Organizational Transformation

Organizational transformation typically focuses on how people are organized around existing work and technology structures, and attempts to optimize by changing this only. This consists of a change to role descriptions and line management, and usually relies on a target operating model to guide the transformation to a fixed end point. We tend to see this kind of transformation most in rationalization or cost-saving exercises, so the radius of impact and value is quite small compared to the disruption this kind of change introduces.

Because of this low disruption-to-value ratio, organizational transformations can feel very frustrating to those affected. There is an additional frustration in the other challenges within the organization that this shift will expose. Frequently, you will see changes to team structure expose deficiencies or constraints in technology and process.

This kind of transformation is like changing the driver of an old car to see if you can make it drive faster or for longer.

Technology Transformation (Replatforming)

This transformation represents an investment in the IT systems of an organization and quite often occurs when the technology supporting the organization becomes so old and congested that it is the single biggest limiting factor to the organization’s success. In other words, technology is a burning platform.

The key differentiator between this and any other type of transformation is that it is a change to systems, tools, and technology only. There is no need to change team structure to achieve this. There is no prerequisite to adopt other ways of working. This transformation simply addresses a very narrow issue within an organization.

This type of transformation does not happen as often as it once did. Organizations are now cognizant of the missed opportunity in addressing only one small area and are tending toward greater systems thinking in resolving core organizational challenges. Added to this is the growth in credibility of Agile and Lean ways of working in getting value to customers more quickly. It is more appealing to adopt this way of delivering new technology, along with the varying degrees of organizational change that implies. As Conway’s law says, “Any organization that designs a system (defined broadly) will produce a design whose structure is a copy of the organization’s communication structure.”

Therefore, technology transformations that limit their radius of impact to system only will miss a potential value opportunity to design an architecture that supports the business, and not current technology team structure.

This kind of transformation is like putting a brand-new engine in a rusty old car. It might get you somewhere much faster, but you’ll worry if the body is up to the task!

Delivery Transformation

As its name implies, delivery transformation focuses on the part of the organization responsible for delivering products and services to the customer. This means that our radius is extended beyond system, tools, and technology into people and practice. It makes the part of the organization that builds and delivers products and services more effective, with continuous delivery, data-driven decisions, and a culture of continuous improvement. In many cases, this is where the first signs of transformation emerge in an organization, as product and service delivery teams are often at the sharp edge of the pain organizations feel when technology, practice, and culture are poorly aligned.

The value of achieving this type of transformation is limited, however, by the lack of integration with core business functions around product/service ownership and the customer focus this provides. Organizationally speaking, this type of transformation is still local optimization. We can still invoke Conway’s law as we are limiting the radius of impact, and therefore the opportunity potential, to the delivery function. In some organizations, this extends somewhat into the business to find product representation, but in many examples (financial services organizations are often guilty of this) we find the radius limited to within the IT organization only.

Let’s not overlook that this type of transformation does solve some great problems within organizations. In addition to potentially solving a “burning platform” issue, it can introduce thinking that significantly improves delivery of value of customers not only in terms of speed to market, but also quality in market and overall responsiveness to feedback.

Ultimately, however, a successful delivery transformation will cause cultural dissonance between the areas included within the transformation, and the areas looking at the transformation. Without addressing leadership from the top, organizations remain at risk of increasing flow but still delivering things of relatively low value, fighting competing and continuously changing agendas, and managing too much work in progress.

Delivery transformation is akin to having a fast car with a powerful engine, but with loose suspension and steering and a driver who is not sure where they are going!

Digital Transformation

Digital transformation is focused on the aspects of an organization that ensure a high-quality, continuous delivery of value to the customer. It integrates the product and service ownership functions with delivery and is structured around delivering customer value. Continuous innovation is supported by lightweight decision making at product level, adaptive programs, and evolutionary architecture. This type of transformation, as with the delivery transformation, tackles technology, people, practice, and culture, but it does so with a wider radial impact across the organization. Here, organizations take advantage of new channels and technologies so that customers can experience products and services in a new way.

There is less cultural dissonance across the organization horizontally; more organizational capabilities are typically involved with digital transformations. Vertically, however, this kind of transformation can still reveal challenges across leadership. Digital transformation is limited by lack of clarity in organizational purpose and vision, heavyweight/waterfall decision-making processes, and lack of clarity or consistency associated with it. This type of transformation is possible only with the direct support and involvement of the entire leadership team.

Digital transformation is akin to having a fast car with a powerful engine and good suspension and steering but a driver with poor reflexes and sense of direction!

