Israel Gat's PMIH Presentation 4/30/2009

1. Reconfiguring the Business
Israel Gat
Senior Consultant
Cutter Consortium

2. Agenda

Part I: A New Paradigm

Part II: The Agile Software Opportunity

Part III: A Chasm Between Executive and Employees

Part III: A Chasm Between R&D and the Business

3. The Classical Techno-Economic Paradigm a la Perez

A sequence of events characterizes each of the techno-
economic cycles:
— Major technological innovation introduces new infrastructure
— The new infrastructure disrupts both industry and commerce
(and very possibly society)
— In good time the new infrastructure becomes a stabilizing force
– The technology gets understood and harnessed
– Confidence builds in the new order that evolves around the
technology
— Inertia becomes the legacy of successful innovation

4. Five Successive Technological Revolutions
Revolution Name Country Initiation Year
First The ‘Industrial
Revolution’
Britain Arkwright’s mill 1771
Second Age of Steam and
Railway
Britain The Liverpool-
Manchester
railway
1829
Third Age of Steel, Electricity
and Heavy Engineering
USA and
Germany
The Carnegie
Bessmer steel
plant
1875
Fourth Age of Oil, the
Automobile and Mass
Production
USA Ford Model-T 1908
Fifth Information/
Tele-communication
USA The Intel
Microprocessor
1971
Source: Carlota Perez, Technological Revolutions and Financial
Capital
Source: Carlota Perez, Technological Revolutions and Financial
Capital

5. Revisionist Techno-Economic
Theory a la Hagel, Brown and Davison

The historical pattern itself has been disrupted:
— Disruption followed by stabilization is no more the case

The pace of change in Information, Telecommunication
and software is exponential
— Uncertainty and instability are pervasive
— Sustained periods of prolonged equilibrium are unlikely

Both business and social systems need to adapt on an
on-going basis to turbulent changes
— But, a company can now punch “above his weight class”
through the global digital infrastructure
(*) Hagel, Brown and Davison, Shaping Strategy in a World of Constant Disruption, Harvard Business Review,
October 2008

6. Agenda

Part I: A New Paradigm

Part II: The Agile Software Opportunity

Part III: A Chasm Between Executive and Employees

Part IV: A Chasm Between R&D and the Business

7. Role of Software in Your Strategy

As software is malleable, it can respond
exceptionally well to the exponential pace/change in
the new paradigm:
— As an end to itself
— As embedded software
— As part of a business process/initiative

The higher the embedded software content in a
product is, the more malleable the whole product
becomes:
— Example: cellular phones

Chunking through Agile methods facilitates quick
changes on a granular level at any phase of the
product life cycle

8. Enormity of the Software Opportunity

Software is becoming pervasive:
— 3 billion mobile devices nowadays touch the Internet
[Joshua-Michele Ross, The Rise of the Social Nervous System]

Software is quickly becoming the biggest component in many
products in which it is embedded
— Each of the aforementioned 3 billion mobile devices probably
contains about 1 million lines of code

Alignment of velocities: IT Operations is becoming ultra-fast
— Flickr updates its servers every 30 minutes
[Kent Beck, Trends in Agile Development]
— IMVU updates its servers every 9 minutes
[InfoQ: Beyond Continuous Integration: Continuous Deployment]
©
Copy
right
2009
8

9. Relentless Software Innovation Through Agile Methods
Many kinds of innovation
— Disruptive innovation
— Product innovation
— Platform innovation
— Value engineering
innovation
— Process innovation
— Business model innovation
— Line extension innovation
— Enhancement innovation
— Various others
Innovation by experimentation
— Learning what does not work is
as important as learning what
works
— Today’s low cost of
experimentation enables finding
by trying
— For Agile, the bi-weekly Agile
iterations provides a “firewall”
that caps investment

10. Two Chasms You Must Cross

Six simultaneous dimensions of change:
— The Software evolves
— The Architecture evolves
— The process evolves
— The organization evolves
— The deployment modus evolves
— The customer and his problem evolve

Some of these dimensions are subject to strong inertia:
— Routine
— School of thought
— Vested interests

Difference in the rhythm of change leads to two chasms:
— Between Executive and Employees
— Between R&D and the Business

11. Agenda

Part I: A New Paradigm

Part II: The Agile Software Opportunity

Part III: A Chasm Between Executive and Employees

Part IV: A Chasm Between R&D and the Business

12. A Social Contract for Agile
• “Team, my overarching organizational objective is to preserve our team
and its institutional knowledge for our corporation and its customers for
years to come
• We will achieve this goal by enhancing our software engineering
prowess to the level that the resultant benefits will outweigh the
repercussions of the current financial crisis
• The state of the Agile art should enable us to attain hyper-productivity
• In the event that we fail to accomplish hyper-productivity and our
assignments fade away, you will find the Agile skills you developed
much in demand in the market
• Whether you will or will not be with the company in the future, I
acknowledge your need to develop professionally as an Agile
practitioner and commit to invest in your education/training”
(*) Loose definition - social contract: "Implied agreements by which people form a community and maintain relatively stable
system of institutions, pattern of interactions and customs."

13. Qualitative Assessment of Success
“ Working with the agile teams at BMC those last two years
were some of the most rewarding in my career because of
the sense of purpose, direction and camaraderie that the
process instilled in everyone.”
[R&D Architect]
“If we used waterfall on BPM, we would still be in
development. We would likely be cutting features right and
left to try to bring the date back in. Changes requested
along the way by the solutions teams would have been
pushed back on rather than embraced. ”
[R&D Director]
“The change you brought to BMC with Agile is the single
largest change to the development model that I have ever
witnessed in my almost 20 years at BMC."
[R&D Director]

14. © Copyright 1/11/2009 BMC Software, Inc.
0 2 4 6 8 10 12 14 16 18 20 22 24
Business Information
Command and Control
Process Control
Scientific
System
Telecommunications
Engineering
Avionics
Microcode
Real Time
Real Time
2826
Quantitative Measurement of Productivity by QSMA

15. Agenda

Part I: A New Paradigm

Part II: The Agile Software Opportunity

Part III: A Chasm Between Executive and Employees

Part IV: A Chasm Between R&D and the Business

16. A Chasm of Biblical Proportions

17. Agile lessons for business innovation

Imperative need for continuous innovation

Neither internal nor external innovation begin with
understanding of customer

Start with stories & design goals, not an elaborate
business plan
• “Agile” as a set of methodologies
allows non-technical innovators to
access the way techies build “stuff”
• Iteratively discover the customer and
define the product in tandem
• Contained cost of experimentation
The Lean Startup
Steve Blank and Eric Ries

18. A Modus for our Time

Classic model: Two propeller heads with a neat new toy
approach VC for money and business maturity

New model: business person has entrepreneurial idea that
happens to be expressed via a Web application

The new tech entrepreneur/intrepreneur is less likely to be
able to build their own technology

Agile is the only development methodology that can fulfill
the needs of the prevailing turbulent environment

19. Q&A
?

20. Closing thoughts: A New Venture Model

Most innovative and successful businesses are holistic re-
combinations of proven patterns in a novel way
— Starting with a cool widget makes the outcome essentially random
— Discontinuous innovation puts the business at risk

Instead:
• Start with an idea to create value in a market & a business
champion
• Start with business design conversations
• Marry to development resources, bring them into the conversation
• Iterate through the process of building the parts of the business
and figuring out how they fit together.

Repeat at portfolio level: build an self-reinforcing ecosystem,
not a one-off firm/project

21. Contact Information
Israel Gat
Cutter Consortium
http://theagileexecutive.com/
512-826-3210
igat@cutter.com