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In response to my article, “Why Agile Is Eating The World,” which presents Agile as a paradigm shift in management, a reader (Mark Butler) wrote: “You make the clear case for the amazing progress that Agile discipline has achieved, but also clearly that the winning firms must be broken up. So, is Agile the devil incarnate, or is it our savior? The saying goes, “You can't have it both ways." Please clarify on which side of the fence do you sit?”
Let’s be clear. The article isn’t suggesting that firms embracing Agile are either angels or devils. I have yet to see a firm espousing Agile that has no flaws: those flaws must be seen for what they are and they need to be addressed. If not addressed, they will cause serious financial, economic or social problems. Some of the flaws need to be addressed by the firms themselves and will be reinforced by the marketplace. Others may require government intervention.
Lessons That The Marketplace Itself Will Reinforce
Among the flaws for which the marketplace will by itself tend to generate corrective action are:
- Failure to continue innovating: In 2011, Apple innovated by seeing the potential of Siri and incorporating the voice-driven assistant in the iPhone. It was a bold move. Apple bought Siri from SRI International but then omitted to keep innovating. Siri remained anchored in the menial taks of finding restaurants, gas stations and the like in the vicinity of the user. Siri’s technology could obviously be applied to a much broader array of uses. Apple didn’t pursue the possibility. Amazon did. The result? Apple’s Siri has been overtaken by Amazon’s Alexa, and now Apple is having to play a desperate game of catch-up.
- Lesson: Agile innovation is a continuing journey: you never arrive.
- Sweat-shop workplaces: Agile is a new kind of management that is needed to enable talent to bring their smarts, empathy and ingenuity to the workplace. Whatever this management is called, it isn’t just a new process. It’s a fundamentally different way of running an organization. It’s economically more productive. And it has immense potential benefit for the human spirit. It can create workplaces that enable human beings to contribute their full talents on something worthwhile and meaningful—creating value for other human beings. The end of wage-slavery in the workplace is thus a pretty big deal on multiple dimensions, In some cases, however, while some firms have used Agile with their top talent, in other parts of the firm, they have continued sweat-shop conditions that are antithetical to Agile management. They also lead inexorably to a reversion to bureaucratic command-and-control. This reversion will in due course create a negative reputation for the firm and make it difficult to recruit talent in future. If not resolved, it will hinder the long-term growth and the eventual survival of the firm.
- Lesson: Avoid sweat-shop workplaces.
- Short-termism: Some firms embrace Agile while trying to comply with stock market pressures for increases in quarterly earnings at the expense of long-term investments in research and development and expanding into new products and new markets. Not surprisingly, companies that give quarterly guidance tend to attract a disproportionate percentage of short-term investors, who in turn exacerbate the pressure for short-term results at the expense of long-term growth. The major financial gains of Agile are likely to come from market-creating innovations which draw in people who are not currently customers.
- Lesson: Use Agile to expand into new products and markets.
- Share buybacks: The Economist has called them “an addiction to corporate cocaine.” Reuters has called them “self-cannibalization.” The Financial Times has called them “an overwhelming conflict of interest.” In an article that won the HBR McKinsey Award for the best article of the year, Harvard Business Review has called them “stock price manipulation.”These influential journals make a powerful case that wholesale stock buybacks are a bad idea—bad economically, bad financially, bad socially, bad legally and bad morally. There is growing recognition even on Wall Street that share buybacks don’t work even on their terms. Yet some firms practicing Agile still engage in them.
- Lesson: Resist the lure of share buybacks.
Lessons That The Public Sector May Need To Enforce
Among the flaws that the marketplace will probably not by itself correct and where the public sector may need to intervene, include:
- Rethink "maximizing shareholder value": Some firms try to combine Agile management with the goal of maximizing value for shareholder as the sole purpose of a corporation. This goal, which even Jack Welch called “the dumbest idea in the world,” and, which, as Steven Pearlstein recently pointed out, “is now taught in every business school, repeated in every earnings call and annual report and waved around by every activist investor, has no basis in law or logic or any credible theory of how a company should be managed. And it is now the source of most of what has gone wrong with American capitalism—from the accounting fraud to the shabby treatment of workers and customers, from the orgy of share buybacks to the never-ending string of unproductive mergers and acquisitions.” Needless to say, Agile management, which embraces Peter Drucker’s dictum that the only valid purpose of a firm is to create a customer, is incompatible with maximizing shareholder value. In Agile, shareholder value is the result, not the goal of the firm. Nevertheless, the goal of maximizing shareholder value is now so deeply entrenched in U.S. public corporations, and supported by massive share buybacks that hide the lack of long-term growth strategies, it seems likely that it will continue unless and until there is either a major global financial crash or the repeal of Rule 10b-18, the 1982 SEC regulation which exempts open-market stock buybacks from the obvious charge of stock price manipulation
- Lesson: Repeal the 1982 SEC regulation Rule 10b-18.
- Abuse of monopoly power and privacy: Because Agile firms like Apple, Amazon, Facebook and Google are so successful, there are temptations for them to use their market power in negative ways. A summary of the issues is set out by David Dayen in an insightful article in American Prospect, “Big Tech: The New Predatory Capitalism.” He argues that “The tech giants are menacing democracy, privacy, and competition” and asks: “Can they be housebroken?” Thus, the successful exponents of Agile are becoming so dominant in the marketplace that they are now emerging as a threat to a free society, in the much same way, mutatis mutandis, that the big industrial companies of the late 19th Century (rail, oil, steel) became a threat to society and had to be broken up the trust-busters like President Theodore Roosevelt. A similar scenario needs to occur with the big IT firms. That’s a job for the public sector. Dayen's article sets out the agenda. True, it's hard to see how all this will happen in the current political environment. But it has to happen, if a free society is to survive. Monopolies have always been, and will always be, a potential evil. If not addressed, they will destroy the capitalist system that created them. We have seen this movie before, many times. Silicon Valley has been given a free pass from public scrutiny too long. We know how to fix these things. What we need is the willpower to do it.
- Lesson: Apply anti-trust policy and privacy controls to the Silicon Valley giants.
Thus we need to see Agile by the clear light of day, neither through rose-colored spectacles in which everything is kumbaya, nor through a glass darkly in which everything is evil. The saying "you can't have it both ways" doesn't mean that we can't walk and chew gum at the same time.
And read also:
Ten Agile Axioms That Make Managers Anxious
