Building the Agile Business through Digital Transformation_ How to Lead Digital Transformation - PDF Room.pdf

Praise for Building the Agile Business
through Digital Transformation
‘Whatever your business, the prospect of staying ahead in digital
transformation is daunting. Neil Perkin and Peter Abraham have
created an outstandingly researched guide that anyone can use to
lead their own transformation.’ Bruce Daisley, VP EMEA, Twitter
‘Packed full of insights, actionable ideas and other people’s
experiences, a toolkit to build on no matter where you sit in an
organization or the stage of change you’re at.’ Sean Cornwell, Chief
Digital Officer, Travelex
‘This is the handbook that I wish I had written. A must-read for
organizations going through digital transformation. . . It cuts
through the hype and buzzwords into simple, practical insights that
all of us can learn from and apply.’ Marco Ryan, Chief Digital
Officer, Wärtsilä Corporation
‘A fantastic guide to conquering the challenges of continuous and
accelerating change in today’s digital world. Neil Perkin and Peter
Abraham are masters of agile business transformation, and they’ve
bottled their experience and wisdom into a highly actionable book.
A must-read for modern leadership.’ Scott Brinker, Author,
Hacking Marketing
‘An essential and comprehensive guide for those leading digital
transformation in their business or wanting to truly understand the
impact of digital on modern leadership practice.’ Louise Howells,
Global Head of Leadership Development, TUI

‘Neil Perkin and Peter Abraham are one of the best choices to help
anyone respond to the challenges of digital transformation – and
their book is a veritable gold mine as they share dozens of bottom
lines and powerful stories with the reader. Read this book to not
just innovate but to transform your business!’ Gerd Leonhard,
Futurist, and Author, Technology vs Humanity
‘Reads like a field guide for digital transformation. Full of actionable
insights, frameworks and practical advice for any organization
preparing for a digital-empowered world.’ Ben Malbon, Senior
Director, Google
‘Building the Agile Business through Digital Transformation is the
definitive guide for every executive and intrapreneur looking to
navigate the exponential changes that every company must deal
with or succumb to. . . A practical how-to you will refer to again and
again, it is expansive but not exhausting. With meticulously
researched ideas and insights that provide frameworks for
understanding why change is both necessary and hard, it’s the
handbook you need to help you create the company you always
wished you worked at.’ Faris Yakob, Founder, Genius Steals, and
Author, Paid Attention
‘This is an important book. A lot has been written about various
aspects of agile, but nowhere else have I seen the thinking and
practice brought to light so intelligently and comprehensively as
here.’ Ashley Friedlein, Founder, Econsultancy
‘In times of rapid change, evolving with the new rules of consumer
engagement and leveraging digital channels is now a must for every
business in every sector. This book clearly distils key insights,
strategies, examples and advice – providing the tools for anyone
wanting to grow, advance and transform their business.’ Jeremy
Willmott, Director, Group Consumer Engagement

‘Pragmatic, yet ruthlessly visionary, this fast-paced book is a wide-
ranging and generously referenced handbook. Ideal both as a c-
suite primer and as a ready-reference for practitioners, this is a
triumph of distillation by two of our sector’s pioneers.’ Ian Jindal,
Leadership and Transformation in Multichannel Retail and
Ecommerce
‘Disruption is all about mindset. Dealing with uncertainty is a
challenge leaders need to integrate into their modus operandi.
Building the Agile Business through Digital Transformation will help
you unlock a treasure.’ Arjen van Berkum, Chief Disruption
Officer and Entrepreneur

Building the Agile Business
through Digital Transformation
Neil Perkin
Peter Abraham

Contents
Cover
Title Page
Copyright
Contents
List of figures
List of tables
Acknowledgements
PART ONE The digital-native organization
Introduction
Notes
01 The key forces for change
Relentless, accelerating change
Transformed competitive contexts
Transformed consumer contexts
Transformed company contexts
The agile context model
The key challenge: rates of change
Notes
02 How digital disrupts
The lifecycle of a technology
Why businesses get disrupted: the ambiguity zone
Defining digital
Notes
03 What’s stopping you?
Slow by design
Why organizations become ‘sticky’
Why good ideas become battles
The arrogance of scale
Protecting against obsolete beliefs and ‘toxic assumptions’
The tyranny of rigid planning

The legacy technology problem
Marginal thinking
Culture and behaviour
Notes
04 Defining digital transformation
What digital transformation is NOT
What good looks like: a maturity model for change
The agile formula
Notes
PART TWO Velocity
Defining velocity
Notes
05 Operating in the ‘ambiguity zone’
Building velocity through continuous innovation
More experimentation = more opportunity
Marginal and breakthrough innovation
The case for a more iterative, emergent approach
The problem with waterfall
The three types of problem in the world
Complex scenarios require emergent solutions
Notes
06 Digital-native processes
Design thinking
Agile
Lean
The principles of agile business
Developing a learning culture
The dangers of systematic survival bias
Learning to unlearn
Fixed and growth mindsets
Embedding reflection time
Notes
07 The agile innovation process
Empowering invention

Ingrained commercialization
Scaling, the digital-native way
Key takeouts
Notes
PART THREE Focus
Defining focus
The wrong side of urgency – Nokia’s story
Notes
08 The role of vision and purpose
The organizing idea, purpose and vision
The link between purpose and profit
Taking the long view
Notes
09 Agile strategy and planning
The key to good strategy
Emergent and deliberate strategy
The balance between vision and iteration
The customer-centric organization
‘P’ is for Prioritization
Strategy as an ever-changing algorithm
Discovery-driven planning
Notes
10 Linking strategy to execution
The five questions
Strategy and tactic trees
OKRs: bringing the team with you
Sprint working as a driver of change
Data-driven decision-making
Technology as a barrier to change
Technology as an enabler of change
Agile budgeting
Key takeouts
Notes
PART FOUR Flexibility

Defining flexibility
Notes
11 Agile structures and resourcing
Concurrent running, co-located working
The insourcing and outsourcing dynamic
Centralization vs decentralization, specialists and generalists
The power of small teams to drive big change
Two pizza teams
Self-organizing, multi-disciplinary teams
The composition of multi-disciplinary teams
Notes
12 Scaling agility
Managing core teams and dependencies
Getting the right mix: pioneers, settlers, town planners
Agile decision-making: flatter structures, quicker decisions
Agile governance and the digital board
Notes
13 Building the culture to move fast
Agile is not just a process, it defines a culture
What is digital-native culture?
The right culture helps you to move fast
What really differentiates high-performing teams?
Creating the culture for real collaboration
The importance of trust and ‘productive informality’
Read my user manual
Notes
14 A blueprint for flexibility: autonomy, mastery and
purpose
Our massive employee engagement problem
Mapping strategy and culture to motivation
Autonomy
Mastery
Purpose
Notes
15 Digital-native talent

Hiring smart
Peacocks, penguins, and pie bakers
Redefining effective leadership for the digital age
Key takeouts
Notes
PART FIVE The transformation journey
The five dimensions of change
Dimension one: personal
Dimension two: principles
Dimension three: process
Dimension four: practice
Dimension five: pace
Staying agile
What now?
Notes
Index
Backcover

List of Figures
FIGURE 1.1 Characteristics of change
FIGURE 1.2 Organizational change is logarithmic
FIGURE 2.1 Lifecycle of an invention
FIGURE 2.2 Overlapping S-curves
FIGURE 4.1 Elements of agility
FIGURE 5.1 The ambiguity zone
FIGURE 5.2 Dave Snowden’s Cynefin model
FIGURE 6.1 Agile software development
FIGURE 9.1 The Eisenhower matrix
FIGURE 10.1 The five questions as cascades
FIGURE 10.2 Strategy and tactic tree
FIGURE 10.3 An organization’s OKRs
FIGURE 11.1 AstraZeneca’s 12-week cycle
FIGURE 11.2 Advanced talent network
FIGURE 12.1 The Agile Team Onion
FIGURE 12.2 Overlapping onions

FIGURE 12.3 Attributes of pioneers, settlers and town planners
FIGURE 13.1 Schneider’s two-by-two matrix of organizational
culture types
FIGURE 13.2 Bringing agility to life at an organizational and
individual level through a focus on velocity and flexibility
FIGURE 13.3 Combining psychological safety and accountability
FIGURE 13.4 Building blocks of true collaboration

List of Tables
TABLE 1.1 Questions to workshop
TABLE 6.1 The 12 principles of agile business
TABLE 11.1 Key differences between legacy and agile

Acknowledgements
This book would not have been possible without the support,
understanding and patience of our contributors, interviewees, co-
conspirators, and publishers. We are particularly grateful to Russell
Davies, Faris Yakob, Gareth Kay, Marco Ryan, Duncan Hammond,
Eva Appelbaum, Gerd Leonhard, John Coleman for contributing
insight from their personal experience directly to the book. We owe
a big thanks to all those who provided inspiration and insight
through sharing their thinking in interviews or via their writing,
blogs and social media, most notably: John Willshire, Tim Kastelle,
Kevin Kelly, Mark Raheja, Tracey Follows, Bud Caddell, Mel Exon,
Ben Malbon, Tim Malbon, Simon Wardley, Aaron Dignan, David
Carr, Adam Morgan, Tom Goodwin, Antony Mayfield, Toby Barnes,
Scott Brinker, Anjali Ramachandran, Mike Bracken, Dave Snowden,
Victor Newman, Matt Edgar, Paul Graham, Brian Solis, Martin
Bailie, John Battelle, Emily Webber, Tom Loosemore, Noah Brier,
Scott Gallacher, Gemma Greaves, Charles Leadbetter, Michael
Sahota, Jason Fried, Ben Thompson, Steven Anderson, Jonathan
Lovatt-Young, James Haycock, John Kotter, Stewart Brand, Charles
Duhigg, Rita Gunther MacGrath, Marc Andreesen, Clay Christensen,
Ray Kurzweil, Charles Handy, Robert Coram, Steven Johnson, Atul
Gawande, Eric Ries, Jim Collins, Carol Dweck, Steve Blank, Dave
McClure, Roger Martin, Richard Rumelt, Sir Laurence Freedman,
Amy Edmonson, Dan Pink, Ben Horowitz, Simon Sinek, Laszlo Bock,
Caroline Webb, Ashley Friedlein, Tim Harford, Ben Salmon, Seth
Godin, BJ Gallagher Hateley, Warren H Schmidt, Michael Crowe,
David Armano, Mirage Islam, Chip Heath, Dan Heath, Ben Pask, Nir
Eyal, Frederic Lloux. We thank Kogan Page for providing the
opportunity to publish what we’ve learnt in the hope others will
gain some additional insight. We thank our families for allowing us

the time and providing their patience. We know we have missed a
few people out along the way and we hope they accept our apology
for that here.

PART ONE
The digital-native organization
In this introductory Part we set the context for digital
transformation, define the key characteristics of a digital-native
organization, make the case for why these characteristics are
necessary, and discuss some of the key barriers to change,
particularly within large organizations.
INTRODUCTION
Change is the process by which the future invades our lives.
Alvin Toffler1
In the contemporary business environment, the ability to be a
genuinely agile company, and one that is native to the digitally
empowered world in which we all live and operate has become not
only a driver of competitive advantage and success, but critical for
business survival.
It was researcher Marc Prensky who, in 2001, originated the term
‘digital native’ (Prensky, 2001)2 as a way to describe people who
were born after 1980 and whose lives have been characterized by
access to networked digital technologies having grown up never
knowing a way of life other than one mediated by digital.
Digital immigrants on the other hand, may be quite sophisticated
in their use of such technologies but grew up in an analog world
and so their experience is typically characterized by less familiarity
with the digital environment.
In a similar way, the digital native organization might be
considered to be one that has grown up in, and has been very much

shaped by, a digitally empowered world. As such, their view on the
world is not tainted by legacy technologies, thinking, culture,
strategies, or approaches. While some organizations have proved to
be very adept at transforming for the radically different
environment in which they find themselves, this distinction is an
important one since just about every area of every business
(including customer interactions and expectations, operational
efficiency and productivity, marketing and communications, sales,
logistics and distribution) has been significantly changed by the
impact of digital technologies.
Digital-native organizations may have originated more naturally
from the technology sector, but they now stretch across the widest
range of industries from retail to logistics to marketing to
automotive. Yet what they hold in common is a natural, inherent
ability to take a different view on the world and the competitive
markets in which they operate, to take an often contrasting
approach to traditional ways of solving problems, and even to have
a different ‘feel’ to the values and organizational culture that they
embrace. These are capabilities, approaches, processes and cultures
that are informed by the networked, technology-centric world in
which we live, but it is also a shift in mindset. It is as much about
the behaviours of individuals and members of the team as it is the
technology or digital solutions they are providing.
In the same way as people’s early experience helps shape them
for the rest of their lives, so companies that are digital immigrants
are required to unravel a lot of outmoded assumptions, ways of
doing things, and organizational habits in order to rebuild to
become not only native speakers in the digital world, but native do-
ers. We call it digital transformation, not digital adaptation because
the change it requires impacts how things get done, how people
work, the way in which the company is structured, and how people
feel when they walk through the door in the morning. In other
words the very fabric of how a company operates, behaves and
does business.

This book is about transforming business to be fit for purpose in a
digitally empowered world. Alongside our own insights, we have
incorporated into the text some ‘stories from the frontline’ –
contributions from other experienced practitioners of digital
transformation bringing to life their observations about how to do it
well. Our book seeks to capture, distill and define the key lessons
that might be learned in order to help companies on their journey
of transformation towards becoming true digital-native businesses.
Notes
1 Alvin Toffler, Future Shock, Introduction, Bantam Books (1990), ISBN-10: 0553277375,
ISBN-13: 978–0553277371
2 Prensky, M (2001) Digital Natives, Digital Immigrants, [Online]
http://www.marcprensky.com/writing/Prensky%20-
%20Digital%20Natives,%20Digital%20Immigrants%20-%20Part1.pdf [last accessed 16
October 2016]

01
The key forces for change
There can surely be very few businesses that do not feel the vivid
and urgent need to acquire a heightened level of agility in order to
deliver against evolving customer expectation and in response to
the challenges and opportunities brought by digital technologies.
Technologies that are impacting right across the business from
marketing and sales, to HR, finance and operations. Technologies
that show little respect for existing business models, competitive
advantage or established best practice. Technologies that are
actively rewiring the way in which entire markets operate with
unprecedented speed and comprehensiveness.
Processing capability has increased exponentially (an Apple
iPhone 5 has almost three times the processing power of the 1985
Cray-2 supercomputer)1 meaning that everyone has a
supercomputer in their pocket with access to virtually universal
information. And yet, while these changes may be driven by
technology, they are very far from just being about technology. If
we want to understand the real impact we need to consider the
behaviours that surround the technology. Similarly, if we want to
understand how best to respond to these challenges, we need to
consider not only strategies but our approaches, thinking, mindset
and behaviours.
In fact, in this book we are deliberately not focusing on
technology. Our observation before writing it was that there were
many discourses on the need for organizations to change in
response the impact of digital, but very few that gave practical
advice, models or methodologies for understanding what we need
to actually do in response to this rapidly shifting environment.

Consequently, we will focus on the ‘how’ of digital transformation
rather than the ‘why’. On the far reaching and comprehensive
change that is needed in the very fabric of how we run our
organizations. But it is also focused on the practical steps that
organizations can take to embark on their own journey towards
digital maturity.
But let us begin by summarizing some early context around the
key driving forces that are shaping this urgent requirement.
Organizations are currently sat at the centre of a perfect storm
characterized by accelerating change, and rapidly shifting
competitive, consumer and company contexts (Figure 1.1).

Figure 1.1 Characteristics of change
Relentless, accelerating change
In 2006 the world’s most valuable companies by market
capitalization were Exxon Mobile (oil), General Electric
(conglomerate), Microsoft (tech), Citigroup (financial services), BP
(oil), Royal Dutch Shell (oil). A decade later in 2016, that list is
dominated by technology businesses, comprising Apple, Alphabet
(the holding company that owns Google), Microsoft, Amazon, Exxon

Mobile (the only non-tech company in the top six) and Facebook.
Change is not new. Progress has always been with us.
Advancement is a given. But what digital has brought to just about
every sector, industry and business is a transformed scale, scope
and pace of change. Meaning that the required organizational
response is not only wide, but deep and fundamental.
‘Adapt or die’ goes the mantra. The need to transform businesses
to become more native for a digitally empowered world is not only
urgent, but essential and inevitable. Those that are slow to
transform will be left behind, disrupted and disintermediated.
As far back as 1938, Buckminster Fuller was talking about
‘Ephemeralization’, describing the trend for how technological
advancement means doing ‘more and more with less and less until
eventually you can do everything with nothing’ (Fuller, 1973).2 Joseph
Schumpeter, the economist who taught at Harvard in the 1930s,
described capitalism as an evolutionary process involving a ‘gale of
creative destruction’ that sees new companies and industries
continually emerge to remove or replace the old. But technology has
brought a new urgency to this process.
Ray Kurzweil’s renowned 2001 essay ‘The Law of Accelerating
Returns’3 famously argues that technological change and therefore
progress, evidenced by historical trajectory, is exponential rather
than linear, and that breakthroughs spawned by technology will be
increasingly common.
Research by Professor Richard Foster of Yale University found
that the average lifespan of a company in the S&P 500 index has
decreased from 61 years in 1958 to around 15 years today.4 His
estimation is that by 2027, more than three-quarters of the S&P 500
will be companies that we have not yet heard of.
Yet the picture is perhaps more nuanced than this headline
finding suggests. Analysis done by Boston Consulting Group (Reeves
and Pueschel, 2015)5 that looked at the patterns of entry, growth
and exit for 35,000 publicly listed companies in the United States

since 1950 showed that over the long term company lifespans have
indeed decreased (and mortality risk increased) yet in the more
recent past they have plateaued. Research from the Santa Fe
Institute (‘The mortality of companies’)6 using a database of 25,000
American companies from 1950 to 2009 for example, pegged the
typical half-life of a publicly traded company at around 10 years but
found that the most common reason for a company to disappear is
merger or acquisition.
So while mortality risk for businesses has increased over the long
term, the true picture about the impact of accelerating change on
businesses is more nuanced. High-profile examples of businesses
that have failed to innovate successfully in the face of digital
disruption (Kodak, Blockbuster, Nokia) encourage us to think of the
impact of digital and accelerating technological change in terms of
corporate fatality.
Yet while these examples represent perhaps the most acute result
of this phenomenon, for most organizations the impact of
accelerating change is likely to be reflected in multiple scenarios
and challenges that the company will need to deal with, and all with
multiple potential consequences. For example, by creating a
significantly more volatile environment in which the company
operates, unexpected new entrants to the sector, growing
competition from all sides, rapid shifts in customer expectation,
fundamental changes in operating relationships with customers,
suppliers and partners, and accelerated changes in product or
service propositions and lifecycles.
In response to relentless, accelerating change, a new heightened
level of agility is not only desirable, but critical to survival. It has
never been more important to determine a defined organizational
response to the shifts in our three crucial contexts: competitive,
consumer and company.
Transformed competitive contexts

With barriers to entry in just about every sector dramatically
reducing through ever-cheaper, easier, more flexible and scalable
access to cloud-based support and infrastructure services and
markets, the threat from new, potentially disruptive entrants is
concurrently increasing. And it is happening at an ever-faster pace.
Digital technologies have served to disrupt the power balance in
markets between consumers and organizations. Digital and social
platforms have brought with them the connected and empowered
consumer, reducing the control that businesses have over their
brand perception, and creating new ways to empower discovery,
trial and adoption. Greater transparency in pricing has brought
new downwards pressure on pricing towards commoditization of
products and services. The integration of digital into operations and
supply chain brings significant potential advantage in timescales,
efficiencies or costs. The challenges for senior corporate leaders are
not only numerous but varied, emergent and rapidly evolving.
Horizontal innovation (competition from anywhere)
IBM’s 2015 global C-suite study7 interviewed over 5,000 business
leaders from more than 70 countries and from 21 industries. One of
the most interesting findings focuses on so-called ‘horizontal
innovation’ – the idea that where once it was comparatively easier
for senior leaders to be able to anticipate where competition will
come from, there is now a much greater risk from competition that
is invisible until it is too late.
As new digitally empowered businesses scale rapidly in one
sector, rewiring the value chain in a particular market through
software, they are then able to more easily move horizontally into
other sectors by reapplying their capability and expertise in new
ways. The net effect is increasingly blurred boundaries between
industries as sectors are brought together and potentially redefined.
When the IBM survey asked senior leaders about the developments
that they expect the next ‘wave’ to consist of, this industry

convergence eclipsed other trends including rising cyber risk, the
‘anywhere’ workplace and the sharing economy.
As we will go on to discuss, digital is, of course, exceptionally
adept at rewriting the rules of competitive advantage but when the
potential is high for rapid disruption to come from anywhere, and
disintermediation (the switching of, or reduction in, intermediaries
between producers and consumers) is happening at pace, we need
to reimagine our response and reorientate our organizations
towards a new and consistently higher level of organizational
agility.
The ‘full stack startup’
Competitive threats from horizontal innovation may originate from
anywhere of course, but one of the unique dynamics that digital has
enabled is the increasing potential for disruption from a new breed
of ambitious startups that have in their sights not just incumbent
businesses but entire industries.
These are startups empowered through digital technology to
operate at global scale, access the best talent, reduce
communication costs and reach far broader audiences than was
once possible.
Hal Varian, Google Chief Economist, talks of micro-multinational
companies:
If the late 20th Century was the age of the multinational company, the early 21st will be
the age of the micro-multinational: small companies that operate globally.
(Varian, 2011)8
Varian believes that just as in the 19th century (where the elements
were standardized mechanical parts like wheels and gears) and the
20th century (internal combustion engines, electronics and,
eventually, microchips) we live now in another era of combinatorial
innovation.
Today, a large proportion of software development and

innovation on the web involves connecting standardized
components (including open source operating systems, servers,
database management systems and languages such as Linux,
Apache, MySQL, Python) in new ways. Not only are the building
blocks of innovation readily accessible, but the barriers to entry
have reduced dramatically through improved accessibility to
support infrastructure and systems such as cloud computing, data,
business, communication and content services.
As a consequence the pace of innovation has increased. The
smallest company can access the kind of infrastructure, much of it
accessible from a device in your hand, that was barely available to
even the largest companies 15 years ago, compete for best people,
work with global talent around the clock, capitalize on global
variation in knowledge, skills and wages:
Innovation has always been stimulated by international trade, and now trade in
knowledge and skills can take place far more easily than ever before.
(Varian, 2011)9
Renowned writer, technologist and the founding executive editor of
Wired, Kevin Kelly talks about how it may feel as though many of
the most significant digital innovations have already been
developed over the past 30 years, yet we have barely begun:
… from our perspective now, the greatest online things of the first half of this century are
all before us. All these miraculous inventions are waiting for that crazy, no-one-told-me-
it-was-impossible visionary to start grabbing the low-hanging fruit.
(Kelly, 2014)10
With the kind of standardized component and infrastructure access
that Hal Varian talked about, the potential for entrepreneurs, says
Kelly, has never been greater. He describes how there has never
been a better time ‘in the whole history of the world’ to invent
something, to start something new. How there has never been a
time:
… with more opportunities, more openings, lower barriers, higher benefit/risk ratios,

better returns, greater upside, than now. Right now, this minute. This is the time that
folks in the future will look back at and say, ‘Oh to have been alive and well back then!’
(Kelly, 2014)
The phrase ‘unicorns’ has become a label (derived from the
investment and VC community) used to denote startup businesses
that are in rapid growth and that have acquired a valuation in
excess of US$1 billion. A better descriptor perhaps is the ‘full stack
startup’,11 originated by internet entrepreneur and venture
capitalist Chris Dixon to describe the new breed of company that is
setting out to disrupt and rewire entire markets. Except the real
disruptors might better be termed ‘full stack stay-ups’ rather than
‘startups’ owing to their innate ability to generate sustainable
growth through continuous but rapid innovation.
Dixon believes that we are in what he calls the ‘deployment
phase’ of the internet. Technological revolutions, he says, happen in
two main phases: the installation phase and the deployment phase.
The early stages of each revolution are typically characterized by a
financial bubble that drives the installation of the new technology
at an irrationally fast rate. The crash that inevitably follows is, in
turn, followed by a recovery and then a protracted period of
productive growth that ‘deploys’ the technology much more broadly
throughout other industries and society as a whole.
If a company develops a new technology that is valuable to an
industry, says Dixon, where once the expectation would be to
license or sell the technology to existing companies in that industry,
the new approach is to build a complete, end-to-end product or
service (a ‘full stack’ approach) that bypasses existing companies:
The most interesting tech companies aren’t trying to sell software to other companies.
They are trying to reshape industries from top to bottom.
(Dixon, 2015)
So Buzzfeed is a media company in the same way that Netflix is a
streaming movie company, or Uber a taxi company, or Tesla a car
company. These are companies that have technology at their core.

They can deliver improved product experience, circumvent cultural
resistance to new technologies and capture a greater portion of the
economic benefits.
It is a potent combination. With big ideas, grand ambitions,
exceptional talent, unprecedented access to global markets and
lower barriers to entry than ever before, the potential for
disruption and horizontal innovation is writ large. A rolling survey
conducted by CB Insights12 was tracking 169 unicorn companies at
time of writing, across sectors as diverse as hardware, retail, data,
fintech, social, transportation, healthcare and media.
But while more renowned unicorns like AirBnB and Uber are
visibly rewiring entire markets, a perhaps less immediately
conspicuous but no less present danger comes from large
corporates with broad product and service portfolios coming under
attack from multiple startups. New competitive threats from young,
early stage businesses that utilize disruptive business models and
are empowered by digital to attack individual product areas or
service offerings, threatening to ‘unbundle’13 incumbent businesses.
The shifting nature of advantage
Just about every organization is finding that navigating the ever-
changing environment in which they find themselves is like riding a
surfboard on a choppy sea of uncertainty. Yet for many, their
approach to strategy has not changed.
We need a new kind of strategy for a new world. A strategy that is
far more adaptive than the fixed, inflexible forms of strategy that
are still prevalent in many businesses. A ‘digitally native’ strategy
that is more suited to the fast-changing, technologically empowered
markets that we now operate in.
Columbia Business School professor Rita Gunther McGrath (in The
End of Competitive Advantage)14 frames this as a change in the
purpose of strategy from trying to secure sustainable competitive

advantage to exploiting a series of transient competitive advantages
that in themselves combine to form long-term advantage. McGrath
based this assertion on research that looked at companies which
had a market cap of over US$1 billion and that had, over the period
2000–09, sustained a net income growth of 5 per cent above global
GDP. There were only 10 of these companies, but she looked in
detail at the lessons from their strategies.
Drawn from that, McGrath developed a useful framework for a
more agile organizational strategy that echoes many of the themes
discussed in this book:
Continuous reconfiguration: moving on from extreme
restructuring programmes to a process of ‘continuous morphing’
that combines core stability in essentials like corporate vision,
while enabling dynamism in operations, structures and
execution. This is empowered through fluidity in the allocation of
talent rather than narrowly defined roles.
Healthy disengagement: rather than defending an advantage to
the end, taking a more systematic, frequent, formal approach to
disengagement, and feeding the learnings back into the business.
Resource allocation that supports agility: key resources are
managed under central control and not held hostage by local
business units, resources are organized around opportunity
rather than opportunities being squeezed into existing
structures, access to assets and leveraging external capability
being key, not necessarily needing to own or build everything
yourself.
Innovation proficiency: moving from episodic to continuous
and systematic innovation, protected through governance and
budgeting being separate from business as usual, dedicated
resourcing, and a balanced approach of resource investment
across core, growth and entirely new initiatives. Higher levels of
experimentation and learning from failure encouraged.
Leadership: promoting continual shifts with broader

constituencies involved in the strategy process, talent directed
towards seizing opportunity, and rather than seeking perfection,
accepting of fast and roughly right.
We are at a watershed moment for organizational strategy. One
where attachment to traditional, deeply ingrained approaches that
seek to extract maximum value from sustainable competitive
advantage for as long as possible, even when that competitive
advantage is in decline, is becoming a significant barrier to
progress. One where outmoded, inflexible, slow-moving systems,
strategies and processes that are optimized over time around
sustainable advantages are becoming a liability.
Much of this is not only about enabling companies to be more
agile and flexible, but about moving away from a number of the
things that create a great deal of demoralizing frustration among
employees – the inflexible pursuit of legacy models, an episodic
approach to innovation, narrow job roles, rigid planning processes,
post strategic-review downsizing and so on. Instead, the continuous
pursuit of new markets, new technologies, innovation and
improved capability around a focused vision has the potential to be
hugely energizing, motivating and inspiring for employees.
If navigating the current business and consumer environment is
like riding a surfboard on a choppy sea of uncertainty, we need to
learn how to surf the waves of opportunity. McGrath talks about
how strategy and innovation have historically been thought of as
two separate disciplines:
Strategy was all about finding a favorable position in a well-defined industry and then
exploiting a long-term competitive advantage. Innovation was about creating new
businesses and was seen as something separate from the business’s core set of
activities.
The disparate fields of organizational change, strategy and
innovation are all coming together, driven by the need for far
greater adaptability in order to win in a world of transient
competitive advantage. Every company now needs to think more

like a startup. Today’s digitally native organizations, for example,
are making huge efforts to retain the culture and agility of a startup
as they scale.
So what does this really mean in terms of organizational strategy?
In June 2014, Boston Consulting Group revisited their classic growth
share matrix. The matrix, originated by BCG founder Bruce
Henderson 40 years ago, famously plots a product portfolio on a 2 ×
2 against growth rate and market share, giving us categorizations
like ‘stars’, ‘problem child’ (or ‘question marks’), ‘dogs’ and ‘cash
cows’, and is a key part of business school teaching on strategy.
Many large organizations have used its principles of mapping
company competitiveness (share) against market attractiveness
(growth) as the basis for investment and resourcing decisions. High
share could result in sustainably superior returns and eventually
cost-efficiencies driven by scale and experience, high growth
indicated markets with the greatest leadership potential.
In the face of rapid change and uncertainty driven by (among
other factors) technological impact, BCG now say that companies
need to ‘constantly renew their advantage, increasing the speed at
which they shift resources among products and business units’. In
addition, market share is no longer a direct predictor of sustained
performance, with competitive advantage increasingly coming from
other factors such as adaptability.
Their research, which mapped every US listed company to a
quadrant on the matrix, found that companies circulated through
the matrix quadrants faster than in previous years (comparing a
five-year period 2008–12 to one from 1988–92). In fact, looking at
some of the largest conglomerates, the average time any business
unit spent in a quadrant was less than two years in 2012 (with only
a few exceptionally stable industries seeing fewer disruptions).
There were also changes in the distribution of companies across
the matrix, and a breakdown in the relationship between relative
market share and sustained competitiveness. Cash cows generated

a smaller share of total profits (25 per cent lower than in 1982), and
were proportionately fewer, with the lifespan of this stage declining
(by some 55 per cent in industries that saw faster matrix
circulation).
Unsurprisingly, BCG go on to say that the matrix is still relevant,
but needs to be applied with greater agility and a focus on ‘strategic
experimentation’ to allow greater adaptability. This is likely to
mean more experimentation in the question marks quadrant, run
more quickly, economically and systematically in order to identify
promising ones that can grow into stars. It is also likely to mean
faster response to cashing out stars, retiring cows and maximizing
what value they can from dogs.
Transformed consumer contexts
The power shift from organizations to consumers, and the greater
transparency and democratization in product and service creation,
development, marketing, sales and operation that has been fuelled
by technological empowerment has brought new and challenging
consumer contexts to many businesses.
As digital empowers ever-richer and more seamless interaction,
customer expectations are dramatically increasing. As soon as we
are spoiled by a seamlessly intuitive, smartly designed, on-demand
customer experience like Amazon one-click or Prime, we want and
expect everything to be like that. In their book A Beautiful
Constraint,15 Adam Morgan and Mark Barden neatly describe this
phenomenon and the rise in ‘unreasonable’ levels of consumer
expectation as ‘Uber’s Children’.
As more products become services, impatience with even the
tiniest annoyances becomes a brand differentiator and the most
exceptional (even if not directly related) customer experience the
benchmark by which everything else is judged. If I can renew my
car tax online so easily, why is it so cumbersome to change a

standing order online with my bank? If I can see real-time how far
my taxi driver is away from me, why am I waiting in at home not
knowing when my package will arrive? If I can navigate seamlessly
to immediately stream on-demand almost any piece of music that I
want, why can’t I do that with all forms of content?
So while service design has become a real differentiator and
driver of advantage, the competitive context for brands has also
become far broader, consumer expectations far more challenging to
address, and the advantage of continually innovating around
customer need never greater.
As Adam Morgan has pointed out, the unreasonable consumer is,
in effect, asking businesses questions that challenge and propel
brands and companies to greater heights and changing the face of
entire categories in the process:
… if we don’t ask propelling questions of ourselves, someone is going to ask them of us,
someone with authority and legitimacy. It may be our largest or most influential
customer, or our noisiest challenger, but if we don’t anticipate this, by the time we hear
them we will already be behind the curve. This is the corollary of the new.
(Morgan, 2015)16
As advantage increasingly resides in customer experience and
usability, those businesses that have long been schooled in great
service design and that can adapt rapidly to shifting consumer
contexts will increasingly show the way. And as wave after wave of
innovation hits customer interfaces (once desktop, and then mobile,
now increasingly those mediated by artificial intelligence), this, and
the market-beating competitive advantage that will be derived from
investment in the smart application of new technologies, will
increasingly separate the great from the simply good.
The ‘gateway principle’ and the customer interface
battle
As technology exponentially advances, so the interfaces that we

have with that technology advances and evolves with it. Ever-more
sophisticated user interfaces enable the potential for more
progressive user interaction and seamless user experience. Put
simply, the way in which humans are interacting with technology,
and the expectations that we have in terms of convenience,
capability and ease of use, is shifting at pace alongside the
development of that technology.
So text and keyboards are augmented with touch screens, voice
activation, artificial intelligence, and eventually virtual and
augmented reality. As this advances, it becomes essential for
businesses to understand where the value lies, and how to best
optimize for not only rapidly shifting customer interactions and
expectations, but also behaviours. Underlying customer needs may
change less than we think, but the behaviours that surround them
and how we choose to fulfil those needs do change, and is
ultimately a very real source of advantage or disadvantage. So
while technology is important, understanding the underlying
behaviours that surround it and how they change is even more so.
As Henry Jenkins (Professor of Communication, Journalism and
Cinematic Arts, University of Southern California) once said: ‘Our
focus should be not on emerging technologies but on emerging
cultural practices’.17
Yet alongside the shifts in customer interfaces (and the rapidity of
those shifts) there is another key dynamic which has become more
important over time: who owns that customer interface or at least
the data that comes from customer interaction. While it remains
important to optimize for shifting customer touchpoints the dangers
of digital disintermediation are never far away. Aggregators (like
MoneySupermarket or ComparetheMarket) enable consumers to
compare prices more easily but also then become the primary
gateway for that market. Rather than go to multiple insurance
providers for example, it is far easier and more convenient to use a
comparison service, but as a consequence that service becomes the
funnel through which customers are channelled to providers.

Similarly, ubiquitous digital services such as Google, Apple,
Facebook and Amazon (so-called ‘GAFA’) are building ecosystems of
digital touchpoints around users through which we are able to
perform all manner of tasks. Leave a comment on a website? Easily
login with Facebook. Find a restaurant nearby? Voice search on
Google. Need a recipe? Ask Siri. Need that recipe to be read out to
you as you cook? Ask Amazon’s Alexa assistant via their Echo
speaker.
The power in being the primary gateway, of course, is more
customer data, which can in turn be leveraged to create more
personalized digital experiences and generate revenue. The
customer relationship with the service provider is now mediated
through multiple service ‘layers’, all battling to be the customer
interface.
As our use of smartphones matures, an increasing amount of
interaction happens not direct with apps (where brands can own
more of the interaction), but via search and the notifications layer,
at the operating system level (where Apple or Google own more of
the interaction). As GAFA invest more in AI-driven automation and
services like Facebook M (in Messenger), Google Now, Apple Siri
and Amazon Alexa, and these services are embedded and
integrated into an increasing number of third-party applications,
service providers become ever-more mediated.
It is, as Tom Goodwin, memorably describes it, like the ‘thin
internet’: a ‘more seamless, more pervasive, personal and even
predictive’ (Goodwin, 2014)18 blanket spread thinner in more
context specific layers across more devices. The battle is
increasingly for the customer interface,19 with the balance of power
increasingly tilting towards a new breed of company that derives
enormous value from software-driven services that are the
gateway, and mediate between large (more often not owned) supply
systems and consumers. Digital disintermediation is a continuous,
ever-shifting danger.

Transformed company contexts
The Data Explosion
The exponential increase in the amount of data generated by the
ever-growing volume of connected devices and services is not new
news. Most organizations are awash with data. In 2010, Eric
Schmidt famously described (at Google’s Atmosphere Convention)
how:
There were 5 Exabytes of information created between the dawn of civilization through
2003, but that much information is now created every 2 days.20
EMC’s Digital Universe Study in 201421 (using research conducted
by IDC) predicted that with the ever-increasing number of
connected people (believed to be almost 3.5 billion, or 46 per cent of
the world population, at time of writing),22 connected and
increasingly smart devices and ‘things’, the ‘digital universe’ will
grow by 40 per cent a year into the next decade, increasing from 4.4
zetabytes in 2013 to 44 zetabytes in 2020. In 2005, the digital
universe was estimated to comprise ‘only’ 132 exabytes of data.
But the challenge of deriving value from it all remains very real.
For all the talk of ‘Big Data’, most companies are struggling to
handle, analyse and extract potentially valuable insights from the
(comparatively small) amount of data they already have access to.
An oft quoted finding from the 2012 EMC/IDC Digital Universe study
revealed that less than 1 per cent of the world’s data is actually
analysed.23
Data may well be the new oil, but as one of the interviewees for
this book said: ‘Data is the new oil because it’s toxic unless you
refine it’, a reference to the widely acknowledged originator of the
metaphor Clive Humby (Founder and Chairman of well-known
customer science business Dunnhumby) who described (to the
Association of National Advertisers in 2006, written up by Michael

Palmer)24 how:
Data is the new oil. It’s valuable, but if unrefined it cannot really be used. It has to be
changed into gas, plastic, chemicals, etc to create a valuable entity that drives
profitable activity; so must data be broken down, analyzed for it to have value.
Gartner’s model for maturity in data analytics25 sees a progression
of value (and also difficulty) that begins with the basic descriptive
analytics (what happened), moves to diagnostic analytics (in which
we understand why it happened), to predictive analytics (where we
can predict what will happen), and eventually to prescriptive
analytics (understanding how we can actually make it happen).
As simple information moves towards optimization, the
opportunity for greater operational efficiency and benefit increases
dramatically.
Everything becoming a service, and software ‘eating the
world’
As the internet becomes ever-more pervasive and is integrated into
an increasing number of not just devices but also objects, an
increasing number of products are morphing into services. As more
things become connected, so the potential to augment product
experience through service becomes much greater. So we have the
connected car that enables voice-controlled access to a whole range
of new services, the smart thermostat that I can access and control
remotely via my smartphone, the album that is updated multiple
times by the artist even after release.26
Where once products were released into the world and
subsequent improvements would only come from new versions of
that same product, now continuous augmentation, fixes and
enhancements can happen in the same way that our smartphone
operating system is continually updated.
As more products become services, the operational requirements
on a business change significantly. Ubiquitous, always-on

connection creates opportunities (and demands) for ongoing
improvements and updates. Ongoing customer interaction
generates the potential for enhanced service delivery through data
collection, visualization, personalization and recommendation.
Real-time data acquisition and aggregation allows for near real-time
response, adjustment and adaptation. The product sits at the centre
of a connected ecosystem of touchpoints and interactions, glued
together by data and the single customer view, and blurring real-
world with virtual world experiences.
Writing about the launch of a new Nike+ app, for example, Toby
Barnes (Product Strategy Director at AKQA in Portland) has
described27 how transformative the app is not just to Nike’s
customer and product proposition, but to the business itself:
The app is a sharp point to a service. A service that involves physical stores, runs clubs,
events, knitted products that are created as consumers design them, content strategies
based on physical activities, non linear story telling and breaking org charts into atoms
and networks.
(Barnes, 2016)
The proliferation of services in turn means that service design,
adept collection, analysis and application of data, and seamless,
exceptional customer experience become real product
differentiators and sources of advantage. As that advantage
increases, so does the importance, potential and power of software
across just about every product category.
In a prophetic Wall Street Journal article authored in 2011, Marc
Andreesen wrote about how more and more business problems
start to look like software problems and why ‘software is eating the
world’.28 As an increasing number of product areas become
surrounded by service propositions, and an ever-growing number
of industries, from travel to logistics, banking to healthcare,
education to consumer packaged goods are remodelled by software,
Marc Andreesen’s prognosis is fast becoming reality.
As seamless integration of software with hardware and other

physical and real-world product experience becomes ever-more
critical to customer perception and advantage, many businesses
across a broad range of sectors are needing to not only redesign
product experiences, technology and support infrastructure, and
operations, but learn a raft of new skills to equip themselves for a
very different world.
From linear to networked dynamics
The digital age has brought with it an unprecedented level of
connectedness at both an individual and an organizational level
creating far greater opportunity for value to be derived less from
linear, one-way relationships and increasingly from networked
systems of customers, suppliers and partners, involving two-way
value exchanges.
An increasing number of digital-native businesses are creating
platforms that connect, facilitate and enable value creation and
exchange that involve all parties. Think business models built on
peer-to-peer. Or the so-called ‘sharing economy’ in which customers
‘rent’ usage of products rather than own them, facilitated through
digitally enabled communities. Think open source models and
ecosystems of external developers that create value for themselves
but also the business, accessing data through APIs.
Think of networked approaches to supply chain management that
now enable a move away from linear flows of information along
the supply chain to a far more connected system and
communication flow between key suppliers, secondary suppliers,
manufacturing, distribution centres and retail, enabling better
decisioning, a heightened level of responsiveness to change, and
real-time visibility to demand, thereby reducing wastage and
latency.
And also think of networks of external or remotely based talent
or services that can be tapped into at short notice. When Nobel
economist Ronald Coase wrote about why companies exist in ‘The

Nature of the Firm’ in his classic 1937 economics article,29 he
described it as being to make it easier to coordinate, and lower the
cost of, producing goods and services. Yet digital technologies are
unbundling traditional aggregations of value, enabling a far more
distributed approach to sourcing and accessing value, and reducing
the transaction costs of utilizing flexible and scalable talent and
services.
In the same way that technology has rebalanced the power
relationship between companies and their customers, so the advent
of ever-more accessible and more loosely coupled architectures of
micro-services (cloud-based services accessed often through APIs or
Application Programming Interfaces that enable remote access to
data and services) is driving a move away from monolithic software
to services that are far more flexible, agile and scalable. Hugely
powerful software and services that were once expensive, complex
and the domain of only those businesses that could invest heavily,
are now accessible to the smallest startup. Powerful data sources
that were once locked behind firewalls can now be accessed to
drive new insights and power new services.
The transition from linear value chains to dynamic, networked
ecosystems where data, information and value more readily flows
between all parties in the system is one of the key business shifts of
our time. Yet networked dynamics require new approaches, new
partnerships and new levels of openness.
If we are to truly capitalize on this trend we need to change our
understanding of how businesses can create and retain value in a
digitally empowered world.
The heightened impact of talent
While having the best staff has always been central to business
success, the whirlwind impact of technology has brought with it a
stark amplification in the importance of talent. The potential for
performance divergence between those companies that can attract

and retain the best digital talent and those that can’t has never been
greater. Put simply, it has never been more critical to have the best
people.
Digital technologies have shifted power towards individuals and
small teams within companies who can create dramatic change
through the origination and execution of exceptional ideas. The
difference between the great and the merely good in digital talent
increasingly makes the difference between the outstanding and the
also-rans in business.
And yet, as the demand for great digital talent expands, shortages
in talent pools from which businesses can draw have left companies
fighting to fulfill shifting skills requirements. Worse still, acute
shortages in specific areas (notably developers, data and analytics,
and content) have generated intense competition in which the
winners win big, and the losers get very little.
At the same time, the competitive context for digital talent has
shifted rapidly. If you are a large multinational with a stuffy,
traditional corporate headquarters in the suburbs, you are not only
up against other large multinationals but the cool, funky startup in
the trendy part of town. The best people can be choosy about where
they work, the environment in which they work and learn, and
whom they work with and learn from. Increasing transparency in
employer practice and brand means there is nowhere to hide. The
culture and environment into which those people arrive become
critical determining factors for whether you will be able to keep
them for any length of time or attract them to work for you in the
first place.
Changing employee expectations means that talented individuals
at all levels, the kind that can really make a difference to wider
business performance and advantage, will only work in the kind of
culture and environment that truly gives them greater freedom and
flexibility, a sense of purpose and empowerment, one that enables
them to thrive alongside like-minded people, and one where they
can learn from the best in the industry.

The agile context model
We have created a practical tool for understanding the key
questions that sit at the intersection of the key contexts
(competitive, customer, company) and the attributes of agility
(velocity, focus, flexibility). Workshop these questions, using the
canvas in Table 1.1 as a way to identify key areas of challenge and
opportunity:

Velocity Focus Flexibility
Competitive What are the
market factors
that prevent you
from moving
quickly?
How does your
vision and
strategy compare
to your
competitors?
Are there
cultural aspects
to the industry
that create
inertia?
Customer How well does
your organization
understand
shifting customer
need?
How well is your
strategy and
innovation linked
to your customer
need?
How quickly
are you able to
respond to
shifting
customer need?
Company What are the key
forces for inertia
in your
organization?
How well is
organizational
execution linked
to a compelling
vision?
How well does
your culture
support agility?
The key challenge: rates of change
When we begin to consider our response to these not insignificant
shifts, we first need to appreciate the fundamental challenge that
sits at the heart of digital transformation – the variance between the
rate of change within organizations and that which is characteristic
of the external environments in which they operate. Put simply,
change within businesses typically happens at a slower pace than
the rate of change in technology and the consumer behaviour that
surrounds it. Too often, companies are playing catch up with
consumers.
Marketing technologist, author and blogger Scott Brinker frames
this dilemma rather neatly (in his thinking around ‘Martec’s

Law’),30 describing this as the ‘quintessential management
challenge of the 21st Century’. Technological change happens
exponentially, but organizational change is dependent on factors
that transition far more slowly (attitudes, thinking, structures,
behaviours, culture) and so is logarithmic (Figure 1.2).

Figure 1.2 Organizational change is logarithmic
The widening gap between these two curves is perhaps the key
leadership, management and organizational challenge of our times.
A company’s ability to absorb, respond and adapt to and master
accelerating technological change is critical to its success in the
modern world yet most companies are simply too slow. Too slow in
adapting processes. Too slow in making decisions. Too slow in
reorganizing around opportunity. Too slow in identifying where
value lies and innovating to capture that value. There is a paradigm
shift required in the level of organizational agility that most
companies are currently capable of and in the very fabric of how
they work. If strategy is about linking execution and action with
purposeful choices and direction, we need a new kind of corporate
strategy. One that is altogether more suited to a digitally

empowered world.
Yet before we even begin on our journey towards becoming a
more agile business, we need to recognize some fundamental
truths: to appreciate the way in which digital disrupts so that we
might identify potential dangers and opportunity and respond
before it is too late; to develop a common way of understanding
what digital really means within the business so that we can
execute against a clear vision and provide direction; and to be
prepared to deal with the barriers and blockers that are
contributing towards inertia and preventing change from
happening.

Stories from the frontline
Gerd Leonhard, Futurist and Author: The Future of Digital Transformation
The term ‘Digital Transformation’ is well on its way to becoming overused, long before it
even has a chance of becoming a reality. It has become an expression that implies a
readiness for the future but which rarely indicates any profound change in thinking. The
kind of changed thinking necessary to equip today’s corporations for surviving the imminent
transition awaiting humanity as technology becomes truly embodied. The shifts that this will
bring, not only to the world of work but to education, retirement, our concepts of birth, life
and death mean that we must not only digitally transform, we must transform digitization.
Transforming digitization means that we must reassume the lead narrative and change
technology before it changes us utterly. Digitization must not become the vehicle to mass
layoffs and unemployment, social contract erosion or cultural collapse and resource wars.
Today, we already exist in a world where a shared economic narrative has almost
disappeared and as humans on a planet with finite resources we must master technology in
ways that we have not yet demonstrated, including socially, culturally, ethically and
environmentally.
The time for treating ethics as a public relations exercise, a nice-to-have after the
economic model has extracted maximum profit, is long gone. We are entering the age of
digital ethics. Technology now enables economic sanctioning of any brand that oversteps
the moral mark and as the world becomes ever-more networked, economic demonstrations
of discontent will become increasingly common.
The talk about digital transformation needs to move beyond the focus on efficiency and
towards wider human progress. We love to talk of exponential technologies rather than of
exponential humanism. Technology is not just removing the intermediaries in every market,
it’s tearing down the walls between public and private life, between economic survival and
moral thriving. The future is not nirvana, neither is it some kind of Hollywood dystopia. The
future, I’m afraid, is all too human. It will look and feel like today, only much faster and
hyper-connected. It will relentlessly punish any kind of outdated thinking.
Transformation means difference, not merely improvement. We need androrithms as
much as algorithms – human values of creativity and empathy that transcend the merely
mechanistic. We may be the last generation in history to live biologically organic lives.
Before this bodily marriage with technology, we should use every remaining minute to
evolve morally as much as we do economically. The next 20 years will change humanity
more than the previous 300 years.
Notes
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2 Buckminster Fuller, R (1938, 1973) Nine Chains to the Moon, Anchor Books, pp 252–59

3 Kurweil, R (2001) The Law of Accelerating Returns, [Online]
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2016]
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stack-startups/ [last accessed 16 October 2016]
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14 Rita Gunther McGrath (2013), The End of Competitive Advantage: How to keep your
strategy moving as fast as your business, Harvard Business Review Press
15 Adam Morgan, Mark Barden, (2015) A Beautiful Constraint: How to transform your
limitations into advantages, and why it’s everyone’s business, Wiley
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17 Jenkins, H (2006), Eight Traits of the New Media Landscape, [Online]
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October 2016]
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19 Tom Goodwin (March 2015), The Battle Is for the Customer Interface, Techcrunch,
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October 2016]
21 EMC/IDC Digital Universe Study (2014), [Online]
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16 October 2016]
22 Global internet users, [Online] http://www.internetlivestats.com/internet-users/ [last
23 Study: Less than 1% of the world’s data is analysed, over 80% is unprotected, The
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October 2016]
25 Gartner, Predictive Analytics, [Online] http://www.gartner.com/it-glossary/predictive-
analytics/ [last accessed 16 October 2016]
26 Evan Minsker, Pitchfork (March 2016), Kanye West Updates the Life of Pablo Again,
[Online] http://pitchfork.com/news/64503-kanye-west-updates-the-life-of-pablo-again/
[last accessed 16 October 2016]
27 Toby Barnes (2016), On designing everything as a service, [Online]
https://blog.prototypr.io/on-designing-everything-as-a-service-
cbae99bd15a8#.ux5k3fth0 [last accessed 16 October 2016]
28 Marc Andreesen, (August 2011), Why Software Is Eating the World, Wall Street
Journal, [Online]
http://www.wsj.com/articles/SB10001424053111903480904576512250915629460 [last
29 Ronald Coase, (9 December 1991), Lecture to the memory of Alfred Nobel,
referencing The Nature of the Firm, (1937), [Online]
http://www.nobelprize.org/nobel_prizes/economic-sciences/laureates/1991/coase-

lecture.html [last accessed 16 October 2016]
30 Scott Brinker (June 2013), Martec’s Law, [Online]
http://chiefmartec.com/2013/06/martecs-law-technology-changes-exponentially-
organizations-change-logarithmically/ [accessed 16 October 2016]

02
How digital disrupts
Perhaps it is the transformational role that data is starting to play in
the healthcare industry. Or it is the revolutionizing of mapping and
navigation through user generated input and augmented reality. Or
it is the increasing sophistication of algorithms and different forms
of curation in news and content discovery. Or it is the growing use
of automation and artificial intelligence in customer service. Or it is
the role that digitally enabled 3D printing will increasingly take in
the manufacturing and construction industries. It seems that
everywhere we look there is a different nuance to how digital is
driving fundamental shifts in the propositions, revenue sources,
costs and operations across many different industries.
Digital disruption is as broad as it is deep, impacting right across
sectors and organizational functions. So just why and how have
digital technologies disrupted so many businesses and markets so
fundamentally?
It was strategy guru Michael Porter who, in his 1985 bestseller
Competitive Advantage: Creating and sustaining superior
performance1 originated the concept of value chains to describe
what businesses do – a value chain being a set of activities that a
company performs in order to deliver value to market in the form
of a product or service.
An organization is essentially a string of components forming a
value chain welded together by transaction costs. Primary activities
(inbound logistics, operations, outbound logistics, marketing and
sales, service) are set out alongside supporting activities
(infrastructure, people, technology, procurement). A business’s
competitive advantage is the sum or the average of its transaction

costs. Companies usually wield large advantages in some
components and are lagging in others, but they are founded on the
idea of a sustainable competitive advantage, focused on continued
improvement in efficiency and standardization as a main
ingredient in order to lower transaction costs in particular
components.
If competitive advantage is derived from cost leadership and/or
differentiation, then digital can enable new sources for either or
both. As businesses grow, pressure to add in resource and cost and
to deliver ongoing shareholder return may well result in the need to
increase prices. This need may be justified through the optimization
of goods and services. Yet a new digitally empowered competitor
entering the market may only (to use Pareto’s principle) deliver 80
per cent of the value but can do so at 20 per cent of the cost. When
this is combined with a potentially sector-defining change in
customer experience, this creates a significant disruptive threat.
In his TED talk on ‘How Data Will Transform Business’, Philip
Evans, author and MD of the Boston Consulting Group, argues that
with digitization it may become possible to achieve zero marginal
cost in some components, meaning that the transactional costs
plummet to a level where there is less or nothing to economize on.
Evans argues that when certain components in the value chain
plummet it can change the rules of the game for an entire industry –
because it breaks up both the welding and usually (but not always)
the entire value chain and allows for new competitive advantages
and new value chains to take root – especially if the component that
did plummet has been protecting the industry from outside
competition.
… what used to be vertically integrated, oligopolistic competition among essentially
similar kinds of competitors is evolving … from a vertical structure to a horizontal one …
The plummeting of transaction costs weakens the glue that holds value chains together,
and allows them to separate.
(Evans, 2013)2

This is comparable to the theory of disruption where Clayton
Christensen argues that an industry is ripe for disruption when its
core technology (or the component in the value chain that is
essential to the nature, protection or capitalization of the industry)
is ‘stretchable’.3
Christensen uses the example of education. A teacher is a
technology, and was not stretchable in 2000, and therefore not ripe
for disruption, but with MOOCs (Massive Online Open Courses), a
plethora of digital learning resources available and even Stanford
University making course material available for digital
consumption, the shape of education is morphing into a very
different future.
As a succession of markets succumb to digital disintermediation
where incumbent mediators in sectors (media or content
businesses, retailers, brokers to name a few) are challenged,
usurped and even replaced or removed altogether, the scope of
digital disruption simply gets wider.
The lifecycle of a technology
Invention is a lot like surfing; you have to catch the wave at the right time.
Ray Kurzweil
Renowned futurologist (and Google’s Head of Engineering) Ray
Kurzweil has described the lifecycle of a technology (or an
invention based on a new technology) as being shaped as an ‘S-
curve’. Kurzweil noted back in 2004 that the pace of innovation is
doubling every decade and so he said that inventions should be
aimed at the world of the future, not the world that exists when
your R&D project is launched, since so many contexts change so
rapidly.4 So if technologies follow an S-curve over time (slow, then
rapid adoption and development, before plateauing into maturity)
in order to time an invention properly you need to be aware of the
entire lifecycle (Figure 2.1).

Figure 2.1 Lifecycle of an invention
Kurzweil describes seven key stages in the evolution of a
technology:
1. Precursor: the enabling factors for the new technology are in
place (and visionaries may even be able to describe its goals or
its operation), but it has yet to become a reality.
2. Invention: for which determination and timing are often key.
3. Development: the refining of the invention, which has likely
entered the world as ‘an ungainly and impractical device’.
4. Maturity: this stage often comprises the bulk of a technology’s
lifespan. It has become an integral part of everyday life and

probably seems as though it will never be replaced.
5. False pretenders: assaults on the now established technology
from potentially disruptive newcomers that claim to be in a
position to replace it, and indeed might be better in some ways,
but are invariably lacking in salient, critical features. The failure
of the newcomer(s) only leads to a stronger conviction that the
existing technology will survive indefinitely.
6. Obsolescence: further newcomers master the absent qualities,
pushing the older technology into obsolescence.
7. Antiquity: the final resting place.
Kurzweil says that in order to be successful, an invention needs to
move through each phase (precursor, invention, development and
maturity), which reminds us of the Schumpeter definition of the
process of technological change which is divided into three key
stages: 1) Invention (ideas); 2) Innovation (the development of new
ideas into marketable products and processes, or
commercialization); 3) Diffusion (scaling or adoption).5 There are, of
course, challenges at each of these stages which are often forgotten
about but worth considering at an organizational level, since we
need to be good at all three of them.
Why businesses get disrupted: the
ambiguity zone
While Ray Kurzweil applied the S-curve to describe the lifecycle of a
technology, it was Charles Handy who (in The Empty Raincoat)6
originally described how the S-curve is a way of understanding the
trajectory of many successful systems, demonstrating the need for
significant and regular reinvention and change, and how disruption
can often happen just when an existing technology looks like it is
performing the best that it ever has. The duration of specific curves
may vary but each one typically begins with an initial period of

learning through trial and error, followed by rapid growth, and
then a plateauing and ultimately decline in performance.
The overlapping of S-curves, caused by the introduction of new
technologies or models into a market is what creates both challenge
and opportunity (Figure 2.2). Many organizations will avoid
significant change until crisis is reached or disruption is obvious
(Point B), which is often too late. By then, resources may well
already be depleted, competitive position already weakened,
leadership credibility already damaged, and energy for new or
creative thinking drained. Starting the change earlier, at Point A,
brings challenges in terms of initiating a period of transition,
continuing to optimize the old while building the new, and
managing different and potentially competing business models,
ways of working and/or cultures concurrently. But change needs to
start here. As Charles Handy put it, when you are standing at Point
A you might look back along the curve and see success and growth,
but you can also look forwards over the horizon and see the fall to
Point B, so the trick is look openly at where the trends will lead you,
what Point B is telling you, and use that to help navigate the right
path on from Point A and on to the next curve. So continual
reinvention, even when things are seemingly going well, is the
name of the game.

