From waterfall to agile:

How a public-sector
agency successfully
changed its system-
development approach
to become digital
Business Technology Office and Public Sector March 2016

Sverre Fjeldstad
Martin Lundqvist
Peter Braad Olesen
 From waterfall to agile: How a public-
sector agency successfully changed
its system-development approach to
become digital
By switching its development methods midstream, the Danish Business
Authority was able to launch an online company-registration system faster
and achieve better results.

Government agencies around the world are under 2009, it decided it could no longer maintain a
internal and external pressure to become more largely manual registration process. It believed that
efficient by incorporating digital technologies and replacing paper forms sent by mail with a simple
processes into their day-to-day operations. online process was crucial to keeping the country
economically vibrant. Specifically, a new digital-
For a lot of public-sector organizations, however, registration process would show both domestic and
the digital transformation has been bumpy. In foreign companies that it was easy to do business in
many cases, agencies are trying to streamline and Denmark, help track money laundering, and better
automate workflow and processes using antiquated identify companies that didn’t report their income or
systems-development approaches. Such methods pay taxes on it.
make direct connections between citizens and
governments over the Internet more difficult. The Danish Business Authority set a goal of
They also prevent IT organizations from quickly completing the specifications of a digital-registration
adapting to ever-changing systems requirements system by 2011 so software developers could begin
or easily combining information from disparate their programming efforts and formally roll out the
systems. Despite the emergence, over the past streamlined process by 2014. In the first two years
decade, of a number of productivity-enhancing of the initiative, the agency used the traditional
technologies, many government institutions “waterfall” approach to design and development. But
continue to cling to old, familiar ways of developing the effort stalled for a number of reasons, including
new processes and systems. ever-changing systems requirements and slow
decision making.
Nonetheless, a few have been able to change
mind-sets internally, shed outdated approaches to In 2011, the IT organization revised its launch date
improving processes and developing systems, and and decided to trade the waterfall approach for an
build new ones. Critically, they have embraced agile approach to systems development; a change
newer techniques, such as agile development, and in leadership was the catalyst. The agile approach
succeeded in accelerating the digital transformation has several hallmarks. New systems requirements
in core areas of their operations. can be accommodated late in the development
process. It’s possible to deliver the software for parts
The Danish Business Authority is one of those of a system early, even before all the requirements
organizations. This agency is charged with are completely understood, to break design
registering corporations that do business in logjams. And decisions can be made more quickly
Denmark. With the world economy teetering in if companies have only one team of businesspeople

2 From waterfall to agile

 and software developers, rather than throwing Initiating the digital transformation
requirements “over the wall” between functions In 2009, the Danish Business Authority (see sidebar,
and thereby facilitating divisiveness. “Helping to make Denmark’s economy click”) decided
that its paper-based process for registering new
By 2014, the system was nearly completed. By companies had to be replaced by a digital one. New
2015, the number of registrations requiring businesses often required weeks or even months to
agency support for completion had dropped complete registration: they had to request the right
from 70 percent to 30 percent. More broadly, the forms, fill them out, and submit them through land
registration system has helped Denmark to rank mail. When forms arrived at the authority, workers
high on the World Bank’s annual index of digital had to enter data from each one into as many as 14
government services and on another index that different computer systems. The agency recognized
rates the efforts of European countries in helping that this manual process was slow and error prone.
new companies launch their businesses.
When the agency received the go-ahead to build
In this article, we consider the digital a new corporate-registration system, it started
transformation of the agency: the challenges it faced with the waterfall method, a systems-development
in moving away from the waterfall methodology; approach it had used for years. Under this approach,
the change-management principles it followed as software developers go through discrete phases,
it incorporated agile technologies, processes, and starting with gathering the business requirements.
mind-sets into its traditional ways of working; Then they proceed to process analysis, including
and the results it has been able to achieve thus far. establishing the business rules that will inform
The agency’s story provides important lessons for the design of the system—for example, “treat this
government agencies everywhere that need to build type of company and that type of company in
critical digital systems. different ways.” The next step is software design

