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It is a practical how-to guide on implementing Digital Transformation and presents a checklist of methods that can be used to achieve organisational agility.
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.
“The reason many digital transformation programs fail has little to do with ambition and technology. It is mainly about execution. Digital transformation, at scale, respects none of the traditional organizational boundaries that we have created. In Orchestrating Transformation, the authors dig deep into the “How” of digital transformation and provide hard-won lessons from many companies’ successes and failures. As we face perpetual cycles of increasingly complex digital change, this book is timely for both practitioners and business leaders who want to turn the odds of transformation in their favor.”
~ Didier Bonnet, co-author, Leading Digital: Turning Technology into Business Transformation and SVP and global practice lead
Inside This Summary
Summary of the Summary
- Setting the context
- The Transformation dilemma
- Setting Guiding Objectives
- Establishing Strategy
- The Transformation Orchestra
- Orchestration competencies
- Organising for Orchestration
- Orchestration in action
20 Point Summary of the Summary
- 1 We are in Wave 2 of Digital Transformation. Wave 1 digitised products/services e.g. Newspapers. Wave 2 is digitising business models and value chains.
- 2 Digital Transformation: “Organisational change using Digital technologies and business models to improve performance”. Improve performance with a Digital foundation.
- 3 Failure is the norm: most companies do not fully understand the problem they face. 5% of “Digital Transformations” meet or exceed expectations!
- 4 Complex entanglement grows as interdependence, scale and dynamism increases this ensures transformation often slips into a frustrating game of Whack a mole, driving failure. Our approach needs to move beyond “Change management” to the “Orchestration zone”. Here, Companies can drive change across multiple fronts by taking a highly connected approach. “Change management” does not work for Transformation as the environment and organisation are too complex and fast-moving for that. Orchestration; “to mobilise and enable in order to achieve the desired effect” is needed to make it work.
View of the book:
“Digital Transformations” fail 95% of the time. Reading this book can lift your success rate!
- 5 To Orchestrate Digital Transformation successfully:
- Really believe that a major Transformation is needed – at Board and top management team level.
- Hire a CTO, ensure there is clear accountability for the CTO and build a Transformation office. Set up an internal venture fund.
- Establish a working group to build the companies Guiding Objectives. CEO and Senior team should set the Transformation Ambition based on the Guiding Objectives and they and the Board must be totally supportive of it.
- Develop the tools to deliver the Transformation: Business Architecture maps, Transformation networks, Transformation leads from the business and develop Agility within the organisation.
The complex entanglement of problems today requires an “Orchestrated” response. “Change Management” will not lead to success.
- 6 We hire Chief Digital Officers (CDO): Average tenure is 2 years! The role is often created by top management in response to a gap in Digital capability that led to lost business. Most are set up to fail as they focus on the “Digital” in transformation rather than the Business. The CDO has 1 of 3 approaches: Customer Experience Maven: focusses mainly in Marketing, customer engagement viewing Digital as a new way to interact with customers, enhance the brand. A focus will be to add Digital capabilities to existing products. Ex-CIO: focussing mainly on the IT perspective. This is often very superficial and is a rebadge of the CIO to CDO. The Agitator: challenging perceived wisdoms and entrenched ways of doing things. Focusses on major change to company strategy and how the company can make money in new ways.
- 7 Hire a Chief Transformation Officer (CTO) instead: CDO can be a logical position to lead a transformation but there is a better title: CTO. Give the CTO accountability for a Transformation charter, responsibility for how the Transformation is executed, for mobilising resources and enabling their connections. The CTO should report to the CEO.
- 8 CTO will lead a lean companywide Transformation office. The office must not be a bloated overlay for company projects. An effective CTO is humble, adaptable, visionary and engaged (HAVE). Able to work with teams without owning them, able to learn and change course without worrying about losing face, able to see the broader end game and able to communicate the Transformation’s financial and business rationale to a broad range of stakeholders.
- 9 Set Guiding Objectives: covering 3 areas: – customer value creation, business model and strategy. Set objectives at line of business level in order to be manageable. Customer Value Creation defines what is in it for the customer, Business Models put customer value creation into motion and strategy defines our implementation approach for the Transformation.
- 10 Set the Company’s transformation ambition: this aggregates all the Guiding objectives of companies’ lines of business. It is a simple statement that unifies the aims of the business. Good Transformation ambitions have 5 features: they are Precise, Realistic, Inclusive, Succinct, Measurable (PRISM).
- 11 Communicate the Transformation Ambition: Everyone will agree that change is needed, HOW it is to be achieved can descend into endless debate and influential forces are often arrayed against a Digital Transformation. So relentless communication of the Transformation Ambition is a must. Be clear about what the Transformation will achieve and who does what. The leadership team and Board must stand behind the Transformation Ambition in both words and deeds.
|Imagine your company as an Orchestra. As conductor there are sections that need to play to the score, in harmony.|
- 12 The Orchestra metaphor: imagine a Company as an Orchestra composed of instruments organised into sections. A conductor directs the musicians to bring out their best and make the whole as the sum of the parts. The Guiding objectives are the score for each section of the orchestra. Bring the composition to life (execute) through Orchestration. The movements of the symphony are the phases of execution. The transformation ambition is the whole symphony. There are 8 organisational elements of an orchestra (strings, horns etc). The 8 sections of the Organisational Orchestra are:
- Offerings: products/services being sold
- Channels: how products/services reach customers
- Customer Engagement
- Partner Engagement
- Workforce Engagement: employee & contract staff
- Organisation Structure: teams, P&L, business units
- Incentive structure: workforce compensation
- Culture: values, attitudes, beliefs, habits
- 13 Resources for each instrument: Data, People and Infrastructure resources, spread all over the organisation make up each instrument. Data is the information needed to make the change. People are the individuals and teams required to execute the change and Infrastructure is all the tangible things needed to execute a change – offices, IT, vehicles, mobile assets, equipment.
