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An Executive Summary of Building The Agile Business Through Digital Transformation by Peter Abraham and Neil Perkin (Kogan Page 2017).
This is a practical how-to guide on implementing Digital Transformation and presents a checklist of methods that can be used to achieve organisational agility.
“Reads like a field guide for digital transformation. Full of actionable insights, frameworks and practical advice for any organisation preparing for a digital-empowered world.”
~Ben Malbon, Senior Director, Google
Why the need for agility?
“In today’s era of volatility, there is no other way but to re-invent. The only sustainable advantage you can have over others is agility, that’s it. Because nothing else is sustainable, everything else you create, somebody else will replicate.”
~ Jeff Bezos, Founder of Amazon
This summary has been brought to you by Neil Rainey of The Digital Transformation People, a writer of summaries with a mission to tease the wisdom from books into a few pages.
Inside This Summary
Summary of the Summary
- WHY DIGITAL TRANSFORMATION MATTERS
- BUILD VELOCITY
- DRIVE FOCUS
- ENABLE FLEXIBILITY
- MAKE THE JOURNEY
1. Digital Transformation is: “applying the culture, practices, processes and technologies of the internet era to respond to peoples raised expectations”. It is inevitable and NOT a chase of new shiny Technology. It disrupts the value chain; knowledge is disintermediated, cost leadership eliminated, and products disrupted (e.g. Airbnb disruption of the short stay market). We need to be agile where Agility = (Velocity x Focus x Flexibility). We must build Velocity, drive Focus and enable Flexibility.
- Velocity is the adoption and use of digital native processes.
- Focus is having an enabling adaptive, agile strategy.
- Flexibility is the culture, environment, structures that enable a fast tempo.
2. Build Velocity: business advantage now comes less from scale and more from the ability to move from one state to another (manoeuvrability). Build velocity through:
- Encourage continuous innovation: Give employees free time to innovate on a regular basis, grant Prizes/grants to do research. Run Hackathons/hack days. All as a regular part of the culture, not just one-off events.
- Allow emergence, start small, deploy, test, learn, develop. Challenges today are complex and complex problems require emergent solutions. Successful complex systems emerge from a simple system that has been improved. Complex systems designed from scratch are costly failures.
- Stop Waterfall development: Waterfall’s linearity and inflexibility don’t work in a rapidly changing external environment.
- Create a culture where failure is ok: the words “embrace failure” is a cliché. Enable a culture that blends creativity and discipline, learning derived from a steady stream of successful and unsuccessful experiments.
- Encourage Growth mindsets: only a Growth mindset will genuinely see failure as an opportunity.
- Use Design Thinking: “a human-centred approach to innovation that draws from the designer’s toolkit to integrate the needs of people, the possibilities of technology and requirements for business success”.
- Use Agile methods: Focus on learning, quality, transparency, sharing results constantly, working in short blocks of time (sprints), having daily stand up meets (scrums), collocated cross-functional teams with a good dose of autonomy. Agile enables the ability to adapt to changing reality swiftly.
- Use Lean methods: Agile is used for Technology teams, Lean is often used in the development of products and services. The core concept is the Build-Measure-Learn Loop to create a Minimum Viable Product (MVP).
“Embrace failure” is a cliché. Can you say it and then act like you mean it in your company?
3. Drive Focus: Focus effort, build momentum towards a distinct direction:
- Document and communicate focus: mission, vision, purpose, values and measures. Create clarity of what we aim to achieve and relentlessly communicate, linking vision/mission to execution.
- Think long term: have a view about the future, work back to today and build strategies as steps towards that future, not an extension of the present day.
- Create strategy: that has thought through customer behavioural trends, where to play in the market and how to apply capabilities of new technology.
- Ensure Strategy is an ever-evolving algorithm: “Everybody has a plan until they are punched in the face” (Mike Tyson).
- Be stubborn on vision, flexible on details: Plans driven by strategy can be highly fluid and adaptive to learning.
- Let customer centricity dictate what you do: True customer centricity builds process from what the customer needs not from what WE want.
- Prioritise to succeed: good prioritisation of resources is vital to success. A key input is customer need, a key input is NOT chasing everything your competitors are doing.
- Use Discovery Driven planning: look at an outcome and ask what needs to be done to achieve it. Then test your strategy: ensure it can be executed.
- Use Data to drive decision making: In God we trust, everyone else brings data.
- Use Technology as an enabler: Really understand user need, then buy technology.
- Focus on actionable early stage metrics: ones that show value before revenue. Traditional budgeting for new product/services (revenue, profit, cash flow in the short term) will kill agility and innovation.
Be Stubborn on Vision, Flexible on details.
4. Enable Flexibility: Flexibility is being “adaptable, able to be easily modified to respond to altered circumstances”.
- Organise: around continual experimentation and opportunity rather than optimisation and execution.
- Combine: Vertical expertise with small, multi-disciplinary teams. Encourage concurrent, co-located working.
- Change job design: to encourage self-learning, ownership mindset, flexible role boundaries, skills-based approaches.
- Overhaul the balance: between centralised and decentralised resourcing regularly. Centralisation brings standardisation, consistency, control, governance, scalability and optimisation. It risks lack of integration with wider organisation, lowers learning opportunities. Ensure the resource can move easily between the centre and the rest of the organisation.
- Determine the Insource/outsource balance: Insource gives more immediate control, responsiveness and consistency.
- Do not outsource the future, those capabilities that is vital to the future success of the organisation.
- Optimally architect access: to both Specialist and Generalist skills. As business problems become ever more complex, we require deep vertical expertise to optimise a specific capability (e.g. Big Data analytics) in addition to generalist skills to marshal capabilities to a shared goal.
- Enable small teams: Small teams can drive big change. Small teams need common team tasks working to a common compelling vision. They need clear boundaries of who is in the team, information flow, alignment with other resources, priorities, policies. Autonomy should be given within defined boundaries and don’t move the goalposts.
- Build teams on skills, not functions include only those whose skills are needed in a team.
- Create flatter structures: quicker decisions will result. We need to have just the right level of hierarchy to succeed.
- Ensure we have a Digitally Savvy Board: the company board is the most important decision-making body in a company and must be digitally savvy or have members who are digitally savvy.
- Enable the right culture: Culture is your best enabler to catalysing Digital change in your organisation. Amplify the elements of a Digital-Native culture through processes, decisions, actions, behaviours and how work is done.
- Enable psychological safety: in order that people can bring their real selves to the team. This engenders trust and generates productive dissent (people debating ideas rather deferential agreement with secret sabotage).
- Encourage engagement through enabling Autonomy (self-management, self-direction), Mastery (having the ability to grow and learn) and Purpose (The “Why” of what we do).
- Hire Digital Native Talent: The nature of modern work (knowledge work) means a few individuals can contribute disproportionally to output. Look for relevant soft skills (learning on the fly, cognitive ability, ownership, intellectual humility, willing to change view based on new data). Cultural fit also matters.
Small teams can achieve big things
5. Make the journey: there are 5 facets of the Transformation Journey. Personal, Principles, Process, Practice and Pace.
- Personal: Work to a shared vision, use empathy, make others look good, use advocates for change, handle negativity appropriately, be resilient.
- Principles: Set out the organising idea (what drives the company at its most elemental level) purpose (the reason the company exists), vision (long term view of the world we are building or contributing too), values (what our organisation believes in), experience principles and behaviours (how the values feel to our customers and the behaviours we in the business need to exhibit to bring the values to life), operating model (the change state required to fulfil the customer experience principles and related behaviours) and customer benefits (tangible benefits).
- Process: create the Situation/Story on why we must change, communicate the change again and again, lead the change actively, focus resources and initiatives to catalyse change, prioritise and reprioritise, execute using small multifunctional teams and capture and celebrate quick wins and make visible to the whole organisation.
- Practice: changing everyday behaviour is at the core of Transformation. Understand the behaviour we want to change and the triggers and rewards that reinforce that behaviour. Create the environment for people to adopt a new behaviour.
- Pace: Elements of Transformation (customers, processes, resources, strategy and vision) transform at differing pace. Accommodate this into the transformation plan.
Why Digital Transformation matters
Digital Transformation Defined
“Applying the culture, practices, processes and technologies of the internet era to respond to peoples raised expectations”.
It is the realignment of, or new investment in, technology and business models to more effectively engage digital customers at every touchpoint in the customer experience lifecycle. Ask 10 people in different areas of your company what Digital Transformation means, and you will get 10 different answers. Building a shared Digital Transformation vision with a common understanding and aligned approach incorporating people, behaviours, skills and culture, (and not just technology) is the foundation from which to create change.
There are 3 truths about Digital Transformation
- It is inevitable
- It is NOT is a chase of new shiny technology.