Figure 2.2 Overlapping S-curves
There are two metaphors that are valuable in relation to this. The
first comes from Dave Snowden, who describes the delicate
balancing act of understanding when it is right to focus on the new
and stop clinging to the old as akin to knowing when the moment is
right to get in the water:
… it is easier to get in just as the tide turns, you don’t want to be stranded on the beach,
but you want to minimise the energy required to get into the blue ocean.
(Snowden, 2016)7
The second comes from Clay Christensen who frames the all-too-
frequent slow organizational response to the need for innovation in
this way:

If a company has ignored investing in new businesses until it needs those new sources of
revenue and profits, it’s already too late. It’s like planting saplings when you decide you
need more shade. It’s just not possible for those trees to grow large enough to create
shade overnight. It takes years of patient nurturing to have any chance of the trees
growing tall enough to provide it.
(Christensen, 2012)8
There are not only companies but possibly entire industries that
have been guilty of this. It is one of the key innovation challenges
for just about every business. But as they say in endurance sports,
we need to eat before we are hungry and drink before we are
thirsty.
Defining digital
In this context of rapid disruption empowered by digital
technologies, it has never been more important to develop a
common language within an organization for what digital really
means.
In fact, this is as good a starting point as any for digital
transformation. Ask a hundred people to define what digital is and
you will get a hundred different responses. Developing a commonly
understood definition enables the business to align around just that
– a common understanding. Yet so few businesses actually do this.
Since digital is so broad, touching so many areas of what we do, and
since it blurs traditional boundaries between roles, functions,
departments, categorizations, having a common understanding
forms the basis for not only a shared vision and an inherently more
aligned approach, but also the foundation from which to create
change.
Many definitions often focus on aspects such as content, video,
mobile, interaction, scale, ubiquity – in other words on what digital
does rather than what digital is. Yet the simplest possible definition
is to characterize digital in terms of binary code (ones and zeros). A
method of getting information from one place to another that is not

analog.
In one sense this is helps us to get past the idea that digital is a
mysterious, amorphous, ever-changing thing that is impossible to
grasp, and instead frames it in the context of taking common needs,
wants, actions and delivering to them or applying them in a new
way. Digital technologies are radically shifting behaviours and
reinventing entire markets, but that does not mean that we should
forget everything we know about great companies, great products
and great brands.
Yet if we are to form a useful, instructive definition we should
take account of more than the technical aspects of digital. It is often
the case that within organizations there is a disproportionate focus
on the technology itself (new technology for the sake of new
technology), over all the enablers that surround the technology,
really bring it to life, and fully realize its capability (people,
behaviours, processes, skills, culture).
When the team that drove the initial digital transformation of
service delivery for the UK Government moved to do the same thing
at the Co-Op, they originated a definition that recognized that when
done well, digital means more than fundamentally redesigning
services; it also means changing the way in which we work:
Applying the culture, practices, processes and technologies of the Internet era to respond
to people’s raised expectations.
(Bracken, 2016)9
Creating a single sentence definition for what digital means to your
business creates the platform from which change can be actioned.
Notes
1 Michael E Porter (2008) Competitive Advantage: Creating and Sustaining Superior
Performance, Free Press; new Ed edition, ASIN: B003YCQ2O4
2 Philip Evans (November 2013) How Data Will Transform Business, TED @ BCG San
Francisco, [Online]

http://www.ted.com/talks/philip_evans_how_data_will_transform_business?
language=en [accessed 16 October 2016]
3 Clay Christensen on Disruptive Innovation, Clarendon Lectures 10 June 2013,
[Online] https://www.youtube.com/watch?v=rpkoCZ4vBSI [accessed 3 November
2016]
4 Ray Kurzweil (2004) Kurzweil’s Rules of Invention, MIT Technology Review, [Online]
https://www.technologyreview.com/s/402705/kurzweils-rules-of-invention/ [accessed
16 October 2016]
5 Proven Models, invention innovation diffusion trilogy, [Online]
http://www.provenmodels.com/14/invention-innovation-diffusion-trilogy/joseph-a.-
schumpeter [accessed 16 October 2016]
6 Charles Handy (August 1995) The Empty Raincoat, Making Sense of the Future,
Random House, ISBN-10: 0099301253
7 Dave Snowden (July 2016) Cognitive Edge, … taken at the flood, [Online]
https://cognitive-edge.com/blog/taken-at-the-flood/ [accessed 16 October 2016]
8 Clay Christensen (May 2012) How Will You Measure Your Life?, HarperCollins, ISBN-
10: 1633692566
9 Mike Bracken (June 2016) Co-op digital blog, What we mean when we say digital,
[Online] https://digital.blogs.coop/2016/06/14/what-we-mean-when-we-say-digital/
[accessed 16 October 2016]

03
What’s stopping you?
Slow by design
If we are to embark on the journey towards becoming a more agile
business, it is worth pausing to consider some of the key forces for
inertia within organizations and potential blockers to change.
The interviews conducted for this book surfaced a wide range of
barriers to progress, the most commonly cited reflecting
technology, strategy and people related reasons, including:
Technology and data: outdated, inflexible systems, creaking IT
infrastructure, difficulty in systems integration and joining up
data.
Short-termism: a focus on short-term targets and priorities,
hampering the ability to progress with larger, longer-term
projects or change.
Talent: the challenge of attracting and retaining the best digital
talent.
Legacy approaches: entrenched behaviours, processes and
decision-making that are inherently slow and problematic to
unlearn.
Organizational silos: the drag brake of internal politics,
competing divisional agendas, siloed decision-making.
Prioritization: challenges around understanding how best to
allocate limited resources, often due to lack of knowledge or
certainty of impact, and the ability to show identifiable, short-
term gain or benefit.

Culture and structure: the inhibiting effect of an organizational
culture that rewards and entrenches behaviours that counteract
change, or inflexible structures that slow progress. Comments
included the need to change culture in order to work smarter
and/or faster, or around how structures are inhibiting, or too
much micro management.
Many of these barriers reflect fundamental aspects of
organizational culture and practice. As Eric Schmidt and Jonathan
Rosenberg describe it in How Google Works, most companies are
run today to minimize risk, not maximize freedom and speed.
Information is hoarded, not shared; decision-making power lies in
the hands of the few:
Their design is a vestige of an era when failure was expensive, and deliberation was a
virtue.
(Schmidt and Rosenberg, 2014)1
In other words, they are slow by design. If an organization has
scaled and grown utilizing specific, established processes or ways of
doing things, it creates inbuilt inertia that is very hard to
counteract. As the company becomes larger and focus moves more
towards efficiency and optimization rather than breakthrough
innovation, the approaches become not only established but honed
and embedded. As hierarchies flourish within the larger company,
and grow up around embedded practices, the inward focus of the
company increases as the outward focus declines. Inertia
strengthens over time.
Why organizations become ‘sticky’
Why do organizations and people become resistant to change? And
why does change seem to become harder the larger the
organization gets? One key reason is that organizational culture
becomes entrenched and intransigent over time, resulting in what

Professor Victor Newman describes (in his book Power House:
Strategic knowledge management)2 as the ‘sticky organization’. If a
culture grows up around the problem-solving experiences and
processes associated with a particular kind of technology, then
relationships between people and patterns of behaviour also grow
up around that and can adapt to block change in an effort to
maintain social stability.
The relationship capital, or the social capital that has been built
up over time between teams and individuals through the
accumulation of reputation, influence and positive impressions
becomes a powerful blocker to change. As innovation specialist
Matt Edgar has said, a startup spends much of its formative life
making and breaking new relationships and links. These are
unpredictable social conditions but ones in which innovation can
flourish. A large organization on the other hand:
… is almost nothing but a massive knot of pre-existing relationships. Getting something
done, even something new, often means following a well-trodden path to actors already
known to each other.
(Edgar, 2013)3
In this case, the ‘innovation pipeline‘ involves moving concepts
from one predictable stage to another and the only way in which
real innovation can happen in that environment is ‘with the
intervention of new actors and the reconfiguration of old ones’. In
order to innovate, therefore, large companies are required to
consciously remain open to new actors or to counter-intuitively
disrupt existing relationships and force the formation of new ones.
In this common scenario, the idea of infallible uniqueness
perpetuates (‘we’re different, so that wouldn’t work here’), and
there is a disinclination to admit failure. Specific ‘craft’ language, or
terms and acronyms that have been developed inside the business
as a shorthand way of describing specific technologies, properties
or practices can reinforce the entrenchment of behaviours that may
have become outdated. As Victor Newman says:

Strong cultures continually evolve new behaviours to block change, to maintain social
stability and preserve power structures based upon existing patterns and accumulated
reserves of mutual relationship capital. The greater the relationship capital in the
network, the ‘stickier’ the organization and the stronger its defence of current structures
and knowledge products embedded in the technology of the organization. The stickier an
organization, the more pronounced its tendency to focus on the problems it can solve,
rather than the problem it needs to solve.
(Newman, 2013)4
Relationship capital is a powerful potential barrier to change since
if the underlying business or technology changes, it also changes
the value of the relationships within the company, which is
something that is resisted. The way in which teams are incentivized
or remunerated can amplify this resistance. Take, for example, the
executives who are unwilling to adopt new practices since they
believe it will impact their quarterly bonus. Or the sales team who
are wary of a new piece of technology since it will enable other
teams to immediately see the status of a piece of business. Or the
team that continue with outdated practices even when new
technology is implemented because they feel comfortable with the
old way of working.
Entrenched behaviours generate resistance to change, and
therefore inertia, but can also create organizational habits that are
often hidden and unacknowledged yet might be powerful drivers of
response and action. Such habitual thinking and behaviours can not
only go unrecognized, but can prove very difficult to change. The
Roman poet Ovid said ‘Nothing is stronger than a habit’, and he
could well be right. A study from Duke University estimated that
habits, rather than conscious decision-making, shape up to 45 per
cent of the choices we make every day.
Why good ideas become battles
Many of us have experienced the very real frustration of coming up
with an exceptional idea that we believe self-evidently has great

potential value for our business only to find that those around us do
not share our vision, leaving us with an arduous struggle to build
support, create momentum and garner enthusiasm. A compelling
business case, however cogent and persuasive, may still not be
enough to gain acceptance of an idea that seems to you to be utterly
convincing in its attractiveness, simplicity or common sense.
In these situations maintaining confidence in your idea
(particularly if it is a potentially disruptive one) and having the
determination to pursue it in apparent adversity, can be a very real
and personal challenge. To paraphrase Hugh MacLeod,5 good ideas
can disrupt the power balance of relationships within businesses
and so are often resisted.
Conformity has its own hidden power. Loss aversion, or the
strong preference most people have towards avoiding losses over
acquiring gains (some studies have suggested that in some contexts
losses can psychologically be up to twice as powerful as gains)6 can
be a powerful barrier to progress when people feel that change
threatens existing constructs, relationships or systems into which
they might have invested considerable effort over time. This results
in a risk-averse culture and a biased assessment on potential gains
against visible losses.
Some internal innovation schemes (often little more than idea
generating competitions) can prove far more demotivating than
they are galvanizing when good ideas are dismissed because of
internal politics, or because the person who submitted the idea is
perceived not to have the skills to lead the project, or due to poor
feedback mechanisms. There are few more efficient ways to turn
passion and enthusiasm into disappointment and disengagement
than a mishandled idea generation process.
Trying to get a good idea off the starting block in an environment
that feels like it is trying to put as many obstacles as possible in the
way of that happening turns it into a campaign to gain consensus
among key decision makers who were often not party to the origins

of the idea and so feel no ownership of it. Working on new ideas
may be additive to workloads, result in a higher demand on already
tight resources, or require constant justification. As designer Adam
Katz once said:7 ‘All of my good ideas are battles’.
But they are always worth it. Famously it took James Dyson five
years and 5,127 prototypes to invent the world’s first bagless
vacuum cleaner.8 Resilience propels real innovation. Without it
ideas wither and die.
The arrogance of scale
As companies grow larger it becomes ever-more difficult for them
to retain the right balance between ambition and humility, external
curiosity and inward focus, restlessness and complacency.
Market dominance and scale can easily turn into corporate
arrogance and lack of urgency. The pressures brought by demands
for ever-greater scale and efficiency are a catalyst for internal
politics, bureaucracy, managing upwards and internal focus. Hubris
can cause poor listening and analysis, missed opportunities and kill
the ability to reinvent.
The opposite, in other words, of the qualities of organizational
longevity listed by Arie de Geus in his renowned book on The Living
Company:9 the ability to learn and adapt from being sensitive to
their environment; to show tolerance for experimentation and
different thinking; to retain a strong, cohesive sense of identity; to
be adept at managing resources to enable flexibility.
A comprehensive study by the Telfer School of Management at
the University of Ottawa10 into the implosion of Canadian telecoms
giant Nortel gives us some stark lessons. The researchers
interviewed 48 per cent of all the Nortel executives who were in
charge of the company from 1997 through to 2009 when it filed for
bankruptcy, and spoke to executives at 53 different companies that
were customers of Nortel in that time. In spite of the rapidity of

Nortel’s decline, they found that corporate failure is a long and
complicated process dependent on multiple accumulating factors.
When asked about Nortel’s biggest management failure however,
the study’s lead author, Jonathan Calof, said:
There were three major factors that caused the failure. When Nortel was a market
leader in the ’70s, it developed an arrogant culture, which led to poor financial discipline.
Then in the ’90s, it focused so intensely on growth that it broke its ability to innovate and
read the market. And after the tech bubble popped, it turned inward and cut costs to the
point where it alienated customers.
(Calof, 2014)11
Arrogance, pursuing growth at all costs, efficiency at the expense of
innovation. Many of these problems were seemingly originating
from a culture that became baked into the company long before it
was in trouble, and served to reinforce the kind of toxic
assumptions we talk about in the next section. Assumptions that
damaged the business and brought focus away from where it
needed to be and created an internally facing company. Says Calof:
It escalated into hubris to the extent of making it especially difficult to absorb
acquisitions, to quickly respond to market needs, and to accept and understand what
customers wanted (largely as result of the delusion of ‘we know better’).
As businesses become leaders in their market it is very easy for
them to become blinded by conceit: for the language of leadership
to slip into the language of arrogance. As they become overly
focused on growth it is very easy for them to become parochial and
lose sight of what really matters. As they pursue efficiency gain over
forward thinking it is very easy for them to become internally
focused, for informal reward systems (such senior management
attention and recognition) to subtly put a premium on inward-
looking management. The potential for rapid disruption that digital
has brought to so many markets serves only to amplify the impact
of such misaligned corporate culture.

Protecting against obsolete beliefs and
‘toxic assumptions’
Legacy systems, processes, and approaches often have their own
assumptions on which they were originally based that then become
embedded in ways of working and thinking without us even
acknowledging that they exist. They may be assumptions about
competitive or partner context, resources, customer needs,
channels, market size or positioning, but they are fundamental,
hidden, ingrained.
Let’s call them ‘toxic assumptions’. They are the most dangerous
kind of assumptions because despite being unnoticed, they become
entrenched over time and they are powerful drivers of thinking and
inertia. They will go unchallenged yet are typically based on a view
of the world that relies on historical or existing market, model or
competitive dynamics. As soon as those dynamics change,
potentially in unforeseen ways, the business is underprepared and
struggles to adapt. When people in the organization say things like
‘that wouldn’t work here’, or ‘we tried something like that a few
years ago and it didn’t work’ or ‘we’ve always done it like that’,
these are signals that you have some beliefs or assumptions that are
potentially obsolete.
So how do we protect ourselves from toxic assumptions? The
answer, of course, is that we need to be continually reassessing our
beliefs and our view on the world in light of the ever-changing
environment in which our companies operate. Paul Graham,
essayist, VC, and founder of startup incubator Y Combinator, has
written about how in order to respond well to a rapidly changing
world, we need not only to have an explicit belief in change (in
other words to be actively looking for change) but also to be
‘aggressively open-minded’. In a static environment, the confidence
we have in our beliefs increases over time as they survive more and
increasingly varied experiences, and are therefore reinforced and

less likely to change. The same is true of our opinions. But when it
comes to things that continually change, we cannot trust our
opinions in the same way. Beliefs become obsolete because the
frame of reference on which they were based has changed:
When experts are wrong, it’s often because they’re experts on an earlier version of the
world.
(Graham, 2014)12
So it is with inflexible, outdated thinking within organizations.
Having an explicit belief in an ever-changing environment means
that rather than regarding the world as static you start to actively
look for change. Focusing on aspects of a market, customer
interaction or situation that don’t change (like human nature, our
desire for convenience, and exceptional user experience) can be an
important source for innovation, but it is just as important to
understand when key dynamics are shifting and, as Graham says,
meaningful change often originates from unforeseen places
meaning that our view on the world can easily and quickly become
outdated.
Until very recently the organization was moving faster than the
consumer, the world was more predictable and consumers were
informed and listened, but now the consumer is moving faster than
the organization, they no longer wait to be told, but can make so
many decisions on the fly about so many aspects of their life.
Organizations consist of consumers but we rarely look at ourselves
in this way. We go to work and the technology we use internally is
often less advanced than the technology we use at home or on the
way to work. Only recently has ‘bring your own device’ (BYOD)
become more acceptable within organizations, reflecting the need
for companies to become employee-centric as much as they are
customer-centric, in order to maintain the connection with the real
world outside.
So this means that we must be disciplined about not letting our
working hypotheses or domain-expertise overly constrain our view

on the future. Becoming an expert in a changing world means that
it is essential to not just look for change, but to always be ready to
flex your thinking in response to it, and avoid becoming imprisoned
by your own proficiency. If knowledge is power, then change can
easily threaten inflexible domain-expertise, leading to entrenched
beliefs and even greater inflexibility. Being what Graham describes
as ‘aggressively open-minded’ means always being ready to
challenge our existing beliefs in response to new information or
ideas:
Within Y Combinator, when an idea is described as crazy, it’s a compliment – in fact, on
average probably a higher compliment than when an idea is described as good.
(Graham, 2014)13
In a shifting environment we need to recognize that strength and
growth in knowledge comes from adaptability. There is a final point
that Graham makes, which is about people. When the future is hard
to predict it becomes just as, if not more, important to focus on the
people rather than the ideas as a way of protecting against obsolete
beliefs. Great ideas come from enthusiastic, earnest, independent-
minded people, so:
Surround yourself with the sort of people new ideas come from. If you want to notice
quickly when your beliefs become obsolete, you can’t do better than to be friends with the
people whose discoveries will make them so.
(Graham, 2014)14
The tyranny of rigid planning
Later in the book we will discuss fundamentally more agile
approaches to planning that take far more account of the rapidly
changing (or as it is often called VUCA: Volatile, Uncertain, Complex,
Ambiguous) environment in which businesses now operate. But it is
worth remembering the restrictive, inhibiting power of traditional,
rigid planning techniques.

A typical, linear, business planning process is not the most
motivating of experiences, as marketer and cartoonist Tom
Fishburne has neatly described:
Crafting an annual plan is like getting a bill through Congress. Behind the final numbers
and strategies lie countless hours of spreadsheet crunching, hallway meetings, and
waterfall charts. We debate assumptions, broker compromises, and eventually settle on
a plan that is wrong the moment it’s inked.
(Fishburne, 2013)15
There are some significant potential flaws that sit at its heart:
The predicted outcome will be wrong. Let’s face it, in the
environment in which we now operate no one can predict what
will happen in the next month let alone the next year, or five
years. In their book, Rework,16 Jason Fried and David Heinemeier
Hansson talk about why we should start referring to plans as
what they really are – guesses. Start referring to business plans
as business guesses, financial plans as financial guesses and
strategic plans as strategic guesses, and stuff becomes a whole lot
simpler. Plans become objectives, so if your predicted outcome is
wrong, your objective is already flawed.
The assumptions on which the plan is built are wrong. Most
plans use the previous year’s numbers as the basis for the
forecast of the following year’s numbers (and often those
beyond). Last year’s numbers, which were the result of last year’s
competitive context, consumer demand and behaviour. All of
which (you can guarantee) will be very different a year later.
Planning is typically done part way through the year and so the
numbers you finally finish the year on are inevitably different
from those that formed the basis of your plan. So your year-on-
year variable starts to look either gloriously easy or (more likely)
increasingly unreachable and unrealistic as the year goes on.
Either way, the basis for the plan is flawed.
Plans ‘let the past drive the future’. Business planning, as does

much ‘management thinking’, favours inductive thinking (based
on directly observable facts) and deductive thinking (logic and
analysis, typically based on past evidence). It is how we are
taught at business school, and often the basis of reward when we
start in gainful employment. And it is the kind of thinking with
which business process is most comfortable. Abductive thinking
(of the kind emphasized in design, imagining what could be
possible) on the other hand, is not. Many businesses are
characterized by processes that are convergent (focused on
making choices, closing down on a solution), rather than
divergent (focused on creating choices, opening up options).
Making big decisions based on contexts that are no longer
relevant or information that will soon be out of date is flawed.
It perpetuates incremental thinking. The context for most
plans is the percentile variable from the previous year. Usually it
is an increase of somewhere between 0 and 10 per cent. The
criteria for success is set at doing-what-you-did-before-but-
slightly-better. This focuses the mind on driving incremental gain
through incremental benefit or efficiencies. When entire
industries are being reinvented, this kind of approach in
isolation breeds complacency and in complacency sits risk.
Detailed, rigid plans are the enemy of adaptability. The more
fixed and detailed your plan is, the harder you have to work to
do something outside it. The harder it is to improvise; the higher
the cost of change. The more difficult it is to budget to the pace of
innovation, rather than innovate to the cycle of your budget. As
circumstance changes (as it inevitably will), plans are revised,
reworked, re-justified. Revisions and justifications are focused on
the differential from the first plan (which was fundamentally
flawed in the first place) making for an unhelpful comparison.
Managers spend time generating reports and attending meetings
to justify why the original plan (which was fundamentally flawed
in the first place) is no longer relevant.

A not insignificant amount of management time is spent on over-
complex and over-burdening planning processes. It kills morale and
it kills time that could be spent on ideas that will genuinely move
the business forward.
The legacy technology problem
Legacy technologies and the processes that surround them can be
another powerful blocker to change. A good example of this was
demonstrated relatively recently in the banking sector, an area
where you would think that advanced modern technology
infrastructure could not be more essential. In 2013 a systems outage
meant that for three hours on one of the busiest online shopping
days of the year, Royal Bank of Scotland (RBS) customers could not
access their bank accounts. This followed catastrophic system
problems in 2012, which for a number of days affected 16 million
customers’ ability to withdraw cash from ATMs, transactions on
their accounts, handling of wages and direct debit payments. The
RBS Chief Executive admitted at the time:17 ‘For decades, RBS failed
to invest properly in its systems.’
Frances Coppola, a former RBS employee and an independent
analyst, wrote an analysis18 talking about the legacy systems
problem that besets the banking sector. Technology investment, she
says, has traditionally been focused on building front-end
applications, meaning that the core systems that run the basic
banking processes have not been upgraded. So in spite of the huge
increase in processing power and storage capacity in modern IT
systems, banks like RBS still had massive traditional mainframe
computing systems at their heart.
The thing that prevents these old systems being replaced outright,
she says, is their sheer size, complexity and criticality. Over time,
the huge cost and risk involved in replacing them has meant that
these organizations have adopted a system of ‘wrapping’ –

effectively treating the core legacy system as a black box which
remains largely untouched while a ‘shell’ of additional applications
that create customer interfaces, point-of-sale functionality,
settlement processing and even real-time updates are created
around it. These newer applications rely heavily on the information
contained within the core system but over time build complexity
upon complexity as the ‘shell’ gets larger, issues of technological
compatibility and connectivity have to be worked through, and
customers rely on them more and more.
This means that there may well be divergence in the financial
information presented to customers and that which appears to the
bank (before reconciliation occurs), the potential for system errors
and data corruption grows, and the risk of significant failure just
increases over time:
The more fragmented your systems architecture, and the more it relies upon stable
interconnections between different technologies, the riskier it becomes … the ‘pasta rule’
still applies: the more your systems architecture looks like spaghetti, the higher risk it
will be.
(Coppola, 2013)19
A significant reason for consistent underinvestment, says Coppola,
is that investment in infrastructure is likely to impact short-term
profits and yet it is not the most interesting type of expenditure. So
while balance sheet risk may have been reduced, operational risk
hasn’t. Banks that are focused instead on rapid expansion have the
very real potential of building up a patchwork of incompatible
technologies, and failing to invest in suitable time or resources for
systems support or proper integration. As long as it keeps on
running, as long as it is easier to patch it up or build a workaround,
the longer it goes on, the more complex the interdependencies
become, and the risk and the associated costs build.
In the case of huge banking systems the risks can elevate to levels
that have implications for the whole economy, but this kind of
legacy systems issue is not confined to the banking sector. It can

often be regarded as one of the most significant barriers to making
companies fit for purpose for the modern digital world. And it is not
just about the technology, of course, but the policies, practices, skills
and behaviours that surround it. The consequences of an overly
short-term focus on profits may be far greater than is visible to
those looking in from the outside.
Marginal thinking
The safest road to Hell is the gradual one – the gentle slope, soft underfoot, without
sudden turnings, without milestones, without signposts.
C S Lewis
How do we avoid the trap of incremental approaches and mindsets?
Or the danger of what Clay Christensen (in How Will You Measure
Your Life?)20 calls marginal thinking? An executive in an established
company, says Christensen, will have two alternatives when making
an investment decision – either to incur the full cost of setting up
something completely new, or to leverage what already exists so
that you only need to incur the marginal cost and revenue. The
marginal-cost argument will almost always outweigh the full-cost
one. But for a new entrant in the market the only choice is the full-
cost alternative (‘Because they are new to the scene, in fact, the full
cost is the marginal cost’).
The problem with marginal thinking however, is that it typically
comes with lots of baggage. The established company is basing the
investment decision on the perspective of its existing operations
and may decide not to invest if the marginal upside is not worth the
marginal cost of doing it. The trap with this, however, is that while
it is easy to see immediate costs of investing, it is much harder to
accurately see the costs of not investing. While the company still has
a perfectly acceptable existing product, the upside of investment
may well be considered too small, but this assumes things will
remain as they are and fails to take into account a future in which

someone else brings the new product to market. This can lead to a
series of relatively minor investment decisions, the consequences of
which may not become apparent for some time but which
ultimately and in totality may doom the company to failure.
Culture and behaviour
As we mentioned earlier in the book, while technology is important,
the behaviours that surround it are a fundamental component of
change and agility. Successfully transitioning to an organizational
state that is far more characterized by fluidity, adaptability and
constant change depends heavily on the skills, attitudes and
behaviours of the people in your business. Becoming a truly agile,
digital-native business will mean adopting not just new
technologies, but new customer-centric thinking and approaches. It
will mean embracing and responding to new processes and
expectations. And it may well mean adapting to new structures,
incentives and responsibilities.
Change requires clarity and leadership to create the environment
in which it can happen, to demonstrate why change is necessary
and to direct and guide behaviour in the right direction, but culture
and behaviour are inextricably linked. Just as culture helps
determines behaviour, behaviour helps shape culture.
So just as entrenched culture and behaviour can be one of the
most powerful barriers to progress, so an enabling culture and new
practices and behaviours can be powerful forces of advancement
towards a more agile business. Digital transformation is less about
‘talking the talk’, and more about ‘walking the walk’. It is not about
jargon, it is about action. As digital literacy grows at all levels of the
organization, beyond the more tangible metrics and results it will
be the expectations that are set, the questions that are asked, the
questions that are not asked, and the visible behaviours of the
senior leadership down, that will be critical indicators that progress

Faris Yakob, co-founder, strategy and innovation consultancy Genius Steals, author of
Paid Attention:21 Everyone likes progress, no one likes change
The world pulses to an exponential beat, daring companies to keep up, as Jack Welch so
famously feared. And rightly so, since most companies will fail to and will die.
That means more and more companies are failing to adapt to the exogenous changes that
either power or destroy businesses.
Why? Why is corporate change so hard?
Some answers are obvious, the well worn territory of The Innovator’s Dilemma, but
others are less well explored and just as important. In our consulting work, we have
uncovered the same barriers, again and again, at very different kinds of companies.
Formal
Legacy infrastructure, built in an industrial age, represents a massive cost base in labour,
equipment which is being amortized, software, systems and so on. Public companies cannot
abandon them and take the mark down, their Wall Street owners would never allow it. So
they must simply continue, cutting costs, to prop up share prices. Processes, once codified,
become orthodoxies instead of guidelines.
Worse, should the problem these companies solve melt away through new technologies,
they will be forced to attempt the even more difficult task of halting progress at a political
and cultural level.
The ‘Shirky Principle’: ‘Institutions will try to preserve the problem to which they are the
solution.’
Informal
Companies often hire ‘change agents’ to usher in new ideas, products and processes. This is
a death sentence, for it sets up said harbingers of the future in opposition to every other
employee. Implicit in naming change agents is the idea that change is needed and that no
current employee is bringing it. This oppositional stance makes collaboration nigh
impossible.
Perverse incentives are rife in corporations. At the board level there is a desperate
appetite for growth, which often means change, but the way it’s pushed through the system
creates inverted incentives. Ridiculous sales targets turned Wells Fargo employees into
criminals, destroying the bank’s reputation. Both the targets and the employees have been
removed.
I spent weeks working on a business and communication strategy for one of the world’s
largest telecoms companies. Our approach was to simplify the purchase process and
migrate it online. Within the recommendation was a call to close many of the call centres
taking sales calls (which the company had in every state in America) which would have saved
millions of dollars by itself. The clients loved the work in the meeting – and subsequently
killed it. Turned out one of the bosses’ bonuses was based on call volume, as a proxy for
leads.
Goodhart’s Law (named after economist Charles Goodhart): ‘When a measure becomes a

Goodhart’s Law (named after economist Charles Goodhart): ‘When a measure becomes a
target, it ceases to be a good measure.’
Conformal
Ideas can come from anywhere, says every CEO. At least in public. But there is a window of
acceptable ideas that conform to expectations, and ideas that fall outside them are ignored.
Overton Window (also known as the ‘Window of discourse’): the range of ideas the public
will accept also operates inside companies, as a barrier to innovation.
The key to addressing barriers is correctly identifying them, which is usually impossible
inside the system, since anyone working at the company is at the mercy of informal and
conformal ones. Companies that can’t work with partners are unlikely to see the end of the
broken bridge until it’s too late.
Notes
1 Eric Schmidt and Jonathan Rosenberg (September 2014) How Google Works, Grand
Central Publishing, ISBN-10: 1455582344
2 Victor Newman (2013) Power House: Strategic knowledge management, [Online]
http://www.blurb.co.uk/b/4278274-power-house
3 Matt Edgar (June 2013) Quora Answer, Why Don’t Big Companies Innovate More?
[Online] http://www.quora.com/Why-dont-big-companies-innovate-
more/answer/Matt-Edgar?srid=pJZn&share=1 [accessed 16 October 2016]
4 Victor Newman (2013) Power House: Strategic knowledge management, [Online]
http://www.blurb.co.uk/b/4278274-power-house [accessed 16 October 2016]
5 Hugh MacLeod (July 2004) Ignore Everybody, [Online]
http://gapingvoid.com/2004/07/31/ignore-everybody/ [accessed 16 October 2016]
6 John Dawes ‘Price changes and defection levels in a subscription-type market: can an
estimation model really predict defection levels?’, Journal of Services Marketing,
(18:1)
7 Adam Katz (2011) Behance, All of my good ideas are battles, [Online]
https://www.behance.net/gallery/905959/All-of-My-Good-Ideas-Are-Battles [accessed
16 October 2016]
8 About Dyson, [Online] http://www.dyson.co.uk/community/aboutdyson.aspx
9 Arie de Geus (1999) The Living Company: Growth, learning and longevity in business,
Nicholas Brealey Publishing; New edition, ISBN-10: 1857881850
10 Nortel Study, University of Ottawa, Telfer School of Management (2014) Jonathan
Calof, Greg Richards, Laurent Mirabeau, [Online]
http://sites.telfer.uottawa.ca/nortelstudy/?_ga=1.151813053.549191806.1369078998

11 Nortel Study, University of Ottawa, Telfer School of Management (2014) Jonathan
Calof, Greg Richards, Laurent Mirabeau, [Online]
http://sites.telfer.uottawa.ca/nortelstudy/?_ga=1.151813053.549191806.1369078998
12 Paul Graham (December 2014) How to Be an Expert in a Changing World, [Online]
http://paulgraham.com/ecw.html [accessed 16 October 2016]
15 Tom Fishburne (October 2010) Waterfall Planning, [Online] https://marketoonist.
com/2010/10/waterfall-planning.html [accessed 16 October 2016]
16 Jason Fried and David Heinemeier Hansson (March 2010) Rework, Crown Business,
ISBN-10: 0307463745
17 Steve Slater and Aashika Jain (December 2013) Reuters, RBS Admits Decades of IT
Neglect, [Online] http://uk.reuters.com/article/2013/12/03/uk-rbs-technology-
idUKBRE9B10YB20131203
18 Frances Coppola (March 2013) The Legacy Systems Problem, [Online]
http://coppolacomment.blogspot.co.uk/2013/03/the-legacy-systems-problem.html
19 Frances Coppola (March 2013) The Legacy Systems Problem, [Online]
http://coppolacomment.blogspot.co.uk/2013/03/the-legacy-systems-problem.html
20 Clay Christensen (10 May 2012) How Will You Measure Your Life?, HarperCollins
ASIN: B006I1AE92
21 Faris Yakob (April 2015) Paid Attention: Innovative advertising for a digital world,
Kogan Page, ISBN-10: 0749473606, ISBN-13: 978–0749473600

04
Defining digital transformation
So how might we best define exactly what digital transformation is?
We must first acknowledge three foundational truths:
1. Digital transformation is inevitable. Change is happening
whether you like it or not. You can either choose to respond or
get left in its wake.
2. Digital transformation is about more than technology. As we
will discuss at length in this book, it is also about strategy,
process, culture, behaviours and people
3. Digital transformation involves fundamental and
comprehensive change. It is the reinvention of the way in
which a company operates. Clay Christensen has a useful way of
framing an organization’s capabilities (what it can and cannot
do), defining three broad areas:1 a) Resources (tangible ones like
buildings and headcount, intangible ones like brands and IP); b)
Priorities (the consensus on what’s right to do, the values, and
the strategy; c) Processes (the formal or informal way in which
the work gets done). This is useful since, as Christensen says,
these aspects are mutually exclusive in that a part of a business
cannot fit into more than one of the categories, but are also
collectively exhaustive (put together the three categories
account for everything inside of the business). So digital
transformation is fundamental in all three of these areas.
In 2014, digital and business consultancy Altimeter defined digital
transformation as:2
the realignment of, or new investment in, technology and business models to more

effectively engage digital customers at every touchpoint in the customer experience
lifecycle.
This definition acknowledges the shift required in not only
technology but also business models and customer experience. Yet
it perhaps does not emphasize enough the changes to processes,
ways of working and culture. So, bearing in mind Clay Christensen’s
way of summarizing the entire capabilities of an organization, this
is our way of capturing a one sentence definition:
The transformation and reinvention of the resources, priorities and processes of a
company in order to be fit for purpose in a digitally empowered world.
What digital transformation is NOT
Digital transformation is not simply chasing shiny new technology.
There is a salutary lesson contained in research conducted by Cap
Gemini and MIT Sloan. The study (The Digital Advantage: How
digital leaders outperform their peers in every industry)3 looked at
more than 400 large companies over a two-year period to assess the
impact of digital technologies and how those companies were
responding to those challenges.
The study found that while most companies were active with
digital initiatives, only a few had positioned themselves to capture
real business benefit. A combination of two separate but related
dimensions combined to contribute toward digital maturity: digital
intensity was defined as investment in technology enabled
initiatives to change how the company operates (including
customer engagements, internal operations, business models);
transformation management intensity was about creating the
leadership capabilities to drive digital transformation (including the
vision, governance, engagement in the process of change, IT or
business relationships to empower it). These two dimensions
mapped out four different types of digital maturity on a two-by-two
matrix:

1. Beginners: organizations that do very little with advanced
digital capabilities, have a low awareness of opportunities.
2. Conservatives: companies that favour prudence over
innovation, have a unified vision but are sceptical of the value of
digital trends.
3. Fashionistas: follow digital trends and implement shiny new
digital apps, but do not have a unified vision for the digital
transformation of their business.
4. Digirati: those that truly understand how to drive value through
the digital transformation of their business. In other words
combining transformative vision and governance with
investment, innovation and continuous improvement in people,
process and technology.
These more digitally mature companies (or ‘digirati’) were able to
combine a focus on change through new technology, with a
concurrent focus on change management, people, process and
culture. The study found that this latter group of companies were,
on average, 26 per cent more profitable, had a 12 per cent higher
market capitalization, and derived 9 per cent more revenue from
existing assets.
This was an advantage that persisted across different industries.
But what was also notable in the research was how companies that
pursued shiny new technologies without the underlying strategies,
processes, team structures and cultures to exploit it (the
‘fashionistas’) effectively damaged their business performance and
were 11 per cent less profitable than the average.
The overarching lesson of the research is that digital
transformation drives real advantage but pursuing shiny new
technology (‘the digital magpie syndrome’) without focusing on all
the supporting behaviours, skills, culture, vision and leadership is
bad for business.

What good looks like: a maturity model for
change
So that we might better represent and summarize many of the key
shifts that we will be talking about in the coming chapters, we have
developed a maturity model for what good looks like. This model
describes three key stages of development:
1. Legacy: the state before a business has begun their journey
toward digital transformation, wherein traditional thinking and
approaches still dominate.
2. Enabled: the business is in the midst of the journey, and has
likely adopted many of the foundational shifts in mindset,
strategy, process, resources and culture, but there is still work to
do to fully embed, extend and realize the full potential value of
these new elements.
3. Native: the business is native to the fluid, rapidly changing
environment in which it operates, and this is reflected right
across the organization in the fabric of its culture and how it
operates.
It is important to note that we are not describing a transition with a
beginning, middle and an end. Rather, that the transition is one to
an organization that is able to operate within a constant state of
flux, continuously adapting to new challenges and opportunities
that arise. In order to provide some structure to the model, we have
delineated levels of maturity across multiple aspects including
customers (orientation of the business), planning and processes,
resources, strategy, vision and culture.
Customers
Legacy – multichannel, not omnichannel, company orients
around efficiency rather than customer need.

Enabled – organization orients around customer need, joined up
processes and data create coherent, consistent, high-quality
customer experience.
Native – seamless, rapid customer feedback loops inform
strategies, tactics, innovation and continuous improvement.
Planning and processes
Legacy – rigid waterfall processes, rigid approaches to planning,
waterfall project management, infrequent release cycle, control
centralized.
Enabled – agile development, SCRUM, test and learn, deployment
of rapid prototyping and build, operations empowered by digital,
strong governance, measurement frameworks.
Native – interdisciplinary agility, cross-functional, small, nimble
teams, embracing of uncertainty, permission to fail, rapid test
and learn embedded throughout, lean methodologies, embedded
digital operations, data-driven and adaptive processes.
Resources
Legacy – siloed data sources, basic analysis tools, descriptive
analytics, technology restricts, legacy platforms, isolated
knowledge, vertical skillsets, poor training, organizational
structures oriented around functional siloes, rigid structures that
do not adapt to opportunity.
Enabled – software-as-a-service, integrated technology stack,
flexible partnerships, joining up data, basic modelling, predictive
analytics, digital centre of excellence, specialists and generalists,
tech skills, more fluid structures, collaborative environment,
integrated digital and online/offline.
Native – structures and resourcing oriented around the
customer, continuous reconfiguration of resourcing, flexible,
adaptive structures, organizing around opportunity, joined-up

data/tech, prescriptive analytics, empowered frontline staff,
customized dashboards, scalability of the cloud, actionable
modelling, real-time decisions, T-shaped, deep knowledge,
human layer over tech, fluid flow of knowledge.
Strategy
Legacy – digital capability development not central to
organizational strategy/KPIs, clinging to legacy advantage,
episodic innovation, short-term view.
Enabled – systematically designed innovation process, more
fluidity to strategy and planning, innovation accounting.
Native – fully agile and adaptive strategy, systematic and
embedded experimentation, healthy disengagement from legacy
advantage, long-term view.
Vision
Legacy – assumes retention of existing advantage, lack of clarity
around organizational direction or purpose on the ground.
Enabled – compelling vision and strategy, strong link between
vision and organizational priorities/KPIs, rigid execution of
vision.
Native – clear organizational purpose and vision lived through
leadership and operations, evident in explicit tactics and implicit
behaviours, adaptive execution of vision.
Culture
Legacy – precise, slow, controlling, restrictive, focused on
efficiency, incremental improvement, highly discursive.
Enabled – collaborative, customer-centric, data-driven, focus on
talent, challenging norms, ownership mindset, greater
autonomy, learning from failures as well as successes.

Native – highly fluid/collaborative, agile culture, ‘fast and
roughly right’, entrepreneurial, empowered teams, distributed
authority, bias to action, 10X thinking, networked, embedded
learning culture.
The agile formula
With comprehensive change requiring a comprehensive response,
our definition of organizational agility incorporates three key
foundational elements:
1. Velocity: heightened pace and progression through broad and
proficient adoption and application of digital-native processes
including design thinking, agile and lean, continuous
experimentation and a culture that supports constant testing
and learning, coupled with an exhaustive, customer-centric
innovation process that enables rapid origination, validation
and commercialization of ideas.
2. Focus: building organizational momentum through an enabling,
agile and adaptive strategy with strong links to execution, and
aligned to a curious, outwardly looking perspective and a clear
vision and purpose.
3. Flexibility: creating the culture, environment and structures to
move fast through agile structures and small, multi-disciplinary
teams, greater agility in decision-making and governance,
productive and collaborative environments and an empowering
and engaging culture characterized by autonomy, mastery and
purpose.
Each of the elements is essential in becoming truly agile. Without
velocity we lack momentum, without focus we lack direction and
governance, without flexibility we lack the enabling environment
necessary for success (Figure 4.1).

Figure 4.1 Elements of agility
We will take each of these elements in turn in this book to help
set out the structure and logic of our arguments. Since these
foundational elements are not mutually exclusive, but are
combinatorial in expounding the essential components of change,
we can represent our formula for the agile business as:
Agility = (Velocity × Focus × Flexibility)
Each Part of this book will incorporate a series of short discourses
that build to form a blueprint for change, and in the final section we
will bring these elements together to form a roadmap to becoming
an agile business.
Notes
1 Clay Christensen, Assessing Your Organization’s Capabilities, [Online]
http://cb.hbsp.harvard.edu/cbmp/product/607014-PDF-ENG
2 Altimeter, Brian Solis (2014) The State of Digital Transformation, 2014, [Online]
http://www.altimetergroup.com/2014/07/the-2014-state-of-digital-transformation/
3 CAP Gemini/MIT Sloan (November 2012) The Digital Advantage, [Online]
http://www.capgemini.com/resources/the-digital-advantage-how-digital-leaders-
outperform-their-peers-in-every-industry [accessed 16.10.16]

PART TWO
Velocity
In this Part, we focus on how to apply digital-native thinking and
processes to build organizational velocity and momentum.
DEFINING VELOCITY
Velocity – Rapidity of motion or operation; swiftness; speed; tempo; the rate with
which something happens; action and reaction; heightened pace and progression
towards a specific direction of change.
How should we think about velocity in the context of organizational
agility? The best framework for understanding this comes not from
a business consultant but from a military strategist. Colonel John
Boyd was arguably not only one of the best fighter pilots that the
United States Air Force has seen, but went on to became perhaps
one of the best military strategists of all time. He was a maverick
who fought multiple battles with Pentagon and military hierarchy
in order to promote the application of his theories and ideas.
In the 1960s he worked with mathematician Thomas Christie to
originate the Energy-Maneuverability (EM) theory of aerial combat
which incorporated elements such as thrust, weight, drag and
velocity into a formula that could be used to model the performance
and combat capabilities of existing aircraft and even potential new
fighter designs. The theory revolutionized how fighter aircraft were
designed and evaluated. At the time, an ingrained design bias
among the USAF hierarchy towards ‘Bigger-Higher-Faster-Farther’
meant that the US Air Force was consistently building larger,
heavier, multifunctional fighter aircraft with significant technical

complexity. Boyd was able to use his EM theory to show that US
fighters faced the very real prospect of being convincingly
outmanoeuvred in combat by Soviet MiGs. Instead, he and his
collaborators (the so-called ‘fighter mafia’ who operated inside the
Pentagon but challenged conventional thinking and therefore
authority) championed a new lightweight fighter concept that
would eventually become the renowned F16 jet fighter.
The impact of Boyd’s prescient theories has reached far beyond
military strategy, and his ideas now have a sharp resonance and
relevance to the modern world of business. His maxim that
technology must serve its larger purpose (‘People, ideas, hardware –
in that order.’) has never been more true. When Boyd taught the
Marines about his new form of warfare he preached that in battle
there are always several ways to solve a problem so never to
commit rigidly to just a single solution.
One of Boyd’s most famous intellectual legacies is the OODA
(Observation, Orientation, Decision, Action) loop, a decision-loop
model designed to illustrate responses to an event.
In his biography of Boyd (Boyd: The fighter pilot who changed the
art of war),1 Robert Coram details how the maverick colonel, who
served in the Korean War, was inspired by the success rate that
American F86 Sabre fighters had achieved over the Russian built
MiG15 jet in the skies over North Korea (some sources peg this as an
overall ‘kill ratio’ of around 6 MiG-15s destroyed for every F86 lost).
When Boyd looked into the reasons behind situations where F86s
had performed in a superior way to the MiGs, he realized that
rather than this advantage coming from the F86s being faster or
more heavily armed than their opposition, it was derived from their
ability to manoeuvre and respond more rapidly to swiftly changing
battle conditions.
This insight, and his work on EM theory, led to Boyd developing
ideas around how success and victory in rapidly changing
environments (such as the battlefield) comes from the ability to

make smart decisions in response to dynamic situations more
quickly than your opponent. The OODA loop breaks down the
decision cycle into four constituent parts:
1. Observation – through collection of data and information.
2. Orientation – forming a mental perspective using analysis and
synthesis. The former breaks down data or information into
components that allow for deductions that lead to
understanding. The latter takes (sometimes unrelated)
components and recombines them to form a new whole.
Analysis, Boyd said, can lead to understanding but not to
creativity.
3. Decision – based on your current mental perspective, the
determination of a course of action.
4. Action – the resultant activity informed by the decisions.
Boyd believed that all intelligent organizations and organisms
undergo a continuous cycle of interaction with their environment
in this way, thereby enabling adaptation, but also that a key
advantage can be derived not only through making smarter
decisions, but by responding faster to changing situations. In
describing the OODA loop, Harry Hillaker (who worked with Boyd
as the Chief Designer of the lightweight F16 fighter) said:
Time is the dominant parameter. The pilot who goes through the OODA cycle in the
shortest time prevails because his opponent is caught responding to situations that have
already changed.2
Boyd’s thinking effectively became the intellectual kernel for a
whole new approach to warfare for the American military that
favoured greater agility over scale and sheer power. It enabled a
move away from hundreds of years of linear, attritional warfare
strategy, and it also came to be applied in multiple contexts to
support business and learning objectives.
But the devil (and the true lesson for becoming an agile business)

is in the detail. Rather than being thought of as a simple one-
dimensional cycle where the advantage comes from being able to
progress through the cycle at the fastest rate possible, the real
power in the OODA loop comes from the ability to use the explicit
and implicit knowledge and abilities of those on the frontline to
create significant advantage through responsiveness, and to create
confusion and disorientation among your opponent by using speed
and agility to get into their decision cycle so that they are making
decisions based on less up-to-date or relevant information. As
Robert Coram describes it in the Boyd biography:
Thinking about operating at a quicker tempo – not just moving faster – than the
adversary was a new concept in waging war. Generating a rapidly changing
environment – that is, engaging in activity that is so quick it is disorienting and appears
uncertain or ambiguous to the enemy – inhibits the adversary’s ability to adapt and
causes confusion and disorder that, in turn, causes an adversary to overreact or
underreact.
(Coram, 2003)3
Thus, rather than being simply about speed, it is all about tempo
and manoeuvrability. As the tempo increases the officers on the
ground can bypass the explicit application of the ‘Orientation’ and
‘Decision’ parts of the loop to use more implicit and intuitive
understanding of a changing environment to ‘Observe’ and ‘Act’
almost simultaneously. This adaptability compresses time, enables
unexpected actions to be taken by the protagonist that in turn
confuse the enemy, which then leads to even slower decision-
making on their part, increasing the advantage even further.
One of the key notions that Boyd drew on to explain this came
from the German concept of Blitzkrieg (‘lightning war’) warfare that
involved the use of speed and surprise through concentrations of
highly mobile, motorized, armoured units that could break through
lines of defence and encircle potential larger enemy forces.
Blitzkrieg was all about a high operational tempo that was
enabled not only through mechanized units but a form of command
that empowered frontline commanders to respond faster, and was

characterized by the concepts of Schwerpunkt and
Fingerspitzengefuhl. Schwerpunkt (meaning the underlying goal,
intent or focus of effort) gave the officers on the frontline focus,
clarity of direction and objective. Fingerspitzengefuhl (meaning
fingertip feel) enabled a level of flexibility within that for officers to
make rapid, intuitive decisions on the ground in the face of fluid
situations. A frontline officer would know the intent of his superior
and understand the role of his unit in fulfilling that objective, but
the executional detail could be far more fluid and responsive.
The reduced time needed to make decisions, improved
communication and use of initiative by frontline officers, better
exploitation of emerging opportunities, and a dramatically
increased tempo through which tactics could be changed in
response to new conditions, all combined with technology (highly
mobile mechanized divisions and units) to powerful effect. Central
to this new way of thinking was the idea that whoever is able to
handle the quickest rate of change would win. Boyd stressed that
once the process begins it should only accelerate. As Coram
describes it:
Success is the greatest trap for the novice who properly implements the OODA Loop. He
is so amazed at what he has done that he pauses and looks around and waits for
reinforcements. But this is the time to exploit the confusion and to press on.
(Coram, 2003)4
Boyd’s OODA loops point the way towards a new way of working
for every business. Many of today’s large organizations still
subscribe to the ‘Bigger-Higher-Faster-Farther’ philosophy that was
so ingrained in the US Air Force. Responses to significant challenges
are often characterized by large, expensive, complex
implementations of new technology that ignore the need to be more
agile. All organizations want to move quicker but true agility is
about more than just speed.
As Boyd’s work shows us, in rapidly changing environments
advantage comes from speed of response and manoeuvrability. And

that’s about people, process and culture – enabling technology to
serve its wider purpose. As Boyd so succinctly expressed: ‘People,
ideas, hardware – in that order’. Instead of the context of
responding faster to enemy action in war, our context is the need
for every business to speed up response to changing customer
behaviour and need, and competitive and market context. Just like
Blitzkrieg, the key to this is how we balance a clear, overarching
vision, direction and objective with the autonomy to enable more
executionally oriented teams and managers to make and act on
rapidly taken, data-driven but also intuitively led decisions in
response to swiftly changing contexts. Velocity is important, but it is
the context in which it is important that matters. Modern business
advantage comes less and less from scale and more and more from
manoeuvrability, or the ability to move quickly and seamlessly
from one state to another.
Notes
1 Coram, R (15 April 2004) Boyd: The fighter pilot who changed the art of war, Back Bay
Books, Reprint edition, ISBN-13: 978–0316796880
2 Ross Johnson (21 February 2013) Antiterrorism and Threat Response, Planning and
Implementation, CRC Press, 1st edition, ISBN-10: 1466512903, ISBN-13: 978–
1466512900

05
Operating in the ‘ambiguity zone’
In Part One of this book, we discussed Charles Handy’s S-curves as a
model for understanding how digital disrupts markets and
businesses.
The overlapping S-curves (Figure 5.1) create points at which a
new technology or model enters the market (Point A), but it is also
the point at which the incumbent technology or model is well
optimized and potentially performing the best that it ever has,
giving the incumbent business little apparent reason to disrupt its
own model. Yet this is, of course, also the point of opportunity.
Investment in experimentation, testing and learning, and
innovation position the company well to generate new, distinctive
and potentially disruptive ideas and therefore capitalize on a
second curve.

Figure 5.1 The ambiguity zone
Many organizations will only do this when they have reached
point B, and are faced with a crisis in confidence and business
performance. By then it is too late. Point B is the inflection point at
which the new technology, or model that has previously been
looked down on by incumbents, scales to the point where it
becomes the dominant way forward. Like a parachutist
experiencing ground rush, the new technology ramps more quickly
than expected, leaving no time for a lagging, slow moving
incumbent to respond in an effective way.
So the answer to this dilemma, of course, is never to get to that
inflection point B. And that requires not just episodic innovation
initiatives that are instituted in response to rapidly declining

performance or an existential threat, but continual
experimentation to create the opportunity to ride the next wave
before it is too late.
Yet operating in the ‘ambiguity zone’ (as we have called it) is not
easy. It requires not only a heightened level of boldness in being
willing to disrupt your already well-optimized model, but the ability
to concurrently manage more than one potentially competing
business model in the same organization, a readiness to allocate
precious resources towards continual experimentation and
reinvention, and the culture to support all of those elements.
Building velocity through continuous
innovation
In the context of the rapidly shifting competitive, company and
consumer contexts that we discussed in Part One, the
organizational response now required means that the kind of
periodic, poorly coordinated innovation efforts seen in many
organizations are no longer enough. Digital-native businesses have
not only found ways to embed continuous innovation into the fabric
of what they do, but also regard it as essential to continuing
survival. In this scenario innovation is not compartmentalized into
blocks of time any more than it is confined into team silos or
individual job titles. This is about orienting the entire business
towards continual exploration of potential opportunity and
progression, and creating an innovation ‘engine’ to generate a
constant flow of new projects and potential value, and move faster
into areas of future opportunity.
Shifting from episodic to continuous, embedded innovation
brings challenges that are practical (like day-to-day resourcing),
strategic (like the need to resource against a longer-term vision),
and cultural (not least that staff need to feel that it is acceptable to
spend time on innovative new projects away from business as

usual). So what are some of the ways to create the kind of culture
that celebrates this way of thinking, doing and being? How do we
create the space to originate, nurture and develop a continuous
stream of new ideas?
We have all heard of Google’s famed 20 per cent time, which
encourages employees to spend 20 per cent of their work time
experimenting with their own ideas, and which reportedly birthed
Gmail and AdSense. But the concept of empowering staff to take the
time to work on side-projects is not restricted to Google.
3M, for example, talk about ‘Time to Think’1 and have, since 1948,
encouraged employees to spend 15 per cent of their working time
on their own projects, utilizing 3M resources:
What would you do if you had access to world-class laboratories and scientists, and
almost one day a week to investigate a new idea?
This policy allowed the team that worked on Post-it® notes the
space they needed to devote to a development process that had to
overcome multiple barriers over the course of 12 years before
launch and widespread success. Some of the ideas that come out of
Time to Think (six to eight projects, twice a year) are supported by
‘Genesis Grants’, which can act as research seed money of
anywhere between US$30,000 to US$75,000, enabling staff to
explore ideas outside of the rigidity of business unit budgets.
The team at the UK Government Digital Service (GDS) have
initiated a policy where for a defined period (two weeks or one
month) they give the people in the team the freedom to go off the
pre-planned roadmap and work on anything they want, as long as it
is for the good of GOV.UK – with fewer top-down commitments. The
policy, called a ’firebreak’, is seen as vital to ‘release some pressure
from the system’, minimize top-down commitments, take a step
back, reduce layers of complexity, but also to work on new ideas. As
Neil WIlliams, one of the Product Leads at GDS wrote:2
A whole team working off-roadmap for a whole month might sound reckless or
indulgent. But in fact, it would have been reckless not to … Great things can happen

when you give creative, passionate people the freedom to explore ideas.
Ideas, problems and opportunities are collated for a month leading
up to the firebreak. Pitch and demo meetings allowed everyone to
keep up to date and decide what they wanted to work on. Learnings
from the process are captured in wrap-up meetings.
Hackathons and hackdays are focused ways for digital-native
organizations to carve out time for new ideas and prototypes. As
well as running monthly hackdays when employees can work on
anything they want, LinkedIn initiated a quarterly project called
(in)cubator3 where any employee, whether they work in
engineering, sales, design or HR, can come up with an idea relating
to any part of the business and pitch it to the executive staff. If the
project is approved the team can spend up to three months of
dedicated time to work on developing the idea. But in addition, the
executive staff commit to mentoring the project leads to do
everything they can to help it to be successful.
Similarly Apple has an initiative, called Blue Sky,4 that gives
employees two weeks away from their usual job to work on special
projects, and Spotify runs regular ‘hack weeks’ with a similar aim.5
Facebook has a long (well, since 2007, which is long in Facebook
years) tradition of running hackdays6 (and nights) where engineers
and other staff come together to build anything they want, the only
rule being that it must not be the same thing that you work on in
the day job. Many of Facebook’s best-known features (including
chat, video sharing, the Like button, and the Timeline) have
originated from hackathons. In the run-up to a hackathon,
engineers submit potential ideas and groups form organically to
work on them. Pedram Kenyani, the engineer who kicked off the
practice of all-night hackathons at Facebook has said about them:7
It’s a way to experiment with ideas in a low-cost way. Lots don’t make it into products,
but every hackathon tends to result in four or five things implemented on the site. A
couple have changed the direction of the company.
Such hackathons go far beyond the traditional company ideas

scheme, and are regular and deliberately created opportunities to
generate the space to progress ideas from thought into prototype.
The practice of carving out dedicated time to focus on innovative
projects is not new, but what is different is the scale and breadth of
how this culture is systematized in the digital-native organization.
In this context, these kinds of embedded conventions are seen not
as a nice to have, but as essential to the fabric of how the company
runs and to its success in the future.
In a digitally empowered world it is simply not enough for
innovation to be episodic. Joel Gascoigne, the co-founder of social
sharing app Buffer, has written about how the strategy that they
have adopted in order to bake innovation into the business and stay
agile as they scale.8 This involves focusing resources on a balance of
three key areas:
1. ‘Core’ areas mean those that are related to the fundamentals of
what Buffer already is.
2. ‘Expansion’ is the term for ‘any projects worked on which are
logical expansions of what the product already is’.
3. ‘Labs’ is higher risk stuff that they ‘want to just try and see what
happens’.
This strategy is an echo of the approach taken at LinkedIn which
similarly features ‘core’, ‘expand’ and ‘venture’ projects, and which
co-founder Reid Hoffman describes9 as a framework for keeping the
company innovative. Working continuously on all three areas
enables both Buffer and LinkedIn to focus not just on incremental
improvement and expansion but also breakthrough innovation.
Joel Gascoigne believes that the ratio between these three
elements at Buffer is around 50:30:20 but each organization will
inevitably need to find their own levels. One alternative split comes
from Intuit (the financial software business that thinks of itself as a
‘30 year-old startup’). Speaking at SXSWi in 2013, Intuit CEO Scott
Cook described a 70:20:10 model for products and budgeting:10

70 per cent is focused on the core or oldest products, with the
objective of incremental growth and maintaining profit. This is
the ‘rowing team’.
20 per cent is focused on young to mid-stage products with an
objective of profitable growth. These are the ‘white water
rafters’.
10 per cent is on completely new products, about solving user
problems and proving a leap of faith. This is the equivalent of
‘diving for sunken treasure’.
Intuit deliberately structure resourcing in this way so that they can
successfully bake experimentation into business as usual. Similarly,
Google have adopted a 70/20/10 approach to time and focus
whereby 70 per cent of management time should be focused on the
core business or areas of responsibility, 20 per cent should be on
related projects, and 10 per cent on unrelated new businesses or
ideas.11 This is a way of embedding fresh perspectives and different
thinking into the company.
Their approach is resonant of three horizons thinking (first
espoused in Christian Terwiesch and Karl Ulrich’s book Innovation
Tournaments: Creating and selecting exceptional opportunities):12
Horizon 1 is about incremental improvements or extensions to
existing brands or products. This type of innovation typically
focuses on existing markets or utilizes existing technologies that
the company is familiar with, and is likely the easiest and most
common form of innovation.
Horizon 2 innovations are more about adjacencies, next
generation products and likely focused on existing markets or
technologies but perhaps ones that the company is less familiar
with. Because of this, it requires different thinking and
techniques from Horizon 1.
Horizon 3 innovations are entirely new, breakthrough products
or categories that are pushing the boundaries, and pushing the

company to explore new markets or technologies.
It is important for companies to focus not just on easier,
incremental innovation but to recognize the need for a more
comprehensive approach that also recognizes the differences
inherent in these different types. While it may not always be
necessary to run all three types of innovation concurrently, digital-
native organizations are adept at accommodating all three,
switching the balance of focus between them as required, and
maintaining the kind of thinking, culture and expectations that can
enable all three to thrive. An important part of this will be setting
realistic expectations for failure (and learning). The failure rate
expected in Horizon 1, for example, should be very different from
that set for Horizon 3. Unrealistic or poorly planned expectations
can kill fragile initiatives before they have even had the chance to
properly prove their worth or reveal a larger potential opportunity
down the line. Adopting a 70:20:10 approach to resourcing akin to
that at Intuit may be challenging in the face of short-term targets
and stretched resourcing but is perhaps a more palatable way of
supporting potentially breakthrough ideas, and in today’s rapidly
shifting environment can companies really afford not to do that?
More experimentation = more opportunity
While we have plenty of well-documented examples of businesses
that have shown an inability to respond to rapidly changing market
and consumer dynamics (RIM/Blackberry, Kodak, Nokia,
Blockbuster), there are also examples of companies that are not
afraid to reinvent themselves. Apple’s revenues have grown
dramatically since the return of Steve Jobs to the company in 1997,
but so has their composition, not least through a product
development programme (iPods, smartphones and tablets) that
shows itself to be unafraid of potential cannibalization.
IBM is a business that has reinvented itself multiple times over its

100+ year history from creating punch card systems for payroll
data, to originating bar codes and credit card magnetic strips, to
developing computer disc drives, chips and a huge mainframe
computing business to computing service delivery, a cloud-based
offering, technology and digital transformation consultancy, and
the development of a design and UX service offering. Their history
has not been short of existential crises, but each one of these
transformations has involved a reinvention of business models,
organizational structure and skills profile.
Yet the pace of innovation and organizational response has
dramatically sharpened. Facebook have radically changed their
revenue base from a position at IPO in 2012 where they were
deriving next to zero monetary benefit from mobile to where, just
four years later, 84 per cent of their advertising revenue base is
mobile.13 Their acquisition strategy sees them actively buying up
rival services (Instagram, WhatsApp) that pose a potential future
threat but instead of then shutting those services down, they enable
them to coexist alongside services like Facebook Messenger that
have been generated in-house through a continuous programme of
innovation.
That innovation is combined with a high-tempo continual
improvement of core services – what the Japanese might call
‘Kaizen’, the culture of continuous improvement.14 The point here is
that investment in continual iteration and innovation creates
opportunity at scale, and opportunity that is not always obvious at
initiation. Steven Johnson, the author of ‘How We Get To Now’,15
tells the story of how Gutenberg’s printing press is an example of an
invention that had a number of unanticipated effects. One of the
impacts of many more people across Europe starting to read was
the realization that many people were far-sighted. This resulted in a
surge in demand for spectacles, which in turn meant an increase in
experimentation with lenses right across Europe, which led to
innovations including the telescope and the microscope:

Almost immediately there is this extraordinary scientific revolution in terms of
understanding and identifying the cell, and identifying the moons of Jupiter and all these
different things that Galileo does. So the Gutenberg press ended up having this very
strange effect on science that wasn’t about the content of the books being published.16
One of the most undervalued consequences of high-volume, high-
paced innovation and iteration is the creation of opportunity that
you didn’t even knew existed.
Marginal and breakthrough innovation
It is easy, perhaps informed by past successes or competitive
activity, for companies to think of innovation in relatively one-
dimensional ways. We might over-focus, for example, on marginal
innovation that brings incremental gain and continuous
improvement over time. While this can bring huge benefit, it can
often be at the expense of breakthrough innovation that involves
high risk, different thinking, frequent failure but big potential gain.
Yet both are, of course, necessary. Both forms of innovation are
vital because, in the words of author and economist Tim Harford:
marginal improvement is all about climbing the hill you’re on … longshots are all about
finding new mountains to conquer.17
The biggest problem with an overemphasis on marginal,
incremental innovation was neatly summed up by Google founder
Larry Page in his 2013 letter to investors:18
It’s … true that over time many companies get comfortable doing what they have always
done, with a few incremental changes. This kind of incrementalism leads to irrelevance
over time, especially in technology, because change tends to be revolutionary, not
evolutionary.
Later in this section we will focus on ways to break out of
incremental thinking and into the realms of the truly disruptive.

