How company culture changes with product maturity

I recently attended a seminar with Kent Beck, a giant in the software delivery world, the father of eXtreme Programming. The topic was about the need to adapt our delivery approach based on where the organisation was within a growth pattern of, “Explore” to “Expand” and finally “Extract”. This progression was related to financial models: investment vs return, against risk.

3X diagramImage Credit to @antonyMarcano

The progression of the product connects to another standard of product theory, that of BCG’s Growth Share matrix which is a portfolio planning model used to divide up products on two axis, revenue generation and market share.

BCG Matrix

Credit @BCG

The progression from “Question Mark” to either “Star” or “Dog”, with the “Stars” finally becoming the “Cash Cows” (the dogs having been killed off along the way) is shown on the diagram. I believe the flow of “Question” to “Star” to “Cash Cow” is somewhat analogous to “Explore”, “Expand” and “Extract” and in both cases is a reflection of product lifecycle. What Kent Beck has explored is the consequence on organisational psychology in having products at the various phases.

In both models what is happening is a change of risk appetite, reflective of the changing balance between investment and return, and the consequence of failure.

I have merged the two ideas to make:

  • Exploring Questions:  Where we experience an unlikely very high return on low investment for a growing product with a small market share
  • Expanding Stars: Where we see a reasonable likelihood of a substantial return on significant investment, for a product that has a rapidly growing market share
  • Extracting Cows: (An unfortunate mental model) Where we see a very highly likely, small return on a large investment, for a product that is a stable market leader

Given this framework; Product development on Exploring Questions is typically undertaken in such small groups that the relationships between team members can be sustained without any process framework and the association between business and tech, between demand and supply, is so tight and immediate, that even most light touch Agile frameworks appear cumbersome. The best practices here are those that weed out the Dogs quickly, User Centred Design and Experience, fail fast experiments etc.

Most of the practices that we see in an Agile delivery I would describe as being suited to the Expanding Star world, rapid gains with constant feedback to ensure we on track. The key here is sustainable delivery, staying ahead of the pack. It is said that success is always a surprise, because if it wasn’t someone else would be doing it, and in this phase product development are trying to increase revenue and market share to ensure the idea, the surprise, remains theirs.

I see the Extracting Cow phase as markedly different, the risk profile and consequences of failure here are much more akin to traditional engineering disciplines. You can’t add decide to add a swimming pool to the 30th floor of a building after completing the first 28 storeys. Product delivery in this phase is much more likely to adopt frameworks and governance that avoid failure than aim for rapid gain, and we say hello again to our old friend Waterfall.

To use a different analogy, to see the changing behaviour against the consequence of failure consider the following epic conflicts:

  • In the novel, “Lord of the Rings” you have a plucky few to take on an uncountable near unstoppable foe, with a slim chance of success but a massive return of saving the world. They are gung-ho in their exploratory approach making it up as they go along. The consequence of inaction is fatal. They have everything to play for, and in the scope of middle earth, not a lot to lose.
  • The Roman Empire between 150BC and 50 AD, had one of the finest fighting forces on the planet and certainly superior to anything nearby. The gains from conquest were substantial and the likelihood of victory high which lead to an enormous expansion. They expanded because if they didn’t someone else would, they didn’t risk losing what they had, they risked losing the opportunity for more. They were systematic, organised and effective. Their only downfall was the sustainability of holding onto the new territory, grow too far, too fast and the cost to operate without sound investment can exceed the returns, and you fall.
  • In the 1983 film, “War Games”, a computer responsible for nuclear war simulation eventually accepts that the only viable course of action, is to take no action. The only winning move is not to play. The consequence of failure is too great.

For an Agile Coach it is important to understand how this product evolution impacts on our ability to work with organisations. How the mindset shaped by the product lifecycle stage transcends the product, and comes to dominates the parent organisation. Typically small fast companies grow on the back of a successful product and become large, risk adverse corporations. It is as if each company has one product and slowly changes their organisational psychology to match that single product’s evolution. Facebook changing its motto from, “Move fast and break things” to, “Move fast with stable infrastructure” is a clear example. If a company was structured along product lines then it would be reasonable to expect that the area owning an Expanding Cow would be slow and reserved, whilst an area associated to an Exploring Question to be fast and dynamic, but that isn’t the case.

What happens is that the organisation “matures” with its first product, loses that innovative capability and is trapped either trying to innovate within a highly constrained system or not innovate at all – innovation becomes a timid extension of a secure product. In an attempt to reduce risk, a mature company typically chooses to split out certain components to specialists, silos are created, technical component teams propagate, swathes of middle management appear to ensure that nothing goes wrong – and stagnation sets in.

perfection-is-stagnation-900x506

At this point an organisation in this state, paralysed and inert but still sustaining huge revenue, many consider an Agile transformation as a possible route out. Many coaches work in this environment – and most find culture the biggest barrier, most of the Agile practices are not suited for this risk adverse mindset, many Agile coaches have cut their teeth in Exploring Questions or Expanding Stars and are lost in the face of the corporate governance of a gargantuan Extracting Cow, the frustration has prompted so called “Scaling Frameworks” to appear which ape agile values while remaining compliant to the NOT SAFE TO FAIL, siloed environment.

But should the main focus of delivery even be happening there anyway? Back to BCG’s model; Cash Cows should be milked, extracting profits and investing as little as possible. The cash that is derived should be used to fund the next set of Questions and to propel those Stars. Are the mature organsiations doing this? Aren’t they all too often ploughing the cash from their Cows back into their Cows, costing a lot for low return? They hold their market share though economies of scale and the value return on effort spent, is often so low that they deliberately choose not to measure it, so as to not own up to their wastefulness.

I believe large organisations with mature products need to have a strategy that focuses on introducing exciting new products funded by revenue from their established ones. The investment should be high in the growth areas and cut to a minimum on those products that have reached the Extract Cow level. Whilst it may be prudent to have a risk adverse approach to the operation and maintenance of the Extracting Cow, that mindset, those organisational dynamics, MUST NOT be replicated in the other product development areas.

Extracting Cows die, eventually. There are plenty of case studies of huge products that have ceased to exist, some have taken their parent companies with them, some haven’t. The BCG work has shown that for companies to survive the death of an Extracting Cow they must innovate, diversify their product portfolio, use the revenue of their Extracting Cow to fund their next set of Exploring Questions, with a few being successful. Invest in tomorrow, rather than hope that today will never end. Kent Beck’s work helps us to understand that the organisational approach across the portfolio needs be variable. Through combining the two I believe it is not sufficient to diversify your portfolio, you must diversify your approach and governance, maybe even culture to match. For your Questions to become Stars you need an Explore based mindset and approach.

Organisations need to reinvent themselves, not just their product offering, in order to survive; the mindset and governance honed to operate and maintain a mature product is an impediment to discovering its replacement.

 

About me:

I am Phil Thompson, an Agile Consultant, have worked at many places in many industries and with many people, mostly in Europe, mostly in the UK, mostly in London. My opinions are my own, shaped and challenged by the people and companies I have been fortunate to work with over the past fifteen yrs.

You can reach me at @philagiledesign or LinkedIn

 

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