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Why Digital Transformations Fail

February 28, 2019

by

Rohit Garewal

A look at how corporate restructuring can lead to changing technologies and cultures

In 1956 Peter Drucker coined the phrase ‘culture eats strategy for breakfast.’  While relevant throughout human history, that quote today could be re-written as culture eats strategy for breakfast, lunch, and dinner! Market disruptions no longer afford corporate cultures sufficient time to course correct, which is why for any ‘digital transformation’ to be successful, a full-on assault on modernizing cultures must be part of the digital transformation program;  only then company’s be able to leverage the benefits that transformations will inevitably bring[1][2][3].

Companies need a full-on assault on modernizing their cultures

When looking at why digital transformations fail, I have looked at where digital transformations succeed; what are the common attributes I’ve observed across companies that have successfully adapted to technology disruptions. I’ve then cross-referenced these observations with the writings of the brilliant people I mentioned above (amongst others) and my own experience in transforming our business from a lifestyle firm to a hyper-growth consultancy. Based on this research and experience, I’ve concluded that successful companies do ONE thing extremely well:

They have the right corporate rhythm to execute disruptive strategies.

In order to execute a successful digital transformation and improve your corporate culture,

you need a corporate rhythm that will execute your collection of digital choices.

You need the right corporate rhythm to execute disruptive strategies: A look at how you do this

What is a corporate rhythm? A corporate rhythm is the clearly defined and repeatable process that keeps your people committed, accountable, and measured. In other words, it’s the engine that defines what a company will do, how it will do it, who will do it, and by when. It is your corporate rhythm that will allow your culture to adapt (or not) to the strategies that you put in place to adapt to market disruptions.

I am particularly passionate about corporate rhythm due to strong correlation to corporate success and great corporate rhythms. It is not the only thing needed to be successful, but I’ve never seen success from an established enterprise without one.

There is no one right corporate rhythm, and the leaders and experts I’ve studied provide several excellent models that you can use (I find a combination of Patrick Lincioni + Verne Hersch to be the most effective, but it’s not right for everyone). So rather than detail out what your corporate rhythm should be, here is one corporate rhythm blueprint that I’ve seen successful in many organizations.

You have the right corporate rhythm when you can do the following effectively and consistently:

Define the right corporate structure, hire the right people into that structure, and have a process of interaction, in order to set, execute, and measure priorities[4].

Ideally, you do this at the organization, program, and operational levels.

1.1: Structure, people, and processes

Defining the right structure(s)

There is no ‘perfect’ organization structure; every company has several dynamics, unique to them, that will dictate what structure is right for you. I can, however, once again point to some (fairly obvious) characteristics of a good org structure:

  • Responsibilities being clearly defined is more important than the role title.
  • If two people have accountability, no one does.
  • Avoid dotted line relationships wherever possible.
  • If you have a shared services across silos, make it very clear what the charter of the shared service is; i.e. what KPIs will define whether the shared services ‘are doing their jobs.’
  • Map out at least two structures: the structure you would want if you had no people debt, and the structure you have today. You won’t get to your ideal, but do your best.
  • When making a decision about what a role’s responsibilities should be based on the people that you have (as you almost always will have to do), ask yourself: Would you re-hire the person at the center of the decision at the rate you’re paying if there was no emotional baggage?

You have to have the right people in the right roles

Almost universally people agree that having great people is important, and almost universally it is not the #1 priority of most companies.

This is simultaneously the easiest and most difficult ‘thing’ to do. Almost universally people agree that having great people is important, and almost universally it is not the #1 priority of most companies.

Companies need to overcome the following fears in order to align their vision with their actions.

The people that got you here won’t necessarily get you there: be prepared to be more loyal to your corporate purpose than to your people.

This is very hard, but also very important. Firms that are trying to adapt to technological disruptions in their marketplace are usually established firms, meaning they have established rock stars and A-level people that made the company successful. The hard reality is that navigating modern market disruptions may require different skill sets and characteristics than your A-level people have today. You have to give these veterans a chance to (re)prove to the company that they can thrive in their new roles and responsibilities, but don’t take it for granted that they can. Even Steph Curry has a trainer to help him shoot better, and even your most accomplished employees will need your help in making the transition. Help them, give them opportunities to try and succeed or fail, hold them accountable, and be ready to put someone else in that role if the results aren’t consistently aligned with commitments.

You need to accept that above-average people demand above-average compensation for a reason, and that you get what you pay for.

