Bosch Power Tools is a major division of the big German technology company, with about 20,000 employees in over sixty countries and €4.6 billion in 2018 revenue. Henk Becker, who became CEO in 2019, launched its agile transformation in 2016. He established a six-person team reporting to him that would guide and support the division’s six business units, sales organizations, and headquarters during the process.
Three years later, a visitor could see signs of thoroughgoing transformation in the division’s everyday operations. The business unit for professional power tools in industrial markets, for instance, established a three-level Kanban process. Stand-up meetings at the product level fed stand-up meetings at the business owner level, which then fed a stand-up meeting at the business unit level. Daniela Kraemer, business owner for power tools solutions in light drilling and chiseling, described her meeting this way: “We share all the project updates in a short period of time. We have tickets on a Kanban board. If you have an update, you turn the item on the board. Then we quickly move on, or we schedule a separate meeting if it’s a bigger topic we need to discuss.” The meeting includes between eight and ten individuals—product owners and expertise owners, such as supply chain and marketing. It takes thirty minutes, and it starts and ends punctually. “At first people thought, whoa, this is a lot of time,” said Kraemer. “But it saves a lot of time.”1
At the business unit level, leaders constituted themselves an agile leadership team and canceled most existing meetings. Zero-basing the calendar in this way forced them to commit to a new way of working. Business-unit stand-ups took place every Tuesday and Thursday at 4:00 p.m. A giant seven-meter board tracked every major work effort. A team that needed something would turn the item on the board ninety degrees. Leaders could also mark an item for discussion. A Scrum master facilitated the meetings. There was no fixed agenda. Meetings ran between fifteen and thirty minutes, with no item taking more than three minutes. (If there was a need for more discussion among some participants, the thirty minutes following the meeting were kept free.) Team members captured every new idea on the board as a backlog, and every three months held a special meeting to prioritize topics. Everyone could see the ideas of others—incremental EBIT, start of launch, whatever they might be. The transparency and resulting alignment carried over from one meeting to the next, speeding up decisions.
The last of Bosch Power Tools’ six business units went through its agile transformation in 2018. By 2019, Becker had established an agile leadership team at the executive level and installed an agile master to support the team. This group defined fourteen focus topics to implement the division’s strategy and deployed these throughout the organization as key performance indicators. Becker held his own stand-up meeting every Monday. Members discussed broad organizational topics, ensuring alignment on priorities and individual responsibilities. “In the past we would come with certain topics, but it was not always clear how they were aligned with the strategy,” Becker told us. “We always disturbed the teams’ sprints. Now we have a clearly defined method of aligning sprints, so that no one is disturbing anyone else.”2
Becker also changed the strategy process to be more inclusive; giving entrepreneurial responsibility to teams meant that more people were needed to discuss strategy and business issues. Power Tools typically holds two big management meetings a year. Before, these included twenty leaders; now they include 120. In the spring 2019 meeting, Becker spent the first day on leadership, building soft skills, and the second day on strategy topics. By all accounts, he got rave reviews from the division’s fifty-five business owners, who were now insiders for the first time.
Business leadership has never been easy, and it doesn’t matter whether you’re the CEO or a manager lower down in the chain of command.
In the old days, a century or more ago, leaders at least knew what they were supposed to do. Find people to do the required jobs. Tell them what to do. Make sure they did exactly as they were told. Frederick W. Taylor’s scientific management codified this approach. Industrial engineers would map out efficient work processes, and bosses would ensure that the work was done. Over time, of course, much of that changed. Many jobs became more complex. Many workers brought skills and opinions of their own and didn’t take as readily to instruction. Douglas McGregor’s famous Theory Y—which he distinguished from the old, tell-’em-what-to-do Theory X—encapsulated a different kind of management style, one that was said to be more appropriate to the new environment. Listen, don’t tell. Trust and believe in your people. Encourage them to take responsibility.3
But though business schools and corporate cultures often gave lip service to the tenets of Theory Y, executives and managers often fell back on a kinder, gentler Theory X. They might not yell or order people around, but there was no doubt who was making the decisions. And why shouldn’t they? After all, they would be graded and rewarded on hard-to-fudge metrics. They had to hit their sales goals, their cost objectives, their budgets. They had to predict what was coming down the pike and respond appropriately. CEOs—and by extension, boards of directors and shareholders—didn’t want to hear excuses; they wanted to see results. So leaders plunged into the work, rolled up their sleeves, told their underlings exactly what to do, and, if need be, did it themselves. Like the factory overseers of old, they knew that their job was to make sure the work got done.
