Which 3 Important Steps Can Make Or Break Your Agile Transformation? Pierre Berrocal, Consultant Initio – Square Group

Which 3 important steps can make or break your Agile Transformation? Pierre Berrocal, Consultant Initio – Square group

Contents Introduction ...... 2 Scaling ...... 3 Business and Operation Integration ...... 4 The ING Case ...... 5 Facilitators ...... 5 Dare to fail, fail FAST! ...... 6 Conclusion ...... 7 About the Author ...... 7 About Initio ...... 8 Contact ...... 8 Initio Belgium ...... 8 Initio Luxembourg ...... 8

Introduction The traditional finance industry is experiencing an increasingly tougher competitive market. Not only are new Neobank-disruptors offering new flashy products with state-of-the-art customer journeys. They are also lean, efficient and smart. Therefore, banks are pushed to innovate and change the traditional “control & command’ leadership Agile is offered as one of the puzzle pieces that banks ought to implement to stay in the game, and the industry listened. However, change is not an overnight process. It usually takes two to three years for a large organization to transform, and even after this period of time the transformation is not fully completed. As shown in the ‘International Agile Maturity’ study led by Initio on a panel of 256 teams representing 5000 people in the financial industry, banks that initiated their Agile Transformation do not consider themselves fully Agile, yet. Sure, on paper, their project managers are called Product Owners and someone is promoted to ‘Scrum Master’ and gets to play around in ‘Obeya rooms’ with white boards, and log their issues in Agile softwares such as Agile Central, Jira and others.

However, Agile is more than using new Agile can also be part of the toolbox, to produce a better tools. You cannot become truly Agile business outcome, while being absent in the headline. Such without shifting the whole working case can be found in Barclays, who specifically avoided words culture of the bank, a process that can as “Agile” or “Transformation” (implying involuntary change), take months if not years. Moreover, to use the term “Better Value Sooner Safer Happier”. experience (and study) has taught us that companies that implement Agile “There are various principles we look to apply – ‘Agile’, ‘lean’, often have to deal with three recurring ‘design thinking’ and others – but our eye is primarily on the bottlenecks: scaling, business outcomes. Our goal is not Agile for Agile’s sake. We’re here to integration and middle management. help teams deliver better business outcomes using tools such as Agile. Those outcomes are summed up as “Better Value Faster Even after avoiding all the bottlenecks to Safer Happier.” an Agile Transformation, it’s worth remembering that not all projects in Jonathan Smart, Head of Ways of Working at Barclays Banks should be submitted to the Agile approach. For instance, Operations in a payment factory are already optimized to the maximum, and follow a very strict process flow dictated by AML1 and Compliance rules. Applying the Agile methodology in such case may not be the correct approach.

International Agile Maturity Study

Test as part of the Sprint 1 Documentation Language 2 Celebrate Sprint results and Team events 1 Use collaboration & communication tools 3 Standup with Team and the Agile Board 1 Retrospection meeting with Team 0 Functional knowledge transfer 1 Scope /Business Case Intro to the team 2 0 0,5 1 1,5 2 2,5 3 2

1 Anti Money Laundering 2 International study on agile maturity, Initio, 2016, https://www.initio.eu/blog/2019/10/16/international- study-on-agile-maturity

Scaling Applying Agile to a team or a domain could be achieved with rigor and good will but when it comes to change every level of a company to embrace a global transformation challenges are way more complex. If we look at BNP Paribas Fortis, they started first by applying the Agile method to their Enterprise Channel teams, producing excellent results, notably because: • The teams were able to develop products independently, releasing part of software without impacting the mainframe of the enterprise (such as a new layout to their banking app). • The senior and middle management understood early the need for change, and acted as true change champions. • The scope of the pilot was limited, allowing the teams to fully manage their workload within their own budget, and setting the development goals achievable within the pilot.