Helping to make Denmark’s economy click

The Danish Business Authority employs 600 In addition, the authority regulates the
people, who institute policies set by the country’s telecommunications industry—administering
Ministry of Business & Growth. Known in the allocation of wireless spectrum, maintaining
Denmark as ERST (short for its Danish name competition among telecommunications companies
of Erhvervsstyrelsen), the agency keeps track and Internet service providers, and working with
of companies operating in Denmark, regulates other Danish government agencies on policies. In
accounting and auditing rules, and monitors fund fact, the Danish Business Authority is an independent
transfers in the financial system (in particular, to regulatory body on telecommunications, and its
spot criminal conduct associated with money rulings cannot be appealed. Just as important,
laundering). It finances economic development the authority builds digital systems that automate
in Denmark, promotes the formation of new communications between businesses and Danish
businesses, and keeps data on business activity. government authorities.

From waterfall to agile 3

 and programming. A core principle of the waterfall prompt them to deliver software code early, even
development approach is that a team using it can’t before all of the requirements were understood.
move to any phase without ironing out the details And it would bring businesspeople and software
of the preceding one. There is good reason for that: developers together on a single team, rather than
fuzzy up-front requirements can introduce big having one try to decipher the other’s input after
software-design and -coding problems later. it had been tossed over the wall. Discrete project
components could be designed and coded in weeks
In the case of the Danish Business Authority, (or in “sprints,” as they were called) rather than
this limitation meant that coding on the new months or years.
registration system couldn’t begin until the process
analysis was finished—and the development team Rebooting the systems-development process
couldn’t agree on the minutia of a standard process At the time of its reboot, the Danish Business
for registering a new company. Additionally, team Authority had found few government institutions, in
members were involved only part-time on the or outside Denmark, that had used agile methods
project; each had other systems priorities. That to develop core digital systems. As a result, the
contributed to long decision-making cycles, even team created its own flavor of agile, based on seven
for minor issues. Big decisions could take weeks critical elements:
to make, largely because the team gathering the
requirements couldn’t get the attention of senior 1. a focus on the customer;
managers quickly. Plus, numerous system-design
decisions had to be made collaboratively, and 2. strong governance and swift decision making;
assembling the relevant business managers to
make them was trying. 3. an IT architecture that enables gradual changes in
the system;
The result was analysis paralysis.
4. a clear systems-development road map comprising
Exploring agile tools and methodologies a number of small, manageable projects;
Around the time the system project stalled, the
Danish Business Authority had brought in a new 5. an organization that embraces agile and the
director general. One of her first priorities was processes supporting it;
getting the development of the digital-registration
system back on track. After a comprehensive 6. outsourcing to multiple partners rather than just
review of the program, the director general and one or two;
the leadership team concluded that what it needed
most was a design and development method that 7. and a culture of trust.
emphasized building and testing new systems in
weeks rather than months and incorporating input Here’s how each element played out in the Danish
from “customers,” external and internal alike. Business Authority’s digital transformation.

An agile approach seemed more appropriate than A customer-centric focus. Emphasizing customer
the waterfall model, the team decided. For one thing, needs gave the project’s team members clearer
the agile methodology would allow developers to priorities and a common vocabulary. Initially, the
incorporate new system requirements into their program had focused largely on the agency’s own
design and planning late in the process. It would registration requirements and less on those of the

