What is the first step for an agile leader when confronted with disruption?
Step 1: Do not Overreact.
Believe it or not, the first step is not to overreact.
The Beer Game Simulation
There is a simple simulation, called The Beer Game, run by MIT (Massachusetts Institute of Technology) and popularized by a book called ‘The 5th Discipline’.
In the simulation there is a supply chain, a brewery that brings in raw materials from farmers and then transforms that into beer, and then the distributors, wholesalers, and end users such as pubs and restaurants around the region.
In the simulation, the demand is driven by customers in the retailer and hospitality industry, but there is a two week delay between the moment the retailer orders the beer and when they receive that order.
In 2017, I ran this simulation with about 45 agile coaches and systems thinkers to explore how they respond to disruption. It proved incredibly interesting because these people are knowledgeable, skilled, and experienced in both agility and systems thinking.
Priming for disruption.
To kick off with, I started by letting them know that in our simulation, David Beckham would be leading the campaign for the beer and that Summer was just around the corner so demand should be at an all-time high.
As we worked through the simulation, I created a brief disruption by doubling the usual order from one of the wholesalers to see how the teams would react.
Most of the teams overreacted, immediately, despite it proving to be a very small disruption to the system. Their lines of reasoning were governed by:
- The advertising campaign must be working and so demand will increase.
- There is a 2-week delay in the supply chain and so we need to avoid running out of beer.
- We need to get our order in before the other teams do to ensure we have stock.
People shifted from an average order of 4 crates of beer per week to 16 crates, 32 crates, and as much as 50 crates of beer per week.
Only two teams held their nerve and looked at the data and evidence to inform their decisions.
Both of those teams were filled with the systems thinking experts and they didn’t want to base their decision-making on a single data point. They wanted to see more data, more evidence, and to decide whether they were witnessing a pattern or whether it was an isolated incident.
Repeating an event, but not creating a pattern.
A little later down the line, I repeated the increased order of 8 crates into the system and again, most teams reacted immediately by doubling, tripling, and even quadrupling their orders.
By this point, the wholesalers were overstocked, the distributors were overstocked, and the brewery was overstocked. The demand wasn’t flowing through the system as the teams anticipated and it was chaos throughout the entire supply chain.
In the real world, this would have caused significant problems and losses.
It reminded me of that game where the mole pups up through the hole and the person on the other end whacks it immediately.
They quickly turn from calm and considered into a frenzy of reaction and activity, without taking time to consider what is happening, why it is happening, and how that relates to their unique application and context.
This is known as Whack-A-Mole management. Sharp, intense reactive behaviour to stimuli and events rather than data and evidence.
So, the first step is not to overreact when confronted with disruption.
Step 2. Check for Cognitive Dissonance.
In the simulation, the systems thinking teams did well because they looked to identify patterns and trends before making a decision about how to respond. They wanted to be responsive rather than reactive, and that is a wise course of action.
So, if you have followed that pattern and the disruption continues, check for cognitive dissonance.
Avoid echo chambers.
Many executives and leadership teams are great at milking the metaphorical cow. They are great at execution and efficiency, kind of like Nokia and Blackberry at the height of their powers.
We need some way to check that we aren’t falling victim to Group Think. We need to check that we have a finger on the pulse of our customers, competitors, and markets in a way that allows us to identify potential disruption and respond accordingly.
A great agile executive will ensure that there is cognitive diversity. Ensure that there are very little YES men and women around them, and instead surrounded by people who are experts in their field and able to call attention to patterns and trends that may indicate the potential for disruption.
Get Fresh Thinking into the room.
Volkswagen did a great job with this.
A few years ago, their product design was stagnant and car sales were drying up.
Instead of persisting with the same design team, they decided to freshen things up and hire an Italian sailboat designer to breathe new life, style, and design elements into their division.
A high-end, exclusive yacht design firm in Milan partnering with Volkswagen to blend their design capabilities with Volkswagen’s engineering and design capabilities produced the revival that VW so desperately needed and helped the VW design team explore new territory in the realm of design.
So, look to do the same in your environment.
Look outside of your industry, your comfort zone, and seek out fresh thinking. Innovators who have a proven track record of delivering great quality work.
It may be the breath of fresh air that your leadership team desperately needs and allows you to avoid cognitive dissonance in your organization and spark innovation and product evolution.
There are a couple of great examples of how injecting fresh thinking into an industry radically transformed that industry in the video, so please do take the time to watch the video.
Step 3: Ensure that you have a low switching cost to respond effectively.
If you have teams of teams working on products, features, and services but they are primed to only work in a certain direction, dependent on various supply chains and infrastructure, what are the costs of switching to a new direction?
It’s kind of like the big oil tanker that is efficient at moving through water in a straight line but takes hours to change direction or stop. If you compare that to an agile speed boat, you can see how one of them is able to immediately respond to threats or opportunities, and change direction with very little to no effort.
That is what we mean by switching cost.
What does it cost you to change direction, either in response to a threat or an opportunity, and how can you improve that switching cost?
Focus on flow.
Many organizations will fill the pipeline with projects that last months, if not years, and so it makes it incredibly difficult to switch direction or respond to disruption because it would cost millions to abandon the projects in the pipeline.
A great way to counter this is to manage flow. The flow of work, products, and projects throughout the organization.
Examine the work that is currently in the system. If you have work that hasn’t been completed in the last quarter, maybe it’s worth holding back the new work you had planned for the system and allow the teams to finish the work that is currently in the system.
Because if you want the system to be able to respond to disruption quickly, cheaply, and effectively, you need the system to be able to bring that work in and immediately have teams working on the problem, solution, or opportunity.
If they still have another year’s worth of work in the system, you are going to need to wait a full year before you can respond to the present disruption or opportunity.
You want to manage flow effectively to ensure that your teams are primed to respond to threats and opportunities immediately, if necessary, or within a reasonably quick time frame.
Focus on these three things when confronted with disruption and you will increase your organizational and business agility rapidly.
About John Coleman
John Coleman has deep experience and expertise working with executives, #leadership teams and product development teams to achieve increased #organizationalagility and create environments where creativity and collaboration produce high-performance teams.
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