Transformation Management

Most organisations fail at innovation because they fail at change. They aspire to innovate but often struggle and continue to lose pace along the fast-moving business landscape.

In this podcast Braden Kelley - Director of Innovation and Human-Centered Problem-Solving at Oracle and author of the books Stoking Your Innovation Bonfire and Charting Change - spoke to me about ways organisations can get better at innovation, change, and transformation.

PMI Ascent - Digital Business Transformation Management Course

Companies the world over are embarking on all sort of digital business transformation journeys, and while they adopt a variety of well-known best practices such as PMBOK for project management, ITIL for IT services, Scrum for building products, or the Agile Manifesto, etc. - how many have adopted a best practice Business Transformation Management approach?

The truth is, not many. And studies by impartial academic and research organisations reinforce that statement. It's one reason why so many companies are struggling either to orchestrate transformation or to indulge themselves in anything more than digital sugar coating.

The Business Transformation Management Methodology - or BTM² for short - is a four-phase holistic and integrated business transformation management methodology.

BTM² is an intensely documented approach to holistic business transformation management, which addresses the transformation journey from start to finish.

It's often said that strategy is three times more difficult to deploy than develop, which explains why so many strategies result in a painful execution journey for everyone involved. Budgets and timelines expand and stakeholders get tired of the noise that comes from a poorly orchestrated transformation.

The benefits on display in the business case begin to fade away as it becomes clear that the planned return on investment is diminishing as more time and resources are pumped into the initiative. This is not to mention the fact that the people and business units aren't prepared for what lies ahead.

This is a reality in many companies because they lack the right transformation tools and capabilities. The BBC's failed £100 million Digital Transformation (download PwC's 58-page report) is one example, and thousands of others are swept under the carpets of companies that thrive on operational excellence but discover to their cost that, transformation excellence requires a very different set of capabilities.

BTM² was the world's first holistic business transformation management methodology that provides a framework with clear phases, deliverables and corresponding methods. It's a generic framework that can be applied to different business transformation use cases, and it isn't specific to one business function, technology or industry.

In its most simple form, there are four phases in the of BTM² transformation lifecycle, which are; Envision, Engage, Transform, and Optimise. This is the continuous lifecycle of business transformation. While projects start and end, business transformation needs to be a continuous cycle.

BTM² consists of nine transformation management disciplines. Let me quickly list them, and then take a closer, albeit very high-level look at each.

Meta Management is about Leadership, Culture, Values, Communication.

Then we have Transformation Direction, which consists of Strategy Management, Value Management, and Risk Management.

Next, there's Transformation Enablement, which is made up of five individual management disciplines. These are Project and Programme Management, Business Process Management, IT Transformation Management, Organisational Change Management, and Competence and Training Management.

Now let's explore each of the nine management disciplines, starting with Meta Management.

In the context of business transformation, Meta Management provides the overarching frame for a business transformation. It also provides the linkages among the disciplines and also the management structure, which allows the transformation process to be effective. It addresses individual disciplines which include guidelines, leadership, culture, values, and communication.

Next is Strategy Management which primarily addresses the Envision phase of the transformation life-cycle, during which a strategy is developed. Strategy Development involves the selection of appropriate team members, collection of data, analysis of transformation needs and readiness. It also involves the design of a business vision, a business model and the definition of an integrated transformation plan.

Next is Value Management, which involves defining the business benefits and the changes needed to realise them. It also includes evaluating the feasibility of making the changes successfully, and producing an evidence-based business case and supporting benefits realisation plan. Value Management relies heavily upon the engagement of stakeholders in the preparation of the business case and benefits plan to create the knowledge and commitment required to realise the benefits described in the business case.

Risk management provides fundamental guidance to the planning, development and effective execution of a business transformation. It's vital that the risks related to the process of transforming an organisation towards a desired future state are well-managed. Along with risks that relate more to the possibility that this desired state quickly becomes either obsolete or inadequate.

Then we have Programme and Project Management, which aims to support the implementation of the transformation strategy in order to achieve the benefits described in the business case. Programme management focuses on high-level specification and the “why and what” of transformation. It includes stakeholder management, benefit realisation, dependency management, transition management/change acceptance and integration with corporate strategies. While Project management focuses on detailed specification and the “how” of implementation, along with control of activities to produce products.