Business Transformation

Business transformation focuses on making the entire organization adaptive. All aspects—from adaptive leadership and clarity of purpose at the executive level, through customer focus, product, and service-aligned teams and evolutionary architecture at the design level, to continuous delivery at the delivery level—are aligned to deliver customer value.

This is essentially a composite of all transformation types that have come before with an added focus on really interrogating the why of organizational purpose and leadership. This is especially useful for organizations that have existed for many years and are beginning to level off in the current marketplace, or have seen many smaller competing organizations begin to chip away at what makes them unique.

As all levels interact and reinforce one another, it is possible for these types of transformations to deliver change more effectively than either digital or delivery transformations. The organization not only aims to deliver value to customers more effectively and cross-functionally, but also to learn and evolve from the data it generates. This creates a resilience and adaptiveness that makes an organization more robust in times of change and uncertainty.

Business transformation takes time and it can take much longer to reap the rewards than a delivery or organizational transformation. It necessitates strong and courageous leadership to hold their nerve in the face of learning through failure as well as investors’ and boards’ questions.

This transformation is like having the best racing car and a trained driver that can use it well!

Approach 1: Boiling the Ocean

You’ve probably heard this stalwart of business-speak many times. It signifies [“link:http://bit.ly/2BAZOzIan impossible task or project or to make a task or project unnecessarily difficult”] or just generally making something much bigger and more difficult than it needs to be. You might be wondering what this is doing in a list of approaches to transformation; however, this approach is more common than you would think.

What does it look like?

This kind of transformation program tries to effect change everywhere at the same time. Typically, it can look quite chaotic and unfocused, with lots of changes happening across multiple areas at the same time. To coordinate this program, there is likely to be a central team. These kinds of programs can feel very pressured, as such a wide radius of impact necessitates high investment, and along with it an expectation of high-impact change over a relatively short time. However, the wide radius of impact often results in a low or superficial penetration of change (see Figure 1-3).

Figure 1-3. Boiling the ocean

In this kind of program, organizations usually push very visible change to assure leadership and investors that change is happening—for example, story walls, charters, ceremonies, and visible data to support the program.

Boiling the ocean is usually a vehicle for practice change and is most likely to be used to achieve a delivery transformation.

Approach 2: Focusing on Hot Spots

Transformation programs that effect change through hot spots do so to take advantage of preexisting areas and people who are already changing or demonstrate a predisposition to change. Building on and incubating organizational success is a sound strategy for transformation and can develop meaningful change in the affected areas. However, you must take care so that those areas that are not targeted do not experience cultural dissonance, leading to suspicion and resistance to change. This is partly why many organizations often find it difficult to find a path to scale successes beyond the hot spots.

What does this look like?

This will be obvious in the organization because there will be areas of very visible change next to the existing processes and practices. It is likely that the hot spots of change will create friction within the existing organization as key organizational capabilities try to operate next to new and old practices; this will manifest obviously around areas like the project management office (PMO), finance, and HR (see Figure 1-4).

Figure 1-4. Hot spot

Hot spots are commonly used as a starting point in an organizational, delivery transformation, or occasionally a digital transformation. Due to the difficulty in joining the hot spots together, this approach inevitably fails or evolves into an “extract and enhance” or “strangler” transformation approach.

Approach 3: Extract and Enhance

Extract and enhance as an approach to transformation is perhaps the most complex from a delivery perspective. It requires deliberate planning, experienced leadership, and many short feedback loops to course-correct. The approach itself is based on an approach from technical architecture aimed at breaking up a technical monolith.

What does it look like?

The approach involves analyzing the organization and its associated technology systems estate to identify “seams” that you can use to break out organizational capabilities so they can be transformed. In practice, this typically involves splitting out functional elements of the business (e.g., finance), as the functional silos in the organization represent the most easily accessible seams due to organizational ownership, structure, and technology (remember Conway’s law?). The extracted function then is transformed while continuing with its ongoing business function, which necessitates significant integration with the untransformed elements of the business. This is often a significant limiting factor, as this need for integration will limit the amount of real change that can be made. An organization taking this approach will likely have to go through many cycles of change for each extracted function or capability before the old organizational and technological constraints are eliminated (see Figure 1-5).

Figure 1-5. Extract and enhance

Approach 6: Organizational Strangler

This is the most significant and impactful approach to change within an organization. It is an effective method of transforming every element of an organization while maintaining the same brand, people, and purpose. It is typically done in parallel with the business-as-usual services, and thus creates an incremental transformation approach in which new services, products, and capabilities are introduced but fit into the wider ecosystem. The strangler effectively creates a business within a business and seeks to draw in old service, products, and capabilities over time until none remain in the legacy space. This is the key differentiator between this approach and the “start again” approach—the change occurs within the organization and therefore is both limited and amplified by the organization’s characteristics.

