Driving an agile transformation in software

by Christopher Kühn and Henning Soller

Companies that have enjoyed rapid growth often face a moment of truth—a realization that the strategy and operating model so instrumental to their ascent is no longer adequate to support a similar trajectory in the future. The software company Softtech, which was founded in Turkey in 2006, faced a similar fork in the road. It had expanded by building products primarily for one customer, but fostering further growth and a broader client base would require investments in a host of organizational capabilities. The complexity of software development made a new approach even more critical. In 2018, Softtech’s leadership understood that a complete transformation was required to reach the company’s potential.

Being part of the Turkish market, Softtech borrowed several of the new concepts that had already been deployed at other software companies in other geographies and adapted them. Additionally, it focused on making the concepts a reality on the ground.

Abdullah Cabaluz has been the transformation director at Softtech since 2018. In this discussion with McKinsey partner Henning Soller and Christopher Kühn from Kiel University of Applied Sciences, Cabaluz highlights the importance of agility, organizational structure, culture, and talent in Softtech’s transformation.

McKinsey: Could you elaborate on the vision for your agile transformation and the progress you have made so far?

Abdullah Cabaluz: Softtech aims to be a people-oriented, global technology company. For many years, we had been working mainly in a single sector and providing services for a single customer. Therefore, to achieve our aim, we needed to improve our expertise, tools, and processes to expand our customer portfolio and open up to the world. These activities were possible because of radical changes we made to the software development process to become a high-performing, agile company.

Our first-year objectives were to ensure all employees were aware of and adopted Softtech’s purpose, vision, mission, and value and to reconfigure our structures, processes, and tools to be compatible with these foundational elements.

The first step was redefining our overall business strategy—essentially creating a new identity for the organization. The second crucial step was a cultural transformation that started with our leaders. We carried out intensive communication activities to increase awareness of the company’s vision, mission, and values. And we focused on incorporating feedback into our daily work practices.

We conducted various operations to harmonize the processes and tools, organizational structure, strategy, and operational model with our redefined purpose, vision, and mission. Our development teams started to work in an agile way.

Today, we are continuing to make organizational improvements, such as launching a product-oriented transformation and creating a center of excellence.

McKinsey: One of the key parts of an agile transformation is organizational change. Could you discuss the shifts Softtech has undergone to become more agile?

Abdullah Cabaluz: Becoming an agile organization is an ongoing process. Therefore, we started by establishing the Transformation Directorate. Its primary mission is to prioritize transformation areas and needs in line with Softtech’s mission, undertake the design and execution of these efforts, and focus on continuous improvement.

Another change area was to become a product-based company—in other words, aligning dedicated teams with products. We have redefined the organizational structure according to current and potential products to achieve simplicity, focus, and cross-functionality. To improve our organization’s governance, we revised all main and subcorporate processes to make them transparent, measurable, and simple and to drive further automation.

Last, but not least, we designed and rolled out “DNA,” which consists of development programs and an operating system to improve our customer focus, agility, and product management practices. With this program, transformation coaches mentor product teams and leaders. We are rearranging the product groups as well as the working methods of the development teams. In addition, we have started the deployment of agile rituals such as sprint planning sessions, retrospectives, and backlog grooming.1

For us, it was really important to ensure this agile transformation becomes a reality. Therefore, we have defined KPIs and clear rituals that we measure on an ongoing basis to ensure we are agile not just by the book but also in real life.

McKinsey: How did you shape the corporate culture to enable your transformation journey?

Abdullah Cabaluz: We think three elements are essential in shaping corporate culture. The first is sponsorship and motivation by top management. The second is inclusiveness to ensure everyone is involved in the process. The third is experimenting with practices and getting timely feedback from the field.

To determine the areas of focus, we measured the current state of the corporate culture. Subsequently, we used research methods similar to focus groups to collect opinions and feedback from employees and leaders on decision making, communication, fault tolerance, and time management. We defined the corporate values and behaviors by using conceptual questioning and discussion techniques with a diverse set of employees.

Following these activities, we focused on communicating the culture. For the transformation process, we created a brand named “D”—short for the Turkish word dönüşüm, which means “transformation”—and carried out an internal communications campaign. We introduced the purpose and values to all employees with a big launch and organized 35 separate training sessions, which were attended by 35 department managers and almost 1,000 employees.

We also launched a leadership development program and in-house leadership coaching. At least twice a year, leaders come together for the Leadership Camp, a discussion forum designed by our team. They direct the company’s transformation strategy and produce solutions to improve the company culture. We also hold various events, trainings, workshops, live broadcasts, executive employee interviews, and focus groups designed to embed our goals and values into daily practices.

McKinsey: How did the agile transformation enable the evolution of underlying technology and tools?

