Sense and Respond: How Successful Organizations Listen to Customers and Create New Products Continuously

by Jeff Gothelf

Often, we fail to make a fundamental reassessment of the way we manage our business as a whole in the era of digital technology.

where we once managed software in the same way we ran our businesses, now we need to manage our businesses in the same way we manage our software.

you need to change the way all of the parts of the business operate, and what you think of as a “plan.” It’s not enough to change the way you make your products and then leave the rest of the business to operate as if those changes weren’t happening.

we need to consider and change how our teams operate. We need to change how we conceive of, create, and market our products and services. We need to change the way we engage with our customers, stakeholders, and users

The industrial-age approach to managing uncertainty was to make detailed plans. Because software systems are complex, that approach does not work. Detailed plans break down in the face of reality.

Prioritizing Learning over Delivery

This is the guiding principle for sense and respond organizations. Start by creating a conversation with your customers so that you can learn first, and refine and deliver second.

Without the learning, you risk delivering a product or service no one finds valuable. The sooner you discover whether your business strategies warrant further investment, the less time you waste on fruitless endeavors. In other words, the sooner you can find out whether you’re wrong, the better.

The effort to create and launch a landing page test, or even three, is trivial compared with building a fully functional service.

Companies that value learning provide teams with business problems to solve, clear constraints within which they can operate, and clear success metrics. The teams then figure out how best to solve these problems, moving from question to question, with the success criteria serving as the barometer of progress.

sense and respond is a way of pursuing a vision, using evidence collected through a continuous, two-way conversation with the market to make decisions. This approach uses alignment with goals (rather than a detailed plan) to coordinate the activities of teams.

In the information age, the best way to understand value is to let our customers tell us what they value. In other words, value is not what we say it is: it’s what our customers say it is.

The alternative to feature road maps is to make looser plans and then adjust them as you learn.

the ubiquitous use of software has increased the pace of change for customer expectations, lowered the barriers to entry for new competitors, and made domainwide disruption a reality for every industry. Working in this new reality, with these new levels of uncertainty, makes assumption-driven planning incredibly risky.

the overwhelming majority of these managers face challenges in turning their organizations around. The “way we’ve always done it”—annual financial budgets, long-term strategic planning, discipline-based silos, incentive structures based on production quotas—proves to be too hard to overcome. But it’s not impossible.

It takes a certain kind of attitude to embrace a sense and respond style of work. People who thrive in this environment are curious and humble and comfortable with uncertainty. They’re oriented toward learning and tend to be good at collaboration. They want feedback on their work, and they want to fix it if it’s not right. Not everyone fits this description.

This was a learning moment for all of us. Creating two-way conversations with a sense and respond approach builds in feedback loops that aren’t there now. This can be uncomfortable for members of your team. If you commit to this way of working, parting ways with some of your colleagues should be expected. Coming to terms with that will help your organization establish the right environment more quickly. And the sooner it’s set up, the more it will attract like-minded individuals.

Successful sense and respond companies find people who want to work this way. You’ll want to hire explorers, researchers, and problem solvers who are not content with the status quo. These folks are attracted to environments that already practice this way of working, which can be a catch-22. You can’t hire the right people without the right environment, and you can’t create the right environment without the right people. The good news is that there are likely people on your staff now who would prefer this way of working but who haven’t yet had the chance. Find them, and give them the challenge they seek.

Digital technology is moving into every dimension of the business world, and it’s forcing every business to consider how it will respond. Every business is now, in one way or another, a software business.

Unfortunately, many companies have adopted agile methods without really understanding why they are doing so. Often these methods are used simply to execute a predetermined plan. Decision making—the ability to respond to feedback from the market—remains outside the team, and thus operates at a much slower pace. This is the mindset of the industrial age, a mindset driven by the pursuit of perfection, lengthy production cycles, assembly lines, and long chains of command. It’s also what will allow more-nimble competitors to capitalize on opportunities before you do. Instead, you must hand over control of the tactical decisions to the teams that are closest to this insight.

There’s another set of expectations you’ll need to meet if you want your business to scale—your employees’.

This problem of uncertainty, combined with the nature of software, means that managing our projects in terms of outputs is simply not an effective strategy in the digital world. And yet, our management culture and our management tools are set up to work in terms of outputs.

Projects like this work because they follow the principles of mission command. They give teams a strategy and a set of outcomes to achieve, along with a set of constraints, and then give them the freedom to use their firsthand knowledge of the situation to solve the problem.

This approach to project leadership is not common, but we see it more frequently on startup teams and in smaller organizations. Indeed the Taproot project was delivered by a single small team working with little need to coordinate with others. Scaling this approach to multiple teams and to larger organizations is a difficult and subtle problem, one that requires careful balance between central planning and decentralized authority.

FaST

Dan North. In a conference talk in 2013, North described it this way. Agile doesn’t scale. There, I said it. Actually people have been telling me that for over ten years, and I’ve just refused to believe them, but they were right.

