When I speak to leadership teams or consult on agile transformation with corporates I’m always keen to stress that there is never one all-purpose solution to what a successful digital transformation looks like. We set out a broad over-arching roadmap to transformation in our book, but also emphasise that each organisation needs to find its own path and make smart decisions about the selective application of agile structures, processes and working. Agile is not one-size-fits all, and it is just as important to think about being agile as it is about doing agile.
Yet the need for far greater organisational responsiveness and continuous and systematic (not episodic) innovation means that we do need a more fundamental rethink of the appropriateness of corporate structures that are typically dominated by functional silos and hierarchy. In order to truly take advantage of the opportunities afforded by digital technologies we need to think about resources, processes and priorities in a very different way.
In the structures work that I do I focus a lot on the potential for small, multidisciplinary teams to generate a disproportionate degree of change and value. I often use the Spotify ‘Squads, Tribes, Chapters’ model as one way of demonstrating a method for scaling agile resourcing. In reality, most companies start by deploying small, multidisciplinary teams in more focused, less scaled ways to innovate, generate new value and help support change (and there are other examples of this). But ING Bank in the Netherlands is an exception.
Over the past couple of years ING have reinvented their organisation at their group headquarters in the Netherlands (comprising 3,500 staff) from the ground up, moving from a traditional organisational model featuring functional departments such as marketing, IT, and Product Management, to a completely agile model that shares much in common with the Spotify example. They started with the group headquarters to show that you could begin with the core, and set an example to the rest of the business. You can get a good feel for how the transformation has been organised from this video (there’s also a good McKinsey interview with a couple of the key senior people, and a BCG one with the CEO):
The Squads are small-multidisciplinary teams (no more than nine people) that are co-located and operate with a high degree of autonomy. Each squad is focused on a specific client-related objective for which it has end-to-end responsibility. A Product Owner is responsible for co-ordinating the activities of the squad and managing the backlog and priorities but they are a squad member rather than leader. As the mission evolves, the team and the functions that are represented evolve with it. As the mission is completed, the team is dissolved.
Squads that have interconnected missions are grouped together into Tribes, and these tend not to exceed 150 people (see Dunbar’s Number). A Tribe lead helps co-ordinate priorities, budgets and is the interface with other Tribes to ensure alignment and knowledge sharing. Each Tribe also has an Agile coach to support high performance.
Functional expertise and learning is supported through cross-squad Chapters, and a chapter lead effectively represents hierarchy for the Chapter, particularly in terms of performance management, staffing and personal development.
This approach has not only improved time-to-market, but increased productivity and employee engagement.
Apart from the level of commitment to agile working and resourcing (which I think is exceptional), there is a number of aspects of this (drawing from the McKinsey interview) that I think it’s important to note and which chime well with points that we bring out in the book :
- When ING began the transformation there was no financial imperative to do so (they were doing well at the time), but they recognised that changing consumer behaviours and expectation could soon create significant challenges if they didn’t become more agile
- ING recognised that it was not a linear transition, but about becoming a different type of organisation that is itself characterised by continuous change: ‘Transformation is not just moving an organization from A to B, because once you hit B, you need to move to C, and when you arrive at C, you probably have to start thinking about D.’
- The re-organisation is focused on minimising obvious barriers to agility like bureaucracy and functional handovers but also on greater empowerment and autonomy to enable teams to move fast. I like the way that they describe a key objective as being to ‘build stronger, more rounded professionals out of all our people’.
- The fact that each squad is focused end-to-end on a particular customer objective (and a common definition of success) and includes all the key functions needed to create value (marketing, product, commercial, UX, data analysts, IT engineers) means that this is a structure that is genuinely customer-centric
- The new organisation is supported by a new agile performance-management model (because performance management really does need to change). Instead of manager’s salary and status being based on how much resource they control, it is now focused far more on how they deal with knowledge and deliver outputs
- The re-organisation began with a compelling vision about what the business could be, and drew learnings from a pilot incorporating five or six squads. Implementation involved a revamp of the working environment (you can get a feel for that here)
- Support functions such as HR, Finance, call centres, IT infrastructure and risk have not initially been included in the squads (and may never be) but have instead adopted agile working practices in different ways
- ING have been focused as much on getting the culture right as they have the structure, spending a lot of time and energy focused on role modelling the right behaviours (customer-centricity, empowerment, ownership) to support change. One example of this is a complete revamp of the on-boarding programme which not only involves new employees moving around the business to generate informal networks and learning, but every employee spending a week in the call centre taking customer calls.
- Meeting structure and governance – most meetings are informal, with formal ones kept to a minimum. Each squad has a clear written purpose for what they are working on, and an agreed way to measure the impact it has on customers, but has autonomy to prioritise and manage its daily activities. Mechanisms such as portfolio wall planning, Scrums and stand-ups ensure that the product owners within each Tribe keep the squads aligned. Quarterly Business Reviews (QBR) involves each Tribe notating what it achieved over the quarter, their biggest learning (from both successes and failures), its objectives for the next quarter and what they’ll need from other Tribes. These QBR documents are openly available to support transparency
The new structure has enabled ING to dramatically improve speed-to-market through more frequent releases, and increase the rate of innovation to help position them as the primary mobile bank in the Netherlands.
But it is the level of commitment to agile resourcing that is truly impressive, avoiding the common trap of adopting some agile attributes but not letting go of legacy structures, processes or governance. As Bart Schlatmann (who was the COO through the transformation) says:
‘It requires sacrifices and a willingness to give up fundamental parts of your current way of working—starting with the leaders. We gave up traditional hierarchy, formal meetings, overengineering, detailed planning, and excessive “input steering” in exchange for empowered teams, informal networks, and “output steering.” You need to look beyond your own industry and allow yourself to make mistakes and learn. The prize will be an organization ready to face any challenge.’
A great example of real agile transformation.
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Also published on Medium.