- 14 The Transformation ambition gives context and direction for the Guiding Objectives. Guiding Objectives determine the Instruments. The Instruments activate the organisational resources. The connectedness of our labyrinthine Companies means we must play well together. Silo-based transformation will not work. Significant transformation means we must have connectedness.
To have a chance to orchestrate transformation successfully invest in 9 capabilities
- 15 Companies need 9 orchestration competencies to have a chance of transforming successfully:
- Customer Journey mapping: the customer journey from the beginning to end of a transaction across your companies’ multiple channels.
- Business model design: having a keen expectation of customer expectations and what they will pay for.
- Business Architecture (a drone level view of the company), map the companies’ nodes and networks.
- Capability assessment: knowing if we have the right people with the right skills to execute our strategies and the data and infrastructure we need.
- Communication: develop a compelling narrative to explain why the company must transform.
- Incubation and Scaling platforms: e.g. providing Data Orchestration via a central Data mart for the Company using Hadoop cluster.
- Internal Venture funding: to fund initiatives that generate the best cross functional outcomes.
- Agile ways of working: Agile plays a core role in how Transformation efforts run. Digital Transformation is about becoming more agile in the way we think.
- Digital Business Agility: being hyper aware of changes in the environment, workforce and customer base, having relevant information, informed decision-making and the ability to execute decisions in a timely way.
- 16 Avoid the “Co-ordinati”; The urgency to change creates a lot of overhead roles to manage change. This gives rise to the “Co-ordinati” whose teams grow fast and create many project/program management roles. Co-ordinati (Glue people) slow down transformation as they introduce levels of debate (“socialisation”), introduce new tools and overhead.
- 17 Create Transformation networks: these allow resources from across the business to work congruently on a shared goal. A Transformation network allows management to work together with reciprocal interdependence. An orchestrator puts the resources together and mobilises them and enables them to do this optimally. Executing change via Transformation networks clearly limits the scope and boundaries of a change. A Transformation network is geared towards a specific Transformation challenge and has a very specific job to do. The network aims to close the capability gap created by the challenge. A Transformation network is made up of nodes and connections. People, data and infrastructures are the nodes and their relationships are the connections and activities that take place between nodes.
Use Transformation networks instead of building a mega bloated central office. The central office should stay lean.
- 18 Orchestration should be built alongside the rest of the Company. A Transformation Office can be a thread interwoven into the Organisational fabric of the business. Appointing dotted-line Business unit leads who are interfaces to the Transformation office is vital.
- 19 The entangled state of our Companies and the challenge the Orchestration Zone represents ensure we hit the limits of our human ability to comprehend what needs to be done. So, we use “Bounded Rationality” to make decisions. Orchestration moves past the Bounded Rationality limitation and tackles the issue of connectedness.
- 20 Digital Technology will help us move beyond Bounded Rationality using Artificial Intelligence, enhanced Data capabilities, 5G and IOT. And last…see final page for the Orchestrators cheat sheet!
- Setting the Context
The Second wave
We are in a second wave of Digital Transformation. The first wave was about Digitising products and services (Newspapers, media et al). The second wave is digitising business models, value chains. The impact of this Digital transformation second wave is that Business to Business (B2B) companies are being impacted for the first time. 75% of executives in the US now believe Digital is significantly disruptive to their industry. There is still a large gap though between realising the business needs to transform and achieving Digital Transformation.
The Digital Vortex – a visualisation model
A vortex draws all inside it to the core. This is how the Digital Vortex works. Things smash and break apart inside the vortex as they are pulled toward the middle of the Vortex where Digital is most intense. Business models and processes and offerings merge and transform at the centre of the Vortex.
Digital “Best Practice” companies’ Halo is fading
Uber is not seen as invulnerable and is under attack from many quarters. Facebook has endured a hellish 2 years with a movement called “Delete Facebook” gaining traction. Wework has seen its CEO ousted and future is cloudy. AirBNB is not seen as an unstoppable force in the accommodation business. We can now pick the best ideas from these companies without feeling it is politically correct to imitate.
Most companies are not successful in Digital Transformation
“Orchestrating Transformation” is less about what the best companies are doing right, it is more about what most companies get consistently wrong in Transformation and how to fix it. Many companies see Transformation as a momentary one-time change rather than an essential and required task of leadership.
|Digital Transformation is Organisational change using Digital technologies and Business models to improve performance|
Digital Transformation defined
Organisational change using Digital technologies and business models in to improve performance. There are several markers that are common to Digital Transformations:
- The objective is to improve performance
- The Transformation is based on a Digital foundation
- One or more Digital Technologies are the core of the transformation
- Digital Transformation requires organisational change; involving people and processes and Business models
Becoming the Chief Digital Officer (CDO)
This can be the career challenge you may wish you never took on. Everyone has high expectation of “Digital Transformation” and the role is often created by top management in response to a gap in Digital capability that led to lost business. Responsibilities may be unclear and clear objectives; budget and a team are unlikely to be in place. It is up to you to make that happen. 65% of large Companies now have a “CDO”. Most are set up to fail as they focus on the “Digital” in transformation rather than the Business. It is the Business that must transform, utilising Digital.
- The Transformation Dilemma
5% of “Digital Transformations” meet or exceed expectations!
In fact, so few succeed that the term has become a red rag in many Board rooms and Senior Leadership teams. Failure happens because many companies do not fully understand the problem they face. The features of the Transformation problem that companies face are:
- Scale – companies have so many things must be managed, processes, people, products…where to start? The scale of most entities builds a transformation challenge. For example, take an inventory of how many “Digital” initiatives your company is undertaking right now. Are the various parts of the company aware of the initiatives that other parts are undertaking?
