consultants just love 2x2 matrix! The first group they labelled "maintenance zone" - these companies are less effective and less aligned. Unsurprisingly they had average IT spending and as a result of poor IT sales were falling at the rate of 2% annually over 3 years.
Unsurprisingly those companies that were more effective and aligned to the business - doing the right thing and doing it right - demonstrated 6% below average IT spending and sales increasing by a staggering 35% annually. However this group constituted just 7% of all companies.
Assuming an organization is in the "maintenance zone" - and after all 76% of companies are - they must decide which to focus on first: to be more effective or more aligned, do the right thing or do things right.
Traditionally Agile improves the effectiveness of development teams. While Agile doesn't ignore requirements the thrust of most Agile processes is to improve effectiveness. Successfully improving effectiveness would allow a team to move from "maintenance zone" to Bain's "well oiled" quadrant. By being more effective companies do things right but don't necessarily do the right thing.
Still, the returns for "well oiled" IT are impressive. The 8% of companies in this category demonstrate below IT spending 15% below average while sales grew at 11% per annum.
These figures show that being an effective development group is actually a pretty good place to be and a vast improvement for many. Simply being effective at what a group does saves significant amounts of money. For some companies just getting to this position will be enough to stay competitive.
But what about requirements? Moving to "well oiled" doesn't address the need to produce what the business wants. What if, instead, we followed the managers' instinct? What if we improved alignment and focused on doing the right thing before doing things right? Wouldn't this be better still?
The answer is No. Bain label this group of companies "alignment trap". While they are more aligned to business need their effectiveness is still poor. These companies see higher IT spending, up by 13%, and more worryingly sales falling faster, 14% per annum than the "maintenance zone" companies. It turns out that doing the right thing poorly is a terrible place to be. This 11% of companies are in the worst place possible.
Yet it gets worse. Bain go on to say that once in the alignment trap it is harder to move to the high performing - aligned and effective quadrant - than it is from "well oiled".
Why is it that doing the wrong thing well is so much better than doing the right thing badly? I think the explanation lies in our old friend the waterfall.
Organizations which attempt to do the right thing naturally focus on requirements. This leads them to take a requirements-first approach. This starts the waterfall, and since 80% of these requirements maybe unnecessary these organization create the demand that pushes up costs.
This model explains why Agile has had significant success to date. Agile has its roots in what developers do. This is most obvious when one looks at one of the first Agile methods to gain popularity: Extreme Programming (XP).
XP provides for an onsite customer to produce requirements but on the whole XP is concerned with what developers do - TDD, refactoring, simple design, etc. By focusing on the development process XP improves effectiveness.
As a result XP - and other Agile methods - are very good at making development teams more effective and moving them from Bain's "maintenance zone" to the "well oiled" quadrant.