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Organizing for perpetual transformation

HABEEB MAHABOOB

Globalization, digitization, and access to capital are leading organizations to operate at a much larger scale and speed than ever before. Companies cannot remain successful if they continue to work as they have for generations. In the past, organizational transformations were rare, and when they did occur, it was a long, drawn-out process. But organizations are now in a state of perpetual transformation.

Ongoing transformation has become a necessity rather than an option. Most of the successful organizations we see today, irrespective of their industry, have adapted and evolved over the years. To stay relevant, these organizations identified newer opportunities and leveraged them for survival, growth, and success.

While the word transformation has been overused in recent years, it is probably the only word that adequately describes the large-scale, identity- defining change that happens within an organization. The objective of a transformation is sustained value creation based on an understanding of evolving stakeholder context, internal capabilities and customer needs.

One company that has come to epitomize sustained transformation is Netflix. Since its inception, the company has undergone significant and multiple transformations by anticipating customer needs to become the behemoth it is now. Netflix transformed its business model from a DVD rental business to a pay-for-use model to a subscription model. Despite its massive successes, Netflix continues to experiment and flourish. The company’s relentless initiatives are part of the organizational transformation it is perpetually going through.

Past approaches to transformation

The infrequency of transformations in the past meant that organizing for transformation was sporadic and at best projectized. Firms tended to transform themselves by changing hard factors like processes, operating models, organizational structures; or soft factors like people and culture; or some combination of both.

A number of transformational tools and frameworks became popular. The lean transformation model is an example of an approach aimed at continuous process improvement, with a focus on eliminating waste. Organizations following this model used a set of dedicated individuals (often called Master Black Belts) and part-time resources to deliver transformation through a series of projects. Mature organizations also tied these projects to the strategic goals of the organization.

The ADKAR model (short for awareness, desire, knowledge, ability, and reinforcement) is a soft skills or people-oriented approach to develop individuals and improve the chances of transformation at an organizational level. Harvard professor John Kotter’s 8-Step Process for Leading Change, gave an outline to implement change systematically and effectively.

While these approaches certainly have their merits, they don’t suit the challenges of continuous transformation now facing organizations, in which ambiguity, speed, agility, and resilience are of paramount importance.⁵² Hence there must be a fundamental shift in the transformational approaches adopted by organizations and a change in the entities tasked with leading the transformation journey. Organizations need to pursue perpetual transformation and adopt tools that make it achievable.

Considerations for organizing for perpetual transformation

The disruptions that we are witnessing today are unlike anything we have seen in the past. The three distinguishing factors of present-day changes are:

• Speed: value chains undergoing rapid and fundamental shifts both from within and from outside.
• Technology: rapid advances along with improved capabilities in big data, analytics, infrastructure, and other technologies, such as artificial intelligence, have removed the barriers that traditionally existed between industries.
• New players: markets are witnessing the introduction of new entrants or organizations from other industries.

As firms organize for perpetual transformation, the structures they adopt need to address the above factors. More importantly, these transformational structures or entities also need to be a permanent part of the organization, rather than temporary for a limited time. In its consulting work, our firm (BE Tech Mahindra) uses the following framework and recommends these organizational structures to ensure ongoing successful evolution.⁵³

Perpetual Transformation Framework

Organizations setting themselves up for ongoing evolution need to consider the following activities/organizational elements to enable the transformation:

1. Explore and Identify: organizations can engage experts who continuously analyze the environment by scanning, discovering, and assimilating opportunities. These experts can be drawn from the internal talent pool or from external resources, such as professional consultants, subject matter experts, or a mix of both. These listening/scanning posts ideally need to be in geographical hotspots of innovation in their respective sector/domain. Using academics who connect and open innovation (through hackathons and the like) are also ways in which organizations can develop a pipeline of ideas that will impact their businesses.

2. Evaluate and Incubate: our studies indicate that incubation of ideas within a firm is a key failure point. This typically stems from an inability to identify specific individuals or teams to own new ideas within the business. Even when identified, the ability of the owners to prioritize incubation activities over running the ongoing business is often poor. Some organizations adopt the mergers and acquisitions route to gain new capabilities or use the acquired companies as an incubator for testing new business ideas. Identifying and dedicating the right talent to incubate an idea (or transformation goal) within the company is the next crucial phase of a transformation journey.

3. Implement and Scale: implementation of transformation actions is the next crucial aspect of success. While we have yet to find a formula for successful transformation, being able to establish a (project) management organization, convert transformation goals to manage- able projects, drive multiple levers of transformation in an integrated manner, and energize the company through a sustained communication and risk/reward program are some of the essential activities for success at this stage.

