposed on banks change over time. When determined that the team’s results were suffi-
this happens, banks are left scrambling to cient and that further implementation would
address unforeseen changes—under extreme- add limited value, the regulator was even
ly tight deadlines. Knowing which require- willing to adjust certain requirements.
ments to implement and in what order can
be difficult. For this reason, the standard Generate trust by maximizing transparency.
sequential approach often requires substan- Because serious mistakes on regulatory
tial modifications, and absent such changes, projects can have ruinous consequences for
this approach may lead teams to miss crucial individual employees, board members, and
deadlines. Instead, teams should strive to organizations as a whole, building a culture
quickly create a minimum viable product, of trust and transparency is extremely
test it, learn what works, and iterate until it important. This process starts with board
meets the requirement. members, who must understand why and
how agile is used in regulatory projects and
To best achieve this, the product owner must fully support the approach. It also requires
stay in regular and close contact with the reg- trust among employees, who may be accus-
ulator, not only to ensure that the team inte- tomed to managing a discrete portion of a
grates regulatory changes into the project’s project and now must work collaboratively to
backlog but also to recognize when the regu- resolve challenges, bypass roadblocks, and
lator is satisfied. One European bank had take responsibility for the entire project.
great success with this approach. The bank’s Finally, it requires trust across units, so teams
agile team invited the regulator to attend ma- can work collaboratively toward the same
jor events, such as sprint reviews. By partici- overarching goal without fear that other units
pating in these discussions, the regulator will pass the buck. Teams must provide full
gained full visibility into how the bank was visibility into project status, including mile-
progressing and provided valuable input to stones, backlog size, delivery schedule, and
the agile team. At times, when the regulator key obstacles. Developing a series of shared

Boston Consulting Group | 27

 goals is also helpful, to ensure that everyone ganizations with a positive track record of de-
is moving in the same direction. livering complex projects via traditional regu-
latory compliance methods may not need
agile. But for the majority of banks that are
Would Your Regulatory Projects struggling to implement regulatory projects
Benefit from Agile Methods? on time and under budget, agile offers ex-
Numerous conditions may suggest that a traordinary benefits.
bank’s regulatory projects would benefit from
agile methods: Norbert Gittfried is an associate director in the
Frankfurt office of Boston Consulting Group and
•• The regulatory requirements are not a core member of the risk, regulation, and com-
viewed as stable and will likely change pliance team. He is the global topic coordinator
over time. for regulation and accounting as well as a re-
gional topic coordinator for compliance. You
•• The bank has a limited track record of suc- may contact him by email at gittfried.norbert@
cessfully deploying complex, cross-func- bcg.com.
tional projects that touch multiple systems
and platforms. Erik Lenhard is an associate director in the
firm’s Munich office, a core member of the Tech-
•• Some key stakeholders doubt that the nology Advantage practice, and a member of
organization can successfully deliver BCG’s software and agile leadership team. You
projects with the current delivery model may contact him by email at lenhard.erik@bcg.
or fear that regulatory projects will have a com.
negative impact on other important
projects in the pipeline. Walter Bohmayr is a senior partner and man-
aging director in the firm’s Vienna office, a core
•• Although the bank has developed an member of the Technology Advantage and Finan-
extensive and detailed list of functional cial Institutions practices, and the leader of
and nonfunctional requirements, most are BCG’s efforts in risk and finance IT and in cyber-
stuck in the concept development phase. security worldwide. You may contact him by
email at bohmayr.walter@bcg.com.
•• The organization has never successfully
delivered an end-to-end functional require- Claus Helbing is a managing director of Platin-
ment related to regulatory demands. ion and a core member of BCG’s Technology Ad-
vantage and Financial Institutions practices
•• The underlying IT architecture is modular with a strong focus on IT transformations and
enough to allow for partially independent IT architectures. He is based in the firm’s Munich
releases in certain applications. office. You may contact him by email at helbing.
claus@platinion.com.
•• The organization has had at least one
successful experience working with agile,
and senior leaders are willing to embrace
a new model.

This is not intended to serve as a checklist—

but rather to present a variety of conditions
where agile is ideally suited to help organiza-
tions surmount obstacles and achieve success.

R egulatory requirements inevitably

evolve, and banks need the flexibility to
respond effectively; otherwise, they may
waste an enormous amount of resources. Or-

28 | BCG on Agile—Focus
 PERSPECTIVE

THE END OF TWO-SPEED IT

by Hanno Ketterer, Benjamin Rehberg, Christian N. Schmid, and Djon Kleine

B ack in 2012, as established companies

began to make a serious push into digital,
BCG advocated a concept known as “two
“Ensuring Digital Readiness in Financial Ser-
vices,” BCG article, April 2016.) And it’s not
just because today’s companies can draw on
speed IT.” It was something of a compro- fleshed-out playbooks when implementing
mise—a very necessary one. If IT organiza- agile. (See “Five Secrets to Scaling Up Agile,”
tions were going to support digital initiatives, BCG article, February 2016.) More than any-
they needed to work in faster, more flexible, thing, it’s because two-speed IT creates—or
more collaborative ways. Yet management will create—significant challenges for compa-
often viewed these methods—based on nies that continue to employ it.
principles set out in 2001 in the Agile Mani-
festo—as untested and maybe even a bit Two-speed IT was a great intermediate stage,
wonky. Two-speed IT was a way of saying, but it is not a long-term solution. And its term
Don’t worry: you can use the new techniques is up.
for new areas like digital, and the traditional
approach for mission-critical core functions.
The Problems with Two-Speed IT
With its iterative development cycles, multi-
Two-speed IT was a good disciplinary teams, and continuous testing,
agile represents a sea change from the tradi-
idea at the time, but times tional “waterfall” approach, where develop-
ment flows sequentially from conception to
have changed. testing and where separate teams take over
at each phase. The differences between the
models—and the processes, culture, and even
It was a good idea at the time, but times have mindset they require—make the appeal of
changed. Today, two-speed IT is a compro- two-speed IT easy to understand. But operat-
mise that companies can no longer afford to ing at two speeds, we have observed, creates
make. The future of IT is one speed: all-agile. three problems.
That’s not just because agile has proved itself
at countless startups and major technology It’s harder to attract and retain talent. Re-
companies—and for all types of software de- cruiting and developing top-tier talent are
velopment, digital and nondigital alike. It’s perhaps the most important challenges that
not just because agile’s footprint is expanding CIOs face today. You can’t do great things
to industries like banking and insurance. (See without great people. But two-speed IT puts

