We’ve been considering how the principles of Agile software development can be applied more broadly, and what insights they can provide into organizational agility. In the first two parts of this series we considered, respectively, the first and second of The Agile Manifesto’s four value statements.

Customer Collaboration

We come now to the third:  We value customer collaboration over contract negotiation.

Customer collaboration is key to software developers’ ability to respond quickly and efficiently to changing requirements: the sooner the change is understood, the less time is wasted off-course.

This principle translates directly and usefully to any business unit that produces a customer-facing outcome. Generalizing an individual customer’s specific requirements to the inconstancy of an entire market, and direct customer collaboration to informed input from an astute business worker, a current understanding throughout the development process of dynamic customer expectations is invaluable to efficiently delivering an effective, market-calibrated outcome.

Scaling Up Agile Practices

Many web-based companies have begun applying Agile across all of their application and product development teams. McKinsey and Company studied thirteen such companies. They published an analysis of their findings in May, in An Operating Model for Company-Wide Agile Development.

They concluded that successfully implementing Agile practices at scale requires several operational changes, and they identified four areas where such changes are necessary. Two of these are particularly relevant to this discussion, the first of which involves the interactions between business and IT.

In the traditional waterfall approach, a proxy product owner from IT manages the process, seeking business-side input only as needed. In the new model, development is managed by a strong product owner from the business side, someone who understands customers and the product, is empowered to make decisions, and collaborates with IT throughout the process.

The authors describe how such collaboration can speed and improve development by overcoming internal barriers due to compartmentalization. They attribute this in part to expedited decision making as a result of the product owner’s broader mandate. They point also to clearer and better informed direction due to the business side owner’s superior product knowledge and customer insight.

Collaborative Engagement

The authors focus on the internal efficiency enabled by closer collaboration between business and IT, and they describe the product owner as having “connections to and an understanding of customers.” Implicit in this description is the notion that a well-connected and discerning product owner can function as a conduit from the customer to the organization, providing some measure of customer collaboration by proxy.

It follows that the degree of fidelity with which product owners can perceive and interpret changing customer preferences is, at least partially, a function of the depth and precision of their interactions with them. Happily, one consequence of engaging customers is the opportunity to understand them better. Deeper and more meaningful engagement heightens the customer connection while yielding clearer and more nuanced customer understanding.

This confluence provides a dual opportunity for the digital enterprise. Collaboration is in fact a form of engagement. The term “collaborative engagement” could describe avenues that rewardingly engage customers in a way that reveals their needs and preferences with such specificity and focus that they approach true collaboration. By seeking ways to engage customers that approach this ideal, companies can promote agility while providing compelling engagement experiences that connect customers more meaningfully to the organization by involving them in its direction and success.

Accounting For Change, Maintaining Agility

While the importance of customer collaboration is its dominant theme, the Manifesto’s third value statement has more to say.

We value customer collaboration over contract negotiation.

As the Manifesto makes clear (“while there is value in the items on the right, we value the items on the left more”), this comparison does not devalue contract negotiation. It is a necessary part of doing business. What a contract seeks to accomplish, however—specifying costs and accounting for changes in advance—tends to hinder agility. Responding flexibly to change requires latitude, which contracts seek to limit.

The third value statement posits customer collaboration as a way to ease that tension. Including customers throughout the development process helps them understand the need for change when it arises. Understanding the need assures them of the changes’ value relative to their cost, and the relationship and trust built through the collaboration allay their concern about having changes accounted for in advance. As the author of Customer Collaboration Over Contract Negotiation? Huh??  put it, “If you talk to your customer frequently, and actually collaborate, you’ll find the contract won’t be pulled out at every meeting.”

Budgeting for Agility

The companies that McKinsey studied addressed the need for cost control by making changes to their budgeting and planning models. These companies discarded traditional yearly, fixed-allocation budgeting in favor of “venture-capital-style budgeting in which a minimally viable product is launched and future funding depends on product performance.”

Beyond limiting waste, such budgeting encourages the type of iterative responsiveness that constitutes agility. Success in a highly dynamic environment demands the willingness to fail and the ability to deliver the next iteration quickly and efficiently. Budgetary constraints limit the cost of failure and enforce a workflow that emulates the short development sprints of Agile methodologies.

AVIO Consulting

A digital transformation-focused consultancy, AVIO equips companies to repeatably innovate long-term customer engagement through the uncertain fluidities of the digital market. We believe that organizational agility has become the fundamental imperative for sustained success. We pursue fresh perspectives and new insights, because rich understanding promotes creative solutions.

Contact us today, and begin a fruitful strategic collaboration with a seasoned and incisive partner—toward greater and more innovative responsiveness, sustained customer engagement, and ongoing success.