A look at academic research on change management with a digital lens
"You can't do today's job with yesterday's methods and be in business tomorrow" - Peter F Drucker
The current Mrs Sealey and I sat down recently to watch Captain America: the Winter Soldier (my choice). It's a great action packed film that sets things up nicely for the forthcoming Avengers 2 movie. It occurred to me during the film that Captain America is a leader of change. He identifies threats and handles them with help from the ensemble cast. He removes corruption, replacing it with new alliance with the vision and mission to do right.
Let me segue into the main topic of this post; accelerating digital transformation (definition). I've had the good fortune in my career to work for or with digital leaders who are attempting to do something new and brave. One thing that is common about them - and this isn't a criticism - they are brim full of good ideas and have often translated this into a compelling vision and strategy for the organisation.
Ideas are cheap, execution is crucial
The issue is moving from ideas, whiteboards, mind maps and strategy documents into real change. The real building of IT platforms. The real restructuring of teams. The real improvements in customer experience. The real investment and the very real financial returns.
In an industry awash with big and good ideas we need execution. And this is the problem. It's not a matter of personal intellect or capability of the digital leaders, it's a matter of business change being difficult. Turning round an oil tanker is a very apt metaphor for how it feels to change a business (although my research tells me that turning round an oil tanker isn't really that difficult).
Fortunately for us in the "digital age" business change has been studied and analysed well by academics and business writers. Whilst we may think that the change we face is new or somehow different, it really isn't. It's about appropriate resourcing, stakeholder management, planning and ultimately execution. Topics that have been studied in detail by experts like John Kotter to give us direction as we strive to help our companies or clients change.
Industry analysts are also providing some sound advice. In a paper for CIOs on digital, Gartner has recommended that CIOs need to build a bi-modal operating model. The first operating model is concerned with the big stuff; keeping the lights on and ensuring everything is secure and accurate. Operating model two is there to deal with agile, digital world where a platform can be created by quickly wiring together MailChimp, an Amazon DynamoDB and a mobile app over web-based APIs.
This idea of a second operating model resonates well with research carried out by John Kotter in a Harvard Business Review article and subsequent book titled Accelerate. Kotter is a long-time student of business change and understands the practice well, however in Accelerate he advances on his work to look at how organisations change quickly. Specifically Kotter's work focusses on why that is now more important than ever as businesses need to evolve at a faster rate.
Failure to change isn't necessarily caused by a failure to identify the need to change. Many organisations have recognised that they are in dire need of change or that the market is presenting an opportunity for those who can change to grab it. Failure comes because they just can't realign resources whilst maintaining business as usual quick enough. Before they complete the transformation the money runs outs, the change programme outright fails, the stock market moves against them or they just give in and continue on a gradual descent into obscurity.
Digital has become a transformation point for businesses as they seek to leverage its power to engage and find customers, create new business models and reduce operating costs. The industry snake oil for digital is in abundance at the moment with vendors, authors and *ahem* consultants happy to talk (and write) at length about digital's virtue. However when the oil is wiped back, there emerges a strong set of case studies supporting digital's claims. Alongside these positive case studies sit examples of companies that failed to keep up and have been overtaken by digital pure plays.
Of course - as one of the aforementioned digital consultants - I firmly believe that digital has the ability to increase top line whilst reducing the bottom. However if I had a magic lamp with a single business wish, I'd wish for transformational agility not digital excellence. Digital excellence can be hired, contracted, bought outright or grown internally. Transformational agility is far more difficult to attain as it deals with the organisation's existing hierarchy, processes and culture.
Developing transformational agility
So how does one become an agile organisation? How having recognised the great opportunities and threats at your door do you capitalise on them in an affordable and rapid way? Great questions that John Kotter has fortunately answered. I will merely give a high level summary of his words and add some of my own opinions for practitioners in digital business areas.
A business' primary purpose is to provide a return to its owner/investors. It does this by providing services or goods for a value greater than the cost of producing that product. This is business 101. I suspect if anything gets debate in this article it will be this definition, but in a capitalist economy this the model the majority of us will be familiar with.
To achieve this purpose an organisation forms processes, roles, structures, rules and supports to provide goods and services. I typically think of this in terms of the value chain; how the business converts raw inputs and goods into something the customer values and will exchange money for. We often title this structure and process as "business as usual".
Whether it's bespoke software or bicycles that the business produces, business as usual happens. Marketing is put out. IT systems are configured and maintained. HR processes are administered. Sales are closed. In a good business this operating system is optimised and on the whole runs smoothly.
This business as usual is what Kotter identifies as the challenge to rapid change initiatives in his article Accelerate:
"The old methodology simply can't handle rapid change. Hierarchies and processes, even when minimally bureaucratic, are inherently risk-averse and resistant to change... Part of the problem is that all hierarchies, with their specialized units, rules and optimised processes, crave stability and default to doing what they already know."