Boston Consulting Group | 29

 companies at a significant disadvantage in speed companies, there is a well-entrenched
the war for talent. The organization is effec- notion that, changed world or not, the more
tively split into two parts—each with its dis- methodical waterfall approach is still better
tinct, and inevitable, culture. There is the suited for legacy and very large projects. But
“fast” group, which is seen as doing all the ex- it’s not. Large projects are particularly sus-
citing, cutting-edge work. And there is the ceptible to delays and rising costs, and tend
“slow” group, which is viewed as doing the to have very low success rates. Part of the
staid and traditional work. The dinosaur proj- problem is that testing comes only at the end
ects. The dull stuff. of the process, so errors are found late in the
game, when fixes become time-consuming,
It’s not hard to guess which group everyone difficult, and expensive. Agile, with its itera-
wants to join. This causes a problem because tive cycles and continuous testing, finds and
having top talent in the slower group is par- corrects errors as development progresses.
ticularly important. Here is where the hard There is no last-minute—and nightmarish—
challenges of transforming legacy systems are back-to-the-drawing-board scenario.
tackled—and where the larger part of IT
spending still goes. But when people see The waterfall approach works well when the
themselves as stuck in the slow group with no goal is fixed—if you know, for instance, that
chance to switch sides, they’ll look for oppor- you need to build a bridge across a river. But
tunities elsewhere. in today’s IT realm, fixed goals are the excep-
tion. Whether it is a digital front end or a
core business system, requirements change
The ability to develop core frequently because of customer feedback,
competitors’ moves, evolving regulatory envi-
systems faster and more ronments, and alterations made to associated
systems.
flexibly is crucial.
Agile-related processes incorporate change
better than waterfall methods do because
Two-speed IT, we are seeing, leads to talent they were designed to incorporate change.
drain. It also makes it harder to hire talent. This adaptability is something the entire IT
Today’s digital generation looks for—and ex- organization—not just part of it—needs to
pects—a workplace that emphasizes the flexi- benefit from.
bility, cooperation, and adaptability that are
hallmarks of agile. In a world where customers have more
choices than ever before, the ability to
It leads to “hurry up and wait.” In today’s IT develop core systems faster and more flexibly
environment, fast-moving agile initiatives in- is crucial. To quote Peter Jacobs, the CIO of
creasingly rely on core and legacy systems. ING Bank Netherlands: “I would rather work
Consider, for example, a digital front end that agile at my core bank system than at the
links to a back-end platform. In such a case, channels.”
two-speed IT means slamming on the brakes.
Fast-moving projects will often run up
against—and be delayed by—slow traditional Making All-Agile Work
test-and-release cycles. What could have been While a single speed can “spread the wealth”
running tomorrow is now set to run after the of agile throughout the IT organization—and
summer—maybe. This “slowest common de- beat back the challenges that two speeds cre-
nominator” issue is becoming increasingly ate—the model won’t work without the sup-
problematic as digital applications become port and commitment of senior leaders. They
more central to business and must interact can mobilize the troops and help steer—and,
closely with core systems. when necessary, push—the initiatives and
changes that will ease the move to all-agile. A
It keeps the larger organization from realiz- number of steps, we’ve found, are particular-
ing the benefits of agile. Within many two- ly crucial.

30 | BCG on Agile—Perspective
Identify and empower agile champions. Two- like a major enterprise-resource-planning
speed IT has helped companies get agile up transformation, won’t lend themselves to
and running in part of their organization. going live in little pieces, agile may mean
The experience and talent already developed releasing code to the testing environment—
can be harnessed to spread agile concepts— but not the production environment—every
and knowledge—throughout IT. The most day. Agile is a flexible set of principles, not a
enthusiastic and communicative agile team rigid doctrine. It should be implemented in
members can serve as mentors to those just that spirit.
getting started—providing insights on what
works, what doesn’t work, and how to do Offer incentives to middle management.
things better. Agile changes the role of middle managers.
Eventually, many of the coordinating tasks
Create the right technical environment. that have historically fallen to them will
Legacy systems are not a deal breaker for disappear. In agile, managers are much closer
agile. Indeed, agile’s main principles can be to the content and the technologies. While
translated to work on any project, and indus- they still have some traditional managerial
tries that still rely heavily on legacy applica- responsibilities, like recruiting and evalua-
tions and infrastructure—such as banking, tions, they now work in the teams them-
insurance, and aerospace—have already selves. And on these teams, they are equal to
started to embrace, and benefit from, agile. every other member—serving, for example,
as a fellow developer. Instead of instructing
But there are modern technologies and prac- others, they work as coaches and advisors.
tices that can make the agile approach more
effective. A decoupled architecture—in which
applications, infrastructure, and data interact
with one another through standardized inter-
Agile will take different
faces like APIs and microservices—allows forms even within a single
teams to work more independently of one an-
other. Now they’re in control of their own de-
organization.
velopment speed (and if one service breaks,
just that service is down—not the whole sys-
tem). Companies can also increase speed and Given these shifts, it’s easy to understand
efficiency—often dramatically—by combin- why middle managers would resist the migra-
ing agile with techniques like continuous de- tion to agile: they can see themselves losing
livery and continuous deployment of applica- control and power. How to avoid this percep-
tions. This reduces the manual tasks—and tion? One way is to start getting these manag-
the resources—required. Companies should ers closer to the front—in both body and
be taking these steps anyway to improve their mindset—through education, training, and
responsiveness and accelerate their digital participation in agile conferences and the ag-
transformation. ile community. KPIs used in measuring a
manager’s performance should be tweaked
Implement agile in an agile way. A large as well. They should encourage the quick de-
established company is likely to implement velopment and deployment of features but
agile very differently than a startup will. After also tolerate some failures as long as the
all, bigger, older organizations must account overall system stays stable. This is much more
for the layers of processes and hierarchy in line with how agile works.
developed over the years. Similarly, agile will
take different forms even within a single Develop a digital culture. Migrations from
organization. Whereas one team may find two-speed to all-agile IT won’t happen
two-week sprints optimal, another may overnight. And with the war for talent
determine that four or six weeks work better. continuing, it’s important to send a message—
Agile on a legacy mainframe, meanwhile, to current and prospective employees—that
won’t look the same as agile on a mobile agile and the workplace it creates are the
shopping app. And because some projects, company’s future. Hackathons—marathon

