If Agile is So Effective, Why Do 95% of Products Still Fail?
& how to build macro-agility in the hyper-competitive New Economy
Agile adoption in software teams increased from 37% in 2020 to 86% in 2021 (Source: Digital.ai). This is a positive step, but one that is largely ineffective.
According to Harvard Business School professor Clayton Christensen, there are over 30,000 new products introduced every year, and 95 percent fail.
This failure rate doesn’t seem to have changed over time. We don’t have data on product failure rates by year, but we can, instead, look at how many companies close within their first year. In the US, this rate has remained remarkably consistent since 1994 (79.6% were still trading after Year 1 in 1995 v. 79.4% in 2021).
And with a drying up of capital markets, a scarcity of venture investment, & a deep tech recession, it’s more important than ever to create products that deliver massive value.
In this article, I will outline why agile adoption leads many product teams to focus on the wrong things, focusing on micro-agility instead of macro-agility, before discussing what specific actions product teams can take in order to survive in the hyper-competitive environment of the New Economy we all now operate in.
What Does “Agile” Really Mean?
I won’t go over the history of Agile & why it came about. Suffice to say, when we talk about Agile, we are broadly referring to the principles outlined in the Agile Manifesto:
“Individuals and interactions over processes and tools
Working software over comprehensive documentation
Customer collaboration over contract negotiation
Responding to change over following a plan”
These are principles voicing the need for teams to move quickly, build stuff, listen to customers & to generally adapt to changing conditions where needed.
They are also principles that anyone with a decent amount of product experience would fully agree with!
Unfortunately, in practice, we see these principles misappropriated, or simply misunderstood. 2 common anti-patterns you may recognise:
Agile Process Teams: Teams moving away from a Waterfall scenario (where stakeholders essentially tell product teams what to build) try to be Agile (with a capital “A”). That means they hire in Agile Coaches to help implement processes that neither the Agile Coach nor the organisation being coached really understand. For example, they have a “daily standup” or obsess over “story point estimation” for tasks, but don’t stop to think about whether the tasks they are working on really make sense in the first place. Thus these Agile Process Teams forget (or ignore) the principles underpinning many of those processes, leading to improved velocity, but not better product decision-making
Micro-Agile Teams: Teams understand the need to be agile (i.e. adapt & move quickly), but only look at the micro-level. Generally, this means that they are agile in how they execute, for example, how quickly they adapt to unforeseen issues in building a feature, or even switching features in & out of a roadmap to adapt in what they end up building. This is a great place to start & helps the team make better product decisions. However, this tends to mean they focus only on micro-agility (e.g. weighing up different features), rather than macro-agility (i.e. adapting on a bigger, strategic level).
What is Micro- v. Macro-Agility?
It’s important to state: It is not good enough for a product team to come up with a great strategy or amazing product idea. Ultimately we still need to execute in order to turn that idea into reality - and build a viable business around it.
This is where micro-agility is essential. Micro-agility means that teams are able to adapt in how they deliver value, for example, finding another, faster way to build a highly technical feature. It also means, to some extent, they are able to adapt in what they deliver. For example, if Feature A is going to take 3 months to build, they might adapt & build Feature B instead because they feel it will deliver the same value with just 2 weeks of work. This kind of agility leads to a better product.
However, an over-emphasis on micro-agility can mean we end up unable to separate the wood from the trees: Too zoomed in on the details that we forget the bigger picture.
That bigger picture is your macro-environment.
Your macro-environment is shaped by forces largely outside of your control: Maybe a sudden recession changes consumer spending. Maybe increased interest rates. Maybe a transformative technology (like the first iPhone) comes along that disrupts multiple different markets, from how photography is done to how we communicate. Maybe the advent of new no-code tools that lead to an explosion of niche competitors that chip away at your market share.
Great teams - teams that shape the future - understand the need to prioritise the macro. They demonstrate macro-agility by being able to adapt to changes in the macro-environment. Conversely, micro-agile teams might be very good & adaptive at execution, but are unsuccessful at adapting to the macro-environment.
Blockbuster, for example, recognised the digital trend sweeping the world in the late 90’s. They ran a very efficient business, with micro-agility in the need to distribute DVDs across a huge number of stores.
However, they failed to go digital, expecting customers to trust in their brand & to always turn up at their stores.
Netflix, on the other hand, showed an ability to repeatedly adapt to the macro-environment.
They started by shipping DVDs directly to the consumer’s home, which was innovative at the time. They then pivoted entirely away from this heavily operations-focused model to an entirely new digital model: Allowing consumers to access content through streaming online.
This macro-agility is far more impressive than we give Netflix credit for.
They had to build & validate an entirely different business model (going from pay-per-rental to physical subscription to digital subscription), an entirely different distribution model (cataloging all content online in a way that was easily accessible & with minimal lag in streaming), with an entirely different skill set (heavy, backend engineering v. physical operations).
And they remain macro-agile, fighting off competition from the likes of streaming services (e.g. Disney, Amazon Prime), as well as moving into the content creation game themselves.
How to Be Macro-Agile In The New Economy
The macro-environment is rapidly changing. It has, in fact, already changed dramatically over the last 3 years. First, Covid shifting consumer & business behaviour dramatically. More recently, a recession, the reopening of China, the war in Ukraine & the emergence of ChatGPT to name just a few factors changing our macro-environment.
