When surveyed, just a few years ago, Australian and Pacific business leaders said the biggest obstacle to digital transformation was an unyielding corporate culture. Now, 41% of APAC leaders identify a lack of clear transformation strategy as the most common barrier.
You can’t hope to lead a transformation for your organisation without a solid grasp of what your new digital paradigm should look like. This clarity requires identifying and having a comprehensive understanding of, a variety of important elements.
Organisational Design vs Operational Design
Organisational Design/Transformation describes optimising the entire business or pivoting the business with a focus on effectiveness. It involves looking at:
- Resource Allocation – How funds are allocated for innovation vs transformation vs operations
- Organisational Structure – Pyramid vs clusters, centralisation vs decentralisation, etc
- Portfolio Management Approach – Product-Market grouping to optimise portfolios
- Strategic Trade-Offs – Optimising metrics to manage risk vs reward
Operating Model Design involves optimising the flow of work for a division within the organisation. It includes the grouping and purpose of the teams, programs and portfolios, and investigating the most efficient ways for them to deliver value to the customers.
Be clear what transformation means.
Transformation can mean many things. Very few organisations have conducted a full transformation — perhaps only three or so companies in Australia. Transformation can be evolutionary or revolutionary. At Elabor8, we worked with one of Australia’s major banks on a very significant transformation that involved over 6,000 people changing the way they worked all at once. While successful, this is a seismic shift in a company and is bound to cause shockwaves.
Therefore, it’s vital to accurately define what your intended transformation is. It’s important to be clear with language — organisational design can sound like a restructure involving job loss, or it can simply mean reorganising existing staff to operate in more customer-centric ways.
Understand the vision for the transformation.
As with any major change, preparation is key. Take the time necessary to thoroughly assess the current state of the organisation ahead of any planned redesign. Be crystal clear on what you expect the transformation to achieve and ensure that this vision is embraced by all stakeholders. The intentions and scope of the transformation need to be supported and enabled from the top down.
Set your expectations around risk.
Decide how you want to achieve change at scale. Are you prepared and capable of accepting the disruption that comes with large-scale, rapid change? Or do you want to take a more risk-averse approach by enacting change slowly, with the knowledge that results may take years to materialise?
As with any major change, preparation is key. Take the time necessary to thoroughly assess the current state of the organisation ahead of any planned redesign.
The elements of success
Bring together the right people to co-design.
Effective organisational design will impact every person in the organisation and demands everyone’s involvement. It won’t work if it’s just designed and prescribed from the C-suite and imposed on an unengaged workforce.
In fact, utilising the knowledge of those closest to the work is essential to designing a system that’s fit for purpose. After all, they have the real-world, day-to-day understanding of what their job entails and where problems exist. It’s important to gain input from all levels, analysing end-to-end processes and covering different areas.
This information does much more than just offer a lot of ideas, it allows you to identify underlying connections or themes. Similar ideas can be grouped, which may lead to improvement opportunities that are relevant across the organisation.
By inviting employees to be co-designers of organisational change, you’re ensuring that the transformation will work at the human level. It’ll improve processes in a way that suits the people who are responsible for them. In addition, offering employees this co-creation opportunity illustrates your respect for their opinion, which will engender loyalty and ensure engagement with the transformation process.
It’s important to realise, and accept, that there’s no optimum external model to follow. Every organisational design is unique and, by definition, must emerge from the people through the process.
Galvanising innovation from every level.
Aluminium giant, Alcoa, provides an impressive illustration of the power of transformation and how involving people from all levels can bring unexpected benefits.
Paul O’Neill’s tenure as Alcoa CEO saw an extraordinary turnaround in the company’s fortunes, almost quintupling sales and improving profitability by 14%. At the same time, underlying productivity per employee improved by 45%. What may be surprising, however, is that much of the gains came not from focusing on productivity, but on workplace safety. O’Neill’s argument was that it was necessary to investigate non-financial indicators such as workplace injury rates, to gain a deeper understanding of how the business operated. And he put his money where his mouth was, telling workers that if management didn’t follow up on safety issues they raised, they could phone him directly, giving them his number.