Boston Consulting Group | 31

 sessions where teams compete to develop nade, the CIO of ING Bank,” BCG article, De-
software and even hardware—have been used cember 2015.)
to foster a fast-moving “think outside the box”
culture. (In fact, Facebook’s ubiquitous “like” Today’s businesses are under mounting pres-
button traces back to a company hackathon.) sure to get products to market and systems
The idea is to take steps that let technology deployed while minimizing risk and delay.
experts know that they can stay—and Two-speed IT was an important step in gain-
succeed—as technology experts; that, ing experience in new and better ways to do
contrary to the old days and the old ways, this. Now it’s time to take the next step. A re-
they don’t need to take a managerial position turn to a single speed—one based on agile
to make a career at the company. principles—will improve efficiency and out-
comes across all technology delivery and, ulti-
Establish joint business and IT teams. One of mately, across the company. The result: better
the hallmarks of agile is the cross-functional experiences for customers—and a competi-
team, in which members representing the tive edge for the business.
business and IT work together. Migrating to
agile means breaking down organizational Hanno Ketterer is a senior partner and manag-
barriers and fostering communication and ing director in the Amsterdam office of Boston
collaboration across once-isolated domains. Consulting Group and the global leader of the
(See The Power of People in Digital Banking insurance sector in the firm’s Technology Advan-
Transformation, BCG Focus, November 2015.) tage practice. For more than 20 years, he has led
Flexibility is crucial here, too. A key tenet of large-scale technology transformations and
agile is that someone from the business side post-merger integrations in the banking and in-
serve as the “product owner.” But for IT4IT surance industries. You may contact him by
products and tools, such as telepresence, it email at ketterer.hanno@bcg.com.
will make more sense for this owner to come
from IT. Once again, the experience and Benjamin Rehberg is a partner and managing
practices already developed on the agile side director in the firm’s New York office and the
of two-speed IT can prove invaluable. global coleader of agile at scale for the firm’s
Technology Advantage practice. You may contact
him by email at rehberg.benjamin@bcg.com.
Taking Agile Even Further
Unlike two-speed IT, the all-agile model is a Christian N. Schmid is a principal in BCG’s Mu-
long-term solution—and not only for the IT nich office. He is active in the firm’s Technology
organization. Think about the main princi- Advantage practice and is the global operational
ples of agile: short iterations that enable leader of the Simplify IT topic in the Financial
teams to quickly spot errors and react to Institutions practice. For the past ten years, he
changes; collaboration in multidisciplinary has driven large-scale transformations—includ-
teams; and progress that remains visible— ing digital and agile transformations, simplifica-
and tested—as work continues. These are tion and restructuring programs, and post-merg-
principles that can be utilized to great effect er integrations—for numerous companies. You
throughout a company, increasing its respon- may contact him by email at schmid.christian2@
siveness to customers and competitors alike. bcg.com.

Already, we are seeing agile move beyond IT Djon Kleine is a project leader in the firm’s San
into areas such as product management and Francisco office. A member of BCG’s Technology
marketing, and functions that include human Advantage practice, he has experience in technol-
resources and risk management. (See The Ag- ogy-related transformations involving digital, ag-
ile Marketing Organization, BCG Focus, Octo- ile, software-development, and cloud-computing
ber 2015.) Spotify and ING are notable exam- topics. You may contact him by email at kleine.
ples of companies that are bringing an agile djon@bcg.com.
style of working to IT and the business alike.
(See “Building a Cutting-Edge Banking IT
Function: An Interview with Ron van Keme-

32 | BCG on Agile—Perspective
 PERSPECTIVE

FIVE SECRETS TO SCALING

UP AGILE
by Kaj Burchardi, Peter Hildebrandt, Erik Lenhard, Jérôme Moreau, and Benjamin Rehberg

C ompanies across many industries are

struggling with the transition to agile, a
fast, iterative software development method.
creased the value delivered per dollar spent
by 50%, simultaneously cutting development
time in half and improving employee engage-
Too many companies have the appearance of ment by one-third.
agile—with, for example, hastily converted,
brightly colored meeting rooms and daily As the quality of software rises and the re-
standup meetings—but they achieve little of sponsiveness of processes improves, some
tangible impact. companies are applying agile principles to ac-
tivities other than software development. For
At software startups in which agile is com- such companies, agile can become a journey
monly used, the development team is at the of continuous improvement.
heart of the business, so buy-in, sustained
commitment, and collaboration come fairly
naturally. It is not easy, however, to integrate Why Agile?
self-directed, cross-functional agile teams into Agile grew out of a desire to improve tradi-
the existing hierarchy of large companies. tional methods of software development.
Customarily, software has been developed se-
Some large companies, however, are figuring quentially, with the waterfall serving as a
out how to make agile work. Rather than im- rough metaphor for its progression. Separate
pose its specific methodologies, they apply its groups conceive, design, build, test, put into
general principles, paying special attention to operation, and maintain software, each group
the integration of agile teams into the rest of waiting for the preceding group to complete
the organization. its work. The method is inefficient. In many
cases, participants spend more time sitting in
When large companies get agile right, the re- meetings and managing handoffs across orga-
sults can be stunning. Productivity can im- nizational boundaries than writing and test-
prove by a factor of three. Employee engage- ing code. According to the often-cited The
ment, measured in quantitative surveys, Chaos Report, less than 10% of large software
increases dramatically too. New product fea- projects come in on time and on budget.1
tures can be released within weeks or months
rather than quarters or years. Rates of inno- The waterfall method comes from
vation rise, while the number of defects and engineering, but writing many types of
do-overs declines. In the first year after going software is different from building a bridge. A
agile, one bank’s development team in- river doesn’t change its course, but software

Boston Consulting Group | 33

 users have frequently changing and can be difficult in large companies, given lay-
unpredictable needs. Consequently, agile ers of processes and structures, such as HR,
relies on bringing together many different finance, and legal functions. Rather than
points of view and supporting back-and-forth viewing agile as yet another new process,
dialogue between developers and business companies should integrate agile values into
executives. their own software-development organization
and culture, making reasonable modifications
Many forms of agile have been developed, when necessary. (See the sidebar, “The Secret
but at its heart, agile is a set of beliefs. It is Sauce: Making Agile Work.”)
iterative, empirical, cross-functional, focused,
and continually improving: There are five secrets of success for large-
scale agile transformations.
•• Iterative. Agile is based on doing things
repeatedly until you get them right. Short
iterations mean that teams can change It Starts at the Top
direction and react quickly. Progress Transformative change requires support from
remains visible and predictable because the top. Senior leaders need to be actively in-
development happens in short sprints. volved in fundamental decisions about the
Delivery risk declines progressively. business purpose of going agile and the cul-
tural barriers and root causes that might
•• Empirical. Agile teams rely less on the stand in the way of success. Without this com-
plans, estimates, and assumptions com- mitment, legacy approaches to, for example,
mon to waterfall methods and more capital allocation, HR processes, and portfolio
on A/B testing and other real-time met- management will doom agile. That’s why
rics generated by end users. One of the business—not just tech—leaders must be ac-
many virtues of sprints is that they countable.
produce empirical feedback quickly,
allowing teams to self-correct. Agile teams
also measure and track their activities
closely.
Business—not just tech—
leaders must be accountable.
•• Cross-functional. Agile teams have
members of such relevant functions as
business, marketing, development, and, in Agile transformations are different from oth-
some industries, risk management er transformations: leaders must mobilize
working closely together in order to management to march in an unfamiliar new
facilitate early and frequent feedback direction. The fast pace and cross-functional-
from business executives and customers. ity of agile can put many executives out of
All the members of the team have specific their comfort zone. Without strong and
roles and responsibilities. steady support from the top, many executives
and team members revert to the norm. The
•• Focused. Agile teams are fully account- CEO of a large European bank told us that he
able. They do not work on several projects wants his organization to operate as a tech-
simultaneously; nor do they leave a nology company that deals with financial ser-
project once their specific duty is done. In vices products.
for the duration, they develop a sense of
accountability.
To Fly, You Need Pilots
•• Continually Improving. Agile software is In a large organization, agile pilots are neces-
a work in progress, with constant updates sary in order to determine whether agile will
and experimentation aimed at satisfying work there and whether the organization will
customers. accept agile principles. Pilots are critical to a
company’s making the necessary adaptations
Putting the agile set of beliefs into practice to agile.