Next, we have Business Process Management, which defines the scope of process changes needed for the expected improvements in performance. To make the transformation effort a continuous success, business processes have to be considered from a strategic perspective. The identification of end-to-end business processes and the assignment of responsible process owners is a major task. It's important to understand that process management doesn't equal process modelling, but rather the relationship between IT, Business and People.

Then there's IT Transformation Management, which evaluates the impact of current IT processes, competencies and systems on business transformation, and vice versa. It assesses and enables solution readiness of the business, defines and assesses the gap between the as-is and to-be of IT, deploys IT operations and services, and implements IT governance. It also involves improving IT operations and services and managing the IT lifecycle.

Organisational Change Management (OCM) addresses the human element of business transformation. It deals with the people who have to change their ways of working and involves setting up a foundation for effective OCM with respect to governance and assessing organisational change readiness. Establishing and implementing stakeholder communication and performance management strategies, and continuously receiving feedback to make improvements is key.

The ninth transformation management discipline is Competence and Training Management, which provides qualification and enablement with respect to the competencies required for business transformation, and the strategic core competencies vital for the company's future success. Competence and Training Management identifies and analyses training needs and objectives, develops training measures and implements the learning process.

If digital business transformation efforts are to be successful, all of the above nine transformation management disciplines need to be adequately addressed, and it's worth noting that technology is just one of the nine disciplines in the list. This really highlights the fact that transformation is less about technology and more about people and business.

Organisations need to ensure that their digital business transformation leaders avoid the pitfall of placing an unbalanced emphasis on technology, process and some project management while paying lip-service or light touches to the other transformation management disciplines. Research has shown that this common error is the basis for countless failed and struggling transformation programmes throughout the world.

BTM² is an integrated and holistic business transformation management methodology that can help firms avoid the pitfalls that over 70 percent fall into.

As in any profession, theory is necessary, but the capability to bring those theoretical best practices and good intentions to life is what separates the best transformation leaders from the rest.

BTM² helps great managers and leaders complement their existing core capabilities with the new transformation capabilities they need to step up into the complex world of digital business transformation. While a leader might have one or two decades of operations under their belt, orchestrating transformation is a brand new challenge for many of them. But they can complement their previous experience with a new way of thinking and working.

The ability to orchestrate the entire business transformation is essential if the performance is to be one that people want to hear. Without it, the tune will be one of noise that no stakeholder expects to pay for. On the other hand, with the right leadership, the transformation could become one of the company's finest performances that its people are proud to be part of.

But why use BTM²?

BTM² is based on extensive academic research and commercial experience. It helps its adopters build credibility among their business peers, and it's an objective, unbiased framework to identify and solve business challenges.

BTM² is an ideal tool for regular and quick assessments of business transformation, and it addresses both the rational and irrational aspects of transformation.

The methodology distinguishes managers and leaders who use a proven approach to transformation, from those that can't articulate an approach that everyone understands.

BTM² isn't focused on any particular technology or company, and it's open for any organisation to use without having to engage the consulting or integration firms that will seize every opportunity to land and expand.

The BTM² methodology was developed by Professor Dr. Axel Uhl (University of Applied Sciences Luzern, Switzerland) and published in the book 'A Handbook of Business Transformation Management Methodology' - ISBN 9781409449805, edited by Axel Uhl and Lars Alexander Gollenia.

Helpful Resources

A Handbook of Business Transformation Management Methodology

PMI Ascent - Digital Business Transformation Management Course

Agility has become an aspiration for many organisations, but it’s not always easy to achieve.

Peter Abraham and Neil Perkin wrote the book Building the Agile Business through Digital Transformation. In this podcast, I quizzed them on the agile components they refer to as Velocity, Focus, and Flexibility, which form the basis of a formula they suggest can help leaders achieve business agility, and move quickly to a position of advantage.

Organisations need to be able to talk about digital transformation using one common language and the right kind of conversation is essential. But that's easier said than done when data, technical, project management, leadership, business and other teams are all talking their own lingo.

Transformation is a collaborative journey, and to collaborate you need great communication. And as we all know, to communicate in any context you need one language, and we need that in transformation too.

Because when we don't have one common language, so much gets lost in translation. Ambiguity, confusion and the inability to collaborate are just some of the words to describe the undesirable outcome of not having one common transformation language that the entire organisation can use.

