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A good time was had by all at Scrum Day India 2020. My talk on “Why 47% of Agile Transformations Fail!” was well received. My slides are posted here - Why 47% of Agile Transformations Fail.

A recent Forbes survey indicated to me that about 47% of Agile transformations fail and 77% of Agile transformations are Scrum transformations so most of the failures are due to bad Scrum.

Questions on these numbers motivated me to dig deeper. The Forbes survey self-selected respondents indicated an 86% success rate. 

Yet Prof. Kotter in his book Accelerate says he has never seen a long term successful Agile transformation with waterfall leadership. At recent Agile conferences with over 200 people in sessions, I asked how many Agile transformations had waterfall leadership? The response was over 95% of those attending. So the failure rate is somewhere between 34% and 95%.

I decided to dig deeper into the Chaos Report data from Jim Johnson, CEO of the Standish Group. Jim has been collecting data for decades on over 500,000 IT projects and we have tested his data by querying over 1000 Certified Scrum@Scale Practitioners on their success rates which average lower than the Standish Group Data. So Standish Group data is known to be conservative as to failure rates.

Why Scrum Works - Decision Latency

Jim Johnson had coffee with me last summer to review the reason why he thinks Scrum works. It all depends on Decision Latency, the average time to make a decision, which he is now tracking in thousands of companies. 

If Decision Latency is less than an hour, the success rate is 68%, independent of the process. If the average decision time is over 5 hours, the success rate falls to 18%. Scrum pushes development decisions to the team and all priority decisions to the Product Owner radically shortening decision time to an hour or less.

In Scrum@Scale implementations, an Executive Action Team is meeting daily to make higher-level decisions. An oil and gas company cut well drilling average time from a month to six days or less by fast executive decisions.

So I asked Jim to give me more detailed data on Decision Latency for his agile teams. Here it is for 10,000 Agile Projects - 10000 Agile Projects, Jim Johnson, Standish Group, 28 Jul 2020

Decision Latency       Agile   Successful  Challenged     Failed
<1 hour 23% 70% 26% 4%
1 to 2 hours 37% 40% 54% 6%
3 to 5 hours 24% 28% 52% 20%
>5 hours 16% 25% 53% 22%
Totals   41.62% 46.92% 11.46%

The best data we have shows 41.62% success and 58.38% failure. And the major cause of failure is taking too long to make a decision, i.e. lack of business agility. The failure rate is 75% when Decision Latency is more than 5 hours.

A followup on failed transformations by the MIT Sloan Business Review showed that 67% of failures are terminal, i.e. the companies go bankrupt or are acquired. Yet the most successful and valuable trillion-dollar companies, Microsoft, Amazon, and Apple all use Scrum and they have shown different paths to Scrum@Scale to achieve phenomenal success.

Why do so many companies go out of business because they cannot get Agile when there are such obvious examples of radical success?

Implementing Scrum properly is certainly one of the primary reasons.

Standish Group data show that 58% of “Agile” teams are late, over budget, with unhappy customers. Current training and coaching are not effective enough. This number is about the same as the failures due to long Decision Latency.

Agile Leadership Means Executive Participation

So here we need a scaling framework that focuses on reducing decision time at all levels of the organization. This requires more than executive sponsorship. It requires executive participation as Agile leaders.

We need an Executive Action Team and an Executive Metascrum provided by Scrum@Scale. Without an Executive Metascrum prioritizing all initiatives, we have seen in company after company that 30% of the projects have no significant business value and should be terminated. So many if not most companies are wasting 30% of their budget before they do anything useful. That is a good indication of failure to achieve Business Agility.

Standish Group data shows consistently over the last 20 years for over 500,000 projects that 64% of features delivered to customers are never or rarely used. 

So without a good Product Owner organization, of the 70% of projects that might be useful, we waste 64% of our staff on things the customer won’t use. At OpenView Venture Partners we call these junk stories. If we eliminate the junk we get investments like Data Dog which has exploded during COVID-19 and gave us a 30000% return.

For the few features being built, effective Scrum teams are critical. The best measure of team performance is Process Efficiency and a typical Scrum team has an average process efficiency of less than 15%. The definition of Lean is over 25%. This can be achieved in one Sprint by having the team focused on eliminating waste.

So with roughly 1/3 of our companies trying to get Agile failing and going out of business, we need a transformation of our Scrum training and coaching. We need to go back to the grandfathers of Scrum, Takeuchi, and Nonaka, and look have they defined Scrum Project Management in their 1986 Harvard Business Review Paper, “The New New Product Development Game.” 

They were looking at autonomous, cross-functional teams with transcendent goals in lean hardware manufacturing companies. They described the intense collaboration and continuous improvement style of these teams and called them Scrum after the scrummage formation in Rugby.

Scrum, at its root, is Lean and about eliminating waste. The latest book on “The Secret Behind the Success of Toyota” shows that lean manufacturing generates only 5% of Toyota profits. The other 95% is generated by the Shusas, the Chief Engineers, who deliver twice the value at half the cost.

But today Toyota is the number two auto company. Why is that?

Tesla is Agile as well as Lean and turning inside the decision loop of the competitors. Professor Nonaka is writing a book on the U.S. Marines who are achieving 400-700% gains in performance with Scrum@Scale. He notes the John Boyd’s OODA loop which is the basis of Marine strategy is more important today to companies like Toyota than the PDCA loop that Edwards Deming taught them in the 1950s.

So we need a major upgrade to Scrum training and coaching.

  1. Scrum Masters need to be taught Lean principles and basic tools. They need teams with over 25% process efficiency. This will at least double velocity.
  2. Scrum Masters need to implement the Hyperproductive Scrum Patterns published in “Teams that Finish Early Accelerate Faster” and in the new patterns book, “A Scrum Book, The Sprint of the Game.” These will enable teams to perform at the level of the U.S. Marines, a 400-700% improvement.
  3. Product Owners need to be taught John Boyd’s OODA loop to get inside the decision cycle of the competition to enable their companies to survive and thrive. Delivering twice the value at half the cost is the key to survival in today’s world. If you can do this you are “Certain to Win.”
  4. In 2020, almost all companies have more than one Scrum team and they need a scaling framework for the organization (not just an IT framework) that enables leadership to actively participate in prioritizing all initiatives and leaning out all areas of the company. Scrum@Scale is the only framework that enables this kind of transformation.

For these reasons, at Scrum Inc., we incorporate all this material into our Scrum training. And we have launched a global program of over 100 independent Scrum Trainers and another 100 independent Scrum@Scale Trainers worldwide. We have put all our materials into Open Source so that all the trainers can use the latest tools and techniques and get constantly updated materials for free to use in their training.

Scrum Inc. Japan provides Scrum coaches and trainers to Toyota Research and Toyota IT in Toyota City. Our materials have proven to increase agility in the world’s leading manufacturers, oil companies, construction companies, food and beverage companies, non-profits, and any organization that wants to improve life for the people and results for the investors. Just as Toyota has freely shared its lean experience with the world over the years, Scrum Inc. is sharing Scrum experience to increase the probability of a successful Agile Transformation for companies worldwide.

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