- Interdependence – ripple impacts are not easy to predict. There are many interdependences between processes within Companies. An initiative may be individually an awesome idea but are all the parts of the Company who need to know aware of the initiative? Interdependence takes several forms.
- Sequential interdependence is where the output of one group is the input for the next.
- Pooled interdependence where several people are undertaking similar tasks in parallel – e.g. teams of salespeople.
- Reciprocal interdependence is where there is two-way interdependence. I.e. IT and Finance departments have two-way interdependence on each other.
|Grey Wolves change the course of rivers. Natural systems are entangled.|
Grey Wolves change the course of rivers – Interdependence (complex entanglement) makes Transformation challenging. Change in one part of a system impacts other parts unpredictably. Re-introduction of Wolves in Yellowstone National Park (they were hunted out by 1926) meant that Elks now had a predator again (the wolves) where none existed for years. Elks eat grass and with less Elks (due to the wolves) more grass grew. More grass meant stronger riverbanks allowing the course of rivers to change. In business, complex entanglement grows as interdependence, scale and dynamism increases.
Dynamism – nothing stands still, and change must be constant. Today’s environment is anything but static. Dynamic systems are adaptive to the individuals within the system and the nature of the system overall. Small external stimuli can make large impact on a dynamic system – think of a single accidents impact on a cities rush hour traffic system. Conversely a major external stimulus may have a small impact – think of a major interest rate cut by a Central Bank sometimes not having much impact on an economy. Change is a constant and unpredictable.
What type of change are you undertaking?
There are four types of change and each requires a different level of change effort.
- Change – functionally autonomous clear change that has clear group boundaries. E.g. an Advertising department changing. Disrupters rarely focus on bringing just one value type to customers and where disrupters blend the 3 types of value to create Combinatorial disruption. their advertising mix (from print to TV for example). Run of the mill.
- Blanket adjustment – a highly entangled, incremental change. A company makes a tweak or change that goes across many groups across the whole Company. It is a minor change, internally significant, that does not require a major reposition of the company in its market.
- “Smart X” change– functionally autonomous major change – the change impacts an area of the company and is major but not a cross company change. I.e. introducing a Smart Supply chain.
- Digital Business Transformation – this is very entangled, major change. It involves high levels of scale, interdependence and dynamism with the need to make fundamental change to the Company. It will involve changes in the Business model. The need for Orchestration is vital in change of this nature due to risk of failure and synchronisation. Traditional Change management fails here as it takes a linear approach to the change where this is a multidimensional problem and is the subject of this book.
|In the “Orchestration Zone” we can drive change across multiple fronts by taking a highly connected approach.|
Transformation moves beyond traditional Change Management
Change management works for simpler changes. For problems featuring complex entanglement companies need to move beyond traditional change management to the “Orchestration zone”. Here, Companies can drive change across multiple fronts by taking a highly connected approach. An example is Lego. They orchestrated open innovation by launching “Lego Mindstorms” in 1998. Lego facilitated ultra-keen users to help build and innovate new products for the company. They provide fairs, sites and groups to allow users to work together on ideas thereby orchestrating 3rd parties for the purpose of product innovation.
- Setting Guiding Objectives
No-one has the picture on the box
Many Digital Transformation efforts are like a million-piece jigsaw where no-one has the picture on the box showing the finished article. So, no-one in the Company really knows the problem that we are attempting to solve. Most leap to solving the “problem” without deeply understanding the opportunities and threats being faced. Execution without strategy is the noise before defeat.
Customer Value can be created by providing a cost that works for the customer or an experience or a platform.
Set some Guiding Objectives
What is needed to start with are a set of Guiding Objectives; clearly articulated aims that serve as a point of departure for effective execution for the Transformation. Guiding Objectives cover three areas: – customer value creation, business model and strategy. They should be set at line of business level in order to be manageable.
- Customer Value Creation – the leadership team must be able to crisply define what is in it for the customer. What value will the transformation deliver for the customer that they do not get today? What is the new and better form of value for the customer? There are 3 key value types:
- Cost value – where a disrupter will provide a cost value. Usually, the first value that disrupters attack. Think Skype on reducing phone call prices to zero.
- Experience value – enhancing the customer experience. An example is Uber. The service is not just cheaper but easier to hail and gives the consumer more control. Also, it is seen as safer due to the consumer having a profile of the driver before getting in the cab. Convenience and quality can be gained from improved Experience value. There was also an advantage of scale – i.e. Uber in the US is the same as Uber in the U.K.
- Platform value – this is where a platform offers benefits to consumers that can be extended to other products. Going back to Uber, the advantages of the ride platform could be extended to other products such as Uber Eats. Platforms create network effects – more users lead to more value for users. Facebook is a good example of this, with Billions of users it offers real network value and is a true social network.
- Business Models – put customer value creation into motion. Disrupters use 15 forms of business model to deliver Cost, Experience and Platform Value. To deliver cost they have business models based on free or low cost, buyer aggregation, price transparency, reverse auctions and consumption (“as a service”) based pricing. To deliver Experience value they use Customer empowerment, customisation, instant gratification, reduced friction and automation. To deliver Platform value they use ecosystems, crowd sourcing, communities and data orchestration. Business model change presents threats – Value vampires will attract with cost value, disrupters focussing on experience will make it attractive enough to switch and platform value disrupters will create stickiness for their customers. Disruptive competitors are interested in value not value chains. In Banking Fintech start-ups are focussing on niches. There are also opportunities – Value vacancies arise because of Digitisation. Companies can exploit value vacancies swiftly to improve revenues.
