1 Introducing the Agile VMO

On March 11, 2020, the World Health Organization declared the rapidly spreading coronavirus outbreak a pandemic. If you, like us, were among the millions around the world watching news reports with growing dread, the WHO’s announcement was merely a confirmation that the world we knew was about to be rocked by the biggest “black swan” event in over a century.

Years and perhaps even decades from now, the struggle to minimize the personal, public health, and financial impacts of the pandemic will continue. Each of us will recollect some particular memories of this unprecedented time. In the United States, there will be troubling memories of the federal government’s inadequate response and its resulting tragic human and economic impacts. By contrast, the shining examples of state governors in the United States, as well as the governments of Mongolia, Vietnam, Ghana, Trinidad and Tobago, South Korea, and New Zealand, are inspiring case studies in leadership and agility.

Like many governments, most organizations also have historically dealt with layers of red tape, internal politics, and regulations that weigh them down, slowing both innovation and the ability to confront crisis. What we are facing today is the clearest need we have ever seen for organizations in all industries to adapt and pivot quickly. Even as we debate the public examples of pandemic response, examples of business agility are lesser known because they do not make the news headlines.

Out of necessity, businesses small and large along with government agencies have responded with alacrity. Sit-down restaurants have become mini grocery stores, mom-and-pop shops have curbside pickup, and movie theaters are reembracing drive-in shows. Stretching to support these businesses are financial institutions, which processed more loans in the first weeks of April 2020 than they did during all of 2019. In a mind-bending display of mission agility, the U.S. Small Business Administration partnered with these institutions to process 29 years’ worth of loans in April and May 2020.¹ Across the board, enterprises are faced with the slap-in-the-face realization that their business will never be back to the old prepandemic normal. With their revenues dropping by up to 90 percent, the airline and tourism industries will be reeling for decades. We are beginning to settle into the next normal of continued business downturn and public health uncertainty.

Even before this crisis, the average company was facing a challenge unlike any before. As shown in figure 1.1, Innosight predicted that 75 percent of the companies listed on the S&P 500 Index would be replaced by 2027, with the average company tenure trending toward 12 years, down from 60 years in the 1950s.²

For decades, technology has broken down barriers between industries and markets, increasing competition and redefining what is possible on a continuous basis. At the same time, lead times to satisfy customers have become much shorter, with constant demands for more value delivered more quickly. This turbulent business environment can be explained by the concept of VUCA (volatility, uncertainty, complexity, and ambiguity), originally coined by the U.S. Army War College to articulate Cold War conditions. In a few short weeks, the coronavirus pandemic forced all of us violently into a hyper-VUCA world.

Figure 1.1: Average company life span on the S&P 500 Index (adapted with permission from Innosight)

The only way for organizations to survive in this next normal is to deliver results more quickly, reducing the time from need to solution to its absolute minimum. Then they need to quickly adapt as necessary to converge on fit-to-purpose solutions to ever-changing customer needs. Digital technologies are rapidly redefining product development and collaboration in this turbulent landscape, and automation and globalization issues are driving business disruption. Overnight, Zoom became our virtual platform of choice and our lifeline for connecting with one another. Now that working from home has become the norm, businesses grapple with employee burnout and productivity concerns as the delineation between work and home life has all but disappeared. To survive in the short term and prosper into the future, businesses are rapidly adapting their strategies, culture, processes, and platforms.

These turbulent business conditions require clear strategy, rapid delivery, an adaptive mindset, and continuous improvement, all steered by strong leadership. Even as vaccines arrive and we begin to overcome the pandemic devastation, we know that turbulence will persist post COVID. Over the past two decades, many chief information officers and other C-suite executives had already built a foundation for business agility by launching initiatives to shorten up-front planning cycles, reduce project size, and increase speed to market by adopting agile methods (see sidebar) in some fashion.

Now, in our current pandemic era, these leaders are guiding their companies out of the crisis and into the future by building on that agile foundation. They are continuing to grow and evolve their organizations by building on the trust, transparency, and collaboration that agile methods enable. With intentional end-to-end communication, agile methods enable them to understand true customer needs in order to learn and move faster to produce innovative and in-demand products and services. Leaders have also integrated agile methods and expanded them with lean thinking, DevOps, and the cloud to deliver business outcomes. This is the essence of business agility: measuring, learning, and adapting rapidly to deliver desired business outcomes, as illustrated in figure 1.2.