This focus on improving health and safety communication between workers and management led to better information flow about all subjects. With enhanced oversight and a more engaged staff knowing that they would be listened to, improvements in all areas of production took place. It was those on the factory floor who were the most qualified to suggest where productivity gains could be made. As well as reducing time lost to injury by 85%, O’Neill had created an environment of innovation.
But the transformation went further. By focusing on improving safety, O’Neill deepened employees’ engagement with the company, increasing cooperation when it came to making other operational changes. Areas of waste and inefficiency that hadn’t been addressed for decades were finally resolved.
By introducing a sense of purpose, and combining it with better information flow, O’Neill discovered a variety of areas that could be reformed. A focus on workplace safety led to a comprehensive transformation.
Agree how you expect to deliver value.
Too often, a project’s success is measured by whether it was delivered on time and within budget, when the real question is how well it delivered business value.
A project achieving all its aims under budget is only valuable to the organisation if the outcome is valuable to the customers.
When it comes to organisational design, it’s vital that you understand how your organisation delivers value to your customers and who those customers are. Using tools like the user story and the buyer’s journey enables you to understand how you can increase value. It’s possible to incrementally improve it but if you intend to deliver something truly ground-breaking, your customers will need time to learn while you’re also learning how to implement the new paradigm.
It’s also important to recognise that you’re limited by your existing customer base and the systems that currently support it. But if you’re continually looking for ways to innovate and add value to your offering, you can capitalise on the data, customer relationships, and brand awareness that you already possess. Which means you won’t be blindsided by a new competitor eating your market share by offering a more attractive alternative.
While the potential benefits of an organisational transformation are appealing, it’s important to realise that you’ll be challenged by existing constraints.
These can include technological limitations, the way you’re currently organised, the processes you use, and existing products and services that can’t easily be eliminated.
While these constraints may appear frustrating, they don’t need to limit your vision. There’s a rich existing constraints and limitations. In fact, research shows that when there are no constraints to the creative process, complacency sets in and people tend to go for the path-of-least-resistance. Constraints, on the other hand, provide focus and a creative challenge that motivates people to search for and connect information from different sources to generate novel solutions.
Your transformation can include developing a roadmap for how areas that are currently unchangeable can be developed over time to better align with the new operating model. Some parts of the transformation will need to be gradual. You have to keep servicing your customers as changes happen behind the scenes.
Apply context to the ways of working.
The move to an agile way of working has become a necessity for organisations in the 21st century.
Replacing the traditional siloed and structured hierarchy with a network of teams operating within rapid learning and decision-making cycles, helps improve productivity and profitability. Agile organisations focus on customer ecosystems, delivering value and collaborative relationships.
But to achieve this, every organisation needs to evolve in its own way. There’s no off-the-shelf solution that can be applied to your business. The context of your structure, processes, staff, and customers needs to be considered when planning a transformation.
There are a wide variety of different methodologies from which to choose that can be adapted to suit specific needs. That’s why it’s important to engage with the affected staff to discover how best to help them make changes to how they operate. Some areas, such as those solving new business problems, may need the flexibility to adapt and change, while others will require a greater level of certainty about the work.
Teaching an old university new tricks
The University of Melbourne (UoM) is Victoria’s oldest university and ranked in the top 50 globally. The education sector is competitive and the university’s business services team wanted to improve responsiveness, increase visibility and transparency across teams, and boost productivity.
Liam Whelan, Transformation Lead at UoM, stated, “We wanted to embed better practices to strengthen our customer focus and also to help with agility to speed up delivery of value to our stakeholders and customers.”
Over 21 months, Elabor8 assisted UoM to implement an Adaptive Ways of Working (AWOW) initiative that eventually reached 700 people across IT and non-IT areas, including finance, human resources, occupational health and safety, facilities, and campus services.