34 | BCG on Agile—Perspective
 THE SECRET SAUCE
Making Agile Work

There are several best practices that help number of people who can eat a single
activate the agile set of beliefs at large pie. The idea is to limit membership to
companies. These practices—which those individuals who possess essential
embrace iterative, empirical, cross-function- and complementary skills so that the
al, focused, and continually improving team can accomplish real work. Howev-
approaches—accommodate the realities of er, this rule can limit the ability of large
large organizations while staying true to companies to have the right experts on
agile principles. a team. The rule may, therefore, be loos-
ened as long as all members are fully
•• Iterative. Agile teams complete on board—part-timers need not
manageable chunks of work—and apply—and contributing, not delegating.
produce a prototype—within fixed time
periods. On the basis of feedback on •• Focused. The single most important
the prototype, the team moves forward element of a functional agile team is
to a new set of tasks. The technical the “product owner,” a single executive
environments of large companies may who is empowered to make decisions
not easily permit teams to operate in about scope, timing, allocation of
the two-week sprints customarily used budget, and product features. In a pure
in agile, so many of them have form of agile, the owner does need to
stretched the sprints to intervals of four consult a steering group or governance
to six weeks. body. In large companies, however, this
focus may be shared by two or three
•• Empirical. Testing, a cornerstone of the executives, such as a product manager
agile approach, ensures that software and a business analyst or expert and
quality remains high and development possibly a “product executive.”
activities are run efficiently. Large
companies, especially those new to •• Continually Improving. Agile teams
agile, may not have invested heavily in rely on retrospectives, obstacle removal
testing tools. But as long as they are processes, and scrum masters to
simultaneously building the business continually identify opportunities to
case for making these investments, enhance productivity by tweaking and
companies can forgo some of the tuning their environment and way of
rigorous testing conducted by true agile working. The specific methodologies are
organizations. less important than the commitment to
view the creation of software as an
•• Cross-Functional. Ideally, teams ongoing—not fixed—and organic
should not violate the “pizza box rule,” process.
which restricts team membership to the

For example, in a scrum, a single product Likewise, it might be difficult to fully imple-
owner takes responsibility for managing the ment iterative development in all instances,
relationship and interactions between but frequent feedback between developers
developers and customers. This role requires and business executives ought to be the
a careful mix of technical and business skills. norm.

Companies may need to have even two or Staged rollouts in waves create momentum
three people collectively serving in that role by building relevant capabilities and ensure
until the organization develops people who that agile principles and culture are embed-
have the required multifunctional skills. ded across the organization. (See Exhibit 1.)

Boston Consulting Group | 35

 Exhibit 1 | Agile Transformations Take Time

% of teams with mature agile practices

100

The organization reaches the tipping point,

80 at which senior-leadership support is critical

The model is refined, and the third

60 wave of pilots is launched
ADOPTION

8
The transformation
management office
40 Adjustments are made in closely monitors the
response to the pilots rollout; training and
refinement are ongoing
Initial
pilot
projects The second wave
20 are of pilots is launched 7
launched 6 The scale model and
5 wide-scale training are
4 implemented
2 3
1 A model for achieving scale is defined
0
6 12 18 24 30 36
MONTHS FROM INTRODUCTION

Sources: BCG case experience and analysis.

Managing the Tipping Point resentful, and certain activities may be

The pilot phase is followed by steps that must outsourced.
be executed with some delicacy to avoid un-
necessary tension: it’s time to scale up agile These are all real technology and organiza-
in an organization that may be theoretically tional concerns that will not resolve them-
willing to accept it but, practically, is chal- selves on their own. Executives must actively
lenged to do so. manage the integration, and the enterprise
almost certainly will have to invest in training
and development to encourage the right cul-
There are several successful ture and behaviors.

approaches for scaling up Several successful approaches exist for scal-

ing up agile within organizations. At one ex-
agile within organizations. treme, the music-streaming service Spotify
has fundamentally changed its organization
structure. The company’s product delivery or-
HR processes, such as performance man- ganization is made up of squads, tribes, chap-
agement, may not be set up to handle fully ters, and guilds. The primary unit is the
dedicated cross-functional teams where squad, a multidisciplinary team that works
team—not individual—results matter most. toward a shared purpose and is run by a
Agile’s flexibility will almost certainly strain product owner. Tribes are groups of squads
budgeting processes even if agile is ultimately that work on related areas. Chapters are
less costly than traditional development groups of people with similar expertise across
activities. An organization’s IT infrastructure squads, and they form the line organization.
may not be set up to accommodate continual Guilds are interest groups that anyone can
integration and deployment because of join. (See Exhibit 2.) Other companies have
lengthy provisioning times. Furthermore, simply overlaid cross-functional teams above
traditional development teams may be existing hierarchy.

36 | BCG on Agile—Perspective
 Exhibit 2 | Organizing the Spotify Way

Tribe Tribe

Chapter Chapter

Guild
Chapter

P P P P P P P P
Squad Squad Squad Squad Squad Squad Squad Squad

SQUAD TRIBE CHAPTER GUILD

• The primary working unit • A collection of squads that • A group of people with • An interest group that
• Self-organizing and work on related areas to similar competencies anyone can join
autonomous solve a specific business across squads
• Long-term mission problem • Responsibility for
• Tribes support squads personnel development
and training

Source: Spotify.

Measure, but Measure the Right ample, create teams consisting of the leaders
Things of each agile project, and they share best
The ultimate goal of agile is to improve the practices.
business. Therefore, the ultimate measure-
ment should relate to business performance.
If the goal of a bank’s agile project is to re-
duce the dropout rate in credit card applica-
tions, then the dropout rate should be the
A t its heart, agile is about creating the
right context in which your people—spe-
cifically your developers—can do their best
most important metric. But in order to im- work. It is often thought of as a method for
prove the business, companies also need to writing software, but ultimately, it is a way to
track software reliability, security, complexity, run and continually improve your business.
and size.

That’s where software measurement tools en-

ter the picture. These tools allow companies
to demonstrate empirically the productivity Note
and quality improvement of agile develop- 1. The Standish Group International, The Chaos Report,
1995, http://www.csus.edu/indiv/v/velianitis/161/
ment and the overall performance of agile ChaosReport.pdf.
teams.

Kaj Burchardi is a managing director in the

Never Stop New York office of Platinion, a subsidiary of
Agile development is an exercise in continu- Boston Consulting Group that provides
ous improvement. It is not a one-off exercise. IT consulting services. He specializes in the
Agile requires constant monitoring to ensure development of strategic IT concepts and
proper functioning. Companies need to take solutions, IT architecture, and digital trans-
steps to bake the agile principles into the or- formation, especially in the financial services
ganization. There are many ways to ensure industry. You may contact him by email at
that agile endures. Many companies, for ex- burchardi.kaj@bcgplatinion.com.

Boston Consulting Group | 37

 Peter Hildebrandt is a partner and managing Benjamin Rehberg is a partner and managing
director in the firm’s Los Angeles office who spe- director in BCG’s New York office and the global
cializes in technology and operational issues in coleader of agile at scale for the firm’s Technolo-
the financial services industry. You may contact gy Advantage practice. You may contact him by
him by email at hildebrandt.peter@bcg.com. email at rehberg.benjamin@bcg.com.