As everyone keeps reminding us, however, times have changed still more. In recent years, it has become harder for leaders to maintain this style of management. Predictability? Forget it. The world is changing too fast. New competitors are cropping up all over. Technology continues to evolve, often too quickly for comfort. Up-and-coming managers and young functional specialists seem to expect more than a company—any company—can give them. Opportunities for growth. More money. Work-life balance. Leaders who were successful at running things in the 1990s or 2000s—which is why they were promoted to ever-more-responsible leadership roles—can now find themselves adrift. Little wonder that so many feel that they are working harder and having less to show for it. Little wonder, too, that they get a nagging suspicion, now and then, that they might be going about things all wrong.
Henk Becker of Bosch Power Tools got that suspicion early on. He had joined Bosch right out of school, with a degree in mechanical engineering. Starting in the company’s automotive division, he worked his way up over the years by building his technical skills and competencies. Back then, success meant being the best functional leader he could be, guiding people in what to do. He spent more than twenty years in such roles, and in 2013 joined the executive board of Power Tools. Initially focused on engineering and quality, he added manufacturing and ultimately became CEO of the division in 2019.
By his own account, however, something at Power Tools was different. A few courageous leaders began to give him feedback of a sort he had never heard before. His leadership style, they said, wasn’t helping him succeed. It wasn’t helping to bring out the best in people, and it wasn’t helping Power Tools win in the marketplace. They told him how they wanted to be led differently, complete with examples. The experience, he says now, was “a click in my brain and in my heart.” He decided that he needed to change his attitude and his behavior. So he began a process of self-reflection and awareness building. He asked for more feedback. At first his teams were dubious: Was this just a passing fad, or was it real? Slowly, he was able to build trust, and he was able to broaden the group of people actively giving him feedback.
Becker shifted his focus to concentrate on the potential and strength of his people and the organization. He tried not to focus on deficits, he says. He started using positive language. He began asking, “How can we?” instead of probing to understand why something couldn’t be done. He focused on listening and two-way communication instead of providing one-way direction. To reinforce his commitment, he gave up his office and parking spot. He also stopped asking people to bring him PowerPoint presentations; instead, he began going out to teams and relying on the information that they were already using. It took time, he says, but he became a different leader—the kind who could successfully launch an agile transformation.
Nearly all the executives and managers we encounter are dedicated, hardworking individuals, just as Becker was during his earlier career at Bosch. They take their jobs seriously, and they are committed to helping their company succeed. They might not put it in these terms, but many see themselves on a kind of noble mission. They believe that they create a great deal of value by knowing exactly what needs to be done and getting people to do it. Their role, as they understand it, is to protect their employees from doing things wrong, from wasting time, from screwing up. Their goal is to get the work done as best as it can be done, as quickly as possible, and at the lowest possible cost. Without their hands-on guidance, they think, people would be forever spinning their wheels.
When we help a company launch an agile transformation, we encourage leaders to think carefully about four principles, and about what they mean for leadership behaviors. Doing so begins to shift what leaders believe about that noble mission and about how they add value. As Becker’s example shows, changing how you lead requires both effort and discipline. The following principles are good starting points.
We have all read, in recent years, about the phenomenon of helicopter parenting, also known as lawnmower or snowplow parenting. Helicopter parents love their children. They recall their own struggles as kids, and they want their own children to be more successful and happier than they themselves were. So they swoop in, as on a helicopter, whenever a difficulty arises. They meet with teachers and principals and coaches, hoping to remove obstacles and smooth the way for their children’s success. They hold the difficult conversations and try to resolve things, rather than expecting the children to cope. On one level, the parents’ thinking is incontrovertible: they are almost always better than their kids would be at talking to the coach or writing the college essay. On another level, it’s easy to see the costs involved. Children don’t learn that they can take care of themselves. They don’t build the necessary skills. At worst, they run to mommy or daddy for help at every little bump in the road.
Employees are not children, but leaders often treat them the way helicopter parents treat their kids. Leaders don’t trust their employees to do the job right, so they give those employees specific, detailed directives. If they have to, they do the job themselves. Some of the employees, like some children of helicopter parents, adopt a kind of learned passivity and wait for the boss to tell them what to do. Those with more talent or spunk—the ones who can see for themselves what to do or how to do it, often better than with traditional objectives and methods—typically bridle at being given detailed instructions. Some are likely to leave. Tufts University professor Amar Bhidé studied the Inc. 500, a compilation of the fastest growing privately held companies in the United States.4 Many successful company founders explained to him that they had tried to launch a particular venture while at their old job but had been prevented from doing so.