- It involves fundamental and comprehensive change – a reinvention of how the company operates, impacting resources – (people, physical and intangible assets), priorities and processes.
Most companies are underway with Digital Transformation
Cap Gemini and MIT Sloan classified company’s efforts as follows:
- Beginners: low awareness of Digital Transformation and have few advanced Digital capabilities.
- Conservatives: unified vision, sceptical of value of Digital trends.
- Digiterati: truly get how to drive value via the Digital Transformation of their business. Digiterati are more profitable, use their assets more effectively and have higher market capitalisation than their peers.
Agile = Velocity x Focus x Flexibility
Organisational agility has 3 foundational elements:Velocity, Focus and Flexibility really matter: Agility = (Velocity x Focus x Flexibility)
- Velocity: Adoption and use of digital native processes such as design thinking, agile, lean techniques, continuous experimentation and culture/KPI’s that allow failures that occur in a test/learn environment. Customer-centric innovation that allows for rapid prototyping, scaling up and commercialisation of ideas.
- Focus: having an enabling adaptive, agile strategy that has strong links to execution with a clear vision and purpose. Strategy must be outward looking and customer centric.
- Flexibility: enabling culture and environment that move fast through agile structures with small multi-disciplinary teams powered by autonomy, mastery and purpose.
Change maturity model (Fig 1)
This model summarises stages of change from Legacy (before the company digitally transforms), to Enabled (company is mid journey) and finally to Native (company is native to the fluid, changing environment). The model describes company features at the various stages along the Digital Transformation path.
|Fig 1. Maturity Model – Indicators of the Stages of Change for a company|
|Aspect||Stage: Legacy||Stage: Enabled||Stage: Native|
|Customer||Multichannel, not omnichannel||Organised around the customer. Processes & data create great customer experience||Seamless rapid customer feedback loops informing strategy, innovation and improvement.|
|Planning/process||Rigid, waterfall style||Agile development, SCRUM, test and learn development. Effective governance.||Small X functional teams. Embrace uncertainty. Allowed to fail. Rapid test/learn embedded. Data driven, adaptive.|
|Resources||Siloed data, basic analytic tools, legacy platforms, restrictive technology, isolated knowledge, poor training, functional silos.||Software as a service, flexible partnerships, joined up data, predictive analytics, more fluid structures, digital centres of excellence, collaborative, specialists, generalists and tech skills.||Structures/resourcing orientated to customer. Adaptive structures reforming around opportunities, data, analytics. Real time decisions, T shaped skill sets, knowledge flows.|
|Strategy||Digital capability development is not core to strategy. Holding to legacy advantage. Short term view.||Systematically designed innovation process, more fluid strategy/planning, innovation accounting.||Fully agile and adaptive strategy. Systematic experimentation. Long term view. Healthy disengagement from legacy advantage reliance|
|Vision||Assumes retaining existing advantage. Lack of clarity on purpose or organisational direction||Compelling and well executed vision and strategy linked to KPI’s and organisational priorities.||Clear purpose/vision lived through leadership and operations. Shows up in tactics and behaviour. Adaptive execution of vision.|
|Culture||Precise, slow controlling. Restrictive with focus on efficiency Improvement is incremental.||Collaborative, data driven, customer centric. Focus on challenging norms. Learn from both failure and success.||Very fluid/collaborative. Agile culture, entrepreneurial empowered teams. Distributed authority, bias for action. Embedded learning culture.|
Accelerating change: a real and present challenge for organisations Company lifespans are now 15 years vs 61 years in 1958 (Yale University) due in part to the higher probability of technical/market obsolescence (Kodak, Blockbuster, Nokia). Change in companies take longer and are slower to implement than changes in the external environment. Technology change is exponential, change in companies is logarithmic as it depends on factors such as attitudes and behaviours, the widening gap is the Leadership challenge of our times. One fast moving change is Customer expectations. Once you have caught an Uber do ordinary Taxi’s look OK to you?
The key forces of change (competitors, consumers, companies):
- Transformed Competitive context: we are in the era of “horizontal” competition where a non-traditional competitor will emerge from anywhere. A company making Mobile phones can suddenly compete with Banks for transaction business (Apple Pay). Open Software development and the breakup of software into smaller standardised components gives small companies access to technology that used to be the preserve of large companies. This enables these small companies to offer the full stack of offerings of a large company and disrupt entire markets (think Uber to taxis, Netflix to Pay TV). As the nature of competitive advantage shifts companies need to respond by:
- Continuously reconfigure to meet the shifting external environment
- Be more detached: prepared to move on from a legacy advantage
- Allocate resources to opportunity: rather than watch opportunity suffocate via outmoded allocation processes
- Build innovation muscle: move away from episodic innovation to a continuous experimentation culture
- Drive Leadership: that directs talent to opportunities
- Pull disparate strands together: Strategy, innovation and Organisational change need to be thought of as one combined single enabler of change.
The Competitive, Consumer and Company contexts have all changed because of Digitisation.
- Transformed Consumer context: we as consumers are experiencing greater democratisation of product/service creation, marketing, sales and operations driven by technology. Think of how your banking has changed in the past decade – How much less do you use cash than electronic payment? Once you have experienced the ease in one area of your life, you start to demand it in others. If I can see the progress of the taxi coming to me online (Uber), I expect the same of others – why can’t the plumber do the same? Once one firm provides Digital service, others must follow and fast. In addition, there is much if a firm becomes a consumer’s primary interface or gateway to the services consumers want. If you start using Google voice search as your interface and Google Play as your gateway to the applications you want then Google as a company gain a lot from you; business, behavioural data, loyalty. Becoming the gateway and interface of choice is a massive win.
- Transformed Company context: Data is the new Oil – valuable once refined. Technology more data capture, dissemination and analysis possible. The explosion of Data changes the game for companies. The unpredictable becomes predictable, operating efficiencies are enhanced and new revenue opportunities emerge. Software is transforming the market context for companies. Products can be continuously improved and updated via regular software updates rather than released and then replaced at long intervals. Products can become services bought as consumed rather than as a one-off transaction (e.g. Software as a Service).
Networking dynamics are changing the company context. The impact of Application Program interfaces (API’s) is an example – companies now access a range of software services via API’s and apply them to their offering. This networked environment yields new possibilities to commerce (think Blockchain impacts to supply chains).
The war for Talent has been amplified through technology. Digital Technology shifts power to individuals with specific skill sets. Hiring to keep is vital, putting a Digital Native used to fast, intuitive software and a merit-based work environment and putting him to work in a hierarchical office environment with poor tools/out of date processes will simply not work.
Figure 2 is a check point on how you are going on meeting the emergent competitive, customer and company contexts:
|Fig 2. Agile Context model – questions from competitive, customer and company contexts|
|Competitive||What factors are preventing you from moving quickly?||How does your vision & strategy compare to your competitors?||Are there cultural factors to the industry that create inertia?|
|Customer||How well does your organisation understand shifting customer need?||How well is your strategy and innovation linked to your customer need?||How quickly are you able to respond to shifting customer need?|
|Company||What are the key forces for inertia in your organisation?||How well is organisational execution linked to a compelling vision?||How well does your culture support agility?|
The value your company brings to the Value chain is vulnerable to Digital disruption.
How Digital disrupts
Disrupting the value chain: the value chain for a company is a set of activities that a company performs in order to deliver a value to a market in the form of a product or service. If the value the company brings is knowledge, this can be disintermediated. An example is Waze a free app providing turn-by-turn navigation information and user-submitted travel times and route details, while downloading location-dependent information over a mobile telephone network in real time. This competes with traditional map makers providing maps online by using a user community to create knowledge.
If the value brought by a company is cost leadership, this can be disrupted. An example is the use of automated customer service through the implementation of artificial intelligence. The cost advantage of the company using automation in this way disrupts traditional companies and the disrupter may even gain kudos by doing this and be the new “cool” company. Plummeting transaction costs weaken the glue holding traditional value chains together.
Technology itself will be disrupted: The S curve of Technology development described by Ray Kurzweil (Google Head of Engineering) and others, sees a technology moving through 7 stages:
- Precursor: Enabling factors for a technology are in place and it is yet to become a reality.
- Invention: Timing is key here.
- Development: Refining the invention into a usable product.
- Maturity: This is most of the technology’s lifespan. It is an integral part of everyday life and seems irreplaceable.
- False pretenders: New contenders arise with the promise of being able to replace the technology but fail in some crucial respects. This reinforces the irreplaceability of the incumbent.
- Obsolescence: More newcomers appear mastering the elements the pretenders could not, pushing out the existing technology.
- Antiquity: RIP
How do you convince your company to move to invest in replacement of a product at the peak of its success?