- Strategy – there are four strategies that can be chosen in Digital Transformation (Harvest, Retreat, Disrupt and Occupy). Harvest and Retreat fit easier into traditional change management techniques as they use the processes and business models the Company uses already to achieve the strategy. Disrupt and Occupy need new approaches:
- Customer Value Creation – the leadership team must be able to crisply define what is in it for the customer. What value will the transformation deliver for the customer that they do not get today? What is the new and better form of value for the customer? There are 3 key value types:
- Harvest – defensive strategy to fend off value vampires. Maximising returns from an at risk or declining business. First up aim at blocking to slow the disruption. Includes legal action, marketing action or financial action such as price cutting. Optimising margin during decline. It is a natural progression for a business facing commodisation of product(s). Harvest is about maintaining customer experience and product in the face of competition.
- Retreat – defensive strategy to fend off value vampires. These differ from Harvest as the market opportunity has been exhausted and only niches remain. There are 2 main components –
- Withdrawal into a niche – into a market set that is a small subset of customers with specialised needs. Withdrawing into a niche and serving it very well will deter value vampires who find a niche too small and hard to attack.
- Market exit – done too early and money is left on the table, too late and money will be lost.
- Disrupt – offensive strategy to pursue new opportunities. Disrupt focusses on creating cost value, experience value and platform value for customers using Digital technologies and Business models in a new way. This requires careful investment and innovation and looking at the business in a new way. Companies struggle with this as it is different from how they make a living today. Their existing business model does not fit this strategy.
- Occupy – an offensive strategy to pursue new opportunities. Occupy is about winning in a disrupted space and focusses on sustaining on the competitive gains through a disruption strategy. Incumbents are in new terrain here and it is challenging for them. An Occupy strategy requires combinatorial disruption (cost, experience and platform). This is not something existing management are used to in an incumbent and so will prove challenging.
- Establishing Strategy
Which Strategy when?
|We must choose a strategy or group of strategies to tackle each Transformation challenge.|
To determine the Strategy appropriate to you, try using the 20 questions tool, shown below. Note that it is rare that one strategy type, offensive or defensive, is used. Rather a portfolio approach is often used using a mix of strategy types. Blending strategy types can help transition between businesses. Retreat strategies are used least frequencies because leaders do not want to show weakness. Disrupt strategies are not often used as it is not something the leadership is used to or has done in the past. Hence a portfolio approach is more often used. For many companies Disrupt strategies become experiments “moon shots” that the rest of the business do not believe in or covertly undermining. Big traditional companies usually focus on Harvest (cost optimisation, streamlining, specialisation) and Occupy is offensive allowing the company to be a fast follower.
|Harvest||Is the business coming under abnormal market pressure from disrupters?|
|Harvest||Does a Value Vampire exist in this market?|
|Harvest||Can market position and profits be retained by increasing efficiencies/reducing cost?|
|Harvest||Can disrupters be blocked – e.g. via lawsuits, marketing counter claims?|
|Harvest||Do you believe this market will remain profitable for the company even if revenues decline for at least 2 years?|
|Retreat||Has this business past an inflection point at which returns are no longer attractive?|
|Retreat||Is it possible to maintain this market as a smaller, more profitable niche serving specialised customers that disrupters are not interested in for at least 2 years?|
|Retreat||Are there synergies in other parts of the business that would make it attractive to keep it going?|
|Retreat||Does this business have assets, intellectual property, processes or talent that could be deployed elsewhere, more profitably?|
|Retreat||Could you exit this business without incurring major cost or could you sell the business?|
|Disrupt||Is there an opportunity to use Digital technologies or business models to dramatically increase value in this business?|
|Disrupt||Is there a way to re-invent value by bypassing the traditional value chain?|
|Disrupt||Have you identified a new value vacancy, a market opportunity that can be profitably exploited via Digital disruption?|
|Disrupt||Are margins fat in this industry?|
|Disrupt||Can a new market be formed, or an adjacent market entered in a way that allows you to leverage existing offers or capabilities?|
|Occupy||Has a competitor already disrupted a market that is appealing to you?|
|Occupy||Is there a robust value vacancy that you could target?|
|Occupy||Is there a path to establish a durable position of market leadership?|
|Occupy||If you were the original disrupter, do you need to change the offering or how you operate to reflect increased competition?|
|Occupy||Has there been a “next” disruption that disrupts the value vacancy in this market?|
|We can take defensive (Harvest or Retreat) or offensive strategies (Disrupt or Occupy) to transformation.|
Strategy and Customer Value creation
By selecting a strategy, you implicitly choose your road to Customer Value creation. A Defence strategy (Harvest or Retreat) will lead you to create Customer Value through Cost Value or Experience Value – leveraging your experience in a market to beat disrupters. If you choose an Offence strategy, then Experience and Platform value are more likely to be the basis that you will create customer value – a new market is not usually about cost in its early days.
Customer Value creation depends on an understanding of value chains, business models and the competitive landscape. A periodic, dispassionate deep dive into these features of your market and their impact on what is important to Value creation is vital to setting strategy effectively. One company who does this well and regularly is Intuit (the finance software company). Since 2010 they have refocussed markets they serve, customer platform experience (from desktop to mobile app), product features (e.g. more Artificial Intelligence, security, data mining capability) repeatedly through repeated strategy refresh exercises. As a result, they perform well above their peers and saw a 600% share price increase from 2010 to 2016 (vs 250% increase for the NASDAQ as a whole).
|The Transformation Ambition is required. It must be Precise, Realistic, Inclusive, Succinct, Measurable.|
The Company’s transformation ambition
This aggregates all the Guiding objectives of companies’ lines of business. It is a simple statement that unifies the aims of the business. This is vital as Transformation is a company-wide phenomenon driven at line of business level requiring aligned execution. Good Transformation ambitions have 5 features that form the acronym PRISM: – Precise, Realistic, Inclusive, Succinct, Measurable. Precise means unambiguous, not open to interpretation. Realistic means the ambition must be something that all can see the company credibly pulling off. Inclusive means it is relevant to everyone in the company. It must be something the average employee can remember i.e. Succinct. Finally, it needs to be visibly Measurable so that everyone can see progress. Metrics need to be consistent and timebound. PRISM helps steer execution.
