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Agile and SMEs

I’ve been reading some material on attempts to implement agile methods in small companies and a recurring theme is that such firms don’t have the resources to invest in training & coaching and yet can’t afford to make mistakes when adopting an innovation like agile. Unlike larger companies, small organisations can’t launch process re-engineering and improvement programs, can’t run pilot projects which could fail, or experiment and learn by their own mistakes.
It got me thinking about how small and large firms are agile in seemingly different ways. Christen Claytonson introduced the idea of The Innovators Dilemma in his book of the same name which, simply put, says that the strategy of listening to your customer and innovating your product to move up the value chain is doomed to failure. This approach was espoused for decades with the tagline “the customer is always right”. The belief was that by delivering what the customer asked for made sure you were delivering what they wanted.
But Christenson showed through several examples that the customer doesn’t always know what they want, or even what its possible to get. He uses the example of mini steel mills in the US which undercut the larger mills by cheaply churning out simple steel products, while the established firms ignored them and focused on the higher margin work – following their strategy of moving up the value chain. But the mini mills gradually ate into the market, becoming more sophisticated themselves and aiming for higher value work. By the time the large mills realised what was happening their high cost, high margin business was collapsing. They had experienced “disruptive innovation”.
A more recent example, and one closer to home, is the rise and rise of low cost airlines like Ryanair – I don’t think any customer asked the airline to charge them for peanuts, or fly them to an airport an hour outside town, or charge them for luggage. But by listening to their customers, established airlines had missed the opportunity for low cost, mass air travel.

So what has this got to do with agile & SMEs? For small companies, business agility has been a powerful weapon – the ability to sense and exploit emerging opportunities, leverage their small size, co-location and lack of bureaucracy to move quickly has given them a competitive advantage versus the scale and resources of larger firms. But recently big firms have begun to invest in agility. Agile and lean philosophies are helping large firms transform from high overhead, hierarchical command and control organisations to more loosely federated small units with increased autonomy and their own sense and adapt mechanisms. If larger firms succeed in developing business agility (and I believe they are)  it will dilute a major competitive weapon of the small firm.

SMEs need to find a way to counter this movement before they get beaten at their own game.

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