Aug 6, 2018

When Trying to Transform Your Organization, Are These Five Principles Getting Lost?

The critical success factors that often go missing in the frenzy to ride the wave of technology innovation

By Mark Ronan, Global Head of Program Management, Numerix

With over two decades of experience as a technology professional working in the capital markets on both the buy-side and sell-side, I’ve been involved directly or indirectly in a number of large, transformational, change programs that resulted in varying degrees of success.

While significant change is always risky, this experience has taught me that costly failures often result from causes that could have been prevented with a little foresight and discipline in execution. I want to note that failures in change execution may have nothing to do with the innovation driving the change per-se, or with particular technology choices.

I recently presented a webinar titled "Avoiding Common Pitfalls on the Path to Digital Transformation." As I was preparing my talk, I found myself de-emphasizing the word “pitfalls” in the belief that it would be more effective to focus on things we can and should do, rather than on things we should avoid doing. In this spirit, I recast the main takeaways as a set of principles to embrace, rather than pitfalls to avoid:

Five Principles to Maximize Chances of Transformational Success

  1. Identify and manage critical stakeholders
  2. Distinguish means from ends
  3. Identify and manage your constraints
  4. Deliver value often, and in small increments
  5. Decide well, and as often as necessary

Before jumping into details, I briefly introduce my thesis here:

The ideas I am discussing are based on patterns I've observed. They are the outcome of years of research and practice at diagnosing problems, influencing change, and sometimes just minimizing the costs of failure. These ideas are drawn from a few different disciplines and various well-known sources, and taken together they form a “toolkit” that has helped me think clearly about the right things and ask the right questions during the early phases of each complex endeavor to which I had been asked to contribute.

I’ll start with what I think is the most important of the five: identifying and managing critical stakeholders. It is based on the work of Tom Gilb, a systems engineer, consultant, and author, in his published work, "Competitive Engineering." This principle is based on the idea that defining and delivering stakeholder value is the foundation for success, which I explain here:

The second principle is about the importance of separating means from ends. Solving complex problems often starts with a set of high-level, vaguely-stated objectives—such as, “We’re going to reduce costs” or “We want to automate processes” or “Our goal is to reduce time-to-market.”

Are these means, ends, or a mix? It’s difficult to tell as stated here. Are all the ends explicitly stated? Here, I talk through an example that stresses the importance of refactoring objectives so there is a clear distinction between means and ends.

The third principle deals with constraint management. At a given point in time, any “system” will generally have one goal that is more important than all others. In the case of a business, which is a type of complex system, that goal might be to maximize shareholder value, revenue, market share or any other quantifiable performance indicator. Whatever the goal, it is also true that there is generally one resource or process—at some point in time—that is the bottleneck or constraint in the system. Optimizations that occur at points other than the constraint are therefore a waste. Constraint management is about identifying constraints and optimizing them as much as possible, ideally until they are no longer constraints. It is also about avoiding wasteful optimizations that occur on non-constrained processes or resources.

The fourth principle deals with delivering value often, and in small increments. Once equipped with the tools for reasoning about stakeholder needs, capturing them and managing them, we must put critical stakeholder needs at the center of the governance processes supporting the change initiative. Here, I explain why it’s better to deliver value in smaller increments, but often.

Finally, we come to the fifth principle, which is to decide well, and as often as necessary. In an era when businesses are focused on agility, we are constantly reminded of the need to “fail fast”. Properly understood, this means that once a course of action has been decided, it is important to implement as quickly as possible so that we get the required feedback with as little cost as possible. Too often, however, “fail fast” becomes a rationale for avoiding the disciplined thought required to make sound decisions. Such shortcuts in thinking, deciding and, yes, even planning, can lead to wasted effort that is dressed up as an agile process. Decision making must be optimized like a first-class business process, involving the right people and aligned with the implementation process. Lex Sisney, an expert on organizational structure and transformation, provides the following decision-process model in his book Organizational Physics: The Science of Growing a Business:

If you are part of a major change initiative, I believe these ideas can help maximize your chances of success or at least minimize the impact of failure. I hope these five principles will help you think a little differently, or at least focus more intently, on some critical success factors that sometimes get lost in the frenzy to ride the wave of technology innovation.

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