Hi, welcome to this lesson where we look at the basics of Agile Project Management.

What content is included in this lesson?

In the next few minutes we will talk about

• the definition of a technical term that is important for understanding this lesson,
• the differences between waterfall and agile,
• about what constitutes agility in reality,
• we look at a few examples of agile companies and their role in business,
• and then compare them with the conventional economy,
• we talk about iterations as a counterpart to the planning organization,
• the necessary mentality in agility,
• we compare an agile organization with a planning organization,
• we also look at the Agile Manifesto together,
• and the 12 principles of agility.
• We also cannot avoid looking at the reality of the first agile steps within planning organizations,
• we learn together about the goals of agility,
• and the benefits associated with it,
• but also the conditions necessary for this, which first have to be created.

So, beforehand, again the definition for a technical term in this lesson:

What is disruptive?

A process is disruptive when an existing business model or an entire market is replaced or shattered by a fast-growing innovation. Historical and current examples of this are

• the replacement of the sailing ship first by the steamship and then by the ships in use today
• the replacement of passenger shipping by air transport
• the replacement of the horse first by the railroad and then the automobile
• the replacement of the vinyl record first by the CD, then MP3 and finally music streaming
• the replacement of video cassettes first by MP4 and ultimately also by streaming offers
• the replacement of the typewriter first by desktop computers, then by laptops and tablets
• the replacement of letters by emails
• but also the replacement of bakers, butchers and other guild crafts by discounters and other chain stores
• the replacement of newspapers and magazines by online offerings
• this is accompanied by the replacement of print advertising by online advertising and, as a consequence, the progressive dissolution of the print shop industry.
• the replacement of cameras by smartphones (by the way: the smartphone has replaced a whole latte of previous devices and services)
• the replacement of combustion engines by electric motors
• AirBnB nibbles away at the hotel market
• Uber nibbles at the cab market
• and Tesla quickly nibbles away at a significant share of the automotive market
• 3D printing is nibbling away at the injection molding market and metalworking
• Online retailing nibbles away at stationary retailing
• and online portals replace brokers

Oh, the list can be extended by many more positions – and new ideas based on new technologies are opening more and more doors.

Now to the content of this lesson:

And this brings us to the counterpart of the waterfall model and milestone trend analysis. Agile Project Management. So what is the difference between agile and waterfall?

How do waterfall and agile differ?

While the waterfall method plans the entire project first and then implements it, agile plans in teeny tiny loops called iterations. As a result, no overall planning is available in agile as a basis for target/actual comparison. Budgeting and scheduling for defined project progress are thus only possible to a rudimentary extent. The basis for planning the next loop arises only after completion of a previous loop. For this purpose, new requirements can always be introduced and existing requirements can be changed in these loops – and after each loop there is a usable and evaluable partial result. This is precisely what makes agility so appealing.

By the way, attached to this lesson you will find a PDF in A3 format with this iteration graphic. I chose the A3 format specifically so that it can be printed with common office printers and not larger. Feel free to print this out and hang it on the wall in your project room to illustrate explanations.

Based on the way the majority of business leaders act, I am more than certain that those of all people who have recently become more and more committed to agility do not understand what agility means at all. Even in IT, knowledge about agility is very superficial. Everyone wants to be, but hardly anyone is in practice. And agility by no means means chaos, as some chaotic people would like to gleefully understand it.

Why is agility so interesting?

With management, it’s clear why agility is so appealing and attractive: for years, they’ve seen young and emerging companies rise to become global market leaders at an insane pace, gradually conquering the domains of the “old economy.” They generate fantastic returns on sales with new ideas and high reaction speed, thereby generating cash with which you can buy up world market leaders in no time at all. In typical consumer and business products, the share of electronics and software is growing continuously. Disruptive business models are turning what were once capital goods into mere utilities, on the basis of which services are sold that enable these extremely high margins – while the “old economy” can no longer generate margins with its products due to the unequal price war with this new competition.

“Yes, we are also agile now”.

What is agility?