So it's essential to have in place something that can provide this common transformation language. A shared framework for structuring activities and responsibilities, a road map for laying out sequence, and a set of transformation guiding principles.

Digital transformation frameworks are what separate successful transformation efforts from the unsuccessful messes that litter the transformation landscape and eventually lead to the demise of so many companies that have been vocal and ambitious about transformation, but that have not been successful at it.

Because despite increasing talk and attention around the benefits of digital transformation, many companies don't adopt a common transformation framework. IT can be found to be doing things one way, while different areas of the business do things in other ways. Supply chain will have its own ideas, marketing will have theirs, and so forth. 

Yes, they might all agree to adopt some concepts like agile and good project management practices, but they're only small components of the bigger transformation picture.

I want to talk about the framework known as THRIVE, which is a set of guiding principles that every organisation needs to consider when embarking on transformation.

We know from Stephen Covey that values govern people's behaviour, but principles determine consequences. So in the way that Covey encouraged us to utilise key leadership principles, so THRIVE is intended to encourage leaders to utilise six digital business transformation principles to equip themselves for the digital economy challenge.

THRIVE is an acronym made from six words which are: Transformation, Holistic, Response, Innovation, Value, and Enterprise. 

THRIVE isn't related to anyone technology or industry. It's a way of thinking of and approaching transformation from a business perspective. It helps leaders approach business transformation from all angles, and not be blinkered by digital marketing hype, specific technologies or the way a particular consulting firm wants you to work.

It's a practical transformation framework, which provides leaders with a set of guiding principles, a body of knowledge and roadmap to help them independently lead their transformation - without the need for expensive consulting firms.

THRIVE serves as a holistic guide to maturing internal capabilities and mindsets, responding strategically and innovatively to market threats and opportunities, delivering new value to the market and satisfying the expectations of internal stakeholders through successful execution.

THRIVE's digital business transformation framework enables transformation leaders to analyse the entire transformation process in the context of their own unique internal environment and position in the market. THRIVE can help chart a clear transformation roadmap, along which business and technology leaders can collaborate to mature transformation capabilities, culture and objectives, in order that the company can thrive in the digital economy.

From business models influenced by new digital capabilities, through to the successful execution of transformation strategy, THRIVE provides leaders with a practical framework for a shared understanding of their organisation’s need to truly transform and thrive, in what is set to be a dramatic decade ahead.

Introducing each of the six guiding principles of THRIVE

T - Transformation

The word ‘Transformation' is fundamental to the THRIVE digital business transformation framework because leaders first need to recognise the fundamental difference between change and transformation before they can lead their companies on a journey of legitimate business transformation. While ‘change’ is required to maintain and modernise an organisation, this is not enough to sufficiently elevate both its internal capabilities and external offerings. 

Too many companies are being lulled into a false sense of transformation security through siloed digital projects and change initiatives that are not strategically transformational.

To take advantage of the opportunities and protect against threats that new digitally enabled business models present, leaders need to commit to being bold and transformational, ahead of those that remain safely within their comfort zones and traditional slow ways of working.

Leaders need to communicate this fundamental difference across their organisations to avoid their best resources being tied up making small changes instead of driving transformation. 

This is also required to keep the company’s best people on board and attract new talent because the high-performers have an insatiable desire to be part of an ambitious digital transformation journey. If one company fails to take them on that journey, they will move to another that will. Legitimate transformation also requires a fundamental shift in other aspects of an organisation. 

Appropriate governance, mindsets, business models, capabilities and culture are just some of the transformation fundamentals that THRIVE addresses.

H - Holistic

The word ‘Holistic' is integral to the THRIVE digital transformation framework because unlike business process re-engineering, which focuses on business processes, or app development which focuses on technology, or projects, which focus on producing outputs, digital business transformation requires an integrated and holistic approach.

THRIVE helps leaders take a holistic and integrated perspective of their enterprise and its complexity. It doesn't reinvent individual management disciplines but it provides a framework that integrates individual disciplines, which should be sufficiently mature to undertake successful transformation. 

From digital business models, capabilities and roadmap design, through to culture, portfolio governance and transformation execution, leaders need to consider the big picture and not limit their focus to only some of the key enablers of transformation. Most transformation strategies are not successfully executed upon, and only a holistic approach to transformation will produce the outcomes a company aspires to achieve. 