The case for a more iterative, emergent
approach
A complex system that works is invariably found to have evolved from a simple system
that worked. The inverse proposition also appears to be true: a complex system designed
from scratch never works and cannot be made to work. You have to start over,
beginning with a simple system.
John Gall, systems theorist
‘Gall’s Law’, as expressed above, comes from John Gall’s 1975 book
Systemantics: How systems work and especially how they fail.19 Gall’s
work has inspired a number of authors in systems thinking but the
book actually focuses more on what we can learn from system
engineering failures and how not to design systems. The law
(although it was never expressly stated as a law in the book) is
essentially an argument in favour of under-specification (so it has a
natural affinity to agile thinking which we will discuss later) and
argues that owing to the difficulty involved in designing large
complex systems accurately, it is far better instead to design
smaller, simpler systems that can then develop incrementally based
on a continual input and measurement of user interaction and
needs.
This was, and is, a simple concept and yet it is quite profound.
Think of all the complex systems that we try to design and launch
(from large IT projects to government policy implementation) that
fail from the outset. As Josh Kaufman has pointed out in his
explanation of Gall’s Law, complex systems are full of
interdependencies and variations that are almost impossible to
anticipate but that actually play a significant role in making the
system function:
Complex systems designed from scratch will never work in the real world, since they
haven’t been subject to environmental selection forces while being designed … If you
want to build a system that works, the best approach is to build a simple system that
meets the environment’s current selection tests first, then improve it over time.20

Far better surely, to start with something simpler, easier, smaller
and evolve from there. This is why, in scenarios characterized by
complexity (such as those within which most businesses now
operate), prototypical, emergent, iterative approaches work best.
The problem with waterfall
Waterfall development is the classic linear, non-adaptive design-
and-build process that has long been applied to software
development. Progression in waterfall is linear since once each
phase has been completed there is no returning to it. Rather than
originating from software design, the process actually originated
from other industries (such as manufacturing and construction)
where the cost or practicality of making changes to a completed
stage was prohibitive.
Waterfall methodologies involve a progression from an (often
extensive and lengthy) requirements capturing and analysis
process, through (often detailed and protracted) design and build
stages, then (frequently arduous) testing and debugging, before
finally being installed and becoming operational. While this can
work for projects where requirements are rigid and unchanging,
there are several key challenges with waterfall processes:
Requirements-gathering processes are frequently poor at
capturing real user need. People do not always know what they
want. Many needs are unexpected.
The detailed, linear, sequential nature of the process (you should
only move to the next stage once the previous one has been
reviewed) means that it is frequently a very lengthy process.
This can also mean that functional interaction (for example,
between designers and coders) is limited, and concurrent
working on the same problem restricted, which can lead to
designers designing elements that cannot work, or developers

coding without design input.
Requirements and contexts now change at a faster pace than
ever but waterfall is poor at adapting to changing needs (once a
stage is complete it is very difficult to go back and make amends),
meaning that by the time the end user sees the first version of
the product or system updates are required straightaway or it is
even no longer fit for purpose.
Unforeseen problems or needs are less easy to identify along the
way since all the requirements capturing has been done upfront.
As we will discuss later, waterfall thinking is emblematic of
traditional approaches to strategy, planning and execution that still
exist inside most organizations. In a world characterized by
accelerating change, the kind of issues that waterfall throws up –
inflexibility and linearity, lack of adaptability to changing
requirements and contexts, lack of pace and momentum, poor
cross-functional collaborative working, are akin to many of the
issues that these traditional ways of working now present. Put
simply, the problem is not only with the process, but with the
mindset, thinking and behaviours that surround it.
The three types of problem in the world
We know that every problem is different but we are often
susceptible to misdiagnosing the nature of the obstacle that we are
facing, and therefore the correct approach to deriving a solution.
American surgeon and author Atul Gawande makes a compelling
case in his book The Checklist Manifesto21 for how the quantity and
complexity of knowledge required to execute many tasks in the
modern world restricts our ability to do it consistently and
correctly, and how something as simple as a checklist can be a
powerful driver of accuracy, dependability and performance.
Gawande makes a point of acknowledging the importance of

recognizing the correct type of challenge that we are facing,
referencing the three types of problem in the world delineated in a
paper on reform in the healthcare industry by Brenda Zimmerman
of York University and Sholom Glouberman of the University of
Toronto:22
1. Simple problems are ones like baking a cake from a mix. There is a
recipe.
2. Complicated problems are ones like sending a rocket to the moon.
They can sometimes be broken down into a series of simple
problems. But there is no straightforward recipe. Success
frequently requires multiple people, often multiple teams, and
specialized expertise. Unanticipated difficulties are frequent.
Timing and coordination become serious concerns.
3. Complex problems are ones like raising a child. Once you learn
how to send a rocket to the moon, you can repeat the process with
other rockets and perfect it. One rocket is like another rocket. But
not so with raising a child, the professors point out. Every child is
unique. Although raising one child may provide experience, it does
not guarantee success with the next child. Expertise is valuable
but most certainly not sufficient. Indeed, the next child may
require an entirely different approach from the previous one. And
this brings up another feature of complex problems: their
outcomes remain highly uncertain. Yet we all know that it is
possible to raise a child well. It’s complex, that’s all.
Zimmerman and Glouberman go on to contend that we (in the
context of the paper they are talking about healthcare experts)
often:
… implicitly describe complex problems as complicated ones and hence employ solutions
that are wedded to rational planning approaches. These often lead to inappropriate
solutions because they neglect many aspects of complexity.
This, say the authors, is like the old joke about the policeman who
sees a drunk man searching for something under a streetlight and

asks what the drunk has lost. He says that he has lost his keys and
so they both look under the streetlight together. After a few minutes
the policeman asks if he is sure he lost them here, and the drunk
replies, no, and that he lost them in the park. The policeman asks
why he is searching here, and the drunk replies, ‘this is where the
light is’. Our observational bias, and the sophistication of our
theories, models and language, say the authors, can be as seductive
as the lamplight. They might provide an illusion of clarity but they
can also lead to approaches that do not properly take account of
complex adaptive systems and situations.
In the context of the modern business environment, which is
more than ever characterized by complexity, it becomes essential
that we define challenges in the right way, avoid conflating the
complex with the complicated, and set about shaping the response
to those challenges in the right way.
Complex scenarios require emergent
solutions
‘Best practice’ is one of those terms that, while not inherently bad,
has become so overused as to be stretched beyond its rightful
application. So it gets applied generically to any scenario where an
understanding of the most effective methods to solve a problem is
desired. Our wish to create certainty out of ambiguity, and to
impose control over the unpredictable leads us to wish to
standardize approaches and apply best practice to many distinct
types of situation. But as we have shown there is a big difference
between simple, complicated and complex challenges.
An excellent way of framing the difference in our response to
each of these types of challenge comes from Dave Snowden’s
Cynefin model,23 a useful framework for decision-making (Figure
5.2).

Figure 5.2 Dave Snowden’s Cynefin model
Simple contexts, characterized by stable, clear cause-and-effect
relationships and ‘known knowns’ are the domain of best practice.
Managers, says Dave, might appraise a situation and base a
response on established processes. The hazards here come from
complacency and entrained thinking, which might blind us to new
perspectives.

Complicated contexts may still have a clear relationship between
cause and effect but can also contain many applicable answers,
some of which are not immediately obvious (‘known unknowns’),
and so this requires analysis of suitable options and is typically the
domain of experts. Good practice is therefore more appropriate
than best practice. The danger in this context comes from experts
who are biased towards preferred solutions, over-analysis leading
to paralysis, or from ignoring potentially innovative ideas from
non-experts.
Complex contexts, however, are constantly shifting (‘unknown
unknowns’). As Dave Snowden notes, the temptation in the face of
such unpredictability is to demand certainty in the form of
foolproof plans with precise outcomes: to revert to a command-and-
control leadership style; to become less patient. But in complex
contexts we can only understand why things happen in retrospect
and answers are emergent so we need to look for instructive
patterns through experimentation. Encouraging the conducting of
experiments that are as ‘safe to fail’ as possible enables informative
patterns and a clearer direction to emerge. Imposing a desire for
order or a rigidly defined course of action will preempt the
opportunity for such instructive patterns to emerge.
In chaotic contexts no manageable patterns exist, the relationship
between cause and effect is impossible to define, and so clear,
concise and immediate action to establish as much order and
stability as possible is what is required. Leaders need to work to
transform situations from chaos to complexity where emerging
patterns might be identified and suitable responses determined.
If the world of business is increasingly characterized by
uncertainty, continuous flux and complex contexts, then the bad
side of best practice is that we seek to oversimplify and use it as a
way of seeking certainty in situations that require a more emergent
pattern of decision-making. As Dave notes, best practice is, by
definition, past practice but hindsight no longer leads to foresight
after a shift in context. While it may be appropriate in simple

contexts, misappropriation of best practice in today’s ever-more
complex world means that we are in danger of becoming the drunk
searching for his keys in the streetlight.
Notes
1 3M, Time to Think, [Online] http://solutions.3m.com/innovation/en_US/stories/time-
to-think [accessed 16 October 2016]
2 Neil WIlliams (February 2015) GDS Blog, GOV.UK’s Firebreak: How and why we
spent a month working differently, [Online]
https://insidegovuk.blog.gov.uk/2015/02/06/gov-uks-firebreak-why-and-how-we-
spent-a-month-working-differently/ [accessed 16 October 2016]
3 LinkedIn, Incubator, [Online] http://blog.linkedin.com/2012/12/07/linkedin-incubator/
4 Matthew Panzarino (November 2012) Apple Blue Sky, [Online]
http://thenextweb.com/apple/2012/11/12/apple-fires-up-its-version-of-googles-20-time-
giving-some-employees-2-weeks-for-special-projects/ [accessed 16 October 2016]
5 Henrik Knowberg (2014) Spotify Hack Weeks, [Online]
https://labs.spotify.com/2014/03/27/spotify-engineering-culture-part-1/ [accessed 16
October 2016]
6 Facebook Hackathons, [Online] https://www.facebook.com/hackathon [accessed 16
October 2016]
7 David Sacks, FastCompany (2012) Secrets of Facebook’s Legendary Hackathons
Revealed, [Online] http://www.fastcompany.com/3002845/secrets-facebooks-
legendary-hackathons-revealed [accessed 16 October 2016]
8 Joel Gascoigne, Buffer, (May 2014) How We’re Trying to Stay Innovative as a 3.5 Year
Old Startup, [Online] http://joel.is/how-were-trying-to-stay-innovative-as-a-3–5-year-
old/ [accessed 16 October 2016]
9 Reid Hoffman talks to Matt Mullenweg (February 2014) [Online]
https://www.youtube.com/watch?v=LMGb2UoNFYM [accessed 16 October 2016]
10 Martin Bailie, SXSW Themes: Startup Culture, Code and Data, [Online]
http://www.slideshare.net/martinbailie/sxsw-2013-themes-startup-culture-code-and-
data [accessed 16 October 2016]
11 John Battelle (1 December 2005) CNN Money magazine, [Online] ‘The 70 Percent
Solution: Google CEO Eric Schmidt gives us his golden rules for managing
innovation’ [accessed 16 October 2016]
12 Christian Terwiesch and Karl Ulrich (1 June 2009) Innovation Tournaments: Creating

and selecting exceptional opportunities, Harvard Business School Press, ISBN-10:
1422152227
13 Sarah Frier (2016) Facebook Revenue, Users Top Estimates as Mobile Ads Surge,
Bloomberg Technology, [Online] http://www.bloomberg.com/news/articles/2016–07-
27/facebook-sales-user-growth-top-estimates-as-mobile-ads-surge [accessed 24
October 2016]
14 What is Kaizen? Kaizen Institute, [Online] https://uk.kaizen.com/about-us/definition-
of-kaizen.html [accessed 16 October 2016] https://uk.kaizen.com/about-us/definition-
of-kaizen.html” [accessed 24/10/16]
15 Steven Johnson (30 September 2014) How We Got to Now: Six innovations that made
the modern world, Riverhead Books, ISBN-10 1594632960 ISBN-13 978–1594632969
16 Megan Gambino (30 September 2014) The World Is What It Is Today Because of
These Six Innovations, Smithsonian.com, [Online]
http://www.smithsonianmag.com/innovation/world-what-it-today-because-these-six-
innovations-180952871/?no-ist” [accessed 24 October 2016]
17 Tim Harford (2 January 2013) The Undercover Economist, Wired, [Online]
https://www.youtube.com/watch?v=7GHhmgZ0BwQ [accessed 24 October 2016]
18 Sergey Brin (2013) Founders’ Letter, Alphabet Investor Relations, [Online]
https://abc.xyz/investor/founders-letters/2013/ [accessed 24 October 2016]
19 John Gall (May 1975) Systemantics: How systems work and especially how they fail,
Times Books, ISBN-10 0812906748 ISBN-13 978–0812906745
20 Josh Kaufmann ©2005–2016 What Is ‘Gall’s Law’?, PersonalMBA.com, [Online]
https://personalmba.com/galls-law/” [accessed 24 October 2016]
21 Atul Gawande (2011) The Checklist Manifesto: How to get things right, Profile, ISBN-10
1846683149 ISBN-13 978–1846683145
22 Sholom Glouberman and Brenda Zimmerman (July 2002) Government of Canada,
Complicated and Complex Systems: What Would Successful Reform of Medicare
Look Like?, [Online] http://publications.gc.ca/collections/Collection/CP32-79–8-
2002E.pdf [accessed 24 October 2016]
23 Dave Snowden and Mary Boone (November 2007) A Leader’s Framework for
Decision Making, Harvard Business Review, [Online] https://hbr.org/2007/11/a-
leaders-framework-for-decision-making [accessed 24 October 2016]

06
Digital-native processes
If the modern business environment requires more adaptive,
emergent and iterative ways of working, there are several
foundational concepts which provide us with not only effective,
well-proven processes but also ways of thinking that are highly
relevant, applicable and instructive. We are talking about agile,
lean, design thinking, and the many variant processes that they
have spawned. The dynamism, flexibility and non-linearity of these
foundational methodologies make them far more apposite for
today’s complex environments. Small wonder, therefore, that they
are expanding beyond startups, innovation labs and technology
teams to become embedded in wider business thinking, inspiring
new approaches and fundamentally different ways of operating.
Design thinking
The growing importance of design in business has become evident
from the heavy investment that companies in a number of sectors
are making in design and user experience talent. Not least of these
are consulting businesses including Deloitte, Accenture and IBM
(IBM have structured frameworks around design thinking to help
IBM-ers solve users’ problems at speed and scale)1 who have
refocused recruitment and acquisition programmes to serve a far
greater requirement for design skills and approaches.
Design thinking was really first adapted for business by David
Kelley and Tim Brown, founders of design business IDEO. Tim
Brown has defined design thinking as:

… a human-centered approach to innovation that draws from the designer’s toolkit to
integrate the needs of people, the possibilities of technology, and the requirements for
business success.2
The process involves a broader application of design methods to
business and innovation, using solution-focused thinking, starting
with a future goal, and investigating both present and future
conditions to iteratively generate multiple ideas and options and
simultaneously explore alternative routes to achieving the goal.
IDEO, for example, look for the intersection that: ‘brings together
what is desirable from a human point of view with what is
technologically feasible and economically viable’.3
Key to design thinking is the successive application of divergent
and convergent thinking, the former being about originating
multiple possibilities, the latter about narrowing these choices
down and selecting the optimal way forwards. One example of a
design thinking process incorporates seven stages: define, research,
ideate, prototype, choose, implement and learn.4 This process has
similarities to the lean learning loop that we will look at later, but
with design thinking these steps are not always linear and may be
repeated in order to find better solutions. Like agile and lean,
design thinking maintains a strong focus on the user (through
empathy) and also teamwork, and some of the tools used including
customer journey mapping, empathy mapping, paper prototyping
and personas may be applied to add value across all three
approaches.
Agile
Published in 2001, the Agile Manifesto5 arose from a meeting of
software developers at the Snowbird resort in Utah who had come
together to discuss lightweight development philosophies that had
evolved as a counterpoint to more rigid processes such as waterfall.
Although iterative, adaptive processes had been around for a

number of years, the manifesto helps capture a new way of working
that recognized some key shifts in value (‘while there is value in the
items on the right, we value the items on the left more’):
Individuals and interactions over processes and tools
Working software over comprehensive documentation
Customer collaboration over contract negotiation
Responding to change over following a plan.
Since then, agile software development practices have grown into
widely adopted and extremely robust processes. A number of
iterative development methodologies are often categorized under
the agile umbrella (including SCRUM, Kanban, XP, Crystal) but agile
has revolutionized the way in which technology teams work, and
software gets built. The key concepts, characteristics and practices
inherent in agile software development methods include (Figure
6.1):
the use of cross-functional teams drawn from all the key
functions (to allow for requirements to change over time, in
place of rigorous, rigid, upfront specification
teams that are are self-organizing, with a high degree of
autonomy
co-location and face-to-face communication prioritized to enable
speed
teams working iteratively in blocks of time or sprints (typically
1–4 weeks) against an agreed set of priorities, which may require
multiple sprints to release new features or a product but the
objective is usually to be able to release working outputs at the
end of each sprint
working outputs that can be demonstrated to stakeholders whose
feedback is incorporated into the next or future work sprints
the product backlog organizing and prioritizing work based on
business and user value – priorities are revisited at the start of

every sprint into a sprint backlog
daily stand-up gatherings (or ‘scrums’ as they are sometimes
called) creating short feedback loops and enabling team
members to report daily progress and intentions towards the
team and sprint goals, or any barriers to progress that have been
encountered
the product owner as a key part of the team, and the
representative of the customer or end user (key stakeholders in
the business agree in advance that the product owner can act on
their behalf) – they are available to developers to answers
questions during the sprint
transparency is key, with physical displays near the team
presenting a summary of progress and current status
a focus on quality maintained through specific design processes
and testing methodologies that are designed to also support
agility.

Figure 6.1 Agile software development
A key advantage of agile methodologies comes from the ability to
adapt to changing realities quickly and therefore minimize overall
risk. Longer-term goals may be set but there is much greater
flexibility built into the path to achieving them. Built-in
retrospectives at the end of each sprint ensure that the quality of
prioritization and work in the next sprint is as good as it can be.
Methods that are more predictive (like waterfall) attempt to plan
out the future context or requirements in comprehensive detail that
limits the ability to change along the way. In a rapidly shifting
environment this carries significant inherent risk, particularly if
that early analysis or planning is flawed.
In agile, the principle is to ‘release early and often’. Testing is
generally conducted on an ongoing basis and incorporated into the
same iteration as the coding work rather than being separated out
into a distinct phase. This means that end users can have far more
visibility of development work and progress, and can better
understand the value. This inclusive approach is highly transparent

and minimizes the risk of misalignment (which in non-iterative
processes can become steadily worse over time), generates better
quality feedback through enabling the end users to make better
decisions on where the real value/issues are in working outputs
(because they can actually use them), and see the progressive build
of value over time through frequent releases.
Agile is not without its challenges. Moving to agile working is a
significant shift in culture and working practice. It can easily bump
up against existing business processes and prioritization. A half-
hearted implementation of agile (or what we term later as ‘doing
waterfall in an agile way’) will more often than not fail. There is a
healthy dose of delusion in business wrapped up in our belief that
we can forecast future needs, situations and outcomes even in
highly complex and fluid environments, and yet the apparent lack
of long-term predictability inherent in agile can leave many leaders
uncomfortable embarking on a roadmap where every step has not
already been mapped out. Leaders may also feel uncomfortable
having to do without many of the totems of more traditional
approaches such as comprehensive documentation in the initial
stages of a project. Coaches in agile, and intermediary roles such as
the product owner or product manager can often play a key part in
mitigating some these risks. But it is important to recognize that the
philosophy and principles that surround this methodology and that
were expressed in the Agile Manifesto all those years ago do not
stop with the technology team running an agile software
development process. This speaks to the much bigger opportunity
that has inspired this book.
Lean
The foundation for lean thinking was established through lean
manufacturing, an approach that considered anything in a
production process outside of the creation of value for the end
customer as wastage and systematically seeks to remove it. This in

turn was inspired by the Toyota Production System (TPS) which had
identified ‘seven wastes’ including defects, inventory (minimizing
anything not in process) and overproduction (the idea of ‘just in
time’ production rather than producing ahead of demand) that
were then methodically eliminated. Lean manufacturing therefore
sought to only bring in necessary inputs to the process at the point
they were needed, and identify imperfections in output as early in
the process as possible to minimize correction time. TPS and lean
manufacturing sit alongside the Japanese practice of ‘Kaizen’
(meaning ‘improvement’) which, in the business context, relates to
the involvement of employees at all levels in the continuous
incremental improvement of the manufacturing process.
In 2008, Eric Ries took some of these ideas and combined them
with his own experience in startups to originate the lean startup,6
the product development methodology that shares some similar
overarching principles to agile. Like lean manufacturing, it seeks to
eliminate waste. Like agile, the process is iterative with continuous
product releases and customer feedback embedded as a key part of
the process. Hypotheses about customer need or product features
are successively validated through iterative releases or rapid
prototyping, thereby minimizing risk and the need for large initial
investment, and enabling continuous learning.
Ries believes that the continuous involvement of customers in the
development process enables startups (and any business developing
new products and services) to inclusively recruit early adopters and
solve real customer problems before attempting to acquire scale.
The core concepts that sit at the heart of lean are:
The build-measure-learn loop: An iterative cycle that follows a
process of identifying a hypothesis (about a specific customer
need or product feature), designing a test that will validate that
hypothesis (often the simplest possible prototype), testing
wherever possible with real customers, and taking the learning
into the next learning loop. This methodology is designed to

eliminate as much uncertainty as possible from the development
process, and to continuously test and learn en route to fulfilling a
vision.
The minimum viable product (MVP): In his book, Ries
describes the MVP as the ‘version of a new product which allows
a team to collect the maximum amount of validated learning
about customers with the least effort’.7 MVPs can be developed to
test a new hypothesis, but the principle is to create the simplest
possible test or prototype to validate that idea and enable
progression on to the next learning loop as quickly as possible.
Innovation accounting: Traditional accounting methods work
well with established products or propositions but can stifle
innovation, a new idea or a startup business by focusing on the
wrong metrics (like ratio and cash flow analysis) that set
unrealistic expectations about early revenue generation.
Innovation accounting focuses on ‘actionable metrics’ (as
opposed to ‘vanity metrics’ that do not accurately represent the
performance and business drivers) that measure early progress
and enable better prioritization. These might include customer
usage and retention measures.
The pivot: Ries describes the pivot is a ‘structured course
correction designed to test a new fundamental hypothesis about
the product, strategy, and engine of growth’. Pivots might enable
a refocusing of the product proposition or key features while still
maintaining the guiding vision for the business or product.
While agile software development may be typically used in
technology teams, and design thinking and lean mainly applied in
the service of product and service development, the principles,
practices and philosophy that surround all three have far broader
application for the way in which we conduct business and secure
competitive advantage.

The principles of agile business
The Agile Manifesto gives us a blueprint for a better way of
developing software, but it also speaks to some fundamental
principles for doing better business in the complex adaptive
environment we know today. The 12 principles of agile business
align closely with those that were originated in the manifesto (Table
6.1):

TABLE 6.1 The 12 principles of agile business
Agile Manifesto Principle Agile Business Principle
1 Our highest priority is to
satisfy the customer through
early and continuous delivery
of valuable software
The primary orientation is
towards customer need delivered
through constant improvement of
customer experience
2 Welcome changing
requirements, even late in
development. Agile processes
harness change for the
customer’s competitive
advantage
Strategies and tactics are highly
adaptive and responsive, and
change is welcomed
3 Deliver working software
frequently, from a couple of
weeks to a couple of months,
with a preference to the
shorter timescale
Iterative, sprint working delivers
customer value through
continuous progress and
momentum
4 Business people and
developers must work
together daily throughout the
project
Effective cross-functional
collaboration, supported through
clear intent, is critical for success
5 Build projects around
motivated individuals. Give
them the environment and
support they need, and trust
them to get the job done
Build companies with motivated
individuals. Empower teams to
deliver through a flexible working
environment characterized by
trust and comfort with dissent
6 The most efficient and
effective method of conveying
information to and within a
development team is face-to-
face conversation
Bureaucracy are politics are
minimized, co-location and face-
to-face communication maximized
wherever possible
7 Working software is the Working outputs are the optimum

7 Working software is the
primary measure of progress
Working outputs are the optimum
measure of progress and success
8 Agile processes promote
sustainable development. The
sponsors, developers and
users should be able to
maintain a constant pace
indefinitely
Agile business supports relentless
and sustainable innovation and
progress. Change and iteration is
constant, and the pace of progress
never slows
9 Continuous attention to
technical excellence and good
design enhances agility
Technical excellence and good
design are central to maintaining
pace and agility
10 Simplicity – the art of
maximizing the amount of
work not done – is essential
Minimize wasted effort,
duplication and resources
11 The best architectures,
requirements and designs
emerge from self-organizing
teams
The best results emerge from
small teams with a high degree of
autonomy
12 At regular intervals, the team
reflects on how to become
more effective, then tunes and
adjusts its behaviour
accordingly
Continuous improvement is
achieved through embedded
reflection time, and behaviours
and culture that support learning
These principles for agile business set out a new orientation for the
digitally empowered business. They concern the very fabric of how
an organization works.
Developing a learning culture
Agile, lean and design thinking have dramatically changed the way
in which technology teams, startups and innovation labs work, but
this revolution does not stop with the innovators, entrepreneurs

and technologists. The principles and practices that are integral to
this more adaptive way of working have much broader application
throughout business but just as importantly (as we will go on to
discuss in Part Four) in order to deliver real value they all require
the organizational culture that can enable them to survive and to
flourish.
There is not one right process. Each team or business will find
that there are methodologies that they are more comfortable with,
and that different scenarios and environments call for different
approaches. Rather it is more often about how you can combine
different approaches and processes for optimum impact and for the
job to be done. Yet all of these ways of thinking and working have
commonality in approaches and outlook that are integral to
operating in the modern business environment. Not least of these is
their need to operate within, and their ability to support and
catalyse an organizational culture that is all about learning.
We have all heard the platitudes to ‘fail fast’, ‘embrace failure’, or
‘fail forwards’. Yet failure in isolation is an unwanted and
unnecessary distraction. So let’s instead talk about the value of
learning cultures. Ed Catmull, President of Pixar, one of the most
successful film businesses of all time has said that:
Failure isn’t a necessary evil. In fact, it isn’t evil at all. It is a necessary consequence of
doing something new.
… and
If you aren’t experiencing failure, then you are making a far worse mistake: You are
being driven by the desire to avoid it.8
And he’s right. But he also said: ‘When faced with a challenge, get
smarter’. The point about failure is that we need to use every
experience, good or bad, as an opportunity to learn so that we get
continually better and smarter over time. To paraphrase the
venture capitalist Marc Andreesen:
The goal is not to fail fast. The goal is to succeed over the long run. They are not the

same thing.9
The agile business is one that is continually exploring but also one
that is continually learning. Author Jim Collins followed up the
bestselling Good to Great a decade later, with Great by Choice,10
based on nine years of research into companies that had risen to
great things from times of uncertainty. One of the key differences
he identified between these companies and others that did much
less well was the practice of what he termed ‘empirical creativity’.
This he defined with a ‘bullets’ and ‘cannonballs’ metaphor. Instead
of firing cannonballs (putting significant resources behind untested
ideas), the more successful businesses began by firing smaller
bullets (they prepared the way with lots of low cost, low risk, low
distraction tests at a far smaller scale in order to develop learnings
about what works and what doesn’t). In other words, they made lots
of small bets.
This kind of ‘empirical creativity’, he says, is a blend between
creativity and discipline, involving the habit of continually learning
from a stream of both successful and unsuccessful experiments and
initiatives. On any given day, Facebook are running hundreds of
tests concurrently.11 Each year, Google reportedly changes its
search algorithm around 500–600 times.12 When they launched the
first version of their pay-per-click advertising product AdWords in
1999 it initially was not very successful but through constant
iteration Google have built a product that is today worth billions of
dollars. But iteration doesn’t stop. Tens of thousands of quality
experiments are still run each year for both search and advertising
products.
The agile business is not one that experiments episodically, but
instead builds a culture characterized by continuous testing and
learning. Whether it is constant testing conducted at high tempo
and designed to incrementally improve existing services, or test and
learn focused on a perpetual stream of new and potentially
breakthrough initiatives, developing a learning culture it seems, is

critical not only to performance but also to survival.

Marco Ryan, EVP, Chief Digital Officer, Wartsila Corporation (and digital transformation
veteran): Test. Learn. Optimize
Perhaps one of the hardest success factors to implement is cultural change. For many,
technology decisions, marketing budgets, investments in websites are easier to measure and
easier to understand.
But what will make the transformation stick – what will cause it to deliver the value – is
the people. And most organizations struggle with the availability and capability of their
talent, to focus on the digital transformation. This is often largely due to approaching it the
wrong way. Large-scale process re-engineering projects, tied for example to changes in an
ERP system, will absorb both the resources and their appetite for change.
An alternative, and more digital approach, is to continuously ‘test, learn and optimize’.
This allows shorter timelines, and importantly, enables unsuccessful initiatives to be halted
quickly. It is what makes the startups able to outpace the more traditional companies and it
can be applied to all parts of the business.
The approach, combined with a hypothesis, good data, the ability to create a pilot, mock-
up or prototype, to work in small cross-functional teams often without the need for
centralized IT resources, can quickly get a product, idea or service to market, in a high
fidelity state that can be tested with a trusted client, improved or perhaps halted. In a
digitally transformed company, failure is okay, providing you fail fast, learn from it and
improve the next iteration.
Too many companies are afraid to try or lack resources to mentor and coach teams
through this new way of working. This can be easily addressed through external input or
interims in the short term. But the sin is not to try.
The dangers of systematic survival bias
In 1943, US mathematician and statistician Abraham Wald was part
of a group asked to advise the US Air Force on how they might
reinforce their planes to prevent so many of them being lost on
bombing raids to enemy fire.
The challenge was that there was only a limited amount of
armour plating that could be used on the plane if it were to still fly.
Research by the military into damage to planes that had returned
from missions revealed that bombers were often riddled with
bullets in the wings, the centre of the fuselage and around the tail

gunner. So they proposed to reinforce these areas where they could
see the most damage.
Wald told them that this was a big mistake, and that they should
in fact do the opposite. He recognized that what the bullet holes
were in fact showing was where a plane could be hit and still
survive to make it home. The reinforcement actually needed to be
placed in the areas where the surviving planes looked unscathed,
since planes hit in these areas never returned. Wald went on to use
a complex series of equations to work out the vulnerability of
individual parts of a plane. Calculations that are still in use today.
Survival bias leads us to overly focus on the successful, to the
detriment or oversight of what we can learn from the unsuccessful,
and can lead to false conclusions. In organizations we tend to be
exceptionally good at looking at successes as the learning exemplars
and exceptionally bad at building in reflection time so that we
might encourage the kind of learning culture that can create the
kind of advantage that Amazon founder Jeff Bezos talks about when
he depicts why Amazon is the best place in the world to fail. If you
swing for the fences, he says, you will inevitably strike out
frequently but now and then you will hit a home run. What is
different between baseball and business though, is that the former
has limited outcomes (the most runs you can get is four). In
business, however:
… every once in awhile, when you step up to the plate, you can score 1,000 runs. This
long-tailed distribution of returns is why it’s important to be bold. Big winners pay for so
many experiments.
(Bezos, 2016)13
Learning to unlearn
It makes intuitive sense that organizations that focus on continuous
learning should fair better in complex adaptive environments. But
one of the less obvious benefits of learning the new is that it helps

you to unlearn old habits and practices.
A study from the European Molecular Biology Laboratory and the
University Pablo Olavide in Sevilla, Spain, showed that our brains
actively erase memories in order to make space for new ones, a
process that seemingly only happens in learning situations.14 In
other words we forget through learning.
As we will discuss later, iterative and sprint working
methodologies are founded on principles of reflection, learning and
application through tight feedback loops from customer interaction
or team retrospectives at the end of sprints. In the context of digital
transformation the point of adopting new working structures and
processes is not only to learn new ways of working but also to help
disentangle the company from legacy thinking and practices. We
forget the old through learning the new. To quote author, inventor
and thinker Buckminster Fuller:
You never change things by fighting the existing reality. To change something, build a
new model that makes the existing model obsolete.
In other words (and here to paraphrase the character Socrates from
Dan Millman’s book The Way of the Peaceful Warrior)15 the secret of
change is to focus all your energy not on fighting the old but on
building the new.
Fixed and growth mindsets
Stanford Psychologist Carol Dweck (in Mindset)16 has described the
fundamental difference in how we view our personality, and
between what she calls ‘fixed’ and ‘growth’ mindsets. The former,
she says, is the view that your intelligence, character and creative
ability are static and so cannot change in a meaningful way. If
successful, those who have fixed mindsets regard that success as:
… the affirmation of that inherent intelligence, an assessment of how those givens
measure up against an equally fixed standard; striving for success and avoiding failure

at all costs become a way of maintaining the sense of being smart or skilled.
Those with a growth mindset, on the other hand, relish challenges
and rather than seeing failure as evidence of unintelligence, regard
it as an opportunity for growth and improving existing capabilities.
We can draw clear parallel between individual and organization.
The agile business has a growth mindset. It sees every initiative as
an opportunity to learn.
Embedding reflection time
One of the key ways in which organizations can develop an
ingrained learning culture is through embedding the practice of
reflective thinking and retrospectives. Unlike critical thinking,
which is a way of utilizing different techniques of reasoning and
insight in order to increase the probability of a desired outcome or
goal, reflective thinking focuses on the analysis of past experiences
to draw learning that might be applied in the future.
Two influential thinkers on organizational learning, Donald
Schön and Chris Argyris, created a useful way of thinking about the
application of what Schön called ‘reflective practice’, the ability of
organizations to not only incorporate as broad a perspective as
possible from the experience of individuals and the company itself,
but to continually improve through a feedback loop of experience,
learning and practice. They considered three key elements:
1. Governing variables: the dimensions that people are trying to
keep within acceptable or accepted limits.
2. Action strategies: the plans and activities used to keep
governing values within the acceptable range.
3. Consequences: the intended or unintended results of an action.
Learning, they said, involves identifying and correcting errors but
when something goes wrong people initially look for an alternative

strategy that will work within the existing governing variables in
what they called ‘single-loop learning’. Single-loop learning is an
error and correction process that enables the organization to
continue current policies in order to achieve its objectives. So
organizations operationalize responses to changing market
conditions. ‘Double-loop learning’ on the other hand, involves
questioning the governing variables themselves:
Single-loop learning is like a thermostat that learns when it is too hot or too cold and
turns the heat on or off … Double-loop learning occurs when error is detected and
corrected in ways that involve the modification of an organization’s underlying norms,
policies and objectives.17
Good reflective practice in the agile business should not only focus
on single-loop error and correction, but more fundamental
consideration of new and improved ways of working, and
challenging and changing established norms.
Reflection is built in to agile methodologies (the last Agile
Manifesto principle is: ‘At regular intervals, the team reflects on
how to become more effective, then tunes and adjusts its behavior
accordingly’) through the practice of retrospectives. These are used
as a simple way to gather the team, typically at the end of a sprint,
and hold a (often facilitated) reflection on their work and way of
operating and how it might be improved in the next sprint. Actions
are captured, made visible and then revisited.
One of the simplest (and therefore best) frameworks for reflection
actually originated from the US military. The so-called ‘after action
review’18 would be used in de-briefs as a way of improving
performance, and features four simple questions that can be
answered after an action of some kind:
1. What did we expect to happen? Knowing that you have to
answer this question afterwards means that you go in with a
greater clarity of objective and desired outcome.
2. What actually happened? A blameless analysis, that identifies

key events, actions and influences, and creates a consensus.
3. Why was or wasn’t there a difference? What were the
differences (if any) between desired and actual outcomes, and
why did this difference occur?
4. What can you do next time to improve or ensure these
results? What (if anything) are you going to do different next
time? What should you do more of/the same/less of? What needs
fixing? What worked and is repeatable or scalable? The idea is
that at least half of the time of the review should be spent
answering this question.
Most businesses are pretty bad at taking time out to reflect and
learn. There is always pressure to move straight on to the next
target, the next priority, the next project. Yet when it is embedded
into cultural, behavioural and process norms it is potentially one of
the most valuable ways to develop a true learning organization.

John Coleman, agility transformation consultant, coach and trainer: Using agile processes,
and bringing people on journey
Even if a client has bought into the significance of more agile working, it’s still important to
ask ‘why agility?’. It’s critical that the organization understands what it will gain from being
more agile, and yet there will often be different answers to this question, especially from
different levels of the business. Senior support for the adoption of new working methods,
values and behaviours is key, and it’s important to address the ‘what’s in it for me?’ question,
so that everyone understands the value.
Benefit will be derived from faster delivery, being more customer focused and innovative,
but this needs to be brought to life at a personal, team and organizational level. People need
to feel like they co-designed the agility transformation that is to come, since this will help
get them through the times when change feels particularly difficult. And there will be
difficult times, since most transformation efforts require a number of ‘J-curves’19 to get
there. The initial stages of change may well create a period of disruption that can have a
short-term adverse impact on performance, before the tangible benefits start to show and
long-term gains become apparent. So people need to be aware of where they are on the J-
curve, and the fact that there may well be multiple J-curves along the journey.
Once the goal of the first J-curve (no longer than 12 months) is agreed, it’s important to
then work out the best options to achieve the positive expected outcome at the end of the
first curve, and to position yourself as best you can for the second curve. Tools such as the
DICE® framework from the Boston Consulting Group20 are useful in being able to better
predict outcomes since it uses four key elements to assess likely results: the duration of the
project (longer projects that are reviewed more frequently are often more likely to succeed
than shorter ones that are subject to a poor review process); the integrity of the team
(quality, skills, capability and configuration); the commitment to change (visible top-down
support, engagement at different levels); and the effort of stakeholders (degree of
additional demands, which should be as minimal as possible).
The key is then to select a toolbox of methods that best suit the current context, to set the
cadence and synchronization pattern that enable regular delivery of value and the mapping
of the interventions needed to achieve the medium-term outcomes, to keep your sights on
generating early benefit and managing risk, and also ‘Black Swan Farming’21 (the potential
to discover features in hindsight that are hundreds or thousands of times more valuable
than other features). There are probably several deal breakers, including the acceptance of a
half-hearted implementation (‘WaterScrumFall’ or ‘WAgile’ for example), a lack of appetite
for continuous integration and automated testing, and a lack of appetite for suitable finance
support and processes (more regular forecasting/budgeting, or ‘Lean Finance’) since this can
inhibit long-term gain and the ability to create stable, high performing teams. The main point
is to use the right method(s)/frameworks for the right context and to get into a
transformation rhythm to get regular wins, pivoting as you discover things that didn’t work
so well in practice in that context.
And keep on going! Keep it fresh by changing the transformation team by asking more key
influencers for help as you go, and as energy dwindles from one focus area and increases in

influencers for help as you go, and as energy dwindles from one focus area and increases in
the next one. Be aware of the politics, keep your forecasts on track (re-forecasting monthly
at a minimum), use positive peer pressure through informal show and tells, tell stories,
spread the word. Above all, leave a legacy so that the transformation continues.
Notes
1 IBM.com (2016) IBM Design Thinking, IBM Design, [Online]
http://www.ibm.com/design/thinking/ [accessed 24 October 2016]
2 ideou.com (2016) Design Thinking, IDEO U, [Online]
http://www.ideou.com/pages/design-thinking [accessed 24 October 2016]
3 ideou.com (2016) Design Thinking, IDEO U, [Online]
http://www.ideou.com/pages/design-thinking [accessed 24 October 2016]
4 Herbert A Simon (26 September 1996) The Sciences of the Artificial Third, MIT Press,
ASIN B002U60C7S
5 AgileManifesto.com (2001) Manifesto for Agile Software Development, [Online]
http://agilemanifesto.org/ [accessed 24 October 2016]
6 Eric Reis (2016) The Lean Startup, The Lean Startup, [Online]
http://theleanstartup.com/ [accessed 24 October 2016]
7 Eric Reis (6 October 2011) The Lean Startup: How constant innovation creates
radically successful businesses, Portfolio Penguin, ISBN-10 670921602, ISBN-13 978–
0670921607
8 Ed Catmull (8 April 2014) Creativity, Inc.: Overcoming the unseen forces that stand in
the way of true inspiration, Transworld Digital, ASIN B00GUOEMA4
9 Marc Andreessen (22 January 2015) Failure – Success is the new failure, Andreesen
Horowitz, [Online] http://a16z.com/2015/01/22/failure/ [accessed 24 October 2016]
10 Jim Collins and Morten T Hansen (13 October 2011) Great by Choice: Uncertainty,
chaos and luck – why some thrive despite them all, Random House Business, ISBN-10
1847940889 ISBN-13 978–1847940889
11 Facebook Engineering (8 August 2012) Building and Testing at Facebook, Facebook
Engineering, [Online] https://www.facebook.com/notes/facebook-
engineering/building-and-testing-at-facebook/10151004157328920/ [accessed 24
October 2016]
12 Moz (2016) Google Algorithm Change History, Moz, [Online] https://moz.com/google-
algorithm-change [accessed 24 October 2016]
13 Eugene Kim (5 April 5 2016) Jeff Bezos: ‘We are the best place in the world to fail’,
Business Insider UK, [Online] http://uk.businessinsider.com/amazon-ceo-jeff-bezos-
best-place-in-the-world-to-fail-2016–4 [accessed 24 October 2016]

14 Ray Kurzweil (21 March 2016) We need to forget things to make space to learn new
things, scientists discover, [Online] http://www.kurzweilai.net/we-need-to-forget-
things-to-make-space-to-learn-new-things-scientists-discover [accessed 24 October
2016]
15 Dan Millman (5 May 2010) Way of the Peaceful Warrior: A book that changes lives,
Peaceful Warrior, ePublishing B003LBRISM
16 Carol Dweck (2 February 2012) Mindset: How you can fulfil your potential, Robinson,
ISBN-10 1780332009 ISBN-13 978–1780332000
17 Smith, M K (2001, 2013) Chris Argyris: theories of action, double-loop learning and
organizational learning, infed.org The encyclopedia of informal education, [Online]
http://infed.org/mobi/chris-argyris-theories-of-action-double-loop-learning-and-
organizational-learning/ [accessed 25 October 2016]
18 Douglas Brown (2 October 2012) After Action Review: The most eye-opening business
success tool, Post University Insights, [Online] http://blog.post.edu/2012/10/after-
action-review-most-eye-opening-business-success-tool.html [accessed 25 October
2016]
19 Clapham, J (2014) David Viney, who did some of the original research on the effect of
perceived change, to use his J-Curve in Steve Fullmer’s courseware and related
delivery, [Online] https://johnclapham.wordpress.com/tag/viney/ [accessed 20
October 2016]
20 Dice: A tool for executional certainty, [Online] http://dice.bcg.com/index.html#intro
21 Arnold, J and Yüce, Ö (no date) Black Swan Farming, [Online]
http://blackswanfarming.com/cost-of-delay/ [accessed 19 October 2016]

07
The agile innovation process
In the agile business innovation is not only continuous, its pace is
relentless. As we discussed in Part One, today’s version of Joseph
Schumpeter’s ‘gale of creative destruction’ involves the rapid
disintermediation of industries, the unbundling and rewiring of
competitive advantage, and burgeoning imbalances in talent. The
required response is as broad as it is deep. An agile innovation
process requires businesses to be adept at all three stages of
Schumpeter’s model for technological change: Invention (ideas);
Innovation (‘the development of new ideas into marketable
products and processes’ or in other words commercialization); and
Diffusion (scaling or adoption). These innovation cycles need to be
expedited so that they operate in months, not years, generating a
continuous flow of new experiments and initiatives.
Empowering invention
Ideas from anywhere
Creativity and innovation is often considered to be driven by the
recombination of previously disparate and unconnected ideas and
concepts in new ways. Professor Andrew Hargadon (Professor of
Technology Management, UC Davis Graduate School of
Management) has described what he calls ‘technology brokering’,1
which exploits the social elements within the innovation process
and the connections between people, as a way in which people and
organizations can apply existing ideas and technologies in new
ways by bridging the gaps between existing networks from

disparate and potentially distant divisions and even industries. New
networks can then be created that can support these creative
recombinations.
This concept of empowering new connections combined with a
relentless throughput of new ideas is foundational to the innovation
process in the truly agile business. Most organizations are pretty
bad at harvesting and nurturing great ideas from their employees.
Despite its shortcomings, the practice of brainstorming has become
so entrenched within organizational behaviour that it is often the
unquestioned default protocol for the origination of new ideas and
strategy. Such sessions, alongside the convention of the board or
team strategy day, often compartmentalize creativity, boxing the
formation of ideas and strategy into a small window of time. And
yet, as Diehl and Stroebe wrote in 1991:2
Brainstorming groups produce more ideas than an individual but fewer and poorer
quality ideas than from individuals working separately. In other words, brainstorms
dilute the sum of individual efforts.
One of the original rules for brainstorming, first popularized in the
1950s by Alex Faickney Osborn in the book Applied Imagination,3
focuses on quality through quantity. It works on the assumption
that the more ideas that are generated, the more likely a radical and
effective solution will be found. Yet as Keith Sawyer, a psychologist
at Washington University, has pointed out4 multiple studies
conducted over a number of decades have consistently shown that
brainstorming groups think of far fewer ideas than the same
number of people who work alone and later pool their ideas.
Far better then, to establish a way to continually harvest the best
ideas from your people. The creative process at Pixar is empowered
by a collaborative culture that combines tight team working with an
‘ideas from anywhere’ approach. Ed Catmull, President of Pixar,
talks about how (since the creative process behind their films
involves thousands of ideas) the notion of an idea as a singular
thing is a fundamental flaw and instead what is required is a group

behaving creatively. So at Pixar, teams of talented people with
diverse backgrounds are marshalled around a singular vision.
In outlining his vision for how to build a sustainable creative
organization,5 Catmull gives the example of the head of a major
Hollywood studio who told him that his central problem was not
finding good people, but instead finding good ideas. This, he says, is
a misguided view of creativity that views it as a mysterious solo act
and reduces products to a single idea, exaggerating the importance
of that initial idea in creating something original. In reality, any
kind of complex product development involves continuous
creativity from a large number of diverse people and disciplines
working effectively together to solve many problems.
In his book on the history of innovation (Where Good Ideas Come
From),6 Steven Johnson talks about how ideas, rather than
originating from lone creative geniuses that have a sudden spark of
inspiration, can mature over time, sometimes laying dormant in the
form of ‘partial hunches’ or half-ideas for years. Since it is the
collision of these half-ideas that enables breakthroughs to happen,
increasing connectivity is the great driver of innovation. Creating
physical and virtual spaces where ideas can mingle is an effective
way that companies can capitalize on this.
As an example, Steve Jobs reportedly designed the Pixar building
deliberately to enable different people to run into each other,
believing that the best meetings are accidental ones (so much so
that, as Isaacson wrote about in his biography of Jobs,7 he
positioned the only toilets in the building adjacent to its large
atrium to facilitate people running into each other). Informal,
random interactions between employees are undervalued.
Another of Osborn’s rules for brainstorming focused on the
importance of withholding criticism, in the belief that participants
will feel more free to express unusual ideas. A study from Charlan
Nemeth,8 a psychologist from UC Berkeley, split 265 students into
teams of five and gave them 20 minutes to work on the same

problem – how to reduce traffic congestion in the San Francisco bay
area. Each team was randomly assigned to work to one of three
different conditions: one that specified no further rules at all; one
that worked to standard brainstorming rules and emphasized
limiting criticism; and a debate condition in which teams were
encouraged to criticize and debate each other’s ideas. The results
for which teams did best were not even close. While the groups that
brainstormed slightly outperformed those that were given no
instructions, the people in the debate condition generated almost 25
per cent more ideas. When participants were asked later if they had
had any more ideas that had been triggered by the earlier
conversation, those who had been in this latter group produced an
average of seven additional ideas, compared to an average of two
from participants in the other two groups.
So it seems that the ‘do not criticize’ instruction is highly
counterproductive. Every morning at Pixar begins the same way,
with the animators debating the previous day’s work (‘ruthlessly
shredding each frame’ as Ed Catmull describes it) in sessions
designed to critique, debate and improve. As well as encouraging
the team to fully engage with the work of others, the sessions
distribute responsibility for catching mistakes across the entire
group, a lesson that Ed Catmull learned from the lean
manufacturing process.
Brainstorming is so inherent to traditional business practice that
the research illustrating its deficiencies seems counterintuitive. Yet
truly agile businesses look far beyond traditional approaches to
ideas generation and begin to facilitate more debate, builds and
criticism, and embed creative approaches and ideas from anywhere
in the fabric of how they work every day.
‘Porous enterprise’ and the value of fresh perspectives
To encourage the kind of ‘technology brokering’ that Andrew
Hargadon talks about we need to become far more networked as

organizations. As companies become larger and face ongoing
challenges, they often become very inwardly facing. An increasing
proportion of time is spent on internal priorities, managing
upwards and company politics. In contrast, being a networked
business means generating an outwardly facing perspective, and
encouraging the flow of fresh thinking, challenges and ideas into
and through the business.
Instead of always focusing on in-sector thinking and examples,
fresh perspectives from unrelated and even distant industries can
be uniquely valuable here. A great example of fresh thinking from
another industry comes from the unlikely combination of a
children’s hospital and a Formula One team. In the surgical and
intensive care units of Great Ormond Street Hospital for Children,
doctors knew that improving the 30-minute process to unplug and
untangle (in a crowded space) all the wires and tubes from patients
in order to transfer them from surgery to the ICU could directly
improve patient care. Dr Allan Goldman, the head ICU doctor and
Prof Martin Elliot, heart surgeon, were watching a Formula One
race in the hospital’s staff common room following a 12-hour
emergency transplant operation and noticed how a 20-member
Formula One pit crew worked seamlessly to change the car’s tyres,
fill it with petrol, clear the air intakes and send it away in less than
seven seconds.
So they invited the McLaren and Ferrari racing teams to work
with them to identify how their own handover discipline could be
more efficient. The racing technicians’ recommendations focused
initially on equipment but then broadened out into training and
process and resulted in a restructuring of the patient handover
procedure, new protocols that detailed who should be the leader in
the process (the anaesthetist) and the exact task of everyone
involved, diagrams that showed exactly where everyone needed to
be positioned around the patient, and rehearsals to make the new
processes as seamless as possible. An industrial psychologist
monitored 27 operations following the adoption of the protocol and

found that the number of technical errors and mistakes in
information handover had almost halved.
Encouraging a regular inflow of perspectives however, requires
this kind of thinking at scale. In The Power of Pull,9 the authors John
Hagel, John Seely Brown and Lang Davison coin the phrase ‘porous
enterprise’ to describe how networked organizations with
externally facing, connected employees acting as the conduit for
new perspectives, focus on the value that can be derived from the
flow of knowledge into and within a business, rather than relying
on the stocks of knowledge that already exist within its boundaries
and firewalls.
Increasingly, it is the agile, networked business that is best
positioned to originate disruptive concepts and ideas from a
broader scope of sources, perspectives and recombinations.
The restless, curious organization
We might describe the porous, networked business as a restless,
curious organization – always moving forwards, never being
satisfied with the status quo, constantly exploring and reaching out
for the next big idea. We are too good, as businesses, at
compartmentalizing creativity not just into time segments (like a
brainstorming session), but into creative functions, roles and
innovation labs. We are too poor, as businesses, at harvesting,
assessing, and nurturing concepts from wherever and whomsoever
they might arise.
Rather than poorly executed, demotivating suggestion schemes,
the creative, curious organization creates an engine of ideation
through inclusive, empowering programmes to originate, harvest
and grow new ideas. Like people, creativity is not one-dimensional.
Research by psychologists Guillaume Fürst, Paolo Ghisletta and
Todd Lubart10 has shown that creativity in individuals requires
many different attributes that will often play different roles at
various stages of the process. The research identified three

‘superfactors’ of personality that could predict creativity. These
factors speak to the broader components of a truly effective
ideation engine:
1. Plasticity: traits including extraversion, high energy, being open
to experience and inspiration. Whether at an individual or
organizational level there is a high drive for exploration, good
levels of curiosity, and a willingness to experiment and learn at
a fast pace.
2. Divergence: non-conformity, and what the researchers termed
‘low agreeableness’. As people or businesses this is about
independence of thought, a willingness to try new things, to
pursue a long-term unique vision even when questioned, to be
stubborn.
3. Convergence: qualities such as precision, persistence, critical
sense and conscientiousness. At an organizational level the
discipline to make robust data-driven decisions to validate ideas
and concepts, to focus and align direction and decision-making
on a strong purpose/mission/vision, to shutter projects and
redirect resources towards opportunity when prudent.
The research revealed how creativity is about combining both
generative (coming up with lots of original ideas) and selective
(being able to critique, evaluate, and elaborate on ideas effectively)
skills. Like design thinking, business agility is about imagining lots
of different possibilities but also focusing on those that have the
most potential value. And it is those that are able to combine these
different behaviours and switch between them in flexible ways,
that are best suited to world in which we now find ourselves.
The creative organization framework
We have created a practical tool for understanding how the
creativity of your own organization maps to the key attributes of

agility. Using the canvas below (Table 7.1), workshop the questions
that sit at the intersection of creativity (plasticity, divergence,
convergence) and agility (velocity, focus, flexibility) to identify
areas of strength and weakness.

Velocity Focus Flexibility
Plasticity We are responsive
to new trends and
ideas, and move
quickly to
capitalize on new
opportunity
We are
outwardly
facing, actively
exploring and
looking for
new
opportunity
We are open to
new ideas, and
have a culture
and practice
that rewards
curiosity
Divergence We are not afraid
to adapt quickly in
response to
shifting contexts
Appetite to
consider
different ideas,
routed in
customer
needs
We have a
culture that
embraces
different
thinking
Convergence We can swiftly
realign resources
around
opportunity
We use data to
test and
validate new
and different
opportunities
Our vision is
aligned to and
routed in an
enabling culture
Innovation is wide, as well as deep
Innovation is often considered in quite one-dimensional ways, and
yet it has never been more important to innovate in a multi-
dimensional way. In their book Ten Types of Innovation11 the
authors Larry Keeley, Helen Walters, Ryan Pikkel and Brian Quinn
make the point that while many executives have traditionally
overemphasized the association of innovation with the creation of
new products and services, the practice of integrating multiple
types of innovation enables organizations to develop offerings that

are highly differentiated, less easy to copy, and that generate higher
returns. Having analysed 2000 successful innovations, they list 10
distinct kinds, grouped into three key areas:
1. Configuration
a Profit Model: How you make money. Challenging sector
conventions on offering, pricing or revenue generation.
b Network: How you connect with others to create value.
Network innovations enable companies to capitalize on their
own strengths while harnessing the advantage that might be
derived from the capabilities and assets of others.
c Structure: The organization and alignment of talent, resource
and assets. Structure innovations can create unique value or
efficiencies. They can improve productivity and collaboration,
help attract talent to the company and drive performance.
d Process: Developing and implementing unique or superior
methods. Process innovations involve a significant level of
change from ‘business as usual’ that can drive greater
capability, adaptability or efficiency. The development of
unique processes can prove difficult for competitors to access
and can yield advantage for extended periods of time.
2. Offering
a Product Performance: the development of distinguishing
features and functionality. This might speak to completely
new products, or significantly improved features, qualities to
existing ones.
b Product System: the creation of complementary products and
services. This is concerned with how separate products or
services might be brought together to create new capability or
improved scalability. So things like integration, modularity
and interoperability are what matter. The development of
ecosystems that take value from one place and use it to
enhance experience at another is one example.