As small pilot projects cannot be replicated at the company level, any company committed to change for an Agile methodology or global framework shall account inter-tribe planning, implement transversal collaboration within the whole organization and adapt the budget allocation processes for instance. And that is the path BNP Paribas Fortis chose to follow. The bank chose a mix between the Spotify model and the Scaled Agile Framework (SAFe), to keep the Agile Way of Working at the squad level, but also to provide a needed structure to leverage the benefits of an Agile company. From the top, the senior management has a crucial role in the transformation, as their vision must be understood by the whole company and embodied at each level of the company to allow teams to work towards the same goal. But also, by providing the tools, such as widespread use of cloud to deliver the speed and repeatability required to respond quickly to customer demands. A large company opting for Agile is more than a superposition of Agile teams. Each team needs to fully understand the strategy, following a global vision. This global vision guides the individual team developments. From the bottom, the framework allows regular contact between different squads and tribes. Those ceremonies help sharing good practices and improve the cross-tribe coordination in the frame of budget provision and identifying interdependencies. In summary, the evolution from an Agile pilot to a fully scaled organization requires carefully planning, and its success depends from the interaction between the management and the local teams.

Business and Operation Integration There are different levels of Agile Maturity. If an enterprise implements Agile only within their IT , but without the Business, they may end up with a two-speed machine. For instance: • On one hand, the Marketing department will design a new product, they will take care of the vision, the business analysis, and in some cases the functional analysis. The testing will be done at the end of the product development cycle, when it’s fully featured. o The testing at the business level is an acceptance testing: Did we build the right thing? Is this what the customer really needs? • On the other hand, IT will design the architecture, develop and test the features included in the sprint. o The testing at the IT level after the sprint is a functional testing: Did we build a correctly working product? Does the software meet the business requirements?

This two-speed machine creates frustrations for all involved parties: • For the Business: One of the fallouts of Agile in this case, is the lack of documentation and reporting produced by IT. So, for the Business, Agile is a black box • For IT: They have no input on the final products, and they feel like a “delivery machine”. They have no incentive to give feedback during the production cycle: The Business believes IT does not know what the client really needs or wants, so they have no say about the matter.

As consequence, an Agile Transformation without properly integrating the Business: • Does not enhance the capability to respond more quickly to new opportunity: The time to market is unchanged • Does not return higher customer satisfaction: Feedback from customers is done at the end of production • Lower employee satisfaction: Due to frustrations.

To avoid the problems below, we need a higher level of maturity, beyond the IT integration. What a company needs to succeed when getting involved into an Agile Transformation in banking, are cross- functional teams who are working in the same space together. Those teams are empowered to solve problems by themselves, but also, to decide to fail if they see a dead-end.

3 The State of Business Agility, CA Technologies, 2017, https://www.intelligentcio.com/africa/wp- content/uploads/sites/5/2017/08/the-state-of-business-agility-2017-fast-facts.pdf

The ING Case

ING decided to introduce Agile when they noticed changes in customer behaviors: “Customer behavior, (...), was rapidly changing in response to new digital distribution channels, and customer expectations were being shaped by digital leaders in other industries, not just banking. We needed to stop thinking traditionally about product marketing and start understanding customer journeys in this new omnichannel environment.” (Bart Schlatmann, 2017, COO ING). However, ING discovered it was not possible to benefit from Agile by simply integrating IT into Agile, they needed to also change the way the Business interacted with IT. The structure of ING had to be completely reorganized, from IT to the end user: It is not enough that IT delivers updates in short sprints, the business also needs to be able to adjust its demands to the customer feedback after each release. They had to cut the requirements into small services and to deploy them one by one and adapt them following an iterative logic. The answer from ING was no longer to have an organization defined by products / services, but to focus their business model on the Customer Journey.

Facilitators To adapt Agile, who originally spawned in the IT world, to a Financial Institution, we need to acknowledge the crucial role played by the middle managers. Middle management is between the “Demand Layer” (What do we need?) and the “Delivery Layer” (How to deliver it). They help disseminate the company strategy to squads and provide context for delivery teams to make decisions aligned to that strategy. The challenge is that many of those managers worked themselves up the pyramid for 20 years. They are used to an environment where they tell people what to do, and how to do it. They want to take ownership and enforce a controlled leadership style. This mindset goes against the Agile Way of Working, where the middle managers become facilitators or business matter experts. In fact, the function of “middle manager” does not exist anymore in an Agile Structure. It does not mean those individuals do not have a role to play, quite the contrary. They are the key to solve the two problems mentioned before: scaling and business integration. Middle Managers have the tough tasks to break the silos between different squads, and between IT and the Business. In a true Agile organization, the middle managers will remove all the blocking points that are outside of the scope of the squad such as: • Making the Business participate in the daily sprints • Coordinating the release between several squads or tribes • Smoothing the angles with a cold handed legal department • Helping to solve a blocking point thanks to their expertise

Managers need to become Facilitators:

1. Spend time with peers at companies that have already gone down this route, or even with members of their own IT department, to see for themselves what this new way of working looks and feels like. 2. Be cultural ambassadors of Agile, help their teams’ transition to a culture of continuous improvement.