Managing perpetual transformation

Managing perpetual transformation

Given that transformation is now continuous and has no end point, organizations need to consider the following factors when designing their operating model to drive transformation:

• Transformations can no longer be projectized as they once were.
• Successful transformations still need to address multiple levers, including people, processes, operating models, and the business model.
• Transformation goals will be achieved in increments rather than all at once.
• Organization-wide involvement is required to ensure successful transformation.

Based on the above, organizations need to find appropriate answers to the following four questions to ensure achievement of transformation goals on an ongoing basis:

1. Do we need a Chief Transformation Officer?

Traditionally, organizations have assigned responsibility for transformation to one or more senior operational unit leaders in the firm. Operational business leaders have struggled to dedicate mindshare and time to drive transformation. Given the ongoing nature of the role now, firms may need to appoint someone with dedicated and clear mandate to drive change. The demerit of this approach is that operating units disown accountability within their units.

The other alternative is for the CEO to take up the responsibility for driving waves of transformation. This approach may allow the CEO to balance the day-to-day needs of the business with the need for change. However, the CEO may require support to execute the transformation agenda. For this reason, organizations would be advised to formalize the role of a Chief Transformation Officer.54 The seniority and location of the role are decisions that should be based on the unique circumstances of the organization. A well thought through strategy will identify which elements of the transformation need to be driven centrally and should guide the role and selection.

2. Do we need to staff a full-time transformation management office (TMO)?

Multiple studies have indicated that integrated transformation efforts that address multiple levers within the organization stand a higher chance of success. The role of an organizational entity responsible to strategize, plan, coordinate, and report progress on transformation on an ongoing basis becomes vital in this context.⁵⁵

Our studies indicate that TMOSs (like any staff function) fall into one of three design patterns as detailed below:⁵⁶

• Weather stations: weather station TMOs tend to focus on providing the organization with feedback on the status of the transformation. Typically staffed by analysts, the TMO focuses on collecting, integrating, and presenting progress reports. The actual tasks associated with the transformation are the responsibility of the various operational entities.
• Coaches: organizations which recognize the importance of capability building as an enabler of successful transformation provide TMOs, which guide and coach transformation teams. Formal training and certification programs are introduced under the guidance of the TMO to build a network of change agents. The TMO will also have senior change leaders who are able to work with work stream leaders to coach and mentor them to address the ongoing challenges they face. This is the preferred model for TMOs, given the ongoing evolution of work streams that are part of any perpetual transformation.
• Control towers: A few organizations find merit in establishing powerful TMOs with accountability to achieve transformation results. Control tower TMOs have accountability for these goals and in many cases authority to override functional units on approach and decisions related to transformation.

Irrespective of the role of the transformation office, organizations need to visualize transformations — not as long duration projects, but as a series of incremental releases, each delivering specific business benefits. Organizations also need to ensure that TMOs are staffed with adequate communication capabilities to articulate and energize the entire organization around ongoing change.

3. Do we need any additional organizational entities to support scanning and incubation?

Another key factor to consider for ongoing transformation is establishing the entities tasked with bringing new ideas into the organization. Traditionally, R&D and marketing functions have played this role. Organizations are advised to strengthen these functions, and to evaluate their ways of working including association with academic organizations and partners developing cutting-edge technologies. The physical location of these units — close to innovation hotspots — is an important consideration.

4. Do we need change agents to embed change in operational units?

While the elements discussed above will act as enablers, real change happens within the operational units of the firm. It is important that organizations provide sufficient capacity (slack) within operational units to drive change.

In the future, organizations will rely on being in a state of perpetual transformation for continuous value creation. With a deep understanding of the internal and external environment, organizations should organize for ongoing transformation, while being mindful of their culture and unique capabilities.

About the author

Habeeb Mahaboob is a managing consultant with BE, the consulting and management services division of Tech Mahindra. Tech Mahindra offers innovative and customer-centric digital experiences, enabling enterprises, associates, and the society to rise. Habeeb brings expertise in working with businesses to articulate the impact of digital technologies (through top-down analysis of the firm from an industry, market, and end customer perspective or through facilitated design thinking-based workshops) and in working with client teams to conceptualize new operating models to achieve digital goals. Habeeb has worked closely with multiple clients to effectively lead the digital agenda of their respective firms.

Habeeb’s colleagues from the India office, Alex Francis Komban, Himanshu Yadav, Sanjeevan Palit, and Abhay Agrawal co-authored the article. Abhishek Anand closely works with PMI in developing these concepts.

Footnotes

52   https://www.linkedin.com/pulse/leading-perpetual-change-will-duke

53   Oliver Bossert and Jürgen Laartz, Perpetual evolution--the management approach required for digital transformation’, McKinsey Digital, 5 June 2017.

54   ‘The Chief Transformation Officer Role Explained’, BMC Software Blogs.

55   ‘The role of the transformation office’, McKinsey Online.

56   ‘Choose the right type of PMO for your business model’, ITM Platform.