Category: Business Improvement and Transformation
Business Improvement and Transformation
Is it fair to say that Digital Transformation is the Business Process Re-engineering (BPR) of our time?
When an AI system makes a decision that is based on bad data, or bad algorithms, in business, who is responsible for that?
What about the ability of the financial institutions to absorb new technologies and changes created, business models and so forth created by technologies such as Bitcoin?
SPICE for Business Transformation
Imagine an organization where people, business processes, products, services, and technologies are in sync. Where an organization performs at its most optimal levels and miraculously everyone is happy and contributing to the wellbeing of the organization. No, I am not talking about a fictional scenario in a far off land. I am talking about an organization harnessing all the power of its capabilities to achieve Business Transformation. And I believe that there are a lot of organizations that can achieve if they view Business Transformation as a holistic and all-encompassing endeavor. So, today I am going to talk to you about how SPICE can make your organizations better.
I help organizations pursue a better version of themselves. In this pursuit, I collaborate with front-line employees, middle management and the C-suite to understand issues beyond the obvious so that individuals and organizations can achieve their objectives. Over the years, I have held many titles but the underlying theme is to always do and look for Business Transformation opportunities.
Business is “the activity of making, buying, or selling goods or providing services in exchange for money” for corporations. For non-profits, business is the pursuit of social causes. For educational institutes, business is the pursuit of knowledge. For governments, business is the pursuit of citizen services and for military business is national security.
Transformation is “a process”.
Now, that you have a baseline understanding of what Business Transformation is and how it helps, the next time when you hear this term you would be aware that it is not just another buzzword and not just another business initiative that would disappear with time.
Now, imagine a person named John who is walking through an unknown and dark tunnel with just a flashlight in his hands and he is carrying some baggage behind him. John does not know what is in the baggage. He continues to use the flashlight to look ahead to find his way out. His resources are limited. Thus, his objective is to reach the correct end of this unknown and dark tunnel as efficiently as possible.
Would John make it?
According to some experts, if this person were an organization pursuing Business Transformation then he would have failed 70% of the time. Think about this for a second, this means that only 30% of Business Transformation endeavors are able to achieve their full potential. Why is this?
While there could be a variety of reasons for this high failure rate, I have observed that the number one reason for this is related to a typical conversation within organizations.
How many times have you said or heard someone say, “the business” wants this and “the business” wants that and that “the business” doesn’t understand that systems cannot be developed overnight? Ingrained in this sort of thinking is the idea that somehow IT is different from “the business”.
Somehow there is this “Us” vs. “Them” mentality.
If we think about it, all organizations take advantage of technological advancements. Paper, which was once considered a technology itself, is now used in every organization today in one way or another. Today, all organizations are digital in one way or another even if they don’t realize it yet and to think that they do not stem from this “Us” vs. “Them” mentality.
Perhaps it is time to change the conversation! Perhaps it is time to think about IT as not something that is outside of “the business” but it is part of “the business”. To have this conversation, there has to be a mutual understanding that neither “side” should downplay the importance of the other. This requires an understanding that all technical and non-technical aspects of the organization are there to support the end objectives of business transformation and that collaboration works much better than just mere animosity.
When I started assessing and improving organizations in 2003, I didn’t know what it was called. All I wanted to do was help organizations apply the full potential of their capabilities beyond what they perceived them to be which included but not limited to IT capabilities. Over the years, this took on new meaning for me as the conversation quickly changed from just doing my duties to fundamentally reshaping organizations inside out.
A couple of years ago Business Transformation, IT Transformation, and Digital Transformation started to pick up steam and it took off. A lot more individuals and organizations started to pay attention when they saw their bread and butter business models being shattered in light of the new economy. Startups like Uber took on the Taxi Services around the world and now are expanding into other means of transportation as well. In response, Taxi Service companies pushed back hard by either through legislation and government policy or creating their own taxi mobile apps. If the taxi service companies think that they can compete with Uber with just their own taxicab apps then they are hugely mistaken. This is just one example that illustrates how one industry became complacent and within a short period of time a competitor emerged with a new business model that directly tied its operations to technology and the rest, as we know it, is history.
So, if you think about it, Business Transformation is not a standalone activity but a holistic one. Thus, if the people, business processes, products, services and technologies are ignored or not paid enough attention then Business Transformation becomes just another pipe dream.
