When Agile Becomes Local Optimization

When we say "Agile," autonomous product teams and groups immediately come to mind—teams that test hypotheses themselves, learn quickly, adjust the product to local context, and don't wait for central approval at every step. In this image, local autonomy and speed seem almost synonymous with agility.

But local agility very easily turns into local optimization: individual teams and business lines run faster, while the company as a whole slows down. More misaligned decisions, competing platforms, and product "silos"—and behind each such "silo" stand duplicated resources (from teams to infrastructure), making large-scale Agile adoption expensive and increasingly unprofitable for the company.

Why does this happen? Because by strengthening the speed and autonomy of individual parts (divisions, product groups, teams), we gain not only the benefits of decentralization but also its drawbacks—and often pay for it with a decline in agility at the company level. It's impossible to be simultaneously "super agile" both locally and at the enterprise level; centralization also provides real advantages: economies of scale, more aligned standards, better use of shared resources, etc.

The "centralization or decentralization" dichotomy is a false choice. In real life, you need your own balance. To find it, it's useful to soberly look at the pros and cons of both sides.

Benefits of Decentralization

• Local adaptation and customer fit. Products, UX, pricing, and channels can be adjusted to local context, with decisions made close to customers and regulators. Local teams quickly adjust offerings in response to changes in demand, competition, and regulation—without spending weeks on a "trip to headquarters" for permission.
• Local ownership and entrepreneurship. Local leaders manage resources, budgets, and results at their scale. This strengthens a sense of ownership and encourages entrepreneurial style: less "we just executed a central decision," more "this is our business, our bet, and our responsibility."
• Local innovation and disruption. Teams closer to customers are first to see new needs and anomalies in market behavior. Local autonomy allows launching non-standard experiments and disruptive solutions that a centralized structure would either not notice at all or kill during the approval stage.
• High development speed. Fewer approvals and more rights to local experiments increase learning speed: the team sees the consequences of its decisions in the product faster, adjusts course, reduces time-to-market, and increases release frequency.

Drawbacks of Decentralization

• Resource duplication. Local units create their own marketing, analytics, UX, and engineering teams, sometimes even mini-platforms. Parallel infrastructure emerges, along with multiple "centers of expertise" that share little with each other—economies of scale dissolve.
• Higher costs. A fragmented IT landscape and scattered supporting functions increase overall costs and reduce utilization of shared assets. Each unit optimizes itself, not the system as a whole, and in sum the company pays more for the same functionality.
• Complex P&L and blurred boundaries. The same platforms, channels, and customers are served by multiple units. Endless disputes begin: who "takes" the revenue, who should pay for shared components, how to properly allocate costs and investments in shared infrastructure.

Benefits of Centralization

• Fewer, bigger bets. The center can concentrate resources on a limited number of large initiatives, instead of supporting dozens of fragmented local projects. This increases the likelihood of truly noticeable impact, rather than many small but non-scalable wins.
• Fluid flow of talent and ideas. With a centralized model, it's easier to organize common career tracks and rotations between business lines, countries, and products. People, practices, and ideas circulate within a single pool, forming a common culture and standard of expertise.
• Economies of scale. IT, HR, finance, data platforms, and other functions work as shared infrastructure for multiple businesses. This provides classic economy of scale: less duplication, higher utilization of shared services, more consistent quality.
• Global reach. A centralized organization finds it easier to launch and support global products and brands and quickly scale successful solutions to new markets. There's no need to reinvent the wheel at the local level each time.
• Enterprise adaptability. The corporate center can make and implement major portfolio decisions: launch, scale, sell, or close businesses and reallocate resources to new priorities. This provides agility not at the team level, but at the system level.
• Aligned standards. Common processes, architectures, and platforms reduce coordination costs, simplify control and compliance. The internal "zoo" of technologies and rules is limited, making it easier to maintain quality and security.

Drawbacks of Centralization

• Centralized bureaucracy. Multi-level approvals, committees, and rigid rules slow response to context changes. Even obvious local decisions get stuck in approval queues and lose relevance.
• Low local speed and flexibility. Local units receive limited authority to change product, pricing, or channels. Teams see opportunities or risks but cannot quickly respond without center approval.
• Low local adaptability and decision quality. Key decisions are made far from customers, partners, and regulators. Important signals are distorted or arrive with delays, undermining decision quality and local adaptability, even if the system is formally considered "agile."
• Weaker personal accountability. When decisions and resources are concentrated at the center, local leaders naturally feel less responsibility for results. Entrepreneurial drive washes out, initiatives are replaced by "following instructions," and the benefits of local agility remain on paper.

How to Find the Balance

Centralization and decentralization are not a value choice of "good versus evil," but a system configuration for your portfolio and strategy.

• The more closely products are connected (common strategy, shared platforms, shared brands and customers), the more makes sense centralization of key decisions, P&L, and platforms.
• The more independent products are (different markets, models, regulations, little actual reuse), the more makes sense autonomous product groups with local P&L and authority.

One practical approach is to gather a group of senior managers who actually influence org design and go through a short structured workshop together.

Step 1. Map pros and cons on axes
Give participants cards with pros and cons of centralization and decentralization and ask them to arrange them on two axes: "pluses/minuses" and "centralization/decentralization." 

Step 2. Identify strategically critical capabilities
Ask participants to mark those capability cards that are absolutely necessary for your corporate strategy: without them, the current or target business model simply won't take off. This is your mandatory "must-have" set from system design.

Step 3. Define acceptable side effects
Then separately identify those negative effects (drawbacks) you're willing to consciously live with for the sake of these capabilities. Essentially, you're articulating the price you're willing to pay for the chosen design.

Step 4. Formulate the target point on the continuum
After this, you have a more honest answer to the question: where on the "centralization ↔ decentralization" continuum do you consciously want to be, given strategy, portfolio, and willingness to accept certain trade-offs. This is no longer a taste dispute ("we love Agile"), but a decision derived from strategy.

Step 5. Choose the appropriate type of product groups

When you've determined the desired point on the centralization/decentralization continuum, you can meaningfully choose the type of product groups:

• Logical (virtual) product group. Suitable if you're betting on high agility and alignment at the company level, willing to maintain strong shared functions, and accept limited autonomy at the specific product group level.
• Product group with partially dedicated functions. A compromise option when balance matters to you: reasonable local speed and adaptability, but while preserving a significant portion of shared platforms and standards for enterprise agility.
• Semi-autonomous product group. A logical choice if strategy requires maximum local agility and speed (separate business models, markets, risky bets), and you're consciously willing to minimize dependence on shared platforms and enterprise-wide decisions.

In the end, the choice between logical, partially dedicated, and semi-autonomous product groups is not a matter of taste, but a concrete answer to the question: what combination of local and "enterprise" adaptability do you want to achieve. Somewhere it will be useful to sacrifice the speed of an individual product group for the sake of a common standard and synergy, and somewhere, on the contrary, it's worth paying the price of duplication and complex P&L to allow one business to move faster than the others.

If you honestly go through the steps of such a discussion, Agile stops being a set of team practices and rituals and becomes a conscious design of where you deliberately strengthen autonomy and where—centralization and economies of scale. And then the question sounds different: are you currently living in an org design that follows your strategy, or in a structure that simply "evolved historically" and prevents that strategy from being realized?