What does it look like?

This approach will be highly prioritized within an organization because it will use many of the organization’s best people to get the work done. The strangler begins with a small cross-organizational piece of work and gains momentum as more data is collected and understood, so the number of people required to complete a transformation of this approach increases over time (see Figure 1-6).

Figure 1-6. The organizational strangler

Usually, organizations will create different areas for these teams to work together, meaning there might be a new or transformation feel versus a legacy feel within the organization. Lastly, this approach requires some diligence at the beginning, so there is likely to be a phase in which discovery is undertaken to form an evolutionary view of the business and technical architecture, along with some adaptive planning to understand operational and user impact when the transformed capabilities are released over time.

Approach 7: Start All Over

This approach initially might seem extreme, but in the right situation, it’s actually very sensible. If an organization is barely surviving and is being attacked by long-standing competitors as well as startups, making changes to your organizational structure and delivery methodology is unlikely to have a big effect. If the organization has many legacy systems, relationships, processes, political baggage, or cultural toxicity, working within these constraints will limit any transformation that takes place within the organization.

In this situation, the sensible option is to start again. This approach is rarely taken by the established organization. Politically, it is rarely seen as a viable option because it means recognizing that the current organization is coming to its end of life. It takes a bold executive team to admit this, even among itself.

Crucially, unlike the organizational strangler, this change is effected outside of the existing organization completely and therefore has minimal factors from the existing environment that can influence the transformation.

The Checklist

Beware the checklist! This could be an actual checklist or a list of pre-agreed things that are hidden in plans and story walls. If you are doing something because the transformation program has committed to it or because it has appeared on program material, not because it is the right thing to do, you are checklisting.

Transformation mentality should welcome change and adapt to new data. Following a plan or list because you have one, not because it’s the right thing to do, is a warning sign that things have not really changed. Resist the false comfort of creating lists that will quickly become obsolete.

Headless Change

Leadership is vitally important to transformation programs, and it’s not just executive-level sponsorship that counts. Transformations need leadership that is present and accessible. If your leadership is asking for reports, has a chain of command, and is not visible around the office, chances are that they are not close enough to the program to really lead it effectively.

Organizations need leadership that can defend in times of doubt and adapt to changing circumstances quickly. Neither can be achieved if the leadership is distant from the program.

Outside Bias

Many organizations will seek outside support and expertise, no matter which type and approach of transformation they are undertaking. This is a sensible strategy to supplement both numbers and knowledge. However, too many contractors and consultants swarming onto one area can make existing teams and people feel threatened and out of control. A bias toward external people delivering transformation also does nothing for internal capability building. The people within the organization must experience the end-to-end process and do the difficult stuff as well—this is how we build organizational resilience.

Centralization

Another fine balance that can have a significant impact on a transformation program is how we govern the program. Typically, a program of any significance will have a centralized capability to support shared learning, shield from outside influence, and course-correct toward the overall goals and vision. Central teams that push change to areas of the business will eventually undermine the transformation program’s effectiveness. To succeed, the transformation must successfully engage the people within an organization. To survive the initial investment and program, the people in the organization must see the value in what they are doing, and want to do it. It is highly unlikely that people will be inspired by a transformation that is done to them.

Installation (Before Experimentation)

Many organizations select a scaling framework because it helps articulate to the organization what an end state might look like in terms of process and organizational design. Selecting a scaling framework necessitates careful consideration of an organization’s characteristics, the characteristics of the various frameworks, the constraints within which it would operate, and how the organization adopts change.

Installing a framework into an organization too early on in a transformation program will detract from the main goal and vision of transformation. Like everything else, it is a tool that can help an organization become a better version of itself. However, it is unlikely this tool will be helpful without much investigation into what makes change successful within the organization and what the limiting factors of the organization are. Moreover, focusing on installing a framework tends to override the cultural changes and dictate the organizational structure prematurely.

Now we have established the “why” that determines the type of transformation, and considered the best approach to effecting change within the organization. The last remaining pattern to consider is leadership, or who is going to create the runway so you can land the change?

What ostensibly started as a digital transformation is, in fact, more of a delivery or technology transformation. Digital transformation is about finding ways of delivering existing services and products to customers via new channels. This necessitates taking what an organization currently offers and finding new ways customer can consume it through digital channels—at minimum an evolution and at best a revolution. Get Me There is an example of where services have been digitized with little or no change—in other words, a digital “lift and shift,” making visible the tensions between the current services and the services customers want.