As I see it, organizations that are committed to figuring out the Business Transformation journey have to ask 5 fundamental questions from an internal perspective and an external perspective. These questions are:
- Who is helped by Business Transformation efforts? Is it management? Is it employees? Or maybe its customers and shareholders? Perhaps answering this entails understanding customer experiences issues and long-term value propositions to shareholders.
- What does Business Transformation teach us? Is it better internal communications? Is it Governance and Standardization? Or is it Branding? An organization that showcases and does actual Business Transformation has better stories to tell about improvements and thus can attract customers who see value in an organization that is trying to do better.
- Where does the Business Transformation start? Does it start in IT? Does it start in Marketing or Operations? Or does it start with customers, vendors, and partners? When a customer comes to you and requests a system to be developed, do you ignore this request since your organization does not develop these types of systems or do you explore this further and figure out how you or a partner could help your customer?
- When should Business Transformation be considered? How about when an employee has a conversation with a customer? How about when established competitors are eating your lunch? Or should it be considered when new innovations and methods arise?
- Most importantly, why do Business Transformation in the first place? Is the organization looking to become optimized and have better cohesiveness? Or is it better long-term value and creating positive societal ripples such as the creation of Corporate Social Responsibility groups that look into Green Technologies to save electricity and in turn save the plant as a consequence.
These are all important questions to ask before, during and after the Business Transformation journeys. But if there are no effective feedback loops then most Business Transformation journeys would be just a one-time initiative and not something that makes organizations become self-improvement entities.
By this time, most of you might be thinking “well ok I get it that Business Transformation is more than what meets the eye but so what?!!”
What does Business Transformation really have to do with Business Architecture?
A valid question. I want you to think about this…
Do you see Business Architecture as just a plan, as just a design or a model, maybe perhaps a guide, or a way to create documentation, or for the purposes of alignment? Or do you see Business Architecture as a way to accomplish a vision and even to improve an organization’s mentality.
The fundamental reason we do Business Architecture in the first place is to fully leverage the technical and non-technical capabilities of the organization to transform itself. You don’t create a plan or a model or a guide to just document it but you do create it so that these insights can be used to make the organization better otherwise why do it in the first place anyway!
Thus, Business Architecture and Business Transformation are highly intertwined. An effective Business Architecture would open up avenues for Business Transformation so that when it comes to responding to market demands, the strategy does not get lost in translation when it comes time for execution.
I have spent many years recognizing patterns in my own engagements, academic literature and case studies and have determined that there are fundamentally 5 factors that affect the journeys towards Business Transformation.
These 5 factors are Strategies, Politics, Innovation, Culture and Execution or simply called the SPICE Factors.
I represent these factors in a pentagon shape. On its edges are the 5 factors which start from Strategies on the left-hand corner and going clockwise until Execution. In the middle of the pentagon shape, there is a loop in yellow indicating that Business Transformation is a continuous process and not just a single project or initiative. Besides each SPICE factors, there is a performance indicator to represent that each of the factors has to be measured. This measurement can entail Key Performance Indicators and even Service Level Agreement checks.
The red pentagon indicates where the organization is today (aka the current state) while the green pentagon indicates where the organization wants to be tomorrow (aka the future state). In the middle, the yellow arrow from the red pentagon to the green pentagon indicates transition and indicates the areas that need to be taken into consideration namely people, business processes and technologies. By extension, these areas influence the products and services provided by the organization.
I am going to go through each of these 5 factors and make you think about how each of these factors can affect Business Transformation within your organizations.
The first SPICE factor is Strategies. The strategy is a careful plan or method for achieving a particular goal usually over a long period of time. Depending upon how far out your organization can think, a long period of time can be 1 year, 3 years or even 10 years. Of course, as you go further out in time, your strategy gets complex as you might not be able to anticipate what is going to happen.
There are many levels of strategies within the organization such as Financial Strategy, Marketing Strategy, Operations Strategy, and IT Strategy to name a few. Additionally, strategies can be top-down, bottom-up, cross-functional and hybrids. But fundamentally, I put strategies in three big buckets namely Organizational Strategy which affects Executives (e.g., performance compensation, M&A, etc.), Team Strategy which affects Middle Management (e.g., Operational Improvement, Tool Selection, etc.) & Individual Strategy which affects front-line employees (e.g., career trajectory, hiring, etc.).
In addition to these strategies and the types of people that they affect, it gets more complex and the real relationships actually look more complicated. Upon further depth, we realize that all of these types of strategies have an internal perspective and an external perspective.