3. Step back: Squads, when in sprints, are focused on their current task, while Managers have a broader view of the running sprints. They can give feedback on the good practices of other squads or tribes. 4. Remove any impediments to the success of their teams

Scaled Agile doesn’t need Middle Managers, but Coordinators, Bridges Builders and Experts. Those skills are usually already present in the Middle Management. But as explained above, some Middle Managers have old habits which are counterproductive in the Agile World. One solution is to invest heavily in training from the start of the transformation, or to hire new people with the correct mindset.

Meanwhile, while Agile culture and mindset may involve a flatter hierarchy; the role of the leader should not be underestimated. Leaders enable change, they promote the culture and working environment. They translate the vision into achievable goals.4

Dare to fail, fail FAST! Implementing a full Agile Structure including the business is no easy feat. Business Agility is about eliminating the threats before they strike, to try new ideas and implement them fast. Will it always work? Another hallmark of Agility is a willingness to fail. "What really matters is, companies that don't continue to experiment, companies that don't embrace failure, they eventually get in a desperate position where the only thing they can do is a Hail Mary bet at the very end of their corporate existence (...) I've made billions of dollars of failures at Amazon.com. Literally billions of dollars of failures(...)None of those things are fun. But they also don't matter." Jeff Bezos, Business Insider, 2014. Remember these? Amazon Spark, Amazon Restaurants, Amazon Storywriter, Dash buttons, Amazon Tap, Instant Pickup, Amazon Tickets, Whole Foods 365, Amazon Fresh's Local Market Seller, Quidsi, Endless.com, MyHabit.com, Amazon Webstore, Amazon Destinations, Amazon Local, Amazon Wallet, Amazon Local Register, Fire Phone, Amazon WebPay, Amazon Askville, Amazon PayPhrase, Amazon Auction.

4 Destroy The Hierarchical Pyramid And Build A Powerful Network of Teams, Corporate Rebels, 2017, https://corporate-rebels.com/rebel-trends-2-network-of-teams/

This list of experiments is what makes Amazon Agile, they seem chaotic but they are aligned with the company goals: “to be earth's most customer-centric company; to build a place where people can come to find and discover anything they might want to buy online”. As those goals evolve, the iterative nature of the development of new ideas means direction and strategy can change fast, allowing customers to benefit sooner

Conclusion “Agile is not just about software development; it is a mindset: squads iterate and make improvements to products based on their experience and what they learnt in earlier sprints.” Sandy Everaerts, Initio, 2020. Agile is offered as one of the puzzle pieces that banks ought to implement to stay in the game. Experience (and study) has taught us that Agile often have to deal with three recurring bottlenecks: • An insufficient horizontal scaling between different teams, withholding the necessary synergies to develop complex products • A Business not integrated enough in the Agile Transformation, generating a two-speed machine • A middle management that didn’t evolved into facilitators, impeding the self-empowerment of teams

Being Agile is demanding, is about adapting organizations to meet future challenges. Agile is in the end, only a culture of accepting change that empowers employees to make decisions, and creating a stable structure that allows it to happen.

About the Author Pierre Berrocal has 12 years professional experience in the Banking Sector. Before joining Initio in 2020, Pierre had a successful career at BNP Paribas Fortis, holding several positions such as Relationship Manager Corporate Banking, Agile Transformation Manager, and RPA Project Manager.

About Initio Initio is a business consultancy firm specialized in the Financial Industry. Every day, our consultants contribute to the successful delivery of business projects by transferring their expertise to our client's management and internal teams. Initio operates in Brussels and Luxembourg and his part of the SQUARE GROUP, an international strategy and management consulting firm.

Contact

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