Middle Management Is the Keeper of the Execution Model

By 2020, organizations of all sizes had made visible shifts toward agility. Most organizations that have adopted agile have implemented Scrum, extreme programming, Kanban, and other team-based agile methods. Many have also scaled agile methods up to the program and portfolio levels with the Scaled Agile Framework, Disciplined Agile, Large-Scale Scrum, Nexus, or Scrum at Scale.

Figure 1.2: Business agility—measuring, learning, and improving

Scaling these methods from information technology teams to programs and portfolios has not been enough. Even before the pandemic crisis, pioneering companies like Haier Group in China and the Vinci Group in France were forging ahead with postbureaucratic management. They had blown up their bureaucracy and top-down hierarchies, instead employing small, self-managing teams connected via entrepreneurial networks. See chapter 7 for more on Haier’s approach. Can we emulate these pioneers in business agility? Perhaps, but the road to success is arduous; it requires clarity of vision, constancy of purpose, and courage and persistence in the execution of a new operating model.

Work management, organizational systems, and policies in most companies are not appropriately structured to allow value to flow across the organization. Instead, in these legacy organizations, every single process, organizational structure, and role is designed to support the current and likely traditional method of delivery. Locked into the past, these rigid, hidebound structures stifle the innovation and agility crucial for an organization to succeed. This is Conway’s law³ writ large—organizations design systems that mirror their own communication structure—and something we must urgently overcome in our current crisis environment.

Sadly, in our decades of experience supporting agile change management, we have seen that individuals in middle management roles tend to offer the stiffest resistance to this critically needed change. These middle managers and junior executives are the gateway between employees in the trenches and top executives in the C-suite who determine strategy. This frozen middle, as it is referred to in management circles, is entrusted with owning the execution model of any strategy or process. They are the ones most invested in the status quo, having worked hard to gain their current position, with years and sometime decades invested in the legacy organizational models. Critically, as organizations transition to a newer end-to-end agile operating model, the roles of middle management need to change to unfreeze the frozen middle. Specifically, these roles will need to be adapted to support agile teams and lead the rapid delivery of value. With such a change, middle management can be freed to champion and lead change, rather than being restricted in organizational structures and roles that impede it. These changes are quite dramatic and must be brought about by executive leaders who understand that they are critical to the survival of their organizations and who have the courage of conviction and the temerity to implement radical change at all levels.

As a cocustodian of the legacy models, project management offices (PMOs) desperately need reinvention as well. Originating in the 1800s as project offices and gaining widespread acceptance and application in the 1900s, contemporary PMOs unfortunately still retain vestiges of legacy industrial-age models, with adherence to bygone practices like implementing rigid, top-down management by objectives or enforcing the iron triangle (cost, time, scope) on projects even as they fail to deliver customer value. As the world has moved on to newer evolutions like quarterly objectives and key results and transitioned from a project to a product model, PMOs remain mired in the past. They have thus become too closely associated with past failures and are not typically identified with newer agile methods or even with postbureaucratic management in general.

PMOs Are under Attack

As organizations become more adaptable and responsive, they are starting to adopt more of a product mindset, which calls into question the need for projects at all. Projects are, after all, an internal construct. Our customers do not care about our projects, our budgets, or even our controls. What they care most about are solutions to their problems through the timely delivery of value, as represented by product features and fixes or service innovations. Because of this fundamental difference in focus, and because PMOs are not associated with newer models of business agility, they are coming under increasing scrutiny and are being pressured to justify their existence in the new age of agile.

Consider the following:

• Project management as a role and as a function is being attacked for being slow, bureaucratic, costly, and at times ineffective. Project management is also unfortunately quite closely linked to waterfall execution models.

• Agile ways of working are quickly leaving the old waterfall execution paradigm behind, making the tools and techniques of most project managers and PMOs more and more irrelevant.

• New roles such as product owners, scrum masters, and release train engineers are starting to chip away at some of the traditional duties of the project manager.

• DevOps and automation tools are starting to provide extreme levels of visibility into progress and quality, lessening the need for traditional forms of reporting.

• The relentless pursuit of cost cutting, profit, and growth makes any function that does not directly add value a potential target for downsizing.

The result of these and other forces is that the traditional PMO and the project managers within it are increasingly under attack, even in the public sector or large and highly regulated private-sector firms. The classical PMO, too closely wedded to management models popular in the 1950s and to waterfall execution in the current age, needs to embrace transformation to stay relevant or to even exist in an agile organization.