Add to that ballooning startup valuations, easy access to investment capital, no requirements to actually achieve profitability, the prospect of a long period of recession or, at least, stagnation?
The difficult economic conditions we are likely to remain in until 2025 all point to the need for you to build products that are able to fend for themselves:
With a user base that highly values the product, and the ability to generate business value in the form of a profit.
That means there is a high chance you will need to adapt.
Whether a Product Manager in a large company, or Head of Product in an early-stage startup, if nobody is driving micro-agility, then it’s up to you.
You must help your product - your organisation - adapt, or see it die (prominent VC Chamath Palihapitiya has gone as far as to call this a “startup mass extinction event”, with up to 80% of startups expected to go bust within the next 2 years).
So, what to do about it?
In order to be macro-agile, we suggest leading by the following principles:
#1 Focus Your Market
In the New Economy, it’s extremely rare to be able to target a huge, broad market successfully.
Sure, Google does it. As does Amazon. But they enjoy monopolies over their markets. For the rest of us, there is just too much competition to try & build a product to please everybody. Instead, you should aim to target a very specific, very focused market in order to deliver a lot of value to them.
Rather than targeting “Founders”, for example, target “First-time founders who have just raised a Seed investment round”.
Why? Because that more specific market has unique problems that require unique, specific solutions. Furthermore, such solutions will be far more valuable to them because they are specifically tailored to their needs. This means we deliver more user value and, alongside a strong business model, this means more profit for us as a business (business value).
If you have multiple personas that use your product, gather data on the average Lifetime Value & cost of acquisition of each persona. Ask yourself: Can you focus your product decisions only on the persona that has the highest LTV:CAC?
If you are struggling to achieve consistent growth, it’s likely because your target market is too broad. Ask yourself: Can we be more specific? What is the smallest viable target market we could create value for? Build for that market.
#2 Constantly Explore New Opportunities
As the macro-environment changes, so will your target market’s needs. You therefore need to be open & receptive to those changes.
Your market will face new problems. Those problems represent opportunities for you as a product team to take advantage of.
Revolut, the modern banking app, is a good example of this in practice. Consumers are looking for safe investments, not risky investments during a recession. Rather than just providing investment options limited to cryptocurrency & stocks, why not add safer investments such as treasury bonds or investing in gold?
This macro-agility is just one example of a product decision that has helped them turn over a significant profit for the first time - when most other companies are struggling to do so.
Use our Miro template with this product discovery guide to aggregate problems & flip these into opportunities. We suggest running a batch of 10-15 discovery calls every 4 weeks in order to maintain a deep, nuanced understanding of your target market’s needs
#3 Everything Should Stem From A Product Strategy
If you are not crystal clear on what your team should focus on - and what they should not focus on - you are likely building the wrong things.
Take the example of my business, Prod MBA. It’s a bootstrapped company that I run as a solo-preneur. We don’t have the $10m+ of money Product School or Reforge raised from venture capital. We don’t even want it. But, it does mean we have to be SUPER focused in what specific value we deliver:
We promise hands-on, actionable product experience that will fast-track a Product Manager’s path to product leadership. We deliver hands-on, actionable product experience. If we are thinking of working on a new idea to improve the experience, we simply ask ourselves: Will this thing help us provide a more hands-on, actionable product experience? If so, let’s think about it. If not, we just ignore it.
Superhuman, an email product outcompeting Gmail & charging $30/user per month follows the same principle. They promise “the fastest email experience ever” - and they deliver on that promise because they are laser-focused:
Does this idea help us deliver a faster email experience? If yes, let’s think about building it. If not, ignore it. It’s not part of our product strategy.
If you have a product strategy, is it as focused as it could possibly be? What maximum 1-2 specific opportunities does it focus on?
If you don’t have a product strategy, use the following formula to define one with your team (you can also use our Miro template):
Who is your specific target market?
What ideal outcome do they want to achieve with your product?
How will you deliver that ideal outcome in a genuinely unique way?
#4 Always Be Building, Measuring, Learning
It’s great to understand the bigger picture - the macro - through focusing your target market & adjusting your product strategy as you go.
However, a big part of understanding the bigger picture is also achieved through experimentation. In fact, product success is closely correlated with the speed of experimentation (Kohavi et al., 2020).
Therefore, be relentless in not just adapting to macro-changes, but make sure you measure & learn from those changes.
If, for example, you work at Revolut & pivot your product strategy to focus on “safe, transparent investments”, rather than building a full investment feature, test out demand through surveys, an in-app signup form for a “Treasury Bond Investment Option” or a manual smoke test to see whether your users will actually investment in Treasury Bonds through an external tool.
Continue to run experiments on a micro-level, but run experiments for any macro-changes you make to your product
We may be in the midst of the toughest economic recession for tech companies since the Dotcom Bubble.
During that bubble, only 52% of companies founded pre-2000 survived until 2004. Company valuations dropped by 78%. A LOT of employees lost their jobs.
If we find ourselves in a similar situation, focusing on micro-agility & building better features will not be enough.
Instead, you have to be able to understand - and adapt to - the bigger picture. You must be macro-agile, whatever your role, whatever your company size.
And you must do so by always paying attention to your target market, to new opportunities that arise, and to focusing on your current product strategy.
Only through continuously seeing the bigger picture will your product/s survive.