Communicating the Transformation Ambition is vital
Influential forces are often arrayed against a Digital Transformation. Although everyone will agree that change is needed, HOW it is to be achieved can descend to an endless debate. A clear, unambiguous and regularly communicated Transformation ambition is vital here. Clarity of who does what and what the Transformation will achieve is vital. The senior leadership team and Board need to stand united behind the Transformation Ambition consistently in both words and deeds. Data is needed to measure alignment and real progress.
- The Transformation Orchestra
Simple change management does not make transformation happen, the environment and organisation are too complex and fast moving for that, particularly in the current context which has been described earlier. It is orchestration that makes it happen. A definition of Orchestration is “to mobilise and enable in order to achieve a desired effect”.
The Orchestra metaphor
A metaphor of a symphony Orchestra helps explain Organisational change. Imagine a Company as an Orchestra composed of instruments organised into sections. A conductor directs the musicians to bring out their best and make the whole as the sum of the parts. The Guiding objectives are the score for each section of the orchestra. Bring the composition to life (execute) through Orchestration. The movements of the symphony are the phases of execution. The transformation ambition is the whole symphony.
There are 8 organisational elements of an orchestra (strings, horns etc) and they are useful metaphor for 8 organisational resources aligning to an objective (i.e. bringing products to market).
The Organisational Orchestra is made up of Go to Market, Engagement and Organisation Structure.
The 8 sections of the Organisational Orchestra
Think of each section as a section of the orchestra, i.e. Woodwind and each sub section as an instrument, i.e. flute.
- Go to market section our offerings and channels:
- Offerings: the products/services being sold
- Channels: how the products/services reach customers
- Engagement section how we engage
- Customer Engagement
- Partner Engagement
- Workforce Engagement: employees/contract staff
- Organisation structure is how we work:
- Organisation Structure: teams, P&L, business units
- Incentive structure: how workforce is compensated
- Culture: values, attitudes, beliefs, habits
Focus on all the instruments of the Orchestra
We know that Silos inhibit transformation in our business.
- To what degree do organisational silos inhibit your Companies’ ability to execute a transformation? If yes, then you are not alone, 88% of respondents to this question believe that silos have some inhibiting impact on successful transformation in their Company.
Transformation in the Orchestration zone (non-simplex change) cannot be done in a single area. The connectedness of our labyrinthine Companies means silo-based transformation will not work. Focussing on one instrument will not produce a great symphony. Focussing on one of the 8 instruments of the organisational orchestra will not produce a great transformation.
The instruments of the Organisational orchestra will involve several resource areas of the business. For example, Workforce engagement will require the involvement of HR resources and other resource areas of the business. Go to Market involves sales resources, marketing resource and others. We must break free from the Organisational structure view and think about each instrument as being composed of Data, People and Infrastructure resources. They are spread all over the organisation.
- Data – information needed to make the change
- People – individuals and teams required to execute the change
- Infrastructure – all the tangible things needed to execute a change – offices, IT, vehicles, mobile assets, equipment
The Transformation ambition gives context and direction for the Guiding Objectives. Guiding Objectives determine the Instruments. The Instruments activate the organisational resources.
Playing in harmony
We know that resources must play well together, and we know that we don’t play well together.
- To what extent is connectedness of resources in your Company a challenge? 89% of respondents to this question believe that a lack of connectedness is a challenge in their Company.
- To accomplish a significant transformation in your business, how important is it to have connectedness of resources in your Company? 97% of respondents to this question believe that a connectedness is very important.
There is an array of factors that contribute to failure of resources to play well together. An ineffective factor in one area will create negative ripple impacts across a whole effort. One instrument playing badly means playing in harmony does not happen.
We need to address the right instruments
We need to focus on the instruments that are appropriate to the challenge we are trying to address. If we wanted to enhance talent management in our Company, we may focus on Workforce Engagement, Organisation Structure, Incentive structure and Culture. This will require Data, People and Infrastructure resources from areas that can execute/impact the transformation to Talent management. Instruments help you move beyond Organisational Structure and to focus on resources. This turns your thoughts to Orchestrating instruments that leads to networks of resources.
Orchestration is a networked model of orchestration
Thinking in terms of a networked model of orchestration is the core conceptual frame to deliver on transformation. It is a connected approach to change. A transformation network should be small and empowered. If you pull resource from more than 4 instruments your transformation approach will become too complex and fail.
Transformation networks create synergy
They allow resources from across the business to work congruently on a shared goal. A Transformation network allows management to work together with reciprocal interdependence. An orchestrator puts the resources together and mobilises them and enables them to do this optimally.
Transformation networks are great for defining scope
Executing change via Transformation networks clearly delimits the scope and boundaries of a change. A Transformation network is geared towards a specific Transformation challenge and has a very specific job to do. The network aims to close the capability gap created by the challenge.
Defining a Transformation network
|A Transformation Network is made up of nodes (people, data, infrastructure) and connections between the nodes.|
A network, by definition, is made up of nodes and connections. People, data and infrastructures are the nodes and their relationships are the connections and activities that take place between nodes. The connections between nodes must be good for the network to work synergistically and well. Weak connections are very important as they transmit new data between nodes. A wide, weakly connected network can be very useful to Transformation as more nodes can be accessed. In fact, the best network for effective Transformation is a blend of broad, weak ties and a small number of small, strong connections. Strong ties create trust which is vital for change. Information flowing between connected resources counteracts entanglement.
- Orchestration Competencies
Invest in the competencies for Orchestration in order to increase your chance of success in Transformation.