Abdullah Cabaluz: First, we are restructuring the production process, which was previously designed with a single-customer focus, in accordance with the waterfall approach2 to support our agile practices. With the contribution of employees who have experienced agile methodology, we aim to implement an appropriate production process consistent with best practices worldwide. Our products are often so complex that they have high dependencies, require alignment across teams, and call for many teams to work together. We’ve also added tools to track the entire process of a product.

Second, we focused on building a new tech backbone with virtualization and cloud. We are aiming to maximize the automation of underlying processes, including testing, code quality and security checks, and a common library of our code base. We want to work in a DevOps environment as much as possible.

Third, we get relevant KPIs directly from our DevOps pipeline with as little human intervention as possible to present an accurate, balanced scorecard. We monitor code quality on an ongoing basis and constantly ask our customers for feedback.

McKinsey: What is your path forward in terms of product orientation?

Abdullah Cabaluz: Softtech focuses heavily on a product’s features and benefits, so our strategy prioritizes customer satisfaction, feedback, and newly identified needs. The business will regularly survey existing customers and conduct focus groups to identify what makes customers happy.

These measures help us innovate, create value, maintain a competitive advantage, and be agile. Innovation is the result of interaction with customer issues, so our product orientation looks for ways to resolve them.

McKinsey: Getting and retaining the right talent is a key success factor of major transformations. How have you managed your talent strategy?

Abdullah Cabaluz: Like many tech companies, we have been dealing with significant churn among our workforce. We’re seeking to counterbalance this trend through hiring, but we’re facing stiff competition from players abroad, which have taken advantage of new remote-operating models to cast a wider net for candidates.

Softtech became known as an employee brand within two years of embarking on the transformation journey. The communication of the new purpose, vision, and mission outside the organization made Softtech attractive to candidates. Our first activity was to establish university collaborations. We also launched an employee experience program called Talent Generation that starts from a candidate’s job application and continues through employee onboarding.

The implementation of development plans accelerated with the spread and support of the cross-functional team structure. We focused on certain candidate groups based on Softtech’s strategy, and we created development plans for our current employees according to these competency needs.

Additionally, we made three fundamental changes in the performance system to comply with agile principles. The first is to conduct performance evaluations twice a year. Second, all employees use the organization’s values to assess the performance, actions, and decision making of their teammates and managers. Third, to create internal cohesion and capacity for collective action, quarterly performance goals for individuals are derived from their team and product group’s goals. These changes support continuous development and customer satisfaction.

Expertise is essential to become a high-performing, agile organization. Therefore, we are transitioning to a center-of-excellence structure to separate expertise, talent, and competency management from the production line. Our goal is to establish centers that determine institutional standards and competency needs, follow individuals’ development journeys, and ultimately ensure the production of quality outputs. With our work in this field, we won the IDC CIO Awards’ Future of Work—Talent Management first prize in 2022.

McKinsey: What has been your key learning, and is there anything you would have done differently?

Abdullah Cabaluz: The company’s previous agile transformations demotivated people. Getting the support and contribution of leaders on transformation activities, developing their competencies, and supporting them—especially in the field of people management—should have been one of the first issues we addressed.

We were missing the infrastructure, tools, and processes to become a people-oriented, leading global technology company. Therefore, we had to invest in these areas before implementing our transformation program across the enterprise.

Last, but not least, we learned that it takes time for people to perceive and understand change. Transformation activities cannot be realized at the speed they are designed on the table. Instead, it is a process that should be managed in a safe environment and rolled out as slowly as needed. Also, from several examples, we learned that defining agile practices and product orientation was comparatively easy but that actually realizing them was difficult. Therefore, we adopted a maturity program to make our practices a reality and are improving on it to this day.

McKinsey: How does the transformation enable Softtech to better serve customers?

Abdullah Cabaluz: We announced 2020 as “the year of the customer” and started a campaign named You = Me. To better hear our customers’ voices, we established teams such as customer relations and customer experience. In addition, satisfaction surveys increased the customer feedback we receive on our products and services.

The satisfaction of customers, stakeholders, and employees is a vital dimension of this transformation. With the corporate flexibility we have gained through the transformation journey, we can respond more quickly to our customers’ changing needs.

Abdullah Cabaluz is the transformation director at Softtech. Henning Soller is a partner in McKinsey’s Frankfurt office, and Christopher Kühn is a professor at Kiel University of Applied Sciences.

The authors wish to thank Aslihan Azeri, Asli Başer, Mehmet Erdal Sevinçer, Merve Eyüpoğlu, and Koray Yangal, transformation consultants at Softtech, for their contributions to this interview.

Comments and opinions expressed by interviewees are their own and do not represent or reflect the opinions, policies, or positions of McKinsey & Company or have its endorsement.

1 In backlog grooming, agile product-development teams prepare for sprints by reviewing the next wave of user stories in the product backlog.
2 A sequential approach that requires a team to complete a set of tasks before taking on additional tasks.