3. Experience
a Service: supporting and amplifying the value of your
offerings. Enhancing performance, utility and loyalty through
improved design or service provision, fixing customer pain
points and helping to ensure seamless customer journeys.
This can elevate the average into the exceptional, and create a
compelling experience.
b Channel: the way in which your offerings is brought to
customers. Channel innovations are focused on finding new
or multiple ways to bring products and services to users,
creating an extraordinary experience with minimal friction.
c Brand: the representation of your offerings and business.
Innovations in the way that consumers might recognize,
recall or associate your brand, the distinct identity and
‘promise’ of your offering. Often incorporating multiple
customer touchpoints, these can confer value, meaning and
intent to the offering.
d Customer Engagement: fostering compelling interactions. The
development of more meaningful customer connections
derived from deep understanding of customer aspirations,
needs and desires. Helping people to ‘find ways to make parts
of their lives more memorable, fulfilling, delightful – even
magical’.
Taking a broader context around innovation opens the
organizational mind toward enabling change that impact not only
the outputs (products and services) but also the infrastructure
(networks), relationships (partnerships, communications), process,
structure and resourcing. Too narrow a consideration of innovation
restricts fundamental change and means that transformation will
fail.
Defining the problem to solve

Design thinking, agile and lean are all customer-centric
methodologies that focus on rigorously defining and responding to
customer need. Lean practices, for example, involve removing as
many assumptions from a process as possible, and that includes the
question of whether you are actually solving the right problem in
the first place.
A useful framework here is the ‘5 Whys’, a simple yet very
effective way of getting to the root cause of a problem by iteratively
asking ‘why’ five times, each question forming the basis of the next
question. It was originally used by Toyota as a technique for
problem solving in their manufacturing process, and was one of the
fundamental techniques in their scientific approach. Architect of
the Toyota Production System, Taiichi Ohno, describes an example
of applying it to a robot stopping:
1. Why did the robot stop? The circuit has overloaded, causing a
fuse to blow.
2. Why is the circuit overloaded? There was insufficient
lubrication on the bearings, so they locked up.
3. Why was there insufficient lubrication on the bearings? The oil
pump on the robot is not circulating sufficient oil.
4. Why is the pump not circulating sufficient oil? The pump intake
is clogged with metal shavings.
5. Why is the intake clogged with metal shavings? Because there is
no filter on the pump.12
Similarly, using the 5 Whys in relation to customer problems or
organizational challenges helps remove assumptions and focus on
the real root cause or issue.
Clay Christensen’s ‘jobs to be done’13 concept is another useful
way to frame customer needs. ‘Jobs to be done’ theorizes that what
causes us to buy a product or service (or indeed a brand) is that we
‘hire’ them to do a particular job for us. It is a simple idea, but

framing it in this way helps us to understand customer motivations
better. Christensen uses an example of the V8 juice drink that was
once marketed to compete with (and in a similar way to) other soft
drinks like Gatorade, using brand attributes like how refreshing it
was. The realization that V8 was being bought instead to fulfil a
different job led to a campaign that focused instead on how the
drink provided the required daily servings of vegetables. Within a
year of this decision, V8 had quadrupled its revenues.
Paul Adams, VP of Product at customer communication platform
Intercom (and ex-Facebook and Google) describes how they apply
Christensen’s framework in the service of product design:
We frame every design problem in a Job, focusing on the triggering event or situation,
the motivation and goal, and the intended outcome:
When _____, I want to _____, so I can _____.
For example: When an important new customer signs up, I want to be notified, so I can
start a conversation with them.14
These kinds of user stories, simple statements about what a
customer wants to do that are framed from their perspective, help
ground product development but also connect wider organizational
thinking towards the needs of the customer.
First principles and 10x thinking
Another way to really focus on breakthrough ideas is through the
application of what Elon Musk (CEO of Tesla Motors and SpaceX and
surely one of the most deeply innovative entrepreneurs today)
describes15 as ‘first principles’ thinking. In Physics or Mathematics,
a first principle16 is ‘a basic, foundational proposition or
assumption that cannot be deduced from any other proposition or
assumption’.
Musk draws a distinction between the common use of analogy in
business (ideas that are similar to something that already exists)

and first principles thinking (where ‘you boil things down to the
most fundamental truths … and then reason up from there’):17
I think it’s important to reason from first principles rather than by analogy. The normal
way we conduct our lives is we reason by analogy. We are doing this because it’s like
something else that was done, or it is like what other people are doing. Slight iterations
on a theme.
While reasoning from analogy can help position new ideas, and
potentially give some comfort that at least some of the elements of
the innovation are founded in existing behaviour or what has
worked in the past, it still means that the starting point incorporates
existing assumptions. Solving problems in entirely new or
disruptive ways requires a lot more mental energy but also starts
with the elemental components of a problem and so is far more
likely to result in an entirely unique solution to a problem.
Too often in large organizations, the start point incorporates
assumptions that have built up over time, become embedded in
culture or practice yet have never truly been tested, or that have
become outmoded but never challenged. It is difficult to break out
of these assumed constraints when the prevailing weight of
opinion, relationship capital and organizational habits within a
company all act to support them.
In The Game Changer,18 long-time P&G CEO A G Lafley talks about
how business schools tend to focus on inductive thinking (based on
directly observable facts) and deductive thinking (logic and
analysis, typically based on past evidence) whereas design schools
emphasize abductive thinking – imagining what could be possible.
There is a good chance that as companies grow the balance between
these three dynamics becomes skewed and we need to work harder
to create more space for abductive thinking.
Google embed what they call ‘10x’ thinking into their innovation
process as a way to avoid overly focusing on incremental and
marginal innovation. At a key stage in the idea generation process
the team focus on answering the question: ‘What’s the 10x version

of this idea?’ This forces the team to re-evaluate their thinking on a
wholly different scale to identify if there is an opportunity for a
truly disruptive solution to be created.
Starting from a problem’s most basic elements, and challenging
ourselves in order to re-examine what might be possible can yield
very different results.
Ingrained commercialization
Structuring for innovation
The test of a first rate intelligence is to hold two opposed ideas in mind at the same time
and still retain the ability to function.
F Scott Fitzgerald
Gary Kasporov, the famous chess grandmaster, once talked about
how chess, like business, is a balance between the mundane and the
unthinkable, and how what separates a winner from a loser at the
grandmaster level is the willingness to do the unthinkable, to have
the courage to explode the game and upend your opponent’s
thinking:
A brilliant strategy is, certainly, a matter of intelligence, but intelligence without
audaciousness is not enough … So it is in business: One does not succeed by sticking to
convention. When your opponent can easily anticipate every move you make, your
strategy deteriorates and becomes commoditized.
(Kasporov, 2004)19
What Kasporov alludes to is a key business challenge: balancing the
need to deliver and continually improve on day-to-day execution as
well as originate, nurture and grow potentially disruptive and
market leading innovations. When the business is oriented to and
focused on delivering steady, logical, incremental improvement or
development within the market, it can be extremely difficult to
have the resource bandwidth, or make room for the challenging
thinking necessary to disrupt the market and get that big leap over

competition.
Key to this is creating the space for breakthrough innovation.
Since the Lockheed Skunk Works came into existence in the 1940s
the idea of the corporate innovation lab has become a dominant
way for organizations to structure innovation. The risks inherent
with compartmentalizing innovation in this way typically lie
around a lack of inclusivity and broader organizational learning.
But autonomy and separation can catalyse innovation and new
ways of working, facilitate genuinely different thinking, and (if
resourced properly) prevent early stage ideas from becoming
submerged under the weight of slow-moving corporate culture.
The benefits can be multi-dimensional. Research by Cap Gemini
among large-scale corporates revealed six key goals for innovation
outposts: accelerating the speed of innovation, providing a conduit
for fresh ideas, enhancing risk-taking ability, attracting talent,
driving employee engagement, and helping to foster a culture of
innovation.20 Silicon Valley entrepreneurs Steve Blank and
Evangelos Simoudis describe a typical three-stage development of
innovation centres, each needing a clearly defined set of objectives
and the right team to match them. The first stage involves
networking and partnering, to actively ‘sense’ innovation and keep
pace with technology development. For example, Silicon Valley
outposts established by car manufacturers such as BMW and
Mercedes to track and engage with self-driving car and other
technologies. The second stage moves into inventing, investing,
incubating, and acquiring technologies and companies (requiring
venture capital or mergers and acquistions capability) in focused,
relevant areas. The third stage involves building products, or
‘productizing the solution to corporate problems’.
As an example, Walmart Labs (‘We’re not a retailer competing in
Silicon Valley. We’re building an internet technology company
inside the world’s largest retailer’), was created when Walmart
acquired Silicon Valley technology business Kosmix. Instead of
swallowing the early stage business into the corporate machine

they created Walmart Labs,21 with a mission to redefine e-
commerce globally, and in doing so drive the wider organizational
capability in digital and mobile commerce. As well as developing a
series of new platforms and applications for the mother brand (it is
claimed that the internal search engine they developed drove a 20
per cent increase in online sales conversions), Walmart Labs has
now acquired over 14 startups.
Other corporates choose to create ‘catalyst brands’ that are given
the freedom to work in different ways to create progressive
impetus. In 2013 British Gas launched the Hive Active Heating
brand with a mission to make the connected home a reality for
everyone. The team use lean startup methodology to keep product
development close to customer need, software is built though agile
methods so that small bite-sized chunks can be delivered iteratively.
In two years their first product, a connected thermostat became the
number one such product in the UK with over 200,000 connected
home customers.22
The Unilever Foundry is a good example of an incubator
established by a corporate with a vision for innovators to connect
with its brands. Housed in a separate building, the objective is to
build and cultivate strategic partners for the future, with Unilever
as a partner of choice. As well as office space, Unilever offer
mentoring to develop brand and marketing propositions and
roadmaps, they run regular hack events focus on Unilever specific
briefs, and operate a crowdsourcing platform focused on the
company’s sustainability challenges. Regular involvement of
Unilever staffers in initiatives helps ensure that fresh thinking
disseminates more broadly across the company.
The Unilever Foundry, Hive and Walmart Labs are three different
examples of how large organizations are creating the space to
originate and nurture competing business models in the business at
the same time. The real benefit comes when innovation labs are
resourced in such a way to make them sufficiently autonomous to
have the freedom to develop potentially disruptive concepts and

work in new ways, yet integrated enough that it can more
inclusively act to champion that new way of working and help
disseminate different thinking more widely in the business. They
are effective at hothousing new approaches and new ways of
working, but it is only when these broaden out more widely than
the innovation lab, that real, fundamental change can happen.
The entrepreneurial function
Companies are generally not short on ideas. A greater challenge lies
in the harvesting, selection, nurturing and then scaling of these new
concepts. A focused innovation lab can be a powerful conduit to
introduce new ways of working to an organization and originate
step-change ideas. Running working processes in that unit that are
based around design thinking, agile and lean can not only improve
innovation tempo but also enable the progressive understanding of
value.
As ideas are iterated on following an overarching strategic vision
but using customer feedback to inform the development priorities,
value becomes emergent and organizational risk is mitigated.
Companies have the opportunity to explore, test and learn rapidly
to validate, and establish early stage products that are already being
used by real customers. Instead of untested products emerging from
the innovation lab and landing in the wider business, which is then
expected to commercialize and scale them, this enables the
opportunity for products to become established at an earlier stage
with an early adopter audience. Even products that will eventually
scale to millions of users should begin with a small market.
Facebook, for example, began as a service limited to Harvard
students before being opened up to other colleges in the Boston
area, Ivy League institutions, and then most universities in Canada
and the United States. This requires a change in corporate mindset.
As PayPal founder Peter Thiel wrote in his book Zero to One:23
This is why successful network businesses rarely get started by MBA types: the initial

markets are so small that they often don’t even appear to be business opportunities at
all.
Yet still the move of an early stage product from the innovation lab
into the wider business presents a key challenge. A concept might
have been rigorously tested and developed in the lab but then it is
given to a manager who is not necessarily as invested in it as those
who have been on the journey from the beginning and sees it as
additive to their already challenging commitments. Worse, the early
stage product is shackled with short-term targets and forecasts, and
dropped into business as usual where it becomes victim to
organizational silos and the drag-brake of bureaucracy. Eric Ries
describes this as akin to moving from science to astrology, and
suggests that there is a missing function of entrepreneurship in
many companies – staff who are responsible for taking ideas out of
the lab and have the ability, incentives, time and space to
commercialize them, who can manage the process from concept to
execution using a disciplined, systematic way of testing new ideas
and developments.
The shackling of early stage products with forecasts and targets
can contaminate development priorities (you build the feature that
you think will make you money rather than the feature that the
customer really wants) and eventually strangle the project as it
struggles to hit forecasts that often have little foundation in reality.
Critical to this stage in a product lifecycle, therefore, is the ability to
show progression of value towards the ultimate desired outcome –
revenue and profit. Eric Ries’s concept of innovation accounting
that we discussed earlier is one way of framing this. Another useful
framework comes from Silicon Valley entrepreneur and angel
investor Dave McClure.
Pirate Metrics
Steve Blank has described how a startup is effectively ‘an
organization built to search for a repeatable and scalable business

model.24 An early stage product, therefore, might be considered to
be a product searching for a market. Tools such as the Value
Proposition Canvas,25 and Lean Canvas26 are excellent frameworks
for establishing product-market fit in early stage products. Yet while
revenue is the desired ultimate outcome, the most important
objective in the early stages of a product lifecycle is to acquire
learning, and so solely using revenue as a measure of success can
be distracting and less than helpful.
Dave McClure’s Pirate Metrics27 defines a set of macro metrics
that can be used to model the customer lifecycle. While revenue
may be one of them, it is not the only one. Pirate Metrics is a
sequential 5 metric-model (A-A-R-R-R) designed to represent all of
the key behaviours of customers – how many users you are
acquiring, how many of them are active users, whether they come
back and use it again, whether they tell others about it, and how
much money you are able to derive from them. To paraphrase:
Acquisition: What are the ways in which your users become
aware of you? What is the rate of customer acquisition?
Activation: How many acquired users actually use/subscribe?
What is the activation rate?
Retention: How many activated users come back and use the
product/service again? What is the retention rate?
Revenue: How much money do you make from user activity?
Referral: How many users refer other users, or advocate your
product/service? What is the referral rate?
These help to define and measure customer value before you
actually start capturing some of that value back. In other words
they are leading indicators to revenue before actual revenues are
realized. And in this sense they can also be used to hold
entrepreneurs, and the leaders of innovation projects, accountable.
It is a simple model, yet shows the need for flexibility right across

an organization if innovation is to succeed.
Scaling, the digital-native way
Large businesses are very comfortable with scale and yet
paradoxically some of the best lessons we can learn about scale can
come from when we don’t have it. For example, the restraint
needed to start small, and then get bigger can force us to make
difficult prioritization choices and be ruthless about finding the
right customer problem to solve. The process of solving a key
problem for (and ultimately dominating) a niche market can create
indispensable learning that can itself be scaled. The pivot can
enable us to make transformational decisions about product
features that then catalyse user adoption. Instagram, for example,
began life as a multi-featured check-in app called Burbn but when
that became too similar to other offerings in the market the
founders pivoted to focus purely on mobile photo sharing (founder
Kevin Systrom said of the pivot: ‘We decided that if we were going
to build a company, we wanted to focus on being really good at one
thing’).28
Brian Chesky, founder and CEO of AirBnB tells the story of how
Paul Graham (founder of startup incubator Y Combinator) gave
them a piece of advice that changed their trajectory – how one of
the keys to get to scale is to do things that don’t scale, or in other
words how it is better to have a hundred people who love what you
do, rather than one million who simply like what you do.29
Then, as a product or service grows beyond its initial customers
and offering, the challenge becomes focused on iterating or pivoting
the product offering while still following the ambitious long-term
vision. Amazon may have always had a vision to dominate digital
retail, but Jeff Bezos very deliberately started with books. So, as
Peter Thiel says in Zero To One:
Sequencing markets correctly is underrated, and it takes discipline to expand gradually.

The most successful companies make the core progression – to first dominate a specific
niche and then scale to adjacent markets – a part of their founding narrative.
If one of the key questions is when to scale the answer has to be
only when it is right to scale. When your key measures tell you that
you are solving real customer problems and your users really care
about your product. Then you scale as fast as possible.
Using network effects
Similar to what we now know as network effects, Metcalfe’s Law
originated in 1980s as a way to express the concept that a network
enabled by communications technologies becomes exponentially
more valuable as more devices are connected to it. In the 1990s this
was expressed as the value of a network being proportional to the
square of the number of users connected to that system. A simple
example of Metcalfe’s Law might be the telephone. If just two
telephones existed, that would be of minor use. But as more
telephones are added to the network the number of people who can
talk to each other using that technology increases, meaning that the
value of every telephone increases as the number of connections
rise.
Similarly in the internet era, network effects describes the simple
but potentially very powerful idea that the more nodes, users or
connected points that there are in a network, the more powerful
that network becomes. So, like the telephone, the greater the
number of users that are using a social network, the more valuable
that network becomes to every user. Products that scale using
network effects get better and better the more people use it,
creating a virtuous circle of growth. Marketing is effectively baked
into the product.
The power of open ecosystems, growth hacking and
APIs

Restraints are often the drivers of creativity. Being open is often the
route to scale. David Weinberger, one of the co-authors of The
Cluetrain Manifesto, once described the web as ‘small pieces, loosely
joined’.
APIs are sets of functions, protocols, procedures and tools that
enable developers to access the features or data of another service
or application. Thousands of APIs exist, connecting thousands of
different services and providing an enormously powerful range of
easily accessible data sources and building blocks for digital
services. There are two ways in which APIs can enable and
accelerate growth. Utilizing third-party data via an API can give you
access to rich sources of intelligence and data on which can be built
services of all kinds. Secondly, if data is a raw material of digital
innovation, creating your own API and opening up key parts of
your data to third parties can dramatically increase the resource
allocated to creating new concepts and services from that raw
material. APIs can facilitate not only scale but also new connections
between services and companies, creating a networked ecosystem
in which value flows as fast as the data.
Open systems and platform business models can create enormous
value for both hosts and participants through empowering co-
creation or facilitating an exchange of value of some kind. Reducing
transaction costs and empowering new forms of collaboration
enables businesses to scale in entirely new ways. Apple and Google
have created billions of dollars of value for both developers and
their own businesses through opening up their respective app
stores in the same way as the integration of APIs at launch into
countless services has catalysed growth, enhanced value
propositions and reinforced innovation.
Yet APIs, open-source, peer-to-peer models, and hacking growth
require a different kind of thinking. In the early days of AirBnB, the
founders were struggling to create critical mass on both sides of the
platform – listings and renters. A traditional approach by a larger
business would focus on marketing and advertising, yet the AirBnB

founders were severely limited in funding. So they automated a
process that when people listed their property on the site it also
proposed that they publish it with only one click on Craigslist.com
linking back to the original listing. This hack enabled them to
leverage the enormous scale that Craigslist had in order to drive
their own growth.30
Growth hacking describes the process for acquiring and retaining
users that combines traditional marketing and analytical skills with
those more akin to product development (including test and learn,
optimizing successes, discarding dead ends). Its purpose is to drive
user growth, particularly in the context of establishing critical user
mass and enabling a service to then capitalize on network effects. In
their early days Twitter, Facebook, LinkedIn and Quora all
employed people to hack their growth.
The concept of growth hacking crosses the divide between
marketing and product development teams, utilizing an
understanding about how your users discover and adopt your
products to build features that will help acquire and retain more
users, so making the spending of marketing budget a lot more
joined up with the building of product features and vice versa. So it
mixes engineering with marketing, combining product
management, data science and traditional marketing skills. It is less
focused on buying attention in order to drive awareness and
interest and more on creating rich and appealing experiences for
users. So it is about getting to points of sustainable growth,
understanding what the data is telling you about the core patterns
from your more active and passionate users, how they became
more active, and then building sustainable features and
experiences that can help continuously attract new users, and
encourage them to be active as quickly as possible.
Well-known growth hacker Josh Elman gives some good examples
of how growth hacking can add real value to scaling. Attempting to
artificially generate growth, he says, may create spiky numbers but
rarely adds long-term value (‘It’s kind of like eating empty

calories’).31 He gives the example of when he worked with Twitter
in the early days and how their core challenge was not acquiring
users, but getting people who had just signed up to the service to
come back and use it regularly. A typical marketing response to this
problem would be CRM-based, or re-targeting users with display
advertising. Yet when they looked at the analytics around user
behaviour they realized that if as a new user you manually selected
and followed at least five accounts on the service when you signed
up, you were far more likely to return. Rebuilding the on-boarding
process and early user experience on Twitter led to a dramatic
improvement in retention.
Fluid resourcing
APIs and platform business models are examples of how
organizations can move quickly to generate scale and respond to
shifting scenarios. In the networked world data and value flow
easily between entities in the ecosystem but as we discussed in Part
One, businesses that operate in the networked era also require a
high degree of fluidity in resourcing.
As Rita Gunther McGrath asserts (in The End of Competitive
Advantage), if sustainable competitive advantage is shifting to a
series of transient advantages then you need to organize your
company in a very different way. Towards a strategy of continuous
reconfiguration, and orienting the company around being
responsive to opportunity rather than simply focusing on efficiency
and optimization. McGrath gives the example in her book of
Infosys, who reorganize the company every two or three years in
order to avoid systemic resistance to changing the way of working.
Rather than extreme downsizing or restructuring, increased
fluidity in resourcing brings greater manoeuvrability. While
innovation labs can be a great way to hothouse early stage ideas
and introduce and catalyse new ways of working, the ultimate goal
is to reorient the wider organization around continuous learning,

increased velocity, flexibility and structural adaptivity.
In educational theory active learning is a well-known method of
schooling in which participants learn through active involvement,
experience or doing. In machine learning this is extended to
become a type of iterative supervised learning in which a learning
algorithm might interact with or query a user or data source in
order to obtain improved outputs. But the clue is in the moniker –
the key word is ‘active’. Organizations may well have digital
training programmes that go beyond specialist digital expertise to
impact the wider organization. They may even have reverse
mentoring or accreditation schemes. But if we are to put any
credence in the well-established 70/20/10 model for learning and
development32 which posits that 70 per cent of development is
derived from on-the job experiences (actually working on tasks and
problems), 20 per cent from interaction and feedback, and 10 per
cent from formal training and reading, then by far the greatest
individual (and surely therefore organizational) learning comes
from active learning: direct hands-on experience and proximity to
new ways of working. Key to developing learning and
transformation at scale, therefore, is how we extend these new
ways of working beyond the innovation lab. How employees from
the wider organization might interact with, cycle through, or work
alongside the lab and how the new thinking and methodologies
might then disseminate wider, and scale beyond the innovation
unit.
In Part Four we will consider this broader context of agile
resourcing, and some challenging but practical ways in which
organizations can structure for manoeuvrability.
Key takeouts
This Part has been focused on bringing to the organization a new
level manoeuvrability and responsiveness, a new tempo of

innovation, and a new way of working to empower continuous
adaptive learning in response to our complex adaptive
environment. Some key takeouts include:
1. Have a view on the maturity of your business model. As an
exercise, gather the senior team together and get an agreed view
on where you believe your organization is on the current ‘S-
curve’?
2. Create the space for experimentation
a Find ways to free up time to dedicate to new thinking,
ideation, nurturing early stage ideas, and embed this in
cultural norms
b Orient resourcing around embedded test and learn. Review
and balance the allocation of resourcing towards core
business (optimization, efficiency), expansion (extending
propositions, related markets), and breakthrough (new
territory, high risk)
c Assess the cultural and corporeal appetite for risk,
experimentation and breakthrough innovation
3. Use digital-native processes such as agile, lean and design
thinking to increase the scope, scale and tempo of exploration
and experimentation
4. Develop a true learning culture in the organization
a Embed reflection time and the practice of retrospectives in
working processes
b Encourage learning from failures as well as successes –
celebrate the learning, not the failure
c Encourage an organizational growth mindset that relishes
challenge as an opportunity to learn – lead by example from
the top, set expectations, ask the right questions
5. Create an agile innovation engine
a Empower invention: take ideation out of organizational silos

and time blocks; maximize the collision of half ideas through
physical and virtual spaces; encourage networked employees
and the flow of knowledge to empower innovation at the
edges; reward exploring behaviours, independence of thought
and willingness to try the new; challenge innovation efforts to
be broad as well as deep; work hard on finding the real
problems to solve then use first principles and 10x thinking to
explode the idea; validate continuously with customers and
data
b Embed rapid commercialization: use innovation labs, catalyst
brands or incubation programmes to hothouse new ways of
working as well as early stage ideas; protect early stage
concepts as they move from labs to business-as-usual through
entrepreneur roles and value driven metrics
c Scale the digital-native way: focus on network effects, open
ecosystems, platform business models, growth hacking and
APIs; encourage active ‘learning-by-doing’ as a way to
disseminate new ways of thinking and working at scale wider
through the organization
Notes
1 Andrew Hargadon (1 July 2003) How Breakthroughs Happen: The surprising truth
about how companies innovate, Harvard Business School Press, ISBN-10 1578519047
ISBN-13 978–1578519040
2 Michael Diehl and Wolfgang Stroebe (September 1991) Productivity Loss in Idea-
generating Groups: Tracking down the blocking effect, American Psychological
Association [accessed 25 October 2016]
3 Alex F Osborn (1 June 1979) Applied Imagination, Scribner, ISBN-10 23895209 ISBN-13
978–0023895203
4 Jonah Lehrer (19 April 2012) Brainstorming: An idea past its prime, The Washington
Post, [Online] http://www.washingtonpost.com/opinions/brainstorming-an-idea-past-
its-prime/2012/04/19/gIQAhKT5TT_story.html [accessed 25 October 2016]
5 Ed Catmull (September 2008) How Pixar Fosters Collective Creativity, Harvard
Business Review, [Online] http://hbr.org/2008/09/how-pixar-fosters-collective-

creativity/ar/1 [accessed 25 October 2016]
6 Steven Johnson (29 September 2011) Where Good Ideas Come From: The seven
patterns of innovation, Penguin, ISBN-10 141033401 ISBN-13 978–0141033402
7 Walter Isaacson (5 February 2015) Steve Jobs: The exclusive biography, Abacus, ISBN-
10 034914043X ISBN-13 978–0349140438
8 Charlan Jeanne Nemeth, Marie Personnaz, Bernard Personnaz and Jack A Goncalo
(April 2003) The Liberating Role of Conflict in Group Creativity: A cross cultural
study, Institute for Research on Labor and Employment, [Online]
http://www.irle.berkeley.edu/workingpapers/90–03.pdf [accessed 25 October 2016]
9 John Hagel III, John Brown and Lang Davison (4 December 2012) The Power of Pull:
How small moves, smartly made, can set big things in motion, Basic Civitas Books,
ASIN B00XWQNRWW
10 Guillaume Fürst, Paolo Ghisletta, Todd Lubart (2 August 2014) Toward an Integrative
Model of Creativity and Personality: Theoretical suggestions and preliminary
empirical testing, Wiley Online Library, [Online]
http://onlinelibrary.wiley.com/doi/10.1002/jocb.71/abstract;jsessionid=60ACE13ABA81805AD1D0278AF
11 Larry Keeley, Helen Walters, Ryan Pikkel and Brian Quinn (19 April 2013) Ten Types
of Innovation: The discipline of building breakthroughs, John Wiley & Sons, ISBN-10
1118504240 ISBN-13 978–1118504246
12 Taiichi Ohno (March 2006) Ask Why Five Times About Every Matter, Toyota Global,
[Online] http://www.toyota-
global.com/company/toyota_traditions/quality/mar_apr_2006.html [accessed 25
October 2016]
13 Clay Christensen (2016) Jobs to be Done, Clay Christensen Institute, [Online]
http://www.christenseninstitute.org/key-concepts/jobs-to-be-done/ [accessed 25
October 2016]
14 Paul Adams (2015) The Dribbblisation of Design, Inside Intercomm, [Online]
https://blog.intercom.io/the-dribbblisation-of-design/ [accessed 25 October 2016]
15 Kevin Rose (7 September 2012) Foundation 20 // Elon Musk, [Online]
https://www.youtube.com/watch?v=L-s_3b5fRd8 [accessed 25 October 2016]
16 Various (2016) First Principle, Wikipedia.org, [Online]
https://en.wikipedia.org/wiki/First_principle [accessed 25 October 2016]
17 Eric Ravenscraft (2013) Use Elon Musk’s ‘First Principles’ Method for Better
Brainstorming, LifeHacker.com, [Online] http://lifehacker.com/use-elon-musks-first-
principles-method-for-better-br-1476303603 [accessed 25 October 2016]
18 A G Lafley and Ram Charan (3 September 2010) The Game Changer: How every leader
can drive everyday innovation, Profile Books, ASIN B0041G68R8

19 Gary Kasporov (January 2004) The Unthinkable … and the Mundane, FastCompany,
[Online] https://www.fastcompany.com/50914/unthinkableand-mundane [accessed
25 October 2016]
20 Capgemini Consulting (23 July 2015) The Innovation Game: Why and how businesses
are investing in innovation centers, Capgemini Consulting, [Online]
https://www.capgemini-consulting.com/the-innovation-game [accessed 25 October
2016]
21 Nidhi Subbaraman (30 January 2012) Walmart Labs Brings the ‘Two-Pizza Team’
Startup Culture to Walmart Empire, FastCompany.com, [Online]
https://www.fastcompany.com/1811934/walmartlabs-brings-two-pizza-team-startup-
culture-walmart-empire [accessed 25 October 2016]
22 British Gas (15 July 2015) British Gas Makes the Connected Home a Reality With
Launch of New Products, [Online]
https://www.britishgas.co.uk/media/releases/ReleaseDetailPage.aspx?releaseId=1358
23 Blake Masters, Peter Thiel, 18 Sept. 2014, Zero to One: Notes on start ups, or how to
build the future, Virgin Digital ASIN B00KHX0II4
24 Steve Blank (25 January 2010) What’s A Startup? First Principles, [Online]
http://steveblank.com/2010/01/25/whats-a-startup-first-principles/ [accessed 25
October 2016]
25 Strategyzer A G (2016) The Value Proposition Canvas, strategyzer.com, [Online]
https://strategyzer.com/canvas/value-proposition-canvas?url=canvas/vpc [accessed
25 October 2016]
26 LeanStack (2016) Lean Canvas, LeanStack.com, [Online] https://leanstack.com/lean-
canvas/ [accessed 25 October 2016]
27 Dave McClure (6 September 2007) Master of 500 Hats: Startup Metrics for Pirates:
AARRR!, [Online] http://500hats.typepad.com/500blogs/2007/09/startup-metrics.html
28 Kevin Systrom (12 January 2011) What is the Genesis of Instagram? Quora.com,
[Online] https://www.quora.com/Instagram-company/What-is-the-genesis-of-
Instagram [accessed 25 October 2016]
29 Chris McCann (8 December 2015) 16 lessons on scaling from Eric Schmidt, Reid
Hoffman, Marissa Mayer, Brian Chesky, Diane Greene, Jeff Weiner, and more,
Medium.com, [Online] https://medium.com/cs183c-blitzscaling-class-collection/16-
lessons-on-scaling-from-eric-schmidt-reid-hoffman-marissa-mayer-brian-chesky-
diane-greene-3d6367e63a42#.nxecphpdl [accessed 25 October 2016]
30 Morgan Brown (2014) Airbnb: The Growth Story You Didn’t Know, Growth
Hackers.com, [Online] https://growthhackers.com/growth-studies/airbnb [accessed
25 October 2016]

31 Josh Elman (28 January 2013) What is ‘Growth Hacking’ Really? Medium.com,
[Online] https://medium.com/@joshelman/what-is-growthhacking-really-
f445b04cbd20#.f0w6cgxf4 [accessed 25 October 2016]
32 Michael M Lombardo and Robert W Eichinger, (January 2000) Career Architect
Development Planner 3rd Edition, Lominger Limited, ISBN-10 965571246 ISBN-13
978–0965571241

PART THREE
Focus
This Part deals with the importance of vision, direction, strategy,
and focus in accelerating pace and creating organizational
momentum.
Focus – Progress and momentum towards a distinct direction, clarity of definition, the
centre of activity, to pay attention to, to adapt to the surrounding conditions to be able
to see clearly.
Innovation without Execution is hallucination.
Thomas Edison
DEFINING FOCUS
Every company wants to move faster. To develop and progress at
pace. In Part One we made the case for velocity to be framed in the
context of a new kind of agility, responsiveness and
manoeuvrability. Yet velocity without focus is foolish. As Peter
Drucker said:
There is nothing quite so useless, as doing with great efficiency, something that should
not be done at all.
Focus is a ubiquitous concept in business, but rarely applied well.
Steve Jobs’ biographer Walter Isaacson tells the story of how after
Jobs returned to the business in 1997 he was faced with a confused
but ample lineup of hardware and peripherals. After numerous
product review sessions he had reached the end of his tether and
shouted for them to stop. Grabbing a Magic Marker, he went to the
whiteboard and drew a two-by-two grid, labelling the columns

‘consumer’ and ‘pro’, and the rows ‘desktop’ and ‘portable’. He then
told his team that their focus should be on building four great
products, one for each quadrant, Everything else should be
cancelled.1
One can only imagine the bewilderment of the execs in the meeting,
but in implementing ruthless focus Jobs saved the business. As he
later said to his biographer Walter Isaacson: ‘Deciding what not to
do is as important as deciding what to do’. Thereafter on Apple
senior management retreats he would have the management team
list out their top 10 priorities for the coming year, then he would
stand up and cross-out the bottom seven on the list and declare that
they could only do three.
While we can increase the tempo of innovation and progress
through continuous exploration and experimentation, we need a
strong, focused vision to create a distinct direction, even if we are
then adaptive in our progression towards it.
In this part we reference Amazon a number of times, but for good
reason. Few businesses have been quite so adept at maintaining a
ruthless focus on a long-term vision (‘We seek to be Earth’s most
customer-centric company for four primary customer sets:
consumers, sellers, enterprises, and content creators’) while also
preserving another important context for focus within the agile
business: that of continuous improvement. Author Matthew Syed
(in Bounce)2 analysed the factors that determine exceptional success
among sporting professionals and concluded that while natural
talent and genetic make up do make a difference, the most powerful
characteristic exhibited by outstanding performers in sport (and
also in other areas) was what he called ‘sustained purposeful
practice’.
This kind of purposeful practice involves deliberately focusing in
a sustained way on the problem areas, things that need correcting,
fixing or improving. Science writer Joshua Foer has used the
example of musicians to make the same point:

When most musicians sit down to practice, they play the parts of pieces that they’re good
at. Of course they do: It’s fun to succeed. But expert musicians tend to focus on the parts
that are hard, the parts they haven’t yet mastered.’3
Constant application of deliberate practice, focused specifically on
improving performance, coupled with the growth mindset that we
discussed in Part Two, lead to world-class achievement. Iterative
sprint working with in-built reflection time is the organizational
form of deliberate practice. Constant, repeated focus reflecting on
feedback, defining and solving customer or business problems, or
improving ways of working, forms an iterative loop of purposeful
practice, and creates its own kind of momentum.
Increased pace may be our desired goal, and a sense of urgency
may help to create a reason for change, but it is focus that brings
momentum towards a distinct direction. Put simply:
Velocity × Focus = Momentum
Momentum is what creates a real impetus for change. It is what
creates a highly motivating environment in which to work. And
adaptive momentum is what creates real competitive advantage and
enables you to win.
The wrong side of urgency – Nokia’s story
One of the foundational elements of any change process is, of
course, to create the reason and urgency for change. Without this,
transformation does not even get started. It is the first stage in John
Kotter’s famous eight-step process for leading change4 (which we
will come back to in Part Five).In this Part we will be discussing the
importance of not only organizational pace and manoeuvrability
but also generating momentum through a heightened
organizational cadence, tempo and rhythm. Creating a sense of
urgency helps establish a compelling imperative for change and
continued momentum, and can bring focus through prioritization

in combining what is important with what requires immediate
attention (in much the same way as an importance/urgency
prioritization would help create better to do lists in our own time
management).
Yet it is essential to draw that urgency from the right place. The
story of Nokia’s decline is grand testament. Research and analysis
(based on an internal perspective from interviews with both senior
and mid-level executives and engineers as well as an external one
from experts) conducted by Quy Huy, a professor of strategic
management at INSEAD, and Timo Vuori, assistant professor at
Aalto University in Finland,5 reveals that rather than the
complacency and ignorance to which Nokia’s innovation and
competitive failures are usually attributed, an organizational
culture that at the time was dominated by a climate of fear was
instrumental in the company’s downturn.
The research indicates that, during the time in question,
temperamental leaders created an environment that made it very
hard to pass bad news back up the line. The fear that senior
management had of the external environment and of not reaching
their quarterly targets in a highly performance-driven culture
seemingly impacted the treatment of their subordinates, making
those middle managers fearful of disappointing the top executives.
This ‘froze coordination’ between senior and middle management
to the point where the latter over-promised, remained silent or
even directly lied to the former in order to avoid being told that
they were not ambitious enough to meet the stretched goals set for
them.
The result was a company-wide inertia. Everyone realized that
Nokia needed a better operating system for its phones in order to
respond to the threat posed by Apple. But middle management,
fearful of appearing defeatist and of the reaction of their bosses,
avoided publicly admitting the inferiority of Symbian (their own
operating system), and the culture led to a ‘decoupling of
perceptions’ between the two groups of top and middle managers

about how quickly Nokia could match the iPhone.
This shared fear was exacerbated by a culture of status inside
Nokia that equated resources with power. This made everyone
want to retain status in order to prevent resources being allocated
elsewhere, or to avoid being marginalized by being perceived to be
not ambitious enough or willing enough to take on challenging
projects or targets. Over-promising became a route to securing
more resources, which in turn was perceived as an increase in
status. This was not helped by a lack of senior technical competency
(at Apple, many of the top brass are engineers), which in turn
meant poor assessment of feasibility in relation to goal setting. A
disproportionate amount of focus and resources were therefore
dedicated towards developing new devices to fulfil short-term
market demands at the expense of what was really required – the
development of a new operating system.
The conclusion from the authors is that leaders, and particularly
those required to lead transformation (and which leader doesn’t fall
into that category right now?), need to be able to identify ‘varied
collective emotions’ and develop a collective ‘emotional capability’
in their companies. In other words to be really sensitive to the
emotional fallout and resultant impact of the culture within their
organization:
While modest fear might be healthy for motivation, using it indiscriminately can be like
overusing a drug, which risks generating harmful side effects … Fear can only be a useful
motivator if management can provide workers with the means to address these fears.
A positively focused urgency can create real impetus for change but
a negatively focused one might overemphasize inputs and action at
the expense of outputs. Valuing action over results can lead to
shortcuts, micromanagement, declines in proactivity, a reduction in
signal vs noise, and a danger that we might value short-term gain
over long-term vision.

Notes
1 April 2012, The Real Leadership Lessons of Steve Jobs, Harvard Business Review,
[Online] https://hbr.org/2012/04/thereal-leadership-lessons-of-steve-jobs [accessed 25
October 2016]
2 Matthew Syed (29 April 2010) Bounce: The myth of talent and the power of practice,
Fourth Estate, ASIN B003P2WJ18
3 Jocelyn K Glei (ed) (September 2013) Maximize Your Potential: Grow your expertise,
take bold risks and build an incredible career (The 99U Book Series), Amazon
Publishing, ISBN-10: 1477800891
4 Kotter International, The 8-Step Process for Leading Change, Kotter International,
[Online] http://www.kotterinternational.com/the-8-step-process-for-leading-change/
5 Quy Huy and Timo Vuori (28 January 2016) Who Killed Nokia? Nokia Did, INSEAD
Alumni Magazine: Salamander, [Online] http://alumnimagazine.insead.edu/who-
killed-nokia-nokia-did/ [accessed 25 October 2016]

08
The role of vision and purpose
The organizing idea, purpose and vision
At the most basic level digital transformation requires setting a new
course. A course that everyone can understand, grasp, get excited
about. As we will demonstrate in Part Five, defining an ‘organizing
idea’, an overarching statement or principle which defines the
fundamental orientation for the business, or what drives the
company at its most elemental level can express this new direction
at the simplest and highest level. But beyond this we need to define
the vision and purpose that can truly catalyse organizational
momentum and bring this idea to life. Mapping purpose, mission,
vision and values requires great clarity. Organization design
consultancy NOBL has a useful framework that captures the subtle
but important differences in definition.1 To paraphrase:
Purpose: This is defined as ‘why you choose to exist together,
beyond financial gain’, and will usually start with the phrase: ‘We
believe … ’
Mission: The mission represents ‘an ambitious yet achievable
position in the market or in your customers’ lives that recognizes
your purpose’. It is important therefore that this makes it clear
what business you are in, and can often start with the phrase ‘Be
the most … ’
Vision: A company’s vision moves beyond its purpose in
expressing ‘the difference you’ll create in your customers’ lives or
the larger world when you ultimately realize your purpose’. The
vision should be compelling to those both inside and outside the

company, and might well begin with the phrase: ‘We will … ’
Values: Organizational values are ‘the principles and values that
will accelerate your progress together’. These may be succinct and
easy to remember, but will often be represented with a verb (eg
‘Be committed’).
Measures: Often not included in a purpose statement, measures
can be the ‘things that you can observe that indicate progress,
forward or backward’, and a useful way to bring the purpose,
vision, mission and values to life.
Reading the mission statements of the largest companies in the
world reveals many that are vague platitudes to shareholder value,
customer-centricity, responsibility and competitive advantage.
Substituting the name of the company in the statement
demonstrates that many of them could apply to any number of
large businesses. The most compelling missions are energizing and
ambitious, have a clarity, simplicity and uniqueness, but also sit
alongside clearly expressed goals, beliefs, character and a reason
for being. The most compelling visions provide not only a strong
sense of direction but also a motivating clarion call for the best
talent, the expectation to shape behaviours, and so enables the basis
to move fast. And they need to come from the very top.

Marco Ryan, EVP, Chief Digital Officer, Wartsila Corporation (and digital transformation
veteran): If the CEO is not the sponsor, pack up and go home
I’ve had the privilege to lead two full-scale digital transformations as well as to design or
influence nearly eight others over the last 15 years. All too often CEOs do not want to risk
the disruption that digital transformation can cause, to be on their watch. They need their
time at the helm to be characterized by profitable growth, increased dividends and the
achievement of their Long-term incentive Plan trigger price.
But digital transformation is so fundamental to an organization’s future success, that if it
is not something the CEO sponsors, you should be worried. Worried enough to walk. This is
not to say that CEOs have to do the heavy lifting. That’s what Chief Digital Officers are for.
But they should be confident enough and smart enough to realize they do not have the time
or the skills and hire someone that has.
But after that individual is hired, it cannot be ‘Box ticked. Job done.’ Digital
transformation needs the CEO to ensure his direct reports understand the priorities, act
with one voice, demonstrate leadership to the organization and prioritize some of the talent
and resources to support what is, in effect, a complete remodelling of the business model. It
is in effect a leadership issue. It starts at the very top. With the CEO.
The link between purpose and profit
Renowned management consultant and author Peter Drucker once
famously said:
The purpose of business is to create and keep a customer.
But he also said:
That business purpose and business mission are so rarely given adequate thought is
perhaps the most important cause of business frustration and failure.
The agile business is characterized by a visionary purpose, but one
that is strongly connected to strategy and execution. This is not a
new idea, of course. Over a decade ago Jim Collins and Jerry Porras
demonstrated (in Built to Last,2 which was based on a six-year
Stanford University research project looking at 18 exceptional and
enduring companies) that companies that were guided by a
visionary purpose beyond just making money returned six times

more to shareholders between 1926 and 1990 than their explicitly
profit-driven competitors.
A more recent survey from a team from at Harvard Business
Review Analytics and EY’s Beacon Institute (called The Business
Case for Purpose)3 found that companies that can harness the power
of purpose to drive performance enjoy a significant competitive
advantage.
But there was another interesting finding to the research about
what happens when that purpose is not clear, or the link between
purpose and action not explicit: 90 per cent of respondents in the
HBR/EY study said that their company understood the importance
of purpose yet less than half thought that it ran in a purpose-driven
way. A lack of clarity on organizational purpose, or how it is
expressed (or how that translates into action) can mean that it is
impossible to measure, properly manage, or even to learn and
improve in the journey towards it. And what is the result of having
no clear overriding purpose other than profit?
In a subtle alchemical shift, the metrics fill the vacuum, muscling out any wider purpose
with the imperative of hitting the numbers. This transposition of ends and means is often
disastrous because methods, now geared to meeting the metric, are detached from
customer purpose – so banks sell payment protection insurance to people who do not
need it, or VW managers manipulate emissions readings to meet targets. Look no further
for the reason why companies lose their customer focus.
Clay Christensen characterizes a company’s purpose as comprising
three parts:
1. Likeness (the vision of the company they want to become)
2. Commitment (the focus to get there)
3. Metrics (the measures of success).
It must be deliberately conceived, chosen and pursued but when
that is in place how the company progresses towards that purpose
is likely to be emergent.
Hundreds of thousands of words have been written about the

importance of purpose in business, yet there are specific reasons
why this matters more than ever. A powerful purpose empowers
velocity and focus, since everyone knows the direction in which to
head, and it supports fast decision-making and autonomy. At the
macro level it creates a calling that employees, new talent,
customers and investors can get behind (VC Ben Horowitz describes
how: ‘The story of the company goes beyond quarterly or annual
goals and gets to the hard-core question of why … why is the world
better off as a result of this company’s existence?’).4 At the micro
level it removes unnecessary questions and informs group and
team strategies and tactics.
Organizational purpose shapes company culture, and seeps into
product design and customer experience. A strong purpose enables
change to be framed as a choice or presented as a point of view
(rather than a response to an existential threat) which in turn
empowers the kind of ideas that don’t only originate great products
but also create new categories. A point of view sets the foundation
for change (as the authors of Play Bigger5 describe it, a point of
view: ‘has to shift people’s minds so they reject an old way of
thinking and come to believe in something new. It has to reach
people on an emotional level’). Above all, a strong purpose enables
the whole company to move at speed towards a commonly
understood, long-term, ambitious vision.
Taking the long view
In his famous letter to Amazon shareholders in 19976 (when the
company was only two years old), founder Jeff Bezos outlined his
belief that a fundamental measure of success for Amazon would be
the shareholder value that they could create over the long term, and
how as a result this may mean that they would make decisions
differently from other companies:
We will continue to make investment decisions in light of long-term market leadership

considerations rather than short-term profitability considerations or short-term Wall
Street reactions.
It is a philosophy that in itself proved to have longevity for the
company. In a 2011 interview with Steven Levy in Wired, Bezos said
that when everything you are working on is to a three-year horizon,
then you are inevitably competing against a lot of people. But since
few companies are willing to invest on a longer time horizon, doing
this dramatically reduces the competition:
Just by lengthening the time horizon, you can engage in endeavors that you could never
otherwise pursue. At Amazon we like things to work in five to seven years. We’re willing
to plant seeds, let them grow – and we’re very stubborn. We say we’re stubborn on vision
and flexible on details.
(Bezos, 2011)7
And in his 2013 letter to shareholders8 he said:
I think long-term thinking squares the circle. Proactively delighting customers earns
trust, which earns more business from those customers, even in new business arenas.
Take a long-term view, and the interests of customers and shareholders align.
Consequently, Amazon’s revenues have grown exponentially over
the long term, but consistent investment in forward-thinking
innovation and infrastructure to continually develop the company’s
capability and scope has meant that earnings have been minimal.
While not every company has the luxury of ignoring short-term
shareholder value, the point is that Amazon is buying itself the time
and space to invest in not only continual, data-driven, shorter-term
marginal improvement, but also large-scale invention. For that, as
Bezos has said, you need to be willing to think long term, to start
with the customer and work backwards, and even to be
misunderstood for lengthy periods of time (as they were when they
moved into hardware with the Kindle). For CEOs with quarterly
targets and multiple pressing priorities this is not easy. And yet, it is
more essential than ever to build the new while optimizing the old.
Google CEO Larry Page believes that the main reason behind many
company failures is that they ‘miss the future’:

When I talk to most companies, I do think their leaders are pretty short-term focused …
It’s pretty difficult to solve big problems in four years. I think it’s probably pretty easy to
do it in 20 years. I think our whole system is setup in a way that makes it difficult for
leaders of really big companies.9
Difficult but now critical. The dangers of too much short-termism
are akin to that Clay Christensen idea of planting saplings when you
need shade – it takes time for the saplings to grow big enough.
Prioritizing investment into new sources of revenues only when
you need them is too late.
Businesses that work to a long-term horizon have a huge potential
advantage, meaning that companies need to have a point of view on
the future and their part in it, and that the emphasis of corporate
strategy itself is shifting. Author and consultant (and co-founder of
the Deloitte Centre for the Edge Innovation) John Hagel has
described this shift in emphasis from strategies ‘shaped by terrain’
to strategies ‘shaped by trajectory’. Traditional approaches to
strategy are profoundly shaped by the current landscape. While
there are still dynamic components to the strategy (such as
responses to shifts generated by your own or competitor activities),
the starting point is always your current position and the
environment that surrounds it.
While strategies of position still matter, in an environment of
accelerating change and increasing uncertainty we need, says John,
more than ever to have a point of view on the trajectory of change
and ‘what degrees of freedom we might have in shaping these
outcomes through our actions’. In other words to position in the
context of the future, not the present. That point of view needs to
look from the future towards the present rather than the other way
round.
Working back from the future in this way enables us to think far
more laterally about our near-term direction and the steps that we
need to take now to achieve the future that we envisage. As an
example, Netflix is quite open about its long-term view on the
future of internet TV and what it sees as its future-facing

guideposts, publishing them openly on the web.10 Businesses are
increasingly defined by their futures, not by their pasts. Effective
strategies of trajectory take account of fundamental needs and
things that are stable over time. Back to Jeff Bezos again who
believes that if you want to build a successful, sustainable business,
you don’t only ask yourself what could change in the next 10 years
that could affect your company, but more importantly ask yourself
what won’t change, and then put all your energy and effort into
those things.11
To be an agile business, you need to have a point of view on the
future. To not make oversimplified presumptions about what that
future could look like. Strategies of trajectory are not only about
what is possible but also about what could be possible. In order to
take a view on that we need to be paying close attention to
underlying shifts in consumer behaviour but also core customer
needs that don’t change, and not simply the latest shiny new
technology.
Notes
1 NOBL (2016) How to Define Your Purpose, Vision, Mission, Values, and Key
Measures, NOBL, [Online] http://futureofwork.nobl.io/futureof-work/how-to-define-
your-purpose-vision-mission-values-and-key-measures [accessed 25 October 2016]
2 Jim Collins and Jerry Porras (1 September 2005) Built To Last: Successful habits of
visionary companies, Random House Business, ISBN-10 1844135845 ISBN-13 978–
1844135844
3 EY (2015) The Business Case for Purpose, EY.com, [Online]
http://www.ey.com/Publication/vwLUAssets/ey-the-business-case-for-
purpose/$FILE/ey-the-business-case-for-purpose.pdf [accessed 25 October 2016]
4 Ben Horowitz (4 March 2014) The Hard Thing About Hard Things: Building a business
when there are no easy answers, HarperBusiness, ASIN B00DQ845EA
5 Al Ramadan, Dave Peterson, Christopher Lochhead and Kevin Maney (14 June 2016)
Play Bigger: How rebels and innovators create new categories and dominate markets,
Piatkus, ASIN B010PIF952
6 Jeff Bezos (1999, 1997) Letter to Shareholders, US Securities and Exchange

Commission, [Online]
https://www.sec.gov/Archives/edgar/data/1018724/000119312513151836/d511111dex991.htm
7 Steven Levy (13 November 2011) Jeff Bezos Owns the Web in More Ways Than You
Think, Wired.com, [Online] https://www.wired.com/2011/11/ff_bezos/all/1 [accessed
25 October 2016]
8 Henry Blodget (14 April 2013) Amazon’s Letter To Shareholders Should Inspire Every
Company In America, Business Insider.com, [Online]
http://www.businessinsider.com/amazons-letter-to-shareholders-2013–4?IR=T
9 Vinod Khosla (3 July 2014) Fireside Chat with Google Co-founders, Larry Page and
Sergey Brin, Khosla Ventures.com, [Online] http://www.khoslaventures.com/fireside-
chat-with-google-co-founders-larry-page-and-sergey-brin [accessed 25 October 2016]
10 Netflix (18 April 2016) Netflix’s View: Internet TV is replacing linear TV, Netflix,
[Online] https://ir.netflix.com/long-term-view.cfm [accessed 25 October 2016]
11 Jillian D’Onfro (31 January 2015) Jeff Bezos’ Brilliant Advice for Anyone Running a
Business, Business Insider.com, [Online] http://uk.businessinsider.com/jeff-bezos-
brilliant-advice-for-anyone-running-a-business-2015–1 [accessed 25 October 2016]

09
Agile strategy and planning
The key to good strategy
… is to have one. As Richard Rumelt noted in his excellent book on
strategy (Good Strategy/Bad Strategy):1
The first natural advantage of good strategy arises because other organizations often
don’t have one. And because they don’t expect you to have one either. A good strategy
has coherence, coordinating actions, policies and resources so as to accomplish an
important end.
Many organizations, says Rumelt, substitute strategy for multiple
goals and initiatives that may symbolize progress, but in reality lack
a coherent approach to actually achieving that progress (apart
from, he notes, ‘spend more and try harder’).
In Part One, we described the key challenge as one characterized
by rates of change: Technological change happens exponentially,
but organizational change is logarithmic. The way in which we
might mitigate this potentially widening gap is through deliberate
choices. Yet, as Rotman School of Management Professor Roger
Martin has noted,2 many corporate strategies avoid this:
The very essence of strategy is explicit, purposeful choice. Strategy is saying explicitly,
proactively: ‘We’re going to do these things and not those things for these reasons’.
(Martin, 2015)3
The problem with a lot of strategies, he says, is that they are
actually full of non-choices. For example, simply saying that your
strategy is to be customer-centric is not making an explicit choice
about what to do, and what not to do. The way to know when you
have made a real strategic choice is if you can easily define what

the opposite of that choice is and it doesn’t sound ridiculous. Non-
choice strategies (and for that matter missions) do lend themselves
to confusion, misdirection and apathy, but do not lend themselves
to moving quickly.
If effective strategy is about making choices, then effective
strategy for the agile business is about signal versus noise, and
framing the choices we make through the lens of our three key
contexts that we discussed in Part One:
Consumer: We need to be selective about which shifts in
consumer behaviour we prioritize, and which customer needs
we choose to address first. This means appreciating the
difference between a fad (a temporary spike in focus) and a
trend (a more fundamental underlying shift). Fads may be
focused around technologies, trends around behaviours. Fads
may address customer needs in transient ways, trends speak to
more fundamental, long-term customer needs and behaviours.
Prioritization, and an adept sense of the relative significance of
specific changes is key. A company that is closely in touch with
the customer, that is outwardly facing and willing to experiment
with the new in order to learn, and one that is networked and
able to draw on insight from a wide range of sources, is
optimized to create the most effective strategy in today’s world.
Competitor: We need to make choices about where we play in
the market, to lead rather than obsessively follow and
benchmark, to make more ambitious choices about who we
regard as competition and be more open to who we can learn
from.
Company: We need to understand the potential and application
of new and existing technologies, and how they might be
combined in new ways to create exceptional value. We need to
be adept at knowledge flow, and drawing learning from rapid
experimentation and iterative working in order to inform the
choices we make around strategic direction.

