Mastering the mix: Five ingredients for digital transformation
By Linda Luu and David Robinson Originally published on ThoughtWorks Insights
Imagine – the whole family is coming over for a potluck, but no one knows what they need to bring, who is doing what, what’s already done, and that it’s dinner we’re making, not breakfast! The difference between a mediocre and memorable get together is focus.
In a world of shrinking attention spans, increasing complexity, and myriad possibilities – focus and clarity are imperative to bridge the strategy-execution divide. According to RHR research published in the Harvard Business Review, “High-performing teams spend over 25% more time focusing the enterprise than their lower-performing peers. That time is spent establishing financial and operational metrics, aligning goals with overarching strategy, allocating resources, and reviewing key metrics.”
How do leading organizations prioritize? How do they organize for the age of urgency? How do they align activities with vision? When everyone is acting productively in concert we call that strategic alignment. But how do you get there? Based on what we’re seeing with enterprise clients, we identified five key ingredients to make sure strategy doesn’t stay in a slide deck.
Dynamic funding for incremental value creation
Multiple ideas for recipes to make? Who says you can only try one at a time? Don’t spend all your time, money, and effort trying to please all of your customers with the same dish. Try multiple small ones! It’s a low cost, quick way to understand which recipes are keepers.
Deciding on a plan upfront and hoping for success doesn’t cut it in today’s dynamic marketplace. Plans change, customers’ needs evolve, and competition is fierce. Platform replacement efforts and big programs don’t have to gobble all the investment dollars for years at the cost of innovation efforts. Think smaller increments to learn fast, steer, and maximize return on investment.
One retailer spent four years replacing a legacy platform. When we met them, they’d spent well over $100M, released nothing to market, and had yet to see any return on their investment. Their ‘lift and shift’ approach required the entire legacy system to be replaced before a customer migration could happen. Teams were laser-focused on building feature-parity, things that were valuable to customers 10 years ago, but did little for the customer needs of today and tomorrow. Meanwhile, innovative projects were starved to extinction. We resliced the work to allow for earlier incremental releases enabling customers to see value sooner and for the organization to realize a return on their investment.
How? The team adopted a different architectural approach and customer migration strategy. By enabling vertical slices of the platform to be visible over time, the leaders of the organization were able to apply relative prioritization decisions across the portfolio to allocate investments to both innovation and replatforming initiatives.
Following a recipe helps guide your culinary moves, but taste tests along the way ensure delicious results (or allow you to abort the mission if all goes sour). Great chefs constantly taste their dishes so they can adjust and improve the end result. In the same way, don’t blindly follow a plan in uncharted waters and hope everything turns out perfect at the finish line. Test, measure, and modify at frequent checkpoints to validate you’re still on track.
The end result? Alignment to invest more dollars in promising initiatives and less in ones that don’t carry their weight. Governance doesn’t need to mean micro-management, a lightweight framework guides funding and decisions while saving time. Value-led governance achieves this in three ways: surfacing higher-value investments, encouraging validation before allocating funds, and supporting the delivery of value by resolving blockers and constraints on teams.
In contrast, the traditional PMO approach, successful in the IT-as-cost-reduction era, was heavily focused on monitoring, controlling, and reporting. Writing in the Financial Times, Simon Caulkin sums up the pitfalls of traditional budgeting nicely, “what made sense in a stable sellers’ market, when compliance with the schedule was paramount, has become a liability when the priority is creative response to rapid change”.
The digital division of a large telco grew from 20 to 250 people without a decision-making framework for portfolio prioritization. A senior-VP found himself drowning in endless meetings. He had to dive into the minutiae to identify pressing issues. His desire was to make his team fully accountable for outcomes and create alignment to the strategic goals. Through our value-driven portfolio approach, we introduced a portfolio-value review cadence that reduced the hours spent in portfolio meetings by 50%, while enhancing the quality of prioritization and investment decisions.