4 From waterfall to agile

businesses that would be using the system. That A flexible IT architecture. The architecture of an
all changed under the agency’s agile development information system stipulates where data will reside
approach. For example, rather than forcing (how many databases), which software components
businesses to enter registration information into will be shared across applications and which will not
14 different systems, the agency designed just one. (such as user interfaces), and other technical details.
That move alone saves businesses considerable time A good architecture saves programmers time
in registering companies—and it saves the Danish writing new code (by reusing common components),
Business Authority a significant number of person- reduces errors, and defines system components so
hours, as well. that they can be updated or replaced without any
need to scrap the whole system. A poor architecture
Strong governance and swift decision making. does the opposite: it piles on rework, introduces
The digital-registration initiative was mission errors, and makes systems difficult to change.
critical but wasn’t treated that way until 2011. The
CIO, for example, had been responsible not only The IT architecture for the Danish Business
for this project but also for a number of other IT Authority’s new registration system divided it into
priorities. In 2011, some of them were moved to a more than 30 components. New features could
different department, so that the CIO could give therefore be implemented and launched piecemeal
more time and attention to the digital initiative. rather than all at once, which reduced the risk
The CEO also became part of the daily project- and complexity of implementing system changes.
governance team. This change caught the attention The architecture also called for only a single
of other senior executives, who then recognized database, which eliminated the requirement that
that they, too, had to make the system part of their the agency’s people manually reenter information
agenda. Meetings to discuss the project’s progress from one database to the next. This would be the
became weekly events, which enabled the multitude sole “source of truth,” with all the information on
of subprojects to stay on track because issues were a company stored in one place. What’s more, in
monitored continually. What’s more, these weekly the new architecture, all users—both internal and
sessions—chaired by the CEO—let the project team external (Danish businesses)—would see the same
bring outstanding issues to the table and have them interface. Additionally, the architecture required the
resolved much more quickly. development teams to share software components,
so that they didn’t have to reinvent the wheel. For
The stronger governance extended beyond the CEO’s example, the software for looking up a registrant’s
weekly meetings. After the big project was divided up business address was a shared component.
into more than 30 smaller subprojects, the teams in
charge of each of them received the authority to make A clear systems-development road map.
decisions affecting their own areas. That meant they Traditional approaches to systems development
didn’t have to wait for answers, which had caused emphasize getting all the requirements up front
big delays in the first round of development. Further, before any coding begins. By contrast, the agile
each team included IT and “product owners”—people approach emphasizes breaking up big systems
from the Danish Business Authority’s business into smaller components, which can be built and
operations—as well as representatives from the implemented one piece at a time and brought to
agency’s vendors. Project teams had the authority to market quickly. The key is building components
make decisions on their system components quickly in ways that minimize interdependencies among
because someone from the business operations was them. As mentioned, the Danish Business Authority
there to finalize the choices. broke its registration system into many smaller

From waterfall to agile 5

 system projects. To track them, the management A culture of trust. Such incentives and ways of
team created a clear road map showing when each working—not asking vendors to collect detailed
would go live and its relationships with the others. specifications before coding, creating teams of
That helped teams to know what their colleagues both business and IT people, and so on—created
were doing, and when. Elements of the registration an atmosphere of trust and collaboration. The
process were improved and launched sooner trust increased rapidly because the authority
than they would have under the waterfall process. asked vendors to deliver their pieces of the system
Additionally, the project teams that hadn’t delivered in 14 days. Mistrust didn’t have time to grow;
their modules could learn from the early releases each vendor could prove its competence quickly.
and modify their plans accordingly. By breaking the project into smaller pieces that
could be turned around quickly, the authority
An agile organization and processes. The Danish enforced better performance from its vendors.
Business Authority followed standard practices It replaced underperforming teams or team
in structuring each project team, which included members rapidly, in this way setting a tone that,
business and IT professionals, as well as vendor just as high performance would be rewarded
staff. The teams were located in the same place, with more work, underperformance would be
which dramatically reduced the chances for punished with less.
miscommunication, since it allowed each side to
speak up early and often. The teams followed agile This culture of trust extended beyond the
practices by asking the software-development development of the digital-registration program;
vendors not to create specific requirements it was a critical element in the rollout of agile
for their pieces of the system, the traditional ways of working in other areas of the authority,
approach. Instead, the vendors were asked to as well. The digital-registration project team
create user stories—denoting, for instance, helped to provide support for the widespread
what the system should allow the user to do at adoption of agile techniques—for instance,
a general level. The programmers had more serving as agile-implementation coaches
room to interpret the design and determine and offering process demos and training on
how to turn it into code. agile principles. That promoted trust in the
methodology and, therefore, change across
Outsourcing development to multiple partners. the organization.
Unlike many organizations, which outsource their
software development to one IT-services company, Launching a new corporate-registration
the Danish Business Authority used four. The system
idea was to provide appropriate incentives and to The agile approach to systems development put
promote more competition among vendors, which the digital business-registration project back
understood that future components would go to on track. Many pieces of the system are live; the
companies that had completed earlier ones on remaining modules are slated for release. The
time, on budget, and on target. The setup even Danish Business Authority is already seeing some
encouraged some vendors to overinvest so they significant benefits:
could secure the next module. It also gave them
an incentive to make their components easy to ƒƒ Less customer hand-holding. The average
maintain and expand—if they did good work, there time needed to resolve a customer’s problems
was a good chance they’d be the ones maintaining over the phone has dropped from 16 minutes
and expanding what they had built. to 5 minutes. The number of customer-support