A further challenge comes from Clayton Christensen's challenge to management to step away from the spreadsheets when considering business risk:
"Capital is no longer in short supply - witnessed by the $1.6 trillion in cash on corporate balance sheets - and if companies want to maximise returns on it, they must stop behaving as if it were. We would contend that the ability to attract talent, and processes and resolve to deploy it against growth opportunities, are far harder to come by than cash. The tools businesses use to judge investments and their understanding of what is scarce and costly need to catch up with that new reality."
For more on this I highly recommend reading the Capitalist's Dilemma.
I've sat down with digital leaders who are pulling their hair out at having to build a business case for something that's never been done before. There's no precedent for some of the initiatives we all would love to launch and that's a big issue when it comes to securing buy-in from risk averse hierarchies.
At this point I hope this is resonating with you. I hope you've recognised this same challenge of pushing change through an organisation who is resistant to brave, bold and often blindingly obvious ideas.
Kotter's solution is similar, yet more detailed, than Gartner's proposed bi-model operating system for CIOs. In order to accelerate change a second operating model needs to be developed. Unlike the business as usual operating system, this model is dedicated to designing and implementing strategy rapidly. It relies on a network of individuals across the organisation to continually assess what is happening and then react to opportunities and threats.
It's not to say that one operating model is better or preferable to the other. They are simply separate in purpose. The business as usual operating model exists to generate profitable returns whilst the change model is focussed on rapidly capitalising on new opportunities.
Digital acceleration operating model
So what does a digital acceleration operating model look like then?
1. It should be built around a big opportunity. Senior executives need to spearhead the formation of the second operating model around a single important opportunity. The opportunity should be big - how big is a matter of your market but certainly it should be realistic.
2. Appoint a team of volunteers as the guiding coalition. This is where the first big shift in thinking needs to occur. It's common to give ownership of a change initiative to a specific executive and leave them to organise resources around it. Instead find a team of volunteers from across business disciplines to get involved. The criteria is enthusiasm for the vision and capability to do it. Rank, department or desk size aren't important. Try to find a group who bring different experience and views to the table
3. Form strategic initiatives around the opportunity. The coalition's first job is to define some strategic initiatives required to achieve the opportunity. At this point the coalition will seek feedback from the executive team. However this is only feedback and not instruction.
4. Build out an army of volunteers. Each initiative will require a team to make it happen. Here's where - with the right vision - something special will occur. People will volunteer to be a part of it. They'll want to join the change because it's interesting and energising. Of course there will be the usual sceptics, but you're looking for energy, knowledge and capability. Ignore the doubters and form these teams around the initiatives. It should be noted of course that for the majority of these volunteers they'll still have to fit in their day jobs.
5. Begin to provide funding and resource required to accelerate from ideas to execution. As the army of volunteers define what needs to be done, specialists will be able to provide cost and resource estimates. These can then be taken back up to executive team members to secure funding or resources. An example might be an initiative to develop an Apple Watch app. The IT specialist who has volunteered to be a part of the initiative could provide estimates for external costs and give some names of developers and designers from within the business who could build it. The guiding coalition could then present the cost and resource request to the CIO for approval.
6. Celebrate success. Particularly small wins. Be public and noisy about the change that is happening.
7. Change the culture. "Culture eats strategy for breakfast" quipped Peter Drucker (allegedly). I can easily accept that platitude so it therefore becomes necessary for the army of change leaders to also change business culture. How they do this is to model the new behaviour. The energy and momentum generated will become infectious.
The scary bit for executives will be letting go of control to a team of motivated employees. This is where the process design is vital. The coalition must understand the rules of play. They need to understand that they still have a business as usual day job to do. They need to understand rules around incurring expenses and drafting new volunteers. However those rules can be easily created, monitored and altered according to need.
Making it happen
Much of what I've written in the past has been at a practitioner level and I'll aim my conclusion at that same audience. If you're a CEO or Managing Director of a company and want to make this happen then that's amazing, go and make the change happen. However for the majority of us our role is to influence and plan.
Here's a few things we can do as digital practitioners to have this kind of impact:
- Build up a team from across the business to experiment and prototype with new technology - could be some kind of lunch based session or one evening a month
- Identify opportunities to form a coalition that can drive change and step up
- Share Kotter's work - it's an evidence based management technique that needs more people to read and apply it
Thanks for reading, I hope it's impressed upon you to do things a differently. I would love to hear your stories of business change successes and disasters (ok I admit it, the disasters would be more interesting to read), so please get in contact or share them in the comments.
David Sealey is a guest writer for Smart Insights. He is Head of Digital Consulting for CACI were he helps organisations define and implement strategic change around digital and data.