Many organisations react too late. For example, at stage 4, revenues and profits from the technology will be solid and there is little appetite to research ways to replace it. Yet that is just what the competitive environment is doing. The incumbent company or industry often moves at stage 6 as a defensive response, by which time it is too late. As in competitive sports you must drink before you are thirsty.
What is stopping you Digitally Transforming
Blockers to change include outdated and inflexible systems, a focus on the short term, challenges in attracting the appropriate talent, legacy-based behaviours, rigid and powerful organisational silos, challenges on resource prioritisation, culture and structural challenges. Our industrial organisational designs enable inertia, where virtue is deliberation and key decisions made by the few. Main blockers are:
- Relationship capital will slow you down: Strong cultures build strong relationship capital. Organisations form around a group of people working on a common problem. An organisation becomes a web of human relationships (relationship capital) that build accepted norms, behaviours and defence mechanisms against challenges to the norms. Add in the incentives and targets in which the culture is set, and you have a human environment against which new ideas will be tested. Nothing is stronger than habit, change will meet with resistance.
- Fear of loss kills good ideas: Good ideas disrupt power balances in a company and will meet resistance. Avoiding loss or failure is a powerful motivator and enables a risk averse culture. Internal idea schemes will be a PR exercise only as any ideas have to run the gamut of the existing culture to be adopted and built. Resilience is vital, the first presentation of an idea is often about overcoming one more “no” on the road to “yes”.
- Scale creates arrogance: Hubris can result when an organisation has market dominance. Balancing the need to genuinely listen and have external curiosity against the pressures to build scale and efficiency (driven by stakeholders who want to capitalise ever more on existing success) is not easy. Yielding to the easy route will lead to bureaucracy, entrenched views, arrogance and failure.
- Toxic assumptions and obsolete beliefs create indecision: Legacy systems and approaches have inbuilt assumptions based on when they were originally derived. They become embedded in the culture and are dangerous as they become unnoticed by those who live in the culture. “The difficulty lies not so much in developing new ideas as in escaping from old ones.” (JM Keynes). Digitisation means strength and growth in knowledge lie in adaptability.
- Planning the old way will project wrong outcomes: We now live in Volatile, Uncertain, Complex and Ambiguous (VUCA) times. The old way of annual planning with months of preparation, presentation and approvals to issue the annual tablets of stone (the plan) is over. Planned outcomes will be wrong, assumptions out of date the day the plan is released. Horizontal competitors or competitive products will come from anywhere guaranteeing obsolescence of the plan. Incremental plans based on last year perpetuate incremental thinking. We must consider the external environment and new opportunities we can pursue. Rigid annual planning blocks adaptability, the very muscle we need to build.
- Legacy technology slows us down: Successful Businesses have technologies at their core that are essential to their existence. Technology investment is often directed to front end systems with the legacy core treated as an expensive black box to plug into. Replacing the core is expensive, complex and risky. Ultimately the company must persuade the market and other stakeholders that risk and expense is necessary price to compete and stay relevant. This is the leaderships role and needs a savvy and brave leadership team who have the capability to upgrade/replace the legacy appropriately and carry their owners buy-in along with them.
- Marginal thinking creates poor investment decisions: decisions will be based on existing operations encouraging minor investment in cash cow products. Meantime others are fighting to build replacements or better products to kill the cow and be investing everything to take away your attractive market.
- Culture beats strategy every time: Digitisation is not just about talking the talk; it is about walking the walk. To drive successful digitisation strategy, we need to exhibit and enable the required new behaviours. Without enabling changes in behaviour, the existing culture will kill the outcomes of a strategy any time.
Incremental plans perpetuate incremental thinking and do not encourage consideration of the changed external environment.
Velocity is balancing a clear overarching vision, direction and objective with the autonomy to enable more execution-oriented teams and managers to make and act on rapidly taken, data-driven but also intuitively led decisions in response to swiftly changing conditions. Ways to build Velocity:
1. Create momentum: business advantage comes less from scale and more from the ability to move from one state to another (manoeuvrability). We want to move quickly, sustainably to provide the outcome we desire. We can build momentum based 4 step process (OODA):
- Observe: collect data and information.
- Orientate: form a mental perspective based on analysis (break information into component parts) and synthesis (recombining the components to create a new whole).
- Decide: determine action based on mental perspective.
- Act: act based on the decision.
Using the OODA process repeatedly presses forward an advantage, leaving your opponent struggling to catch up and know what to do next. OODA is about building a faster tempo, building velocity in a measured and thoughtful way. Rapidly changing environments require speedy response and manoeuvrability using people, process, culture and enabling technology to serve its wider purpose.
Build Velocity through continuous innovation.
2. Operate brilliantly in the Ambiguity Zone – when it appears as if we don’t NEED to invest, our products are doing well, that is when to do it. Invest in alternative products or superseding our product. Competitors are not complacent and are working daily to oust our products and eventually they will succeed. We must act during stages 4 to 6 of the 7-stage model of development we looked at earlier.
3. Build velocity through continuous innovation: Innovation processes need to be a regular part of the culture, not just one-off events.
- Give employees free time to innovate on a regular basis: Google allow employees to spend 20% of work time on projects with nothing to do with the day job.
- Grant Prizes/grants for research – 3M give $US 30k – $US 75k to pursue successful ideas.
- Run Hackathons/hack days – pioneered by LinkedIn, Apple and Facebook.
4. Consciously divide innovation effort 70/20/10: dividing effort enables appropriate focus: 70% innovation focussed on the core, improving what you have, 20% innovation focussed on young/mid stage products, 10% innovation on blue sky products.
5. Use time horizons:
- Horizon 1: Incremental improvement aimed at existing markets by extending current technology. Low failure rates are usual here and short timeframes.
- Horizon 2: Adjacency innovation aimed at moving into new products in existing markets using current technologies. Higher failure rate, longer timeframe.
- Horizon 3: Innovation for new breakthrough products, moving into unknown markets and technologies. Expect high failure rates, long timeframe.
6. Experiment more: IBM has re-invented itself many times and has survived more than 100 years. Experimenting with new products and services has been vital. This results in periodic reduction of revenue during reinvention, but this beats obsolescence. More experimentation = more opportunity.
7. Be comfortable with Breakthrough innovation: marginal innovation is important and actively supporting Breakthrough innovation which costs money and is prone to failure matters too. Don’t get sucked into your own rhetoric around this, talk is cheap, to succeed the organisation must provide resources, support and champion both types of innovation, not just the comfort of marginal improvement.
8. Allow emergence: There are simple problems for which there is a known recipe to fix, complicated problems that can be broken into a set of simple problems and complex problems (e.g. raising a child!) With complex problems each situation is unique and new approaches are needed. Expertise is useful but not enough. Outcomes are very uncertain. We know a solution is possible but achieving it is complex. These problems are where we fail most, and they prevail more in today’s environment.
Complex problems require emergent solutions. Start simple and build.
Complex problems require emergent solutions. Successful complex systems emerge from a simple system that has been improved. Complex systems designed from scratch are mostly costly failures. Allow emergence, scrap the complex megaprojects, start small, deploy, test, learn, develop. “Good practice” here is better than “Best practice”. Experts will provide specific solutions, constrained by their frame of knowledge so we must experiment, listen to non-expert voices as well as expert. In “safe to fail” experimenting we will spot emergent patterns and learn, amend, build. This works better than lengthy analysis paralysis by an expert team. Complex scenarios demand emergence.
9. Avoid Waterfall development: Requirements gathering is usually flawed as users do not know what they want. The linear nature of the Waterfall process means development takes a long time. Needs change quickly, by the time the project has moved on to a later stage the technology is out of date. Interaction is limited as one work silo will pass the work onto the next with limited dialogue. Unforeseen problems are hard to identify and will arise late in the project when they cannot be addressed. Waterfall’s linearity and inflexibility does not work in a rapidly changing external environment.
10. Build a learning culture:
- Create a culture where failure is ok: “embrace failure” is a cliché. Adopt it, make it mean something in your organisation.
- Build a blend of creativity and discipline: an organisation should be learning from a steady stream of successful and unsuccessful experiments. Google changes its search algorithm 600 times a year (do you do that to any of your core products?) Agile businesses have a culture of disciplined continuous test and learn.
- Be aware of Survival bias: this is a natural human instinct leading us in our business lives to focus more on successful outcomes. We measure success, like it and often get paid because of it. Learning from the unsuccessful is more important as learning from the failure and making change will be better for survival. Failure is not sexy; we demote its importance and miss the chance to adapt and grow.
- Learn to unlearn: Our brains actively erase memories to make space for new patterns and learnings. Sprint working methods are founded on learning, reflection, improvement; helping us unlearn legacy thinking.
