Jeff Gothelf is co-author (with Josh Seiden) of Sense & Respond: How Successful Organizations Listen to Customers and Create New Products Continuously. The book is a fascinating exploration of how digital technologies and collaborative practices have enabled more agile ways of working, allowing companies to put the fast-evolving needs of customers first. Jeff Gothelf is a leading thinker and practitioner in the areas of user experience, design, and agile practices. He believes that middle market companies are uniquely positioned to develop new, more agile styles of working that prioritize quick adjustments to their offerings based upon real-time market feedback. 

How has digital technology enabled a constant, two-way “conversation” between middle market companies and their customers?

Gothelf: In the past, a customer would walk into your business and buy your product or service, and then walk out. You'd re-engage with them when they came back. With today’s digital technologies, that conversation is instantaneous and continuous. The benefit for business is that you now have a 24/7 inflow of customer insights.

You can have an immediate sense of how well or how poorly your products and services are meeting customer needs. So the measure of success becomes making the customer happy. Digital technology has ushered in a culture of customer-centricity based on “sense and respond.” So “sensing” is the act of collecting this quantitative and qualitative customer information, while “responding” is the ability to react to it in the same time-frame. 

Amazon, for example, deploys software to customers five times a minute. They’ll take a button and move it to the left and see what happens. If the change has a positive impact, they’ll optimizes and scales it. If the impact is negative, they roll it back.

How did “agile practices” like these first emerge?
Gothelf: Agile practices came from software development. They grew out of the frustrations of building and shipping software products in the 1980s and 90s. A group of software engineers decided there must be a better way to build software systems, so they met in Utah back in 2001, spending a long weekend together. They wrote the Agile Manifesto which is a set of working principles for how to think through the complexity and uncertainty of software development. 

It has since become the most popular approach to software development, replacing the traditional linear, waterfall model, which is a very stage-gate based model [of top-down planning]. Meanwhile, the digital revolution has taken root and businesses of all sizes have become software businesses at their core. These agile principles are now becoming relevant to all parts of the business, because the approach is about managing complexity and uncertainty. 

How are agile practices now emerging in businesses areas other than software development? 

Gothelf: You can't be agile in technology only, because the benefits of customer-centrism and “sense and respond” capabilities cannot be fully realized without the support of the entire organization. The story I describe in the book of how General Electric developed a new refrigerator is a good illustration. Traditionally, the product reinvention life cycle of a refrigerator is five years, and it's a linear, waterfall process. There's usually a lot of upfront design, and then negotiations with manufacturers and raw material suppliers. Then it's manufactured and pushed onto the market.

GE wanted to reduce the cycle time to 12 months. They used agile principles, which involve cross-functional collaboration, iteration, continuous learning, and continuous improvement. They put everybody in a room at the same time, including finance people to budget out the costs. They started by asking “what's the purpose of this new refrigerator, what are we trying to improve upon and how can we get people to buy this particular refrigerator?” Everybody contributed their thoughts, brought in their specific expertise, and then they built mock-ups of refrigerators. They put these mock-ups in front of real customers and learned quickly, actually delivering a great customer experience while meeting their business needs. 

What investments might middle market companies need to make in order to adopt more “sense and respond” ways of working?

Gothelf: Middle market companies have a terrific advantage in making agile practices work. From a size perspective, they’re in that sweet spot. They're not start-ups blindly guessing about their customers, the value that they bring to the market, how to deliver it, and what it costs. They have enough information to drive strong, evidence-based decision-making. Now they're not too big either, so changing their culture and the way they work isn’t a monumental task. 

That said, middle market companies will need to make system-level investments and cultural-level investments. With your initial, infrastructure investment, you’ll want to build the technological capabilities to deploy incremental and iterative improvements to your products and services. At the same time, you’ll want to invest in analytics systems, in qualitative research, in user research, in market conversations, anything that allows you to measure things both quantitatively and qualitatively. 

But the “respond” part requires investments in culture. You have to invest in empowering your teams, creating a culture that makes it okay to learn quickly and make mistakes inexpensively. It's not just investing in the technology and in the infrastructure that supports continuous learning, but also creating a culture that allows teams to leverage learning in real-time. 

What cultural and behavioral changes are needed to support agile practices at middle market companies?

Gothelf: Both employees and leaders need natural curiosity, a sense that there's always a better way to do something, as well as the ability to critically look at evidence and be willing to adjust. While creating a culture is company-specific, leadership dictates that. Humility, for instance, is a core value, It has to come from the top down. Humility simply says, "I have a strong opinion about the direction of the company, but I’ll present it as a hypothesis as opposed to a directive.” A leader can say “I have an opinion, but if you provide me with evidence to the contrary, I’m willing to listen and adjust.” If you want to drive cultural change, you have to incentivize it through your employee reviews, performance management systems, and the language that you use to recruit, hire, and retain people. It has to be a part of the way the whole company operates.