The long slowdown

Or why Agile has not (yet) changed the world

Some month ago Stephan Wolpers wondered if we have reached the peak of agile? He referred to the fact many of us worldwide are now engaged in some sort of Scrum-team but wonder what the benefits of Agile or Scrum are? For a lot of people these benefits are not always obvious. Sometimes this leads to an eroding support of the Agile way of working. This is an attempt to put things in a macro-economic perspective.

Agile is all about people. About how people relate to their work, to their colleague’s, to the hierarchies in their organizations and the products or services they create. So it is about labor. Labor is one of the four factors of production. The other three are: land, entrepreneurship, and capital. Land as a factor of production is not really relevant in this perspective. Entrepreneurship is but is extensively discussed in numerous publications. The interaction between capital and labor however, is crucial in understanding why innovation of the concept of labor (e.g. Agile) is sometimes undervalued in comparison to innovation in the concept of capital (e.g. technology).

Technological innovation and its slowdown

When we talk about capital we mean assets you can buy or build. Like buildings, machines, vehicles, software, etc. Since the beginning of the industrial age innovation in the factor capital was enormous. In the 6 decades between the first 12 seconds flight of the Wright brothers in 1903 and Neil Armstrong’s first steps on the moon, the world saw a flood of technological changes. If a person living in 1903 could time travel to the 1960’s, he would be totally lost.

Now, in 2020, again more than 5 decades after the beginning of space travel, we see that the curve of technological innovation is much flatter. In an article in the Scientific American last august Wade Roush states that contrary to popular believe the last 50 years were less innovative then the decades before the 1970’s. Technological innovation certainly did not stop but game changers like the combustion engine, electricity, radio, motion pictures, telephones, airplanes, computers, became increasingly rare.

Instead we spend huge effort in further development of existing technologies. Notably the computing power and storage capacity of computers. That multiplied enormously! As described by Moore’s law. Apollo 11 carrying Neil Armstrong to the moon in 1969 relied heavily on computers. These computers were basically the same as present-day computers. But infinitely more slow and limited. 

Labor productivity

The technological innovations since the beginning of the industrial age until the 1970’s led to a dramatic rise in labor productivity and increased prosperity till a level beyond the dreams of pre-industrial man.

The rise of information technology after the 1970’s led to changes in particular communication and data processing. Despite the huge changes in communication and data processing, the increase in labor productivity slowed down after the 1970’s. According to Statistics Netherlands (CBS), the last decade in the Netherlands there was an increase of labor productivity of 3.9% but at the same time the amount of worked hours increased by 5.3%. So the actual economic output (efficiency) per worked hour dropped. It looks like people in the Netherlands appreciate working hard for long hours more than working efficiently.

The reason why an Agile way of thinking is not just a trendy word in modern management theory is because Agile is about the human factor in the production process. It is an innovation in the factor labor. One of many. 

Innovation: The challenges for the factor labor

One of the consequences of the rise of information technology is a change in how we perceive the way we organize work. Combined with the fact that by now approximately half of the young adults that enter the labor market did receive tertiary education, the labor conditions are very different from the 1970’s.

In 2004 prof. dr. Michiel Schoemaker in his inaugural speech at Nijmegen University was one of the first to give a coherent picture of the consequences and substantiated an alternative way of thinking (without mentioning Agile even once). He pictured future organizations were the “old industrial bureaucracy” is replaced by flexible, autonomous communities of professionals.

In numerous organizations innovation is primarily seen as mere modernization of the factor capital. Cheaper or better machines, software, or financial constructions to pump up profitability. Even lowering the cost of labor per hour is often considered an innovation (e.g. offshoring). The last few decades however, we have seen that the effects of innovation of the factor capital on growth and productivity was less than the decades before the 1970’s.

From the 1990’s onwards many professionals and scientists pointed out that we need a way of working that is more in tune with the changing socioeconomic circumstances (one of its characteristics is an emphasis on constant change). Innovation of the factor labor became as important as technological innovations before. Putting highly educated professionals in the straightjacket of a top-down command-control culture is as counterproductive as demanding that they use written letters instead of email. Innovation in labor can be characterized by a changing managerial culture that doesn’t order professionals to do something but facilitates them to find creative solutions to complex problems by maximizing business value and eliminating those tasks that create insufficient value.

The key concept here is Trust. Trust in professionals to come up with the best solutions. Trust is a much more effective than control.

The “old industrial bureaucracy” however seems hard leather when it comes to changing its way of working. It has a persistent emphasis on innovation of the factor capital. The last two decades professionals in organizations (i.e. the people new on the labor market) kept on insisting to innovate the factor labor as well. This led to a situation in many organizations were the workplace adopted some form of Agile way of working but the management (especially the higher echelons) is either unaware of this innovation or is struggling to incorporate this innovative way of working in the existing bureaucracy.  

The result is that organizations are confronted with a faltering labor productivity. The technological innovations do no compensate for the lack of innovation in labor. It is cynical that organizations complain about the lack of well-educated employees and feel compelled to resort to the abundant cheap labor in countries like India (which they like to keep as cheap as possible) only because the innovation of labor lags behind.

We let ourselves down if we implement Scrum teams in our organizations but hesitate to innovate the process of labor. The tension between a lagging innovation in the factor capital and a half-hearted innovation of labor, will lead to increasingly cynical employees not seeing the benefits of labor innovation. It might result in a call to return to previous ways of working. Better to live with the devil you know than the devil you don’t ….

Thanks to Ivan Rios Cervi?o for reviewing and cooperating