If, as Roger Martin says, developing strategy often becomes ‘an
exercise in agglomerating initiatives, assigning responsibilities
without a coherent set of choices that help bind them’4 (meaning
that most strategic plans are more accurately described as ‘budgets
with prose’), then we need to be clear that this is not fit for purpose
for an uncertain, rapidly moving business environment. Neither is
poor communication of strategy, or poor connection with tactics
and execution, or conflating a varied set of goals or targets with a
coherent strategy. Richard Rumelt said: ‘Goals are not strategy.
Goals are wishes. Strategies are how one goes about achieving
goals’, but he also defines what makes a good strategy:
A strategy is a coherent set of analyses, arguments and actions that respond to a
significant challenge. A good strategy derives from consideration of many plausible
courses of action and selects, in a deliberate, reasoned way, one/some of those courses of
action to the exclusion of others.5
His ‘strategy kernel’ combines diagnosis, the creation of a guiding
policy, and a coherent set of actions or direction. The agile business
combines adept analysis with creative and astute synthesis to be
good at all three.
Emergent and deliberate strategy
In order to achieve true agility we need an organizational strategy
that retains the right combination of that which is fixed and
‘deliberate’, and that which is more flexible, or emergent. Harvard
Business School professor and author Clay Christensen describes
how strategy is ‘not a discrete analytical event’ or something
decided using best-known numbers at the time in a meeting of
senior managers. Instead, it is a ‘continuous, diverse, and unruly
process’ that constantly evolves.6 So the art of managing this is not
to dismiss anything that deviates from the original plan but to
continually identify better options and then manage resources
flexibly to nourish them. Rigid planning processes (particularly in

large organizations, where challenging an original fixed plan can
often be a political, morale-killing exercise) mitigate the flexibility
needed to respond to rapidly changing contexts.
The example Christensen uses to illustrate the advantages of
flexibility is the way in which Honda broke into North America. The
company’s strategy was based entirely around big motorbikes
(since that is what US consumers seemed to favour), bringing them
into competition with manufacturers like Harley. Some Honda
employees started to use a few of the much smaller Supercub
models to do a bit of weekend dirt biking in the hills around LA, a
Sears buyer sees the interest this generates, decides to stock them in
the outdoor equipment department, and a new opportunity for
Honda, an innovative distribution strategy, and a whole new genre
of biking, is born. Honda refocused their strategy on the Supercub
which went on to become the best selling two-wheeler on the
planet, in no small part due to their ability to break into the North
American market.
Business is increasingly populated with examples of companies
that have ‘pivoted’ in this way, and the high uncertainty and
ambiguity that characterizes our modern business environment
lends a heightened importance to this kind of fluidity. Image
hosting and sharing service Flickr emerged from tools that were
created for a web-based multiplayer online game called ‘game
neverending’. Ludicorp, the game’s creators, then shelved the game
and pivoted to concentrate on growing Flickr. Pinterest began life as
a mobile shopping app called Tote that was arguably ahead of its
time but provided the foundations for the service we know today.
Twitter grew as a side project out of a podcast company called
Odeo. Android, the largest operating system in the world, began
with the intention of creating an operating ecosystem for digital
cameras.
It is not just technology businesses that need to pivot. Professor
Amar Bhidé (in The Origin and Evolution of New Business)7 has
shown that 93 per cent of all companies that ultimately become

successful had to abandon their original strategy. Companies that
survive are able retain a high and consistent level of strategic
adaptation and improvisation, even if they occasionally trip up
along the way.
The balance between vision and iteration
Jeff Bezos once said:
We are stubborn on vision. We are flexible on details … If you’re not stubborn, you’ll give
up on experiments too soon. And if you’re not flexible, you’ll pound your head against the
wall and you won’t see a different solution to a problem you’re trying to solve.8
Stubborn on vision. Flexible on details. These words capture the
essence of agile strategy. The balance between a strong, directional
vision that steers, guides and enables, and adaptive, iterative
planning that flexes, adjusts and modifies in response to changing
contexts and new information.
Iteration without direction is chaotic. The vision should be
challenging, clear and compelling, but it needs to give direction to
strategic choices and decision-making throughout the business.
Change does not come from the CEO standing in front of the
company with a PowerPoint presentation. It comes from constant
reinforcement through frequent repetition of the vision and
continuous communication of goals and progress. It comes from the
behaviours and decisions exhibited by senior leaders and those
around us. It comes from what we choose to recognize and reward,
and how we structure our learning. Every meeting, every update,
every communication is a chance to underline, fortify and energize
around that vision.
Yet rigidly pursuing a plan with no room for frequent adaptation
leads to declining performance, missed opportunities and limited
learning. Real change also comes from the continuous iteration that
drives progress towards that vision. It comes from the flexibility
that allows for enough autonomy and plasticity to adapt planning to

continuously learn and improve. Every sprint, every retrospective,
every actionable learning is a chance to advance towards bringing
that vision to life.
In Part Two, we discussed the analogy of how the high
operational tempo of Blitzkrieg was enabled through a command
methodology that empowered frontline commanders to make quick
decisions in the face of rapidly shifting contexts. The underlying
goal, intent or focus of effort (the ‘Schwerpunkt’) enabled clarity of
objective and direction, and combined with a well-understood level
of flexibility for frontline commanders (‘Fingerspitzengefuhl’ or
‘fingertip feel’) to enable rapid responsiveness and progression.
This is a governance structure built for speed and manoeuvrability.
Using a more modern military analogy, the US Army frame this
balance in the terms of a ‘Commander’s intent’ and the ‘concept of
operations’. The former:
… succinctly describes what constitutes success for the operation. It includes the
operation’s purpose, key tasks, and the conditions that define the end state. It links the
mission, concept of operations, and tasks to subordinate units. A clear commander’s
intent facilitates a shared understanding and focuses on the overall conditions that
represent mission accomplishment.9
The Commander’s intent is the central objective or idea that pulls
everything together, the unifying element of the plan, the
Commander’s expression of what they want to make happen. The
concept of the operation is designed to direct the way in which
subordinate units should cooperate to fulfill a mission, and creates
the sequence of actions that the force will actually use to get to that
objective. The Commander’s intent should therefore bridge the gap
between the mission and the concept of operations. This system has
represented a move away from an over-reliance on a rigid, and
therefore increasingly unsuitable methodical planning process
which does not work well in situations characterized by
uncertainty. Again, it is a governance structure designed for agility.
The agile organization therefore, has a good understanding of

what is fixed, and what is flexible, and the critical difference
between a strategy and a plan. This latter distinction is best
expressed by Sir Lawrence Freedman:
Strategy is much more than a plan. A plan supposes a sequence of events that allows one
to move with confidence from one state of affairs to another. Strategy is required when
others might frustrate one’s plans because they have different and possibly opposing
interests and concerns … The inherent unpredictability of human affairs, due to the
chance events as well as the efforts of opponents and the missteps of friends, provides
strategy with its challenge and drama. Strategy is often expected to start with a
description of a desired end state, but in practice there is rarely an orderly movement to
goals set in advance. Instead, the process evolves through a series of states, each one not
quite what was anticipated or hoped for, requiring a reappraisal and modification of the
original strategy, including ultimate objectives. The picture of strategy … is one that is
fluid and flexible, governed by the starting point and not the end point.10
So a strategy should be fluid, and open to creating many potential
routes to success (‘You don’t make strategy so that there’s one path
to victory; you make it so that as many paths as possible lead to
something which isn’t loss,’ said Nick Harkaway in his novel The
Gone-Away World).11 So the pace of change at which each element
evolves and adapts is key:
Mission and purpose: are fixed and do not change.
Vision: is compelling, and largely fixed.
Strategy: characterized by choices, changes and evolves to take
account of shifting contexts and new information, but does so
more infrequently or slowly.
Plans or tactics: are highly fluid, iterative and adaptive to
feedback, learning and new information.
Agility and adaptiveness increases the closer we get to execution,
but the strategy and governance that frames planning, tactics and
delivery is flexible enough to allow responsiveness throughout the
organization. Leaders need to set the expectation, establish the
governance that acknowledges necessary boundaries but removes
barriers to progress, and empower teams with required tools and

resources. And then GET OUT OF THE WAY.
The customer-centric organization
Above all else, align with customers. Win when they win. Win only when they win.
Jeff Bezos
In the agile business, the customer is the guiding beacon for the
organizational mission, vision and strategy, but also the operational
priorities, tactics and execution. Every company believes that they
place the customer at the heart of their business, yet so often the
orientation and prioritization is derived from what is easier and
more efficient for the company, rather than better and more
effective for the customer. Businesses are frequently organized in
ways that make little sense for the customer (ever had a customer
service representative need to transfer you to another department
because they cannot action your query?). In resourcing
prioritization, too much emphasis is placed on business efficiency
over customer satisfaction. Too much customer-facing resource is
focused on dealing with a failure of the organization to do
something or do it well (failure demand), rather than helping to
create more value (value demand). Poor application of automation,
use of scripts or inflexible rules and systems make for bad customer
service (many businesses still bury contact details on their website
or even worse, charge their customers to talk to them).12 Too many
customer experiences are not joined up, resulting in duplication of
effort for the customer and missed opportunity for the company.
We have already discussed how digital-native processes such as
agile and lean are naturally customer-centric, involving the
customer along the development process. Yet real customer-
centricity stretches into every aspect of the business, from process
and strategy to culture, measures and even structure (we will
discuss more about customer-centric structures in Part Four).
Earlier we showed how Amazon takes the long view on

innovation. But they are also an exceptional exemplar for what true
customer-centricity really means (remember that the Amazon
mission is: ‘We seek to be Earth’s most customer-centric company
for four primary customer sets: consumers, sellers, enterprises, and
content creators’). This is brought to life throughout the operating
model, measures and culture. As Jeff Bezos puts it:
We’re not competitor obsessed, we’re customer obsessed. We start with what the
customer needs and we work backwards.
Early in Amazon’s life, Jeff Bezos would famously bring an empty
chair, which represented the customer (or the most important
person in the room) into meetings. Each year thousands of Amazon
managers (including the founder) spend time in the call-centres to
help ensure a culture of not just listening to, but understanding,
customers. Team objectives and metrics are aligned to customer
experience, and data-driven decision-making used to continuously
improve against those measures. Performance at Amazon is tracked
via 500 measurable goals, with almost 80 per cent of them relating
to customer objectives.13 Its highly tuned algorithms create an
unparalleled degree of content personalization across a customer
base of hundreds of millions of users. Customer experience is taken
so seriously that even the tiniest delays in web page loading time
become a significant focus to improve (they believe that a 0.1
second delay in page rendering can result in a 1 per cent drop in
customer activity). The Amazon obsession with efficiency is driven
by the desire to deliver better prices for customers, Bezos waging
war on ‘muda’ (the Japanese word for waste). Everything Amazon
do as a business is oriented towards the customer. The point is that
saying you are something doesn’t make it so. And customers can see
that.
Customer-centricity can be a central driving force for digital
transformation. The UK Government Digital Service (GDS) are a
small team of people sitting at the centre of multiple government
departments but who have brought an unprecedented level of

agility to what would typically be a distinctly un-agile environment.
From the beginning their approach has been characterized by
transparency, user-centricity, and solid service design practice, as
exhibited by their 10 design principles14 which read like a
manifesto for not just exceptional digital design, but a truly digital-
native way of working. To summarize:
1. Start with needs – user needs, of course, not government needs.
2. Do less – only do what you can do and concentrate on the
‘irreducible core’. Make what works shareable and reusable to
minimize duplication of effort. Build platforms that others can
build on, develop APIs, link to the work of others.
3. Design with data – use data to demonstrate real behaviour, to
learn, to reduce assumption, to drive decision-making.
Continuous iteration using data to prototype, test and improve
services. Analytics should be embedded, always on and easy to
understand.
4. Do the hard work to make it simple – work hard to make
complex systems easy for people to use, challenge toxic
assumptions.
5. Iterate. Then iterate again – ‘start small and iterate wildly’.
Test minimum viable products and prototypes with real users.
Make constant improvements using customer feedback. Don’t be
afraid to remove or move on from what doesn’t work: ‘Iteration
reduces risk. It makes big failures unlikely and turns small
failures into lessons’.
6. This is for everyone – services should be accessible, inclusive,
legible.
7. Understand context – design for people, not screens. Consider
the context in which services might be used.
8. Build digital services, not websites – connect the digital world
to the real world, consider all aspects of a service, make no
assumptions about platform.

9. Be consistent, not uniform – consistency in language and
design patterns, but respect shifting circumstances.
10. Make things open: it makes things better – the sharing of
knowledge, code, ideas, failures brings unforeseen benefit.
The traditional approach to service design was government-centric:
start with the government policy, then consider the process needed
to fulfil the policy, and then the systems needed to support that.
User need came far down the list, but this method led to overly
detailed input, ‘digital versions’ of existing practices, poor customer
journeys, lengthy and complex procurement procedures and
inflexible solutions based on traditional thinking.
The new approach turned that on its head: user needs provided
the foundation, services are designed around those needs, the
systems needed to support those services then considered, and then
a check that the service is delivering to government policy. GDS do
the research, they analyse the data, they talk to and observe users to
make sure that they make no assumptions, and are focusing on real
needs (combining claimed behaviour, or traditional forms of
research such as surveys, polls and focus groups, with real
behaviour, assessed through observation or analytics, leads to a
more three-dimensional understanding of customer need). This
fundamental shift in approach not only ensures that service design
is grounded in a solid empathy with, and understanding of, user
need (thereby leading to better services), but catalyses a much
broader philosophical and organizational shift towards orienting
processes, culture and resourcing towards the customer. Executive
Director at GDS Stephen Foreshew-Cain describes this
transformation thus:
The upshot will be services that shape government, not the other way round. Because
we’re putting users first, and because we’re working in an agile way, and because we’re
making data easier to use, government itself will have to change.
(Foreshew-Cain, 2016)15

This ‘organizing idea’, he says, is not about incrementally making
existing things a little better; it is about completely rethinking the
way that they work. Combining service design methodologies with
small, multidisciplinary teams working in short, iterative sprints
can bring a new breadth and depth of customer-centricity to an
organization, which can in turn lead to real transformation.
‘P’ is for Prioritization
One of the key challenges with any digital transformation
programme is the prioritization of limited resources. Good
prioritization can make the difference between a successful
transformation and complete failure and yet there are some
immediate pitfalls that many fall into. Poor technology literacy
among the senior leadership of an organization, for example, can
easily lead to poor decision-making about technology or project
development prioritization. In the age of horizontal innovation and
accelerated, non-incremental change, in-sector competitive activity
can be disproportionately significant in determining organizational
priorities and a time-suck on company resources. While competitive
positioning and strategies are important, so much management
time in organizations is wasted analysing what the competition are
doing. Google founder Larry Page has talked about how he thinks of
his job as getting people not to think about what Google’s
competition are doing because rather than think about the things
that already exist he would rather his staff focused on the things
that have not been thought of yet. It is, he says, hard to find
examples of amazing things that have only happened because of
competition, and if the focus is simply on crushing another
company that does almost the same thing, that does not make for
the most compelling place to work:
That’s why most companies decay slowly over time. They tend to do approximately what
they did before, with a few minor changes. It’s natural for people to want to work on
things that they know aren’t going to fail. But incremental improvement is guaranteed to

be obsolete over time.
(Page, 2013)16
One of the key inputs to prioritization, of course, is customer need.
When the Government Digital Service began the huge task of
redesigning the UK government portal they faced a massive
prioritization challenge that covered 660 services involving 1.3
billion transactions over 16 departments. The team looked not only
at what users wanted from those services, but also prioritized
projects based on usage patterns. The data told them that there was
a real long-tail to service usage with 26 per cent of services (or 4 per
cent of the total services) accounting for 90 per cent of
transactions,17 so they took the top 25 and made those the initial
ones to focus on. This ensured that they could have the biggest
impact in the shortest possible time. Russell Davies, who was
Director of Strategy at the Government Digital Service during the
key period of early transformation, describes how you need to start
with a firework (an impactful win that can get people excited),
followed by some quick fixes (‘you need to make some stuff work
surprisingly well, surprisingly quickly and cheaply’), then move
rapidly out of innovation and fireworks into fixing the basics
(‘transforming the basic reality of the organization’), and focus on
fundamentals such as digital infrastructure (hiring, procurement,
contracts, management), analytics and measurement (including
tracking key indicators), organizational blockers, governance and
reporting (‘an essential element of transformation is likely to be
dissolving the existing corporate silos – that can’t be done from
within one of them’), and of course, culture.

Russell Davies: Prioritization in digital transformation
If you’re really doing digital transformation, you have to do everything first. Everything’s
connected. So you have to do everything.
Some things will happen first, but you have to start as much as you can as soon as you can.
So, for instance, the plan to transform government publishing with GOV.UK was part of a
larger plan to transform government services as a whole. That was prioritized since it was
thought to be relatively quick, cheap and easy to do. It would be very visible and would reach
a lot of people.
Within the GOV.UK project itself there were then many other prioritization decisions
that were informed by a mixture of easiness and impact. And those changed over time.
What you prioritize for the alpha – when you’re learning what to do and trying to
persuade people to let you do it – is different to when you have full control and you’re
grinding through the programme. For the alpha, things that Ministers would immediately
care about were prioritized. Once their backing was secured, then came the stuff that would
really matter. On the whole we optimized for momentum – it was known that eventually the
machine would wake up and try to slow things down, so we tried to change as much as we
could as quickly as possible, so it would be harder to unpick.
And then, inside the project itself there were a ton of decisions: What services do we start
with? Which departments should go first? It’s fractal – priorities within priorities. Eventually
you solve that by trusting the team doing it. You describe some outcomes, emphasize some
things over others (MOMENTUM!) and let them work out their own delivery priorities.
Setting specific priorities at every level is counterproductive, it becomes a version of
waterfall or (dread phrase) a Target Operating Model.
And, of course, zooming out again, if you’re doing proper transformation you can’t set
these priorities in isolation. In order to transform publishing you need digital specialists,
which means you need to hire different people, which means you need to change the HR
practices, which means you need to change hiring guidelines and recruit different HR people
and rewrite all the ads and find a way round the salary restrictions. And you have to give
people the right tools which means you have to persuade IT to allow people internet access
and to change accounting practices so people can use a government purchasing card to sign
up to Heroku ($99, 30 seconds) rather than use the single source hosting contract ($
millions, months). That’s all at the apparently trivial level, but it actually makes a huge
difference. And at a more apparently ‘transformational’ level you probably have to fire,
disempower, or sidestep the existing IT organization and their suppliers. Which may well
mean changing the composition of the board. You’ll probably have to change the way
procurement works and re-educate them about what a good IT contract looks like. You
might need to extract all kinds of digital stuff from the marketing and sales organization. It
goes on and on.
Prioritization via impact and effort is not new, but becomes

particularly important when the requirement is to demonstrate
early value in a digital transformation programme. Put simply,
showing big impact in a short space of time buys you more time,
particularly if you can show the tangible benefit not just to the
business but also from the perspective of the customer (nobody can
argue with customer data). As well as impact and effort, a third
dimension to prioritization is, of course, time. As Dwight D
Eisenhower famously said:
What is important is seldom urgent, and what is urgent is seldom important.
The Eisenhower matrix (Figure 9.1) is a simple but powerful way of
balancing these two criteria to define what we should pay attention
to first.

Figure 9.1 The Eisenhower matrix
It is, of course, important that we ensure we are not constantly
ignoring or scheduling for later development priorities that might
not be urgent now, but are fundamentally important for long-term
capability or advancement. Ring fencing resource and allocating to
short-and long-term needs helps mitigate this, and simple scorecard
approaches (including, for example, an assessment of customer
impact, risk, cost, time and profit contribution) can be highly
effective in prioritizing development. Any broader innovation or
transformation programme can be significantly undermined by
poor, nonsensical service design and delivery and so fixing basic

but poorly designed customer or product experiences and
unnecessary barriers to seamless customer journeys can often be a
powerful driver for change. Remember, innovation is no substitute
for basic competence.
Clarity of roadmap ownership and governance, robust
prioritization methodologies and capacity planning against set
criteria are essential to prevent capacity overload and development
precedence being given to inappropriate internal priorities (like
from those who shout loudest) rather than those that make sense
for the customer.
But when is it not right to listen to our customers? It is, of course,
a myth that Apple do not do research, but Steve Jobs famously
described the limitations of customer feedback when designing the
new:
It’s really hard to design products by focus groups. A lot of times, people don’t know
what they want until you show it to them.
Henri Seydoux, Founder and CEO of technology and drone business
Parrot describes how there are times when they have no
consideration of the user, and other times when they are extremely
sensitive to user need:
When your idea is totally new, you cannot ask the user … if you ask people to dream with
you, they not will understand with you, or the dream will not be serious.18
Seydoux relates the story of how an idea for a connected picture
frame rapidly became overcomplicated by focus groups who
relayed all kinds of additional features that they wanted to the point
where it became untenable. Yet for a developing or existing market,
continuous customer feedback is key. As Clay Christensen said:
Working harder, being smarter, investing more aggressively, and listening more astutely
to customers are all solutions to the problems posed by new sustaining technologies. But
these paradigms of sound management are useless – even counterproductive, in many
instances – when dealing with disruptive technology.19
The secret is to design with vision and optimize with feedback.

Strategy as an ever-changing algorithm
Everybody has a plan until they get punched in the face.
Mike Tyson
We have discussed how the agile business is stubborn on vision but
flexible on details, and how strategy is about making choices,
continually defining better options, evolving in response to shifting
contexts but changing more slowly than the highly fluid and
adaptive planning process. Noah Brier, the founder of marketing
software business Percolate, describes strategy as an ever-changing
algorithm and it is a useful analogy. If algorithms create a set of
rules that enable problems to be solved, then strategy ‘is really
about building algorithms that help drive optimal outcomes in
decisions’.20
If we think about strategy as an ever-evolving algorithm, then the
rules or guidelines that we set should help us to navigate the terrain
that we need to cross. Just as algorithms constantly change to take
account of new inputs, so a strategy should be emergent, constantly
taking account of new contexts and what data and insight is telling
us in order to find the path to the optimal solution. Google updates
the search algorithm hundreds of times a year but periodically
undergoes a major overhaul that impacts how it works in more
fundamental ways, in the same way that strategies continuously
morph but periodically need a significant correction to keep us on
track when we are in danger of getting thrown off-course.
While rigid, top-down strategy is the more traditional domain, the
requirement in the agile business is both to set the strategy in such
a way that it can evolve utilizing a continuous stream of insight,
data and feedback from customer facing teams, and in an
environment of increasingly transient competitive advantage to be
ready to disengage and refocus, even when the business is still
viable. As Rita Gunther McGrath describes it:
One of the most significant differences between the assumption of sustainable

competitive advantage and more dynamic strategy is that disengagement – the process
of moving out of an exhausted opportunity – is as core to the business as innovation,
growth, and exploitation are.21
So just as we should work to increase the pace of change and
responsiveness in the way in which we work, we need to take more
account of the tempo of change in our strategy and planning
process and find ways to embed this practice and thinking. A useful
framework for this has been created by ex-Global Head of Brand
Design at Facebook and now VP of Product at Intercom Paul Adams,
who describes an effective way of thinking about your product
roadmap by delineating over three timelines: the next six years,
next six months, and next six weeks. Paul applies the framework in
the context of a product roadmap but it is just as applicable to a
more adaptive approach to strategy:
The next six years: this is your view on the shape of the world
six years out, taking account of how key trends and your own
actions will have changed it. This is your strategy of trajectory.
The next six months: your focus here is on your plans for
building, creating or executing things that will materially impact
on progress towards your long-term strategy. This is a rolling
timeline that can evolve so that at the end of the six months, says
Paul, you may have built 50–75 per cent of what you set out to do,
but the remaining 25 per cent is made up of new things that you
had not thought of before.
The next six weeks: the immediate plan which is known well,
and is being worked on in detail right now, and changes
iteratively as a rolling timeline every week or two.
The timescales used in the ‘666 roadmap’ are less important than
the three-timeline concept (although aligning it with the ‘number of
the beast’ no doubt creates plenty of opportunity for amusement
among product teams) which allows for a directional view on the
future, a mid-term adaptive strategy, and a highly iterative short-

term plan.
Discovery-driven planning
Processes such as agile and lean are designed to remove as many
assumptions from development as possible. With an exponential
increase in the quantity of available data, applying that data in the
service of challenging assumptions (particularly the hidden, or
‘toxic’, assumptions that go unquestioned) is an essential
requirement in helping the agile business get to the outcomes it
desires. If, alongside this, we are tracking back from our vision of
the future in order to reimagine our present priorities (rather than
extrapolating from a past which may be defined by out-of-date
assumptions) then we have a more solid basis for crafting our agile
strategy. But there are times, such as when we are entering new or
poorly defined areas, when the ratio of assumptions we are forced
to incorporate relative to the knowledge we already possess is likely
to be unusually high. Emergent, iterative strategy and planning
helps to mitigate risk, but it is still critical to identify as many
avoidable, or hidden, assumptions as possible.
Rita Gunther McGrath’s discovery-driven planning22 is a useful
concept that forces you to identify a desired outcome, and then ask
what needs to be true in order for that outcome to happen.
Conventional planning is based on a premise that future results can
be accurately extrapolated from the predictable platform of past
results and so may be useful in a stable, incremental or known
scenario. Discovery-driven planning focuses on establishing the key
truths that are needed for an outcome to be achieved and so is
much more useful for those ventures that are new, more unknown,
or characterized by a greater degree of uncertainty.
McGrath uses a great case study to illustrate the folly of using
conventional planning techniques for a new venture – the launch of
Euro Disney Resort (what is now Disneyland Paris). The launch in

1992 was something of a disaster, with numbers of visitor-days
falling far short of expectations. Two years after launch it had
accumulated losses of more than US$1 billion and only achieved its
target of 11 million admissions after a drastic drop in ticket prices.
In the planning process Disney had used assumptions based on
their extensive knowledge derived from their experience running
parks in other parts of the world (United States and Japan). There
were some pretty big assumptions around the admissions price that
punters would be prepared to pay, how European customers would
want to eat, and the type of merchandise they would buy. But the
really punishing assumption was that (based on their experience in
other markets) they had assumed that people would stay an average
of four days in the park’s hotels. And yet the average stay in the
early days was only two days. Euro Disney opened with only 15
rides, compared with 45 at Walt Disney World. People could do all
the rides in a single day and so had little reason to stay longer.
In order to avoid such outcomes, McGrath defines a number of
disciplines including: specifying a clear frame for the project
(including quantifiable goals); the importance of basing plans in
market and competitive reality; to translate strategy into specific,
implementable actions (working backwards from what you have to
deliver); to document, test and revisit assumptions; and finally
planning to learn at key milestones.
In discovery driven plans, the whole plan is organized around converting the maximum
number of assumptions to knowledge at minimum cost.
As the novelist E L Doctorow once said:
Writing a novel is like driving a car at night. You can see only as far as your headlights,
but you can make the whole trip that way.
With discovery-driven planning we have enough knowledge to plan
in detail to the next major milestone but not beyond it, so the key is
to test assumptions as you go at key milestones. Much like agile and
lean, this approach is motivating, giving people freedom to test and
learn rather than shouldering them with an obligation to justify

divergence from a flawed original plan. The key question to always
ask: What needs to be true in order for this outcome to be achieved?
This form of emergent strategy has never been more appropriate
than it is today.
Notes
1 Richard Rumelt (9 June 2011) Good Strategy/Bad Strategy: The difference and why it
matters, Profile Books, ISBN-10 184765746X ISBN-13 978–1847657466
2 Roger Martin (21 January 2015) Roger Martin’s Unconventional Wisdom, Bridgespan
Group, [Online] http://www.bridgespan.org/publications-and-tools/strategy-
development/roger-martins-unconventional-wisdom.aspx#.VRvHoBB4r7R [accessed
25 October 2016]
development/roger-martins-unconventional-wisdom.aspx#.VRvHoBB4r7R [accessed
25 October 2016]
development/roger-martins-unconventional-wisdom.aspx#.V9ZVyJOU3-b [accessed
25 October 2016]
5 Richard Rumelt (9 June 2011) Good Strategy/Bad Strategy: The difference and why it
matters, Profile Books, ISBN-10 184765746X ISBN-13 978–1847657466
6 James Allworth, Karen Dillon and Clayton Christensen (10 May 2012) How Will You
Measure Your Life?, HarperCollins, ASIN B006I1AE92
7 Amar V Bhidé (16 October 2003) The Origin and Evolution of New Businesses, Oxford
University Press, USA, ISBN-10 195170318 ISBN-13 978–0195170313
8 John Greathouse (30 April 2013) 5 Time-Tested Success Tips From Amazon Founder
Jeff Bezos, Forbes.com [Online]
http://www.forbes.com/sites/johngreathouse/2013/04/30/5-time-tested-success-tips-
from-amazon-founder-jeff-bezos/#3ad6bc73351a [accessed 25 October 2016]
9 Major Richard Dempsey and Major Jonathan M Chavous (December 2013)
Commander’s Intent and Concept of Operations, United States Army Combined Arms
Center, [Online]
http://usacac.army.mil/CAC2/MilitaryReview/Archives/English/MilitaryReview_20131231_art011.pdf
10 Sir Lawrence Freedman (31 October 2013) Strategy: A history, OUP USA, ISBN-10
199325154 ISBN-13 978–0199325153

11 Nick Harkaway (4 September 2008) The Gone-Away World, Cornerstone Digital, ASIN
B0031RS8JE
12 BBC (6 August 2013) Complaints Call Costs to be Capped, BBC News, [Online]
http://www.bbc.co.uk/news/uk-politics-23590778 [accessed 25 October 2016]
13 George Anders (4 April 2012) Inside Amazon’s Idea Machine: How Bezos decodes
customers, Forbes.com, [Online]
http://www.forbes.com/sites/georgeanders/2012/04/04/inside-
amazon/3/#3ec60390650f [accessed 25 October 2016]
14 Gov.UK (2016) Design Principles, Gov.uk, [Online] https://www.gov.uk/design-
principles [accessed 25 October 2016]
15 Gov.UK (2016) What GDS Is For, Gov.uk, [Online]
https://gds.blog.gov.uk/2016/06/29/what-gds-is-for/ [accessed 25 October 2016]
16 Steven Levy (17 January 2013) Google’s Larry Page on Why Moon Shots Matter,
Wired.com, [Online] https://www.wired.com/2013/01/ff-qa-larry-page/all/ [accessed
25 October 2016]
17 Tom Loosemore (5 June 2014) Government Digital Services, Slideshare.net, [Online]
http://www.slideshare.net/intscotland/tom-loosemoregovernment-digital-service
18 Mike Murphy (11 September 2016) This French Drone Company Innovates By
Knowing When To Ignore What Consumers Want, Quartz.com, [Online]
http://qz.com/753538/how-parrot-the-french-drone-company-comes-up-with-new-
products/ [accessed 25 October 2016]
19 Clayton M Christensen (22 October 2013) The Innovator’s Dilemma: When new
technologies cause great firms to fail (Management of Innovation and Change),
Harvard Business Review Press, ASIN B00E257S86
20 Noah Brier (26 November 2014) Leadership: Strategy as Algorithm, Percolate.com,
[Online] https://blog.percolate.com/2014/11/strategy-as-algorithm/ [accessed 25
October 2016]
21 Rita Gunther McGrath and Alex Gourlay (14 May 2013) The End of Competitive
Advantage: How to keep your strategy moving as fast as your business, Harvard
Business Review Press, ASIN B00AXS5EBY
22 Rita Gunther McGrath (August 1999) Discovery Driven Planning, ritamcgrath.com,
[Online] http://ritamcgrath.com/ee/images/uploads/Discovery_Driven_Planning.pdf

10
Linking strategy to execution
The five questions
To understand a company’s strategy, look at what they actually do rather than what
they say they will do.
Andy Grove
In the agile business, the link between strategy and execution is
critical to enabling the organization to move fast, yet misalignment,
or worse, confusion about what the corporate strategy is and how it
relates to team strategy and execution often prevails in many
companies. Roger Martin has described how strategy is the answer
to five key questions that cascade logically:
1. What are our broad aspirations and the concrete goals against
which we can track progress?
2. Across the potential field available to us, where will we choose
to play and not play?
3. How will we choose to win against the competitors in this
chosen place?
4. What capabilities do we require to win?
5. What management systems are needed to build, operate and
maintain these key capabilities?1
The key to applying these five questions successfully, he says, is to
understand that since the questions are interlinked and cascading,
so the answers should be consistent, linked and reinforcing. The
challenge comes in appreciating that this interlinking means that an
iterative approach is often required. It may be difficult to start at

the top with a compelling vision, for example, without some idea of
the answers to the next two questions. So this requires iterating
back and forth between the five questions, using the answers we
are getting in one area to inform the answers in the others. This
kind of iteration actually makes strategy easier:
It will save you from endless visioning exercises, misdirected SWOT analyses, and lots of
heroically uninformed big thinking. Crafting your strategy in relatively small and
concrete chunks and honing the answers to the five questions through iteration will get
you a better strategy, with much less pain and wasted time.2
Rather than leadership being like the brain (making key choices,
controlling everything) and the rest of the organization being like
the body (delivering what the brain tells it to), a more useful
conception of the corporation sees cascades of the five questions
(and answers) operating at the corporate, strategic group and
individual level, all linked together to ensure strategy is tied closely
to execution (Figure 10.1).

Figure 10.1 The five questions as cascades
Strategy and tactic trees
Another way of framing this concept is the idea of strategy and
tactic trees. Many businesses set a company-wide strategy and then
regard everything else as a tactic that contributes toward that
strategy. Not so. Dr Eli Goldratt (in 2002)3 observed that strategy
itself has a hierarchical structure, and that there might be several
layers of strategy that are each connected by necessary conditions.
In this way, objectives at a lower level are prerequisites for
objectives at a higher level – the former more specific or detailed
than the latter (Figure 10.2).

Figure 10.2 Strategy and tactic tree
Goldratt defined strategy as the answer to the question ‘What
for?’ (in other words the overarching direction needed to get to an
objective), and tactics as the answer to the question ‘How to?’ (the
steps in the process needed to pursue the strategy). In defining his
strategy and tactics trees, he argued that if strategy was
hierarchical, every strategy should have an associated tactic and the
two should always exist in pairs at every level of the organization.
Thus, a strategy can be brought to life and related to specific actions
at every level. As an addendum to this concept, we should also
consider the role of measures, aligned to tactics and strategies at
every level of the organization, in order to ensure that our metrics
too are linked, coordinated, and that strategy truly aligns with
execution.
OKRs: bringing the team with you

OKRs, or Objectives and Key Results, is a methodology for
connecting company, team and individual goals and measurable
results that was originally introduced at Intel in the 1970s. John
Doerr, an Intel executive and Google board member introduced the
framework to Google early in the company’s journey as a way of
helping them align objectives and direction across the business as
they scaled rapidly. They are still in use at Google today, and have
since expanded out to other technology sector businesses (including
LinkedIn, Oracle, Twitter) and beyond.
The system involves setting quarterly measurable, definitive
objectives at a company, team and individual level, and then
supporting those objectives with quantifiable key results, against
which performance is measured. OKRs are generally transparent
(at Google for example, everyone’s OKRs from Larry Page the CEO
down are available to see on the internal directory) but provide a
clear directional focus and expectations, ensure alignment at every
level, and a high level of awareness of what others priorities are.
This brings greater empathy and understanding for individual or
team priorities, and giving focus to how an individual might make
their own priorities align with someone else’s in order to get stuff
done.
Between three and five ambitious, achievable and time-bound
objectives are set at each level. Each objective is supported by three
or four measurable results that are clearly quantifiable, stretching
while attainable, and can provide the basis for grading
performance. The grading against each result can be scored 0 to
100, or 0 to 1.0 according to the level of achievement. These result
indicators can be updated regularly throughout the quarter,
perhaps weekly, but are designed to be stretching. When objectives
are scored, we might consider them as not ambitious enough if 100
per cent of results have been achieved, but instead if we have
achieved a score around 70 per cent, we can consider this to be
successful. OKRs may be operational or more aspirational (fixed
against bigger, longer-term goals) but can be regularly reviewed to

ensure that they remain ambitious, and that they are always
aligned to evolving strategic needs.
If your mission and vision provide the long view, this might then
be expressed in a limited number of objectives and key results at an
organizational level, which in turn can then be delineated in team
and individual OKRs (Figure 10.3).

Figure 10.3 An organization’s OKRs
The key benefit to the OKR system is that it clearly aligns strategy
with execution and measurement at every level of the organization,
ensures disciplined thinking around major goals, demonstrates to
everyone very clearly what is important to the organization,
enables transparency around individual and team priorities, and
ensures regular review of objectives and motivates and tracks
progress towards them. In this way, OKRs can play a key role in
transformation, and towards becoming a more agile business.

Duncan Hammond, Delivery Director at Guardian News & Media: Using OKRs to drive
change
In 2015 the Guardian appointed a new Editor in Chief, Katharine Viner, and a new CEO,
David Pemsel. This was the biggest leadership change in many years and it gave the
Guardian a great opportunity to take stock and review its strategic priorities.
The Guardian will be 200 years old in 2021. So Katharine and David posed a simple
question; what will the Guardian be at the age of 200? This led to a six-month strategic
review, named Project 2021, which culminated in a new three-year strategic plan designed
to change the organization and set us on a sustainable path to the future. We called our
three-year plan The Relationship Strategy.
The Project 2021 process revealed some difficult realities about the challenges facing the
Guardian, we called them The Unvarnished Truths. These truths were major blockers to
achieving sustainability.
One of the unvarnished truths stated our organization was too complex and insufficiently
agile. With complexity came a lack of clarity on what our strategic priorities were; how we
allocate our resources for the greatest impact; how we express our intent and measure
success, or failure; and how we ensure the right people are collaborating at the right time,
focused on the right things.
In the year prior to unveiling The Relationship Strategy we had been experimenting in
small pockets of the organization with the Objectives and Key Results framework, also
known as OKRs. OKRs were invented by Intel in the late 1970s and famously adopted by
Google in 2001. It’s a simple framework which introduces a consistent approach to setting
aspirational goals and measurable results to judge success (or failure). We had some
successes with OKRs in these small experiments and had aspirations to adopt them more
widely as part of our new strategy.
The first step we took was to set five organization-wide objectives (OKRs), to focus us for
the first year of the new strategy. These directly cascaded from the vision the Editor and
CEO had crafted for the Guardian. If we could deliver these five objectives, we would be on
a trajectory to deliver the Relationship Strategy successfully over the following years.
Next, we introduced the concept of huddles. Huddles are small, cross-functional teams,
focused on delivering an OKR of their own. They’re normally expected to deliver over three
months. They have the freedom to approach the challenge as they see fit, and take a test-
and-learn approach to delivering the best possible solution.
A huddle’s OKR directly cascades from one of the organization-wide objectives. This
ensures we’re focusing on the ideas that have the biggest impact on the strategy. It’s clear
how the huddle’s work fits into the bigger picture. And the huddle members should be able
to see how their day-to-day tests are impacting on the overall vision of the Guardian.
Having a common approach to setting objectives for huddles, and a shared language, has
helped democratize the quarterly process. It has forced new behaviours and encourages
teams to be more strategic in their thinking, ensuring the work they prioritize has the most
impact on our strategy. And it has enabled the organization, and our leaders, to be clearer in
their approach to prioritization and resource allocation.
The OKR framework has improved our focus and working in huddles has increased the

The OKR framework has improved our focus and working in huddles has increased the
diversity of ideas and approaches to delivering an objective. These two things alone won’t
solve all the challenges we face, but they have gone a long way to improving the way we
deliver our strategic priorities at the Guardian.
Sprint working as a driver of change
Working in iterative time-blocks, or sprints is, of course, central to
agile and lean processes, each sprint forming a repeatable cycle of
work that is confined to that unit of time and characterized by one
iteration of the process. Working in sprints has a number of not
insignificant benefits including:
Clear focus on a set of expected outcomes to be delivered by
the end of the sprint – each sprint commits to a set of
deliverables, with review and reprioritization at regular
intervals.
Embedded feedback loops and learning – testing with real
customers (wherever possible) and regular retrospectives
empower learning and data-driven decision-making.
Multi-disciplinary working – most teams working on sprints
will be small and multi-disciplinary, comprised of the key
functions needed to enable the outputs, which maintains
continuous progress, ensures better communication and
contributes to team spirit.
Greater velocity – clarity of direction towards tangible,
achievable outcomes, blocks of time for ‘doing’ and a focus on
removing barriers to progress all ensure a heightened level of
velocity. Constant iteration and focus on continuous
improvement enhances pace and performance.
Improved transparency – the defined tasks, level of difficulty,
and progress against specific tasks are typically made visible to
the whole team (and others), the practice of daily stand-up
meetings enables blockers to be addressed at the earliest

opportunity.
Greater accuracy – working in cycles helps challenge and
remove assumptions and improves forecasting accuracy.
Energizing and motivated working – participants can see both
working outputs, and clear progress against longer-term
objectives which is both galvanizing and empowering.
Sprints can operate to different timescales and it is important to
define for your own context the blocks of time that will be short
enough to enable rapid progress and long enough to ensure useful
working outputs at the end of each one. In agile methodologies such
as Scrum for example, sprints may be two weeks long, but some
development sprints may be as short as one week. The Google
Ventures Design Sprint,4 for example, is a five-day iterative sprint
process:
1. Day one – Understand: agree the goal and target, map the
challenge, draw in insight, analytics and research to inform.
2. Day two – Diverge: draw in inspiration, ideate, remix ideas,
envisage solutions.
3. Day three – Decide: critique solutions, converge on the best
idea, storyboard that idea.
4. Day four – Prototype: turn the storyboard into something you
can test, create the simplest possible prototype.
5. Day five – Validate: with real users wherever possible, learn
what does and doesn’t work.
Sprint working is central to the agile business and has far wider
application than simply technology and innovation teams. It is a
naturally empowering, energizing, motivating way of working that
can drive organizational momentum, invigorate innovation, and act
as a catalyst for new mindsets and behaviours that can support
greater agility and ‘transformation through doing’. Don’t keep that
confined to the technology team.

Data-driven decision-making
Typically information is defined in terms of data, knowledge in terms of information, and
wisdom in terms of knowledge.
(Jennifer Rowley)5
Data-driven decision-making is essential in the agile business. Data
is central to the flow of knowledge into and within a business, to
governance processes, performance optimization and customer
experience delivery. The fallacy of ‘big data’ (extremely large data
sets that require specific techniques to analyse computationally in
order to reveal associations, relationships and patterns) is that most
organizations do not have the volume or variety of data or the
velocity of data processing (the so-called ‘3Vs’)6 required to qualify
to join the ‘big data’ club. Nonetheless, companies are awash with
data, typically with small proportions of it being analysed and
applied in the service of business optimization. An oft-quoted study
by IDC from 2012 found that less than 1 per cent of the world’s data
was being analysed.7
In order to structure an approach to deriving value from data, we
need to understand the hierarchy of value at the simplest level. The
Data, Information, Knowledge, Wisdom (DIKW) model is a
straightforward way to position this. Raw data, observations,
measurements at the bottom of the pyramid have little value until
you are able to put some structure around the data, and turn it into
information. Information is capable of answering simple who,
what, where, when questions. Applying meaning, understanding
relationships and connections turns it into knowledge. Knowledge
answers the ‘how’ question but still has limited value. Wisdom, at
the top of the pyramid is attained through the application or use of
knowledge and answers the ‘why’.
The opportunity apparent in the smart application of knowledge
through data is manifold and yet few companies invest time and
resource in creating an integrated data strategy. Key areas within a

data strategy that require focus include:
Collection of data – What data do we need to drive business
outcomes? What questions do we ask? What sources? What level
of detail?
Storage, management and access – What technologies,
processes, governance, privacy rules, location, security?
Architecture, integration and flow of data – structure,
network, breaking down data silos.
Insight, analysis and application – What information and
knowledge is required by whom? What needs to be real-time?
How do we align with organizational objectives? What skills,
resources, roles, responsibilities? How can we ensure insight is
actionable? What is the role for algorithms, automation and
dashboards?
As business moves from simple analytics to data science, so it is
shaping entirely new requirements not just for technology, but also
for capabilities, roles and business processes. Agile businesses are
establishing robust infrastructure and resourcing alongside
intuitive interfaces and dashboards that enable analytics (often
real-time) to become central to the governance, performance and
operations of the business. But in the words of the UK Government
Digital Service, do the hard work to keep it simple. Success through
data depends on widespread process and practice adoption,
comprehensive strategy and application, but also on supportive
behaviours. It needs to be embedded in the culture.
Technology as a barrier to change
New technology is usually viewed as both a driver and an enabler
of change. But sometimes the reverse is true. Large businesses often
feel comfortable making big decisions about big spends on big
solutions (this is akin to the ‘Bigger-Higher-Faster-Farther’

philosophy prevalent among the US Air Force hierarchy that John
Boyd fought so hard against). To draw a metaphor from Star Wars,
we might call this the ‘Death Star’ IT approach. When technology is
seen in companies as the solution to a business need, the answer
can often look like a large, expensive, proprietary software system.
Since it is expensive, the system is complex enough to require a
lengthy training course to understand how to use it and is
accompanied by a thick user manual that few people ever read.
Since it is complex, when people (being people) make errors it
requires valuable management time to unpick them. Since it is
inflexible to changing requirements, it attempts to mould people to
its needs, rather than moulding itself to the needs of the people that
use it. Since it is not open-source (because it comes from a world
where value has traditionally been generated through protected
proprietary assets), it struggles to update at the pace required to
keep up with shifting requirements and contexts. Since it is
designed to fulfil a specific function in a specific way, the cost of
adaptation is high, and when adaptation is required (as it inevitably
will be) new functions get added in layers so that it becomes more
unwieldy over time, not less.
Adding more users to the system simply makes it more expensive,
not more powerful. Because of its high cost, it is retained by the
business for an extended period of time, and eventually required to
fulfil functions that it was never designed to do. So it does them
badly. Perhaps it is one of several such systems within the
organization. Systems that likely don’t talk to each other. At least
not intuitively. So data and outputs are difficult to join up. And
more management time is spent dealing with anomalies. Sometimes
a big expensive system is the right way to go. But the consequences
and opportunity costs of the choices we make are often hidden. If
you make it expensive to change, you will likely not. And nothing
endures but change.

Technology as an enabler of change
In 2013, the UK Government Cabinet Office engaged the
Government Digital Service in a process to develop a different way
to deliver technology to government departments and the civil
service. At the start of the process, GDS defined an aim to ‘deliver
modern, flexible technology services that are at least as good as
those people use at home’,8 and ones that were less expensive than
those currently in place. They set out some guiding principles that
provide a blueprint for technology acquisition and transformation,
and speak of the fundamental need not for rigid, detailed, upfront
planning processes, but of flexibility. Rather than the ‘Death Star’ IT,
we might think of this as the ‘X-Wing fighter’ approach to
technology. To paraphrase:
Start with user need – don’t start buying things until you
understand what users want.
Design with choice and flexibility in mind – offer solutions that
benefit individuals as well as teams.
Make the process transparent – ensure users and stakeholders
understand key approaches by being open about decisions and
actions.
Architect loosely coupled services – allow for greater
flexibility, less dependency and duplication (‘a key success
measure for the programme is that we should never have to do it
again’), services that can independently be replaced or swapped
in and out.
Favour short contracts – to enable flexibility in response to the
rapid change in technology capability.
Bring the best of consumer technology to the enterprise –
devices and cloud applications that intuitive and contemporary.
Make security as invisible as possible – security is important,
but it shouldn’t get in the way of user experience.

Build a long-term capability – don’t rely on a single outsource
vendor, establish necessary skills in-house to support
(‘technology delivery doesn’t end with the programme’).
Technology can be a powerful enabler of change, with significant
opportunity deriving from three complementary but overlapping
elementals:
1. Analytics, tracking and measurement: It was sociologist
William Bruce Cameron who said ‘Not everything that can be
counted counts. Not everything that counts can be counted’9 (a
quote often attributed incorrectly to Einstein) which is why we
should spend at least as much time focusing on what to measure,
as we do measuring it. Data should inform but not dictate
strategy, insights need to be actionable, we should focus on
measuring what really matters rather than vanity metrics (those
that may have large numbers but which are ultimately
superficial or easily manipulated). In physics, momentum is the
product of the mass and velocity of an object, and so when
tracking momentum of change we should focus on measuring
not only the pace of progress but also the elements that add
weight to create momentum change (behaviour and attitude
change).
2. Automation, communication and infrastructure: From
dynamic pricing systems to self-driving trucks to new
communication tools, technology can facilitate, network, notify,
optimize, distribute, aggregate, filter. From business process
automation, to communication and notification systems,
customer service interaction, marketing automation and lead
management, workflow automation can bring powerful
efficiency benefits, augment human decision-making, and
automatize uniform, repetitive tasks. Yet we need to remember
that not every business process can be automated, and that
human oversight, intervention and strategic or creative input is

never very far away from the most adept application of
machines.
3. Artificial intelligence and machine learning: Taking simple
automation to new levels, agile businesses will increasingly
apply machine learning to enable pattern recognition and
continuous improvement in areas as diverse as customer
insight, forecasting, production, service optimization,
information flow and distribution, and demand anticipation.
While machine learning is already being applied to help solve
simple problems, or as a valuable part of more complex
decision-making flows, the adept use of ever-more sophisticated
artificial intelligence capabilities will create the competitive
advantage of the future.
If a business is to be truly agile, no employee should be coming into
the workplace bemoaning the fact that the technology is worse
there than it is at home. Technology stacks should be malleable
enough to bend easily to the inevitable shifts in requirements.
Interfaces should be intuitive and simple to learn. Communication
technologies should facilitate agile, fast conversation, connection
and distribution (think IM and chat services like Slack, rather than
entirely relying on e-mail). The guiding principles for technology as
a driver for change are flexibility, adaptability and scalability.
Agile budgeting
A last word (for this Part) on budgeting. We can establish highly
flexible, adaptive and iterative working practices but they will fail if
not supported by suitably flexible, adaptive and iterative budgeting.
As we discussed in Part Two, traditional accounting methods may
work well for established propositions but new ventures
characterized by increased uncertainty, iterative value, and test and
learn should not be shackled to short-term targets, over-
burdensome reporting and inappropriate measures. Like Eric Ries’s

‘innovation accounting’, we need instead to focus on actionable,
early stage metrics that can show value before revenue, and
demonstrate sufficient progress towards the ultimate goals of
customer satisfaction and profit. But more broadly financial
resourcing needs to support an orientation towards
experimentation, and the fulfilment of not only short-term
objectives, but longer-term, breakthrough goals.
The politics of budgeting can act as a drag-brake on agility. Overly
hierarchical decision-making on financial controls slows progress.
Overly bureaucratic budget setting processes act as a time-suck for
management. Siloed control of financial resources reduces
flexibility and manoeuvrability. As Rita Gunther McGrath
expounds, it is about investing in flexibility:
Firms built to thrive under transient-advantage conditions handle resources differently
from firms designed for exploitation. In an exploitation-oriented firm, reliable
performance, scale, and replication of processes from one place to another make a lot of
sense because you can operate more efficiently and gain the benefits of scale. Resources,
therefore, are directed to support these goals, and changing these resource flows is
painful and difficult. A transient-advantage-oriented firm, on the other hand, allocates
resources to promote what I call deftness – the ability to reconfigure and change
processes with a certain amount of ease, quickly.10
Financial resourcing that is oriented not only towards efficiency
and optimization, but towards finding the next star product, the
next breakthrough, the next curve. Financial resourcing that
supports the mitigation of risk through investment in multiple test-
and-learn scenarios to explore new opportunities, rather than the
‘Bigger-Higher-Faster-Farther’ school of financing. Financial
resourcing that is fast and flexible enough to support the truly agile
organization.
Key takeouts
In this Part we have focused on building a heightened momentum
within the organization through enhanced velocity allied to a

reinvigorated focus, brought to life in new ways of working. Key
takeouts include:
1. Map out the organizational purpose, mission, vision and values.
Make them unique, compelling and easy-to-grasp. An ambitious,
motivating call-to-arms.
2. Create a positive sense of urgency to drive continuous change
towards that compelling vision. Communicate the vision
repeatedly, bring it to life at every opportunity, live it, breathe it,
exhibit it in leadership actions and behaviours.
3. Create the space to pursue that long-term vision, to solve the big
problems, to enable breakthrough innovation. Fight the suck of
resources to short-term targets and priorities.
4. Have a point of view on the future. Pay attention to what doesn’t
change, as well as what is changing. Work back from that vision
of the future to empower different thinking and shape near-
term priorities towards long-term goals.
5. Create clarity in strategy through making definitive choices
shaped by consumer, competitor and company contexts.
6. Be stubborn on vision, but flexible on detail. Combine emergent
strategy with highly fluid, iterative planning.
7. Orient strategies, processes, resourcing, operational priorities
and execution towards the customer. Don’t sacrifice customer
experience for efficiency gain. Use short, fast customer feedback
loops inherent in processes such as agile and lean to embed
customer focus in development and operational working. Put
user need at the centre, start with the customer and work
backwards, but design with vision and optimize with feedback.
Use data in the design process to validate and drive decision-
making.
8. Be ruthless about prioritization. Know your competitors but
don’t follow them. Balance importance to the organization with
impact to the customer. Fix flawed customer experiences before

investing in shiny innovation.
9. Use a three-timeline strategy framework to align short-,
medium-and long-term strategy and planning. Work to remove
as many assumptions as possible. Ask what needs to be true in
order to achieve a desired outcome.
10. Link strategy to execution at every level of the organization
using strategy and tactic trees and OKRs.
11. Build organizational momentum by using sprint working as a
driver for change, to shift behaviours and mindsets as well as
processes, and to catalyse innovation, new ways of working and
transformation.
12. Develop a robust data strategy to support transformation and
performance.
13. Take a user-centric approach to technology, guided by principles
of flexibility, adaptability and scalability.
14. Support change with fast, flexible budgeting that enables the
space to experiment and the adaptability to manoeuvre fast.
Notes
1 Roger L Martin (May 2005) Five Questions to Build a Strategy, Harvard Business
Review, [Online] https://hbr.org/2010/05/the-five-questions-of-strategy [accessed 25
October 2016]
2 Roger L Martin (May 2005) Five Questions to Build a Strategy, Harvard Business
Review, [Online] https://hbr.org/2010/05/the-five-questions-of-strategy [accessed 25
October 2016]
3 Eli Goldratt, Rami Goldratt and Eli Abramov (2002) Strategy and Tactics, Washington
State University, [Online]
https://public.wsu.edu/~engrmgmt/holt/em534/Goldratt/Strategic-Tactic.html
4 Google Ventures (2016) The Design Sprint, Google Ventures, [Online]
http://www.gv.com/sprint/ [accessed 25 October 2016]
5 Jennifer Rowley (April 2007) The Wisdom Hierarchy: representations of the DIKW
hierarchy, Sage Publishing.com, [Online]
http://jis.sagepub.com/content/33/2/163.abstract [accessed 25 October 2016]

6 Diya Soubra (5 July 2012) The 3Vs That Define Big Data, Data Science Central,
[Online] http://www.datasciencecentral.com/forum/topics/the-3vs-that-define-big-
data [accessed 25 October 2016]
7 John Burn-Murdoch (December 2012) Study: Less than 1% of the world’s data is
analysed, over 80% is unprotected, theguardian.com, [Online]
https://www.theguardian.com/news/datablog/2012/dec/19/big-data-study-digital-
universe-global-volume [accessed 25 October 2016]
8 Tom Read (13 November 2013) Technology at Least as Good as People Have at Home,
Gov.UK, [Online] https://cabinetofficetechnology.blog.gov.uk/2013/11/13/technology-
at-least-as-good-as-people-have-at-home/ [accessed 25 October 2016]
9 William Bruce Cameron (1963) Informal Sociology: A casual introduction to
sociological thinking, Random House, ASIN: B001A9FCWQ
10 Rita Gunther McGrath (4 June 2013) The End of Competitive Advantage: How to keep
your strategy moving as fast as your business, Harvard Business Review Press, ISBN-
10: 1422172813, ISBN-13: 978–1422172810

PART FOUR
Flexibility
In this Part we consider the role of people, culture, structures,
resourcing in enabling and facilitating change.
Flexibility – adaptable, able to be easily modified to respond to altered circumstances,
to bend without breaking, workable, malleable, supple, ready and able to change.
DEFINING FLEXIBILITY
In 2014, author and social innovator Charles Leadbeater wrote a
paper (The London Recipe: How systems and empathy make the
city)1 that attempted to define the key facets or ingredients that
combined to create a successful city. Some of the best recipes, said
Leadbeater, comprise two key ingredients (like eggs and bacon or
fish and chips) and so it is with cities that a combination of two
factors that determine success or failure – systems and empathy:
Systems oil cities. Without effective power, transport, health and education systems,
cities fall apart. But it’s empathy that makes cities human.2
We need systems to ‘bring together disparate interacting
components to achieve a common purpose’, to have processes and
methods, to make everything work easily and reliably at scale, and
to gain efficiencies. Life is chaotic without shared systems. And yet
we also depend on the ‘dark matter’ of empathy, our capacity for
insight, affinity, rapport, to understand and find common ground,
to collaborate, cooperate and engage in sharing and exchange.
The city, Leadbeater said, is at its absolute best when it combines
both of these things, where ‘lots of people use efficient systems to

have a highly convivial, charged, shared experience’ (Figure P4.1).

Figure P4.1 Systems and empathy
Success comes from this combination of both systems and empathy
(Leadbeater used the London Olympics in 2012 as an example of
when efficiency of large-scale systems combined with very human
connections and approaches to great effect). System-heavy entities
may look impressive but they can often feel dead. Empathy brings
in the countless small and large acts that make large systems
human.
In his paper, Leadbeater talks about how a key challenge when
building systems is how to scale empathy. A city, like a large
organization, is a social system in that it comprises lots of people
interacting in different ways. Interactions between elements over
time become systems when they naturally evolve to develop a set of
understood and recognized boundaries that help define them.
These emergent conditions help to guide and shape the way in
which the system operates and may then become more rigidly

defined rules. But as this scales the factors that once created the
value in relations and interactions can be challenged, undermined
or corrupted so that we lose connection, intimacy and empathy.
Organizations are systems but in the digital age, now more than
ever, they need empathy at scale to survive and thrive. To become a
truly agile organization, therefore, we need structured systems and
efficiency but we need to combine that with human-centred
approaches, processes and experiences. Trying to introduce agile
into a non-agile culture will not work unless we face the human-
centred challenges that will inevitably arise. Trying to create
change without bringing people on the journey with you will lead to
failure. Attempting to become more responsive as an organization
without accepting the need to think differently about the fluidity of
resourcing will not work.
To become more agile we need the human-centred flexibility in
culture, resourcing and behaviours to create the environment in
which change can really happen. Put simply:
(velocity × focus) – flexibility = failure
Notes
1 Charles Leadbeater (1 April 2014) The London Recipe: How systems and empathy
make the city, Centre for London.org, [Online]
http://www.centreforlondon.org/publication/london-recipe/ [accessed 25 October
2016]
2 Charles Leadbeater (29 April 2014) Charles Leadbeater: It’s small things that make
our big city what it is, Evening Standard, [Online]
http://www.standard.co.uk/comment/comment/charles-leadbeater-it-s-small-things-
that-make-our-big-city-what-it-is-9301446.html [accessed 25 October 2016]

11
Agile structures and resourcing
The decisions we make around how we choose to build, structure
and apportion our capability have a fundamental impact on our
ability to deliver our strategy but also our capacity to be more agile.
So what do we mean by agility in resourcing? Traditional
approaches are often characterized by rigid functional or divisional
silos, inflexible roles and job descriptions, a focus on owned assets
and exploiting existing positions, large downsizing programmes,
restrictive approaches to career mobility, demotivating
performance review systems, control over resources being seen as
commensurate with power and influence, and change disliked and
avoided.
Our historical approaches emphasize the optimization and
aggregation of vertical craft and experience expertise into
functional groupings which, while valuable, comes at the expense
of flexibility and effortless cross-department or division working. So
in a rapidly shifting environment we need to work harder to find
new and more agile ways to combine that vertical expertise, blend
it with more generalist skills, and establish a far greater degree of
fluidity in our resourcing. We need easier collaboration between
disciplines. Easier flow between centralized and decentralized
resources. Greater internal employee mobility. A move on from
rigid functional roles to a more skills-based approaches that can
attract, retain and combine required skills in more adept ways.
Smarter outsourcing and use of external capability to reduce
reliance on owned assets. Continual modification to free up
resources and refocus on new projects and initiatives. Change
welcomed as an opportunity. And as Rita Gunther McGrath

described, we need key resources that are managed under central
control and not held hostage by local business units, and faster,
more responsive organization around opportunity rather than
opportunities being squeezed into existing structures.1
Greater advantage now comes from information efficiency, or
establishing tight customer feedback loops, easy access to key
analytics, and reducing the number of information exchanges that
are needed to respond to opportunity or demand or other key
processes. It is more essential than ever that our organizational
structures reflect and enable progress towards our vision. Strategies
that are customer-centric, for example, will struggle unless
structures are adapted to also be customer focused (most, as we
have already discussed, are not). Rather than supporting limited,
episodic innovation and singular initiatives, resourcing needs to
enable continuous experimentation and multiple projects that
combine to create momentum and change. Table 11.1 summarizes
the key differences between legacy and agile.

TABLE 11.1 Key differences between legacy and agile
Legacy Agile
Organized around exploitation,
execution and optimization
Organized around continual
experimentation, exploring and
learning
Rigid functional silos, difficult
cross-division cooperation
Easy cross-team collaboration
Large, single-discipline
departments
Vertical expertise combined with
small, multi-disciplinary teams
Fixed job descriptions, rigid
functional roles, restrictive
career mobility, directed
learning
Self-learning, ownership mindset,
flexible role boundaries, skills-based
approaches, high career mobility
Emphasis on vertical
aggregation of expertise
Easy cross-discipline aggregation,
vertical combined with generalist
skills
Periodic overhaul of balance
between centralized and
decentralized resourcing
Continual flow between the centre
and local capability
Focus on owned assets, in-
house headcount and capability
Asset-light businesses, networked
ecosystem of talent and resource
Change seen in negative terms,
new initiatives fitted to
established structures
Change welcomed, continuous
regeneration, oriented around
opportunity
Functionally oriented
structures, poor information
efficiency
Customer-facing structures, tight
feedback loops, high information
efficiency
Companies achieve great efficiencies and craft expertise through
organizing in vertical functions (marketing, sales, finance,

engineering, and so on). As organizations scale and become multi-
product companies these vertical expertise areas exist as functions
within divisions that group products together into logical areas.
These multiplying silos enable functional focus and efficiency to
work at scale, but faced with rapidly shifting contexts we need to be
far more adept at combining functional expertise in different ways
to gain advantages in velocity and focus. We need more of our
expert resource to be working concurrently with other functions,
far greater emphasis on small, multi-disciplinary teams to be used
to address key challenges, energize experimentation and develop
new capability, and we need to greatly improved fluidity between
central and localized, in-house and outsourced resourcing in order
to be truly responsive and to open up new opportunity.
Concurrent running, co-located working
Traditional methods of working can often involve waterfall-driven
processes with one department completing their part of the project
before handing off to the next function to work through theirs. A
product development process, for example, may involve designers
passing an initial look and feature set to the engineers (who find
ways to make it actually work), and then on to manufacturing (who
work out how to produce it), and then sales and marketing (who
decide how to sell it).
Yet as the innovation writer Steven Johnson has pointed out, the
ubiquity of this model comes from the fact that it works very well in
situations where efficiency is the most important consideration but
it kills creativity since original ideas get chipped away at every
stage. In contrast, Apple’s development model involves all the
groups (design, engineering, manufacturing, sales) meeting
continuously throughout the process in an approach that is messier
and more chaotic in the early stages, but which avoids great ideas
being slowly hollowed out and becoming ghosts of themselves:

The process is noisy and involves far more open-ended and contentious meetings than
traditional production cycles – and far more dialogue between people versed in different
disciplines, with all the translation difficulties that creates.2
In the same way that single-team waterfall processes (like an IT
development project) can move too slowly and fail to take account
of shifting contexts and adapt accordingly, so multi-team waterfall
working can make for sluggish, arduous, and overly rigid process
and progress. Sometimes it is necessary. But often there is a better
way.
Concurrent, co-located working, with all the key skills and
disciplines working on solving problems at the same time and in the
same room carries a number of key advantages. It acts to break
down departmental silos and align priorities cross-functionally
since the group is working towards a common goal. It enables
different disciplines to spark off one another and catalyse the
creative process. It circumvents issues around key input not being
available when required. It allows simultaneous input from
multiple perspectives, and an ‘ideas from anywhere’ approach (the
best ideas don’t always come from where we most expect them to).
It simplifies communication and can enable greater transparency
and accountability on progress.
Co-located working with external partners (such as innovation or
marketing agencies) can enable a combined team to move at pace
through greater efficiency of communication, improved
understanding of each other’s priorities, demonstrable
commitment, shared goals, smoother workflow. In other words, a
real partnership. AstraZeneca, for example, partnered with the
digital agency DigitasLBi to form a co-located Digital Innovation
Group to tackle the ‘wicked problems’ in healthcare:
A wicked problem has innumerable causes, is tough to describe, and doesn’t have a right
answer … Not only do conventional processes fail to tackle wicked problems, but they
may exacerbate situations by generating undesirable consequences.3
Owing to the complex nature of these problems, conventional

working in a linear, sequential way gave way to iterative, highly
interactive, agile working involving a continuous process of insight
gathering, building and learning in rapid sprints throughout a 12-
week innovation cycle. A highly social, collaborative process
between AstraZeneca stakeholders, the DIG teams and the end
beneficiaries, the 12-week cycles kick off with an immersion phase,
followed by rapid concepting and prototyping (Figure 11.1). This
enables multiple ideas to be worked on in parallel, using a series of
gate meetings to filter out ideas that do not deliver on the agreed
conceptual promise.