6 From waterfall to agile

 calls after registration has dropped from This system has helped Denmark attract new
70 percent of applications needing phone companies. The World Bank compiles an index on
support in 2009 to only 30 percent today. the ease of doing business in 189 economies. In the
2016 list, Denmark ranked third overall, trailing
ƒƒ Less need for rework by customers. The only Singapore and New Zealand.1 A frequent user
number of registrations completed accurately of the registration system, who works at one of
the first time around by businesses has risen to Denmark’s largest law firms, estimates that she
92 percent, from 80 percent. spends 50 percent less time on registration tasks
and on updating corporate information, such as the
ƒƒ Less time needed to get new employees names of new board members.
ramped up. Because of the improved
usability of the new digital system and More broadly, the Danish Business Authority has
CDP 2016
because it automates much of the work significantly improved its ability to provide digital
From waterfall to agile: How a public-sector agency successfully changed its system
employees had to do, the authority has solutions in other areas. It has increased its IT
development approach to become digital
reduced the time it takes to train new productivity by about 60 percent, for instance, and
Exhibit 1 of 1
employees by 80 percent, from five months significantly improved its time to market for new
to one month. digital services (exhibit).

Exhibit Digitization has greatly increased the efficiency of Denmark’s company-

registration process.

Tasks Before After

Multiple combinations of
Number of process flows 13 to 15 screens
100+ screens

Creation 11 screens 1 process

Journaling 4 or 5 screens 1 process

Case types More than 100, manually chosen Automated creation of cases

Entry, validation of information Validation of information

Working with registrations
from paper documents entered by end user

Follow-up on documentation Obtain missing documents Control attached documents

Support of digital reporting Multiple systems 1 centralized system

Training in journaling 2 to 3 months 1 or 2 days

Training in case work (per area) 4 to 6 months 1 or 2 weeks

From waterfall to agile 7

 quickly but also to provide proof of Denmark’s
commitment to digital technologies and
Denmark’s digital business-registration system is approaches. Indeed, government executives
burnishing the country’s reputation as a place to believe that doing business digitally has become
launch new businesses. For example, it is helping critical to attracting the next wave of digital and
the Danish government with the Start-up Denmark nondigital businesses.
initiative—a campaign to attract new high-tech
firms that can keep the country economically 1
World Bank Group, doingbusiness.org.
vibrant and serve as a magnet for jobs and talent.
Sverre Fjeldstad is an associate principal in McKinsey’s
By using an agile approach to building a digital- Oslo office, Martin Lundqvist is a principal in the
registration system, the agency has been able Stockholm office, and Peter Braad Olesen is an
not only to streamline a critical service relatively associate principal in the Copenhagen office.

Contact for distribution: Peter Braad Olesen

Phone: +45-3337-8245
Email: [email protected]

March 2016
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