Too often companies tend to think that if they go cheaper (usually aligned with less accomplished), productivity doesn’t fall at an equivalent level. For example, if you pay someone 20% less, productivity drops only 10%. While this may hold true at certain positions, I’ve observed the opposite on leadership roles. Hiring at the top-end of the spectrum leads to at least 1.5x the productiveness as hiring ‘average’. Pay someone 20% more, get 50% more productivity, which doesn’t even include the intangibles such as lifting the entire organization’s competitive edge, innovation, less of your time, etc. Keep in mind, I am not saying that paying someone more means that they will produce more — this is simply a statement that you should hire the best that you can afford, and the best will ask for more than average compensation. As an antipodal point, if someone isn’t demanding top-end compensation, there usually is a reason why.

Hiring at the top-end of the spectrum leads to at least 1.5x the productiveness as hiring ‘average’

If you have to prioritize, start with the top-level leadership at your firm.

Your leadership will own their respective silos, and when you pair leaders with the right corporate rhythm, the silos will tend to self-organize to achieve the corporate goals and KPIs. Apply the above to your top-level leadership first.

Then, look for what makes great leaders that drive internal transformation. Recently I was speaking to behavioral psychologist Dr. Christopher Kroner about the characteristics I should be looking for as I hire my next super-star sales executive. These roles are expensive, and I didn’t want to throw away several hundred thousand dollars on a ‘wrong’ hire. Dr. Kroner and I discussed many of the characteristics of great salespeople. I realized that these were the same characteristics that many leaders demonstrated. Look for the following:

  • Need for achievement in their role
  • Competitiveness in their role
  • Confidence / optimism in their role

If you want more details on what each of these are and how to interview for them, email me here or Dr. Kroner here.

Connect your leaders with processes

Once you’ve aligned that you need the right people, and you’re dedicated to finding them internally or externally, it’s time to move on to the most telling characteristic of whether a company will adapt to market disruptions: whether they have a winning set of processes.

Transformation means change, and change is scary, so you’re going to need trust as part of your culture to successfully transform.

Most thought leadership for corporate processes revolves around scalability and auditing, but process is just as important in achieving cultural transformations. Transformation means change, and change is scary, so you’re going to need trust as part of your culture to successfully transform. Your process, that will govern how the people in your organization interact with one another, needs to be created on a foundation of trust between your people. Patrick Lincioni modeled this structure the best.

Patrick speaks about a trust where everyone feels a shared purpose, value, and mission; and that everyone puts these in front of personal ego and ambition. Once you have this trust, you can foster conflict. In order for conflict between peers to be productive, it has to be built on the trust that people are looking out for the well-being of the mission. After everyone has shared their view, and you’ve had productive conflict, you can ask for commitments (there is a difference between commitment and consensus). With people committed, you can hold them accountable. And finally, when great people are accountable, you willachieve your transformational results. The key then, is that you have a process that drives this cycle. There are countless books written on various processes which will work for you; find them by googling the experts on this..

1.2: Set, execute, and measure

The purpose of having the right structure, people, and processes is so that you are best positioned to set goals (priorities), execute, and measure your transformation. Let’s begin to dive into how you will accomplish this.

Setting the right goals.

This can be rewritten as:

  • With the right rhythm you will set strategy goals at the corporate level (and execute and measure)
  • With the right rhythm you will set priorities goals at the program level (and execute and measure)
  • With the right rhythm you will set quality goals at the operational level   (and execute and measure)

While there are numerous ways your structures, people, and processes will come together to achieve the above statements, as an illustrative example I would like to continue our theme of focusing at the program level. Specifically, let’s look at how to set program priorities with the sample governance model in the following image:

What you see here is the an adapted governance model to define priorities in a SCRUM project. How the supplies and inputs come together inside the blue irregular hexagon to arrive at priorities are company-specific, but any organization can use the model to understand how inputs, supplies, controls, and goals work together to create a program’s priorities. In a recent change management for digital transformation project that we participated in, the alignment of this model was critical for the customer to implement new program governance.

Executing goals and holding people accountable.

Once you have done the heavy lifting of placing the right people and giving them a process by which they can evaluate and set priorities, you will find executing priorities to be much easier than if this work hasn’t been done. That is because your process will make it very clear what people are committing to along with a transparent way of holding people accountable.

At the corporate level, the CEO is the most important role in enforcing the corporate rhythm. At the program level it will be the program manager, and at the operation level it will be the line managers.

If a program doesn’t fail because of ballooning scope, it will fail because of misunderstood commitments between crucial silos.