Moving from Organic to Orchestrated
In your Company today there will be digital skunk works going on. Whilst shadow digital efforts this may be individually brilliant; these efforts cannot be leveraged for overall transformation. Companies need 8 orchestration competencies to have a chance of transforming successfully:
- Customer Journey mapping: Customer Value creation is at the core of our Guiding objectives and Transformation ambition. We need to know what the customer values. How do I connect with the consumer better? How do I take out friction points? How do I provide value that the customer does not even perceive yet? Map the customer journey from the beginning to end of a transaction across your companies’ multiple channels.
- Business model design: having a keen expectation of customer expectations and what they will pay for. How are competitors providing cost, experience and platform value to customers? You need value modelling skills, being able to build use cases. A small team of financial analysts can size the value vacancy prize for you. Calculating the Total addressable market and the NPV of what piece your company can gain in that market through Transformation efforts. The Transformation ambition should have an element of measurement in it (the “M” of PRISM). Soft goals do not usually work. Before and After measures are useful here. I.e. Before we made the change, it cost us “X” to do this transaction, now it costs us “Y”.
- Business Architecture (a drone level view of the company): Mapping the companies’ nodes and networks. Who is who? Where does data exist? Where to resources including Capital assets sit? We need to catalogue the location of resources before we can leverage them for the Transformation. Create cluster maps of which resources that matter sit where. It is also a good idea to inventory every single digital initiative underway in the business currently. Documenting the current state of play as to where investment is being channelled and how it can be stopped or used.
- Capability assessment: begin by asking: Do we have the right people to execute on our strategies? Do they have the right skills to do the job? Where are the gaps and how do we close them? Do we have the data we need to execute our strategies? Are we capturing, analysing and using the data properly? Do we have the right infrastructure to execute our strategies? What assets are we missing?
- Communication and Training: we need to develop and scale a compelling narrative to explain why the company must transform. It will include and description of market dynamics, an examination competitor’s dynamic, a picture of customer changing wants and needs. The communication must be set at the Executive level and the Transformation ambition needs to be core to communication. The narrative must clearly explain the Operational changes including what is in it for the employee. Specialised communication people are needed for this who fully can drive effective stakeholder engagement.
- Incubation and Scaling platforms: these are particularly useful for creating synergies. It is easy to create a capability, it is harder to scale the capability and push it out to the company, effectively. Platforms play a role here in enabling orchestration. It could be a suite of capabilities or components or processes that can be used across the Company. Internal platforms promote cross-pollination across the silos. An example of a platform is by providing Data Orchestration via a central Data mart for the Company using Hadoop cluster.
- Internal Venture funding: Budget for success: budgets are team specific, highly linear, set in stone and they become excuse makers to starve a Transformation effort of its lifeblood (finance). Setting up an internal Venture capital function with a budget will solve this problem (at Cisco it is $100m US per annum). Initiatives can then be given to initiatives that generate the best cross functional outcomes for the company. An example of a cross-functional project might be the development of a streamlined “quote to cash” buying process.
- Agile ways of working: Agile plays a core role in how Transformation efforts run. Digital Transformation is about becoming more agile in the way we think – a test, deploy, retest, deploy development thought frame. In addition, it involves using the methodology known as Agile. The Agile referred to here is the process arising from the “Agile Manifesto” in widespread use today. This includes the Agile structures (Tribes, Guilds, Chapters et al) as well as Agile processes (Sprints, scrums et al). Agile allows companies to move from periodic, waterfall, megaproject releases to a continual small release methodology. Dynamic “Agile” teams make it easy to innovate as the Organisation chart does not require continual update.
Digital Business Agility means being Hyperaware, making informed decisions and being able to execute fast.
Digital Business Agility: is the capacity a company must be able to change. It is made up of three elements: Hyperawareness: sensing changes in the companies’ environment, workforce and customer base. Having relevant information, wherever it exists in the value chain. Informed decision-making: using the information captured to make the best possible decisions. It requires inclusive decision making, good collective knowledge and expertise and seeking out information to make informed decision making. Fast Execution: executing decisions in a timely way. It involves allocating the right resources to where they are needed. Process needs to be dynamic.
- Organising for Orchestration
Who is in charge around here?
It is not often that large incumbent companies have an organisation structure that enables them to orchestrate this level of change. There are pros and cons of each structure. Centralised structures are elitist and remote. Decentralised can slow down execution through doing the same things twice or co-ordination costs going up. Is Digital someone’s job or everyone’s job? 56% of Companies think Digital Transformation is the job of a group or individual (usually IT or CDO), 44% think Digital is every manager’s job. 84% of Companies have set up a special group to implement Digital Transformation. It is seen as something that must be driven in a targeted way. The way Digital Transformation is managed varies:
- Functional (22%), geographic (14%) or business level team (20%)
- Centralised approach (31%)
- Cross-Functional effort with a Transformation leader (10%)
- Distributed approach; self-generating teams work on their own challenges (4%)
- Trial and error as companies use different approaches
The Co-Ordinati are expensive, too numerous and will bog down your Transformation. Avoid them!
Beware the Co-ordinati!
The urgency to change creates a lot of overhead roles to manage change – the “Co-ordinati”. The teams grow fast and create many project/program management roles. Co-ordinati (Glue people) slow down a transformation as they introduce levels of debate (“socialisation”), introduce new tools. They tend to bureaucratise by increasing the density of discussion and decision making. They make point to point bilateral connections (e.g. between two Business units) rather than multilateral organisational interlock. In the Orchestration Zone, Co-ordinati gum up the works caused by a lack of clarity about who is responsible for Transformation.
Do you need a Chief Digital Officer (CDO)?