Through holistic transformation, leaders will dramatically increase the odds of transformation success, and be among the minority that actually achieve their transformation objectives successfully, and live up to stakeholder expectations.

R - Response

The word ‘Response' remind organisations why and how they need to respond strategically to the opportunities and threats they are presented with – both inside their organisation, and externally in the market.

Internally this could involve responding to the evolutionary needs of the organisation’s culture, maturing the capabilities required to achieve transformation excellence and the establishment of new governance that facilitates innovative transformation while minimising bureaucracy.

Externally it could involve defensive and offensive responses to the changing dynamics of the market, caused by disruption, or seizing the opportunities that digital technologies and new business models can be used to take advantage of. 

These and other responses form part of the transformation strategy that needs to be shaped, then planned as part of a short, medium and long-term roadmap, which is then governed and executed upon. It is vital that the transformation response not only strategically addresses all of the key threats and opportunities the organisation faces, but it must also be supported by the appropriate leadership mindset, workforce culture and capabilities required to transform strategy into reality. A rapid response is vital to implement quick wins and avoid the delays caused by traditional lengthy implementations.

I - Innovation

Cloud, mobile, the Internet of Things and Robotics, etc. will bring about the most rewarding business transformation when used strategically. Only through the innovative convergence of digital technologies can companies truly transform through new business models and ways of working. 

Plugging in individual digital solutions in non-innovative ways lulls companies into thinking they're transforming, when in fact they're merely updating their technology and changing nothing fundamental about their business. This only achieves change, while business transformation should be the goal.

Innovation empowers companies to consider many new possibilities that can be part of its strategic response, and this requires effective approaches to innovation, which transcends technology upgrades and simply doing the same things faster, better or cheaper. Companies need the ability to envisage how new technologies can be converged into a scalable architecture that's prepared for near, mid and long term digital adoption. 

V - Value

External value represents the benefits transformation creates for its customers, while internal value represents the benefits delivered into the business as a result of transformation investment. External value is generated through digital business models shaped by strategic responses to what is happening in the market. 

This enables companies to tap into the known and unknown needs of its current and potential customers, in ways that create competitive advantages and seize market share. These models can also be used to reclaim market share after disruption and protect a company’s position in the market.

As markets are disrupted, the opportunities to satisfy the need for value have changed. In 1999, millions of customers were not expecting 24 hour delivery of products purchased via a smartphone, but today they do. The world has changed, but too many companies still rely on antiquated business models. Internal value is generated through initiatives that provide stakeholders with tangible or intangible return on investment. This could involve higher revenues in a particular line of business or increased workforce capabilities that empower a company to undertake successful transformation, and further increase internal and external value.

E - Enterprise

Transformation must encourage, embrace and educate people from across the enterprise and build a collaborative culture of new capabilities and mindsets.

CEOs need to foster a transformation mindset among their executive teams, which is aligned with the strategic aims of the company. This transformation mindset then needs to shape the company’s culture at every level, to create an environment within which innovation and digital business transformation can thrive.

Opportunities to upgrade workforce capabilities need to be identified and people made to feel safe and comfortable about innovation, success and failure. The right external support and training are vital in helping to achieve this, without unrealistically expecting an operational workforce to become overnight transformation masters. 

This can be a major undertaking, particularly for organisations that have been shaped over many years by goals, roles, processes, values, and attitudes. While this will have created operational excellence, it is also prone to preventing attempts to change “how we do things around here”. Such an environment will inhibit even the finest transformation strategy, because as Peter Drucker told us, “culture eats strategy for breakfast”.

Using one common language, the THRIVE roadmap leverages THRIVE's body of knowledge to chart a collaborative way forward for business and technology teams.

While every organisation presents a unique scenario, there are steps and considerations that no organisation can afford to avoid, if their transformation is to be a success. The THRIVE Roadmap provides short, medium and long-term milestones and includes elements such as:

• Establishing digital business transformation governance and portfolio;
• Developing response strategies to market opportunities and threats;
• Evolving leadership mindsets and organisational culture;
• Designing and prioritising digital business cases;
• Executing transformation and realising internal and external value;
• and more.