But a saying like this is not enough. Agility is a mentality, an attitude, a culture (mindset) – from the very top of the company to the very bottom and back again. And you don’t change the mentality of a company just like that. It is precisely the leaders at all levels of the company who find it very difficult to change. Let’s take a look at some examples of the companies that have become so dangerous for the “old economy” through agile corporate structures and are significantly driving the current upheaval. Feel free to pause the video and explore the content in more depth if you’re interested. If necessary, I suggest that you take a parallel look at the business models of the companies mentioned. For the management of large companies, it is precisely these companies that are a role model for organization and strategy:

What are the Big 5?

Google

When was Google founded?

Google was founded in 1995

What is the turnover of Google?

Google earned $161.9 billion in 2019

What is Google’s annual profit?

Google posted annual profits of $34.3 billion in 2019. With only one year’s profit Google could buy the biggest car manufacturer in the world, VW, or 2x Deutsche Bank, or 5x Lufthansa – it’s insane, isn’t it?

What is Google’s return on sales?

Google’s return on sales for 2019 is 21.2%

How many employees does Google have?

Google had 118,899 permanent employees and 121,000 work and temporary contracts at the end of 2019

What is Google’s market capitalization?

Google’s market capitalization in 2019 is approximately USD 766.4 billion

How much is Google worth?

Google’s net worth is approximately $863.2 billion in 2019

Where does Google rank among the world’s largest companies?

In 2000, Google was ranked 17th in the Forbes Global 2,000

How many companies has Google acquired?

As of 10/2019, Google has acquired 236 companies

What were Google’s biggest acquisitions?

• Motorola: USD 12.5 billion (Mobile Hardware)
• Nest: USD 3.2 billion (Smart Home)
• DoubleClick USD 3,1 billion (Online Marketing)
• Looker: USD 2,6 billion (Data Analytics & Business Intelligence)
• Youtube: USD 1.7 billion (Video Streaming)
• Waze: USD 1.15 billion (Navigation)
• HTC: USD 1.1 billion (Mobile Hardware)
• Admob: USD 750 million (Online Marketing)
• ITA Software: USD 700 million (Software)
• Deepmind: USD 650 million (Artificial Intelligence)
• Apigee: USD 625 million (Software)
• Postini: USD 625 million (Online Marketing)
• …

Where does Google invest its profits?

And then let’s take a look at where Google invests its profits:

We see here the affiliated companies from the Alphabet holding structure:

• Access & Energy (including Google Fiber) – Industry: Networks
• Calico – Industry: Biotechnology, Genetic Engineering
• DeepMind – Industry: Application of artificial intelligence
• CapitalG (previously Google Capital) – Sector: Investments with 44 company holdings
• Google – industry: classic Google business (this is where a large part of the profits come from)
• Jigsaw – Industry: Technology Incubator
• Loon – Industry: Internet Access
• Sidewalk – Industry: Traffic Management, Advertising Media
• Verily Life Science – Industry: Life Sciences
• GV (Google Ventures) – Industry: Venture Capital Financing
• Waymo – Industry: Self-Driving Cars (which enable the highest level of autonomous driving today, but unlike Tesla, are not yet ready for the market. But if they wanted to, they could just buy VW from the Porsche family, or BMW, or Daimler, or Toyota. Money shouldn’t be a problem).
• Wing – industry: Development and Operation of Delivery Drones
• X – Industry: Research (e.g. Google Glass)

Apple

Or Apple. Another agile company. Where do they invest their profits?

What is Apple’s market capitalization?

Apple’s market capitalization is $1 trillion in 2019 (more than Google)

How many companies has Apple acquired?

Apple has acquired 109 companies as of 2019

What were Apple’s biggest acquisitions?

• Beats: USD 3 billion (Audio SW, Streaming, Headphones).
• Dialog Semiconductor: USD 600 million (Semiconductor)
• Anobit: USD 500 million (Semiconductor)
• Shazam: USD 400 million (Music Recognition)
• Next: USD 400 million (Software Development & Computer Hardware)
• Primesense: USD 360 million (Object Recognition)
• Authentec: USD 356 million (Biometrics)
• PA Semi: USD 278 million (Semiconductor)
• Quattro Wireless: USD 275 million (Online Marketing)
• C3 Technologies: USD 273 million (Navigation)
• Siri: USD 250 million (Voice Assistant)
• Turi: USD 200 million (Artificial Intelligence)
• Topsy Labs: USD 200 million (Network Analysis)
• Lattice Data: USD 200 million (Artificial Intelligence).

