Agile in Corporates, Traditional in the Mittelstand: What Each Can Learn

Agile work fits where requirements become clear along the way and changes are cheap, and traditional planning fits where outcome and route are fixed. Corporates and the Mittelstand often choose by habit and size, although the nature of the work should decide. Each side can adopt a great deal from the other: the corporate the closeness to the outcome, the Mittelstand the regularity of learning.

This article shows the criteria by which to choose a way of working for each initiative, what corporates can see in agile programmes in the Mittelstand and which elements of the traditional Mittelstand are missing in corporates. The Mittelstand here means the German-speaking world's owner-led mid-sized companies.

Why do corporates work agile while the Mittelstand works traditionally?

Corporates often introduce agile methods first in large development efforts with many participants, because coordination costs most there and methods modelled on software development were available early. In the Mittelstand the strength frequently lies in reliable manufacturing, long customer relationships and short decision paths, and these strengths work well with traditional planning. Both reasons are understandable, yet neither says which way of working fits an individual initiative.

The Agile Manifesto of 2001 comes from software development and aims at work in which requirements change along the way. Traditional phased planning is widespread in manufacturing and construction, where late changes are very expensive. Winston Royce, whose 1970 paper is credited as the origin of the waterfall model, wrote in the same text that the simple phased sequence is risky for all but the simplest undertakings. Phased planning and agile methods are thus answers to two kinds of problems.

The consequences of choosing by size are shown in the article on agile rituals without effect: the rituals run, yet delivery barely changes.

By which criteria do you choose agile or traditional?

You choose the way of working for each initiative by five criteria: clarity of requirements, cost of a late change, access to customer feedback, number of teams involved and form of acceptance. The vaguer the requirements, the cheaper late changes and the faster the feedback, the better an agile way of working fits. The clearer the outcome, the dearer the changes and the stricter the acceptance, the better a traditional one fits.

The grid shows that a company needs several ways of working at once. A machine builder develops the control software in an agile way and builds the housing traditionally, and the interface between the two is settled at a fixed date. Anyone who fills in the grid before an initiative starts makes the choice on the basis of the work itself.

What can the corporate learn from the traditional Mittelstand?

The corporate can learn from the Mittelstand to keep decision paths short and to leave responsibility for outcomes with people rather than committees. In many Mittelstand firms the managing director or a head of department decides within days, and the person responsible for an outcome is known by name. In large corporates decisions travel through several levels and committees, and an agile rollout reinforces this effect when it creates additional roles and coordination meetings.

A second lesson concerns commitments. The Mittelstand promises dates it keeps, because it calculates them from experience and agrees them personally with the customer. Corporates can adopt the discipline of basing commitments on data, as described in the article on milestone planning in agile programmes. A third lesson is closeness to the customer: where sales knows the customer personally, feedback flows into development without detours.

What can the Mittelstand learn from agile corporates?

The Mittelstand can learn from agile corporates to deliver work in short cycles, make progress visible and check regularly whether the right thing is being built. Traditional initiatives often show problems only at acceptance. A sprint rhythm with a demonstration every two to four weeks brings the same information much earlier. The 2020 Scrum Guide provides the Sprint Review for this, in which results are inspected with the stakeholders. How this turns into real decisions is described in the article on the sprint review.

The second lesson concerns learning from mistakes. Retrospectives give teams a fixed place to improve their own work and replace conversations that otherwise happen by chance or not at all. The third lesson is the visibility of work: a Kanban board shows where orders are waiting without anyone having to ask. For businesses with make-to-order production this is often the first gain, because waiting times become visible.

How does cooperation between a corporate and a Mittelstand firm succeed?

Cooperation between an agile corporate and a traditional Mittelstand supplier succeeds when the interface is designed up front as a contract on outcomes and dates and both sides may keep their way of working. Corporates occasionally ask suppliers to fit into their methodology, for example through daily check-ins or shared boards. That creates effort without gain when the suppliers manufacture hardware. Fixed handover points, clear acceptance criteria and a named contact on each side work better.

How do you combine both worlds in one organisation?

You combine both worlds by keeping a stable hierarchy for day-to-day business and building a network next to it for change and new ventures. John Kotter describes the model in his 2014 book “Accelerate” as a dual operating system: the hierarchy secures efficiency and reliability, while the network of volunteers and teams seeks opportunities and carries out change. Both systems work simultaneously and are linked by people who take part in both.

For the Mittelstand this means: the proven business stays traditionally managed while one or two agile teams develop new offerings or digital initiatives. For the corporate it means changing only those areas in which the nature of the work demands it.

Combining agile work and traditional planning with Niehues Consulting

Niehues Consulting is a consultancy for AI management and organisation design from a delivery perspective, based in Düsseldorf. Founder Marin Niehues builds organisations that deliver and works on projects ranging from VC-funded scale-ups to DAX 40 corporations, deployed in over 20 countries on six continents. In the service areas of delivery management and organisation design he shapes ways of working so that they fit the nature of the work.

The approach follows the Niehues Delivery Model. Two of its review questions matter when choosing a way of working: who decides, who delivers, who uses? And: which roles, decision paths as well as interfaces does operations need? How an organisation restarts after a first attempt is described in the article on restarting an agile transformation. Scope and terms of an engagement are discussed in the free initial consultation, which you can arrange via the contact page.