Are agile methodologies the reason 'software is eating the world'?
In 2011, venture capitalist Marc Andreesen published his now legendary op-ed, 'Why Software is Eating the World', in the Wall Street Journal. In it, Andreesen listed the various Silicon Valley-style entrepreneurial tech companies that were 'invading and overturning established industry structures'. To the six-year-old list, we can now add the new companies that have turned our homes into hotels, cars into taxi cabs and phones into wallets.
Meanwhile, most large organizations are finding it difficult to innovate - a popular perception that has been confirmed by research. In June 2017, for example, a study of 100 corporate innovation programmes by venture capital fund 500 startups concluded that corporates are 'too slow, disorganised and conservative' to innovate, after over 80% of respondents stated that fewer than a quarter of pilot programmes have resulted in commercial deals. It's the story of David and Goliath being retold at industrial scale.
The most successful tech companies have large workforces, offices all across the world, shareholders to please and market share to protect. Some of them have even been around for 20-plus years. Still, they are often referred to as startups. The reason, of course, is that companies that are synonymous with innovation never relinquish the startup label.
The iPhone was launched in Apple's 31st year and Google will put self-driving cars on the road over 20 years after it transformed the search engine. Amazon Web Services, the market leader in cloud computing, was launched in 2006 as a side business, 12 years after the launch of Amazon.com.
This brings up an important question: if multiple tech companies can stay innovative, why do all others fail? One logical answer is the pervasive adoption of agile methodologies within Silicon Valley.
Why agile works
Agile methodologies have been behind most technological innovation in the past 30 years. It has been shown to boost rates of successful innovation to 39% from 11%, according to a 2015 study by The Standish Group. In more complicated projects, success rates jump to over 70%.
For the dramatic change it can produce, agile is fundamentally simple. When an agile organisation spots an opportunity to innovate, it forms a cross-functional team that is fully empowered to take decisions and manage itself. Agile formats are wildly different from traditional styles, particularly in the way feedback is communicated. Team members discuss their progress daily and even incremental changes to the product are tested on select customers. When feedback - from team members or customers - is poor, the team re-examines its path and, if necessary, changes direction altogether. Regular feedback ensures that waste is minimal, and frequent validation from customers leads to happier, more productive teams.
This feedback loop forms the basis for the agile mantra,'Learn. Build. Repeat'. Agile methodologies, therefore, don't unlock creativity or better problem-solving skills in a team; they simply increase the speed of innovation.
Disruption is coming
Over the past two decades, game-changing innovation has almost exclusively stemmed from software companies. The swift advances they are making across sectors should worry just about anyone - for some perspective, remember that it took SpaceX just a decade to begin competing with NASA. Large organizations keen on increasing the success rates of their innovation programmes would do well to pay closer attention to agile methodologies. Its implementation would ensure that the focus isn't on the mere digitisation of traditional products and services, but on a redesign of the end-to-end customer journey.
Innovation at DBS
At DBS, we have been experimenting with small, cross-functional teams for over seven years now. We have run over 1,000 experiments to reimagine the banking process, and have successfully eliminated waste in many areas. For example, to reduce the effort a customer needs to put into opening a savings account, we have eliminated the branch completely - our customers can open an account at one of 500 partner stores in under five minutes. To ensure that our SME customers have a seamless payment experience, we have also integrated our net banking platform with Tally's ERP software. The changes introduced since 2010 have collectively led to the elimination of 250 million customer hours from the system. However, this is just the beginning of our larger journey toward digital reinvention.
To stay competitive in this age of disruption, all large corporates, including the 25,000-strong workforce at DBS, will need to focus on continuous innovation. Our experiments are a clear indication that agile methodologies provide the framework to do so, even outside of IT.
Learn. Build. Repeat. A mantra not just for agile, but for innovation at large.