For a more explicit example, let us continue going a little deeper into the program. In the diagram above you will notice that there is a program manager that owns the monthly process for program prioritization, but this person will do much more for you — this person ultimately will own making sure people know what they are committing to and hold team members accountable to those commitments[5].

Typical transformation projects will have several, self-managed siloed teams responsible for specific deliverables. If a program doesn’t fail because of ballooning scope, it will fail because of misunderstood commitments between crucial silos. A great program/delivery manager will know how to look at the chasms between your silos and ensure that there are a sufficient amount of bridges so that information is being communicated, understood, and acted upon. In the event of miscommunication, the program manager will witness or anticipate this and then proactively move to clear up the misunderstandings. Your program manager will also hold your leads of the respective silos accountable, and needs to have the authority to replace leads when they aren’t.

You can’t manage what you can’t measure

No rocket science here — how can you know if you’re successful in your initiatives if you aren’t measuring the progress of the completion of those initiatives (projects) and whether those initiatives are delivering the value you expected?

Measuring the progress of your initiatives / projects / programs

I recommend that you track the progression of your key corporate, program, and operational initiatives only through the people that you hold directly accountable for the delivery of these initiatives. It should to be one person per initiative (though one person will usually own many initiatives). The key items you want to track are initiative progress, initiative health, and initiative quality.

These KPIs require a clear vision of where you are going and why you want to get there, before you start, so that you can course correct on deviations when you’re off course, and pivot when your original ideas were ‘wrong.’

There are several tools that you can use to track your KPIs; for example spreadsheets can handle almost everything you need. If your organization requires more governance, you can look at tools like Jira, Asana, or Lattice to help manage goals and accountability.

Corporate, program, and operational rhythms, where should you start?

I consider your corporate process to be the most important one to get right…but I recommend starting with transformation at the program level.

You will need sets of processes to be implemented at the corporate, program, and operational levels. While your processes will drive accountability at all levels, it should have a different focus based on where it is being used.

  • Corporate process(es): Focus on driving strategy and accompanying corporate KPI
  • Program process(es): Focus on driving priorities
  • Operational process(es): Focus on driving quality

I consider your corporate process to be the most important one to get right (to drive digital and cultural transformation), but corporate transformation requires a lot of alignment and commitment in the most entrenched parts of the organization. Therefore, I recommend starting with transformation at the program level. I define program level as the individual projects that you will take on to achieve your digital transformation. These are your consistent base hits necessary to win the (digital transformation) game.

Since this will be ground zero for most digital transformations, it is crucial that your process for governing programs helps you keep a tight and attainable scope. ‘Regular’ IT projects go over budget by about 34%, but I contend that transformational projects could be double that number. By their very nature, transformational projects require companies to step into unfamiliar territory, which leads to confusion, constantly shifting ‘needs,’ and no one, clear north star to guide decisions. The result? The project fails, the transformation loses steam, and the worst thing is that people lose confidence in the transformational vision.

By enabling processes at the program level with a focus on prioritization, you will be able to drive and enforce the new culture you need, not disrupt the corporate status quo (yet), and have a much higher chance of success.

Conclusion

At the end of the day, what we are really talking about here are core components of your company culture.  Patrick Lincioni wrote, ‘Culture lives in the way things get done,’ which I think is one of the most elegant and succinct definitions of culture I have ever read.  While what is written above is a core component of culture, it in itself won’t work without being run by people of similar values, a common purpose, and foundation of trust.  I hope that this article provides at least a small amount of benefit as your work to understand, establish, or improve your own corporate rhythms!

[1] Much of what you’re going to read here are influences of the great minds that have laid the blueprints on how disruption happens and how companies establish winning rhythms: Clayton Christianson, Michael Porter, Patrick Lincioni, Verne Harnish, Michael Collins, and several others

[2] This article will focus on the framework on how to achieve digital and cultural transformations. Each of these framework pillars will require a significant amount of extra work to implement in your organization.

[3] Two distinct events over the past year compelled me to write this post. One is my experience in driving the very real cultural and digital transformation of our firm, Object Edge. Second are my discussions with three Fortune 2000 companies (in the past month) where we’ve looked at their challenges to adopt commerce and data in a way that drives real customer engagement, and impacts corporate KPIs such as revenue and margins.

[4] That last set can also be written as set commitments, execute commitments, and hold people accountable.

[5] Please note that this is simply a role title, and not meant to refer to the typical titles from PMO or SCRUM.  Put another way, this could be read as the Manager of the Program.


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