The management methods and practices that have been gathered under the term agile claim the status of a Copernican Revolution. Agile reverses the traditional view of business revolving around the firm, instead placing the customer at the center and viewing all other elements as revolving around the customer.
This is a welcome development — but just a step towards the Austrian vision of consumer sovereignty and the concept of value as created by the consumer, not the producer.
Key Takeaways And Actionable Insights
We examined the three “Laws of Agile” proposed by Stephen Denning in his book The Age Of Agile, and Per Bylund notes the elements that are useful for entrepreneurs, and the extra insights provided by Austrian Economics that can help entrepreneurs to perform at a higher level in facilitating value experiences for their customers and consumers.
The Law Of The Customer
- Agile recognizes that the one valid definition of business purpose is to create a customer.
- The customer — with mercurial thoughts and feelings — is at the center, and demands to be delighted.
- What the firm thinks it produces is less important than what the customer thinks he / she is buying — what they consider “value”.
- Everyone in the firm must view the world from the customer’s perspective, and share the goal of delighting the customer.
- The firm must have accurate and thorough knowledge of the customer.
- Continuous innovation is a requirement to delight customers.
- The firm’s structure changes with the marketplace.
- Speed of response becomes crucial and time is a strategic weapon.
Austrian Enhancements
- The Austrian concept of Customer Sovereignty is even more powerful for entrepreneurs — customers create firms, in the sense that customers decide what is produced by buying / not buying, and therefore which firms are successful.
- Value is subjective — and so customer preferences can change rapidly and frequently.
- Responsiveness is not enough — the goal is to imagine the customer’s future needs, and involve them in the production of future value.
The Law Of Network
- Collaborative network of competence replaces hierarchy of authority.
- The network has no leader, but it does have a shared, compelling goal.
- The network is the sum of the small groups (rather than individuals) it contains.
- Each group has an action orientation.
- The network’s administrative framework stays in the background. No bureaucratic reporting.
Austrian Enhancements
- Agile is based on too narrow a view of the economic network. It’s still producer-centric.
- The true network is the market — which includes customers (of which there are many more than firms, and who exert more economic influence than firms).
- Networking the production side of the firm is an incomplete act.
- A fully-functioning network includes customers and consumers with equally valid connections to the firm, not just collaborative production partners.
The Law of Small Teams
- Big and difficult problems are disaggregated into small batches and performed by small cross functional teams — scaling down the problem.
- 7 +/- 2 is a good rule of thumb for team size.
- Each team is autonomous, and works in small batches and short cycles.
- Each team aims to get to “done” — it’s binary: either done or not done, never almost done.
- No interruption.
- Radical transparency.
- Customer feedback each cycle.
- Retrospective reviews.
Austrian Enhancements
- A pure focus on short term execution can divert attention away from longer term considerations – especially, imagining the future, which is the core component of entrepreneurship.
- Focus on creating value for the future, while ensuring no loss of current reputation and relationship.
- Administration — and therefore “bureaucracy” — can’t be eliminated entirely without a reduction in customer value.
- Required services can be a component of value creation — such as compliance, operations management, etc.
Additional Resource
“The Laws of Agile Meet Austrian Economics” (PDF): Mises.org/E4E_38_PDF
The Mises Institute exists to promote teaching and research in the Austrian school of economics, and individual freedom, honest history, and international peace, in the tradition of Ludwig von Mises and Murray N. Rothbard. These great thinkers developed praxeology, a deductive science of human action based on premises known with certainty to be true, and this is what we teach and advocate. Our scholarly work is founded in Misesian praxeology, and in self-conscious opposition to the mathematical modeling and hypothesis-testing that has created so much confusion in neoclassical economics. Visit https://mises.org