In an agile environment, leaders take a different approach. They may tell a team what to focus on, but never how to do it. Figuring out the how is up to team members themselves. Their job is to experiment, to test and learn. What product is most likely to succeed in the marketplace? How can the order-entry process be revamped to ensure both speed and accuracy? What is the best way to ensure a continual stream of qualified candidates for our various departments? Questions like these rarely have easy answers. Leaders may have strong, experience-based opinions about what the answers are, but they usually have no way of knowing whether they are right. Like children, adults learn best by trying things out and seeing what works. That is the hallmark of an agile team.
Trust between leaders and the people they lead was an essential part of McGregor’s Theory Y. Trust, he said, means the following: “ ‘I know that you will not—deliberately or accidentally, consciously or unconsciously—take unfair advantage of me.’ It means ‘I can put my situation at the moment, my status and self-esteem in the group, our relationship, my job, my career, even my life in your hands with complete confidence.’ ”5 This is a tall order, and McGregor’s strictures about trust have most often been observed in the breach. It’s tough for a leader to trust a subordinate when the leader isn’t sure about the subordinate’s intentions or skills. And it’s tough for a subordinate to trust a leader who seems to prioritize (at all costs) getting the job done exactly according to his or her directives.
Agile provides a way of building trust—of making people trustworthy, so to speak—over time. Think again about how the method works. An agile team is resourced and given a mission by a leader. Team members break the work up into manageable components, create a backlog, and then begin working their way through the backlog in (say) two-week sprints, reprioritizing over time as may be necessary. At the end of every two weeks both the leader and the team can see what has been accomplished and can learn from it. The process is wholly transparent. Even a cynic would have to agree: How much trouble can a team get itself into in just two weeks—especially if they are taking guidance from the customers they serve? A leader who feels that team members have veered off track can quickly steer them back in a more productive direction by asking: What are our key assumptions and how can we test them? Leading with trust in this manner takes discipline, especially under stress, as that is when control instincts kick in. But it gets easier with time.
Workplace trust, in short, isn’t something that exists or doesn’t exist in the abstract. It’s something that people build by collaborating productively. People on an agile team take on new tasks and assume responsibility for the results. That’s how they become trustworthy.
In 1817, the English economist David Ricardo published a book called On the Principles of Political Economy and Taxation.6 It elucidated a theory that has since been taught to every first-year economics student and that explains the benefits of international trade. In principle, said Ricardo, a country could decide to make everything for itself, within its own borders, and not trade with anyone. But its citizens will be better off if they focus on producing whatever they are best at and then trade with countries that produce what they are best at. Each has a comparative advantage relative to the other.
Now put this in a managerial context. It’s sometimes the case that a manager, by virtue of skills and experience, can do almost everything better than his or her direct reports. At Bosch, Becker may have been the best engineer, the best product designer, the best assessor of exactly what kinds of features would most appeal to customers. But if he were to spend all his time doing those tasks, there’s a big opportunity cost: he would not be spending time on the tasks that only he could do. He wouldn’t be thinking about the overall direction of the business. He wouldn’t be exploring new markets or looking into potential acquisitions. Rather, he would be doing what his employees should be doing, and everyone would be the worse off.
Certainly there are plenty of business leaders, from CEOs on down, who believe they have a firm grip on customer needs. The best ones, of course, spend time talking with their customers, so they have at least some evidence on which to base their judgments. Still, it’s difficult for any one person, no matter how experienced or intuitive, to know how a customer will respond to any particular feature. It’s also difficult for senior leaders to know how internal customers—the people who rely on the work of the IT department, HR, finance, the warehouse, and so on—might want things done differently and how they might respond to innovations.
An agile team assumes that the best judge of what the customer wants is the customer. It’s why teams develop minimum viable products—just so they can get customer reactions and can modify the product accordingly. Agile teams working on internal process innovations typically engage the people who will use those innovations as part of the team, so that customer feedback is built in from the very beginning. The representative on the team can consult with his or her peers in the relevant unit and bring the team ongoing feedback about what’s looking good and what’s falling flat.
Agile leaders who think carefully about the issues we just raised—and who adjust their actions accordingly, as Becker did—are apt to find themselves in a very different place from where they started out. They will no doubt be just as dedicated and hardworking as they were originally. But their roles will have changed dramatically, and they will have a very different conception of how they add value to the organization. When leaders on a management team come together in this new way, they can redefine their noble mission still further.
For one thing, they can stop running their business. Think about this for a moment. Most senior leaders spend their time solving problems, watching their budgets, and so on. But what if they now have a dozen or a score or even a hundred agile teams peppered throughout the organization, each one charged with pursuing innovations that will create new opportunities, improve efficiency, and eliminate problems? These leaders no longer need to spend their time doing what they were doing before, because other people are taking on those responsibilities. Instead, they can pursue their own comparative advantage, which is to think about the big picture and make decisions about strategy and resource allocations.