- Encourage Growth mindsets: A Fixed mindset views intelligence and character and capability as fixed. Those with fixed mindsets will always avoid failure and strive for success as an affirmation of their intelligence against a fixed standard. Growth mindsets will genuinely see failure as an opportunity for growth, a way to grow capability. Agile methodologies embed reflection time into the process.
Design Thinking, Agile, Lean…all are concepts to help you adapt rapidly to the shifting external environment.
11. Use Design Thinking: Defined as “a human-centred approach to innovation that draws from the designer’s toolkit to integrate the needs of people, the possibilities of technology and the requirements for business success”. Design thinking uses successive sequences of Divergent thinking (come up with many ideas) and Convergent thinking (narrow down those ideas to the best ones). It follows a 7-stage process – Define, research, ideate, prototype, choose, implement and learn. A strong focus on the user and user needs are feature with tools such as Customer Journey mapping, personas and empathy mapping.
12. Use Agile: Agile concepts include; individuals and interaction matter more than tools, having working software took priority over documentation, customer collaboration matters more than contract negotiation and that response to change matters more than following a plan. Agile is a major cultural shift for organisations and requires full commitment of resources (people, money, training, systems) to be successful. Moving in a half-hearted way will fail. Development using Agile has the product owner as a key part of the development team. Focus is on learning, quality, transparency, sharing results constantly, working in short blocks of time (sprints), having daily stand up meets (scrums), co-located cross-functional teams with a good dose of autonomy. Agile enables the ability to adapt to changing reality swiftly. Because of adaptability of the process reduces risk. Agile builds flexibility into the road to the long-term goal. Agile has built-in review ensures the quality of work and optimised prioritisation of work. Transparency and frequent reviews mean users have visibility of progress and can better understand what is being delivered. Misalignment between developers and product owner is reduced and high-quality feedback loops help users make good decisions.
- Primary orientation is to customer need.
- Delivery via constant customer experience improvement.
- Strategies/tactics highly adaptive. Change welcomed.
- Iterative, sprint working delivers customer value through continuous progress and momentum.
- Effective cross-functional collaboration supported by clear intent critical for success.
- Co-location and face to face communication maximised.
- Teams built with motivated individuals.
- Teams empowered via flexible work environment.
- Trust and comfort with productive dissent the norm.
- Autonomy given to small teams to yield best results.
- Minimise bureaucracy and politics.
- Working outputs are the measure of progress/success.
- Change/iteration constant, pace of progress never slows.
- Technical excellence, good design central to maintaining pace and agility.
- Embedded reflection time to support learning. e.g. After-Action Review: What did we expect to happen? What happened? (This is a no blame, objective analysis), Why was there or wasn’t there a difference? What can you do next time to improve or ensure these results?
- Release early and often. Test regularly and iterate development based on test results.
Sprint is a method central to the delivery of Agile and Lean processes.
13. Use Sprint to drive change: Sprint is a method central to delivery of Agile and Lean process. Sprints should be used beyond technology teams; they will create momentum for any team. Benefits of Sprint are that it creates clear focus on outcomes to be delivered by end of the Sprint, Embeds feedback and learning, Multi-disciplinary working enables better communication and team spirit, seeing working outputs and clear progress motivates and energises the team, there is greater velocity of results with continuous improvement enhancing pace and performance, there is greater transparency with difficulties and success made visible in daily stand up meetings to the team and others and finally greater accuracy results as testing and learning removes assumptions and builds real outcomes. An example Sprint process:
- Day 1 – Understand: Agree goal/target. Map the challenge, use insight, analytics, research to inform.
- Day 2 – Diverge: ideate, mix ideas, envisage solutions.
- Day 3 – Converge: critique solutions, converge on the best, storyboard the best idea.
- Day 4 – Prototype: convert storyboard into something we can test, build the simplest possible prototype.
- Day 5 – Validate: with real users, test. Learn what does/doesn’t work.
14. Use Lean processes: Emerged from the Auto Manufacturing industry (Toyota) where it was designed to remove waste from manufacturing process. Where Agile is used for Technology teams, Lean is often used in the development of products and services. The core concepts are:
- Build-Measure-Learn Loop: An iterative cycle of hypothesis build (re a product or customer need), testing the hypothesis with real customers, reviewing and building learning into the next iteration. Aims to remove uncertainty from development and test and learn your way to the end outcome.
- Minimum Viable Product (MVP): Create the simplest possible test to validate the idea; using the simplest version of a new product which allows a team to collect the maximum of validated learning about customers with the least effort.
- Innovation accounting: focus on actionable metrics that measure early progress and enable prioritisation, e.g. customer usage and retention. Early stage should not focus on irrelevant financial vanity metrics such as cash flow and revenue.
- The Pivot: Pivots enable refocus of a product proposition whilst staying within the guiding vision. It is a structured course correction designed to test a new fundamental hypothesis about the product, strategy and engine of growth.
The collision of half-baked ideas and vigorous debate creates real breakthrough. Unchallenged Brainstorming is unnatural and is not as productive.
15. Encourage ideas from anywhere: empower new connections with a relentless, continuous flow of ideas from employees. People are more productive when they have an idea and do some work on it, then bring the idea to a session to with others with ideas of their own that they have worked on and debate and critique them. It is the collision of these half-baked ideas that creates real breakthroughs. The “do not criticise” mantra of traditional brainstorming may sound permissive and productive, but it is unnatural, counter-intuitive and we don’t produce our best work when we are unchallenged.
16. Value fresh perspectives: to succeed we need to become a more networked company. This mean facilitating an outward (into the market) perspective encouraging a flow of ideas back into the organisation. The outward view can be even to other industries and sectors to spark ideas within the organisation. Many larger organisations become inward looking; maintaining internal networks, following difficult processes and working with politics. This must change.
17. Enable the restless, curious organisation: no brilliant individual holds the creative spark. Innovation labs risk saying to the organisation “innovation only happens here in this special place with creative, clever people”. Psychologists have identified three components of creativity in people:
- Plasticity: extraversion, energy, open to new experience and inspiration. Willing to learn at a fast pace, try new things and experiment, explore and be curious.
- Divergence: non-conformist, independent thought, pursue unique long-term vision, stubborn, willing to try new things.
- Convergence: precise, persistent, conscientious, have a critical sense. Disciplined to make good data-driven decisions, direct resources to opportunities prudently.
Drive Velocity by Innovating successfully
Take the right steps to innovate well:
- Define the problem: really define it. Drill deeper and deeper. Poor problem definition is common, precise definition is vital.
- Establish first principles: The assumptions we have are often unconscious, establishing first principles as a start avoids constraining the solution.
- Establish an innovation lab: Innovation labs have become a way to drive space for breakthrough innovation. Through autonomy and separation, we can catalyse different thinking, create new ways of working and prevent new ideas struggle in the slower moving corporate culture. A Lab can be a path for new ideas, attract talent, foster an innovation culture, enable employee engagement, accelerate idea development.
- Measure the right things: most innovations fail at scale up. Developing products will not meet traditional revenue/profit profiles. Use measures such as Acquisition rates, Activation volumes, Retention rates, Referrals and Revenue per user.
- Build entrepreneurship in the business: Assign staff with accountability, time, incentives, resources to commercialise the product and
- Start small: large businesses do not scale up new ideas well, start-ups do because they have too. Serve a small market brilliantly then scale up fast to larger markets.
- Use network effects: How can you leverage the network effect? Can you link your product into an existing network?
- Use API’s: Application program interfaces are a simple software link from your system to someone else’s.
- Access Open systems – these empower co-creation or exchange of value. An example is the Google App Store.
- Hack for growth: Use detailed analytics about how exactly your customers refine your product to acquire more customers. Twitter saw that new users who joined and then followed at least 5 accounts were more likely to become return users. From this, they rebuilt their onboarding process with great success.
- Drive continuous reconfiguration: organise the organisation around opportunities rather than on efficiency/optimisation.
Innovations that work change the Business model or the Offering or the Customer Experience.
Types of successful innovation
Research over 2000 successful innovations showed 10 kinds of innovation that worked.
- Configuration innovation:
1. Profit model: Challenging sector norms on offer, price.
2. Network: Capitalising on organisation strengths while harnessing the advantage derived from the capabilities and assets of others.
3. Structure: Organising talent, resources, assets to improve productivity, collaboration, unique value or efficiencies. Attracts talent to the organisation.
4. Process: Developing, implementing unique or improved process. This drives greater capability, adaptability or efficiency and is hard for competitors to mimic.
- Offering innovation:
5. Product performance: Developing distinguishing features or functionality.
6. Product System: Creating complementary products or services. Integration, modularity and interoperability matter here.