Facebook

What is Facebook’s market capitalization?

Facebook has a market capitalization of $499 billion as of 2019

How many companies has Facebook acquired?

Facebook has acquired 79 companies as of 2019

What were Facebook’s biggest acquisitions?

• WhatsApp: USD 22 billion (Communications)
• Oculus: USD 2 billion (VR Hardware and Software)
• Instagram: USD 1 billion (Communication)
• LiveRail: USD 500 million (Online Marketing)
• Onavo: USD 200 million (Network Analysis)

Amazon

What is Amazon’s market capitalization?

Amazon has a market capitalization of $851 billion as of 2019

How many companies has Amazon acquired?

Amazon has acquired 85 companies as of 2019

What were Amazon’s biggest acquisitions?

• Whole Foods: USD 13.7 billion (International Supermarket Group)
• Pill Pack: USD 1.2 billion (Online Pharmacy)
• Zappos.com: USD 1.2 billion (Online Clothing Retailer)
• Ring: USD 1 billion (Smart Home)
• Twitch: USD 970 million (Video Game Platform)
• Souq.com: USD 580 million (Online Platform)
• Kiva Systems: USD 775 million (Robotics)
• Audible: USD 500 million (Online Books)
• Quidsi: USD 500 million (Online Platform)
• Annapurna Labs: USD 370 million (Data Center Software)
• Love Film: USD 312 million (Film Company)
• AWS Elemental: USD 296 million (Data Center Software)

Microsoft

What is Microsoft’s market capitalization?

Microsoft has a market capitalization of $1 trillion as of 2019

How many companies has Microsoft acquired?

Amazon has acquired 225 companies as of 2019

What were Microsoft’s biggest acquisitions?

• Linked-In: USD 26.2 billion (Career Network)
• Skype: USD 8.5 billion (Communications)
• GitHub: USD 7.5 billion (Software Development Platform)
• Nokia: USD 7.2 billion (Mobile Hardware)
• aQuantive: USD 6.3 billion (Online Marketing)

These are the so-called Big 5, all from the USA only. China, however, is hardly inferior. With Alibaba, Tencent, Huawei, as well as a lot of other big companies from the Asian region, but unknown to the public in our country, other companies also follow the strategy of the Big 5, including companies like Uber, AirBnB, Tesla, Netflix and some more. Organized in an agile manner, they react flexibly to any efforts to protect the “old economy”.

How do German companies compare to the Big 5?

The Big 5 have a

• Market capitalization of USD 4.4 trillion and a
• net cash assets of USD 365 billion (as of 05.02.2018).

These 5 companies could buy up all the carmakers in the world right off the bat – and pay for them in cash, with no outside financing. With just a quarter of the cash, the 5 could buy up all the aircraft manufacturers in the world. That’s rad!

For comparison:

The market capitalization of selected DAX companies as of September 23, 2019:

• Lufthansa: EUR 6.6 billion
• Deutsche Bank: EUR 15.1 billion
• Volkswagen: EUR 32.9 billion (the largest car manufacturer in the world!)
• Siemens: EUR 83.3 billion (the world’s largest industrial group, but one that is steadily evolving into a software manufacturer, which is precisely why it is so highly valued. The once great adversary General Electric now only has a market capitalization of USD 50 billion).
• SAP: EUR 134.9 billion (the only bright spot in Germany with world-class performance, market leadership and a future – and a rudimentary agile organization)
  • The return on sales is 30%

What distinguishes the Big 5 from large German companies?

The common thread among the Big 5 is that they have not stayed in their original business, but have moved into other industries with a variety of subsidiaries with the organizational advantage to deepen value creation. These companies then try out with strong financial support and look at the result: if the result is good, then they continue. If it is not good, then consideration is given to whether a different approach will produce a good result. If no other approach is available with a chance of success, then the project is discontinued.

With these few words, I have already described the core of agility. They are the perennial 3 questions that an agile project member asks themselves over and over again with each and every action and task (called an iteration). And answers honestly over and over again and then responsibly, coolly and logically draws the right consequence.