Erik Lenhard is a principal in BCG’s Munich of-

fice and a core member of the Technology, Media
& Telecommunications practice and Technology
Advantage practice. He is a topic expert in digi-
tal transformation, strategy information man-
agement, big data, and agile software develop-
ment. You may contact him by email at lenhard.
erik@bcg.com.

Jérôme Moreau is an associate director in the

firm’s London office and a core member of the
Technology Advantage practice who specializes
in digitization, technology transformation, and
agile development. Before joining BCG, he
worked for eight years in the automotive sector
as the leader of an agile task force. You may con-
tact him by email at moreau.jerome@bcg.com.

38 | BCG on Agile—Perspective
 PERSPECTIVE

TAKING AGILE TRANSFOR-

MATIONS BEYOND THE
TIPPING POINT
by Neil Pardasani, Martin Danoesastro, Koen Alfrink, Liza Stutts, Tom Schotkamp, and Pim Hilbers

A gile has proved its value in industries

far afield from software, where it was
born. But when companies expand agile
What’s good for tech firms and startups, it
turns out, is also good for more traditional
companies. Fighting off fintech startups, banks
beyond the pilot phase, they often run into were perhaps the first organizations outside
challenges as friction develops between of pure technology companies to embrace ag-
traditional and agile teams. ile. But agile has now expanded into a wide
variety of digital-enabled industries, and agile
At this tipping point, senior leaders face a principles are being adopted far beyond soft-
crucial choice. Do they limit the use of agile ware development. (See “Taking Agile Way
and its benefits—including speed, customer Beyond Software,” BCG article, July 2017.)
focus, and employee engagement—or do they
unlock far greater value by changing the op- To date, most companies limit agile to what
erating model so that agile becomes the we call the delivery organization—typical
norm rather than the exception? Committing headquarters functions such as marketing,
to a new operating model requires a transfor- product management, digital channels, and
mational approach, led from the top. IT. As agile spreads, it looks and feels differ-
ent, depending on the underlying nature of
the work. What agile means for the delivery
The Benefits of Agile organization, for example, is different from
When a customer or a business challenge re- what it means for contact centers and opera-
quires input from different parts of a compa- tions. But the overall mindset and principles
ny, it’s logical to bring together and empower should remain consistent.
people from those disparate areas to find a
solution. Software developers embraced this As many organizations have found, the payoff
idea by creating multidisciplinary teams is worth the effort. Companies that have ad-
whose daily and weekly operating rhythms opted agile at scale have increased customer
generated minimum viable products that satisfaction by delivering better products fast-
could be tweaked and improved in response er while simultaneously improving efficiency
to customer feedback. This way of working in- and employee engagement.
creases customer focus, output orientation,
and team empowerment. Software that
emerged from this process met customer Managing the Transition
needs far better than software that was devel- Companies cannot proceed with agile pilots
oped through conventional methodologies. forever. Eventually, they have to decide

Boston Consulting Group | 39

 whether to take the next step and achieve hold. They also should seek to ensure that ag-
scale with this new way of working. ile teams work in the same location—a chal-
lenge for companies with teams scattered far
The rest of the organization can become re- and wide. These changes require the full com-
sentful when agile teams make decisions and mitment of the CEO and other senior leaders.
progress more swiftly and as they receive re-
sources that might otherwise be dedicated to A top-down transformational approach may
more traditional business-as-usual initiatives. seem counterintuitive. After all, the goal of
Similarly, when the number of agile teams agile is to empower rather than control
grows, they become more difficult to manage teams. But structurally changing the operat-
as an exception. The embedded bureaucracy ing model can succeed only when the top
often takes hold again, and agile’s benefits team leads. This can be a scary transition, es-
start to slow and ultimately disappear. Unsur- pecially for leaders, but it allows companies
prisingly, the morale of the agile teams sags to fully capture the value of agile across their
with the return of hierarchies and slow deci- organization.
sion making. Managing both agile and tradi-
tional tracks is challenging. Companies can
either quarantine agile in relatively isolated A New Role for Leaders
parts of the business or fully embrace agile at Leadership looks different in an agile organi-
scale. zation. One key role of agile leaders is to en-
sure alignment around purpose, strategy, and
Agile is a fundamentally different way of priorities. Leaders need to communicate what
working that requires a change in culture, val- they want and why, and then empower their
ues, and behaviors. Achieving these changes teams to figure out how to achieve it. The
at scale requires alterations to the context in greater the alignment that leaders create, the
which people work. And the only effective more autonomy they can grant.
approach to changing the context at scale is
to transform the organization’s operating In the C-suite and right below it, leaders can
model. (See Exhibit 1.) Organizations need to sometimes be siloed, internally oriented, risk
change underlying structures and roles, sys- averse, and motivated by their own perfor-
tems, governance and funding mechanisms, mance metrics rather than those of their
and career paths in order for agile to take team. They have risen to the top ranks by op-

Exhibit 1 | The Eight Elements of an Agile Operating Model

Purpose, strategy, and priorities

Governance and funding Structure

Processes Culture and behavior Leadership and talent

Measurement framework Technological enablers

Source: BCG analysis.

40 | BCG on Agile—Perspective
erating in ways often counter to agile. Accus- an agile organization are familiar to any exec-
tomed to overseeing budgets and business utive who has gone through a successful cor-
cases, these executives instead need to set porate transformation. (See Exhibit 2.) The
clear objectives and guardrails and then give steps of committing, designing, preparing,
agile teams the responsibility and resources and refining are variations of any large-scale
to achieve those goals. In providing visible change.
support for agile teams, they must demon-
strate openness, trust, and collaboration. What’s different is that the transformation
itself needs to be conducted using agile meth-
Not all leaders can make this transition. For ods. One premise of agile is that learning
example, one Asia-Pacific company undergo- through trial and error is the best way to dis-
ing an agile transformation replaced cover answers to essential questions. The
one-quarter of its top 40 leaders with individ- transformation should rely on a minimally vi-
uals who better embodied agile values, such able approach to analysis, skills, and technol-
as collaboration and teamwork. ogy. Iteration is core to agile. Once an organi-
zation takes the first steps toward an agile
Middle managers will also face challenges. transformation, the process unfolds through
Those who have grown up inside silos will continual refinement and adjustment. A will-
need to learn how to manage cross-functional ingness to adapt is the raison d’être of a suc-
teams and delegate decision making to em- cessful agile transformation and of the ag-
ployees closer to the field. They may even ile-leadership mindset.
need to return to doing the daily work rather
than only managing other people. The coor-
dination activities that consumed so much of Are You Ready?
managers’ time are increasingly handled We are bullish on agile because we’ve seen it
within and between teams. create greater employee engagement, higher
product quality, faster product delivery time,
and stronger financial performance.
What’s Different About Agile
Transformations At the same time, top-down agile transforma-
While agile may be a fundamentally different tions are challenging. Leaders need to reflect
way of working, many of the steps to become on whether they’re willing to commit fully to

Exhibit 2 | A Typical Journey Launching an Agile Model

Pilot Commit Design Prepare Launch Iterate and harden

Pilot
timing 1–3 months 6–12 months 6–18 months
varies

Staff the new model

Define new structure Pressure test, learn,
(design, test, iterate, size) Charter the teams and refine structure
(KPIs and backlog)

Develop and pilot • Governance and funding

enablers of minimum • People practices Execute and refine enablers
Test viable products • Processes
Set
and
approach
learn
Initiate and accelerate data and tech transformation

Define coaching needs and Provide new-behavior

Coach teams
develop capabilities coaching and training
Develop and implement senior-leader behavior training, change management,
communications, and employee-sentiment tracking

Source: BCG analysis.