- Experience Innovation:
7. Service: Supporting and amplifying the value of offerings through improved design, service provision, pain point removal, seamless customer experience.
8. Channel: Changing the way offerings are brought to customers, finding new ways to bring products to users.
9. Brand: Innovating how customers recognise, recall, associate, think of the promise of brand/offering.
10. Customer Engagement: Developing more meaningful connections with customers by understanding their aspirations, desires. Making the magic happen for them.
Velocity x Focus = Momentum
Focus effort and build momentum towards a distinct direction. Velocity without focus is foolish. Lack of focus is common, when Steve Jobs returned to Apple, he drew a 2×2 matrix, consumers and Pro for columns and Desktop and Portable rows. He instructed the team that they could build one thing in each box. Everything else was cancelled. Time and again a lack of focus leads companies into costly blind alleys. A strong focussed vision that creates direction (Focus), coupled with Velocity = momentum and this creates real impetus for change.
Documenting and communicating focus are vital
The process of deriving mission, vision, purpose, values and measures is as important to a leadership team as the outcomes. The process creates clarity of what we are trying to achieve. Relentlessly communicating, prioritising and linking organisational efforts to vision and mission will help focus execution efforts.
- Purpose: Why you choose to exist together beyond financial gain. “We believe…”
- Mission: Clarity about what business you are in, setting an ambitious market position or customer position. “Be the most”
- Vision: Moving beyond purpose by expressing the difference you will make in customers lives. Must be compelling when heard both inside and outside the company “We will…”
- Values: the principles and values that will accelerate your progress together. Must be action verbs. “Be committed…” Caution here; most value statements are well-worn clichés.
- Measures: observations indicating progress forward or backward. Great measures bring purpose, mission, vision, values to life.
Focus is empowered by Purpose and Vision
Vision and Purpose must be strongly connected to strategy and execution. Where there is not a strongly understood and believed vision or purpose, metrics take over. Absent purpose you end up with quarterly bonus metrics driving behaviour: Bankers selling life insurance to those who don’t need it, Car manufacturers falsifying emission tests. Purpose, when clear and bought into, will shape the culture, think about Disney’s common purpose: to create magical guest interactions. For frontline staff this means “Creating happiness”, a clear purpose against which strategy, plans, execution can be driven.
“Just by lengthening the time horizon you can engage in endeavours you might not otherwise pursue. We like things to work in 5 to 7 years.” Jeff Bezos
Focus is sustainable when we think long term
With the quarterly demands of the market and shareholders, long term thinking takes guts to present to shareholders. As stewards of the business you either lead or return the money to shareholders as you have no better way to use their money. Prosperity and growth in the long term needs long term thinking. Jeff Bezos (Amazon founder and CEO): “Just by lengthening the time horizon you can engage in endeavours you might not otherwise pursue. We like things to work in 5 to 7 years. We like planting seeds and letting them grow”. In an environment of rapid change, think about the trajectory of change, where it is going, have a view about the future and then work back to today and build strategies as steps towards that future. Don’t allow your strategies to merely be an extension of the present day.
Focus is driven by great strategies
- Make informed choices: selecting a path, responding to a specific challenge through analysis, argument and actions. Too often companies will have a strategy to be “Customer Centric” which, without granularity will mean we just slot our existing initiatives under the umbrella of the supposed “strategy”. Or we will take all existing goals and initiatives and agglomerate them and put a title on the agglomeration. These are not strategies they are a muddle. A strategy is effective when:
- Customer: We have really thought about through behavioural trends (vs flash in the pan fads).
- Competitor: We have examined and thought in detail about where we should play in the market. Not just following benchmarks and “world class”.
- Company: We understand potential and application of new technology and how to harness it.
- Keep flexible, allow strategy to be emergent: Strategy should be an ever-evolving algorithm – “Everybody has a plan until they are punched in the face” (Mike Tyson). Being flexible to everything is simply chaos. Effective flexibility is about having a fixed component to your strategy and allowing sub-elements to be flexible. Honda’s strategy to break into the US Motorcycle market in the 1960s was via the launch of large motorbikes. What they found was that consumers loved their small machines and so they flexed to channel small machines into the market. As a result, they built a huge presence and broke into the US market via the small motorbikes, same strategy with a pivot/flex on method.
- Be stubborn on vision, flexible on details: plans should be open to frequent adaptation, driving toward the overarching vision based on learnings from the market. Mission, Purpose and Vision are fixed and should be compelling. Strategy can remain fluid with many possible routes, it has choices, evolving to take account of shifting contexts and information. Changes should be considered and done slowly. Plans and tactics, driven by the strategy can be highly fluid, iterative and adaptive to learning.
Keep the customer at the centre of everything you do.
Focus must be driven by customer centricity
In business we design process to be efficient, to optimise, to remove waste and risk. This may, coincidentally serve a customer, but this is far from guaranteed. Contact centres serve to optimise customer interface efficiently for a company but can give a lousy customer experience. True customer centricity builds process from what the customer needs. Features of customer concentric process design:
- Start with user needs
- Do less: Make what works sharable. Build platforms that others can build on via API’s.
- Design with data: remove assumption and base design on data from real behaviours. Test and experiment often.
- Work for simplicity: simple is not easy to achieve
- Iterate again and again: Test, Learn, Build. Test prototypes and MVP’s with customers.
- Build for everyone: services must be inclusive, accessible.
- Understand context: design for people, not screens.
- Build digital services, not websites: consider all the aspects of a service not just the shiny user interface.
- Be consistent not uniform: language and design must be consistent, and we must respect shifting circumstances.
- Make things open: share knowledge, code, failures. The quality of what comes back will amaze you.
Focus on your priorities
Do not chase everything your competitors are doing, think customer need. Prioritisation allows you to show big impact (on customers and the business) in a short time, buying you the ability to carry on. Your customers will not always help. No-one asked for the i-Phone.
Focus on outcomes and work back
Discovery-Driven planning looks at an outcome and asks what needs to be done to achieve it. This contrasts with conventional planning which extrapolates today into the future. With discovery-driven planning we specify a clear framework for the project with quantifiable outcomes considering the market, competitive environment. Actions are derived by working out what must be done by working backwards from the outcome. This gives clarity and the ability to test and learn, enabling us to make the changes needed to achieve the end outcome.
Focus by linking strategy to execution
Strategy and Tactics are linked: Strategy moves hierarchically from the overarching strategy through to strategy in the levels of the organisation. Strategy and Tactics are linked at each level (if you want to implement it!). Strategy will answer the question “What for?” and the associated tactic will answer “How To?”. Each twin of Strategy and tactic should have measures attached to it in order to ensure metric linkage from the top through to each level in the organisation. Test your strategy to ensure it can be executed:
- What are our broad aspirations and the goals against which we can monitor progress?
- In the playing fields available us where will/won’t we play?
- How will we choose to win against competitors in our chosen area?
- What capabilities do we need to win?
- What management systems do we need to build, operate, maintain these capabilities?
Great measures linked to strategy will incent the right behaviour and drive execution.
Focus by using the right incentives
Objectives and Key results (OKRs) for all helps execution. At Google, everyone from the CEO down has OKRs, published and transparent. There are 3 to 5 ambitious, time bound objectives, which are graded and used in performance reviews. OKR’s clearly link strategy with execution and measurement at every level of the organisation. They show what is important and aligns everyone effectively to the goals of the organisation.
Focus means using Data to drive decision making
In the Agile business, Data provides Information which then can provide Knowledge and when mixed with prior experience facilitates Wisdom. The virtual DIKW sequence needs a Data strategy, which, when deployed, will provide the data required to drive decisions in an Agile way. Components of a Data Strategy:
- Collection of data: What data do we need to drive business outcomes? From what sources? At what level of detail? What questions do we need to ask?
- Storage, management, access: What technologies, processes, governance, privacy, rules, location, security do we need?
- Architecture, integration and flow of data: this is the structure of the data, the network it can flow through and the data silo’s we need to break down and access.
- Insight, analysis, application: What information and knowledge is required by whom? What needs to be real-time? How do we align with organisational objectives? What skills, resources, roles and responsibilities are needed? How can we ensure insight is actionable? What is the role of automation, dashboards, algorithms, artificial intelligence?
The role of Technology is to support strategy is not a solution to a business problem.
Focus by understanding of the role of Technology
When Technology is seen as a solution to a business problem, the answer often is a complex, proprietary complex system. The system becomes the home of super users, is not open due to its proprietary nature and its own language that few understand. Technology CAN be an enabler providing Analytics, tracking, measurement (focus on measuring what matters), Automation, communication, infrastructure (augmenting human decision making and automating repetitive tasks) and Artificial intelligence and machine learning (helping complex decision-making flows and building future competitive advantage). Tips for building technology as an enabler:
- Really understand user need: THEN buy technology.