THRIVE lends itself well to the transformation education process. Its simplicity through core principles and comprehensiveness through content make it an incredibly effective education tool for managers and leaders. A tool that will become increasingly valuable to any company with aspirations to approach transformation in an aligned manner.

It’s key to every organisation’s future because when you adopt THRIVE, you adopt the fundamental principles required for digital business transformation success. It helps connect the dots in a simple and coherent manner so you can answer the key questions that are relevant to your organisation’s ambitions to innovate, digitise and transform – and ultimately THRIVE in the years ahead.

THRIVE guiding principles can help steer an organisation throughout its transformation journey in all circumstances, irrespective of changes in its goals, leadership team or industry.

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Before a company can hope to reshape its culture, the leadership mindset must first make its own shift. Because if leadership mindsets aren't properly aligned, reshaping a company’s culture is going to be very difficult - or even impossible.

That said, leaders should start by considering, whether the company is flexible enough to take advantage of the opportunities that are on offer. Is the company prepared to take risks? Is transformation an integral part of the organisation yet? Or is it still seen as a series of one-off departmental initiatives that exist in silos? 

Culture isn’t simply created overnight. It happens as a result of behaviours exhibited by the teams and individuals in an organisation. Multi-coloured sofas, motivational posters, mission statements and a fridge full of free drinks are nice - but there’s far more to shifting culture than that. Culture is shaped and solidified over time through mindsets and behaviours. And an aligned leadership team needs to be behind that.

Transformation involves a conscious and committed departure from the current state. But while almost every company is now talking transformation, some aren't walking the talk, and they aren't prepared to make the departure from their old - and often antiquated - ways of working. So, they tinker with digital and delude themselves into thinking they're transforming, when in fact they're only creating small change, which will neither disrupt, nor protect them against disruption.

While the words digital and transformation get used in the same sentence, the disconnect between knowing about digital technologies and orchestrating a transformation, is often painfully obvious.

Digital business transformation isn’t simply the implementation of cutting-edge technologies. It’s a new way of thinking about value, business models and the organisation. It requires a mindset that adopts a new way of operating in the company by encouraging transformation. 

The successful orchestrators of transformation are those that have acquired a firm grasp of culture, communication, management and leadership. They leverage the knowledge of technical, data and business process experts and they understand the 360° view of transformation.

Just like the violin and flute players in an orchestra, the IoT, Cloud and other technical experts have an important role to play in transformation, but the leader of transformation is that person who can orchestrate the entire performance, and get the best out of teams, with a solid grasp of all transformation-related disciplines - particularly culture and communication.

Although digital business transformation calls for a cultural shift, this isn't the first-time leaders have faced the cultural challenge. Company mergers have been taking place for decades, and culture has been one of the greatest challenges that leaders have had to contend with during a merger. While the goals of the cultural change required for transformation might be different from those during a merger; values, practices, attitudes and beliefs remain at the core of each.

Most established companies have thrived on cost control and operational efficiency after leaders have embedded a culture of reliability by optimising for operational excellence over variability. These leaders now need to do an about-turn and accept that transformation without innovation can't happen, and that with innovation comes risk. Risk that can strike fear into the hearts of traditional managers and leaders who thrive upon safety and “how things have always been done with certainly”.

In transformation, often an initial excitement surrounds a new initiative, but when the honeymoon period passes and the day-to-day life of execution becomes the norm, old cultural behaviours and attitudes begin to re-appear, and the old organisational culture does its best to return to “how it’s always been here around”.

Companies with high digital transformation maturity have very bold cultures. They set out to be transformational by taking risks that many wouldn’t. Their culture is one where the organisation collaborates well and makes rapid progress. But this isn't the norm among large companies that have been around for many years.

So how do you change something that's at the heart and soul of an organisation? Cultures that took years to shape, are certainly not going to change overnight, or as a result of a re-written mission statement and an hour-long speech from the CEO. Cultural evolution takes time. Lots of time.

Digital business transformation goes against the grain of traditional ways of working that a company has become accustomed to, and it’s a threat to management practices that have sometimes existed for decades. Transformation initiatives surrounded by the wrong organisational culture and DNA result in an unsatisfied workforce, chaos, confusion and political collusion.