Some companies feel passionately about the CDO role. Digital natives such as Google believe that this is unnecessary. The role is varied and varies a lot across Companies. Should you hire a CDO? What would they do? This relates closely to how you organise for Transformation. There are 3 main types of CDO:
- The Customer Experience Maven: focusses mainly in Marketing, customer engagement. Views Digital as a new way to interact with customers, enhance the brand. A focus will be to add Digital capabilities to existing products.
- The ex-CIO: focusses mainly on the IT perspective. This is often very superficial and is simply rebadging the CIO to CDO.
- The Agitator: to challenge perceived wisdoms and entrenched ways of doing things. Focusses on major change to company strategy and how the company can make money in new ways.
The average tenure of a CDO is about 2 years, steeped in controversy and likely to be swallowed by evolving CIO or COO roles. So rather than ask should we hire a CDO, the better question is to ask how we empower the business with Digital capabilities.
The new Chief Transformation Officer (CTO)
CDO can be a logical position to lead a transformation but there may be a better title: CTO. The CTO should be:
- Given accountability for a Transformation charter
- Be responsible for how the Transformation is executed
- Responsible for mobilising resources and enabling their connections
- Act as the companies’ synergy creator
- Report to the CEO in most cases. Report to CIO and COO are other alternatives
- Be senior enough to command respect companywide
The CTO should lead the companywide Transformation office of 50-200 people depending on company size. The CTO office must stay lean and not become a bloated overlay of company projects. The CTO will be expected to deliver a very specific companywide initiative and connectedness of the Company in general.
Weave the Transformation Office into the fabric of your Organisation. Do not allow it to become an overlay.
How to optimise Centralisation AND Diffusion
Orchestration should be built alongside the rest of the Company. A Transformation Office can be a thread interwoven into the Organisational fabric of the business. Appointing dotted-line Business unit leads who are interfaces to the Transformation office is vital. They are not Co-ordinati but rather evangelists for the Transformation and help by providing resources from the line of business to the Transformation effort. The Transformation leads need to be senior enough and talented leaders in the Company. We can make the Orchestration Zone work by having a Transformation Office (centralisation – using broad weak ties) and Transformation leads within the business (diffusion – using specific strong ties). This provides a method where centralisation and diffusion can co-exist. Attempts create diffusion via Centres of Excellence or Hub and Spoke models leads to confusion, attempting to impose a matrix on siloed companies resulting in dual reporting lines and general confusion.
Skills to look for when hiring a CTO
Effective transformation leaders are humble, adaptable, visionary and engaged (HAVE). Humility is about being able to work with teams without owning them. Being Adaptable is about being able to learn and change course without worrying about losing face. Being Visionary is to be able to see the broader end game. Being Engaged is the ability to communicate the transformation’s financial and business rationale to a broad range of stakeholders. A skill the CTO needs is the ability to work with senior leaders and workers across the business. It is about changing company mindsets.
Let leaders lead
Digital impacts everyone everywhere in the Company. Every manager, therefore, should understand Digital and should be allowed to do what they do without interruption from the CTO. Most leadership teams are there to operate the business, to deliver results. They are not there to transform the business. They should be allowed to run the business. They can play a role in change management but do not interfere with their day job. Management should leverage the Transformation office for big cross-functional change. The Orchestrator (CTO) is there to catalyse and accelerate change, frame the issues, provide expert advice relating to e.g. market disruption or customer behaviours. They are not there to run every element of the change. There is a shared responsibility (CTO and Leadership Team) for the successful delivery and operation of the Transformed model.
CTO enables connections and mobilises resources. The actual work is done by people in the Business units (the Transformation network). The CTO is accountable for the Transformation program.
Executing with Transformation networks
Running the Transformation networks is done by the “Network Operator”. They are part of the Transformation Office and report to the CTO and their role is to manage the running of a Transformation Network. They are an Agile head coach for the Network they manage and use agile ways of working. They help mobilise resources from the Network they represent. When it comes to scaling the new process, Transformation network moves the process into the business. The personnel involved in developing the new process in the Transformation Network belong to the Business units who will take on scaling, thus acceptance of the change is made easier. Scaling and Operation belongs to the mainstream. Agile methods like Devops include a linkage between those who develop a new process and those who inherit it. Transformation networks are the linchpin to take development and transition to the mainstream.
- Orchestration in Action
Execute a Digital Transformation program
13 actions will set you up for success in Digital Transformation.
You might not do it in this order.
- Really believe that a major Transformation is needed – at Board and Top management team level.
- Create a Chief Transformation Officer role and hire the CTO with the right attributes (HAVE) – Humble, Adaptable, Visionary, Engaged. Desirable to have the CTO as a direct report to the CEO.
- Ensure there is a clear accountability for the CTO to implement Transformation holistically. Focus on cross business unit efforts and creating connectedness. The detail of accountability is vital, for example, most time the Business units will continue with their accountability to implement Transformation projects (or the CTO will become an Uber-Project manager!).
- Build a Transformation office. It will comprise Business architects to map the People, Data and Infrastructure resources. Research, develop and agree measures that will be used to value to outcomes of the cross company Digital Transformation initiatives (this will involve a skilled financial modeller). Also needed will be Agile coaches, customer journey mapping experts. Some of these skills need to be hired as contract staff and may be expensive and from far from the home market.
- Ensure the CEO and Board are totally supportive of the Transformation effort and ambition. The CEO must communicate this broadly, repeatedly and in behaviour as well as words.
- Set up an internal venture fund (CFO and CEO should do this) and allocate the fund to the CTO organisation. This is needs to be substantial and is vital. Without money for funding projects, the CTO will go nowhere.
- Establish a working group to build the companies Guiding Objectives. The team is built with the active involvement of the whole senior leadership team. This group reports to the CTO. It investigates what customers want, how the company can create value. The group should develop plans complete with individual Transformation initiatives that must be agreed by the relevant Line of Business leader. The Guiding Objectives must be endorsed and agreed to by the Leadership team.