Figure 11.1 AstraZeneca’s 12-week cycle
DIG has launched a succession of new (and award-winning)
projects and services including ones to help drug trial participants
and heart-attack patients, new social networks for lung cancer
survivors and ethnographic health studies in Africa, and has begun
to have a positive impact on the wider AstraZeneca organization.
As we will go on to discuss, if the teams working on challenges are
small, kept to a core group, not allowed to become corpulent with
members whose contribution is peripheral or required only
periodically, and then empowered to work iteratively towards a
solution, then they can really move fast. The opportunity provided
by small, multi-disciplinary teams to accelerate organizational
tempo is vastly undervalued. We need a new way of working that
places far greater emphasis on their role as catalysts for a new type
of organization.
The insourcing and outsourcing dynamic
The dynamic of what companies choose to do in-house and what
they outsource to partners and third parties is a continually shifting
one, yet there is a distinct trend for organizations to facilitate
greater agility by establishing more sophisticated, nuanced and
outwardly facing approaches to partnering and outsourcing. The
obvious advantages behind insourcing include more immediate

control, responsiveness and consistency, and the opportunity to
build owned capability and value over time. In many areas (notably
when dealing with areas of critical importance to the business like
the effective integration of people, data and technology that relates
to key areas of competency or customer experience, reputation or
compliance) keeping capability close at hand leads to improved
responsiveness and agility.
It often seems that with the empowerment of digital technology,
companies are doing more and more in-house. Yet the picture is
more nuanced than this suggests. A more sophisticated approach to
outsourcing can open up the opportunity to leverage a broader
range of expertise, assets and resources (wherever they sit) in ways
that are more flexible, scalable, and even cost efficient. The growth
of cloud-based services has been the great exemplar of this for a
number of years, but it is just one example of how agile
organizations are cultivating increasingly networked ecosystems of
partners and resources from which they can draw. Whether it is
utilizing third-party data or stitching together remote services
through APIs, or accessing specialist expertise, assets and
resourcing remotely to fulfil specific functions, such networks can
dramatically enhance organizational capability, help build in-house
learning and capability (as a key output of an agency or consultancy
engagement, for example), and bring new levels of flexibility and
agility.
External resource can add value both at the centre (incremental
improvement of existing products, processes and services through
efficiency gain, automation, optimization) and at the edges (new
ideas, consultancy around developing new propositions, early stage
capability). But you should never outsource the future. The critical
thinking, decisioning, hiring of talent, and essential elements of
customer experience – in fact, any capability that is crucial to the
long-term success of the business – should not go outside. As
example of what can happen, Clay Christensen describes how Dell
in the early 1990s were a disruptive force in part because they were

able to outsource key capabilities to Asus in Taiwan. As time went
on, however, and spurred on by Wall Street who smelled greater
efficiencies, Dell expanded their outsourcing programme to more
critical parts of their business including the management of their
supply chain and the design of the computer. By 2005 Asus had got
so good at so many parts of Dell’s business that they were able to
create their own brand of computer. Over the years, says
Christensen, Dell had ‘slowly outsourced its way to mediocrity in
the consumer business’.4
One example of this is the growing approach for organizations to
create talent networks to augment internal capabilities. A
combination of new technologies, remote working capability,
improved support networks and infrastructure such as the growing
global proliferation of co-working spaces, and new business models
including algorithmically managed workforces like Uber, and
crowdsourced micro-task services like Amazon’s Mechanical Turk
and Task Rabbit, have led to a notable rise in freelancing and
contracting. One study from Intuit predicts that by 2020, over 40 per
cent of the American workforce (equivalent to 60 million people)
will be independent workers.5 Huge value exists in being able to tap
into specialist expertise on a more flexible basis, whether that is
through the growing number of freelance consultants, or the global
range of technical outsourcing solutions. An advanced talent
network may draw from three key sources: full-time, permanent
employees; a wide-ranging pool of specialist freelance expertise;
and a pool of contracted or associate partners and consultants
(Figure 11.2).

Figure 11.2 Advanced talent network
Each organization will structure its own talent network according
to its own unique needs, but the aim is always the same: flexibility,
scalability, cost efficiency, agility.
Centralization vs decentralization,
specialists and generalists
In a digital transformation process there are key dynamics that will

inevitably see a continually evolving balance. Our ever-more
complex, digitally enabled business environment, for example,
requires increasing levels of technical and functional specialization.
We need deep, vertical expertise in key areas to optimize specific
capability. But there is also greater value in more horizontal,
generalist roles that can bring diverse specialist expertise together
and marshal that capability towards achieving a shared goal.
Similarly, the dynamic between what resource is held at the
centre, and that which serves more localized needs or discrete
divisions and audiences is continually changing. The centralization
of digital resource, for example, can bring significant advantages in
a transformation process including improved governance,
standards and control, greater consistency, scalability and
efficiency, and more emphasis, clarity and focus. But the risks
inherent with centralization can include a lack of integration with
wider activity, and a lack of learning in the broader business. Often,
a centralized digital team will begin to devolve executional
resourcing and responsibility out to localized areas (in a ‘hub-and-
spoke’ model), and this may even eventually involve more strategic-
level decision-making. It may often be the case, for example, that
strategic direction and broad capability development sit at the
centre, while discrete strategy, plans and tactics sit locally.
Overarching governance and standards may reside centrally, but
compliance and specific rules are local. And process design is likely
to be centralized, but implementation local. But above all, there
remains a requirement for a heightened level of fluidity in
resourcing between these two areas to effectively orient resourcing
to capitalize on not just exploitation but also opportunity.
The power of small teams to drive big
change
From the Founding Fathers in politics to the Royal Society in science to Fairchild

Semiconductor’s ‘traitorous eight’ in business, small groups of people bound together by
a sense of mission have changed the world for the better.
Peter Thiel
When attempting to increase tempo and momentum within
organizations, teams that work in small multi-disciplinary units (or
‘pods’, as we might call them) can be disproportionately powerful in
demonstrating new, agile, iterative ways of working and helping to
drive transformation across the business.
Work by author, Harvard professor, and specialist in team
dynamics Richard Hackman has shown the challenges inherent in
attempting to accelerate pace using large teams, the issues not only
relating to the size of the team itself, but the number of links
between people and the growing burden of communication.6 As
group size increases, the number of unique links between people
also increases, but exponentially. So while a small team of 6 creates
15 links between everyone, a larger team of 12 will generate 66
links, and a team of 50 has no fewer than 1225 links to manage. This
exponential increase means that coordination and communication
costs are soon growing at the expense of productivity.
Leaders, says Hackman, may often create oversized teams in the
faulty assumption that ‘more is better’ for team effectiveness, or
due to emotional considerations such as sharing responsibility and
spreading accountability across larger numbers of people, or for
political reasons such as ensuring that all relevant stakeholders are
represented. You may then have a politically correct team, but
likely one that is incapable of moving at pace towards its objective.
Hackman defined four key features that are critical to create an
effective team in an organization:
1. Common team tasks that work towards fulfilling a compelling
vision.
2. Clear boundaries in terms of who is in the team, information
flow, and alignment with other resources, priorities, policies and
teams.

3. Autonomy to work within these boundaries.
4. Stability.
These qualities take on a heightened level of significance when
trying to move fast within the agile organization. The difference, for
example, that Hackman delineates between a ‘co-acting group’ and
a real team. A great deal of organizational work is performed by
groups that are commonly called teams, but in reality are more like
co-acting groups that have members who sit in close proximity, may
have the same leader, but where each member has an individual
job to do and the completion of that job does not depend on what
the others in the group do. The hope is that managers can gain the
benefits of teamwork while still directly managing the behaviours
of individual members but this is, he says, misplaced: ‘If you want
the benefits of teamwork, you have to give the team the work’.7
In the agile organization, far greater emphasis is placed on small
multi-disciplinary teams where the interdependencies, work and
individual responsibilities between team members intertwine in the
course of concurrent working towards a common, shared objective.
Work by Wharton Management School professor Jennifer Mueller8
has shown that individual performance in larger teams can suffer
in comparison to those in smaller teams due to ‘relational loss’, or
the perception that individual team members are less able to get as
much support, ease of access to information or recognition in a
larger team. Momentum comes from teams becoming a real unit,
improving iteratively over time, focused on clear outcomes. As the
UK Government Digital Service was always fond of saying: ‘the unit
of delivery is the team’.9
Similarly, it is essential for the team to have clear boundaries in
order to move fast. While the work doesn’t always need all team
members to be in the same location at the same time for progress to
be made, lack of clarity over who is on the team will act as a brake
on momentum if key members are juggling multiple priorities or
missing from key meetings. Attempting to establish new ways of

working through a half-hearted adoption of cell-based working that
sees key members allocating only part of their time to the new team
is likely to be problematic. It requires commitment. The team needs
to be sufficiently bounded to profit from clear direction and
comprehensive participation, while sufficiently porous to enable
beneficial cross-boundary exchanges. More than ever, agile teams
need focused objectives, clear ways of monitoring advancement
towards achieving those objectives, and then the freedom to define
how they will work to create that progress.

Gareth Kay, Co-Founder, Chapter SF: The new unit of work
It’s been widely accepted for some time that the atomic unit that unlocks the potential of
any organization is the team. What we’ve failed to realize is that the very nature of the team
has changed dramatically as technology has allowed people to work together in new and
better ways.
We are not unlocking the full potential of our teams because we are using the wrong map
to understand organizational structures today. Despite all our talk of agile working
processes and the democratization of the ‘bottoms up’ workspace, we still envision teams
operating in a rigid, post-industrial hierarchy of command and control. Org charts are the
still dominant way we shape and present those who work with us. We see teams being
bounded, at best, by the organization and at worst by their department or discipline.
The organizations that unlock their potential see their teams quite differently. They see
the team as a group of people who come together around a common goal. Yes, this could be
a department but more likely it will be a group of people from different disciplines,
potentially working in different countries and even different companies, who are working
together to achieve something together they wouldn’t otherwise be able to.
Research by Amy Edmonson at Harvard Business School shows that the nature of teams
is changing dramatically in response to a more fluid world. As much as we talk about them,
stable, bounded, clearly defined teams are less and less in evidence. What she sees more of
is ‘teaming’, a dynamic activity, not a static, bounded entity. A verb rather than a noun. If we
use this map of the world, then some very different needs emerge about how to build a
world class team (of teams).
First, we need to be far more radical in our approach to bringing different people together
in different ways. We should be looking at how we can truly diversify the talent, skills and
experience we bring around a problem. This means looking outside the ‘usual suspects’
inside an industry and looking for inspiration outside. We should look at how we can break
the approaches and working processes we repeat every week and replace them with new
ways of collaborating at different tempos (not everything should perhaps be a sprint). If we
are to find new solutions we need to approach different problems with different processes,
approaches, mindsets and people.
Second, organizations have to accept that their greatest ability to create value is to act in
a way that may feel initially antithetical to everything they’ve done before. Great
organizations today understand that they are no more than a network of teams. This
changes their approach to management. They become more open and permeable and accept
that talent lies outside the organization not just within; that a coalition of talent can get
further, faster. They are less obsessed about process and more obsessed by creating the
environment and organizational underpinnings that allow people to recombine and
shapeshift without losing the knowledge that used to be guarded within the team or
department.
The team may be an old concept but teaming is the new unit of work. If we’re to thrive we
need to design and build our organizations for it.

Two pizza teams
Amazon is a technology company. We just happen to do retail.
Werner Vogels
Amazon are fixated on staying agile as a business as they scale.
Werner Vogels, Amazon CTO has outlined one of the key ways in
which they do this.10 Scaling quickly had always been the key
priority for the company. More of a priority, he says, than
maintaining a coherent architecture, which led them to developing
services based around APIs rather than direct database access. This
in turn lent itself to an organizational structure focused around
small teams typically comprised of no more than seven to eight
people. These small, nimble groups were called ‘Two-pizza teams’
since they were typically the number of people who can be fed
easily with two large pizzas. There are hundreds of such teams in
the business, each behind specific services that go to comprise the
wider Amazon offering. The Amazon home page, for example,
requires about 200 to 300 such services to construct the page.
This strategy comes right from the top of the organization, from
founder Jeff Bezos, who believes that small, nimble, networked,
task-based teams are the best way of maintaining a high degree of
focus and agility. People in small teams are more easily able to stay
in touch with what other members of the team are doing whereas
in most large teams, regular meetings are required to achieve the
same goal. Meetings, believes Bezos, slow teams down. This
decentralized structure also brings focus. From the earliest
beginnings of the company, Bezos wanted:
… a decentralized, even disorganized company where independent ideas would prevail
over groupthink.11
Amazon structure two-pizza teams in such a way to allow for focus
through objective and direction, autonomy in prioritization and
execution, and accountability through performance measures. Each

one of those small teams was established with a ‘fitness function’, a
key business metric agreed between the senior leadership and the
team lead that gives the team focus. This autonomy enables greater
entrepreneurialism, the opportunity for greater ownership and
growth.
It is a structure that is built for speed. Amazon are able to bring a
new service or product to market in 10 to 15 days. Vogels has
depicted how Amazon deliberately design for flexibility, for on-
demand and, where appropriate, for automation. Processes are
distilled into their simplest form because they have to be and it
means that they can enable a culture of continuous innovation (for
example, Vogels describes Amazon Web Services, their cloud
computing division, as resembling ‘a collection of 15 or 20 or 40
startups’) and a relentless customer focus. Any benefits accrued
from additional scale are passed on to customers, and innovation is
focused on the things that will always be important to those
customers.
Amazon launches a continuous stream of new products, often
with minimal initial feature sets, and then develops additional
features through close cooperation with customers and data from
customer interaction. Despite building a huge business, Amazon
have been able to retain the flexibility and adaptability of a startup.
In a world increasingly characterized by the need to respond to and
design for on-demand, there is a lesson in that for all of us.
Self-organizing, multi-disciplinary teams
The best architectures, requirements, and designs emerge from self-organizing teams.
The Agile Manifesto
The principle of self-organizing teams is one of the foundational
tenets of agile and, like many of the practices inherent to this way of
working, has broadened out beyond the distinct agile practice area.
The not insignificant advantages inherent to self-organization

include increased staff motivation, productivity and ownership
(you have, after all, chosen to work on this project so are naturally
invested and feel greater responsibility for the outputs).
But it is when self-organization is incorporated as part of a wider
adoption of new ways of working (such as agile or Scrum) that it
can catalyse greater change and continuous learning. As teams
work iteratively, for example, there is regular opportunity to
optimize working patterns, processes and behaviours. The process
of embedded reflection through retrospectives helps the self-
organized team to learn and become more efficient over time
through constant inspection and adaptation without delay.
Combining the multiple disciplines needed to progress outputs in
the same team, working can be concurrent and fast. Key roles in the
team can help it to function well. Product owners or managers
might act as the voice of the customer, interface with the rest of the
business, and work to prioritize and re-prioritize the work backlog.
In agile methodologies like Scrum, the ‘Scrum master’ helps to
oversee, not micro-manage but instead ensure that rules and
boundaries are respected and that barriers to progress are
removed.
Richard Hackman described four key functions that must be
accomplished by an organizational unit that has work to achieve:
executing work; monitoring and managing progress; to design the
performing unit (structuring tasks, organizing application of
resource and required support, establishing norms of behaviour);
and setting the direction for the team out of which fall the
necessary tasks. How we separate up these tasks and
responsibilities across management and team, he said, gives us an
authority matrix that we can use to describe different levels of
authority that we might give the team:
Self-governing teams: the team-members have responsibility
for all four aspects (like a startup or a worker’s cooperative).
Self-designing teams: managers set the direction but the

members have authority over all other aspects so can modify the
design of their team and/or aspects of the organizational context
in which they operate on an ongoing basis.
Self-managing teams: team members are responsible for
execution but also monitoring and managing progress.
Manager-led teams: Managers do everything except task
execution, which is left to team members.
A key benefit of higher levels of autonomy and self-organization in
teams is the ability to more easily and continuously adapt to a
changing environment as resources are focused on achieving the
job at hand rather than being at the mercy of organizational and
managerial politics. Greater adaptation and more emergent, fluid
structures lead to greater resilience.
The process of self-organization tends to naturally align and bring
together the necessary talent needed to achieve a goal that the team
is setting out to pursue, but we need to balance this with the need to
ensure specific expertise is dedicated towards solving key
challenges. Heightened levels of self-organization can empower
teams to move quickly, but as we have seen there are different
gradients of self-organization and manager/team responsibility.
Concepts such as Holacracy apply the idea of self-organization
and flat hierarchies but at scale. Holacracy is presented as the
‘complete, packaged system for self-management in organizations’,
replacing traditional management hierarchy with ‘a new peer-to-
peer “operating system” that increases transparency,
accountability, and organizational agility’.12
The system may seem like it lacks leadership or management, but
as Frederic Laloux has said: ‘ … the absence of dominator hierarchy
is not the same thing as the absence of any hierarchy’.13 In
Holacracy, collective intelligence informs decision-making reducing
the ability of one person to unnecessarily put the brake on a process
or hold an idea or budget hostage. Transparency comes through

visibility of responsibility rather than power. Team members are
responsible for what needs to be done, but also monitoring and
managing the progress of each other and the team as a whole.
Difficult decisions are worked through at a team level rather than
pushed up the line. It attempts to replace traditional ‘dominator
hierarchies’ with ‘actualization hierarchies’ focused on recognition,
influence and skill.
While Holacracy has to date been adopted by mainly smaller-
scale organizations, we can all learn from exploring different ways
of devolving responsibility and ownership throughout the
organization rather than decisions always emanating from the top.
Finding the right balance is about creating as much freedom as
possible at all levels through greater autonomy and flexibility
around resourcing, while still establishing clear direction,
boundaries, governance and accountability. Above all, the over-
arching principle (again) should be to keep the unit small.
The composition of multi-disciplinary teams
Careful consideration needs to be given to the composition of these
small cell units. The key rule is to take a skills-based, rather than
purely functional, approach. Don’t feel pressured to include staff
who are there to represent a function but whose input may be
incidental or infrequent. The only people who should be included in
the team are those whose skills are central to making outputs
happen, those who have direct, tangible and ongoing input. Above
all the unit should be kept to ‘two-pizza’ size.
Eric Schmidt of Google describes the people who he believes can
have the biggest potential impact within organizations (he calls
them ‘smart creatives’)14 as those who can combine a triumvirate of
key skills’ areas: technical knowledge, business acumen and
creativity. We will talk more about ‘smart creatives’ later, but this
troika of skills areas has the potential to be transformational at not

just at an individual level, but at a team level as well. While the
specific roles or job titles may differ, the pattern of combining these
key capabilities in a small multifunctional team is repeated again
and again. And for good reason. We need business acumen
(strategists, product managers, product owners and so on) to align
to business needs and inputs, provide direction and prioritization,
and a commercial perspective. We need technical skills to code,
build, make, engineer. And we need creative skills to ideate,
imagine and design for user need. While the balance in composition
may differ according to need, this triumvirate of skills can work on
a problem through every stage but with no single practice area
leading. Each area amplifies and extends the capabilities of the
other. As Tim Malbon, founder of product innovation agency Made
By Many, has described it:
It’s a force multiplier … we’ve created a machine that renders insights and ideas into
code in almost-real-time on a continuous and self-correcting basis.15
This is the modern blueprint for a multi-disciplinary team.
Notes
1 Rita Gunther McGrath (4 June 2013) The End of Competitive Advantage: How to keep
your strategy moving as fast as your business, Harvard Business Review Press, ISBN-
10: 1422172813, ISBN-13: 978–1422172810
2 Steven Johnson (29 September 2011) Where Good Ideas Come From: The seven
patterns of innovation, Penguin, ISBN-10 141033401 ISBN-13 978–0141033402
3 John C Camillus (May 2008) Strategy as a Wicked Problem, Harvard Business Review,
[Online] https://hbr.org/2008/05/strategy-as-a-wicked-problem [accessed 25 October
2016]
4 James Allworth, Karen Dillon and Clayton Christensen (10 May 2012) How Will You
Measure Your Life?, HarperCollins, ASIN B006I1AE92
5 Future of Small Business, Intuit, [Online] https://http-
download.intuit.com/http.intuit/CMO/intuit/futureofsmallbusiness/intuit_2020_report.pdf
6 David M Messick and Roderick M Kramer (22 September 2004) The Psychology of

Leadership: New perspectives and research, Psychology Press, B000SMD1IS
7 J Richard Hackman (10 July 2002) Leading Teams: Setting the stage for great
performances, Harvard Business Review Press, ASIN B0106P71WI
8 Jennifer S Mueller (January 2012) Why Individuals in Larger Teams Perform Worse,
Science Direct, [Online]
http://www.sciencedirect.com/science/article/pii/S0749597811001105 [accessed 25
October 2016]
9 Russell Davies (17 April 2013) A Unit of Delivery, Russell Davies, [Online]
http://russelldavies.typepad.com/planning/2013/04/the-unit-of-delivery.html
10 Werner Vogels (5 October 2011) Werner Vogels: Amazon and the Lean Cloud, Hack
Fwd, [Online] http://blog.hackfwd.com/post/11060764003/werner-vogels-amazon-
and-the-lean-cloud [accessed 25 October 2016]
11 Richard L Brandt (15 October 2011) Birth of a Salesman, Wall Street Journal, [Online]
http://www.wsj.com/news/articles/SB10001424052970203914304576627102996831200
12 HolacracyOne, How It Works, Holacracy.Org, [Online]
http://www.holacracy.org/how-it-works/ [accessed 25 October 2016]
13 Frederic Laloux and Ken Wilber (9 February 2014) Reinventing Organizations: A
guide to creating organizations inspired by the next stage of human consciousness,
Nelson Parker, ASIN B00ICS9VI4
14 Eric Schmidt and Jonathan Rosenberg (12 March 2015) How Google Works, John
Murray, ISBN-10 1444792490 ISBN-13 978–1444792492
15 Tim Malbon (March 2016) The Solution to Design Thinking [Online]
https://medium.com/the-many/the-solution-to-design-thinking-
42e8f1b59022#.i117lomra [accessed 6 March 2017]

12
Scaling agility
Big is a collection of smalls.
Nigel Bogle
New ways of working such as Agile, Lean, and Scrum and operating
in small, multi-disciplinary teams are not only the domain of
startups. With rapidly shifting contexts every company needs to
become more adaptive, iterative and emergent, and work to
combine functional expertise horizontally across the organization
in smarter, more fluid ways. As Silicon Valley entrepreneur and
academician Steve Blank has pointed out a startup is not a smaller
version of a large company.
As an organization scales, functional groups are an excellent way
to optimize efficiency and craft. As it scales and diversifies further
to become multi-product, divisions (which each house their own
functional groups) allow these efficiency and expertise gains to be
extended. But this comes at the expense of structuring for the
benefit of the organization, not for the customer. Customers are
horizontal. They don’t care about the differences between sales,
customer service, or marketing. They don’t care about how
company divisions are structured. They just want products that
work, and to be able to find solutions to problems easily and
quickly. So the need for more seamless customer experience and
greater agility creates a heightened horizontal tension and
obligation to counteract the constraining impact of organizational
silos. Adept collection and application of data can mitigate this
(utilizing a ‘single customer view’ in order to join up customer
touchpoints and help interaction to be more personalized and
intuitive, for example). But the organizational response needs to

stretch deeper into processes, culture and, of course, structures.
This means finding better ways to combine the benefits we can
derive from unifying expertise in functional groups (HR, finance,
sales, marketing, operations), with the ability to capitalize on the
agility and momentum that can come from small, multi-disciplinary
pods. Organizational systems and ideology are weighted heavily
towards optimizing efficiency through functional groups. We need
to find a new balance, one that reflects a greater emphasis on
learning, velocity, focus and flexibility through agile, iterative,
multi-functional pod working.
More commonly iterative methodologies and pod working seeds
first in technology teams, centralized digital units, innovation or
product development labs and incubators, or standalone catalyst
brands that are established to enable a large organization to
experiment with new approaches. But confining these ways of
working to small units or single teams misses the huge opportunity
that companies have to scale agility far more broadly across the
organization. We can represent this progression of agility through
several distinct stages:
1. Dispersed mavericks: Restless change agents in dispersed areas
of the business recognize the need for different approaches and
start to question the status quo and agitate for change. This may
initiate pilot projects or minor revisions in local areas efforts are
not joined-up and substantive change is difficult in the face of a
lack of senior support, and wider organizational complacency.
2. Focused agility: As the strategic imperative for change takes
root at senior levels, investment and resources are allocated
towards digital capability development and innovation. New
agile ways of working become established in specific areas such
as innovation units, catalyst brands, technology teams and
digital centres of excellence. Centralization brings focus, a
visible statement of intent, easier prioritization, efficiency,
better governance and commonality of approach. Iterative,

sprint working in small, multi-disciplinary teams enables faster
learning and greater experimentation, agile culture and
behaviours are nurtured and protected through senior backing
and ‘translator’ roles.
3. Scaling agility: As the need to scale agility becomes more
pressing, small multi-functional pod working, and iterative
experimentation is expanded beyond tightly focused innovation,
technology or digital areas more broadly into the wider
organization. This is accompanied by senior vision,
communication and support, along with a clear link between
corporate and team strategy, objectives, execution and
measures. Over time the proportion of the workforce that is
working in this way increases.
4. Dispersed agility: As agility naturally scales ever wider, it
becomes essential for the business to manage the ever-fluid
proportion of staff that are working in multi-functional pods,
and continually balance that with the efficiency and craft
benefits gained from functional groups. Ongoing sensitivity to
the type, scale and scope of customer needs, and the ability of
the business to respond to these and other contextual challenges
is key.
The stage when we are looking to scale agility can be particularly
challenging. It is at this point that we are expanding new
approaches, behaviour and culture beyond an isolated area, so a
senior mandate, permission to fail-safe but to orient to learning
becomes critical to success. Initial focus may be on setting up small
multi-functional teams to address key business challenges through
iteration and experimentation. Or establishing areas at a divisional
level that can enable the introduction of these new ways of working
focused on divisional priorities – more of a hub-and-spoke model to
scaling agile working.
Exposure to agile working and culture can support wider
adoption over time. This might come via staff, functions and teams

that interface regularly with already agile areas (osmosis). Or wider
assimilation through deliberately including an ever-wider coterie of
staff to experience agile working and be included in pod team
working (diffusion). Or encouraging the larger organization to learn
from catalyst brand initiatives (mother-learns-from-baby).
Businesses cannot go from a rigid, functionally oriented state to a
highly fluid, agile, learning-oriented organization overnight. The
staged approach allows for proper establishment of supporting
structures and cultures, and the proportion of workforce that is
ultimately working in pod-like structures is likely to be fluid.
To see an exemplar of scaling agile structures, we can look at
Spotify. Agile and organizational coaches at Spotify, Henrik Kniberg
and Anders Ivarsson, have detailed an approach that the company
has adopted successfully, focused on what they call Squads, Tribes,
Chapters and Guilds.1 Spotify has scaled more rapidly than most
companies but the structure that they have adopted in their
engineering teams is specifically designed to maintain an uniquely
advantageous level of agility across 30 teams and three cities.
The basic unit of development at Spotify is the ‘Squad’, a small,
nimble, multi-disciplinary, autonomous self-organizing team that is
designed to feel like a mini-startup. Squads are co-located and focus
on specific areas of the product or service, incorporating all the
tools and skills they need to take an idea from design to test to
release and production. Much like Amazon’s two-pizza teams,
Squads are clearly focused on a specific task and KPI.
Squads are grouped together into related product areas called
‘Tribes’. Tribes are like the incubator for the squad mini-startups
and designed to be no larger than 100 people. Specific processes
help minimize the potential of dependencies to slow things down.
‘Chapters’ and ‘Guilds’ link Squads horizontally together, enabling
some economies of scale without sacrificing autonomy, and acting
like the glue that binds the company together. Chapters group
together people with similar functional expertise and meet

regularly to share learnings. The Chapter lead is the line manager
for chapter members and has more traditional staff-management
responsibilities, but is also a member of a Squad themself so stays in
touch with the work. Guilds are looser, more organic and wide-
reaching communities of interest that can stretch across the whole
company (rather than just how a Tribe like a Chapter does). They
enable knowledge and tool-sharing across a wider group.
As Kniberg and Ivarsson describe it, it is like a matrix
organization but one that is weighted towards delivery. The
structure is a departure from typical organizational approaches in
that rather than people being grouped into vertical silos defined by
function, the vertical dimension is customer and product focused,
and defined by those multi-disciplinary, self-organizing, co-located
Squads, while the horizontal dimension is all about sharing
knowledge, best practice, learning and tools.
The risk in having a looser organizational structure focused
around small, nimble teams is that an increased level of complexity
is created through a greater number of dependencies, coordination
issues, a possible lack of focus on developing vertical functional
expertise, and the difficulty in effectively sharing learning
horizontally across the organization. What’s interesting about
Spotify’s approach is that it specifically finds ways to avoid those
potential pitfalls, while making for a customer focused structure
that is far more flexible and empowering, and one that can be far
more adaptive at scale.
Managing core teams and dependencies
When scaling agile working and small multi-functional teams
through the organization we need to remove barriers to ensure that
they can move fast. An important part of this, as we have discussed,
is being ruthless about keeping the team small. But we also need to
ensure that teams have the necessary support and input they

require, what they need when they need it, in order to generate and
maintain momentum.
The model of Agile team onions (Figure 12.1), originated by Agile
practitioner Emily Webber, is a way of structuring dependencies
which, in a large organization may be required functional inputs
(perhaps ops, legal, finance and so on) that are involved in some
way in delivery but which are still situated in vertical silos, around
the core team.2 The onion is a way of creating understanding about
who is in the wider team, and inviting them in without disrupting
the small (and effective) size of the core team:

Figure 12.1 The Agile Team Onion
Source The Agile Team Onion © Copyright 2016 Emily Webber @ewebber. Published as The Agile
Team Onion: A model for Agile teams in large organizations, July 2016
http://tacit.pub/agileteamonion
This isn’t just a stakeholder map, it is about bringing the organization in and having
shared responsibility for what you are creating together.
The onion is classified thus.
Core team

Purpose: delivery of digital services
Communication: daily (all stand-ups, retrospectives, planning,
show and tells)
Co-located: daily, all day
Types of people: product owner, scrum master, developers,
designers, etc.
Collaborators (who might be working on multiple teams)
Purpose: bring in specialist information to assist the team,
assurance as needed, reduce dependencies and blockers (open
doors)
Communication: regularly, they come to some agile meetings
Co-located: on a regular basis (as a guide ~2 days a week) – this
also depends on what is needed and the phase of project – but
enough to be able to not block anything
Types of people: other delivery teams working within the same
portfolio, security liaison, policy liaison, portfolio manager,
operations, suppliers, etc.
Supporters
Purpose: keep informed, feed into broad organizational priorities
Communication: every sprint/iteration (show and tells, ad-hoc
when needed)
Co-located: monthly or as needed
Types of people: steering groups, wider organization.
Mapping out your team onion, inviting people in, agreeing
expectations and protocols establishes the right footing for it all to
work. So, ultimately, an organization may consist of many
overlapping onions (Figure 12.2).

Figure 12.2 Overlapping onions
Source The Agile Team Onion © Copyright 2016 Emily Webber @ewebber. Published as The Agile
Team Onion: A model for Agile teams in large organizations, July 2016
http://tacit.pub/agileteamonion
In this way, the core team is kept at a suitable size to maintain
velocity, collaborators provide necessary inputs to maintain
momentum, and supporters remove barriers and provide direction
to empower agility.
Getting the right mix: pioneers, settlers,
town planners

David Smith, of Global Futures and Foresight, has written about3
achieving effective change through a model which positions the
right person in the right place at the right time. It’s interesting, says
David, that the business world has more recently prized leadership
over managers and entrepreneurs when, of course, all three are
critical to the effective running of a business. Yet they are very
different beasts:
The Entrepreneur: dreams about the future, is strong on ideas,
and brilliant at vision.
The Leader: plans for tomorrow, is strong on people and brilliant
at behaviour.
The Manager: delivers today, is strong on process, and brilliant at
capability.
Entrepreneurs in companies are the ideas people who often end up
being put in charge of building new capability or business units. But
once those units are established they require managers to extract
the full value or generate sustainable sales or greater ongoing
efficiencies.
Conflict can occur between entrepreneurs and managers as the
former struggle to get the latter onside with new ideas, and the
latter despair of getting the former to appreciate the nuances of
running the ongoing business. As entrepreneurs are focused more
on the ideas of tomorrow, and managers more on the business of
today, the former may see the latter as ‘change blockers’. Once a
new venture has been created, entrepreneurs may be less equipped
or enthused to optimize the venture on an ongoing basis and so
may be moved out of the business rather than be assigned the next
entrepreneurial challenge, resulting in innovation loss for the
company. For this reason, says David, more entrepreneurs feel that
they don’t belong on corporate world and so end up in SMEs.
But all three are, of course, essential. Leaders need entrepreneurs
(to identify and capitalize on ideas), and entrepreneurs need

leaders (so that they are not working in isolation). Both need
managers who can take innovations and make them work, and
managers in turn need leaders and entrepreneurs. Everyone has a
profile that mixes these three attributes to a greater or lesser
degree, and it goes without saying that where things go wrong is
where someone’s profile is mismatched to the role that they find
themselves in. In the context of achieving change, awareness of the
profiles enables you to identify where support for the change will
come from, and where there might be blockers. In the context of a
senior team in the corporate environment, leadership may be
overvalued (everyone wants to be a leader) at the expense of
entrepreneurs and managers, resulting in an imbalance.
We need to ensure that our best talent is oriented towards
opportunity, not just to efficiency. Putting the right people to work
on the wrong thing can have a disastrous impact. Take Microsoft, a
business that many believe badly trailed its competitors in its
development of key technologies including mobile. In a 2014 Vanity
Fair article on Microsoft, Steve Ballmer talked about the cost of the
misalignment of the talent that the company had:
The worst work I did was from 2001 to 2004. And the company paid a price for bad
work. I put the A-team resources on Longhorn, not on phones or browsers. All our
resources were tied up on the wrong thing.4
Researcher Simon Wardley has described an approach that brings
together the unique combination of resourcing characteristics
needed to bring products and services to life (in a concept itself
adapted from Robert X Cringely’s description of companies in terms
of Commandos, Infantry and Police).5 Pioneers, settlers and town
planners are each brilliant in their own way, but demonstrate
different attributes:
Pioneers: have the ability to explore uncharted territory and
generate entirely new concepts: ‘They show you wonder but they
fail a lot.’

Settlers: can turn incomplete ideas into something useful for a
larger audience, make prototypes into products, commercialize,
build understanding and trust: ‘They make the possible future
actually happen.’
Town planners: are able to industrialize young products to
capitalize on economies of scale: ‘You trust what they build. They
find ways to make things faster, better, smaller, more efficient,
more economic and good enough.’6
While pioneers will be experimenting iteratively, prototyping in-
house, using agile working and techniques, settlers may be utilizing
more off-the-shelf technologies, tapping into ecosystems, using lean
methodologies, and town planners will likely be using existing tools
to drive efficiency, perhaps outsourcing, and maybe even using
more traditional waterfall development. Each of these stages are
critical in the agile organization, and great people are needed in
each of these roles to create the right combination that can not only
generate new ideas, but also commercialize and scale them at pace.
There is even the potential to deploy small, multi-functional pods to
fulfil each stage of this process.
While the pioneers may logically sit within the innovation area or
digital team, and the town planners within vertical functions, the
settler stage is a key one. During this phase the concept or project
may start as an early stage prototype that has established an early
value proposition and product-market fit, but then needs to be
properly commercialized, and the business model and proposition
developed to make it repeatable and ready for scale. The inherent
dangers at this point are that the concept moves out of the
innovation area, straight into business-as-usual functions where it
is saddled with a short-term profit target and given to a functional
leader and staff who have not been invested in the idea from the
start. Under these burdensome conditions, the idea (even if it is a
great one) will often wither and die. There are several factors that
can instead contribute to success:

1. A clearer metrics journey that can show early stage value before
revenue (see ‘Pirate Metrics’ in Part Two).
2. Senior patronage, and a clear understanding of the role of the
new initiative in progressing towards a long-term vision.
3. A continuum of resourcing on the project – key people who have
been there from the start continuing to work on it. The balance
here is ensuring that pioneers, adept at ideation, rapid
experimentation and prototyping, are not being forced
unnecessarily to play the role of the settler.
4. Resourcing dedicated to the commercialization of early stage
ideas. Sometimes, with the right support, the same team can take
an idea through from initial concept to commercialization. But
even a startup adapts its skill base in tune with these critical
stages. So more commonly in a large organization we need
committed staff with the right expertise, or a multi-functional
team specifically focused on establishing scale and economic
viability. We need not only systematic ways of testing new ideas,
but also disciplined ways of commercializing the ones that show
early stage promise.

Figure 12.3 Attributes of pioneers, settlers and town planners
We need to create the conditions in which each phase can feed off
the others. This is about building a systemic way to orient the
organization towards not only continuous experimentation but also
continual commercialization and scaling of early stage ideas.
Agile decision-making: flatter structures,
quicker decisions
The primary purpose of the organizational hierarchy in a company is decision-making
efficiency.
Ben Horowitz7

Here’s a scenario. The CEO needs to do a big review presentation. So
they ask five of their direct reports to help put it together. Those
five leaders brief five of their subordinates to compile the material.
Those five subordinates brief out another five of their juniors
asking for specific information. Each of those stages requires just
two meetings between each of the individuals involved (briefing
and review), and perhaps five e-mails. A not unreasonable scenario
and yet that is already 156 people, 310 meetings, 775 e-mails for one
presentation. Over-burdensome hierarchy creates its own over-
burdensome process. And it can be paralysing.
Consider a second scenario. A team wants to implement a change
that will support one of their objectives but which impacts another
team’s activity. In an overly hierarchical business the proposal gets
passed up the line to the department head, who engages the head of
the other team in trying to win support for their initiative. The
other department head consults their own team to understand the
implications of the change. In the absence of appropriate data, the
decision becomes drawn out and protracted as the department
heads go back and forth to negotiate a solution they are both happy
with. Instead of being dealt with quickly at an appropriate level,
multiple decisions are passed up the line, across, down the line, and
back again. Time passes. Projects are stalled.
In order to move quickly it is essential in a large organization
(particularly in the context of leading transformation) to invest time
in understanding where decision-making and influence resides. In
other words, to know ‘who’s who in the zoo’. Attempting to
implement change that carries dependencies without the support of
key stakeholders or influencers within the organization will at best
slow things down and at worst result in failure. Simple frameworks
such as RACI (Responsible, Accountable, Consulted, Informed) are
useful not only in assigning and managing responsibilities, but also
in determining the required actions necessary to smooth the
process of change and ensure continued support.
Over time, the number of managerial layers in large

organizations seems only to increase; yet flatter structures reduce
unnecessary communication and expedite speed of decision-
making. The secret is to have just enough hierarchy. Yet reaping the
benefits of a flatter business is not just about formal structures.
Decision-making needs to be empowered with ease of access to
relevant data, and the kind of culture that is not suffocated by
internal politics. Effortless access to the right data at the right time
(through dashboarding, for example) can bring agility by
supporting and removing contention around a proposed course of
action. Teams that have access to relevant data make better
decisions. Companies that make that data easy to access enable
their staff to make those better decisions faster.
Similarly, senior perks and other visible symbols of status might
make a few staff feel self-important but are largely counter-
productive to open communication and can be a barrier to just
getting the job done. Are executive floors, large exuberant offices,
and other visible perks of seniority really necessary?
When he was CEO of successful work productivity company
Evernote, Phil Lipin said that such signals: ‘create artificial barriers
to communication. They create artificial things that people focus on
rather than just getting their job accomplished’.8 Eliminating all
distractions so you can just focus on achieving means that you
attract people who are primarily motivated by how much they
achieve.
We should all be passionate in the pursuit of maintaining
decision-making structures that enable clarity of responsibility and
authority while preventing redundant or avoidable hierarchy and
process.
Agile governance and the digital board
If the rate of change on the outside exceeds the rate of change on the inside, the end is
near.
Jack Welch

Slow decision-making can be anathema to effective digital
management and transformation. As the pace of digital
development accelerates and pressure on resources intensifies, one
of the key challenges that arise in organizations undergoing digital
transformation is the effective prioritization of digital projects and
developments. There is just so much to do, so many different (and
potentially competing) priorities that it can be hugely difficult for
those at the top tier to know the right thing to do (especially if their
level of knowledge of all things digital is not what it could be).
The issue is often not about the level of comparative significance
attributed to digital developments by the company board, nor their
visibility among the most senior staff of the company. A more likely
scenario is that while an organization may already have digital
development as a strategic pillar of the corporate strategy, the
difficulty comes in taking account of multiple dependencies or risk
factors and in elucidating and defining a priority list that will
ensure that the most meaningful and impactful changes are
prioritized above those which may have less significance.
Sometimes impact is difficult to demonstrate or even to determine.
Sometimes changes that have short-term impact might be unfairly
or misguidedly prioritized over those with potentially much larger
long-term impact. Sometimes involvement of multiple senior-level
stakeholders slows the decision-making down to the point where
the impact of development is negated.
Companies might try to mitigate this risk by appointing digitally
savvy people to the board, or having a board member take
responsibility for becoming a digital ‘champion’. Both of these
options can help. Yet there can be little substitute for a board that is
conversant and experienced as well as informed. The broader this
capability across the board the better. Every company is operating
in a digitally empowered world, which means there is now little
excuse for lack of board level competency and proficiency.
Outside of board meetings, decision-making structures need to be
agile in support of an empowered board. Clear delineation of

responsibility helps. Peter Thiel has said:
The best thing I did as a manager at PayPal, was to make every person in the company
responsible for doing just one thing. Every employee’s one thing was unique, and
everyone knew I would evaluate him only on that one thing.9
While the clarity, focus and simplicity that this brings may reap
dividends for startups and small businesses, as a company scales
applying this approach to small teams rather than individuals is
likely to be easier. Clear and sensible escalation procedures also
help.
More formalized decision-making and feedback structures such
as the creation of a ‘digital board’ can, however, prove to be
extremely valuable in facilitating agile governance while providing
a crucial link to most crucial decision-making body in the company:
the main board.
A ‘digital board’ might typically comprise key main board
members (the board ‘digital champion’, or Finance Director or
perhaps even the Managing Director or CEO) and other principal
digital stakeholders, and becomes the main decision-making body
for the digital development roadmap, meeting regularly to make
key investment and strategy decisions.
This ensures the ongoing commitment, involvement and
engagement of key senior staff including the CEO, CFO, and/or the
IT and Operations Director, provides a crucial link between digital
operations and the main board, while still keeping the decision-
making process as agile possible.
Notes
1 Henrik Kniberg and Anders Ivarsson (October 2012) Scaling Agile @ Spotify, with
Tribes, Squads, Chapters and Guilds, [Online]
https://dl.dropboxusercontent.com/u/1018963/Articles/SpotifyScaling.pdf [accessed 25
October 2016]
2 Emily Webber, 14 May 2016, The Agile Team Onion. How many pizzas does it really

take to feed your team?, Emily Webber http://emilywebber.co.uk/agileteam-onion-
many-pizzas-really-take-feed-team/ [accessed 25 October 2016]
3 David Smith (26 October 2016) Effective Business Change: Right person, right place,
right time, Global Futures and Foresight, [Online]
http://thegff.com/Articles/205178/Global_Futures_and/Methods_and_tools/Effective_Business_Change.a
4 Bethany McLean (November 2014) The Empire Reboots, Vanity Fair, [Online]
http://www.vanityfair.com/news/business/2014/11/satya-nadella-bill-gates-steve-
ballmer-microsoft [accessed 25 October 2016]
5 Robert X Cringely (4 April 1996) Accidental Empires: How the boys of Silicon Valley
make their millions, battle foreign competition and still can’t get a date, 2nd revised
edition, Penguin Books Ltd, ISBN-10 140258264 ISBN-13 978–0140258264
6 Simon Wardley (13 March 2015) On Pioneers, Settlers, Town Planners and Theft,
Gardeviance.org, [Online] http://blog.gardeviance.org/2015/03/on-pioneers-settlers-
town-planners-and.html [accessed 25 October 2016]
7 Ben Horowitz (24 April 2014) The Hard Thing About Hard Things: Building a business
when there are no easy answers, Harper Business, ISBN-10 62273205 ISBN-13 978–
0062273208
8 Adam Bryant (7 April 2012) The Phones Are Out, but the Robot Is In, New York Times,
[Online] http://www.nytimes.com/2012/04/08/business/phil-libin-of-evernote-on-its-
unusual-corporate-culture.html?pagewanted=all&_r=1 [accessed 25 October 2016]
9 Peter Thiel and Blake Masters (16 September 2014) Zero to One: Notes on startups, or
how to build the future, Crown Business, ISBN-10 804139296 ISBN-13 978–0804139298

13
Building the culture to move fast
Agile is not just a process, it defines a
culture
Agile is a working process that has revolutionized the way in which
technology teams (and increasingly a wider set of functions) work
but it is far more than that. Agile defines a broader opportunity to
change mindsets, behaviours, and yes, organizational culture.
Agile practitioner Michael Sahota has written about a key
distinction in this respect: the difference between doing agile, and
being agile – in other words between adoption and transformation.1
Change agents, he says, talk of adopting agile but rarely about
transforming the culture of a company to support the agile mindset.
And without that, it fails. Sahota builds on a model from William
Schneider2 that maps four distinct organizational culture types
against a two-by-two matrix which positions people versus
company-oriented businesses on the horizontal axis against reality
versus possibility oriented companies on the vertical (Figure 13.1).

Figure 13.1 Schneider’s two-by-two matrix of organizational culture
types
Source Adapted from William Schneider (May 1994) Reengineering Alternative: A plan for making your
current culture work, Irwin Professional Publishing, ISBN-10: 0786301201
So, for example, the ‘cultivation culture’ is about succeeding by
growing people who fulfil a compelling vision, collaboration culture
is about succeeding by working together, control by getting and
keeping control, competence by being the best and so on. No one
culture is better than another but while companies may have
characteristics that originate from multiple culture-types, they are
likely to be routed in one. Other cultural elements may be
encouraged as long as they serve the dominant culture. This also
enables us to see a relationship between different culture types.
Controlling organizational cultures, for example, are more

compatible with competence and collaboration cultures than they
are with cultivation.
The model is useful in thinking about where your company culture
is routed, but also in identifying potential areas of conflict. Agile
culture is focused more on collaboration and cultivation, and so
arguably plays less well with controlling cultures in particular.
Conflict can arise when individual teams or departments may have
a subculture that is different to the dominant organizational
culture. These cultural mismatches can kill off new ways of working
before they have even had chance to prove their value, or cause a
long-term drift back to the old ways of doing things. It is like when a
virus is introduced into the bloodstream in our bodies, the white
blood cells cluster around it and try to kill the foreign body off.
Similarly, an organization can reject the introduction of a foreign
culture system and work hard in order to maintain the status quo.
The role of ‘translators’, or ‘interpreters’ here is key. These are
roles that can help make the new way of working make sense to the
rest of the business (and avoid triggering the antibodies). Job roles
such as product managers and project managers can help fulfil this
need in these early stages.
What is digital-native culture?
You don’t create a culture. Culture happens. It’s the by-product of consistent behaviour …
real cultures are built over time. They’re the result of action, reaction, and truth. They
are nuanced, beautiful, and authentic. Real culture is patina.
Jason Fried3
Organizational culture can be the one of the biggest enablers, but
also blockers, to change. We cannot deliberately create culture
overnight, nor can we change a company’s culture at whim. But we
can recognize that there are certain essential characteristics and
behaviours that are fundamental to organizational agility, and
frame the context in which they can thrive. We can set expectation,

recognize, amplify and reward, and demonstrate through the
choices that we make, the questions we ask, and our own
behaviour. In this sense, it is not about creating a digital-native
culture, but enabling a culture that is fit for a digital world.
To describe the essence of this culture, we can draw together a
number of essential ingredients. We can talk about being
entrepreneurial, innovative and experimental. About continuous
learning. About being non-hierarchical and collaborative. The
importance of commercial focus, data-driven decision-making and
accountability. About openness and transparency. Staff who benefit
from a high degree of empowerment and autonomy. An
organization that is passionate, hungry, outwardly facing and
curious.
All of these things are important. But so is how we choose to bring
this to life. Nolan Caudill, Engineering Chief of Staff at rapidly
growing communication and productivity app Slack, has written
about how every company builds products that they sell but also
the culture within the company. Yet while the former is often an
explicit undertaking and the result of conscious effort:
Culture – which we understand to mean the systems that dictate how employees relate to
one another, the work to be done, and the customers – often forms without much
oversight. Like any random experiment, the results of letting culture form unchecked can
vary between fair to disastrous.4
At Slack, culture is seen as a way to not only create the environment
where people can do great work, but as a manifestation of what the
company values and as way of making explicit decisions to avoid
groupthink, politics and unhelpful concentrations of power.
This is reflected in how the work is done and decisions made,
who they choose to hire, what they choose to reward, and
encapsulated in three key values: diligence (doing the hard work to
be exceptional); curiosity (not being satisfied with the status quo,
considering problems from multiple angles, asking the right
questions to the right people at the right time); and empathy (the

ability to view things through the eyes of the customer, diversity of
experience).
Similarly, social technologies company Buffer focus around nine
(openly published) values that include positivity, transparency, self-
improvement, listening, and being a ‘no-ego’ do-er. Their default to
openness and transparency has seen them publish detailed monthly
performance reports on their blog,5 and even went as far as
initiating an ‘open salary’ approach based on a formula which
made remuneration for employees completely transparent.6 Buffer
CEO Joel Gascoigne has expressed why openness is so important to
them: ‘Transparency breeds trust, and trust is the foundation of
great teamwork’.7 While not every company might have this level of
appetite for transparency, the point is that they are living their
values openly and demonstrably, and that is the behaviour of a
confident business.

Joel Constable, People Development at Pinterest: Bringing agility to life at an
organizational and individual level through a focus on velocity and flexibility
At Pinterest we bring agility to life at an organizational and individual level through a focus
on velocity and flexibility (Figure 13.2). ‘Organizational velocity’ is about how we can create
the conditions necessary to increase velocity. This primarily involves removing roadblocks.
Roadblocks show up in an organization in many forms including lack of goal or role clarity,
decision-making or resourcing bottlenecks, and employees’ fear of taking risks and having
important yet tough conversations.

Figure 13.2 Bringing agility to life at an organizational and
individual level through a focus on velocity and flexibility
We’ve removed these roadblocks through our semi-annual planning cycle, thoughtful
cascading of critical information, and bi-weekly all company progress meetings. When every
employee consistently understands our strategy and key priorities, they can make better,
quicker trade-off decisions.
We also have clear owners for each of the company’s major objectives who are known
across the company. These individuals are accountable for key outcomes and metrics
related to the goals and have the autonomy to make critical decisions.
At the organizational level, we create the conditions for flexibility through strong shared
values that help guide how employees approach and complete their work. These values are
built into performance reviews, enlivened through workshops, and visible in the physical
work space. We use guiding principles when proposing a solution or course of action to
clarify what we’re optimizing for and how to think about the problem.
At the individual level, we enable velocity by helping employees feel a sense of ownership
beyond their job description and accountability through performance expectations.

beyond their job description and accountability through performance expectations.
Employees work towards clear, challenging goals and have regular discussions with their
manager about their progress.
Individual flexibility is facilitated through an emphasis on embedded reflection. We’ve put
significant investment into external coaches to work with many of our leaders (not just
executives). Coaches provide our leaders with a sounding board and structured time every
couple of weeks to reflect on how things are going and where they can improve or change
course.
Reflection is critical for all leaders but it’s been especially important for us as we’ve scaled
quickly. As the company grows, our leaders need to frequently re-assess how best to
allocate their time and invest their energy. What was the best approach six months ago will
frequently not be the best approach now. I like to use two questions to help with this kind of
reflection:
Is this the most important work I can be doing right now to make the team and company
successful?
Is the process approach strategy we used before still the most effective approach given
our current reality?
While the agile business has singular, stable, directional vision,
strategy and values, it is able to adapt at speed through enabling
processes, practices and culture.
Having posters on the walls with catchy slogans is the easy bit. To
really bring culture to life we have to see and feel it around us, in
the behaviours of those around us, in the decisions that leaders
make, in the people that are hired, in the systems that make
everything work, in how we judge success, in the patterns of
recognition and reward. That is where real agility and competitive
advantage will come from. To quote from John R Childress: ‘Anyone
can copy your strategy, but no one can duplicate your culture.’8
The right culture helps you to move fast
AirBnB co-founder Brian Chesky has described an office visit from
entrepreneur Peter Thiel just after they had closed their Series C
funding round in 2012 in which Thiel invested US$150 million in
the fledgling business. When Chesky asked him what was the single

most important piece of advice he had for them, Thiel replied ‘Don’t
f**k up the culture’. Thiel believed that it was all too easy for the
early stage culture to be destroyed as AirBnB scaled. So Chesky and
his co-founders decided that culture would be one of things they
focused on above all else. Not least because it helps you to move
fast. The stronger the culture in a business, he says, the less process
that company needs:
When the culture is strong, you can trust everyone to do the right thing. People can be
independent and autonomous. They can be entrepreneurial. And if we have a company
that is entrepreneurial in spirit, we will be able to take our next ‘(wo)man on the moon’
leap.9
Process itself is, of course, not inherently bad for business, but there
is the kind that helps you to progress at pace and the kind that
slows you down. Netflix, for example, delineate between good
processes that help talented people to get more done (frequent
release schedules, regular strategy and context updates, budgetary
discipline), and bad processes that can creep in over time and often
try to prevent recoverable mistakes (such as overly complex sign-off
procedures, avoidable micro-management of expenditure,
unnecessarily multi-level approvals).10
If, as Chesky defines it, culture is ‘simply a shared way of doing
something with passion … a thousand things, a thousand times’,
then organizational culture in the agile business is about enabling
more intuitive decision-making and autonomy, removing
unnecessary process and hierarchy, and empowering the business
to move fast.
What really differentiates high-performing
teams?
This feels like something of a holy-grail question for companies, and
one that Google has undergone a lengthy quest to understand.

Several years ago they embarked on a comprehensive study, called
Project Aristotle, that studied hundreds of teams from the business
in an attempt to find out what separated the exceptional from the
average. Findings from a wide-ranging review of academic studies
into how teams work were overlaid onto the teams inside the
company to try to define which factors made a difference.
After extensive research and data analysis of many different
potentially influential variable elements, there was no obvious
common patterns or factors that emerged which separated teams
that were high-performing from those that weren’t. Surprisingly, all
the elements that we might expect to be influential including team
composition, longevity, degree of hierarchy, and the mix of
personality, background and skills of the team members all made
no difference.
Instead, further research revealed that the group norms (‘the
traditions, behavioural standards and unwritten rules that govern
how we function when we gather’)11 that the team operated to
seemed to play an important role in how successful a team was.
Analysis of over a hundred groups for more than a year showed
that the right norms could raise a group’s collective intelligence,
and the wrong ones have the opposite effect (even when individual
intelligence was high).
But while team norms differed widely in character, high-
performing teams all exhibited a high level of ‘psychological safety’.
Professor Amy Edmondson from Harvard Business School defines
this as a ‘shared belief held by members of a team that the team is
safe for interpersonal risk-taking’,12 and also as describing a team
climate that is ‘characterized by interpersonal trust and mutual
respect in which people are comfortable being themselves’. Feeling
like you can really be yourself in the team and work environment,
that you do not need to play a particular role, and that work is more
than just work, really matters. Anything that detracts from this
impacts not just employee happiness, but performance.

Similarly, research by Carnegie Mellon, MIT and Union College
has documented the existence of a collective intelligence among
teams who cooperate well that extends beyond the cognitive
abilities of the group’s individual members. Teams with the right
kind of internal dynamics, and particularly those that exhibited
higher levels of ‘social sensitivity’ (how well team members are able
to perceive other team members emotions), and those where team
members were able to speak in a more equal distribution of turn
taking rather than one person in the group dominating, performed
well on a wide range of assignments. Interestingly, teams
containing more women demonstrated greater social sensitivity
and in turn greater collective intelligence compared to teams
containing fewer women. As one of the researchers noted: ‘Having
a bunch of smart people in a group doesn’t necessarily make the
group smart’.13
From her work, Amy Edmondson has defined three key strategies
for leaders to create the environment in which psychological safety
can work:
1. Framing work as learning problems, rather than execution
problems – if leaders can depict clearly how increased
uncertainty and interdependence means that each team
member’s input matters: ‘We’ve never been here before; we
can’t know what will happen; we’ve got to have everybody’s
brains and voices in the game.’14
2. Acknowledging fallibility – simple statements or questions that
acknowledge that the leader does not have all the answers, and
create permission for input from others.
3. Model curiosity by asking a lot of questions – this creates the
need to generate answers and therefore the need for voice.
Edmondson believes that the interaction between psychological
safety and accountability, enabling questions and open discussion
while holding people accountable, can combine to create a high

performing team in an uncertain environment. Conversely,
accountability without psychological safety can create anxiety and
mistakes, and maintaining the open, safe culture without
accountability means employees remain unchallenged and overly
comfortable.
If combining psychological safety and accountability works at a
group level to create high performance in uncertain climates, and a
collective intelligence that is greater than the cognitive abilities of
individual team members, then we need to scale this approach
across the entire organization. In 1996, Rob Goffee and Gareth Jones
described an approach to understanding organizational culture that
plotted cultures across two axes: Sociability (emotional, non-
instrumental relations, friendliness, social interaction for its own
sake, ‘high levels of unarticulated reciprocity’); and Solidarity (the
ability to pursue shared goals effectively and quickly, regardless of
personal ties, relationships based on common tasks or mutual
interests).15 This defined four main cultural types:
1. Networked: High sociability, low solidarity. Characterized by
high trust and empathy, open door policies, loyal to social group
rather than an organization.
2. Mercenary: Low sociability, high solidarity. Exhibited by weak
social ties, encouraged competition between employees, high
performance but employees stay only as long as their personal
goals are met.
3. Fragmented: Low sociability, low solidarity. Here there is low
consciousness of organizational objectives, a shut door policy,
employees rarely agreeing with organization objectives.
4. Communal: High sociability, high solidarity. Characterized by
strong team working, sharing the organizations mission, value,
risk, and reward, strong friendship relations.
Goffee and Jones stress that no one of these cultures is the ‘best’
option, that there may well be advantages and disadvantages, and

that different cultures are appropriate for different business
environments.
Building on this work, and that of Amy Edmondson, we can
understand that if we desire a culture that supports agility, we need
to combine traits that support psychological safety at scale
including sociability, openness, and risk without recrimination,
while still optimizing for accountability towards a shared, common
objective (Figure 13.3).