For example, from an internal perspective, the organizational strategy looks at things like the type of organizational structures such as functional, matrixed, product-based or hybrids. Depending upon what structure your organization has or wants to evolve into, there would be repercussions. In a functional organizational structure, focus on areas of expertise is increased but what is lost is the cross-collaboration which leads to silos. On the other hand, in a matrixed project-based structure, the individuals are only needed for the duration of that project and then they go back into a pool to be picked up or not. What incentive do people have in this type of structure to get the job done efficiently? Something to think about.
Depending upon what the end goal is, these strategies can
- Affect performance compensation for executives
- Create or destroy middle management fiefdoms
- Affect Hiring, Training, and Layoff of frontline employees
- Create and destroy bloated expectations
The last point is interesting since a strategy with bloated expectations or no expectations at all can lead to misalignment namely between IT Strategy and other Organizational Strategies. Let’s think about this…
- Was this misalignment always there or somehow it evolved over time?
- Why did this misalignment happen in the first place?
A root cause understanding from technical and non-technical views can reveal something that might have been taken for granted. For example, IT teams creating and acquiring tools that have no relationship to the Organizational Strategy or perhaps revealing the purchase of technology by non-IT teams which again has no relationship to the Organizational Strategy.
In short, there are 3 key points to consider for Business Transformation in terms of strategies:
- The real an unreal organizational structures matter more that you might like to believe
- Plan to plan and measure performance both at an organizational level as well as at individual levels
- Alignment is a two-way conversation that is not a top-down demand but should be a collaborative approach
Having said that, as corporate citizens of the organization, we have to realize that Strategies are not shelf-ware.
Merriam Webster defines politics to be the complex of relations between people living in a society. For our purposes, here society would refer to your organization. No one wants to talk about politics in the organization and yet there are decisions made every day that are political in nature.
Politics in organizations is about power; the power to frame a problem; the power to influence the decision and the power to make decisions. While we are all aware of the official power that is the power of your superior within the organization but most have also encountered unofficial power where regardless of the title an individual is able to persuade others. Some people call this leadership while others call it manipulation.
In organizations, while it may seem that all similar titles should hold the same power but that is certainly not the case. Even with VP titles, not all VPs are the same. Some have more power based on the number of people they manage, based on the revenue generated by their teams and even based on the relationships they have with others within the organization. So, the next time you look at an org chart and see all VPs at the same level you will know that an organizational chart is just a fairytale representation and not reality. Why this matter? This matter because the next time you are looking for champions to support your projects keeps a vigilant eye on who has power and how much of their power is used to make decisions.
The display of power is more relevant today in the age of big data than ever before. As you know, most Big Data initiatives revolve around gathering massive amounts of data and then finding patterns. The thought behind is that once we can figure out patterns then we can make better decisions. This, however, is not the complete picture. Beyond the usual Vs of Big Data, I believe there are 4 Vs that are critical but missing in most conversations.
These Vs are Vitality meaning how important the data is, Versatility meaning how data could be applied to various scenarios, Vocality meaning the supporters of data-driven approaches and lastly Veto meaning the ultimate authority to accept or reject big data conclusions. As you might have noticed, Vocality and Veto are about Power.
The idea of power also applies when you are creating an ERP System. The executives who have official and unofficial powers can become champions or become obstacles. One way to remedy this is to get them involved early on; have a discussion, find out pain points and get feedback. So, when it is time to stand up an ERP system, the people have been engaged from the beginning and it is not a surprise. Also, be prepared that business process optimization should be done first prior to any large scale systems because otherwise all you are doing is automating broken business processes and thus when it is time to optimize them it would become much harder to do so. Other examples of displaying power would be in Cloud Computing and Shadow IT.
In short, there are 2 key points to consider for Business Transformation in terms of politics:
- The official and unofficial power considerations matter and can make or break a project
- Create a Power Map to know where power resides, assign quantitative values to them to set a baseline and then verify with projects that those baselines are correct
Remember, politics needs to be understood especially in the case of organizations.
Innovation is defined to be the act or process of introducing new ideas, devices or methods. Innovation can be a new product, a new way of hiring people, a new way of doing business processes, a new service and it can also be a new technology. If there are so many ways of being innovative, why organizations and individuals struggle in this area?