- Develop the Transformation Ambition based on the Guiding Objectives. The CTO develops the statement and agrees it with the CEO and the Leadership team. This Transformation Ambition must become the rallying call for the Business and known and engaged with by every employee.
- Deliver Business Architecture maps. This is the output of the Business architects and shows who does what, where resources are deployed, what and where data is used (a Drone level view of the business). Also deliver a Capability map showing gaps that must be filled.
- Form Transformation networks. Each network will build new processes and better capabilities. Each network consists of multiple instruments (from our list of 8: Offerings, Channels, Customer Engagement, Partner Engagement, Workforce Engagement, Organisation Structure, Incentive structure, Culture) and resources they represent (the relevant Data, People and Infrastructure) to help address the challenges the company faces. Multiple networks will be set up to address the challenges. Each Network is accountable to deliver the projects within their scope that will build better process and capability. Led by a Network Operator they must map what must be done, ensure capability is in place to deliver, ensure the relevant data is available, develop the plan, execute the plan.
- Appoint Transformation leads from the business from within each Transformation Network. These have the role to link the Transformation office with the relevant line of business. The line of business appoints the Transformation lead and it should be a talented senior manager within the line of business.
- Close down Transformation networks over time and create new ones as work is done.
- Develop Agility within the Company; including Hyperawareness capabilities, Connectedness capabilities and rapid Execution capability (building and utilising an inhouse capability for the “Agile” methodology).
|The Human condition means we are limited by our own Cognition capability. We limit the world using “Bounded Rationality” to make decisions.|
We are all limited in Cognitive ability
The entangled state of our Companies and the challenge the Orchestration Zone represents ensure we hit the limits of our human ability to comprehend what needs to be done. As humans, we use “Bounded Rationality” to make decisions. These are limitations imposed by our cognitive framework and the timeframe we must make the decision. We tend toward “Satisficing” where we make decisions with simple rules of thumb that make decisions that are “good enough”. The issue here is that we do not consider the connectedness of decisions and that this lack of holistic thinking leads to real business problems over time. We consistently fail to break silos, we create them. Our bounded rationality means that most of our “transformation programs” look like a series of point solutions. Years of satisficing leads to a Kodak. There is no-one getting all Digital Transformation right and be assured there is a lot of thirst for knowledge within industries to understand what others are getting right.
Moving beyond Bounded Rationality
The game has changed. New technologies are here to help us move beyond Bounded Rationality in solving Transformation problems.
Orchestration moves past the Bounded Rationality limitation and tackles the issue of connectedness. Digital Technology will help us move beyond Bounded Rationality and into this world of connectedness. Artificial Intelligence and Data capabilities are building the ability to build better resource allocation in real time. This is already happening in our IT areas and will spread to the whole Company. 5G and the Internet of Things (IOT) have the potential to connect our Companies as never before with Data – think of warehouse to production real time data interconnection to drive work schedules. Blockchain will transform inter and intra company supply chains for products and information. This will impact legal, finance, sales and other areas. Think of using blockchain to automate contract to cash flows for the purchasing area.
The Orchestrators cheat sheet
|General Principles||When pursuing Digital Transformation embrace the need for a connected approach. Operate in the Orchestration Zone rather than relying on ill-suited change management doctrines.
Ensure the Executive team consistently embrace the Transformations direction and that they expect employees to act in ways that support and enhance the direction being taken.
Ensure CTO works with other key leaders particularly the CIO and Transformation leads to increase the companies’ agility: including creating weak and strong tie networks.
|Establishing Guiding Objectives||Make the customer the centrepiece. Work backward to create new/improved value for the customer.
Set Guiding objectives that provide appropriate value for customers, capturing that value through and appropriate business model and develop the strategy to make that value creation happen.
Set Guiding objectives at the Line of Business level. The leader for a given line of business must be supportive of the Guiding Objectives.
Pursue a portfolio of strategies with different Guiding Objectives for each line of business.
|Articulating a Transformation ambition||Articulate a Transformation Ambition, the companies’ overall change goal that is PRISM (precise, realistic, inclusive, succinct and measurable).
Encourage senior leaders to become engaged with the Ambition and include it in their team communications.
|Orchestration competencies||Document major Digital initiatives to provide visibility and synergies.
Create an internal venture fund that can accelerate cross-company transformation initiatives and outcomes.
Engage resources that can model value impacts of Transformation programs.
|Mobilising resources, enabling connections||Create a Business architecture map of the company, spanning all the instruments of the transformation orchestra.
Map the people, data and infrastructure that exist as well as the data flows between them.
Determine which instruments and the organisational resources they represent are most relevant to the companies’ Guiding Objectives.
Create Transformation Networks comprising of multiple instruments to address Transformation challenges. Keep each Network small and focussed on a specific Transformation challenge.
|Organising for Orchestration||Appoint a CTO how is humble, adaptable, visionary, engaged. Invest the CTO with seniority (preferably Direct report to CEO) to enable organisational gravitas.
Make the CTO responsible for orchestrating the companies’ Digital Business Transformation mobilising the resources and creating connection between them.
Create shared KPI’s between the CTO and the business for results.
Build a Transformation Office under the CTO. Keep the team small as it should Orchestrate the Transformation rather than performing it.
Prioritise hiring skill sets in the CTO office that reflect Orchestration skill sets such as Design Thinking and Business Architecture.
Encourage CTO to build strong rapport with the Business at all levels.
Appoint Transformation leads from lines of business. Weave an organisational fabric of execution into the existing fabric of the business rather than building on top of the existing organisational structure.
Keep the Transformation office focussed on incubating new capabilities.
|The Orchestrators cheat sheet gives a shorthand of the actions you should take to enable a successful Digital Transformation.|
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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