Boston Consulting Group | 41

 new ways of working and leading and wheth- Koen Alfrink is a principal in BCG’s Melbourne
er their organization can withstand the tu- office. He is a core member of the Financial In-
mult of such a transformation. stitutions and People & Organization practices
and specializes in agile at scale. You may contact
In a digital world, we think the choice is clear. him by email at alfrink.koen@bcg.com.
Agile provides two crucial strengths: the
alignment to ensure that resource allocation Liza Stutts is a principal in the firm’s Boston of-
and strategy are in sync, and the autonomy to fice and a core member of the People & Organi-
promote the agility needed in a fast-moving zation practice. She focuses on topics including
economy. You should start with a series of pi- agile at scale, leadership, and talent. You may
lots. But it takes a full-scale transformation to contact her by email at stutts.liza@bcg.com.
reap all the riches and rewards of agile.
Tom Schotkamp was a principal at BCG.
Neil Pardasani is a senior partner and manag-
ing director in the Los Angeles office of Boston Pim Hilbers is a principal in the firm’s Amster-
Consulting Group. He is also the global node for dam office and a core member of the Financial
agile at scale in the Financial Institutions prac- Institutions practice who specializes in agile at
tice. You may contact him by email at pardasani. scale. You may contact him by email at hilbers.
neil@bcg.com. pim@bcg.com.

Martin Danoesastro is a senior partner and

managing director in the firm’s Amsterdam of-
fice and the global coleader of agile at scale for
the People & Organization practice. You may
contact him by email at danoesastro.martin@
bcg.com.

42 | BCG on Agile—Perspective
 VIEWS FROM THE FIELD
by Paul McNamara

T he agile practitioners at BCG share

their insights in many forums. Following
are a selection of relevant blog postings.
that must get done every week, month, quar-
ter, or year, but we are also surprised by un-
expected, urgent work that must be ad-
dressed immediately. Distractions are
inevitable. There’s never enough time to get
everything done.
LinkedIn blog
Can Agile Work for Business-as- Business-as-usual teams can use agile tech-
niques to prepare for planned work. Planned
Usual Teams?
work includes activities like weekly reporting,
One of the common misconceptions about recurring meetings, performance reviews, ex-
agile is that it can be used only for project ecutive-meeting preparation, and so on.
work, not business-as-usual work. Busi-
ness-as-usual work refers to the routine, day- To create more agility when it comes to rou-
to-day operations that keep the business tine work, teams can create laminated cards
functioning smoothly (as opposed to innova- that define planned tasks. The cards can be
tive projects aimed at changing the business). posted on an agile wall that teams use to track
work, taken down when the task is complete,
Agile is used on a project basis for obvious and then reused when the task rolls around
reasons. With agile, project teams are more again. With this approach, you can be sure
productive, products get to market quicker, that routine activities are under control and
and companies can be more responsive to that the backlog never gets overwhelming.
customers’ needs. As agile spreads through-
out the entire organization, however, teams The real challenge comes when coping with
that engage in business-as-usual operations unplanned tasks. Your boss needs a presenta-
can also use it. tion for an upcoming meeting. You need to
respond to an urgent regulatory request. You
So, if you’re not working on an agile project get pulled into a high-priority project. You
but want to get the benefits of agile in the can’t plan for these things—and they often
workplace, here are a few tips. have urgent deadlines.

Plan for the expected—and the unexpected. In these situations, use agile to manage time
In our daily work, we all have to balance appropriately. Start by establishing a simple
competing priorities. We have regular work rule: nothing gets done unless it’s on a card

Boston Consulting Group | 43

 Example of a Sprint Board

To Do Doing In Review Done

Project Work

Same work every

BAU Planned
cycle, so reuse cards

Set time box for BAU Add a card for each

work based on past new unplanned BAU
BAU Unplanned
experience to set aside task and record the
capacity for the sprint 3 time spent on it

Source: BCG.
Note: BAU=business as usual.

that will be posted on your agile wall. (See weekly, and monthly basis. Once you can vi-
the exhibit.) sualize when and how your routine work is
being disrupted, you can plan for these dis-
Also, take 15 seconds at each standup meet- ruptions—and prioritize more effectively. You
ing (a standup meeting is a feature of agile) can also pinpoint the areas where time is be-
to jot down on a card what you did and how ing squandered.
long it took. Afterwards, the agile coach can
tally up how much time was spent on these So, whether you’re engaged in project work
unplanned tasks. Be sure to track (in the mo- or business-as-usual work, there’s much to be
ment, not weeks or months later) how long gained from agile ways of working.
tasks take so that you can truly understand
the cost of unplanned tasks. Surprisingly, the
amount of time spent on unplanned tasks is LinkedIn blog
quite consistent from month to month, which How Leaders Can Signal that an
means that teams can budget time for them.
Agile Transformation Differs from
Anything That’s Come Before
Prioritize relentlessly. Create a single board
that allows teams and other stakeholders to For an agile transformation to work, people
visualize the status of planned work, un- need to believe in it. It needs to look and feel
planned work, and project work. When some- different, and that requires major changes,
one makes an urgent, unplanned request, from the top down. Top executives need to
teams can consult the board and respond this make clear not only that they expect their
way: “Of course we can do that. Can you help management teams to change but that they
me understand if it’s a higher priority than themselves are willing to change.
the planned work and project work on the
board?” To send a strong signal that this transforma-
tion is different from anything that has come
Marketing teams often find this approach before, companies need to make meaningful
particularly useful. One creative director who changes in the executive ranks, break down
used this technique said, “This is amazing. strongly held cultural barriers, build a sense
Now that I can show my boss the impact of of camaraderie, and create opportunities for
distractions, it’s no longer a fight. It stops the people to experiment with new ways of work-
back-and-forth.” ing. This requires change at all levels of the
organization, especially at the top.
If you want to incorporate agile into your
business-as-usual operations, start by under- So, senior executives need to ask themselves:
standing how you spend your time on a daily, “What am I willing to give up?”