Figure 13.3 Combining psychological safety and accountability
Combining both creates the culture and support systems for high-
performing teams to thrive in a truly agile business.
Creating the culture for real collaboration
Having established what is needed to build a culture that empowers
high performance, we need to understand how at a team and intra-
team level, we can empower true collaboration to enable us to
move fast. It is very easy when we are trying to increase velocity as
a business to over-focus on the process and under-focus on the
environment that enables speed to happen. If it is a culture that is
characterized by trust, which enables a greater degree of unity and

autonomy then we are more likely to be able to progress at pace.
There is less chance of misalignment through individual action, or
micro-management, or unnecessary explanation, updates, reporting
or supervision, which slows everything down.
Similarly, if it is a culture that embraces the kind of ‘psychological
safety’ that we discussed earlier, one where staff feel like they can
be their true selves in the workplace, and one that enables healthy
debate, questioning and dissent, then there is less chance that we
waste time with unnecessary company and team politics, which
again slows everything down.
Analyst Ben Thompson has described the building blocks of true
collaboration as a combination of mutual trust and respect and
comfort with dissent16 (Figure 13.4). Ben makes the point that real
collaboration, particularly cross-functional, is hard to achieve, and
yet that is where the real value lies:
As much as we glorify the solitary coder or designer, the truth is that, especially in
technology, breakthroughs are collaborative and iterative, borne of thousands of
disagreements.17

Figure 13.4 Building blocks of true collaboration
Source Adapted from Ben Thompson, (July 2013) The Uncanny Valley of a Functional Organization,
https://stratechery.com/2013/the-uncanny-valley-of-a-functional-organization/
Not having the necessary cultural ingredients can lead to conflict or
group-think, so in order to truly start to break down functional silos
we need to invest in enabling the kind of behaviours and cultural
characteristics that empower real collaboration.
The importance of trust and ‘productive
informality’
When John Boyd derived his ‘OODA loop’ approach to military

strategy, he emphasized how important trust is to the effective
operation of the cycle. As his biographer, Robert Coram describes it,
the commander and subordinate share a common outlook, trust
being the force that binds the group together, giving the
subordinate greater freedom of action:
They trust each other, and this trust is the glue that holds the apparently formless
effort together. Trust emphasizes implicit over explicit communications. Trust is the
unifying concept.18
In the scenario of the battlefield, explicit communication is often
simply not fast enough. In the same way, trust in the organization is
essential for it to move fast. Overly formal or explicit language and
behaviours can restrict, impede and slow progress. A common
understanding of our direction and context combined with an
environment of trust enables us to move fast.
Yet that combination needs to be actively created. Research by
MIT Sloan and London Business School (based on a survey of 11,000
senior executives from more than 400 companies) demonstrates the
weak link that often exists in companies between strategy and
execution.19 For the two to be aligned, a strategy must be clearly
articulated and comprehensively understood. When the researchers
asked people to list their company’s top three to five priorities, only
around half could list the same one priority (even with five tries),
and only a third could list the top three. Even more surprisingly, the
result was only slightly more than half for those who were actually
involved in developing the strategy.
The research also found that execution in large organizations
suffers from a lack of trust, which in turns leads to over-
commitment. The findings showed that senior managers trust their
colleagues to deliver all of the time less than 10 per cent of the time,
the result being that senior managers end up doing the job
themselves, stretching themselves and their teams too thin, letting
their own commitments to other teams slip, and compounding the
problem. This enduring issue results in ‘passive commitments’,

duplication of effort, inefficiencies, and a failure to focus on or
recall the firm’s priorities. London Business School Teaching Fellow,
Rebecca Homkes describes how it is often not ill-will that lead to
cross-department commitments failing:
People are taking on huge volumes of work to ensure a job well done, but they also feel
they cannot say ‘no’. The tendency is to say ‘yes’, but then certain things just don’t get
done. That’s when things start to break down.20
When trust is inherent in a culture it enables not only velocity, but
acceleration. Service design and innovation consultant Matt Edgar
has described this as ‘productive informality’.21
In high-performing teams, implicit rather than explicit
communication is emphasized, teams are more unified in achieving
a common goal, we need less forward planning, staff are
collaborating as equals, and empowered with greater freedom of
action. This becomes particularly important in the realm of
customer-centric service design where the requirement is to tune in
to potentially highly differentiated needs:
Productivity in service is infinitely variable. This means that optimizing for repeatable,
well-known processes with narrow tolerance is actually the fastest way to leave value
lying on the table … Only through continuous, informal communication can we discern
and meet the full, diverse, messy, constantly shifting range of customer needs.
The opposite scenario is characterized by non-inclusive working,
late briefing or involvement, arbitrary timelines, and detailed and
rigid requirements. When things go wrong the instinctive reaction
is to impose a tighter rein, which simply serves to move you further
away from the conditions that will most likely result in success.
Instead, informality grows from trust, and trust is earned through
delivery. And so there is a virtuous circle where service
productivity builds trust, and that trust begets informality, which in
turn enables faster, richer, continual learning that is critical for any
service to be productive.

Read my user manual
Effective collaboration comes from the right environment, but also
the right behaviours, and our ability to work well with diverse
people. This becomes even more critical when we are working in
small, multi-functional units. Whether the team is fixed or flexible,
we need to understand how others like to work, not just our own
preferences. When we work with people for the first time or when
someone new is on-boarded it can take time to understand that
person, but if we are moving at pace there is benefit in
understanding that person and how they like to work as fast as
possible. Ivar Kroghrud, co-founder of feedback management
business Questback, advocates the idea of creating a one-page ‘user-
manual’ to help others quickly grasp how best to work with you and
to shorten the learning curve when building new teams, noting that
if you want to get extraordinary results then you have to play to
individual team members’ strengths.22
Adam Bryant of The New York Times, built on this idea to develop
a set of questions relevant to senior leaders (and others in the
workplace) to help build their own user manual. These questions
focus around them as individuals (such as: What are some honest,
unfiltered things about you? What drives you nuts? What are your
quirks? How can people earn an extra gold star with you? What
qualities do you particularly value in people who work with you?
What are some things that people might misunderstand about you
that you should clarify?). But there are also questions relating to
how you interact with others (including: How do you coach people
to do their best work and develop their talents? What’s the best way
to communicate with you? What’s the best way to convince you to
do something? How do you like to give feedback? How do you like
to get feedback?).23
It can take time to learn how best to collaborate with co-workers,
but adopting simple and transparent hacks such as one-page user

manuals to facilitate working at pace means that actually working
at pace is far more likely to happen.
Notes
1 Michael Sahota (25 July 2012) An Agile Adoption and Transformation Survival Guide,
Info Q, [Online] https://www.infoq.com/minibooks/agile-adoption-transformation
2 William E Schneider (1 March 1994) Reengineering Alternative: A plan for making
your current culture work, Irwin Professional Publishing, ISBN-10 786301201 ISBN-13
978–0786301201
3 Jason Fried (13 May 2008) You Don’t Create a Culture, Signal vs Noise, [Online]
https://signalvnoise.com/posts/1022-you-dont-create-a-culture [accessed 25 October
2016]
4 Slack (13 January 2015) Building the Workplace We Want, Slack HQ.com, [Online]
https://slackhq.com/building-the-workplace-we-want-31fff8d6ffe0#.bxtx8569m
5 Buffer, Buffer Monthly Reports, Buffer.com, [Online]
https://open.buffer.com/category/transparency/buffer-monthly-reports/
6 Joel Gascoigne (19 December 2013) Introducing Open Salaries at Buffer: Our
transparent formula and all individual salaries, [Online]
https://open.buffer.com/introducing-open-salaries-at-buffer-including-our-
transparent-formula-and-all-individual-salaries/ [accessed 25 October 2016]
7 Joel Gascoigne (21 September 2014) Why we have a core value of transparency at our
startup, and why the reasons don’t matter, [Online] http://joel.is/why-we-have-a-core-
value-of-transparency-at-our-startup/ [accessed 25 October 2016]
8 John R Childress (1 December 2013) Leverage: The CEO’s guide to corporate culture,
Principia Associates, ISBN-10 957517971 ISBN-13 978–0957517974
9 Brian Chesky (20 April 2014) Don’t Fuck Up the Culture, Medium, [Online]
https://medium.com/@bchesky/dont-fuck-up-the-culture-597cde9ee9d4#.y9qukolei
10 Reed Hastings (1 August 2009) Netflix Culture – Freedom and Responsibility,
Slideshare.net, [Online] http://www.slideshare.net/reed2001/culture-1798664
11 Charles Duhigg (25 February 2016) What Google Learned From Its Quest to Build the
Perfect Team, New York Times, [Online]
http://www.nytimes.com/2016/02/28/magazine/what-google-learned-from-its-quest-
to-build-the-perfect-team.html?_r=3 [accessed 25 October 2016]

12 Amy Edmondson (4 May 2014) Building a Psychologically Safe Workplace: Amy
Edmondson at TEDxHGSE, YouTube, [Online] https://www.youtube.com/watch?
v=LhoLuui9gX8 [accessed 25 October 2016]
13 Carnegie Mellon University (October 2010) New Study by Carnegie Mellon, MIT and
Union College Shows Collective Intelligence Of Groups Exceeds Cognitive Abilities of
Individual Group Members, Carnegie Mellon University, [Online]
https://www.cmu.edu/news/archive/2010/October/oct1_collectiveintelligencestudy.shtml
14 Shana Lebowitz (20 November 2015) Google Considers This to Be the Most Critical
Trait of Successful Teams, Business Insider, [Online]
http://uk.businessinsider.com/amy-edmondson-on-psychological-safety-2015–11
15 Rob Goffee and Gareth Jones (November 1996) What Holds the Modern Company
Together?, Harvard Business Review, [Online] https://hbr.org/1996/11/what-holds-
the-modern-company-together [accessed 25 October 2016]
16 Joe Turner (April 2016) The Building Blocks of Real Collaboration, Medium, [Online]
https://medium.com/@joeturner/the-building-blocks-of-real-collaboration-
450d1b115041#.xt7eoqk2t [accessed 25 October 2016]
17 Ben Thompson (16 July 2013) The Uncanny Valley of a Functional Organization,
stratechery.com, [Online] https://stratechery.com/2013/the-uncanny-valley-of-a-
functional-organization/ [accessed 25 October 2016]
18 Robert Coram (15 April 2004) Boyd: The fighter pilot who changed the art of war, Back
Bay Books, Reprint edition, ISBN-13: 978–0316796880
19 London Business School (7 December 2015) Two Thirds of Senior Managers Can’t
Name Their Firms’ Top Priorities, London Business School, [Online]
https://www.london.edu/news-and-events/news/two-thirds-of-senior-managers-cant-
name-their-firms-top-priorities [accessed 25 October 2016]
20 London Business School (7 December 2015) Two Thirds of Senior Managers Can’t
Name Their Firms’ Top Priorities, London Business School, [Online]
https://www.london.edu/news-and-events/news/two-thirds-of-senior-managers-cant-
name-their-firms-top-priorities [accessed 25 October 2016]
21 Matt Edgar (July 2016) Put Down All Behaviour Hurtful to Informality!, [Online]
https://blog.mattedgar.com/2016/02/07/put-down-all-behaviour-hurtful-to-
informality/ [accessed 25 October 2016]
22 Adam Bryant (30 March 2013) Want to Know Me? Just Read My User Manual, New
York Times, [Online] http://www.nytimes.com/2013/03/31/business/questbacks-lead-
strategist-on-his-user-manual.html?_r=0 [accessed 25 October 2016]
23 Inc.com (1 January 2014) To Make Your Management Style Clear, Create a User’s
Manual, [Online] http://www.inc.com/the-build-network/to-make-your-management-

style-clear-create-a-users-manual.html [accessed 25 October 2016]

14
A blueprint for flexibility:
autonomy, mastery and purpose
Our massive employee engagement
problem
One of the greatest and yet still relatively undiscussed global
corporate productivity issues is the seemingly huge employee
engagement problem. Gallup’s 2013 State of the Global Workplace
study1 surveyed 230,000 workers from 142 countries. It found that
only 13 per cent of workers feel engaged by their jobs (described as
psychologically committed to their jobs, likely to be making positive
contributions); 63 per cent are ‘not engaged’ (lack motivation,
putting less effort in, especially discretionary effort towards
organizational goals), and 24 per cent are ‘actively disengaged’
(unhappy, unproductive, liable to spread negativity). According to
Gallup,2 this translates roughly into 900 million not engaged and
340 million actively disengaged workers around the world. It is a
bleak, disheartening picture.
Looking regionally, the United States and Canada have the highest
proportion of engaged workers (at 29 per cent) but one of the
interesting nuances to these figures was that when employee
engagement is broken down by company size it reveals that a much
larger proportion of employees who work in small companies (10
people or fewer) are engaged at work compared with those who
work in larger companies. Gallup has estimated that actively
disengaged employees cost the United States $450 billion to $550

billion in lost productivity per year.3 Their research4 shows that
employee engagement is strongly connected to an organization’s
financial success, and business outcomes such as profitability,
productivity and even customer engagement. Data from The State
of the American Workplace report, for example, shows that:
… companies with 9.3 engaged employees for every actively disengaged employee in
2010–2011 experienced 147% higher earnings per share (EPS) on average in 2011–2012
compared with their competition.5
The research found that over the same time period companies that
had a lower average of 2.6 engaged employees for every actively
disengaged employee experienced 2 per cent lower EPS compared
with their competition. The exponential boost in earnings
attributable to a higher engagement ratio, they conclude, is a
competitive advantage that business leaders cannot afford to
ignore.
Mapping strategy and culture to motivation
My old boss Jim Barksdale was fond of saying: ‘We take care of the people, the products,
and the profits – in that order’. It’s a simple saying, but it’s deep. ‘Taking care of the
people’ is the most difficult of the three by far and if you don’t do it, the other two won’t
matter. Taking care of the people means that your company is a good place to work.
Most workplaces are far from good. As organizations grow large, important work can
go unnoticed, the hardest workers can get passed over by the best politicians, and
bureaucratic processes can choke out the creativity and remove all the joy.
Ben Horowitz6
Sometimes, large organizations seem almost uniquely designed to
suck the motivation out of their staff. And yet, when it comes to
agility and moving fast, motivation and engagement are absolutely
key. In his book Drive,7 Dan Pink makes a cogent, convincing and
convention-challenging argument about the limitation of money in
driving performance and satisfaction in the workplace, and how
what really motivates us is autonomy (the ability to make decisions

that can make a difference), mastery (how people can be rewarded
for progress, and getting better and better at what they do), and
purpose (working towards a vision or purpose that is important to
us). Intuitively this makes sense, but this argument is supported by
a plethora of academic studies and research.
Given how critical staff motivation is to organizational
performance, it seems strange that in most companies, so few
organizational constructs are focused around these principles. Yet
they provide us with a compelling and effective way of framing
how we can map organizational strategy, process, culture and
structures to outputs in the agile business. The point being, again,
that becoming more agile as an organization is not only about
technology and processes, but also about the people and culture.
Autonomy
Knowledge workers have to manage themselves. They have to have autonomy.
Peter Drucker8
Where did it all go wrong? Data from the 2016 Edelman Trust
Barometer, a global study with over 33,000 participants,
demonstrates that one in three workers don’t trust their employer,
that trust decreases as you go down an organization’s hierarchy
(the proportion of staff who say they trust their organization at
executive level is 64 per cent of executives, at manager level is 51
per cent of managers, and rank and file level is 48 per cent), and
that for information on the company employees trust peers more
than CEOs.9 And yet, as we discussed earlier, trust is essential not
only to effective collaboration but to moving fast. A true learning
culture can only exist if employees are enabled with the right tools
and processes, and then trusted to learn from their failures as well
as their successes. Overly restrictive procedures and micro-
management kills any chance of creating a culture of ownership
and responsibility.

After flirting with a completely flat organization in 2002, Google
realized that some degree of hierarchy in the company helped in
prioritization, the communication of strategy, ensuring that
processes were aligned with objectives, and facilitating inter and
intra-team working. But they still kept that hierarchy to a
minimum. Now they have only four visible, meaningful levels:
individual contributor, manager, director and vice president.
Rather than micro-managing, managers are focused on creating the
right environment for great work and outputs. Beyond that, staff
are given autonomy to fulfil objectives in the way that they believed
would be most successful. A focus on outputs and results rather
than inputs helps to keep teams on track and support this freedom.
When Amazon established their two-pizza team model, they
structured in such a way to allow for focus through objective and
direction, autonomy in prioritization and execution, and
accountability through performance measures. Each one of those
small teams was established with a ‘fitness function’, a key business
metric agreed between the senior leadership and the team lead who
gives the team focus. This autonomy enables greater
entrepreneurialism, the opportunity for greater ownership and
growth. The value in the organization is naturally oriented towards
performance rather than presentation, great ideas and problem
solving rather than managing upwards, expertise and capability
rather than status or job title. To quote VC Ben Horowitz:
In well-run organizations people can focus on their work (as opposed to politics and
bureaucratic procedures) and have confidence that if they get their work done, good
things will happen both for the company and them personally. By contrast, in a poorly
run organization, people spend much of their time fighting organizational boundaries
and broken processes.10
Netflix believes that most companies naturally curtail freedom and
autonomy as they scale. As organizational complexity increases,
talent density decreases, heightening the need for over-burdensome
process, which worsens the talent drain. In the short term the well-

optimized, process-driven, efficient company may be successful but
then it is unable to adapt quickly to context changes since process-
adherence becomes what is valued, there are ever-fewer ‘curious
innovator-mavericks’ introducing new thinking, and growing
irrelevance ensues. CEO Reed Hastings:
Our model is to increase employee freedom as we grow, rather than to limit it, to
continue to attract and nourish innovative people, so we have a better chance of long-
term, continued success.11
Instead, Hastings advocates eliminating distracting process and
rules, enabling a culture that values simplicity, and increasing
talent density at a faster rate than growth in complexity. Creating
an environment characterized by informal running and the
freedom to make an impact but also a culture that celebrates self-
discipline and high performance serves to maintain agility at scale
but also attract the best talent.
This requires the right framework within which to bring
autonomy alive. In Part Two we talked about how the high
operational tempo that characterized Blitzkrieg enabled frontline
commanders to have the freedom to respond quicker to shifting
scenarios. Schwerpunkt (or the underlying goal, or intent) gave
them the clarity of direction, but Fingerspitzengefuhl (or fingertip
feel) allowed the flexibility to make rapid, intuitive decisions in the
face of fluid situations. This is how autonomy empowers agility.
Netflix describe this as ‘highly aligned’ but ‘loosely coupled’. The
former means that the strategy and goals are clear, specific and
broadly understood, but also that team interactions are focused on
strategy and goals rather than just tactics. The investment in
management time is in being transparent, articulate and perceptive.
Being ‘loosely coupled’ means that cross-functional meetings are
kept focused on strategy and goals. This requires a high level of
trust on tactics and a low level of preview or approval between
groups in order to facilitate moving fast, and leaders proactive in
reaching out as needed for coordination and perspective, or doing

‘post-mortems’ to ensure alignment.
Frontline autonomy only works if we set the right guidelines,
boundaries, direction and measures and then get out of the way.
But it also needs us to be able to internalize the external. If
employees (particularly digital-native talent) feel that they have out-
of-work behaviour that is highly empowered by digital technologies
and connections, yet conversely experience restrictive practices,
technologies and expectations within the workplace they will not
stick around for long. In fact they will probably leave and launch
the next disruptive startup to attack your position in the market. As
organizations, we need to pay attention to changes in consumer
behaviour and norms around social behaviours and acceptance not
only to produce better customer experiences but also better
employee environments. We need to empower the people closest to
the customers to make suggestions and be able to implement
changes that benefit both customer and employee. Looking from
the inside out means that we fall behind. It should be outside in.
Mastery
In the agile organization, mastery means empowering staff to not
only learn and improve but also to visibly see the results of their
learning. The role of data, in supporting data-driven decision-
making but also tracking individual and team progress is central to
this idea. In Part Three we looked at how using OKRs can tie
execution to strategy and provide a universal framework for
tracking objectives and performance. Making performance visible
in real-time through dashboarding is also a powerful way to
demonstrate impact and motivate improvement. As an example, the
UK Government Digital Service have created public dashboards that
show real-time performance across 803 services (just 541 of them
account for 2.4 billion completed transactions per year at time of
writing).12

A data-driven approach to employee performance and well-being
has been championed by Laszlo Bock, long-time Head of People
Operations at Google. Recognizing the paucity of data in the field of
human resourcing, he initiated a long-term study involving
thousands of Googlers in a bi-annual survey called ‘gDNA’. Bock also
established a team of people at Google, under Prasad Setty, focused
on so-called ‘People Analytics’, who are entirely devoted to
expanding a data-driven approach. Work by this team has already
led Google to evolve its recruiting practices, downplaying the
importance of college degrees in favour of ‘intellectual humility’
and other softer qualities (as discussed later in this Part).
Harvard Business School professor David Garvin has described
how the People Analytics team launched a set of research questions
which became Project Oxygen, another long-term research and
training programme that seeks to identify, measure and improve
key management behaviours.13 Through the accumulation and
analysis of multiple data points relating to management and
employee effectiveness (including employee surveys, performance
reviews, exit interviews, and interviews with high and low scoring
managers), the team leading the programme were able to show that
even small incremental improvements in manager effectiveness
had significant impacts.
Google had expanded data-driven decision-making from its
traditional areas of application (product development, marketing)
into assessing the effectiveness of management itself.
Unsurprisingly, there was a high degree of correlation between
managers that scored high on quality scores, and the satisfaction of
the employees in their teams. The team delved deeper into the data
to identify specific traits exhibited by high-scoring managers,
alighting on eight key behaviours. A good manager:
1. Is a good coach.
2. Empowers the team and does not micro-manage.
3. Expresses interest in and concern for team members’ success

and personal well-being.
4. Is productive and results-oriented.
5. Is a good communicator – listens and shares information.
6. Helps with career development.
7. Has a clear vision and strategy for the team.
8. Has key technical skills that help them advise the team.
These key behaviours, primarily focused on leaders of small or
medium-sized teams, incorporated the kind of elements that might
be thought of as classic good management techniques (including
communication, team and individual development, autonomy and
empowerment) but are ones that in reality are often neglected. It is
also notable how softer qualities such as being a good coach, being
engaged in employee well-being, and communication of team vision
and strategy ranks higher than having specific technical skills.
The project has led to a quantifiable and wide-ranging
improvement in management effectiveness scores over time,
helped the company develop a common language and expectation
around management, and impacted positively on employee
perception of working at Google.
It is important that we recognize that mastery and autonomy go
hand-in-hand. Laszlo Bock and his team have deliberately taken
power and authority over employees at Google away from
managers, meaning that decisions over recruitment, performance
rating, salaries or awards are not the jurisdiction of one person, but
a group of peers or a dedicated team. Younger employees (often
grouped as ‘millennials’) increasingly desire both the freedom to
make the key decisions that impact the area that they are
responsible for, and the support to help them get there. One survey
by Intelligence Group found that 72 per cent of ‘millennials’ want to
be their own boss at work, and that 79 per cent wanted their
superiors to act as coaches or mentors.14 In this context, the old-
style performance review, often conducted infrequently (and locked

into an annual or bi-annual frequency) can do more harm than
good. A succession of companies including Accenture, Deloitte,
Microsoft and Adobe have moved away from these old-style reviews
and replaced them with simpler, more focused evaluation processes
that unfold incrementally throughout the year. When Deloitte
conducted a review of their old-style performance review system it
was discovered that the review cycle including administration,
meetings and rating was consuming around 2 million hours a year
(mostly in discussing the ratings rather than the actual
performance).15 In the context of more fluid, iterative working and
embedded reflection time, there should be multiple opportunities
for feedback. If there are not, you are not doing it right.
The antithesis of this is valuing upwards management over real
measures of output. As Peter Thiel puts it:
In the most dysfunctional organizations, signaling that work is being done becomes a
better strategy for career advancement than actually doing work (if this describes your
company, you should quit now).16
In addition to improving visibility of performance data through
dashboarding, and more regular feedback, simple tools and hacks
can facilitate better working in flatter, and more decentralized
hierarchies. The system of ‘Snippets’ (originated at Google but now
widely used in technology-driven and increasingly other
businesses), involves staff writing down on e-mail what they have
achieved in the past week, and what they are setting out to achieve
in the coming one. This is compiled into a public forum and
distributed as a transparent but simple way to ensure that
employees take the time to reflect on progress and plans, and are
more connected to their work. The ‘Snippets’ system (and others
like it) create minimal time disruption but maximum transparency,
helping to log progress and reduce internal politics.
Improved performance transparency through data, visible
learning, embedded reflection, combined with the autonomy to
move at pace: these are all elements that not only intuitively feel

right, but drive exceptional performance.
Purpose
Much has been written about the importance of purpose to business
and brands, but perhaps one of the most compelling arguments
comes from Simon Sinek and his concept of the ‘golden circle’. Sinek
argues that people don’t buy what you do, they buy why you do it.17
If we consider the way in which the brain works, our neocortex
deals with rational and analytical thought and language, and that
aligns to the ‘what’. But we ignore the ‘why’ at our peril since this
speaks to the limbic brain, which has no capacity for language but is
central to how we feel, behave and make decisions.
This is powerful not only in attracting customers but also talented
employees. A compelling mission, cause or belief catalyses loyalty,
alignment and motivation. People who want to make a difference in
the world are attracted to organizations who themselves are setting
out to achieve what no other company can do. Shared passion
creates an imperative to do great work but also a great
environment in which to do that work. As exceptional talent
becomes more selective about where it wants to work, and
employer brands become more transparent, organizations that do
not have a compelling purpose will fail.
This clarity of purpose needs to run through the organization.
Pixar, one of the most successful film businesses of all time, has a
creative culture that relies on an interpretation of leadership firmly
routed in vision and purpose. Ed Catmull, Pixar President, has said:
We say we are director led, which implies they make all the final decisions, [but] what it
means to us is the director has to lead … and the way we can tell when they are not
leading is if people say ‘we are not following’.18
Author Adam Grant has demonstrated why purpose is so
powerful.19 Working with employees of a university fundraising

call-centre, he divided them into three groups: a control group; a
group who read stories from other employees about the benefits of
the job; and a group who read stories from students who had
received a scholarship about how it had changed their lives. The
first two groups saw no difference in performance. The third group
however, grew their weekly pledges from 9 to 23 per week and their
weekly fundraising by 143 per cent. Extending the study to see what
would happen if another group of fundraisers actually met some
recipients of scholarships, he found that the weekly fundraising for
that group went up by 400 per cent. Creating a significance for the
work beyond money, it seems, leads to far greater performance.
Purpose brings meaning, and meaning brings connection.
Notes
1 Gallup, State of the Global Workplace, Gallup, [Online]
http://www.gallup.com/services/178517/state-global-workplace.aspx [accessed 25
October 2016]
2 Gallup, Worldwide, 13% of Employees Are Engaged at Work, Gallup, [Online]
http://www.gallup.com/poll/165269/worldwide-employees-engaged-work.aspx
3 Gallup, Worldwide, 13% of Employees Are Engaged at Work, Gallup, [Online]
http://www.gallup.com/poll/165269/worldwide-employees-engaged-work.aspx
4 Gallup, FORTUNE 500 Employee Engagement Tools for Your Size Company, Gallup,
[Online] https://q12.gallup.com/ [accessed 25 October 2016]
5 Gallup (11 June 2013) How to Tackle U.S. Employees’ Stagnating Engagement, Gallup,
[Online] http://www.gallup.com/businessjournal/162953/tackle-employees-
stagnating-engagement.aspx [accessed 25 October 2016]
6 Ben Horowitz (24 April 2014) The Hard Thing About Hard Things: Building a business
0062273208
7 Daniel H Pink (13 January 2011) Drive: The surprising truth about what motivates us,
Canongate Books, ISBN-10 184767769X ISBN-13 978–1847677693
8 Rick Wartzman (October 2014) What Peter Drucker Knew About 2020, Harvard
Business Review, [Online] https://hbr.org/2014/10/what-peter-drucker-knew-about-

2020 [accessed 25 October 2016]
9 Lydia Dishman, April 2016, Why Employees Don’t Trust Their Leadership, Fast
Company, [Online] https://www.fastcompany.com/3058630/why-employees-dont-
trust-their-leadership [accessed 25 October 2016]
10 Ben Horowitz (24 April 2014) The Hard Thing About Hard Things: Building a Business
0062273208
11 Reed Hastings (1 August 2009) Netflix Culture – Freedom and Responsibility,
Slideshare.net, [Online] http://www.slideshare.net/reed2001/culture-1798664
12 Gov UK, https://www.gov.uk/performance
13 Harvard Business Review (December 2013) How Google Sold Its Engineers on
Management, Harvard Business Review, [Online] https://hbr.org/2013/12/how-google-
sold-its-engineers-on-management [accessed 25 October 2016]
14 Rob Asghar (13 January 2014) What Millennials Want in the Workplace (and Why
You Should Start Giving it to Them), Forbes, [Online]
http://www.forbes.com/sites/robasghar/2014/01/13/what-millennials-want-in-the-
workplace-and-why-you-should-start-giving-it-to-them/#4564504f2fdf [accessed 25
October 2016]
15 Marcus Buckingham and Ashley Goodall (April 2015) Reinventing Performance
Management, Harvard Business Review, [Online]
https://hbr.org/2015/04/reinventing-performance-management [accessed 25 October
2016]
16 Peter Thiel and Blake Masters (16 September 2014) Zero to One: Notes on startups, or
how to build the future, Virgin Digital, ASIN B00KHX0II4
17 Simon Sinek (September 2009) How Great Leaders Inspire Action, TED, [Online]
https://www.ted.com/talks/simon_sinek_how_great_leaders_inspire_action?
language=en [accessed 25 October 2016]
18 Scott Burkun (19 April 2010) Inside Pixar’s Leadership, Scott Burkun, [Online]
http://scottberkun.com/2010/inside-pixars-leadership/ [accessed 25 October 2016]
19 Adam Grant (April 2013) Give and Take: A revolutionary approach to success,
Weidenfeld & Nicolson, ASIN B00CAUH7UE

15
Digital-native talent
Hiring smart
In Good to Great,1 Jim Collins’s research emphasized just what a
difference finding the right people to fill the right positions in a
company makes to that company’s performance. This intuitively
feels like something that should be obvious, and yet it is one of the
hardest things to actually get right. Not least because of the (internal
and external) pressure that often exists to fill an important position
in a timely manner.
Collins found that one of the characteristics of the leaders of ‘good
to great’ companies was that they kept searching for the right
person if they were not categorically sure that the candidates in
front of them were not absolutely right. They were also great at
ensuring that they positioned their best employees in the optimum
opportunities for growth in the business (rather than solving
everyday problems). And they focused on character, ideals, values
(that match those of the business), behaviour, work ethic as well as
(and sometimes as a higher priority than) direct experience. In
short, they valued people for who they were and not just what they
could do for you, and demonstrated attributes themselves that they
also looked for in others like a disciplined work ethic mixed with a
sense of personal responsibility, of cultivating passion and an
entrepreneurial spirit.
Earlier we discussed Eric Schmidt’s concept of ‘Smart Creatives’,
or the individuals who can combine technical knowledge, business
expertise and creativity and really transform organizational
capability (‘when you put today’s technology tools in their hands

and give them lots of freedom, they can do amazing things,
amazingly fast’). The empowerment of digital technologies is
dramatically amplifying the potential of exceptional talent to make
a difference to the business in which they work. In their research
into star performers in 21st-century organizations, Herman Aguinis
of the George Washington University and Ernest O’Boyle of the
University of Iowa, argue that the nature of modern work has led to
the emergence of a few individuals who contribute
disproportionately to outputs: ‘instead of a massive group of
average performers dominating … through sheer numbers, a small
group of elite performers (dominate) through massive
performance’.2 Instead of following a normal distribution,
individual performance follows an underlying power law
distribution.
Yet the competition around exceptional digital talent is such that
creating the environment in which such talent can thrive is
essential, not a nice-to-have. As is taking the time and space to find
them. Google front-load their people investment, spending an
unusually high proportion of money and time on attracting,
evaluating and cultivating new employees since they believe that
talent is a major pressure (‘Our greatest single constraint on growth
has always, always been our ability to find great people.’ Laszlo
Bock).3 Patrick Collison, founder of the (rapidly growing) payment
technologies company Stripe has articulated how important it has
been for them to take their time to make sure they hire the best
talent. It was six months before they had hired their first two
people, and another six months before they had hired the next few.4
Peter Thiel talks about how recruitment is a core competency for
any company and should never be outsourced.
When Laszlo Bock reviewed the outputs of Google’s extensive
employee research, he noted that school and college performance
correlated poorly with predicting ultimate performance. Instead,
Google have found that structured behavioural interviews involving

a more consistent standard for assessing people is more useful than
highly individualized interviews from different managers.
Recruiting managers are encouraged to ask candidates to give
examples of situations where they have solved difficult problems in
the past. Such questions about direct experience enables better
assessment of how candidates have reacted in a genuine situation
as well as revealing good insight into what they consider to be
difficult. While educational qualifications don’t hurt, and while
vertical or technical skills are important for a significant proportion
of roles, the importance of softer skills is really emphasized:
For every job … the No. 1 thing we look for is general cognitive ability, and it’s not I.Q.
It’s learning ability. It’s the ability to process on the fly. It’s the ability to pull together
disparate bits of information.
There is priority attributed to qualities such as ownership and
humility, the latter in the context of intellectual humility, to be
committed to a line or argument but then be willing to change their
point of view when new data arises.
As well as intellectual humility, traditional forms of candidate
selection often undervalue soft skills at the expense of direct
experience. While the latter is, of course, important it is perhaps
easier to quantify than softer skills such as articulation and
persuasiveness and yet these latter attributes can mean the
difference between an applicant who proves to be competent and
one whose contribution is extraordinary. Staff who can effectively
articulate complex digital concepts or ideas (particularly to non-
digital specialists), and are persuasive in winning support from
people (particularly those in other teams or departments) can be
enormously valuable.
Culture fit, or how well a candidate’s qualities align with the
culture, purpose and values of the organization can be another
difficult aspect to get right, and one that feels tricky to systematize.
Yet it is a critical part of the hiring process for the digital-native
business. As an example, Anurag Gupta, who runs data

warehousing and database solutions at Amazon (Amazon Redshift
and Amazon Aurora), talks about how half the interview time
should focus on culture fit, and how essential it therefore is to have
absolute clarity about what your company culture is, and what it is
not.5 Amazon have spent time defining their core leadership
principles and have not only detailed them on their website but also
thought about what those principles mean for every job at every
level, and brought them to life through the language used in
interviews, one-to-ones with existing staff, and in performance
reviews.
The leadership principles include many qualities that we have
discussed already such as customer obsession, ownership, thinking
big, the ability to invent and simplify, a bias toward action,
recruiting the best talent, relentlessly high standards, but also to
have good instinct, and to be vocally self-critical when appropriate.6
The difference between good and great in talent has never been
greater, nor more fundamental to organizational performance in a
digitally empowered world.
Peacocks, penguins, and pie bakers
There are two kinds of people and organizations in the world: eaters and bakers. Eaters
want a bigger slice of an existing pie; bakers want to make a bigger pie. Eaters think that
if they win, you lose, and if you win, they lose. Bakers think that everyone can win with a
bigger pie.
Guy Kawasaki7
We need more pie bakers in the world. To move fast we need
people who can see the bigger picture, who embrace positive
change as an opportunity, and are optimistic about their ability to
change the world around them. But we also need to create an
environment in which many different types of people can thrive.
Complex problems require diversity to solve them, and solve them
well. Author Scott Page has made a compelling case for how

diversity supports not only better problem solving, but better
predictive capability, defining four key diversity dimensions:
diverse perspectives (how we represent or envision differently);
diverse interpretations (how we classify); diverse heuristics (the
ways in which we generate solutions); and diverse predictive
models (how we extrapolate analysis or stories).8
Like the famed fable about A Peacock in the Land of Penguins,9 we
need to be able to celebrate and combine very different attributes.
While the penguins are those who maintain order, and keep the
system running, the peacocks are the mavericks who create the
opportunity for innovative thinking and creative leaps forward. We
need to celebrate non-conformism as much as we revere efficiency.
We need both to flourish if we are to survive.
Redefining effective leadership for the
digital age
During the research conducted for this book, one of the most
interesting pieces of feedback came in the area of leadership, and
notably on the value of softer skills. Traditional leadership
characteristics such as having a strong commercial focus or being
visionary, inspiring or clear-minded and action-oriented when it
was needed were, of course, still seen as being important, but there
was consistent feedback about the increasing value in ‘softer’
qualities such as curiosity, empathy, collaboration, creativity and
adaptability.
This concurs with research from Wharton University which posits
that leadership styles need to change in the context of the shift in
business models, new sources of value and new types of
relationship with suppliers, partners, customers that digital has
enabled.10 While more traditional ‘command and control’
leadership styles were still valid in some scenarios, leaders need to
increasingly embrace the role of collaborator or co-creator. Where

command and control assumes most of the key insights will come
from the top of the organization, the modern reality is increasingly
about an emphasis on ideas and insights from wherever, meaning
that leaders need to draw on a wider range of leadership styles to
reflect this broader set of value sources. As more business models
rely on the creation of technology, or on so-called ‘network
orchestration’ involving value being derived from more intangible
assets such as relationships, leadership styles that prioritize
collaboration or co-creation become more important.
IDEO founder Tim Brown has also argued that the traditional way
in which we have thought about leadership as ‘leading from the
front’ with someone at the top making all the decisions, is not the
most effective way of unlocking the kind of creativity in an
organization that is so crucial in an environment that dictates a
need to constantly evolve. He frames the role of the leader as an
explorer – someone who can set the direction but also ask the best
questions. Modern, successful leadership, he says, is like a dance:
It’s about the effective playing of a number of different leadership roles depending on the
moment and the circumstances and having the skill to move between those stances as
needs require.11
In the digital age, effective leadership is increasingly not about
telling people what to do, but more about inspiring, nurturing,
persuading. It is less about directing, and more about
empowerment, empathy and cultivation. It is less about control and
more about setting the right context to enable great work. It is about
having the determination and persistence to pursue a compelling
vision, but having the humility to learn, and to know when to
change direction. It is not about coercion, it is about bringing people
on the journey with you.
Key takeouts
In this Part we have discussed how human-centred flexibility in

culture, resourcing and behaviours can create the enabling factors
and environment to catalyse real change and agility. Key takeouts
include:
1. Pay attention to the balance between in-house and outsourced,
central and local, and specialist and generalist resourcing, but
above all maintain a heightened level of fluidity to enable
responsiveness.
2. Use small multi-functional teams, working concurrently in
iterative sprints, and co-located, in order to drive organizational
momentum. Consider how to combine business, technical and
creative skills, and utilize the power of self-organization to
catalyse motivation and productivity but above all, keep the
teams small.
3. Scale agility by focusing small, multi-functional units on key
business or innovation challenges, and support the core team
with collaborators and supporters. Recognize the need for
pioneers, settlers and town planners, and pay particular
attention to nurturing early stage concepts as they come out of
the innovation lab or digital team. Establish appropriate digital
or change governance, perhaps through a ‘digital board’.
4. Build the culture to move fast by promoting mutual trust and
respect alongside comfort with dissent. Promote, recognize and
exhibit behaviours that can nurture a digital-native culture.
Encourage ’psychological safety’ and ‘productive informality’ in
the work environment to lead to high performance.
5. Build engagement, motivation and productivity through
empowering autonomy, mastery and purpose.
6. Spend a disproportionate amount of focus and time on hiring
the exceptional talent that can really make the difference.
7. Draw from a wider set of leadership qualities, and recognize the
value in softer qualities in bringing people on the journey with
you.

8. Celebrate the mavericks.
Notes
1 Jim Collins (4 October 2001) Good to Great, Random House Business, ISBN-10
712676090 ISBN-13 978–0712676090
2 Herman Aguinis and Ernest O’Boyle (May 2014) Star Performers in Twenty-First-
Century Organizations, Research Gate, [Online]
https://www.researchgate.net/publication/237438406_Star_Performers_in_Twenty-
First-Century_Organizations [accessed 25 October 2016]
3 Laszlo Bock (7 April 2015) Work Rules!: Insights from inside Google that will
transform how you live and lead, John Murray, ASIN B00NLHJKBE
4 Chris McCann (8 December 2015) 16 Lessons on Scaling from Eric Schmidt, Reid
Hoffman, Marissa Mayer, Brian Chesky, Diane Greene, Jeff Weiner, and more,
Medium, [Online] https://medium.com/cs183c-blitzscaling-class-collection/16-lessons-
on-scaling-from-eric-schmidt-reid-hoffman-marissa-mayer-brian-chesky-diane-
greene-3d6367e63a42#.4snhenedq [accessed 25 October 2016]
5 First Round, Mechanize Your Hiring Process to Make Better Decisions, First Round,
[Online] http://firstround.com/review/Mechanize-Your-Hiring-Process-to-Make-
Better-Decisions/ [accessed 25 October 2016]
6 John Rossman (2014) The Amazon Way: 14 leadership principles behind the world’s
most disruptive company, CreateSpace Publishing, [Online]
https://pdf.k0nsl.org/C/Computer%20and%20Internet%20Collection/
2015%20Computer%20and%20Internet%20Collection%20part%202/
CreateSpace%20Publishing%20The%20Amazon%20Way,%2014%20
Leadership%20Principles%20Behind%20the%20World’s%20Most%20
Disruptive%20Company%20(2014).pdf [accessed 25 October 2016]
7 Guy Kawasaki (3 March 2011) Enchantment: The art of changing hearts, minds and
actions, Portfolio Penguin, ASIN B004S26HB2
8 Scott E Page (11 August 2008) The Difference: How the power of diversity creates better
groups, firms, schools, and societies, Princeton University Press, ASIN B003TFELFI
9 B J Gallagher Hateley and Warren H Schmidt (1 November 2001) A Peacock in the
Land of Penguins: A fable about creativity and courage, Berrett-Koehler, ISBN-10
1576751732 ISBN-13 978–1576751732
10 Knowledge @ Wharton (6 February 2015) Is Your Leadership Style Right for the
Digital Age?, Knowledge @ Wharton, [Online]
http://knowledge.wharton.upenn.edu/article/the-right-leadership-style-for-the-digital-
age/ [accessed 25 October 2016]

11 Diana Budds (May 2016) IDEO’s CEO on How to Lead an Organization Creatively,
Fastcompany, [Online] https://www.fastcodesign.com/3059787/ideos-ceo-on-how-to-
lead-an-organization-creatively [accessed 25 October 2016]

PART FIVE
The transformation journey
True digital transformation is an enormously complex and
manifold beast that is intertwined with a broad range of
dependencies and factors. So there is no one definitive path to
getting it right. Yet there are some useful ways of thinking about the
process of transformation that we have collected here in our final
Part. We are calling this Part ‘The Transformation Journey’ because
that’s exactly what it is – a journey. Change is a process, not an
event.
The five dimensions of change
The journey to becoming a truly agile business is a multifaceted one
involving a number of fundamental aspects. We can therefore
frame this transformation in the context of five core dimensions:
1. Personal: the individual journey, the challenges, the ups and
downs, the highs and lows.
2. Principles: reorienting around a new foundational organizing
idea and vision, and mapping the values, behaviours and
outcomes to that vision.
3. Process: the structure and process of change. The route into
transformation, the key stages and progression of the journey.
4. Practice: change through behaviour, systematizing change.
5. Pace: the time dimension. The speed of change of component
parts, and the tempo of the transformation process itself.

Dimension one: personal
The transformation leader and the ‘hero’s journey’
Digital transformation, like any change process, is hard. And it takes
time. Potentially, a long time. Perhaps even years. Leading this
change, therefore, can be a soul-crushing, thankless, morale-
sapping, attritional task. But don’t let us put you off. It can also be
the most rewarding work you’ll ever do. An unmissable opportunity
to affect real change in a company. Visible change to the
fundamental way in which that company works. Tangible benefits
that can make the difference between whether that company
prospers, or doesn’t even survive.
It’s an adventure. But it’s not for everyone. The transformation
leader needs to be optimistic, determined, and above all, resilient.
People used to talk about the change management process in terms
of the Kubler-Ross model for the ‘5 Stages of Grief’ (Denial, Anger,
Bargaining, Depression and Acceptance). The digital transformation
leader will likely find that they need to deal with these reactions
from many different sources and all at once. They may well face
their own emotional ‘hype cycle’ (akin to the famous Gartner Hype
Cycle) where initial excitement around the potential to make real,
lasting change soon peaks in the face of the sheer challenge of
trying to create change in the face of wearying inertia. But then, just
when it seems to reach its most difficult point, a small success
shows what’s possible. And then another, and another. And hope,
energy, momentum and motivation build until we’re truly ‘in the
zone’ (Figure P5.1).

Figure P5.1 Digital transformation leader ‘hype cycle’
So who are these heroes? It is critical, of course, that the impetus
and support for digital transformation comes right from the very
top of the organization. But more often it will be a Chief Digital
Officer, Director of Transformation, or a dedicated board member
who will be charged with leading the change process. These are
leaders with energy, enthusiasm, a thick skin, resilience and a
passion to make things better. They can keep focused on underlying
needs rather than becoming distracted by the complexity and
messiness that surrounds change, or the intrusive nature of the
internal politics that that brings. They are the type of leader who
can articulate a vision and then enthuse people to follow them on
the journey to realizing it. They are not fazed by the fact that if they
do their job well, their job will eventually disappear as new
practices, a new culture, a new organization takes shape and
becomes the norm. Their job is essentially to make themselves
redundant, but the knowledge and experience they’ll gain is

Eva Appelbaum, Partner Digital Talent @Work and former Head of Digital Marketing
Transformation, BBC: The importance of resilience
Leading digital transformation is hard. It is challenging, and it is invigorating, but it is also
extremely taxing. Looming over us is the fact that most transformation programmes fail.
And this is the case even when the transformation entails moving from one known, fixed
state to another. With digital, we have the added pressure of a future in constant flux and
even the current state has not solidified enough to give us any certainties to make decisions
off of.
So to lead digital transformation you either need to suspend all disbelief and jettison the
organization towards a future ‘you’ see clearly, or, give in to the uncertainty and do your bst
to shepherd your businesses towards a hazy unknown. Either of these approaches require a
leadership style and competencies that stretch way beyond technological know-how or
commercial acumen.
Much has been said about digital leadership and the need to develop leaders who are
more agile, curious, collaborative and so forth. Digital transformation in particular requires
leaders who can lead with strong emotional intelligence, and who are as comfortable with
uncertainty and intuition, as they are with data and process.
However, there is another side to leading transformation that is less spoken about, less
acknowledged – and that is the personal resilience and strength it takes to hold these roles.
Leading digital transformation means accepting a difficult, sometimes impossible mission.
Stats tell you that it is unlikely you will deliver everything you set out to achieve. The
business’s expectations are often unrealistic to begin with. Sometimes you do not have
enough resource, budget or buy-in to fully disrupt what needs to be disrupted. Other times
the board has bought in too much, believing digital to be some sort of magic bullet, which
will only disappoint in the end. Typically, you have no blueprint for change in your sector, as
very few businesses are that far ahead of you on the journey. Your transformation vision is a
mix of gut decision-making and peering into the proverbial crystal ball.
As a digital transformation leader you are simultaneously telling the story of change,
running the agile programmes to drive change, leading your team, managing up, managing
down, convincing some stakeholders that ‘digital’ IS in fact important, and convincing others
that it is not going to solve everything, promoting innovation on one hand, while trying to
stop too much investment in shiny but ineffective distractions on the other, all the while
being seen as a potential threat to other ambitious leaders in the business.
And in the end, you will find that you have a very short life-cycle. Most transformational
leaders come into a business with an aura around them, and for about six months, maybe a
year, will be trusted as the champion of change with a Midas touch. It is in everyone’s
interest to believe in you. But by year two, the shine wears off, and by year three everyone is
bored of your song and dance, and probably starts questioning what you have really
delivered anyway. You start to look stale. Unfortunately, truly impactful digital
transformation often takes a lot longer than three years! In order to keep the aura alive, to
keep everyone on board the journey and evolve the narrative, transformational leaders
have to expend a lot of their own personal energy over years keeping momentum going,

telling and retelling a constantly evolving story, networking and keeping everyone on side.
This can take a huge toll on the individual and it helps to have a strong balance outside of
your working life to give you the reserves needed to persevere.
In the end, there is usually an in-built hard stop to your efforts. The point at which, if
successful, you are able to integrate ‘digital’ into the businesses and effectively make
yourself obsolete. And the hardest truth of all – the glory of your efforts often come after
that point, and the kudos will go to others.
This is why the real differentiator for truly outstanding digital transformation leaders is
personal and emotional resilience. People who thrive on this challenge and can take
pleasure in the outcomes, despite the mission impossible.
Building a movement for change
How do we bring people on the journey with us? Once we have
made the case for change and created the positive urgency needed
to counteract the forces of inertia, we need the engagement of those
who can make the change happen. There are several powerful tools
we can use here:
1. Work towards a shared vision. The key word here is ‘shared’.
People are far more motivated to work towards a vision if they
feel ownership in helping to shape what that end point is and
how it is achieved. Framing the way forwards as a choice
between two mutually exclusive options (perhaps as simple as
the choice between doing nothing and taking decisive action)
helps a broader constituency within the business feel as though
they are part of a deliberate choice about where the business is
going. An inclusive approach is far more likely to result in
greater ownership and appropriate behaviour change than a
diktat from the top. Even better if we can create a real
movement for change by framing the choice as a genuine call to
arms, an insurgency against the slide into irrelevance.
2. Use the power of empathy. This involves enabling stakeholders
to see the world through the eyes of customers, to see the real
pain points in current processes or approaches (customer
journey mapping or other forms of immersion are excellent

ways to do this). Design firm IDEO talk about ‘Transformative
Empathy’, and how easy it is for key stakeholders in a business
to become far removed from their customers, and difficult then
for them to imagine how things could be different. Immersion in
a different perspective can free up thinking and gain alignment
on the real problems that need to be solved.
3. Make them look good, help them do their job better.
Everyone likes to do well, to be recognized for great work, or to
find better ways to achieve objectives. Framing progress or
projects in ways that enable people to understand how it will
benefit them is a simple, but very powerful way to gain
engagement.
4. Use the power of advocacy. Creating an expanding network of
influencers and champions to spread new thinking through the
organization helps build social proof, amplify influence and
extend behaviour change. As an example of the power of wider
employee digital advocacy Barclays Bank implemented a scheme
called ‘Digital Eagles’ that created 20,000 staff champions who
each volunteer their time to help explain technologies to other
staff and to customers. Drawn from multiple functions, the
eagles are responsible for championing the use of new
technologies at a grassroots level but also running ‘tea and
teach’ sessions designed to answer their customer’s questions
about digital. Hundreds of workshops have trained thousands of
people over the course of the programme, creating a network of
proponents for learning digital skills across the company. A
partnership with the Young Rewired State organization has even
seen the launch of ‘tech accelerators’ in over 1,500 branches in
the UK. As the community has grown, so has the waiting list to
become a Digital Eagle. For Barclays, they have gained not only a
grassroots movement for empowering digital change, but new
ways to identify talent and manage career development.
Leading a group of people who are creating real change within a

much bigger organization can sometimes feel like leading an
insurgency. As people, we have a strong instinct to belong to small
groups defined by clear purpose and understanding, and if done in
a positive way this tribalism can help build momentum. Tribe
members support one another in an environment where respect
and status comes from contribution value and outputs rather than
job title or how many people you manage. Loyalty, shared purpose,
strong bonds, and shared and individual accountability are all
characteristics of belonging to a tribe. As Sebastian Junger has said:
Humans don’t mind hardship, in fact they thrive on it; what they mind is not feeling
necessary. Modern society has perfected the art of making people not feel necessary.1
In his book on tribalism, Junger goes on to talk about how human
beings have three basic needs to be content (with strong echoes of
the autonomy, mastery and purpose that we discussed in Part
Four): to feel competent at what they do; to feel authentic in their
lives; and to feel connected to others. Work conducted by
anthropologist Christopher Boehm has demonstrated that human
groups have long been at their most productive and successful
when there is an absence of arbitrary authority, and when moral
behaviour stems from group pressure with good actions (like doing
something for another person) being recognized and rewarded and
bad behaviours (most notably a failure to share) being punished.2
As Junger says:
The beauty and the tragedy of the modern world is that it eliminates many situations
that require people to demonstrate a commitment to the collective good.
We are wired to want to help one another. So organizational
momentum has its foundations in a company’s ability to be able to
harness our fundamental need to share, feel connected, and work
productively towards a common purpose with other people.
Technology is the enabler.
Dealing with negativity

As we discussed earlier, leading change inevitably results in the
need to face up to a not insignificant amount of negative reaction
along the way. So it’s as well to be prepared for what Dr John
Gottman (Professor Emeritus of Psychology at the University of
Washington) has identified as the ‘four horsemen’ – the four key
reasons why work relationships fail:3
1. Criticism: while complaints focus on specific behaviour,
criticism might attack the character of the person.
2. Contempt: open signs of disrespect, perhaps coming from an
assumed or relative position of authority.
3. Defensiveness: often a form of self-protection.
4. Stonewalling: when one person closes off from the interaction.
Handled badly and in the wrong circumstances, these behaviours
can serve to amplify each other, so while a degree of
misunderstanding, conflict or negativity (particularly from those in
the wider organization that are resistant to change) is inevitable, it’s
sensible to prepare strategies for dealing with it. While not
necessarily feeling like the most natural thing to do, making efforts
to empathize with the potential reasons for negativity can often
help to diffuse conflict. We need to remove the language and
behaviour of blame from situations as much as possible. Caroline
Webb, in the excellent book How To Have A Good Day: Harness the
power of behavioural science to transform your working life4 tells
how helpful it is to assume that you are a good person, but in bad
circumstances or just having a bad day.
The motivation inherent in pursuing a shared vision, and the
support that we can draw from the like-minded collaborators
around us can go a long way to combating the negative impacts of
conflict. But the work of creating a culture of appreciation, respect,
constructive feedback, and healthy rather than negative dissent
should never cease.

Dimension two: principles
The organizing idea
Our second dimension comes from the need in any change process
to set out the vision and direction for change, and provide structure
to how we can reorient the business around some foundational
principles, values and behaviours. Our favourite framework for this
comes from Steven Anderson (Future Kings Ltd) and Jonathan
Lovatt-Young (Love Experience Ltd) who have built a one-page
framework to encapsulate the key elements (the planks and the
pillars) of an agile organizational strategy (Figure P5.2). The
framework is useful in helping to orient the direction and activity of
diverse teams working concurrently on multiple work streams,
potentially across numerous initiatives and touchpoints, and
motivate a tribe of change agents around a singular organizing idea
and vision, providing a clear link with the strategy, execution and
customer experience benefits that feed off from it.

Figure P5.2 Organizing idea-driven experience framework
Source © Steven Anderson and Jonathan Lovatt-Young 2016
Working from the top of the framework down:
1. The Organizing Idea: the overarching statement or principle
which defines the fundamental orientation for the business. This
is what drives the company at its most elemental level.
2. Purpose: a related purpose provides the reason that the
company exists.
3. Vision: the longer-term view of the world we are building or
contributing to. Although the strategy will come to life through
the pillars we expand on below, it’s also possible to capture an
overarching strategic statement at this point.
These planks are supported by three sets of pillars that support and
fulfil our vision, purpose and organizing thought. These are set out
as key component blocks (captured as single words):
1. Values: the things that the organization believes in.

2. Experience principles and behaviours: sets out what these
values feel like as a customer experience and the behaviours by
those in the organization who can bring these values to life (it’s
also possible to take these customer experience principles
further to determine what functional user experience assets can
really bring this to life).
3. Operating model: characterizes the change state that is
required to fulfil these customer experience principles and
related behaviours.
4. Customer benefits: defines the tangible benefits for the end
user ensuring again that everything we do is brought back to
customer need.
This framework can be used as the basis for a series of workshops
that can draw out and inform the key planks and their supporting
pillars.
The benefit of representing this framework on a single page is
that it encapsulates in the simplest but most powerful form what
the organization is setting out to achieve and the expected
behaviours and customer benefits that support that. It can be
circulated to new and existing employees as an uncomplicated,
transparent way of communicating vision and expectation, rather
than this critical information being buried in lengthy
documentation or impenetrable company manuals. It can help align
functional and small multi-disciplinary teams to head in the same
direction, and provide a solid basis for greater ownership and
autonomy.
Dimension three: process
The process and structure of digital transformation
In his 1996 book Leading Change,5 John Kotter famously laid out a

sensible eight-step process for change that became one of the most
widely respected and quoted change management models. The
eight steps were (to paraphrase):
1. Establish a sense of urgency: through analysis of market or
competitive realities, major opportunities or crises and potential
crises.
2. Form a powerful guiding coalition: establish a senior group who
can lead the change.
3. Create a vision: to provide direction, and support that with a
strategy for activation.
4. Communicate that vision: repeated communication, and setting
an example via the guiding coalition.
5. Empower others to act on the vision: remove barriers, change
systems and structures to prevent change being undermined.
6. Plan for and create short-term wins: recognition and reward of
visible performance wins.
7. Consolidate improvements and keep the momentum for change
moving: more systems change, hiring, reinvigorating with new
projects.
8. Institutionalize the new approaches: visibly link new behaviours
to corporate success, leadership development and succession.
In his 2014 follow-up book, Accelerate6 (subtitled ‘Building strategic
agility for a faster-moving world’), Kotter updated the eight-step
process in some key ways:
1. Where the 1996 version recommended responding to and
generating episodic change in sequential and relatively rigid
ways, the updated model suggested that the steps should be run
concurrently and continuously.
2. Similarly, focusing on a linear progression characterized by
doing one thing well at each stage before moving on is replaced

with a continuous search for, and activation of new opportunities.
3. The idea of a small, guiding coalition in the old model is replaced
with the idea of the engine for change coming from a large,
diverse ‘volunteer army’.
4. Where the old model recommended operating within the
existing hierarchy, the new one proposed a network-like function
that could work in flexible and agile ways in conjunction with the
traditional hierarchy.
Kotter’s updating of his model makes intuitive sense in the context
of the fast-moving world in which we now operate. We should, after
all, not take a waterfall approach to becoming more agile. But we
still need a route into digital transformation, to be able to track
progress against key elements of change, and there are some
unique attributes to the process of digital transformation that
enable us to augment existing thinking with the new.
Our framework builds on existing change management thinking
to propose a more digital-native framework for change. One that
utilizes much of what we have discussed so far in this book. The key
to digital transformation is about generating velocity (and
momentum), and combining that with the adroit application of
focus (vision, strategy, execution), and the environment and culture
that enables change to happen. The new reality, as Kotter’s update
suggests, is that this will not be a linear, waterfall process. As we
work to become more agile we need to be agile in iterating and
adapting the process to respond to ever-shifting contexts. We need
to move away from a linear transition model to one where we can
run multiple elements concurrently. We need to move on from the
idea that this is a story with a beginning, middle and an end. It is,
instead, an evolution to a new form of organization that is in a
continuous state of organizational flex and flow.
Our model, the Agile Spiral (Figure P5.3) comprises three
foundational components:

1. Situation and Story: creating the reason and impetus for
change. We need to fully appreciate the new contexts that shape
the world we now exist in (competitive, customer and company),
where we are now and how we need to respond to these
challenges. Then, we need to set out our new vision and
direction, and the elemental components that can get us there.
Storytelling is critical to any transformation process, not least in
bringing people on the journey with us, so how we conceive,
craft and tell our story is fundamental to success. The key parts
to this story are therefore:
a Redefine: to understand and define why the world has
changed forever. Show how the new world will result in
winners and losers, why fundamental change is necessary,
and what happens if we do nothing.
b Visualize: to visualize the promised land, frame the choice
open to us, define and bring to life your organizing thought,
related purpose and vision for reaching the promised land.
c Map: to set out the component elements of change, define
approaches to data, technology, structures, process, culture.
Show how they can overcome obstacles to progress, and how
the company can make the change come true. Map the
dependencies that will enable success.
2. Energize and Enable: having crafted the vision and the story
for change, we need to not just execute, but energize the drivers
of change, marshal resource, remove barriers, build momentum
and amplify positives. We need to prioritize and reprioritize to
bring focus and give direction to the momentum. The essential
ingredients here include:
a Communicate: Find the most compelling way to tell the story
– tell it, tell it again, never tire of telling it. Live it through
behaviour, expectation and the questions you ask everyday.
b Lead: Leading the insurgency – the transformation leader, the
support and involvement of the senior leadership team,

ongoing communication and support through the digital
board, removing barriers to progress.
c Focus: Gather the insurgents – centralize resource and
initiatives (digital centre of excellence, innovation hub,
catalyst brand) to bring focus and catalyse change. Prioritize
and reprioritize – fix the basics, continuously track
performance and progress, but optimize for momentum (the
biggest impact first) to address key business challenges and
continuously search for new opportunity.
d Execute: Work iteratively in small, multi-functional teams to
escalate experimentation and learning and build momentum.
Nurture new cultures and ways of working through translator
roles, by empowering autonomy and encouraging
psychological safety and accountability.
e Capture: Create some highly visible quick wins to create the
space to grow, and celebrate and amplify those wins.
3. Flex and Flow:
a Support: Support with a network of supporters and
collaborators (agile team onions).
b Build: Build on early successes. Expand small, multi-
functional, pod-working beyond the innovation/digital area,
into functions or to address key business challenges.
c Advocate: Create as many advocates and champions for the
new ways of working as possible – use them as an insurgent
army of change agents, equip them with the tools and stories
to spread change.
d Embed: Embed constant experimentation into resourcing.
e Never stop: Never stop working to resist inertia and drift, or
to nourish agility and the culture of collaboration that
empowers it to achieve organizational flow.