Governance didn’t involve command and control. The teams and leadership were proud of the autonomy and collaborative culture they had built. People knew what decisions they could make, who to go to for help, and how to work together to resolve issues without having a “manager” involved. Here, governance served two important purposes. First, it added much-needed structure to funding and steering decisions. Then, it identified those responsible for educating the team on a holistic view of the organization-wide portfolio so that they could make value trade-offs in favor of higher-value initiatives.
The first time Linda, one of the authors, tried a new recipe using Australia’s venerable Vegemite, her dog wouldn’t even touch it. He didn’t fancy the next six versions, either. Rather than turn in her chef apron, Linda researched tried-and-tested flavor pairings which inspired her to make Vegemite lamb shanks. Delicious!
Organizational grit is the perseverance to continuously learn from failure so that it becomes ‘just the way we do things around here’. It’s about a commitment to solving a problem incorporating feedback, experimentation, and learnings from failures. Customers didn’t like the first prototype? Product pitch didn’t make it past the funding round with stakeholders? That’s not the end of the world in a company with strong organizational grit. Employees take the learnings and find better ways to solve the same problem. Here, teams are rewarded for learning, not punished for failing.
A recent Google study investigated what high-performing teams had in common. The most important trait? Psychological safety. Team members share the belief that they won’t be punished when they make a mistake. Encouraging positive emotions during the creative process broadens this mindset. Barbara Fredrickson found that this mindset enables the brain to discover new knowledge and skills, thereby building new resources to tackle problems. Leaders who create a safe environment foster more open-minded, creative, and resilient team members. Incubating this mindset at scale creates a learning culture that can sense and respond to the changing environment.
Collaboration around customer purpose
A great dining experience springs from the effort of many: from the chef to the kitchen staff to the server. It takes communication and awareness of how all the pieces come together. Building products within an organization isn’t any different. High-performing teams own how they work together, ensuring a smooth transition between roles to ensure the pieces blend the best of everyone’s experience. Cross-functional collaboration eliminates mental energy needed to hand off information as projects and products unfold. A Nielsen study found that concepts created by teams with collaborators from four or more business units resulted in 18% better performance than those generated by teams with three or fewer functions represented.
We worked with a bank that had three functionally siloed teams—software developers, lawyers, and accountants—working on their software product. The regulatory environment was a complex web of federal and highly-variable state regulations. Competitors were launching innovative new products and services faster by creating better user experiences around the regulatory constraints. The three teams were in different locations and communicated requirements in document form. Prioritization was based on which team shouted the loudest. Miscommunication, lack of alignment and missed deadlines were rampant. Things needed to change.
Realigning into product-centric teams that blended legal, engineering and accounting enabled the organization to deliver a first-to-market product. Combined with process improvements, the realignment enabled the company to better prioritize the highest value opportunities and products, replace detailed documentation with collaboration, and improve morale. These improvements meant they could release market-leading products on a more competitive schedule.
Renown chefs are choreographers in their kitchen. They don’t blindly follow recipes; they master flavor pairings and preparation techniques. They don’t do all of the work; they hire and train people with different skills. Above all, they set an example for the rest of the staff. Likewise, the executive leader’s role in digital transformation is to hold a mirror to their employees,
We worked with a large insurance company where it took 9 months to get an idea approved before engineering could begin work. Every pixel and use case was carefully examined and approved by senior management. By the time the delivery team received the work, there were only 4-6 months to build the product before launch. As a result, features were compromised, descoped, or completely ignored. People were frustrated, employee morale dipped and people headed for the exit.
In the war for talent, leaders cannot afford to lose high-value players. They must cultivate an environment where individuals thrive. Why recruit and hire smart, highly-engaged professionals, only to remove their decision rights and tell them to churn out features as fast as possible? Leaders must empower teams to think creatively to solve real customer needs, support learning, encourage experimentation, and fast feedback. This different way of leading means letting go of command and control leadership styles and practicing techniques that steer through ambiguity and focus relentlessly on value.
Every company is different. Great leaders manage the ingredients and interplay all the time. If you’re not realizing the outcomes expected from your transformation, ask yourself, what’s missing? Smatterings of grit, adaptive leadership, experimental culture, and new-age funding serve up an ideal environment for true strategic alignment.