SAFe moves teams away from a sense and respond approach and toward a central-planning approach. In effect, it reduces the agile team to a production team, giving them a fixed set of requirements and expecting a specific output to emerge from the end of the assembly line. This approach can be appropriate for high-certainty efforts, but it limits an agile team’s ability to learn from feedback as it goes forward. And again, it’s this learning from feedback that allows teams to navigate in high-uncertainty contexts.

Instead of trying to fit agile into a command and control framework, we’ve seen many organizations adopt coordination approaches that are more in line with mission command—that move away from planning with outputs and toward managing with outcomes. These approaches use different tactics to coordinate the effort of large teams, but they tend to create something we call outcome-based road maps.

Here’s the bottom line: when you’re figuring out how to assign work to teams and how to measure their performance, you have to remember that there is no single set of measures by which team performance can be assessed.

This all adds up to a simple and overwhelming problem: the high likelihood of building the wrong thing. So the project approach is efficient but not effective. Utilization is high, but the output creates no value.

Creating Autonomous Teams with Outcome-Based Missions

the capabilities of autonomous teams: monitoring and observing customers, creating experiments, understanding and interpreting data, deciding how to respond, and producing a response. These capabilities form the heart of the cross-functional teams we seek to create. In practice, this means we must build teams from cross-functional groups and make sure that the core team functions—design, engineering, and product management—are dedicated to that team.

Although a single team can schedule tasks together and optimize its flow internally, it becomes much harder for two teams to schedule tasks together. If a designer has to produce a drawing for team A, then her work for team B is idled until that drawing is complete. And if two people on team A have responsibilities to other teams—for example, the designer owes work to team A and the developer owes work to team C—then the scheduling problem suddenly multiplies in complexity and rapidly becomes unmanageable.

FaST

Developers may be used to working from detailed requirements documents; they must get used to starting with much sketchier inputs. And everyone needs to get used to the idea that change and rework are valuable parts of the process, instead of costs to be avoided.

Creating Co-Located Teams Once you have a single team and have dedicated it to a single project, you have the conditions for creating good collaboration. At least, you have the foundation upon which you can build. The next step is to get the team members working together. The easiest way to get people working together is to put them in the same room. People who sit together will more naturally use conversation as a communication tool. It seems perhaps overly simple to say this, but in an age of text messaging, chat rooms, email, and videoconference, the power of face-to-face conversation is still hard to overstate.

Finally, it’s worth noting that sandboxes and explicit constraints are not necessarily the only way to give teams the freedom to operate. We talk about culture in more detail in chapter 8, but for now, note that over time, many organizations find that as they adopt this approach, they learn to trust that people will do the right thing.

FaST Principle - Do the right thing

Why would organizations want to reconsider the budgeting process? If it’s possible to learn continuously, why would you limit your power to respond by making annual plans that resist change?

Companies are reluctant to tinker with financial governance processes—and rightly so. Careful financial stewardship is foundational to success. Yet the process Pearson is implementing here shows what’s possible when a company, even a company that’s more than one hundred years old (Pearson was founded in 1844), faces the future and commits to change. It’s possible to take one of the most conservative and appropriately risk-averse parts of the operational elements in a business—the financial governance process—and reinvent it to better fit into the information age.

The annual budgeting process should be reconsidered in favor of more frequent periodic progress checks with teams, based on progress toward business outcomes.

A delivery culture that values hitting your production targets and deadline targets is in direct conflict with a culture that prizes discovering and embracing emergent customer value. In a delivery culture there’s no time for conversations with the market and no time for learning and iteration. Instead, delivery culture rewards employees and managers for completing tasks on plan rather than confirming that these were the right tasks to complete in the first place.

Instead of a top-down, order-taking culture, sense and respond methods push decision making out into the organization—allowing the people who are closest to the customer, to the markets, and to the situation at hand to make the decisions. It values what these people know, and, even more, it values their ability to learn. With that in mind, we believe there are seven important elements that make up a learning culture.

The importance of social ties is something we sometimes forget, but it comes up repeatedly when people talk about creative teams.

To thrive in the digital age, we must move away from command and control and move to sense and respond methods. Our competitors are already making this move. Large incumbents are being swallowed by smaller players who take sense and respond methods as their birthright.

We see these continuous, feedback-based processes in methods like agile, DevOps, design thinking, and lean startup. Taken together, this body of methods is the future, and our challenge now is to look at our organizations and institutions and evolve them—or risk seeing them replaced by newcomers.

Finance will need to reassess the way budgets are made. Product management will need to reassess road maps and portfolio planning. Marketing and sales must move from a predictable, feature-based world into a world of continuous value creation and delivery. “This year’s model” is a thing of the past. Legal teams and compliance teams will need to work with delivery teams to find safe ways to enable continuous learning. In other words, technology is no longer only an IT problem. The rhythm of technology is changing the rhythm of business, and we’re all going to need to adapt.

the key principles remain the same: a two-way conversation based on learning, continuous flow, and a customer-centered definition of value must take priority over following a predetermined plan of action. Cross-functional collaboration must lead the structure of the organization.