Attached to this lesson you will find a PDF in A3 format with the 3 questions of agility. Feel free to print this out and hang it on the wall in your project room as a constant reminder for the team.

How do agile companies deal with risk?

Companies such as Google or Alphabet cope well with the fact that 85% of the risk capital invested in such projects and subsidiaries fails – provided that the failure is recognized quickly and then leads to the consequence of not burning further capital unnecessarily. The remaining 15% has multiplied the total investment in all test balloons many times over the last 10 years. This is the successful corporate strategy of Google, but also of the other Big 5 companies. They are fast, courageous, imaginative, disruptive, high-margin, transparent, and organized in a flat and flexible way. And this is what the management boards and supervisory boards of our major companies increasingly want or need to achieve. They don’t want to be shark food anymore, they want to get back to the top of the food chain themselves. Getting back to where they were until 10 years ago.

How do agile companies differ from planning organizations?

Agility is the antithesis of planning. Agility has different goals, but also different requirements. While investors, banks and traditional business management are constantly looking for and demanding target/actual comparisons, agile companies focus just as much on stringent budget and resource conservation as they do on rapid adaptability, fast results, a fast time-to-market and a high research and development rate. What the target/actual comparison is for classical management, the iterative question of agility is whether the result is achieved after one iteration, how it can be achieved in a subsequent iteration, or whether it is unachievable – with the result of each iteration as the basis for the subsequent iteration, in every moment, in every area, in every hierarchical level, in every activity. Thus a new iteration has “no plannable basis”, it results in the short term from the previous iteration. Incidentally, the open admission of unattainability is not a flaw for agility, but rather the basis for the optimal use of budget and resources – in other words, the consistent avoidance of wasted resources. Today, agility is a prerequisite for technological advantage, which in turn enables high margins and thus generates liquidity once again to extend the lead.

What are the agile guiding principles from the Agile Manifesto?

The agile guiding principles were formulated in 2001 and recorded in the “Agile Manifesto”. I do not want to say much about it, please just let it work:

“We’re unlocking better ways to develop software by doing it ourselves and helping others do it. Through this activity we have learned to appreciate the following 4 values:

• Individuals and interactions stand above processes and tools
• Functioning software stands above comprehensive documentation
• Cooperation with the customer takes precedence over contract negotiation
• Responding to change overrides following a plan

That is, although we think the values on the right are important, we value the values on the left more highly.”

Attached to this lesson you will find a PDF in A3 format with the 4 values of the Agile Manifesto. Feel free to print this out and hang it on the wall in your project room for regular team reflection.

What are the principles of the Agile Manifesto?

Agile has imposed the following 12 principles or guiding principles on itself in the “Agile Manifesto”:

• Customer satisfaction through early and continuous delivery of valuable software
• Agile processes leverage change (even late in development) to the customer’s competitive advantage
• Delivery of functioning software in regular, preferably short time spans (i.e.: a few weeks or months)
• Nearly daily collaboration between subject matter experts and developers during the project
• Providing the environment and support needed by motivated individuals to perform tasks.
• Information transfer in face-to-face conversation, if possible
• The most important measure of progress is the functionality of the software
• Keeping a steady pace of work among clients, developers, and users for sustainable development
• Constant attention to technical excellence and good design
• Simplicity is essential
• The best architectures, requirements and designs emerge from self-organized teams
• Self-reflection of teams on their own behavior to adjust with a view to increasing effectiveness.

How does the Agile Manifesto fit with the reality in large companies?

And if I may guess now, a big murmur goes through your head. Right? And why? Well: because in the practice of large-scale projects “none” of this applies in reality – and this despite the fact that an agile project method has been agreed upon. Instead, the reality looks more like this:

1. Processes are to be followed 100%, tools are specified in the Book of Standards for safety reasons, interactions are highly regulated (hey, just don’t communicate too much with the customer), and individuals have to do what the supervisor says.
2. If the documentation does not meet the specifications, the customer does not pay and the team member either gets a slap on the wrist or is removed from the team for repeated non-compliance.
3. What is not in the contract is not done. If an additional effort is identified, then this must first be ordered by the customer before implementation. And cooperation with the customer is subject to the strictest communication limitations, so that nothing gets through to the customer that could be detrimental.
4. If the plan is not followed, then nothing is paid and the project is stopped because milestones are not met as agreed. Who is not familiar with the related escalations triggered by levels of superiors at the customer and in their own company? Necessary changes are to be bypassed wherever possible or ignored as long as possible.