Elabor8’s approach to launching the exemplar team involved coaching and delivery support. This included agile fundamentals training, a team purpose and design workshop, Kanban board design, team health checks, team chartering sessions, and the creation of the team backlog of work.
The benefits of AWOW were evident university-wide. There was a 208% productivity increase in the overall throughput of work, with teams delivering a third more valuable work. Moreover, quality improvement through reduction of defect/technical tasks rates rose by more than 25%.
“The results were undeniable. Not only were the teams who were part of the initiative more productive, but the quality and value of work they performed improved. This was due to overall better prioritisation eliminating at least 30% of low or no value work before it even reached the delivery teams,”said Whelan.
Just as significant to the university was the impact of the initiative on the culture. AWOW improved team engagement by 15%, with team alignment rising 18%.
Traditionally, innovation and organisational agile transformation have been seen as something for only software and IT areas, but the success that the UoM experienced in non-IT areas illustrates its potential for wider usages.
Test and reiterate.
One way to significantly reduce the risk involved in organisational transformation is to eliminate the use of intuition. Many companies choose their new structure based on untested hypotheses or gut feel. The stakes are way too high to decide a new direction simply on what feels right.
It’s far better to design several options and test them against each other. Rather than assuming something to be true, build a falsifiable hypothesis and test it. Choose an assumption, identify the target group you want to test the assumption with, and choose a baseline and metric to make the assumption falsifiable.
By testing these hypotheses, you’ll not only see which have merit and which don’t, but you’ll also receive valuable feedback that can be integrated into your potential business model. It’ll help you gain more clarity around the benefits and costs, allowing you to better set expectations. Leveraging the agile concept of fast feedback will help refine your testing as you go and assist moving through the process more efficiently.
Experiment fast, succeed faster
A relatively young Australian player in a market dominated by large international operators, this sports software developer knew they would need to compete on innovation and be first to market with original features.
After choosing to partner with Elabor8, it was decided that aligning the development team was key. “We have a great team, but they were pulling in different directions, explained chief information officer, Steve Maidment. “There was no data, no standard way to build products. It was all quite ad hoc. Just do what you can, wear lots of hats. We had no uniformity, which meant we couldn’t move out of reactive mode, into a strategic mindset.”
Elabor8 helped build a highly autonomous workforce aligned around a common mission. A blend of intent-based leadership, agile, and data-driven decision-making, formed the basis of this new way of working.
Teams were given access to a rich set of metrics that could be used as proof points for hypothesis driven change. “The use of consistent data points and techniques for metric capture allows our teams to build context-rich experiments and quickly gather feedback on their success or failure,” said Maidment. “We have designed a system that can improve without the need for a high degree of leadership intervention.”
As a result of the new operating model, the company achieved a 300% improvement in speed to value, a 300% improvement in predictability and delivery forecasts, and 280% more features delivered compared to the same period the year before.
Transformation isn’t a single event, it’s the beginning of an ongoing journey. Its entire intent is to put in place the opportunity for continual improvement.
Launch with the intention of further change.
While a business strategy deck can be altered in just a few hours, changing the mindsets of the people who need to implement it is far more complex. But it’s your staff who are at the core of a business transformation. The way they gain insights, the way they collaborate internally, and their external relationships with customers all need to change.
You need to launch new ways of working and supply the right tools to give your employees the skills they need to embrace and accelerate change. You can start with a Scaled Agile Framework (SAFe) but as you progress through the initial implementation, you’re likely to discover better ways to do things. Ensure you offer the time, space, and investment to allow for continual improvement.
The opportunity to make significant improvements to your organisation through transformation is undeniable. But it can only be a success if it’s planned and executed with thought and care. The impact of organisational transformation will be felt by everyone involved and they’re your most valuable resource for getting it right.
Take the time necessary to test options and craft a strategy that’s appropriate for your organisation. With the right preparation, you can mitigate the risks of change. When the strategy is decided upon, make sure it’s understood and embedded in daily workflows.
The potential is there. With the right approach, you can ensure your success.