Strategic transformation can’t happen without a shift in organisational culture and changing a culture that's been shaped by decades of reliable, stable, consistent, and repeatable ways of working isn't easy. As Gary Hamel once said; “the most profound business challenge we face today is how to build organisations that can change as fast as change itself”.

The best leaders know that the traditional bureaucratic command-and-control driven structures are not the environment for transformation to flourish. They know they need to foster a culture that exploits digital technologies in innovative ways to create new value and competitive advantage. They encourage people to unleash their passion for innovation and transformation. 

With digital transformation firmly on the agenda of the best organisations, how well prepared are they to address organisational change in a business environment that looks different to how it did a decade ago? Especially when the current state of work in some traditional firms is now very broken. A situation that's demonstrated by the fact that only around one-third of employees are engaged at their jobs.

While many executives feel more comfortable dealing with costs and strategy than culture, leaders need to clearly communicate a vision or story of the future and take a practical approach to first understanding and then tackling cultural issues that could even serve to derail transformation efforts.

Why on earth should employees succumb to the digital transformation hype that's attempting to change what made the company so great? These people genuinely believe they simply need to continue with business as usual and put a stop to notions of transformation. 

It's the responsibility of leaders to help these people understand the need for transformation and the inevitable shifts that will ripple through the organisation, to change the day-to-day working lives of many people. 

The CEO and their leadership team need to work hard to communicate a set of aligned messages about why the company needs to transform, and what’s in it for people. They need to clearly communicate how companies that were once in similar comfortable situations became victims of their own complacency.

In fact, transformation is a perfect opportunity for leaders to step back, update and re-shape current management practices and mindsets, and then educate and inspire the hearts and minds of their people. Forget “out of the box” thinking. In the modern world of transformation, there shouldn't be a box.

A strong, shared sense of purpose also removes many obstacles, and this has to be communicated from the top. Let’s face it, if an organisation’s leadership is unable to inspire its people, how can those leaders expect their workforce to bring initiative, imagination and passion to their work every day?

But how do you do that?

I don't have time to get too deep into psychology here, but I can suggest you explore the persuasion cycle from Mark Goulston. It involves taking people through five stages and shifting them from resisting to listening to considering to willing to doing, to glad they did and will continue to do.

Of course, there are techniques underneath these five stages, and plenty of people skills are needed to get this right. But through the application of these five stages, leaders with a desire to understand and nurture company culture can make real progress in the quest to shift mindsets in the interests of the longevity of the business, and the transformation that's required to ensure that longevity.

The ability to nurture company culture effectively is what really sets the best transformation leaders apart from the rest. And nothing about that is related to technology.

Transformation calls for leaders to think of new ways to re-shape the overall business model, and to focus on value drivers. They then need to bring this perspective of what transformation means for their company, workforce and customers, into the entire organisation and focus people behind a common transformation vision.

Let's consider ten of the menaces that can often get in the way of a transformation mindset.

1. Overconfidence - the company is doing well so there's no need for any major transformation. They think that what happened to Kodak and Nokia couldn't possibly happen to them.

2. Being in denial - not looking for, or wanting to see new disruptive trends.

3. Being entrenched in orthodoxy - holding onto beliefs that held true in the past.

4. Old-timers use political tactics to lock-down the best resources in activities that are less-important that transformation.

5. While leaders use the transformation word, technology implementation is often as good as it gets.

6. Staying stuck in comfort-zones with an unwillingness to make bold decisions which could compete with - or even cannibalise - the core business.

7. Putting short-term results ahead of long-term value.

8. The expectation that an operational workforce can become overnight transformation masters, without investing in re-training them.

9. Insular thinking and behaviour - not investing in and encouraging process-driven innovation which can become a permanent part of the organisation.

10. Lack of strategic clarity resulting in people being unsure about whether they should focus on speed, quality, efficiency, or innovation. 

As long as these barriers exist, a business will struggle to commit to authentic transformation. Only after a mindset overhaul among leaders will companies be ready to embark on legitimate transformation and avoid the consequences of digital sugar coating that are now evident in many places.

Accepting the existence of a new competitive paradigm isn't easy for some leaders of established companies. It often requires them to acknowledge an inevitable loss of business and an acceptance that they need to develop disruptions that cannibalise their existing business.

Failing to come to terms with this is a sign that a leader might be too anchored to old orthodoxies to lead a company in the digital economy.

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