What does reality have to do with agility then? Well, we will deal with that intensively after the basics have been taught. Now the most important basics for understanding – later the practice. However, this also makes it clear to us what a long way we still have to go to exploit the potential and where the stumbling blocks to project success are to be found.

Attached to this lesson you will find a PDF in A3 format with the 12 principles of the Agile Manifesto. Feel free to print this out and hang it on the wall in your project room as an orientation for the team.

What is the goal of agile processes?

One goal of agile processes is to make projects more efficient by reducing administrative shackles and taking into account human needs and mistakes.

In detail, this means that the design phase and planning processes are reduced to a minimum in order to get to the development phase and thus to the usable solution as quickly as possible, which is then further developed at regular and short intervals. Only then can a solution be flexibly adapted to changing customer requirements, which in turn generates customer satisfaction and the technological edge.

Does agile involve working aimlessly?

So agility really means working without a planned goal. On the other hand, it is definitely not aimless work, because agile work also needs a goal in the form of a vision. And every iteration, every sprint in agility needs an intermediate goal from which the next intermediate goal is derived. This makes agile work much more challenging than pre-planned work, because planning becomes part of each iteration. Because it is only with this granular planning that agility and flexibility are achieved in a project.

In order not to sink into chaos, fixed rules accepted by all in the form of principles, framework conditions to be adhered to and the consistent use of project tools provided are required.

Is project success higher in agile than in waterfall projects?

Another small piece of accompanying information from the Standish Chaos Report: projects using agile methods have a much higher probability of being completed successfully than when using classic waterfall methods.

With the waterfall method, in a 2015 study of more than 10,000 companies

• 11% of projects successful
• 60% problematic
• 29% fail

With agile methods

• 39% of projects are successful
• 52% ar problematic
• only 9% fail

It is even more interesting for us to look at the study results if we only consider the major projects from them. If only 3% of large projects are successfully completed in waterfall models, then there is simply a need for large companies to take action to improve.

Reason enough, then, that agile methods are increasingly attracting the interest of decision-makers alongside the Big 5’s role model function. The fact that there is a greater distance between “interest” and “successful implementation” is quite another matter.

I quite like the marketing slogan from a BMW TV commercial that goes, “Work becomes collaboration.” To me, such mass advertising shows the priority of Agile Transformation in this company. But it is also just a saying. A marketing slogan to show where it’s going. Just like the saying on the board, “Hey, we’re agile now!”. And a lot of time passes before a saying becomes substance, which is simply necessary for a cultural change in the company.

I will also leave it at that in this lesson, not going deeper into agile ceremonies, methods, principles and rules of agile organization, because we will look at these components in quite some detail later in this course series. At this point in the course, it is only important for me to understand “why” we subsequently place agile methods and frameworks at the center of action and then, depending on the needs and project phase, quite pragmatically supplement them with components of other methods – indeed, in some cases even replace agile methods with other solutions.

Now let’s summarize what we have covered in this lesson:

• we have learned a new technical term.
• We now know the difference between waterfall and agile,
• we have at least an idea of what agility means in reality,
• we learned about the Big 5 and their corporate strategies,
• we know the dangers for conventional planning organizations,
• we have discussed how iterations work,
• and the mentality we need for a change process,
• we have learned about the ideals of the Agile Manifesto,
• just like the 12 principles of agility,
• we have taken our first critical look at agile approaches in large companies,
• and compared with the goals as well as the associated benefits.
• And we now know – each for himself and the company he works for – what road still lies ahead until we reach our goal.

In the next but one lesson, I will address criticism that agility would not work at all in our country, in contrast to a libertarian society like in the USA. But before that, we have another little surprise for you: The following lesson contains a short quiz in which you can check for yourself which content from this lesson has stuck with you. I wish you a lot of fun, see you in the next lesson but one!

*Source data: 22, 25, 26