- Design with choice/flexibility in mind: solutions fitting a range of users.
- Make process transparent: be open to users re decisions and actions and the key approaches being taken.
- Architect loosely coupled services: these are component parts that can easily be replaced, swapped in/out.
- Use short contracts: this enables flexibility in response to rapid technological change.
- Bring the best of consumer technology to the enterprise
- Make security invisible as possible (but make it strong)
- Build in long term capability: ensure some in house skills and do not rely on a single vendor.
Focus by using the right financial measures
Agile budgeting is designed to help iterative, uncertain, test and learn initiatives. To do this we need to focus on actionable early stage metrics that show value before revenue. Measures showing progress towards profit and customer satisfaction. Traditional budgeting for new product/services (revenue, profit, cashflow in the short term) will kill agility and innovation.
Flexibility is being “adaptable, able to be easily modified to respond to altered circumstances”. Systems and empathy help flexibility. Systems are needed to bring together disparate interacting components to achieve a common purpose, Empathy brings our human insight, affinity, rapport and ability to find common ground. When we have high system capability and high empathy, we have a Human centred approach that is responsive at scale. For example, the London Olympics enjoyed success by combining large scale systems with very human connections.
Vertical organisations with siloed functional groups were a response to the need for optimising efficiency and control and are no longer fit for purpose.
Flexibility through structure
Vertical organisations with siloed functional groups were a response to the need for optimising efficiency and control and are no longer fit for purpose. Advantage is gained now from information efficiency, tight customer feedback loops, better access to analytics, reducing information exchanges needed to respond to opportunity.
|Fig 3: Key differences between Legacy and Agile structures|
|Organised around optimisation and execution||Organised around continual experimentation, exploring, learning|
|Functional silos, difficult cross division cooperation||Easy cross team collaboration|
|Large single discipline departments||Vertical expertise combined with small, multi-disciplinary teams|
|Fixed Job Descriptions, rigid functional roles, limited career mobility, directed learning||Self-learning, ownership mindset, flexible role boundaries, skills-based approaches, high career mobility|
|Emphasis on vertical aggregation of expertise||Easy cross discipline aggregation, vertical combined with generalist skills|
|Periodic overhaul of balance between centralised and decentralised resourcing||Continual flow between the centre and local capability|
|Focus on owned assets, in-house headcount and capability||Asset-light businesses, networked ecosystem of talent and resource|
|Change seen as negative, new initiatives fitted into existing structures||Change welcomed, continuous regeneration, orientated around opportunity|
|Functionally oriented structures, poor information efficiency||Customer facing structures, tight feedback loops, high information efficiency|
Flexibility: Concurrent, co-located working enables adaptability
- Enhances Collaboration: Breaking departmental silos
- Aligns cross function priorities: team works to a common goal
- Catalyses creativity: multi skills interacting sparks ideas
- Ensures availability: all being co-located means wide range of inputs available always
- Simplifies Communication: the core team talk daily
- Ensures Transparency and accountability: on progress
Maintain Flexibility through appropriate resourcing models
Insourcing, outsourcing and networking are 3 key levers. Insource gives more immediate control, responsiveness and consistency. Companies insource more as digital technology better empowers their people to do the work. Outsourcing; we cannot outsource the future, capability that is vital to the future success of the organisation should not be outsourced. External resource is useful for tasks at the core of the business such as product development, improving process. At the edge of the business External resource is useful for tasks such as new idea research and development. New trends in outsourcing are appearing such as the new business models that used by Uber; tasking an algorithmically organised external workforce (the “Gig economy”). The growth of Freelancers accessed digitally gives another talent pool of specialist skill available to companies. Networking; Digital Transformation enables Companies to better leverage networks; an example is the move by companies putting Cloud based IT services to work rather than building their own compute infrastructure.
How we optimally architect access to Specialist and Generalist skills sets is very important
Maintain Flexibility by understanding Specialists/Generalist mix
As business problems become ever more complex, we require deep vertical expertise to optimise a specific capability (e.g. Big Data analytics capability) in addition to generalist skills to marshal various capabilities to a shared goal. How we optimally architect access to both skills sets is very important.
Be Flexible by using Centralisation vs Decentralisation well
The dynamic of what is held at the centre is also changing continuously. Centralisation brings standardisation, consistency, control, governance, scalability and optimisation. It risks lack of integration with wider organisation and creates a lack of learning outside the centre. We need to ensure fluidity of resource between the centre and the rest of the organisation. This ensures we capitalise on opportunity.
Flexible by understanding Big is not better
Small teams drive big change. As team size grows, the number of connections that are required to communicate rises rapidly. A team of 6 has 15 links between the whole team, a team of 50 has 1225 links to manage. Amazon favour “2 Pizza teams”, teams of no more than 7 or 8 people (who therefore would be able to munch through 2 Pizzas!). The Amazon had 200-300 such teams construct its home page. The structure of many small teams brings momentum and speed. Naming conventions of agile working (using Spotify as an example): Squad: small, co-located, nimble autonomous, multi-disciplinary, self-organising team set an objective. Tribe: A group of squads grouped together into related product areas. Chapter: Group people with similar functional expertise together. Chapters link Squads together horizontally. Guilds: are looser communities of interest for a functional skill that can be cross the entire company.
Flexibility means Leaders understanding their role
Leadership sets objective and direction giving the team autonomy for prioritisation. Execution and accountability are established through performance measures. Small teams need 4 things to excel:
- Common team tasks working to a common compelling vision: a real team is multi-disciplinary where interdependencies and responsibilities of the team members intertwine as they work to a shared objective.
- Clear boundaries: of who is in the team, information flow, alignment with other resources, priorities, policies and teams. Having part time team members who miss meetings and have only part of their time devoted to the project kills success. Commitment is a must.
- Autonomy: within the defined boundaries. If you want the benefit of teamwork, give the team the work.
- Stability: of objective, personnel, space.
Flexibility means allowing teams to self-organise
This improves motivation, productivity, ownership. An organisational unit (team) has 4 things to achieve; execute work, monitor/manage progress, design the performing unit (structure tasks, organise application of resource, establish team norms and behaviour), set direction for the team for the work they have been assigned. Greater team autonomy will lead to a more adaptive, resilient team, less subject to managerial politics and more fluid and productive. There are different levels of authority we can give teams:
- Self-Governing team: team responsible for all 4 aspects
- Self-Designing team: managers set direction; team members responsible for the other 3 aspects.
- Self-Managing team: team members responsible for execution and monitor/managing progress.
- Manager-Led team: team responsible for execution only
Team Flexibility means building teams on skills, not functions
People on the small team must include only those whose skills are needed. A mix of technical skill (engineers, coders etc), business acumen skills (strategy, product managers etc) and creative skills (ideation) will be an ideal mix. The strength of a multi-disciplinary team is that each skill will amplify/extend the capability of the other.
Flexibility is maintained by supporting the team
The Onion structure of managing core teams and dependencies; think of an onion with 3 layers. The Core team, Collaborators and on the outside, supporters.
- Core team: Purpose is delivering of digital services, they communicate daily via stand-up meeting, planning, show and tell. The core team is made up of the product owner, scrum master, developers, designers and others.
- Collaborators: Purpose is to bring specialist information to help the team, reduce dependencies/blockers. They communicate with the core team regularly are co-located with the core team approx. 2 days per week. Collaborators are security specialists, policy specialists, product portfolio owner and others.
- Supporters: Purpose to keep informed and feed Core team information into organisational priorities (and vice versa). They come along to sprint Show and Tells and ad hoc. They are co-located periodically, perhaps once per month. Supporters are steering groups and others from the wider organisation.
Enable high performing teams by giving them a goal and then get out of the way.
Flexibility is helped by enabling high performing teams
Trust is lacking in the modern organisation. A survey of 11,000 senior leaders in 400 organisations found that senior leaders trust their colleagues to deliver only 10% of the time. There is a tendency to defer, say “yes” to huge workloads only for delivery not to happen. It is here that the link from Strategy to Execution breaks down. In addition, the same research shows few people know the company’s strategic priorities (33% could name the top 3 priorities). In high performing teams are characterised by high trust, meaning implicit communication is emphasised, the team is unified in achieving a common, known goal. The team members feel empowered and collaborate as equals. Control, forward planning and direction setting by senior staff becomes less required in this situation. Help set group norms – behavioural standards and unwritten rules about how the team function when working together play an important role in the success of a team. Being psychological safe as a member of a team means you can be yourself and bring your best to the team. A leader can create an environment that enables psychological safety by:
- Framing work as learning problems rather than execution problems: show clearly how each team members input matters.