Of course, they can’t do that alone. That’s why companies that are launching an agile transformation typically reconstitute the executive committee at the top of the organization into an agile leadership team. They do the same with teams of leaders at lower levels of the organization. They thus redefine not only how leaders spend their time but also how they work together.
Today, most companies’ executive committees are representative bodies. Business-unit heads and functional heads come together as representatives of their own silos, reporting on their units’ accomplishments and looking out for those interests. They may make decisions that benefit their own budgets, that protect talent they are hoarding, or that further their own career aspirations. The CEO or general manager is responsible for weighing each silo’s interests and making trade-offs, creating a unified strategy for the good of the whole.
But what happens when the executive committee constitutes itself as an agile leadership team? Doing so means operating as an agile team in service of external and internal customers. Since operating skills and innovating skills seldom thrive together in a single person, the agile leadership team capitalizes on the power of a group. It is a team of decision makers who focus on the greater good, not a collection of individuals. Operational reviews still happen, but they focus on learning, prioritizing, and removing roadblocks. Sometimes operating experts take the lead, and sometimes innovation specialists take the lead. But both groups must collaborate to run the business efficiently and reliably, change the business adaptively, and harmonize all these activities. The agile leadership team brings running the business and changing the business together in proper balance.
Members of a good agile leadership team realize that they create the greatest value for their enterprise not by increasing the number of times they predict, command, and control but by unleashing the untapped potential of tens of thousands of employees. They get comfortable delegating testable decisions and helping to make more decisions testable by those closest to the front line. They help the entire organization build testing and learning skills. They think in terms of systems—creating small, minimum viable microcosms of full systems. These microcosms enable leaders to test multiple changes to see how they interact with one another over time without putting the enterprise at risk. While bureaucrats fear that testing potential changes to the company’s operating model will tip their hand and scare people, agile practitioners test almost everything all the time and expect that the organization will grow accustomed to continuous adaptation. They focus on accelerating cycle times and minimizing waiting times, especially the time required for making decisions. They avoid running decisions through excruciating gauntlets up and down the hierarchy. They break complex processes such as planning, budgeting, and new product deployment into smaller, more frequent batches and feedback loops.
The agile leadership team deeply respects the realities of navigating complex systems. It recognizes the futility of long-term forecasting, knowing that transitioning to an agile enterprise is more like driving on a treacherous mountain road in the dark of a rainy night than barreling down a desert straightaway in broad daylight. Team members know where they hope to arrive, but they avoid committing to specific turns beyond the insights of their headlights. They jointly and adaptively determine how far to go, how fast to go, and how to handle unexpected rocks in the road.
The agile leadership team, in short, becomes a strategy team guiding the entire organization, with all of its members looking out for the company’s best interests rather than the interests of their individual silos. Members’ time horizons shift. They focus on longer-term objectives having to do with building the organization’s capabilities rather than worrying about short-term results. Instead of improving the productivity of only their direct reports, they are improving the productivity of thousands of people throughout the entire organization. How do you shift mindsets from being a silo leader to being a member of an agile leadership team? For day-to-day guidance, we often suggest that leadership teams customize and commit to their own version of an agile manifesto. You can see a representative example of a manifesto in appendix A.
As the long list of commitments in appendix A suggests, leading an agile transition is a lot of work. The journey typically begins with the team developing a guiding vision and using it to communicate the potential benefits of an agile enterprise. The team doesn’t develop the vision behind closed doors, then spring it on the organization as commandments written in stone. Rather, it views those who will implement agile activities as customers. Like all agile teams, leaders collaborate with their customers and cocreate the vision and potential strategies for achieving it with them in full transparency. They then discuss alternative directions the vision could take, and they identify the key questions that must be answered to determine which of those directions will be most successful. Ideally, they demonstrate intellectual humility. They jointly develop metrics for inputs, activities, outputs, outcomes, and purposes that will help them to monitor and adapt to the answers to those questions.
The transition is a perpetual improvement process, not a project with a completion date. The agile transition is not a costly distraction; it is the way the business will run. The best way to lead an agile transformation is from a mindset of trust rather than one of control. Contrary to conventional wisdom and Hollywood action movies, dictatorial management is ineffective in a crisis. Command-and-control systems work best when operations are stable and predictable, commanders have greater knowledge of operating conditions and potential solutions than their subordinates do, centralized decision makers can effectively handle peak decision volumes, and sticking to standard operating procedures is more important than adapting to change. None of these conditions exists in extreme events such as natural disasters, terrorist attacks, major military battles, or large-scale business transitions. The variability and unpredictability of events are too high for rigid directives. Experienced operators in the field have better knowledge and more current information than remote dictators or their mercenary agents do. Information overloads paralyze command centers, creating devastating bottlenecks. Standard operating procedures fail because the situations are by definition nonstandard.