Executive Leadership and Transformation Type

Organizations will form executive teams around the key capabilities required to ensure success. With so many organizations now evolving to embrace digital solutions and technologies at the core of the business strategy, it’s not surprising that we have seen the inclusion or creation of new roles at an executive level. The number of organizations employing a chief digital officer has increased from 7% in 2014 to 25% in 2017—this is a staggering change both in terms of volume and in changing the dynamic of executive teams. Other relatively new roles at this level include chief data officer (information as an enterprise asset), chief scientific officer (technology advisory across the enterprise), and chief product officer (product strategy across the enterprise). Moreover, the balance of power is moving around the executive table with 71% of CIOs stating their strategic influence within an enterprise has grown significantly over the past year.

In this environment of new roles and shifting power, what does the correlation of transformation type and executive sponsorship look like? Table 1-1 provides an overview of the kind of sponsorship required per transformation type.

Business transformation

This requires the broadest buy-in from executive teams. This must be led by the CEO with full support from the rest of the executive. Only the CEO can represent a team that is looking to fundamentally challenge and change the business model of the organization. The CEO must work with the team to build a vision and support the organization to deliver toward it, but the CEO alone will be responsible for defending the work, obtaining the investment, and managing stakeholders at the highest level.

If your transformational vision exceeds the scope of your organizational authority, all is not lost. There is no linear path through transformation, and it is not always the executive leadership that starts this journey. This is where the approach can help build confidence and pave the way for the desired transformation type. In this case, beginning with some small hot spots of delivery transformation is perfect for demonstrating how changes might work at small scale, generating data, and testing out where the key challenges will lie.

The roles, and therefore the correlating type of transformation, are only half the picture. The characteristics of the executive leadership team can also be a limiting factor of the approach to transformation. The key role of the executive sponsorship team within the change program is to remove enterprise-level blockers and constraints. Without this, we cannot achieve significant change in the way organizations deliver value to customers. Therefore, the characteristics of the executive team will help determine the approach to transformation that is most realistic at any point in time. It is important to use feedback here because it might be possible to change the approach to transformation based on the data available to help leadership teams make better-informed decisions (see Figure 1-7).

Figure 1-7. How leadership influences the transformation approach

Hostile and Reluctant Leadership

These kinds of leadership will generally amplify the negative characteristics of a transformation program and do not lend themselves well to change approaches that require more collaboration, courage, and confidence. Hostile leadership can manifest when some, but not all, of the executive team are on board with the transformation vision. The opposing leaders can cause friction at board level when faced with large-scale organizational changes like creating cross-functional teams, streamlining ongoing work, and making key hires.

Reluctant leadership can be rooted in a difference in views between the executive team but can also be found where the leadership feels the changes included in the transformation program are forced upon them. This can happen when external bodies recommend the adoption of new practices and tools rather than the need being generated internally. In this situation, leaders can feel like the change is being done to them—much like the effect an overly powerful central team might have on teams within a transformation program.

These characteristics lend themselves more to certain approaches that are less organizationally risky but have high complexity or lower potential for value. Boiling the ocean is often the starting point for organizations with reluctant or hostile leadership because no decision on a starting point, measures for success, or how to effect change can be reached. Hot spots can form when there is a desire for change but no executive sponsorship, or where the executive seeks data to inform future decisions. Interestingly, the extract-and-enhance approach is also selected by leadership lacking in confidence and commitment as a way of making a large digital change with minimal impact to business as usual or to take advantage of a new capability within the transformation timeline.

Committed and Extreme Leadership

Committed and extreme leadership will amplify more positive characteristic within a transformation program. Committed leaders are fully invested into the transformation and will do all reasonably in their power to remove organizational barriers and make the program work. Extreme leaders are the rare breed that will take the opportunity to really embrace the journey toward organizational adaptability and invest in their own self-development to better serve others in the organization. Both leadership types are needed for digital and business transformation.

Digital transformation requires a profound shift in how an organization is structured to deliver value to customers more effectively. It also necessitates breaking down the fourth wall between the business and the customer. This generally means a high degree of organizational flux during the program, which the leadership team must navigate through while keeping the business running.

Business transformation is even more extreme because it involves all of the above while fundamentally questioning the validity of the organization’s business model and propositions. This kind of leadership requires visioning, storytelling, defending, and exhibiting passion that few leaders possess.