- Acknowledge fallibility: show that the leader does not have all the answers and needs the help of the team.
- Model curiosity: ask lots of questions. This creates the needs for answers and gives the team a voice.
With psychological safety in place, people can bring their real selves to the team. It is more likely that this will engender trust. It should also create productive dissent.
With psychological safety in place, people can bring their real selves to the team. It is more likely that this will engender trust. It should also create productive dissent, that is, people debating ideas rather deferential agreement with secret sabotage. Comfort with dissent drives ideas forward. Combining psychological safety and the accountability needed in an agile culture gives us a frame to see high performance, shown below:
The Tough part of Flexibility – scaling agility
A start-up is not a small version of a large company, as a company grows functional groups form to optimise efficiency and skills. Ultimately functional groups become unwieldy as customers are horizontal and do not care about the vertical silo’s you use to service their needs. We need to find a more unifying way to utilise the talent in the functional groups to serve the customer. This is fertile ground for multi-disciplinary teams to develop. Growing and scaling up these take time and require a shift in culture (backed by senior mandate). Agile working scales in 4 phases (shown below). A looser structure based around many small teams risks complexity through difficulties or co-ordination. Also, developing functional expertise may slip away and sharing learning horizontally across the company may become difficult.
- Dispersed mavericks: change agents in disparate parts of the organisation agitating for change. Leads to small scale local initiatives without senior or organisational support.
- Focused agility: the imperative to change becomes accepted at senior levels and resources are allocated to new agile ways of working in specific areas (usually innovation teams, technology teams, Digital centres of excellence).
- Scaling agility: the need to scale agility becomes clear. Small multi-functional pod working, and experimentation expands and more start working in this way. Senior support drives clear links between corporate and team strategy, execution, measures.
- Dispersed agility: Agility continues to scale and control of the ever-fluid number of people working in multi-functional pods becomes of critical importance.
Flexibility by using the right person at the right time
- Entrepreneurs are strong on dreaming big, having ideas and are brilliant at vision. Leaders plan well, strong on people skills and brilliant at fostering the right behaviours. Managers deliver well, are strong on process and brilliant on developing and delivering capability. All three types are essential, it is the timing of their use that matters. Focus talent on opportunity not just efficiency. Growth is as important as cost control!
- Use Pioneers, Settlers and Town planners: Pioneers: will explore uncharted territory and generate new concepts. They show wonder and fail a lot. They are in at the beginning, pre-productisation. Settlers: will turn incomplete ideas into something useful, turn prototypes into products, build understanding and trust. They make the possible future happen. They are in the main development phase of what is now a product. Town Planners: will capitalise on young products to make economies of scale. You can trust what they will build, they will find ways to make it faster, better, more efficient, economic and good enough. They will be most use at maturity or commodity stage. The sequence by which you use each type in development of a product is important. What all groups will need are a clear metrics journey that supports early stage product development, Senior patronage, a continuum of resourcing and resourcing dedicated to the product.
Flatter structures = quicker decisions
Flexibility through Flatter structures
Flatter structures = quicker decisions. In large organisations we must invest time to find out who is who, in order to get things done. A simple task for the CEO to brief the board will turn into exhaustive work for an army of people across the layers of the organisation. We need to have just the right level of hierarchy to succeed in our rapidly changing external environment. Organisations need:
- Easy access to the relevant data to make decisions
- Culture not smothered by internal politics
- Culture devoid of trappings of entitlement (e.g. physical separation of senior managers from middle and lower levels)
- Structure just flat enough to empower teams whilst keeping the ability to co-ordinate and control around vision, purpose.
Flexibility means you need a Digitally Savvy Board
Digital developments are often recognised as important by an organisation, linked to Corporate strategy and given support. The challenge is knowing which ones are of high significance and which lower. It is hard to state clearly the myriad of dependencies and risk factors. A company board is the most important decision-making body in a company, and they must be digitally savvy or have members who are digitally savvy. They must be able to have educated dialogue and make good prioritisation decisions about Digital topics when needed.
Agile is more than a process, it defines a culture.
Building Flexibility, enable the culture to move fast
Agile is more than a process, it defines a culture. The diagram below shows the cultural tendencies of a firm from People orientated to Company orientated on one axis and between being rooted in current reality to dreaming of possibility on the other axis. Agile sits best in the bottom left quadrant and will clash with the sub-cultures in your organisation where you have cultural pockets that are positioned in one of the other boxes of the diagram.
Culture is your best enabler (or blocker) to catalysing Digital change in your organisation. We want to amplify the elements of a Digital-Native culture. We do this through our processes, decisions, actions, behaviours and how we do work. Digital-Native cultural elements are being entrepreneurial, innovative, experimental, non-hierarchical, collaborative, data driven, commercially focussed, open, transparent and having clear accountabilities. Continuous learning, curiosity and open to external market inputs are also important. Staff who enjoy transparency, accountability, empowerment and autonomy are a feature of a Digital-Native culture. Encourage these elements in the organisation and agile will become “how we do things around here”. The stronger the culture in a business, the less process a company needs. Trust builds and trust oils the wheels of business. Culture in an agile business is about enabling intuitive decision making and autonomy removing unnecessary process and hierarchy and empowering the business to have good, high paced momentum. Note; process and hierarchy are not bad just process needs to be fit for purpose and hierarchy just right to enable control without smothering the business.
Building the flexibility we need via Autonomy, Mastery and Purpose:
Employee engagement, that is the extent people feel committed to their jobs and likely to do productive work is in dire straits. Gallup’s Global Workforce poll (2013) found 63% of workers “not engaged” and 24% “actively disengaged”! There was some regional variation with US and Canadian worker feeling slightly more engagement. The main variance was between small (10 people or less) and larger companies. Small companies had much higher engagement scores. Research and a book by Daniel Pink found 3 factors that really engage employees:
Gallup’s Global Workforce poll (2013) found 63% of workers “not engaged” and 24% “actively disengaged”
- Autonomy (self-management, self-direction): Google tried a completely flat organisation in 2002 and found that some small level of hierarchy helped co-ordination, process alignment, strategy communication and helping inter-team working. Even today they only have 4 levels, low for a large organisation. Autonomy enables entrepreneurialism, giving a greater sense of ownership and growth. Others that give great autonomy to teams and individuals, successfully, are Netflix and Amazon. Frontline autonomy works when we give good guidelines, boundaries, direction, measures and then get out of the way.
- Mastery (having the ability to grow and learn): in an organisation this means enabling staff in a learning environment where they can grow and see the results of their learning. Data driven decision making based on people analytics is important here. Accumulating many data points on employee and manager effectiveness, analysing the data and acting on it works. There is a high correlation between managers who score well on quality scores and the employee satisfaction of their team. Behaviours particularly valued by employees are Team/individual development, empowerment, being a good coach, being interested in employee welfare and communication of strategy rank highly – all things that help “Mastery”. One survey found 79% of Millennials want their superiors to act as coaches and mentors. Improving performance transparency through data, visible learning and embedded reflection help drive mastery and performance.
- Purpose (The “Why” of what we do): our brains are wired to not just understand the what and how of what we do. We also require a “why”. Purpose is central to our actions, motivates us and is why organisations need a compelling purpose that employees can relate too. Employees will engage with compelling purpose and work hard to deliver to help that purpose. One example is where highly paid, expert IT professionals around the world give hours of their time each week to deliver a piece of software, for Free! The software is Linux and the purpose: “Open Source”, working to provide great, openly available capability to millions of users.
Hiring the right people is a foundation stone for Flexibility
Great companies focus hard on hiring smart. The nature of modern work (knowledge work) means a few individuals can contribute disproportionally to output. Google work so hard on finding great people that they say, “our greatest single constraint on growth has always been our ability to find great people”. They and others find that whilst educational qualifications are a good thing to have, they do not correlate to great employees. Rather the role of soft skills matter; such as ability to learn, cognitive ability, ownership, intellectual humility and willingness to change their view in the face of new data. Cultural fit also matters, though is difficult to assess. In a customer obsessed company such as Amazon you want to hire someone really feels customer obsessed not someone who pays lip service to the words just because they are fashionable. In recruitment, this can only be ascertained through carefully structured interview.
Hire Growth Mindsets, those who embrace positive change.
Complex problems change rapidly in the Digital age. We need to hire Growth mindsets, those who embrace positive change, see the bigger picture and are optimistic that they can change the world around them. Diversity helps to in terms of tackling problems from different perspectives, interpreting differently, generate differing solutions and differing ways of extrapolating analysis.
