This article is part of a blog series dedicated to the book: Creating Agile Organizations - A Systemic Approach, by Cesario Ramos & Ilia Pavlichenko.
Cross-functional team is the basic structural block in Scrum. It is a self-managed unit that optimizes speed of learning and flexibility. When multiple cross-functional teams are working on the same product we call it a scaled Scrum and there are different implementations of it, for instance, Nexus and LeSS. But in a context of an enterprise new questions pop up:
- How to take into account the whole value creation system? For instance, for a typical banking product like a mortgage, besides creating new features, the organization needs to perform lots of activities like supporting existing clients, marketing, value propositions, selling the product, comply with regulatory requirements etc.
- What is the place for organizational functions that are rarely the primary focus of an Agile Transformation: legal, procurement, HR?
- What is the overall organizational design for an Agile company?
In this article we’ll briefly cover the above questions.
Agile Organization Design
The prototype of an Agile Organization would have a few shared functions along with the strategic management. The rest of the organization is mainly organized around semi-independent Product Groups that likely have separate leadership, finances, resources, and people, which may be augmented with shared services such as purchasing, sales, human operations, and finance.
Figure 1.1: Prototype of an Agile Organization
This approach gets the benefits of a decentralized approach (speed, flexibility) combined with economies of scale that emerge from shared services.
Think of a Product Group as an enterprise level cross-functional unit that extends cross-functional team concept.
Let’s have a look at how a Product Group is structured.
Product Group Structure
Product Group is organized around a product that generates a revenue stream. For example, credits, mortgage, loans if it’s a bank. Each Product Group is led by a senior manager (Product Owner in Scrum) who is responsible for product success and has control over all the resources. A Product Group has a few critical characteristics:
- It has a definitive purpose or mission.
- Consists of elements to achieve its mission: cross-functional teams, functions, systems, roles and responsibilities.
- Has a market focus and a profit and loss (P&L) responsibility.
- Has decision-making autonomy.
Figure 1.2: Product Group example
In Figure 1.2 you can see a concrete implementation of a Product Group concept. In this particular case the product is an ecosystem for small and medium entrepreneurs. Five cross-functional teams create the core digital value proposition and share a single Product Backlog. That’s the scaled Scrum part, but it’s not enough for Agility. The Product Group also includes additional organizational functions to execute a business model:
- Sales
- Customer support
- Legal
- Operations
- Security
- Marketing.
- A group of banking experts that help the Product Owner product management activities
Do the latter mentioned functions work in Scrum? Maybe, but not necessarily. What is more important is that the Product Group includes all the necessary resources to cover the value stream and generate revenue. Why? People that belong to the same product unit coordinate effectively because they report to the same manager, adopt the same goals and priorities, and share the same resources, therefore coordination costs go down. The flow of work also increases because by grouping interdependent roles in the product units and in the teams, the teams waste less time on alignment and coordination activities. Over time, members of the Product Group are likely to develop a shared culture, further facilitating collaboration.
This was a really brief introduction into the prototype of an Agile Organization and concept of a Product Group. It raises additional questions:
- How to design a Product Group?
- Which functions should be included in the cross-functional teams and which should stay separate?
- What functions should be centered as shared services among Product Groups?
In the following articles we'll try to cover those. Hope that was helpful.