44 | BCG on Agile—Views from the Field

Here are a few examples. posting the roadmap and plans in plain sight.
It led tours of the team room for employees,
Give up your corner office. Being given a who were encouraged to ask questions so
corner office has long been a measure of that they could feel included as part of the
success for any manager. It reinforces the change, rather than viewing it as something
company hierarchy and confers instant status. that was happening to them. The CEO even
posted a video on Facebook of the transfor-
But to succeed in an agile world, leaders need mation team’s “base camp.”
to empower teams—and that often means
getting down in the trenches to work along- Change up the leadership. One of the most
side them. An Australian bank deliberately telling signals a CEO can send is to make a
embraced an open floor plan such that the change at the leadership table.
CEO sits at a desk in the open and uses an of-
fice only for confidential meetings. It’s quite In an agile culture, leaders need to set a clear
striking for employees to walk past the CEO vision, build high-performing teams, remove
every day on the way to their desks. obstacles, and inspire employees to do great
work. Some companies have experimented
Remove executive-only access. Reserving spe- with making all leaders re-apply for their jobs
cial privileges for executives only serves to or bringing in new leaders from nontradition-
reinforce hierarchy. If certain executives get al backgrounds, to signal early on that an ag-
more, it suggests that their contribution to ile transformation is unique.
the organization is more important.
Walk the walk. When executives sponta-
How to reverse this? A Dutch bank unlocked neously ask their teams for status updates, it
its executive-only elevator, allowing all em- creates a lot of stress and frantic activity.
ployees to access the floor where the execu-
tives worked. At another company, the CEO With agile, however, these types of updates
removed the special parking spaces for execu- (which are called showcases or sprint re-
tives, opened up the executive floor, and es- views) are built in. Executives can sit in on
tablished a kanban wall outside his office to these showcases to get a clear, comprehen-
display companywide improvement initia- sive, and unvarnished view of where projects
tives for all to view. stand at regular intervals.

Reverse recruiting. Managers tend to recruit At an airline, the CEO of a division participat-
new talent by placing a job ad, waiting for ed actively in every showcase. At one point,
applicants, then choosing who will work “for” she publicly celebrated a team’s failure, say-
them. One organization recently launched a ing: “This is amazing. It normally would have
careers marketplace in which senior execu- taken us six months to figure out that this
tives were asked to “pitch” potential employ- was a mistake, but you found out in two
ees about why they should join the team. By weeks. Well done!”
shifting the balance of power, employees felt
a much greater sense of ownership regarding And the CEO of a large bank regularly visits
the company’s overall mission and purpose. team rooms and attends showcases when the
team members—not the managers—provide
Open communications. Transparency can be updates, gaining a more granular view of the
difficult for senior managers, particularly if team’s progress.
they believe employees expect them to have
all the answers. By holding secretive meet- Transform the workspace. To signal the
ings behind locked doors and communicating importance of an agile transformation, things
only when decisions are final, companies need to feel and look different. The changes
breed a great deal of uncertainty. don’t need to be expensive—some Ikea
furniture and cardboard pop-up walls will get
An Australian bank created an open-door the job done—but teams should be able to
policy for its transformation team meetings, create their own spaces, convert old offices

Boston Consulting Group | 45

 into team rooms, and have access to large Some companies are developing career paths
walls to post sprint boards, customer jour- that allow strong performers to receive the
neys, and other useful content. same level of compensation for promotions
within their function as they would receive
These are just a few of the changes that can with a promotion into management. This al-
signal that an agile transformation is differ- lows doers to do what they love and get paid
ent. You will need to find yours. What are well for it.
you willing to give up?
For example, an Australian construction man-
agement company recognized that it was los-
LinkedIn blog ing all its best project managers to the head
Is Agile Putting Managers Back office, because a move to the head office came
with a big pay raise. So, the company offered a
to Work?
new career path for project managers that al-
As organizations embrace agile, they are lowed them to thrive—both professionally and
forced to reckon with a fundamental paradox financially—in the role they loved, a role that
that lies at the heart of today’s business mod- is also very valuable to the company.
el. The most productive and talented employ-
ees (the doers) are often rewarded for their Spotify and ING took another approach. They
exceptional work by getting promoted—into implemented the concept of chapters, which
management. are teams of approximately seven employees
with similar skill sets. The chapter lead di-
This is often a big mistake. When they pro- vides his or her time equally between manag-
mote the doers into managerial positions, ing the chapter and delivering work to the ag-
companies lose their most talented producers ile squad. Being a chapter lead is a career
and bloat their management ranks. Consider path that allows experts to grow into “manag-
this. In traditional organizations, approxi- ers” and share their skills by building a team
mately 30% to 40% of overhead is dedicated while still being able to actively hone their
to non-doers; that is, employees who don’t own functional skills.
deliver value directly for customers.
We need to stop promoting our most valuable
By organizing into agile teams, companies employees into stagnant management posi-
can get this share down to 10% to 15%. As tions. Find ways to reward and promote them
part of your agile transformation, should you so they can focus on what they do best.
be putting managers back to work?
Establish a motivating environment. Daniel
The answer is yes. And most of the people in- Pink, author of Drive: The Surprising Truth
volved will thank you for it. By developing new About What Motivates Us, highlights three
career paths, creating a motivating environ- elements that motivate people in the work-
ment, and restructuring the way teams work, force: purpose, our yearning to be part of
companies can retain their best and bright- something larger than ourselves; mastery, our
est—and deliver more output than ever before. urge to make progress and get better at what
we do; and autonomy, our desire to be
Develop new career paths. When employees self-directed.
get promoted, it usually means they’re moved
into a management position where they lose Doers draw upon all three motivations on
the opportunity to use their specialized a daily basis. But for managers, it’s not so
expertise. But this expertise is the very thing easy. Many managers gradually lose touch
that set them apart from their peers. Promo- with their sense of purpose, stop doing the
tions like this represent a huge loss for the things they love to do, and have less direct
employee—and the company. Instead, we control over outcomes. The buzz that comes
need to create career paths that reward from a promotion to management is short-
excellence without turning people into lived; managers soon realize that they can’t
non-doers. contribute in the ways that allow them

46 | BCG on Agile—Views from the Field

to learn, create, and build something new. tions with colleagues. In practice, the arrange-
ment means established teams find it diffi-
But when managers are put back to work, cult to collaborate over time.
they regain the opportunity to derive mean-
ing and satisfaction from their work on a dai- “Hot-desking,” or “hoteling,” is an even more
ly basis. radical experiment. In this arrangement, em-
ployees either share an assigned desk with
Support self-organizing teams. To maximize colleagues during different time periods or
the number of doers versus non-doers, teams are not assigned a desk at all and must find
need to be able to manage themselves. It can one when needed. Hot-desking can serve as a
take time to build these capabilities, and agile cost-savings measure in companies whose
coaches play a key role in supporting autono- workforce travels a lot, as is the case with
mous teams. In the early stages, teams road warriors, consultants, and technicians.
typically need a ratio of one coach for two to
three squads. As the teams mature and But in more traditional companies, hot-desk-
become better at self-organizing, the ratio ing can leave employees perched in make-
can shift to one coach for four to eight shift work areas, without adequate access to
squads. A strong agile leader will simplify private or quiet spaces. It can also lead to un-
processes, remove roadblocks, track outcomes pleasant competition for scarce resources.
(rather than schedules and budgets), and
establish clear metrics for success. In one company that experimented with ac-
tivity-based working, team leaders began
Companies can significantly improve produc- sending executive assistants to the office a
tivity by ensuring that doers are properly re- half-hour early to “reserve” seats for their
warded and promoted. It requires some tar- team. Naturally, other teams started to do the
geted changes within the organization: same thing, and it soon became a race to see
developing new career paths, creating a moti- who could get into the office first to reserve
vating work environment, and investing in space.
self-organizing teams. But these changes are
not particularly difficult to implement, and Similarly, when a wealth management com-
they can radically improve productivity, moti- pany moved to activity-based working, it, too,
vate the workforce, and help companies opti- got into a situation where squads were com-
mize talent. peting for space to sit together—and those
who didn’t get in early enough were literally
left without a seat.
Is Agile the End of Hot-Desking
and Other Work Environment Activity-based approaches to workplace pro-
Experiments? ductivity are particularly problematic for
In recent years, new approaches to workplace companies shifting to more agile ways of
productivity have taken off. Not all of these working. Agile is fast becoming an effective
experiments are yielding positive results. and efficient way to organize the way a com-
Consider the need for fit-for-purpose work pany is run. One of the keys to success for ag-
environments that push beyond the classic ile is having small, persistent, cross-function-
“corner office” setup. Some of these efforts al, and collocated teams working to deliver a
tend to undermine agile ways of working. shared outcome.