Figure P5.3 The Agile Spiral
Dimension four: practice
Change through behaviour

Dr B J Fogg (founder of the Persuasive Tech Lab at Stanford
University) has defined long-term behaviour change as coming
from three key sources: an epiphany; a change of context; and the
cumulative impact of tiny habits over time.7 Framing the context
for change, the new reality, and the new vision for addressing that
reality in the ways that we discussed earlier can lead to the
realization of the need to shift direction. We can change the context
around decision-making, processes, structures, expectation and
environment in the ways that we have also discussed at length
throughout the process of change. But it is the everyday behaviours
and the culture that supports and surrounds them that will ensure
lasting, embedded change. Fogg also says that behaviour comes
from the combination of three elements at the same time: the
trigger, motivation and ability. If one of these elements is missing,
then a behaviour doesn’t occur.8 This being the case, to encourage
new behaviours we need to ensure that the motivation and ability
to respond to triggers in a different way is present. In other words
we need to create the reason for people to respond differently, and
equip them with the capability to do so.
Real transformation comes from bringing a compelling long-term
vision to life through everyday approaches, defaults and
behaviours. In order to truly change behaviour we need a
deliberate shift in the conscious choices that we make, but also
shifts in the habitual behaviours, decisions and routines that shape
much of corporate life.
Remaking organizational habits
All our life is but a mass of habits.
William James
Old habits die hard, or so the phrase goes. The behaviours we
repeat are imprinted as patterns in our neural pathways,
unconscious routines that we regularly follow. The more we repeat
a process the stronger the link between the context and the action

becomes, so increasing automatic behaviour. Organizations are
comprised of people and so just as people develop habits over time,
so might companies. These might be habits of thinking (like the kind
of ‘toxic assumptions’ we described earlier in the book), or habits of
doing. If a habit is an acquired behaviour pattern that is followed
until it becomes almost involuntary or automatic, then an
organizational habit is a customary practice or an inveterate
response to a stimulus that is often accepted, unthinking, deep-
rooted. Transforming an organization means that we not only have
to be aware of what these organizational habits are, but also how
powerful they can be in resisting and also enabling change.
In his book on The Power of Habit,9 Charles Duhigg talks about
just how powerful habits can be in shaping behaviour. A study by
researchers David Neal, Wendy Wood and Jeffrey Quinn at Duke
University,10 for example, estimated that habits, rather than
conscious decision-making, shape up to 45 per cent of the choices
we make every day. The best way of changing a habit or ridding
ourselves of a bad one, says Duhigg, is to replace it with another
habit. This involves recognizing three things:
1. The cues that trigger the start of the habit.
2. The action you take.
3. The benefit you get from doing it.
Breaking it down like this helps us to understand that habits are
comprised of several different elements, each of which might be
challenged and changed. The cues, routines and rewards that
comprise the habits that people acquire enable us to interrogate
their origins and what bolsters them. Cues trigger an action, a
reward reinforces it, a routine develops. Understanding this in the
context of both personal habits as well as organizational habits
gives a far greater opportunity to reform habits, and in the context
of digital transformation, make habits our friend rather than our
enemy.

With cues, says Duhigg, at the moment we feel the urge for the
habit we want to change, we need to ask ourselves questions
around our situation (Where are we? What just happened? Who
else is involved? What did we just do? What emotion are we
feeling?) that will help us identify the most commonly occurring
cue.
With rewards, we need to understand the need that the habit is
satisfying (for example, is it our need for status? Or ego? Or
gratification or some kind?). Once the reward has been identified
we can test that diagnosis by substituting another reward or
experiment further with other rewards until we have found the
correct one.
Having identified the cue and the reward, we can then change the
habit by inserting a new routine.11 This new activity can then still
be triggered by the old cue, and deliver the same old reward.
Duhigg suggests writing a plan for change along the lines of: ‘When
(insert cue), I will (insert new routine), because it provides me with
(insert reward)’.
When bringing change to a company, we therefore need not only
to be aware of what organizational habits have developed that
support and reinforce outdated ways of working, but what the cues
and rewards are that are associated with that routine. We must
identify the times when old routines are no longer appropriate or
are even falling apart (perhaps due to a crisis of some kind) and
utilize that opportunity to bring in a new routine.
We must also focus on what Duhigg calls ‘Keystone Habits’, the
particularly significant behaviours that can act to create a culture
within a company and ‘unlock all these other patterns in someone’s
life or in an organization’. Such keystone habits are more important
than others since they can start a chain reaction, shifting other
habits as they change, and starting a process that over time can
transform a far wider set of behaviours. In order to identify
keystone habits, Duhigg suggests focusing on the three key

characteristics that they all share:
1. Keystone habits create small wins, are places from where
momentum can build, and are typically characterized by giving
you lots of small senses of victory.
2. They also create new platforms or a new basis from which other
habits can emerge (they serve as ‘the soil from which other
habits can grow’).
3. They change our sense of what is possible, or give us confidence,
and so establish a culture where an attribute or virtue (like
change, or perseverance or excellence) seemingly becomes
contagious.12
Duhigg uses the Aluminium Company of America (Alcoa) as an
example of a company that transformed through a focus on
keystone habits.13 As a newly installed CEO, Paul O’Neill was
expected by analysts to focus directly on worker relations (15,000
workers had recently gone on strike), efficiency drives, margins and
profits, or new markets. Instead, O’Neill surprised everyone by
announcing that his top priority was going to be worker safety, and
that his mission was to make Alcoa the safest company in the
United States with a record of zero employee injuries.
Despite analyst scepticism, this focus on how better practices and
habits could improve employee safety catalysed a whole series of
improvements meaning that Alcoa became a far more efficient and
profitable business. Within a year, profits had hit a record high, and
over the next 13 years of O’Neill’s tenure, Alcoa’s market
capitalization rose by US$27 billion and its net income rose to
become five times larger than it was when O’Neill took over. It
turns out that the focus on worker safety engendered an
environment characterized by greater employee trust and more
open communication of ideas, which led to significant
improvements in efficiency. Focusing on worker safety as a
keystone habit had catalysed a positive change to the culture of the

entire company.
So, what might be the keystone habits in your organization? The
answer will likely be different in different organizations, but when
thinking about digital transformation the keystone habits that
matter will likely be those behaviours and approaches that are
fundamental to the day-to-day operations of the business, yet can
also catalyse new ways of working across a broad spectrum of
functions and roles. Perhaps that might be how the organization
uses data in its everyday operations, or behaviours around
openness and transparency, or approaches towards risk and
experimentation. Whatever keystone habit is identified as
sufficiently broad-based yet impactful, it is critical that the
subsequent strategic focus must be brought to life in the very fabric
of what the organization does every day.
Developing systematic change
As we’ve said earlier in this book, change is a process, not an event.
That means that in order to embed long-term and impactful change,
targets are not enough. Change needs to be systematic. In How To
Fail at Almost Everything and Still Win Big14 Scott Adams (the
creator of Dilbert) defines this difference as:
If you do something every day, it’s a system. If you’re waiting to achieve it someday in
the future, it’s a goal.
If a goal is a target that you set to achieve at some point in the
future, a system is a change in behaviour, a way of continually
looking for better options or creating the right habits to build
towards success. Systems, says Adams, are ultimately more
powerful than goals:
Goal-oriented people exist in a state of continuous pre-success failure at best, and
permanent failure at worst if things never work out. Systems people succeed every time
they apply their systems, in the sense that they did what they intended to do. The goals
people are fighting the feeling of discouragement at each turn. The systems people are
feeling good every time they apply their system. That’s a big difference in terms of

maintaining your personal energy in the right direction.
This can make a significant difference in keeping energy and
momentum going in the right direction. Adams gives a few
examples to make his point, a simple one being setting a goal to lose
weight (something that may be difficult to maintain motivation for)
as compared with learning a systematic way to eat better (and
substituting willpower for knowledge).
Companies love setting goals. They are nice and tangible, give a
good sense of direction, and can give clarity on what targets to
achieve and where activity should be directed. The classic scenario
of a CEO announcing a new strategic direction, and a new set of
targets to facilitate the new strategy, plays out often. What
businesses are much less adept at doing, however, is developing
systems that will enable change to happen. The trouble with
isolated goals is that unless there is more fundamental change in
behaviours, processes, skills and incentives, those goals will likely
never be achieved. In this scenario, not only will the change effort
fail, but also staff may well become demotivated, and even lose
trust in the ability of senior management to lead change. Changing
everyday behaviour, orientation and defaults are fundamental
ways to systematize change and create lasting transformation. So
while goals are good, finding ways to change, recognize and reward
behaviours to create a new system is better.
Think, feel, know
The definition of insanity is doing the same thing over and over again, but expecting
different results.
Albert Einstein
A key way to think about changing everyday behaviour is to
consider the factors that shape it. Author Clive Hyland has written
about a simple behavioural model (expanding on a coaching
framework originally created by Darren Shirlaw)15 based on three
key structures of the brain, and the way in which it works in order

to represent how our everyday behaviour (in relationships, team
working and leadership) is shaped:16
1. Think: from the cortex (the grey outer mass of the brain). This is
the domain of logic, reason and rational processing. The domain
of self-awareness, sense-making, the rules of social engagement.
2. Feel: from the limbic region (in the middle of the brain). This is
the domain of the senses, emotions, relationships, connections
with others, and is most closely linked to the heart. It is about
the personal, the subjective, the desire to bond and to form
groups.
3. Know: from the basal region of the brain (just above the spinal
column). This is the domain of instinct, intuition, ‘gut feel’. The
so-called ‘reptilian brain’.
Each of these areas of the brain wields its own type of influence
over our behaviour, and particular types of response may become
more dominant over time, notably in response to specific
circumstances. The thinking style, for example, might elicit the need
for structure, logical argument and clarity of thought or method.
The feeling style may make decisions based more on emotive
reasons, or be influenced more by close associates. They may be
more immediate, perceptive, creative. The knowing style are more
intuitive, using ‘gut feel’ to inform decisions, and keen to get things
done without distraction.
This is useful is a number of ways. It can be helpful in
understanding the reasons behind certain behaviours, or
empathizing with where people are coming from. It can be
advantageous to consider how a great team will naturally need a
combination of styles drawn from all three areas, and how different
people in the team might map to different roles, and combine to
greater effect. As Clive Hyland says:
… if people are developed in the right cultural environment they will inspire and energize
one another to higher levels of achievement …

It can also be fruitful as a way to understand how best to connect
with and engage others in order to bring them on the journey with
us. And it is useful as a way to understand how we might map new
behaviours to particular styles, and therefore inform what levers
we need to pull in order to affect behaviour change.
Dimension five: pace
Our fifth dimension draws in the key dimension of time, notably in
enabling us to understand the varying tempo inherent to different
elements of change, and to better manage the pace of the change
process itself.
Managing the pace of transformation: pace layering
It’s important to recognize that along the transformation journey,
not everything changes at the same pace. Writer Stewart Brand
expounded the concept of pace layering in his book The Clock of the
Long Now.17 Pace layering sets out six layers that function and
evolve simultaneously at different speeds within society. From
fastest to slowest: fashion; commerce; infrastructure; governance;
culture; nature. In 2012, Gartner then used pace layering as a way
to describe the different layers of an organizational technology and
application strategy. From fastest to slowest: systems of innovation
(characterized by experimentation); systems of differentiation
(supporting processes that are different from competitors); systems
of record (supporting core processes which may not be unique).18
In the same way, there will be layers and elements of the digital
transformation process that will develop and evolve at different
timescales. Broadly, from fastest to slowest: while there will be
fundamental customer needs that do not change, or that develop
very slowly, it is likely that we will need to respond to rapidly
shifting customer interaction on a continuous basis; similarly while

there will be basic approaches and procedures that will remain
essential and consistent, it is also likely that we will need to adapt
tactics, processes and workflow rapidly to respond to shifting
requirements; as we’ve discussed earlier, resources need to be fluid
and adaptive, so may change but will likely need to be modified at a
slower pace than the practices and execution that they enable; our
overarching strategy and governance is also adaptive, but changes
more slowly than the tactics that they inform and oversee; our
vision may adapt but should remain relatively settled and
anchored; and lastly while we can take steps to begin cultural
change at the earliest opportunity, this takes the longest time to
transform.
A pace-layered approach to digital transformation might,
therefore, look like Figure P5.4.

Figure P5.4 A pace-layered approach to digital transformation
The productive zone: the balance between comfort and
urgency
Dr Ronald Heifetz of the Center For Public Leadership at Harvard
University has delineated a clear differentiation (in his book
Practice of Adaptive Leadership)19 between what he calls ‘technical
change’ and ‘adaptive change’. Broadly speaking, he describes
technical change as the type of change that addresses more tangible
things such as products, procedures or processes, whereas adaptive
change is that which is more concerned with less tangible human
aspects such as attitudes, thinking, beliefs, values and behavioural
change.20
Adaptive challenges, he says, have a different timeframe to

technical problems. The latter might cause a high level of
disturbance that will then trigger an organizational response, but
since the organization is typically already well equipped with
relevant knowledge, cultural assumptions and capability to deal
with such a challenge, a solution may quickly be found.
Adaptive challenges are different. Instead of being problems that
might be solved rapidly with existing expertise, they require
ongoing experimentation, learning, behavioural and attitudinal
change from multiple parts of the organization.
Heifetz argues that we are often quite poor at distinguishing the
difference between these two types of change, and yet the response
required is very different. Technical change is focused on fixes to
simpler problems that do not require a change to the system in
which they exist. Adaptive change, however, is about more
fundamental shifts to the system or environment in which the
company operates, and therefore demands different thinking, the
learning of new skills, and more disruptive forms of innovation.
The former helps maintain the status quo, the latter is much harder
to achieve since people are much more ready to embrace technical
change than they are the more elemental adaptive change. Making
changes to the system is something that the system itself resists.
Our argument in this book has been that businesses are
increasingly facing complex, adaptive challenges that require far
deeper change than the quick, easy fixes that might be more suited
to technical challenges. In this scenario, staff will need to feel
comfortable with a certain degree of ambiguity and have an
ongoing commitment to the longer-term vision, which dictates that
while clarity and communication of vision is key, leadership might
well be more about asking the right questions rather than providing
the final solution.
A key challenge of ‘adaptive leadership’, as Heifetz calls it, is to
help staff to distinguish what from the past is worth building on,
and what needs to be discarded. In this sense, he says, successful
adaptations are ‘both conservative and progressive’. As they help

people to navigate through a period of potentially significant
disturbance, the adaptive leader needs to be patient and persistent,
determined and resilient in order to prevent the system from
slipping back into its old ways.
Heifetz describes the ‘productive zone of disequilibrium’,
whereby the focus and pressure is high enough to create forward
momentum and engagement, but not so high that it creates
unmanageable levels of pressure that might lead to unhappiness,
chaos or the wrong kind of disruption. Building on this idea, the
secret of managing effective transformation is working within these
boundaries. We need to create sufficient ferment, positive
restlessness and impetus to move beyond complacency and comfort
zones, and to break the forces of inertia. Not reaching this threshold
will mean that transformation efforts will be stifled before they
have even begun. But moving beyond the limits of tolerance may
result in breaking key components of the business needed to ensure
positive outcomes (Figure P5.5).

Figure P5.5 The productive zone of disequilibrium
Source: Adapted from: Mobilizing Adaptive Work: Beyond Visionary Leadership, Dr Ronald Heifetz
with Donald L Laurie, in Jay A Conger, Gretchen M Spreitzer and Edward E Lawler III, The Leader’s
Change Handbook (San Francisco: Jossey-Bass, 1999), pp. 55–87
Our job, in leading transformation is to stay within the
‘productive transformation zone’. At the boundaries of this zone
will be signals that we have either not gone far enough to create
movement and momentum, or that we are starting to break things.
The signs that you haven’t reached the threshold for change are
likely to be:
1. Behaviour – no visible changes to behaviour, no ownership for
change.
2. Inertia – change too slow, old relationship capital still
dominates.
3. Drift – the business starts to drift immediately back to the old
ways of doing things.

4. Innovation – marginal improvements rather than breakthrough
innovation, no change to rate of innovation/experimentation.
5. Complacency – people still within their comfort zone, not
exhibiting changed behaviour or priorities.
The signs that you’re exceeding the limit of tolerance are likely to
be:
1. Morale – dispirited workforce, lack of belief in leadership.
2. Performance – lack of attention to the core business, outputs
suffer, performance declines rapidly.
3. Behaviour – becomes overly pressured, unpredictable, or
characterized by unwanted shortcuts.
4. Talent – the most talented people start to leave, challenges in
retaining the best staff.
5. Focus and governance – unfocused or poorly thought through
innovation initiatives, disjointed focus, breakdown in
governance processes and structures.
The workings of an organization, says Heifetz, can be like dancing
on a dance floor. When you’re busy dancing you only really notice
what is immediately around you, but the adaptive leader needs to
periodically ‘get on the balcony’ to see the wider picture of what’s
happening, and gain a true perspective in order to avoid applying
technical solutions to adaptive challenges. This is also true of digital
transformation. Every now and then we need to take a step back to
look for the signals that can tell us whether we are still in the
productive zone of transformation or not.
Staying agile
The danger of drift

Once we have begun to create real momentum for change the work,
of course, does not stop there. A company that does not keep
pushing the drivers for change will lose momentum in the same
way that a car that runs out of petrol will coast to a stop. As we
mentioned in Part One of this book, this is not a transformation
with a beginning, middle and an end, it is journey to becoming a
new type of organization that is characterized itself by continuous
change, fluidity and rapid adaptation. Losing momentum in the
renewal process means losing performance, position and
advantage.
Analysis by Boston Consulting Group found that 75 per cent of
transformation efforts ultimately fail (only 25 per cent having
outperformed in the long term).21 Their research indicated two
common trajectories whereby a period of short-term recovery
(typically following an initial streamlining process to reduce
inefficiencies) was followed either by long-term slow decline or less
commonly by long-term reinvigoration of growth and performance.
Which ‘chapter two’ trajectory (following the ‘chapter one’
efficiency drive) a company followed was determined by their
commitment to creating lasting change, deploy, grow and innovate
around a new vision, model and/or strategy and then refine it over
a multiyear period.
Success was dependent on many of the factors that we’ve
discussed already in the book: a conscious decision to move beyond
efficiency and refocus on growth and innovation; the creation of
room for experimentation and separation of new business models
from legacy operations, coupled with a new and clear shift in
strategy; an appetite to challenge the old assumptions, ask the big
questions and reinvent business models; multi-dimensional
innovation; determination in taking the long view, sticking to the
vision over a long period of time, and persisting through internal
resistance and setbacks; evolving transformation through test and
learn, deploying a portfolio of initiatives to drive growth, and
constant adaptation of a flexible plan.

Interestingly, the research also revealed a number of key traps
from those that attempted transformation but ultimately failed. To
paraphrase:
The early-wins trap: calling victory too early, after initial gains
in efficiency, and failing to move to ‘chapter two’ and create
lasting change.
The efficiency trap: over-lengthy and enthusiastic cost-cutting
and efficiency drives.
The legacy trap: not moving on from legacy assumptions and
ways of working.
The proportionality trap: dabbling in change (eg a small-scale
series of pilots) rather than properly addressing the scale of the
challenge with a fundamental and scaled response.
The false certainty trap: sticking to a rigid transformation plan
instead of iterating and adapting continually in response to new
knowledge or contexts.
The proximity trap: keeping the new business too close to the
legacy business, and thereby undermining its chances of
survival.
The persistency trap: giving up too soon and underestimating
the amount of time needed to realize results.
Avoiding these traps requires long-term commitment to a vision,
and to continuous adaptation, and the right approaches to
implementing and embedding lasting change. Irresolute or
lackluster executions do not work. Bringing in new ways of working
and implementing agile, for example, half-heartedly simply leads to
doing waterfall in an agile way, which will not work. Underpinning
these traps is the fundamental risk of how easy it is for large
organizations to succumb to what Russell Davies (former Director
of Strategy at the UK Government Digital Service) has called
‘principle drift’. It’s always possible, he says, to make the internet fit
the business model you understand:

… the biggest challenge in Digital Transformation is not in the initial refocusing on a new
organizing principle, it’s in resisting the steady drift back to the old one … Or, worse, to
something that looks like the new one but is, in fact, the old one.22
Digital transformation is not a quick fix. Becoming an agile
organization is a fundamental, long-term shift, and so we need to be
resolute in our determination, stamina and in pursuing our vision.
Minimum viable bureaucracy
Once we have established a growing momentum behind new ways
of working, one of the key ways to kill them is to allow a drift back
to legacy practices that are unnecessarily additive to bureaucracy
and serve only to slow things down. We need to be single-minded in
maintaining the focus to stay fast. One of the key battles to wage is
against low value time-suck and, in particular, meeting creep.
There are two types of meetings: those that result in action and
those that result in a loss of very valuable time. Paul Graham
(Silicon Valley startup incubator founder) has drawn a distinction
between what he calls a ‘maker’s schedule’ and a ‘manager’s
schedule’. Makers (creative types, writers, programmers, do-ers)
prefer to use time in units of at least half a day since you can’t
complete a project or write or program well in anything less.
Managers use time in a different way, typically segmenting time
into one-hour slots. Several hours can be blocked off to complete a
specific task, but the default is that you change what you do every
hour. For those on a manager’s schedule, a meeting is simply a
matter of finding an open slot and booking it in. But when you’re
operating on the maker’s schedule meetings can be a disaster, since
one meeting can blow the whole afternoon by breaking it up into
chunks too small to do anything truly productive with. The different
types of schedule can work in isolation but problems arise, says
Paul, when they meet. And since most bosses operate on the
manager’s schedule ‘they’re in a position to make everyone
resonate at their frequency if they want to’.23 Protecting blocks of

time for key staff to make progress on initiatives is essential.
Yet meetings are a necessary part of corporate life. People need to
get together in order to give and receive updates, make decisions,
move projects on so when we do need to have them we should run
them in the right way and question the defaults we have. It is, after
all, very easy for a growing internally focused, meeting-driven
culture to permeate. Noah Brier (co-founder of innovative
marketing technology platform Percolate, based in New York)
describes how the slow growth and normalization of this behaviour
can slow everything down:
In the case of meetings what starts as a one-off meeting to discuss something, becomes a
weekly meeting for 15 minutes, eventually with more people involved, and eventually you
have 15 people spending an hour together without any real sense for what they’re
talking about or why.
Add in a layer of creeping formalization, which manifests in the
form of ever-more convoluted preprepared reports which
eventually create a mountain of pre-meeting reading, and you have
created a serious brake on agility and actually getting things done.
Noah’s company has introduced six rules for meetings:24
Do you really need a meeting?
Meetings should be 15 minutes by default.
No spectators.
Have a purpose, state it upfront.
Make tasks, assign them to people.
Don’t bring computers or phones.
The questioning about whether you need a meeting at all should
always happen. Setting a time default that pushes teams to make
decisions or to update quickly resets the norms away from the one-
hour blocks of time that typically characterize the manager’s
schedule (and meetings have a habit of growing to fit the time
allocated even if that is not needed). Clarity about objectives and

outputs seems obvious but can often slip. And screens distract from
the task at hand. Sensible, but important.
At LinkedIn they begin by defining the success criteria for the
meeting, apply the RAPID framework (making sure the key people
are in the room – the recommender (R), where necessary key people
who agree with recommendation (A), the performer who executes
the decision (P), if appropriate those with key input (I), and the
decision-maker (D)), always begin with a silent read through, rely
on as few slides as possible, poll the room, and then afterwards
distribute and cascade actions, and follow up.25 These might sound
like obvious best practice, but meetings are often run in multiple,
unstructured ways in a business (dependent on who is chairing it)
which, when the majority of management time may well be spent in
this way, can lead to a significant drain on resources.
Amazon have a no PowerPoint rule for meetings. Says Jeff Bezos:
The traditional kind of corporate meeting starts with a presentation. Somebody gets up
in front of the room and presents with a PowerPoint presentation, some type of slide
show. In our view you get very little information, you get bullet points. This is easy for
the presenter, but difficult for the audience.26
Instead, a six-page narrative memo is created and attendees sit and
read it in silence at the beginning of the meeting. This forces greater
clarity, better presentation of data and reasoning, it removes
unnecessary questioning, and ensures better decisioning.
It’s important to find your own rules and norms for maintaining
time efficiency but establishing better defaults and common
expectations is a good place to start.
The ultimate goal: achieving organizational ‘flow’
When we talk about being ‘in the zone’, we’re usually describing
what psychologist Mihály Csíkszentmihályi has termed ‘flow’, the
mental state where we are completely immersed and absorbed,
with deeply focused motivation, on a singular task or activity.27 The

concept has been applied to a broad range of contexts including
work, education, music, art, sports and gaming.
If becoming a truly agile organization is about transitioning to a
highly manoeuvrable state of continuous adaptation and renewal,
then we might also say that it is about achieving a state of
‘organizational flow’. Csíkszentmihályi has described how achieving
flow in the workplace requires clear goals that are combined with
more immediate feedback and the right balance between
opportunity and capacity.28
The ultimate goal of the agile organization is to achieve a highly
productive state of organizational flow, the characteristics of which
can be described as:
Complete focus on achieving clearly defined goals, with no
distraction.
Tight feedback loops that enable constant feedback and action.
Seamless adaptation to continually accommodate improved ways
of achieving objectives.
Exceptional manoeuvrability and fluidity in response to rapidly
shifting contexts.
Restless, constant innovation and experimentation in search of
opportunity.
Deeply ingrained learning culture.
An energizing, absorbing, invigorating environment in which to
work.
Propelled by a self-perpetuating momentum that never slows.
The personification of a singular, bold, confident business.
Only when we have achieved a state of organizational flow, can we
really say that we have created a truly agile business.
What now?

Go do it!
Notes
1 Sebastian Junger (24 May 2016) Tribe: On homecoming and belonging, Twelve, ISBN-
10 1455566381 ISBN-13 978–1455566389
2 Christopher Boehm (July 2008) Conscience Origins, Sanctioning Selection, and the
Evolution of Altruism in Homo Sapiens, [Online]
https://view.officeapps.live.com/op/view.aspx?
src=https://media.eurekalert.org/aaasnewsroom/2009/FIL_000000000621/BBS%20FINAL%20July%2019
3 Ellie Lisitsa (24 April 2013) The Four Horsemen: Criticism, Contempt, Defensiveness,
and Stonewalling, The Gottman Institute, [Online]
https://www.gottman.com/blog/the-four-horsemen-recognizing-criticism-contempt-
defensiveness-and-stonewalling/ [accessed 25 October 2016]
4 Caroline Webb (14 January 2016) How To Have A Good Day: Harness the power of
behavioural science to transform your working life, Macmillan, ASIN B00ZCCX55I
5 John P Kotter (13 November 2012) Leading Change, Harvard Business Review Press,
ISBN-10 1422186431 ISBN-13 978–1422186435
6 John P Kotter (25 February 2014) Accelerate: Building strategic agility for a faster-
moving world, Harvard Business Review Press, ISBN-10 1625271743 ISBN-13 978–
1625271747
7 B J Fogg (18 June 2016) Tiny Habits Method, tinyhabits.com, [Online]
http://tinyhabits.com/ [accessed 25 October 2016]
8 B J Fogg (2016) Behaviour Model, [Online] http://behaviormodel.org/ [accessed 25
October 2016]
9 Charles Duhigg (7 January 2014) The Power of Habit: Why we do what we do in life
and business, Random House Trade Paperbacks, ISBN-10 081298160X ISBN-13 978–
0812981605
10 David T Neal, Wendy Wood and Jeffrey M Quinn (August 2006) Habits – A Repeat
Performance, Research Gate, [Online]
http://www.researchgate.net/publication/252798940_HabitsA_Repeat_Performance
11 Charles Duhigg, Need to Break a Bad Habit?, charlesduhigg.com, [Online]
http://charlesduhigg.com/need-to-break-a-bad-habit/ [accessed 25 October 2016]
12 Charles Duhigg, April 2012, The Right Habits, Lifehacker.com
http://lifehacker.com/5896846/the-right-habits [accessed 25 October 2016]

13 Charles Duhigg (28 April 2012) How ‘Keystone Habits’ Transformed a Corporation,
Huffington Post, [Online] http://www.huffingtonpost.com/charlesduhigg/the-power-
of-habit_b_1304550.html [accessed 25 October 2016]
14 Scott Adams (8 April 2014) How To Fail at Almost Everything and Still Win Big: Kind of
the story of my life, Brilliance Audio, ISBN-10 1491518855 ISBN-13 978–1491518854
15 Shirlaws, TFK FAQ: Compass from Shirlaws, Shirlaws, [Online]
http://www.shirlawscompass.com/tfkfaq [accessed 25 October 2016]
16 Clive Hyland (27 February 2013) Connect: Through THINK FEEL KNOW, Anoma Press
Ltd, ASIN B00BMJTTJG
17 Stewart Brand (16 March 2000) Clock of the Long Now: Time and responsibility – the
ideas behind the world’s slowest computer, Basic Books, ISBN-10 465007805 ISBN-13
978–0465007806
18 Gartner newsroom (14 February 2012) Gartner Says Adopting a Pace-Layered
Application Strategy Can Accelerate Innovation, Gartner, [Online]
http://www.gartner.com/newsroom/id/1923014 [accessed 25 October 2016]
19 Ronald A Heifetz, Martin Linsky and Alexander Grashow (1 April 2009) Practice of
Adaptive Leadership: Tools and tactics for changing your organization and the world:
A fieldbook for practitioners, Harvard Business School Press, ISBN-10 1422105768
ISBN-13 978–1422105764
20 Dr Ronald Heifetz (14 August 2011) Adaptive vs Technical – Dr. Ronald Heifetz,
YouTube, [Online] https://www.youtube.com/watch?v=UwWylIUIvmo [accessed 25
October 2016]
21 B Martin Reeves, Kaelin Goulet, Gideon Walter and Michael Shanahan (21 October
2013) Why Transformation Needs a Second Chapter Lean, but Not Yet Mean, Boston
Consulting Group, Perspectives, [Online]
https://www.bcgperspectives.com/content/articles/transformation_growth_why_transformation_needs
22 Russell Davies, January 2015 Principle Drift, Russell Davies
http://russelldavies.typepad.com/planning/2015/01/principledrift.html [accessed 25
October 2016]
23 Paul Graham (July 2009) Maker’s Schedule, Manager’s Schedule, Paul Graham.com,
[Online] http://www.paulgraham.com/makersschedule.html [accessed 25 October
2016]
24 Noah Brier (9 June 2014) CULTURE The 6 Meeting Rules of Percolate, Percolate,
[Online] https://blog.percolate.com/2014/06/6-meeting-rules-of-percolate/ [accessed 25
October 2016]
25 Brian Rumao (9 March 2015) How LinkedIn Execs Run Meetings, Linkedin.com,
[Online] https://www.linkedin.com/pulse/how-linkedin-execs-run-meetings-brian-
rumao [accessed 25 October 2016]

26 Brad Porter, September 22, 2015, The Beauty of Amazon’s 6-Pager, Linkedin.com,
[Online] https://www.linkedin.com/pulse/beauty-amazons-6-pager-brad-porter
27 Mihály Csíkszentmihályi (1 August 2002) Flow: The psychology of happiness: The
classic work on how to achieve happiness, Rider, ISBN-10 712657592 ISBN-13 978–
0712657594
28 Mihály Csíkszentmihályi (5 January 2004) Good Business: Leadership, flow and the
making of meaning, Hodder Paperbacks, ISBN-10 340739738 ISBN-13 978–0340739730

Index
Note: Chapter notes and ‘stories from the frontline’ are indexed as such. Page numbers in
italics indicate Figures or Tables.
3M: ‘Genesis Grants’ and Time to Think 65
Accelerate 245
Adams, P (VP of Product, Intercom) 103, 146
Adams, S 251–52
‘adapt or die’ 4–5
adaptive leadership, key challenge of 256
advanced talent networks 177, 178
agile/Agile 79–82 see also Agile Manifesto
budgeting 162–63
challenges 81–82
methodologies, key advantage of 81
‘release early and often’ principle 81
software development practices 79–81, 80
team onions 191–93, 192, 193, 248
the agile innovation process 95–117
empowering invention (and/with) 95–104
the creative organization framework 100, 100
defining the problem to solve: the ‘5 Whys’ 102–03
first principles and 10x thinking 103–04
ideas from anywhere 95–97
‘porous enterprise’ and value of fresh perspectives 98–99
the restless, curious organization 99–100
wide and deep innovation 100–102
ingrained commercialization (and) 105–09
the entrepreneurial function 107–08
pirate metrics 108–09
structuring for innovation 105–07
key takeouts 114–15
scaling, the digital-native way (by) 109–13
fluid resourcing 112–13
power of open ecosystems, growth hacking and APIs 111–12
using network effects 110
Agile Manifesto 79, 82, 83, 91, 183

agile strategy and planning (and) 132–50
balance between vision and iteration 135–37
the customer-centric organization 137–40
discovery-driven planning 147–48
emergent and deliberate strategy 134–35
key to good strategy 132–34
and key contexts: consumer, competitor, company 133
P for Prioritization 141–45, 144
strategy as ever-changing algorithm 145–46
agile structures and resourcing (and) 171–87, 172
centralization vs decentralization, specialists and generalists 178–79
composition of multi-disciplinary teams 185–86
concurrent running, co-located working 173–74, 176, 175
Holacracy 185
insourcing and outsourcing dynamic 176–77, 178
power of small teams to drive big change 179–82
self-organizing, multi-disciplinary teams 183–85
two pizza teams 182–83
agility, scaling (and/by) 188–201 see also Spotify
agile decision-making: flatter structures, quicker decisions 197–98
agile governance and the digital board 198–200
getting the right mix: pioneers, settlers, town planners 193–97, 196
managing core teams and dependencies (and) 191–93
Agile team onion model 191–93, 192, 193 see also models stages: dispersed mavericks,
focused agility, scaling agility, dispersed agility 189–90
Aguinis, H 227–28
AirBnB 9, 109–11, 207
Altimeter 51
Amazon 15, 88, 110, 120, 128–2, 138–39, 182–83, 261 see also Bezos, J
Mechanical Turk 177
one-click 13
Redshift and Aurora 229
Task Rabbit 177
two-pizza team model 219–20
view on innovation 138
Web Services 183
Anderson, S (Future Kings Ltd) 242
Andreesen, M 17, 87
Appelbaum, E 237–39
Apple 15, 68, 111, 119–20, 122
Blue Sky initiative 66
application programming interfaces (APIs) 9, 18–19, 111–12, 115, 139, 176, 182

Applied Imagination 96
Argyris, C 90
articles/papers (on)
economics (Coase, 1937) 18
The Law of Accelerating Returns (Kurzweil, 2001) 5
‘The London Recipe: How systems and empathy make the city’ (Leadbeater, C) 167
Microsoft (Vanity Fair, 2014) 195 see also Ballmer, S
‘The Nature of the Firm’ (Nobel, 1937) 18 see also Coase, R
reform in the healthcare industry (Zimmerman and Glouberman) 73
‘Why software is eating the world’ (Andreesen in Wall Street Journal, 2011) 17
AstraZeneca (and) 174–76
Digital Innovation Group and ‘wicked problems’ in healthcare 174, 175
DigitasLBi 174
autonomy, mastery and purpose (and) 217–26
autonomy 219–21
employee engagement problem 217–18 see also studies
mapping strategy and culture to motivation 218–19
mastery 221–24
purpose 224–25
and the ‘golden circle’ concept 224 see also Sinek, S
Ballmer, S 195
Barden, M 13
Barnes, T 17
barriers to progress: hindrances and problems (and) 34–49
the arrogance of scale 38–39
culture and behaviour 45–46
legacy technology problem 43–44
marginal thinking 44–45
potential flaws of rigid planning 41–43
protecting against ‘toxic assumptions’ 39–41
slow by design 34–35
why good ideas become battles 37
why organizations become ‘sticky’ 35–36
A Beautiful Constraint 13
Bezos, J 88, 110, 128–29, 130, 135, 137, 138–39, 182–83, 261
Bhidé, A 135
Bigger-Higher-Faster-Farther (US Air Force philosophy) 57, 60, 159, 163
Blank, S 106, 108
Blitzkrieg 60, 61, 220 see also Fingerspitzengefuhl and Schwerpunkt
blueprint for flexibility: autonomy, mastery and purpose 217–26 see also flexibility
autonomy 219–21
employee engagement problem 217–18 see also studies

mapping strategy and culture to motivation 218–19
mastery 221–24
and key behaviours of managers 222–23
purpose 224–25
Bock, L (Google Head of People Operations) 221–22, 223, 228
Boehm, C 241
Bogle, N 188
Boston Consulting Group 27
analysis of patterns of entry, grown and exit of US companies (2015) 5
DICE® framework 92
growth share matrix (2014) 12
Bounce 120
Boyd, J 57–61, 159, 212
and OODA loops 58–60, 212
originates EM theory of aerial combat (with T. Christie) 57
Boyd: The fighter pilot who changed the art of war 58
Bracken, M 32
brainstorming 96, 97
Brand, S 254
Brier, N (Percolate) 145, 260–61
Brinker, S 21
and Martec’s Law 21
Brown, T (IDEO founder) 78, 231
Bryant, A 214
Buffer social sharing app 66
building the culture to move fast (and) 202–16
agile as defining a culture 202–03, 203
creating the culture for real collaboration 211–12, 211
creating a user manual 214
differentiating between high-performing teams (and) 208–10, 210 see also research and
studies
four main cultural types (Goffee and Jones) 209–10
key strategies for leaders (Edmondson) 209
digital-native culture 204–07
trust and ‘productive informality’ 212–13
with the right culture 207
Built to Last 127
Calof, J 38
Cameron, W B 161
Catmull, E (President, Pixar) 85–86, 96, 97, 224
Caudill, N 204
change, five dimensions of 235–58

1: personal 235, 236–42 see also stories from the front line
building a movement for change 239–41 see also Boehm, C and Junger, S
dealing with negativity 241–42 see also Gottman, J and Webb, C
the transformation leader and the ‘hero’s journey’ 236–37, 237
2: principles: the organizing idea 235, 242, 244, 243
3: process: process and structure of digital transformation 235, 244–48, 247
4. practice 235, 248–53
change through behaviour 248–49
developing systematic change 251–52
remaking organizational habits 249–51 see also studies
think, feel, know 252–53
5: pace 235, 254–58
layering 254, 255
productive zone: balance between comfort and urgency 255–58, 257
change, key forces for (and) 3–25, 4
the agile context model 20, 20
change as relentless and accelerating 4–6
key challenge: rates of change 21–22, 21
transformed company contexts see change: transformed company contexts
transformed competitive contexts see change: transformed competitive contexts
transformed consumer contexts 13–15
‘gateway principle’ and customer interface battle 14–15
change maturity model 52–54
culture 54
customers 53
planning and processes 53
resources 53
strategy 54
vision 54
change: transformed company contexts (and) 15–20
the data explosion 15–16
the heightened impact of talent 19–20
from linear to networked dynamics 18–19
from products to services, apps and software 16–18
change: transformed competitive contexts (and) 6–12
the ‘full stack startup’ 7–10
horizontal innovation 6–7 see also studies
the shifting nature of advantage and McGrath framework 10–12
‘unicorns’ 8–9
chapter notes (for)
the agile innovation process 115–17
agile strategy and planning 148–50

agile structures and resourcing 186–87
autonomy, mastery and purpose 225–26
barriers to progress: hindrances and problems 48–49
building the culture to move fast 214–16
defining digital transformation 56
digital-native organization 2
digital-native processes 93–94
digital-native talent 232–33
flexibility 169, 225–26
focus 122–23
how digital disrupts 32–33
key forces for change 23–25
linking strategy to execution 164–65
operating in the ‘ambiguity zone’ 76–77
role of vision and purpose 131
scaling agility 200–201
the transformation journey 263–65
velocity 61
The Checklist Manifesto 72
Chesky, B (AirBnb) 109, 207
Christensen, C 27, 31, 45, 50, 51, 103, 128, 129, 134, 145, 177
and ‘jobs to be done’ concept 103
Christie, T 57
The Clock of the Long Now 254
The Cluetrain Manifesto 111
Coase, R 18
Coleman, J (agility transformation consultant) 91–93
Collins, J 86, 127, 227
Collison, P 228
Competitive Advantage: Creating and Sustaining Superior Performance 26
Constable, J (People Development at Pinterest) 205
Cook, S (Intuit CEO) 67
Coppola, F 43–44
Coram, R 58, 59, 60, 212
Cringely, R X 195
criticism 2, 241
importance of withholding 97
Csíkszentmihályi, M 262
and ‘flow’ 262
cultural types (Goffee and Jones): networked, mercenary, fragmented, communal 209–10
Davies, R 141–43, 259
Davison, L 98
definition(s)of

definition(s)of
culture (Chesky) 207
design thinking (Brown, T) 78
digital transformation 50–51
a good strategy (Rumelt) 134
long-term behaviour change (Fogg) 248
measures (NOBL) 126
mission (NOBL) 125
process of technological change (Schumpeter) 29
psychological safety (Edmondson) 208
purpose (NOBL) 125
strategy (Goldratt) 153
values (NOBL) 125
vision (NOBL) 125
Deloitte 78, 223
Centre for the Edge Innovation 130
Diehl, M 96
Digital Eagles (Barclays Bank) 240
digital-native organization 1–56 see also change, key forces for; digital transformation and
how digital disrupts
introduction to 1–2
digital-native processes (and/and the) 78–94
agile 79–82, 80 see also subject entry
dangers of systematic survival bias 87–88
design thinking 78–79
embedding reflection time 90–93
fixed and growth mindsets 89
lean 82–83 see also subject entry
learning to unlearn 88–89
principles of agile business 83, 85, 84–85
value of learning cultures 85–87 see also Andreesen, M; Catmull, E and Collins, J
digital-native talent 227–33
hiring smart 227–29
and key takeouts 231–32
peacocks, penguins and pie bakers 229–30
and redefining effective leadership for the digital age 230–31
digital transformation (and) 50–56
the agile formula: velocity, focus and flexibility 54–55, 55
a maturity model for change 52–54 see also change maturity model and models
what it is NOT 51–52
Dixon, C 9
Doctorow, E L 148

Doerr, J 153–54
Drive 218
Drucker, P 119, 127, 219
Duhigg, C 249–51
and Keystone Habits 250
Dweck, C 89
Dyson, J 37
Edgar, M 35, 213
Edison, T 119
Edmondson, A (and) 181, 208–10
‘psychological safety’ 208
strategies for psychologically safe environment 209
Einstein, A 161, 252
Eisenhower, D E 143
and Eisenhower matrix 143–44, 144
Elliot, M 98
Elman, J (growth hacker) 112
empathy and systems 167–68, 168
The Empty Raincoat 29
The End of Competitive Advantage 10, 113
ephemeralization (Fuller) 5
Evans, P 27
Facebook 15, 66, 69, 107, 112

figures
advanced talent network 178
agile software development 80
the Agile Spiral 247
the Agile Team Onion 192
the ambiguity zone 64
AstraZeneca’s 12-week cycle 175
attributes of pioneers, settlers and town planners 196
building blocks of true collaboration 211
characteristics of change 4
combining psychological safety and accountability 210
Cynefin model (Snowden) 74
digital transformation leader ‘hype cycle’ 237
Eisenhower matrix 144
elements of agility 55
the five questions as cascades 152
lifecycle of an invention 28
an organization’s OKRs 154
organizational change is logarithmic 21
organizing idea-driven experience framework 243
overlapping onions 193
overlapping S-curves 30
a pace-layered approach to digital transformation 255
the productive zone of disequilibrium 257
Schneider’s two-by-two matrix of organizational culture types 203
strategy and tactic tree 153
systems and empathy 168
Fingerspitzengefuhl 60, 136, 220
Fishburne, T 41
Fitzgerald, F Scott 105
flexibility 167–233 see also agile structures and resourcing; agility, scaling and digital
native talent
blueprint for see autonomy, mastery and purpose
defining 167–69, 168
Flickr 134–35
flow, organizational 262
focus 119–65 see also agile strategy and planning; linking strategy to execution and vision
and purpose, role of
defining 119–21
and the wrong side of urgency (Nokia’s story) 121–22
Foer, J 120
Foff, B J (Persuasive Tech Lab, Stanford University) 248

Foreshew-Cain, S (UK Government Digital Service) 140
Foster, R 5
Freedman, Sir L 136–37
Fried, J 42, 204
Fuller, B 5, 89
Fürst, G 99
GAFA (Google, Apple, Facebook, Amazon) 15
Gall, J 70–71 see also Kaufman, J and Gall’s Law 71
The Game Changer 104
Gartner 16, 254 see also models Hype Cycle 236
Garvin, D 222
Gascoigne, J (CEO, Buffer) 66, 67, 205
Gawande, A 72–73
de Geus, A 38
Ghisletta, P 99
Glouberman, S 73 see also articles/papers
Goffee, R 209–10 see also cultural types (Goffee and Jones)
golden circle concept 224 see also Sinek, S
Goldman, A 98
Goldratt, E 152–53
and his definition of strategy 153
The Gone-Away World 137
Good to Great 86, 227
Good Strategy/Bad Strategy 132
Goodhart’s Law on measures 47
Goodwin, T 15
Google (and) 70, 111, 141, 286 see also Kurzweil, R
10x thinking 104
20 per cent time 65
AdWords 86
Atmosphere Convention 15
extensive employee research 228
People Operations 221
Project Aristotle 208
Venture Design Sprint 157
Gottman, J 241
and ‘the four horsemen’ – key reasons why work relationships fail 241
Graham, P 40–41, 109, 260 see also Y Combinator startup incubator
Grant, A 225
Great by Choice 86
Grove, A 151
growth hacking 111–12

Gupta, A (Amazon) 229
hackathons, hackdays and hack weeks 66
Hackman, R 179–80, 184
and key features for effective teams 180
Hagel, J 98, 130
Hammond, D 155–56
Handy, C 29–30, 63 see also S-curves
Hansson, D H 42
Harford, T 70
Hargadon, A 95
Harkaway, N 137
Hastings, R (CEO Netflix) 220
healthcare, wicked problems in (AstraZeneca/DigitasLBI Digital Innovation Group) 174,
175, 176
Heifetz, R (and) 255–58
adaptive leadership 255, 256
productive zone of disequilibrium 256, 257
Henderson, B 12 (Boston Consulting Group founder)
Hillaker, H 59
Hoffman, R (co-founder LinkedIn) 67
Holacracy 185
Homkes, R 213
Horowitz, B (Amazon) 128, 197, 218, 220
‘How Data Will Transform Business’ (TED talk) 27
how digital disrupts (and/and the) 26–33
ambiguity zone 29–31, 30 see also S-curves
defining digital 31–32
lifecycle of a technology 28–29, 28
How to Fail at Almost Everything and Still Win Big 251
How Google Works 34
How To Have A Good Day: Harness the power of behavioural science to transform your
working life 242
How Will You Measure Your Life? 45
Humby, C 16 (of Dunnhumby)
Hyland, C 252–53
IBM 6–7, 69, 78
Innovation Tournaments: Creating and selecting exceptional opportunities 67
Isaacson, W 119–20
Ivarsson, A 191
Jenkins, H 14
Jobs, S 68, 97, 119–20, 144

Johnson, S 69, 96, 173 author of ‘How We Get To Now’ 69 see note 15
Jones, G 209–10 see also cultural types (Goffee and Jones)
Junger, S 240–41
Kaizen 69, 82
Kasporov, G 105
Katz, A 37
Kaufman, J 71
and Gall’s Law 71
Kawasaki, G 229
Kay, G 181
Keeley, L 100–102
Kelley, D 78
Kelly, K 8
Kenyani, P 66
Kniberg, H 191
Kotter, J and his eight-step process for leading change 121, 244–45
Kroghrud, I 214
Kubler-Ross, E 236 see also models
Kurzweil, R (Head of Engineering, Google 5, 28–29 see also articles/papers and S-curves and
Law of Accelerating Returns 5
Lafley, A G (P&G CEO) 104
Laloux, F 185
Leadbeater, C 167
Leading Change 244
lean (and) 82–83 see also Kaizen and lean: core concepts
manufacturing 82
startup 82 see also Ries, E
Toyota Production System (TPS) 82
Lean Canvas 108
lean: core concepts 82–83
build-measure-learn loop 82–83
innovation accounting 83
minimum viable product (MVP) 83
the pivot 83
learning 88–91 see also reflection/reflective practice
double-loop 90
single-loop 90
to unlearn 88–89
Leonhard, G 22
Levy, S 129
Lewis, C S 44

LinkedIn 67, 112
and RAPID framework 261
linking strategy to execution (and) 151–65
agile budgeting 162–63
data-driven decision-making 158–59
the five questions 151–52, 152
key takeouts 163–64
OKRs: bringing the team with you 153–56, 154
spring working as driver of change 156–58
strategy and tactic trees 152–53, 153
technology as barrier to change 1 59–60
technology as enabler of change (and) 160–62
analytics, tracking and measurement 161
artificial intelligence and machine learning 161–62
automation, communication and infrastructure 161
Lipin, P 198
The Living Company 38
Lovatt-Young, J (Love Experience Ltd) 242
Lubart, T 99
McClure, D 108–09
McGrath, R G 10–11, 113, 146, 147–48, 162–63, 171
MacLeod, H 37
Malbon, T 186
marginal thinking 45
Martec’s Law 21
Martin, R 132, 133, 151
measures, Goodhart’s Law on 47
Metcalfe’s Law 110
Millman, D 89
Mindset 89
models see also change maturity model and Kotter, J
70:20:10 approach to resourcing 68
70/20/10 approach to time and focus (Google) 67
70/20/10 for learning and development 113
70:20:10 for products and budgeting 67
the agile context 20, 20
the Agile Spiral 246–48, 247
Agile team onion 191–93, 192, 193
collaborators 192
core team 192
supporters 193
Cynefin (Snowden) 74, 75

Data, Information, Knowledge, Wisdom (DIKW) 158
for the five stages of grief (Kubler-Ross) 236
for maturity in data analytics (Gartner) 16
maturity: legacy, enabled and native stages of development 52
Schneider’s two-by-two matrix of organizational culture types 202, 203
two-pizza team (Amazon 219–20
momentum (velocity x focus) 120–21
adaptive 121
Morgan, A 13
Mueller, J 180
Musk, E (CEO, Tesla Moors) 103–04
Neal, N 249
Nemeth, C 97
Netflix 9, 130, 220–21
Newman, V 35, 36
NOBI organization design consultancy 125
O’Boyle, E 227–28
Ohno, T 102
O’Neill, P (CEO of Alcoa) 251
OODA loops 58–60 see also Boyd, J
operating in the ‘ambiguity zone’ (and/by) 63–77, 64
building velocity through continuous innovation 64–68
complex scenarios requiring emergent solutions 74–75, 74 see also models
marginal and breakthrough innovation 70
more experimentation = more opportunity 68–69
more iterative, emergent approach 70–71
the three types of problem in the world 72–74 see also Glouberman, S and Zimmerman, B
waterfall processes – key challenges 71–72
The Origin and Evolution of New Business 135
Osborn, A F 96, 97
Ovid 36
Page, L 70, 129, 141, 154 see also Google
Page, S 230
Paid Attention 46
Palmer, M 16
Pareto’s principle 27
A Peacock in the Land of Penguins 230
Pensel, D 155
Pikkel, R 100–102
Pink, D 218

Pinterest 135, 205–06, 205
Pirate Metrics 108–09
Pixar 96–97
Play Bigger 128
Porras, J 127
Porter, M 26
The Power of Habit 249
Power House: Strategic Knowledge Management 35
The Power of Pull 98
Practice of Adaptive Leadership 255
Prensky, M 1
Pueschel, L 5
purposeful practice 120
Quinn, B 100–102
Quinn, J 249
Reeves, M 5
reflection/reflective practice 90–91
research (on)
average lifespan of S&P 500 index companies (Foster, R) 5
change in nature of teams in response to more fluid world (Edmonson) 181
collective intelligence among co-operating teams (Carnegie Mellon, MIT, Union College)
208
innovation (Cap Gemini) 105–06
mapping US listed companies on growth share matrix 12
‘The mortality of companies’ (Sante Fe Institute) 5
need for change in leadership styles (Wharton University) 230–31
star performers in 21st-century organizations (Aguinis and O’Boyle) 227–28
transformation efforts (Boston Consulting Group) 258–59
weak links between strategy and execution (MIT Sloan & London Business School)
212–13
Rework 42
Ries, E 82–83, 108
and innovation accounting 162
Rosenberg, J 34–35
Rumelt, R 132, 133–34 see also definitions
Ryan, M (Wartsila Corporation) 87, 126
S-curves 28, 29–30, 30, 63, 64, 114 see also Handy, C and Kurzweil, R
Sahota, M 202
scaling agility see agility, scaling
Schmidt, E 15, 34–35, 186 see also Google

and Smart Creatives 227
Schneider, W 202, 203
Schön, D 90
Schumpeter, J 5
and definition of process of technological change 29
Schwerpunkt 60, 136, 220
Seely Brown, J 98
Setty, P (Google) 222
Seydoux, H 144–45
and Parrot technology and drone business 144
Shirlaw, D 253
Simoudis, E 106
Sinek, S 224
and golden circle concept 224
Smith, D (Global Futures and Foresight) 193–94
Snippets system 223–24
Snowden, D 30, 74, 75 see also models
Socrates 89
Spotify 66
and ‘Squads, Tribes, Chapters and Guilds’ 190–91
stories from the frontline (on)
agile strategy and planning: prioritization in digital transformation 142–43
agile structures and resourcing 181–82
barriers to progress: hindrances and problems 46–47
building the culture to move fast 205–06, 205
digital native processes 87, 91–93
The Future of Digital Transformation (Gerd Leonhard, Futurist and Author) 22–23
linking strategy to execution (using OKRs to drive change: Hammond, D) 155–56
the transformation journey and importance of resilience (Eva Appelbaum) 237–39
vision and purpose 126
strategy see agile strategy and planning and linking strategy to execution
and plan, difference between (Freedman) 136–37
Stroebe, W 96
studies (on)
brainstorming (Nemeth, C) 97
differentiating between teams (Google: Project Aristotle) 208
The Digital Advantage: How digital leaders outperform their peers in every industry
(Cap Gemini and MIT Sloan) 51
the ‘digital universe’ (EMC Digital Universe, 2014) 16
employee engagement (State of the Global Workplace: Gallup, 2013) 217–18
habits (Duke University) 36, 249–50
high-performing teams (Project Aristotle, Google) 208

IBM 2015 global C-suite study on competition and ‘horizontal innovation’ 6–7
Nortel – its failure and bankruptcy (Telfer School of Management) 38
percentage of analysis of world’s data (EMC/IDC Digital Universe, 2012) 16
predicting percentage of US workforce as independent workers by 2020 (Intuit) 177
trust in organizations (Edelman Trust Barometer, 2016) 219
unlearning to learn (European Molecular Biology Laboratory/University Pablo Olavide)
89
surveys (on)
The Business Case for Purpose (HBR/EY) 127
unicorn companies (CB Insights) 9
Syed, M 120
Systemantics: How systems work and especially how they fail 70
Systrom, K (Instagram) 109

tables
the 12 principles of agile business 84–85
key difference between legacy and agile 172
questions to workshop 20
Terwiesch, C 67
Thiel, P 107, 110, 179, 199, 207, 223, 228
Thompson, B 211, 212
three horizons thinking 67–68
Toffler, A 1
the transformation journey (and) 235–65
the five dimensions of change 235–58 see also change, five dimensions of
staying agile (and) 258–62
achieving organizational ‘flow’ 262
the danger of drift 258–59 see also research
minimum viable bureaucracy 260–62
what now? – do it! 263
Twitter 112, 154
and Odeo 135
Tyson, M 145
Uber 9, 177
‘Uber’s Children’ 13
Ulrich, K 67
unicorns 8–9
Unilever Foundry 106–7
United Kingdom (UK)
Government Cabinet Office 160
Government Digital Service (GDS) 65, 141, 159–60, 221
10 design principles of 139–40
‘X-Wing fighter’ approach to technology 160–61
United States (US) 217
Air Force ‘Bigger-Higher-Faster-Farther’ philosophy 57, 60, 159, 163
Army: Commander’s intent 136
and ‘concept of operations 136
military: ‘after action review’ 91
and report on State of the American Workplace 218
Value Proposition Canvas 108
Varian, H 7–8
velocity 57–117 see also agile innovation process; digital-native processes and operating in
the ‘ambiguity zone’
defining 57–61 see also Boyd, J

Viner, K 155
vision and purpose (and) 125–31
link between purpose and profit 127–28
the organizing idea, purpose and vision 125–26 see also definitions
taking the long view 128–30 see also Bezos, J and Hagel, J
Vogels, W 182–83
VUCA (volatile, uncertain, complex, ambiguous) business environments 41
Vuori, T 121
Wald, A 87–88
Walmart Labs 106, 107
Walters, H 100–101
Wardley, S 195
The Way of the Peaceful Warrior 89
Webb, C 241–42
Webber, E 191
Weinberger, D 111
Welch, J 46, 198
what’s stopping you? see barriers to progress: hindrances and problems
Where Good Ideas Come From 96
Williams, N 65 see also UK Government Digital Service
Wired 129
Wood, W 249
Yakob, F 46
Y Combinator startup incubator 40, 41, 109
Zero to One 107, 110
Zimmerman, B 73 see also articles/papers

“An outstandingly researched guide that anyone can use to lead their
own transformation.”
Bruce Daisley, VP EMEA, Twitter
“Packed full of insights, actionable ideas and other people’s
experiences.”
Sean Cornwell, Chief Digital Officer, Travelex
“The defi nitive how-to guide for an organization going through digital
transformation.”
Marco Ryan, Chief Digital Officer, Wärtsilä Corporation
“A must-read for modern leadership.”
Scott Brinker, Author, Hacking Marketing
“An essential and comprehensive guide for those leading digital
transformation in their business.”
Louise Howells, Global Head of Leadership Development, TUI
“A veritable gold mine!”
Gerd Leonhard, Futurist, and Author, Technology vs Humanity
Building the Agile Business through Digital Transformation is an in-depth
look at transforming businesses so they are fi t for purpose in a
digitally enabled world. It is a guide for all those needing to better
understand, implement and lead digital transformation in the
workplace. This book goes beyond traditional thinking and sets aside
outdated strategies to explain what steps need to be taken for an
organization to become truly agile. It addresses how to build
organizational velocity and establish iterative working, remove
unnecessary process, ingrain innovation, map strategy to motivation
and develop talent to succeed.
Building the Agile Business through Digital Transformation provides
guidance on how to set the pace and frequency for change, break old
habits and reform the behaviours of a workforce to embed digital
transformation, achieve organizational agility and ensure high

performance. Full of practical advice, examples and real-life insights
from professionals at the leading edge of digital transformation, this
book is an essential guide to building an agile business.
Neil Perkin is a renowned blogger and the founder of digital and
media consultancy Only Dead Fish. An expert speaker and consultant
on organizational agility, digital strategy and emerging media, he also
curates the quarterly series of Firestarters thought-leadership events
for Google and has been named by the British Interactive Media
Association as one of the most infl uential people in the UK digital
industry.
Peter Abraham is co-founder of weareCrank, an organization that
provides clarity for business acceleration, utilizing data and analytics.
He is also co-founder of Cultuora, a solutions provider that utilizes
data on behaviour to effect culture change within businesses. An
adviser, mentor and consultant, he has over 15 years’ experience in
the creative and media industries and 20 years’ experience helping
companies defi ne their digital strategy and approach to digital
transformation.
KoganPage

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