Only 27 of the world’s top 100 companies in 1999 remain at the top in 2019. Since 1999 the pace of change has accelerated, fuelled by massive interconnectivity, intelligent automation and autonomous systems driven by high-performance software, powered by low cost and ultra largescale computing.
In this so-called fourth Industrial age, customers expect much more, competition is fierce and business disruption could come from anywhere.
My personal experience working with clients in Financial Services, Public Sector, Telco and Media resonates strongly with this observation and started me on a journey to understand the dynamics and potential change strategies.
My aim remains to improve how I lead teams and better navigate businesses to gain advantage from technology with the outcomes of increased resilience and adapting to thrive in our world of constant change.
I’d like to share one conclusion that I believe to be at the core of a successful pivot and technology-enabled business transformation. This centres on a mindset shift about finance and people.
Shifting mindset is easier said than done
Natural behaviour is to build on previous successes. This develops an ingrained culture of “this is the way we work here” which becomes codified in business processes, influences how people are hired and trained, defines the way success is measured and people are rewarded.
Most people don’t like change, they like to know where they stand and gain comfort in the certainty of how they add value.
Similarly, financial performance is critical for all organisations: citizens expect value for money from their taxes and shareholders expect a good return.
Consequently, the organisational antibodies are often strongest in the areas that protect and safeguard the two most precious resources in an organisation, finances and people.
These present considerable barriers to change.
Introducing Agile Enterprises
There is extensive research into the dynamics behind today’s most successful companies, the business strategies they execute and the methods, tools and processes they use. These enterprises include Microsoft, Alphabet (Google), Apple, Amazon and Facebook. They all exhibit very high degrees of agility.
Their ability to rapidly adjust their strategy to adapt in light of new customer needs, disruption and technology, is giving them resilience and capabilities to thrive. For example, the frequency of their new product feature releases is measured not in months or years like traditional companies, but in seconds.
Studies show that they all share some common cultural themes which can give us insight. They seem to have a culture that:
- embraces commercially failed products as learning points (e.g. Google glass)
- continuously look for disruptive ways to improve (e.g. Apple credit card)
- encourages frequent incremental product enhancement (e.g. Alexa skills)
Drilling in further showed me that the mindset they have towards employing finance and people resources is one of their keys to success.
Investing to thrive
The first mindset shift is about increasing the focus on the paying customer gaining value and measuring this carefully. For example, the rate of sales growth, number of 5-star reviews, customer repeat buys, or referrals.
This is a shift from a project way of thinking to a “value stream” view, the term given to the processes within an organisation that result in something a customer is prepared to pay for.
Financial budgeting is traditionally managed in terms of project budgets which are assigned following governance of business cases and are managed as costs to a business. Shifting to a value stream approach is a mindset shift to consider the investment needed to increase value to the customer.
This has quite a profound effect. No longer are departments competing for scarce budget allocations with time and effort spent in the construction and review of complex and speculative business cases, but the conversation turns to a debate about which ideas are the strongest to drive improvement in value stream measures.
This takes a different set of disciplines, a clear unifying business vision and a relentless focus on customer value. Where hard evidence is short, investment in trials and proof of concepts is the way forward to ensure decisions are based on real-world experience, not hunches or guesstimates.
Organising to thrive
Traditionally, companies are organised in functional departments, passing work from one to another until the product is shipped to the customer. This drives vertical optimisation, with each department being measured on its part of the overall process.
But a customer only cares that a product is cost-effective, performs its function efficiently, looks good and doesn’t break, not how well marketing is doing vs engineering.
Building on the concept of increasing the flow of value to a customer has an interesting consequence for how organisations are structured. A good example of this is at Amazon where Jeff Bezos (Amazon’s CEO) coined the phrase “two-pizza teams” as the optimum team size. This is about 8-10 people, about what two family-sized pizzas can feed.
The key to speeding up flow rate turns out to be about minimising queues, a principle called Little’s Law. Think of a coffee shop with more baristas and coffee machines so the queues can be much shorter.
By creating small teams comprising staff across departments significantly reduces the queuing time for work as handoffs are eliminated. This also encourages high efficiency as these teams’ gel and find very high-performance ways of working together. The trick is then to create packages of work associated with value streams for these teams to own and deliver.
Creating lots of small cross-functional teams requires new ways of working, organisation design and governance approaches. This has led to the thriving cultural traits of agile enterprises and unleashed growing levels of productivity, flexibility, innovation, scalability and value-prioritisation of product features.
The journey to achieve these two mindset shifts is more difficult for some organisations than others. My experience has shown that implementing these two mindset shifts requires vision, determination and strong leadership. Until the mindset shift is firmly made – implementation struggles.
This is not just a change for the IT department but across the whole company and this starts with senior business executives, business leaders, operations, finance and HR.
This topic of “Agile transformation” is fast-evolving and I would be interested to hear about your experiences, lessons and successes. We live in a world of increasing change. Ensuring benefit from investment and people through agility is one success factor to build the capability to thrive.
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