Digital Transformation — Part 2 (of 2)
If you ended up here, and want to start from the beginning, you can read part 1 here…
People’s Hearts and Minds
All of us desire some level of clarity and certainty. Establishing a strategy that clarifies how the company intends to be uniquely positioned for success is a precursor to getting people engaged. Once that can be communicated (remember, not the plans to get there, but the actual destination itself) — that then can rally people. It calls for engagement — for people to contribute to the planning process — how do we get to where we want to go. It gives people the tools to make local decisions, aligned with the goals the strategy establishes. But we also need to enable people to break free of the assumptions and ways of working from the past. In addition to strategy, this is essential to come from top down. What level of a second set of eyes, risk taking, ownership do we intend to run the company with? I would contend that there’s a natural bias in each industry for governance, but generally agility is desired, both to enable faster decision making, but equally to motivate employees through ownership and growth.
Clearly articulating a new culture is not easy. You’re looking to highlight people who’re doing things ‘the new way’, but chances are they always were. Finding the people who’ve changed and getting others to change is a slow process. Changing the leadership is essential — some combination of new employees, rotations, and on the ground change management exercises for existing teams. It means letting go of some of the historical management metrics of the well-managed company that you are part of. It also means collaborating with people who are already operating differently. And finding a way to not let people secretly snicker at the currently small efforts that could eventually grow or create learnings to help iterate overall.
Functionalization, Operating Models, and Alignment
Large successful companies that have been around for a while have had the opportunity to create departments that focus on specific areas (aka functionalized) and service multiple business groups. Some examples would be a vendor management department for the company, or a central IT group that handles technology across product lines. These groups are then managed for cost, since they become internal groups and act as service providers to the product lines. A central theme is that the decision-making processes for these groups don’t actually involve what’s driving revenue, but only via proxy. Internal groups tend to focus on how they can serve their internal customer better, and don’t keep a view to whether those decisions will bring more revenue or improve profit margins in a strategic way (beyond basic cost-cutting).
All the change work going on in the company should be looked at from the perspective of revenue-generating product lines. Can we truly get sponsorship from P&L owners — is there a problem worth solving? If we’re changing the HR system, how will this make us better for our customers? Yes, there will be times when the internal functions need investment, but I would propose it’s when they are actually hindering winning business, servicing customers, making strategic decisions, creating financial/existential risk or causing employee attrition; otherwise “don’t fix it if it ain’t broke”. When decision making can be shifted to this model, non-core functions start to become marginalized and it becomes clearer that those don’t need to be within the boundary of the firm. Alignment on decision making needs to be focused on revenue and P&L, and to an extent existential risks.
Accountability goes along w/ decision making alignment. Let each person in a company have a unique set of accountabilities. While redundancy is required in large companies, it’s equally important that people all the way down have an essential hand in the success of the strategy. They should need to know how they fit in and how anyone else fits in. Having more people slows down decision making, since every decision requires more people to get onboard. Not only is each person executing but each person is also an idea machine, so size up your team to the number of ideas and unique initiatives you want to be dealing with.
And so…
Change is in the air, and transformation an imperative. The 2 key things to focus on first — strategy and culture. Strategy creates a unique path for the business to succeed and win and culture creates the necessary conditions for people to take action and execute on that strategy.