For most, innovation is something that is considered difficult since people don’t know where to start or how to continue. Innovation comes from inspiration and I believe that organizations and individuals can be inspired by things around them. The left picture represents the possible sources of organizational inspiration for innovation. These sources include:
- First, the organization’s internal customers. By internal customer, yes I do mean anyone who is within the boundaries of your organizations and yes that includes your employees. Employees who can see beyond the immediate needs and are able to connect the dots should have an avenue to express it. Thus, there should be some sort of innovation process that captures the wisdom of these employees.
- Second, the organization’s external customers. We are all aware of the external customers who are outside the boundaries of your organization but they too can provide feedback to improve your products and services.
- Third, within your own industry, which includes looking at what competitors, partners and/or startups are doing something that could be applied internally.
- Fourth, outside your industry. Think about the field of Project Management that emerged from the construction industry but now it is used in Software Development.
- Lastly, the integration, customization, and combination of inspirations from the above four ways. Think about the evolution of writing from cave walls to stone tablets to paper and then eventually to computers.
The picture on the right represents the possible sources of individual inspiration for innovation. These sources include:
- First, your direct circle of influences namely your friends and family. Have you considered talking with them about problems that you might be facing and what they would recommend?
- Second, your indirect circle on influence namely your co-workers, educational and professional associations. Perhaps what you are having trouble with they have already solved or at least they can give you a nudge in the right direction.
- Third, increasing your understanding of areas that interest you which includes reading books, blogs, news articles and talking to people who have experience in that area.
- Fourth, increasing your awareness of areas that you are not that knowledgeable in which includes different types of readings, experiencing cultures beyond your own, conversation with diverse people, observing the plant kingdom and observing the animal kingdom.
- Lastly, the stitching, applicability, and combination of inspiration from the above four ways. Think about the invention of Velcro by observing cockleburs in the plant kingdom.
Thus, it would be naïve for organizations to think that they cannot fully take advantage of innovation at the organizational and individual levels.
They have to remember that innovation is the lifeline.
Culture is a way of thinking, behaving, or working that exists in a place or organization. Often times when there is a discussion of culture within organizations we immediately think this is something fuzzy and it is only equated with people. While people definitely create culture but there is more to this than meets the eye.
You see culture is not just one thing but a combination of things. Most organizations don’t have one culture but they have a mix of sub-cultures. The way people are treated creates a sub-culture. For example, how are people within the organizations at all levels incentivized and rewarded? The way people dress creates a sub-culture. For example, if executives dress differently vs. non-executives this visibly creates the culture of in-crowd vs. outsiders. The posters in public locations, the discussion between Mac. Vs. Windows, IT behind closed doors and even an individual can create sub-cultures within an organization.
All of this matters because the culture is not just having a foosball table or other “perk”, it is creating an environment where employees are appreciated not just by a talk by the executive but by tangible actions through incentives, rewards and performance goals.
Culture is at the base of the SPICE factors for a reason.
Culture can make a strategy just another paper-exercise, culture can drastically affect politics, culture can resist organizational innovation, and culture can prevent effective execution of operations and all of this means that culture can diminish any hopes for Business Transformation.
Execution is the act of doing or performing something. If you notice in the above-mentioned factors, all of them need to be executed; measured and performed otherwise all we are doing is just wasting our breath and paper. As I see it, execution also has an organizational level and an individual level. Both of them are highly intertwined. If there are no structures and processes to determine and quantify execution issues then how would you know where your baseline is and if you don’t know where your baseline is then how would you know if your Business Transformation efforts have been successful or not.
Note that execution is highly based on biases and perceptions of organizations and individuals as discussed earlier. They have to be considered and if needed be persuaded to be changed.
Rewards and incentives can not only change behavior but it can enhance cohesion and collaboration across the organization.
Lesson learned are useless when all they are is a paper exercise of capturing what happened wrong or right but not an input for other projects so that they can avoid similar mistakes or repeat successes.
All the factors that have been discussed are not something that is done in isolation but they all come together to create an organization that is able to transform it self based and stay ahead of the game.
As we can see from the live survey, the most important area for Business Transformation is People and the most important factor for Business Transformation is execution.
Now, let’s go back to our dear friend John (aka your organization). With his understanding of the SPICE Factors and his awareness of how the SPICE Factors can affect people, business processes, products, services, and technologies, don’t you think he would have used his flashlight to find out what was in the baggage? Perhaps some of the baggage was the dead weight that he needed to get rid of and perhaps in the baggage, there were additional resources he could use such as food, liquids and even a map. But the only way John would find out would be to look behind and just check his baggage!
All I am saying is…help John find his way and help him succeed!
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