We must engage the right Leadership skills in the Digital environment. As business models move to “network orchestration” we need to be ready to leverage relationships. Leaders need to embrace the role of collaborator and co-creator. Partners do not respond well to command and control (they are not on your payroll!) and leadership in a networked world is about inspiring, networking, nurturing and persuading. For both your staff on payroll and those of partners, to get the outcomes you need becomes much more about empowerment, empathy and cultivation. Now more than ever it is about bringing people on the journey with you, not telling them what to do.
Make the Journey
Digital Transformation dimensions
We shall conclude by looking at 5 facets of the Transformation Journey. Personal, Principles, Process, Practice and Pace.
A Transformation leader has a thankless task. Success will be passing on a successfully executed transformation to the business for other business leaders to fold into “Business as Usual” and gain the kudos. Success means doing yourself out of the job! Failure (which happens most of the time) is about being a “blow in” who came in with great ideas and then burned out. Transformation leaders do it because they have energy, enthusiasm and a passion for making things better. They can articulate vision, enthuse people to follow them, are very resilient, have a thick skin. Usually they are in a senior role and appointed by the CEO to the role. Things to do as a Transformation leader, in order to succeed are:
- Work towards a shared vision: create a movement for change that people can feel ownership and engage with, a genuine call to arms. It should feel like an insurgency; humans have a strong instinct to belong in small groups defined by clear purpose and understanding.
- Use empathy: help others see the world through customers eyes, gain alignment on the problems to solve
- Make others look good: people love to feel success. Frame projects in a way that helps others see how it will help them have success in their day job.
- Use advocacy: create a network of champions from the early advocates of the change. This will multiply the force for change, particularly as these will be people from within the business.
- Handle negativity appropriately: understanding where negativity is coming from and handling it well is tough. It can be criticism (attacks the person not the behaviour), contempt (open disrespect), defensiveness (self-protection from a perceived threat) or stonewalling (closing oneself off from interaction). These are fear-based behaviours and how a Transformation Leader handles this is very important.
A change process must set out a vision, direction and structure for change. We can set up a framework for the principles via a series of workshops in the business, the process will help people understand and align to the change. The elements we define to create the framework are (working from the top down):
- The organising idea: what drives the company at its most elemental level.
- Purpose: the reason the company exists
- Vision: long term view of the world we are building or contributing too.
- Values: what our organisation believes in.
- Experience principles and behaviours: how the values feel to our customers and the behaviours we in the business need to exhibit to bring the values to life.
- Operating Model: the change state required to fulfil the customer experience principles and related behaviours.
- Customer Benefits: tangible benefits for the end user.
“Keystone Habits” are the significant behaviours that act to create a culture in the company. Identify Keystone Habits needed in the new culture and enable the conditions for them to establish.
|Establish a sense of urgency, form a volunteer army including a senior group to guide the change, create a vision, communicate the vision continuously, empower others to act, plan/create short term wins, consolidate improvements and institutionalise the new approaches.|
Successful Digital Transformation requires us to create velocity (momentum) and focus (vision, strategy, execution) and the environment and culture that will enable it to happen. John Kotter in his revised change model listed 8 steps for change. The steps are: Establish a sense of urgency, form a volunteer army including a senior group to guide the change, create a vision, communicate the vision continuously, empower others to act, plan/create short term wins, consolidate improvements and institutionalise the new approaches. The steps happen concurrently, continuously, operate in a networked style environment and require a diverse “volunteer army” to enable the change. There are 3 things to do in the Transformation process:
- Create the Situation/Story: humans love stories. We must create a transformation story that redefines why the world has changed and why we must change. It should visualise what the end looks like once we have transformed and it should map how we will get there (approaches, technology, structure, processes, culture).
- Energise and enable communicate the change again and again through actions, behaviours and telling the story. Lead the change actively with the Board, Leadership team removing barriers. Focus resources and initiatives to catalyse change. Prioritise and reprioritise, fixing the basics and tracking change. Execute using small multifunctional teams. Capture and celebrate quick wins and make visible to the whole organisation.
- Flex and Flow: Support via a network of collaborators, build on early success by expanding the small team working (agile) into other functions, create many advocates, embed experimentation into resourcing and never stop or inertia can creep in.
Establish a sense of urgency, form a volunteer army including a senior group to guide the change, create a vision, communicate the vision continuously, empower others to act, plan/create short term wins, consolidate improvements and institutionalise the new approaches.
Changing everyday behaviour is at the core of Transformation and we must work with the science of human habit. Repeated behaviours become habits, creating this in an organisation will not be as easy as flicking a switch. To undertake a behaviour, we need a sufficient trigger/cue to start the behaviour, motivation (that works for us) and ability (to perform the behaviour). We repeat behaviours based on cues and rewards (think Pavlov’s Dog here). So, replacing a habit with a new behaviour requires a cue to trigger the start of the habit, the action we take and a reward for doing it. In an organisation we must understand the behaviour we want to change and the triggers and rewards that reinforce that behaviour. Identify when the old routines, behaviours are not working or causing disfunction and use that as an opportunity to bring in a new routine. There are “Keystone Habits”, those that are the significant behaviours that act to create a culture in the company. Identify Keystone Habits needed in the new culture and enable the conditions for them to establish. There are 3 characteristics of these types of habits:
- They create small wins. Places from which we can build momentum.
- They create platforms upon which other habits can form
- They change the sense of what is possible, give us as individuals confidence.
Human behaviour is shaped by how we think, feel and know. Understanding how all three elements work to determine behaviours can be useful in understanding why people behave as they do and how we might create the environment for them to follow a new behaviour.
- Think: Cortex region of the brain. The rational logical reasoning part. Our domain of self-awareness, sense-making, social engagement rules.
- Feel: Limbic region of the brain. Domain of senses, emotions, relationships with others. It is the personal, the subjective, the desire to bond, be part of groups.
- Know: Basal region of the brain. Domain of instinct, intuition, “gut feel”.
Systems are more powerful than goals. For example, you are more likely to fail if you set a weight goal for yourself rather than learning a systematic way to eat better. Companies love to set goals, the problem with that is that without a change in behaviours, systems and processes, they will not be achieved. Goals are good, finding way to change, recognise, reward behaviours in order to create a new system is better.
Adaptive change is about fundamental shifts in the environment that the company operates in and therefore needs different, adaptive, thinking. Adaptive leadership is required to tackle Adaptive challenges.
Elements of Transformation move at different pace. It is obvious and useful to be aware of this in a change.
- Customers: User Experience, Service and interaction touchpoints. Rapid and frequent change possible here.
- Processes: workflow, procedures, practices. Can change frequently, slower to change than customer interaction.
- Resources: Organisation structure, skills, technology, data and assets. Moderate change pace achievable here.
- Strategy: Objectives, major priorities, governance. Too rapid change here can look like indecision. Considered change pace is appropriate.
- Vision: Direction, principles should change infrequently.
- Culture: values and norms are, unsurprisingly the slowest to change
There are two types of change identified in Ron Heifetz’s Adaptive Leadership model. First, Technical change: that is focussed on simple change that does not require any change in the organisation’s system to resolve. Second, Adaptive change is about fundamental shifts in the environment that the company operates in and therefore needs different, adaptive, thinking. Adaptive leadership is required to tackle Adaptive challenges. This means discarding some of what has worked in the past and adopting some new ways. This needs to be done at a pace that is urgent but not chaotic, this is the productive zone of disequilibrium. In this zone you should see behavioural change, no drifting back to the old ways, inertia falling away, breakthrough innovation and no complacency. If you are pushing too fast you will see poor morale, falling performance, pressured behaviours, talent leaving and the effectiveness of focus and governance falling away.
Traps that will ensure drift back to old ways, killing pace:
- Calling Early wins: declaring victory too early
- Over cutting: too much, too long efficiency drives.
- Legacy trap: no movement forward on old assumptions.
- Proportionality trap: dabbling with small initiatives instead of scaling up and going for it.
- False certainty trap: sticking to the plan with no flex.
- Proximity trap: keeping new business too close to the old, thereby smothering the new.
- Persistency trap: giving up too soon, underestimating the time need to achieve real results.
Keeping pace moving by making meetings effective (no spectators, clear purpose, default to 15 minutes, ensure attendees are pre-read before discussion). Finally, pace Nirvana is achieved in a “flow” state, when everything seems easy for the team. Flow is when there is complete focus on the goals, tight feedback loops, seamless adaption to changed circumstances, rapid fluidity of resource allocation, restless experimentation and innovation, a learning culture, a stimulating work environment.
This Executive Summary has been brought to you by Neil Rainey of The Digital Transformation People. A writer of summaries, Neil’s mission is to tease the wisdom from books into a few pages.
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