Agile software development, with sprints, scrums, and self-organizing cross-functional teams, is now widely practiced on appropriate projects. Positive results have been widely touted. Along with products that better meet customer needs delivered faster, such development practices demonstrate the value of thinking differently about innovating in today's turbulent and customer-driven marketplace.
How can we capitalize on these insights on innovation to spread agile approaches beyond software development into other aspects of IT organizations as well as other functions of the corporation? We can learn from an unlikely source: Haier, a Chinese company that is the world's largest appliance manufacturer. Over the past decade the gross profits of Haier's core appliance businesses have grown by 23% per year, while revenue has increased by 18% annually. And Haier has created over $2 billion in market value from new ventures.
Agile practices extend throughout Haier's organization, not just its IT function. The firm is organized into 4,000 small self-managing microenterprises (10 to 15 employees) that view themselves as entrepreneurial and innovative. Each microenterprise is charged with pursuing ambitious goals for growth and transformation, and is free to buy services - or not - from other Haier microenterprises. New products are developed in the open, leveraging the Haier Open Partnership Ecosystem, a network of 400,000 solvers. Haier uses crowdsourcing to gather feedback on products and defray development costs. Microenterprises, who leaders are chosen competitively, set their own strategies, select their members, and distribute bonuses tied to market outcomes. Moreover, this large global business operates with just two layers of management between frontline teams and the CEO.
Would Haier's approach to embedding agility everywhere work in your organization? The CIO members of the Advanced Practices Council explored that question at a recent meeting. They were impressed both with Haier's results and favorable positioning in today's fluid global business world and inspired to champion many of the practices. But they recognized the challenges of such a transformation and acknowledged that Haier's transformation evolved over ten years of experimentation and learning. One insight that emerged from our discussion is the opportunity to better equip organizational units - whether or not they are true microenterprises - with better information to support local decision making.