Paradoxically, even as middle management is popularly identified with bureaucracy and rigidity, middle managers have been identified as pivotal leaders of successful change management efforts.⁴ In the 2020s pandemic era, many organizations worldwide will be struggling to emerge from the crisis in a turbulent sea of rapid and continuous change, even as other, nimbler organizations navigate the crisis successfully. Middle management in general and the PMO in particular have a rare opportunity to lead change from the front and drive value, instead of fading further into obscurity and obsolescence.

Transforming the PMO into an Agile VMO

How can the PMO lead in the modern pandemic age? How can the PMO repurpose itself and redesign its mission and operation to be more value adding, less bureaucratic, more customer focused, and more in line with agile product management and other modern ways of working? We believe that, to accomplish this, the PMO needs to rapidly evolve into the Agile Value Management Office, or Agile VMO®. This transition will represent a huge change for most organizations, and they must provide a formal structure to guide the PMO’s evolution into the Agile VMO.

As illustrated in figure 1.3, the VMO’s formal structure consists of a small, cross-functional, cross-hierarchy team with key representatives who work collaboratively across the organization.

The VMO has members who function as linking pins across organizational silos and between hierarchical levels. These members will have roles in both the VMO and their organizational units and will ensure tight linkages between the VMO and those organizational units. The key roles in the VMO are director, program manager, and executive champion. The VMO includes executive action team stakeholders, value stream managers, and agile team representatives from across value streams and teams. In chapter 9 we provide a detailed explanation of how to implement this structure in your organization.

Figure 1.3: The Agile VMO—an end-to-end, cross-hierarchy team driving business agility

Achieving true end-to-end business agility requires transitioning to this new Agile VMO structure, as well as the methodical restructuring of processes and structures along the entire value stream, from business strategy to operations and every step along the way.

The VMO has a strategic responsibility to drive organizational change and the day-to-day responsibility to help manage a dynamic, active portfolio of work in partnership with value stream managers. All the VMO’s work functions and its members’ corresponding responsibilities are listed in table 1.1.

We will cover these in detail in the rest of the book and summarize them in chapter 9. As an applied example, figure 1.4 illustrates how this plays out with Disciplined Agile’s program life cycle for a team of teams. As a team of teams, the VMO can help agile teams using Disciplined Agile define their way-of-working processes, help them optimize flow, provide program oversight and governance, and support program coordination.⁵

Table 1.1. VMO Responsibilities

Figure 1.4: The Agile VMO and Disciplined Agile’s team of teams (adapted with permission from PMI)

In following chapters, learn how to set up an Agile VMO and explore all the fundamental aspects of the VMO’s work:

• In chapter 2, understand how to define an agile process at your organization.

• In chapter 3, explore how to reconfigure and organize around value streams.

• In chapter 4, implement adaptive planning at all organizational levels, from the top of your organization down to your agile teams.

• In chapter 5, explore how to use visual management systems and other key techniques to track and monitor program flow.

• In chapter 6, learn to decompose projects and products into smaller increments by prioritizing and selecting MMPs.

• In chapter 7, extend these concepts to business considerations by evolving a funding and governance strategy.

• In chapter 8, consider ways to manage organizational change.

• Finally, in chapter 9, make a detailed plan to set up your own Agile VMO.

To get a flavor of how the VMO has been implemented in industry to achieve business outcomes, see the sidebar for a case study from Nationwide Insurance.⁶

CASE STUDY: IMPLEMENTING THE AGILE VMO AT NATIONWIDE INSURANCE

Summary

The dust is settling on the next normal in our pandemic era. Agile methods have provided a rock-solid foundation on which to grow and evolve an organization. Organizations can drive business agility in the pandemic era and beyond by understanding true customer needs, learning, and moving faster to produce innovative and in-demand products and services.

Figure 1.6: Collaboration across silos with big room planning

As legacy organizations transition to a newer end-to-end agile operating model, the roles of middle management need to unfreeze and not only accept but encourage change. The PMO needs to redesign its mission and operation to be more value adding, less bureaucratic, more customer focused, and more in line with agile product management and other modern ways of working. The PMO must be repurposed toward value management. To accomplish this, the PMO needs to rapidly evolve into an Agile VMO.

Achieving true end-to-end business agility requires transitioning to a new VMO team-of-teams structure and methodical restructuring of processes and structures along our organization’s entire value stream.