Managers who fall prey to the dictator-in-a-crisis myth pay a heavy price. Their responses to unexpected developments are slow and ill-informed (think of Hurricane Katrina, the Chernobyl meltdown, perhaps even the ongoing disaster at Sears). And their obvious lack of confidence in front-line employees will hinder growth long after the crisis passes. For these reasons, even modern crisis teams are turning from command-and-control systems to more adaptive, agile approaches.
In a conventional urgent transformation, a small team of people at the top tries to figure out a company’s problems and make the necessary changes. In an agile transition, hundreds or even thousands of employees attack those problems at the root—and learn skills they can put to work for the rest of their careers.
During the transition, agile leadership teams help people to make decisions faster and with less information than traditional teams. To do so, they typically take five actions:
Of course, the agile leadership team has responsibility for determining how far and how fast to go with agile. In keeping with agile principles, it doesn’t plan every detail in advance. Even though they have laid out a vision, leaders recognize that they do not yet know how many teams they will require, how quickly they should add them, and how they can best address bureaucratic constraints without throwing the organization into chaos. So they typically launch an initial wave of agile teams, gather data on the value those teams create and the constraints they face, and then decide whether, when, and how to take the next step. This lets them weigh the value of increasing agility (in terms of financial results, customer outcomes, and employee performance) against its costs (in terms of both financial investments and organizational challenges). If the benefits outweigh the costs, leaders build on the momentum and continue to scale up agile—deploying another wave of teams, unblocking constraints in less agile parts of the organization, and repeating the cycle. If not, they can explore ways to increase the value of the agile teams already in place (for instance, removing organizational barriers or upgrading prototyping capabilities) and decrease the costs of change (by publicizing agile successes or hiring experienced agile enthusiasts).
A good agile leadership team avoids bureaucratic arguments to treat an urgent agile transition like an authoritarian project. “We have a crisis here, and a crisis is the time for decisive, even dictatorial, leadership. Show complete commitment to agile. There is no turning back. Burn the boats. Get the skeptics out of the way. Install leaders who will relentlessly drive our vision to completion. Let’s get these painful changes done so that we and the rest of the organization can get on with running the business.” As Luke Skywalker might reply, “Amazing. Every word of what you just said is wrong.”
At Bosch Power Tools, Becker’s leadership transition helped open him to the possibility of a better way, and the company’s adoption of agile gave him a road map. The goals of the transformation that he launched were more innovations that would be of value to users, greater speed and adaptability, and new models for collaboration. He and his six-person transformation team established a vision and set a tone of continuous improvement from the beginning. “This is certainly not a classical project, where everything is defined in detail before it starts,” said Anne Kathrin Gebhardt, who led the team. “We are in the middle of an iterative and self-learning process. The path we have chosen is the Bosch Power Tools path. Every company or every business division must define its own path.”7
After learning from pilot teams, the transformation team began looking at one of the six business units within Power Tools. “A transformation of this nature obviously involves many challenges,” said Gebhardt. “After all, it is not merely a simple reorganization, but rather the most far-reaching transformation of our operating system. We are going right back to roots and changing everything, including our management and team culture, our organizational structures, the methodology we employ, and our strategic processes. The key wasn’t which topic we dealt with first. Instead, the focus is on addressing every single topic and relating it to a holistic transformation approach.” The five tracks of work the transformation team defined were strategy, organization, leadership, processes and methods, and culture. Over three years, the team sequenced through each of the six business units as well as the headquarters functions. In the leadership track, what was most critical was the time and space for dialogue. For instance, team members sponsored a wide variety of activities—leadership days, training on topics such as coaching and mindfulness, soliciting broad feedback on leadership style to create feedback loops and help leaders, creating more engagement between leadership and front-line teams, and so on. They also began to experiment with agile methodologies and practices in becoming an agile leadership team.
Three years later, agile practices had spread to the entire division. Some innovation cycles moved from three years to six months. Product managers, business owners, and division leaders were holding their stand-ups, reviewing their backlogs, making decisions on the spot wherever possible, and turning out more and more innovations that customers of all sorts would find valuable. As for the financial results, early indicators are encouraging—but time will tell.
FIVE KEY TAKEAWAYS