Creating new business models is hard. Creating an organization that is continuously creating new business models is extremely hard. The closest I’ve seen is organizations running an Agile Product Development (APD) process. APD focuses on creating a culture and processes that support small, semi-autonomous, high performance teams.
APD has done a lot to radically accelerate product delivery, better value employees, prioritize decision making and show how organizations can have speed and stability. With the DevOps revolution evolving into the GitOps revolution, the increase in speed between Agile organizations and organizations that use waterfall product development models can easily top an order of magnitude.
Unfortunately, APD isn’t the answer when it comes to business model innovation. The brightest minds in Agile lay this out well even if they don’t say the words “business model innovation” when they talk about where APD has challenges:
- Why Scaling Agile Doesn’t Work – Jez Humble
- Scrum at scale – Jeff Sutherland
- The Root Causes of Product Failure – Marty Cagan
- Agile is Dead – Dave Thomas
The core reason APD does not work well for business model innovation is simple. APD assumes you ship product to the customer. For most attempts at creating new business models, you don’t ship! (My blog post on how No One Can Pick Winners explains why >90% of innovation projects should be stopped and no one knows which ones in advance.) The winning game in Agile Business Model Innovation (AgileBMI) is to, as quickly and cost-effectively as possible, kill opportunities by finding their weaknesses. If an opportunity continues to be good enough not to kill throughout the AgileBMI process, then it ships to customers.
This requires a different kind of organization with different goals. In essence, an AgileBMI organization has to run a feedback loop that embraces Strategy, Business Model Options, Product Options, Sales/Channel Options and then can measure which aspects are correct (a “Validation-Driven Strategy”) relative to the original strategic hypotheses. That makes the principles of APD a bit different that those for AgileBMI. We need to take the best of what APD has learned about boosting productivity of small, self-organized teams while also embracing the challenges of innovating around business models instead of prioritizing product features.
If you’re not familiar with it, jump over and read the Agile Manifesto right now. It’s good! The authors follow up with Principles behind the Agile Manifesto, which, again, you should jump over and read.
Agile principles are evocative of the Toyota Production System and Kaizen improvement teams – within the framework and business goals, let teams figure out how best to run their process and improve their results and productivity. AgileBMI shares that philosophy – continuous improvement is critical to success and that happens at the team level.
With full credit to the Agile Manifesto, I propose an Agile Business Model Innovation Manifesto:
“Individuals and interactions over processes and tools
Testing and reflecting over assuming success
Customer empathy and validated value delivery over specification
Responding to learning over following a plan.
That is, while there is value in the items on the right, we value the items on the left more.”
The Principles behind the Agile Business Model Innovation Manifesto:
- The highest priority is customer-centric innovation – to delight customers by delivering new kinds of value. Directly interacting with customers is the fastest way to learn how to do that.
- Most business model innovations fail. Therefore, teams must focus on finding the truth about whether theirs will be successful. An AgileBMI team must constantly justify continuing to work on an opportunity. Since teams want to deliver as much value to as many customers as possible, if they can’t find a scalable, profitable way to do that, they must stop and move on to a new opportunity.
- Teams evaluate the scalability of their business model frequently, updating their experimental plan weekly and running experiments daily. They evaluate go/no go status monthly and quarterly.
- The fastest learning, best experiments, and scalable opportunities emerge from self-organizing teams.
- Teams consist of cross-functional expertise (business and technical) working together collaboratively.
- Teams consist of motivated individuals, given the environment and support they need, and trusted to make good decisions and get the job done.
- Teams use face-to-face conversation as the most efficient and effective method of conveying information amongst the team.
- Interpretable experimental results that drive go/no go decisions relative to strategic hypotheses are the primary measure of progress. Teams constantly focus on validation, with experimental results informing what the team does next.
- AgileBMI processes promote sustainable delivery. Sponsors, team members, and managers are able to maintain a constant pace indefinitely. Innovation is a day job, not a heroic act.
- Continuous attention to entrepreneurial excellence and good experimental design enhances agility.
- Simplicity – the art of maximizing the amount of work not done is essential.
- At regular intervals, the team reflects on how to become more effective, then tunes and adjusts its behavior accordingly.
APD can increase an organization’s product development productivity by an order of magnitude and we are seeing AgileBMI increase the number business models organizations can test beyond an order of magnitude. Creating sets of teams doing AgileBMI lays the foundation for companies to incrementally and systematically create an Ambidextrous Organization that embraces AgileBMI Principles while implementing AgileBMI processes. This means doing business model innovation as a regular, repeatable process that runs in parallel with traditional product development so revenue growth, profit delivery and innovation all happen simultaneously and at scale.