One such effort, “activity-based working,” Research backs up the benefits of having
provides an example. With this approach, em- long-standing, persistent teams work together.
ployees are encouraged to move around and Recent studies have shown that the “cohe-
occupy the office spaces that best support sion” of teams is a key driver of performance.
their daily activities, whether workstations,
open spaces, or private rooms. In theory, this To create cohesion, teams must work together
arrangement supports a flexible working over a long period of time to achieve a
style and encourages spontaneous connec- shared goal.

Boston Consulting Group | 47

 Cohesion can also boost innovation. Research When it comes to workplace productivity,
also shows that dedicated teams aren’t just there is no one-size-fits-all approach for the
more productive, they’re more innovative, physical environment, but it’s essential to un-
particularly when tackling tasks that are not derstand how teams work together and de-
well defined. sign physical workspaces that can truly en-
hance their effectiveness.
For all of these reasons, the physical work-
space is an important part of making agile Paul McNamara is a senior advisor in the
work in large organizations. Here are four Sydney office of Boston Consulting Group, and he
things to consider when designing workspac- is the agile transformation lead for Asia-Pacific.
es to make agile teams effective: You may contact him by email at mcnamara.
paul@bcg.com.
•• Workspaces need to be designed so that
collocated and persistent agile teams can
sit together.

•• Because agile is a very visual way of

working—with sprint boards, customer
journeys, personas, and so on—and
because much of this content is physically
up on the wall, teams need wall space to
post their agile project management
artifacts.

•• Agile ceremonies play an important role

in team collaboration. Teams need spaces
to conduct daily agile ceremonies, such as
standups and sprint planning (both
features of agile), that won’t disturb those
around them. They also need access to
larger spaces for more long-term planning,
as with retrospectives and showcases
(additional features of agile).

•• Teams need the right balance between

quiet working areas and collaboration
areas, while ensuring adequate space for
people to share learning across agile
teams.

Many different layouts can be employed to

achieve an agile workspace: cubicles, open
plan pods, design rooms, and more. When de-
signed right, this can be very efficient; howev-
er, it must be a deliberate design effort and it
may require significant investment to break
away from a traditional corner-office style.

48 | BCG on Agile—Views from the Field

 NOTE TO THE READER

Acknowledgments For Further Contact

The authors are grateful to the glob- Martin Danoesastro Stephen Edison
al community of agile practitioners Senior Partner and Managing Director Principal
at BCG; these articles leverage their BCG Amsterdam BCG Dallas
experience and expertise. They also +31 20 548 4000 +1 214 849 1500
specifically thank Michael Grebe, danoesastro.martin@bcg.com edison.stephen@bcg.com
Hana Montgomery, and Stuart
Scantlebury for their input. Benjamin Rehberg Grant Freeland
Partner and Managing Director Senior Partner and Managing Director
And they thank Katherine Andrews, BCG New York BCG Boston
Gary Callahan, Alan Cohen, Cather- +1 212 446 2800 +1 617 973 1200
ine Cuddihee, David Duffy, Abby rehberg.benjamin@bcg.com freeland.grant@bcg.com
Garland, Robert Hertzberg, Kim
Friedman, Meghan Huff, June Lim- Andrew Agerbak Norbert Gittfried
beris, Shannon Nardi, Amy Strong, Director Associate Director
and Mark Voorhees for their edit- BCG London BCG Frankfurt
ing, writing, design, and production +44 20 7753 5353 +49 69 91 50 20
contributions. agerbak.andrew@bcg.com gittfried.norbert@bcg.com

Koen Alfrink Claus Helbing

Principal Platinion Managing Director
BCG Melbourne BCG Munich
+61 3 9656 2100 +49 89 231 740
alfrink.koen@bcg.com helbing.claus@platinion.com

Vinciane Beauchene Pim Hilbers

Partner and Managing Director Principal
BCG Paris BCG Amsterdam
+33 1 40 17 10 10 +31 20 548 4000
beauchene.vinciane@bcg.com hilbers.pim@bcg.com

Vikram Bhalla Peter Hildebrandt

Senior Partner and Managing Director Partner and Managing Director
BCG Mumbai BCG Los Angeles
+91 22 6749 7000 +1 213 621 2772
bhalla.vikram@bcg.com hildebrandt.peter@bcg.com

Walter Bohmayr Hanno Ketterer

Senior Partner and Managing Director Senior Partner and Managing Director
BCG Vienna BCG Amsterdam
+43 1 537 56 80 +31 20 548 4000
bohmayr.walter@bcg.com ketterer.hanno@bcg.com

Kaj Burchardi
Platinion Managing Director
BCG Amsterdam
+31 20 548 4000
burchardi.kaj@bcgplatinion.com

Boston Consulting Group | 49

NOTE TO THE READER

Djon Kleine Deborah Lovich Neil Pardasani

Project Leader Senior Partner and Managing Director Senior Partner and Managing Director
BCG San Francisco BCG Boston BCG Los Angeles
+1 415 732 8000 +1 617 973 1200 +1 213 621 2772
kleine.djon@bcg.com lovich.deborah@bcg.com pardasani.neil@bcg.com

Steven Kok Elizabeth Lyle Christian N. Schmid

Project Leader Principal Principal
BCG London BCG Boston BCG Munich
+44 20 7753 5353 +1 617 973 1200 +49 89 231 740
kok.steven@bcg.com lyle.elizabeth@bcg.com schmid.christian2@bcg.com

Fabrice Lebegue Paul McNamara Liza Stutts

Platinion Managing Director Senior Advisor Principal
BCG Montreal BCG Sydney BCG Boston
+1 514 228 5900 +61 2 9323 5600 +1 617 973 1200
lebegue.fabrice@bcgplatinion-ma- mcnamara.paul@bcg.com stutts.liza@bcg.com
ya.com
Jérôme Moreau
Erik Lenhard Associate Director
Associate Director BCG London
BCG Munich +44 20 7753 5353
+49 89 231 740 moreau.jerome@bcg.com
lenhard.erik@bcg.com

50 | BCG on Agile—Note to the Reader

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