Transformation & Change100
Crafting a Business Agility Transformation
Crafting a business agility transformation by Phil Abernathy
May 22, 2019
May 22, 2019
Based on 12 years of experience in numerous transformations, some small, some mammoth, some successful and some not, this talk will outline how to craft a successful Agility transformation from scratch to finish.
The talk will address the following million-dollar questions:
A talk filled with real world stories and ‘too funny to be true incidents that will show you the way, or what to avoid?
All right. So, there once was a mouse, and this mouse was lost in a field, and it was lost in a wheat field and couldn't find its way out, and the wheat was really high. So it looked up and it saw this fantastic owl sitting up on the tree there, and he asked the owl, "You're up there, you can see everything. Can you show me the way out?", and the owl said, "I have a strategy. Why don't you grow a pair of wings, fly up, then you'll see a way out and you can head out."
The mouse said, "That's a fantastic idea! But how do I grow wings? I'm a mouse.", and they owl said, "I only do strategy, I don't do execution."
So I'd like to, I'd like to talk about Agile transformations in that context. It's so important to have not just a strategy for Agile transformations, but absolutely be able to execute it as well, and the strategy has to match the capability for your execution. So what I'm going to do quickly today - am I going the wrong way. Yes, I am. OK! - is very quickly talk about the principles of success, whether we transform or not, then move into the approach and then some challenges.
So there are three principles, as I call it, before you start any transformation. Now, different companies are at different stages. So the first one is, decide on it. This is that 'why'. Not because the boss said, or because it's the latest thing that we have to do - why are we transforming as an organization? And this is a business reason. It's because you don't want a Kodak moment. You're here one moment, you're gone the next. You don't want, maybe your competitors are coming along really fast. Maybe you want to grow. Maybe you want to reduce cost. Maybe you want a better employee engagement. There has to be a reason. And under that first heading, what is key is that leaders work very closely at the executive level - with the boards or without the boards - but come up with a shared understanding and commitment as to the 'why'. Now we as coaches and transformational leaders have to be involved in that journey of defining the 'why' if you don't have the 'why' then the 'what' and the 'how' struggles later on. So that's the first one. The second one is the commitment. Now, this is not about just saying, "Do we want to go Agile? Yep, OK", and you get what I call the kiss of yes, yes, yes, yes, and nothing. So what's important in that stage that I found with the transformations that I've done, is to be able to have the teams burn their boats. So the most successful transformations that I've run with the leaders, they've actually used Alexander's strategy on the banks of the Indus. He came in there, he saw 50000 people. He saw this army of the Indian king with 300,000 - and his troops wanted to go. "No way am I going to do this". So he sent his people, they burnt the boats. So they had to fight the battle, they had to go through it, and of course, they were successful. So it's making that commitment and holding the leaders accountable. If the leaders are not held accountable, and I'll talk about the difference between the transformation team and a leader led transformation. It's the executive leadership that has to own the transformation. If you start anywhere else, yes, it will be a nice pilot. Yes, it will be an MVP One. Yes, it will be - and sometimes you have to go through that journey. That's fine. But for a total transformation to actually take place, you need the top down commitment. And lastly, you need to support it. So what does that mean? That means putting your money where your mouth is. I see so many transformations, "Fantastic! We are going Agile", and you've got one person. And the budget, "No, you have to go through procurement and that takes one year."
Yes, thanks for sharing that story. So I stole it, as you can see. So you have to support it as a leadership team with the right amount. Now, in my experience of 12 or so major transformations, you're looking at being cost neutral in the first year. So that means you don't need an additional dollar of money. So where does the money come from for the Agile transformation? It comes from all those programs you are going to stop. That's where it comes from, and that's the big commitment and that's the big support. So when you commit, it's very important that leaders understand the impact of the Agile journey, and I'm going to walk you through that, as to what is the impact of embarking on this journey of agility, and thanks to Bjarte this morning, he talked about 'Going through the roundabout is more difficult than waiting at traffic lights.' It really is. So you have to know what is going to happen before you commit, and we have to be honest with them about that.
So there are a couple of things before I go any further. I'm Phil Abernathy. I live in Slovakia, in Bratislava, which is 45 minutes from here. So it feels almost like coming home, and I work out of Australia and around Bratislava because of the two hemispheres, and that makes it a bit easier for me.
So what are the principles, and what's the transformation approach? I use this simple thing: I call it the beams, the streams and the teams. That's what you have to set up before you embark on a transformation. So the beam is nothing but the agreement of what is agility in your organization. You've done the 'why', you've talked about the 'why'. Your leadership team agrees you need to change. Do you have to change? Yes. Now, a lot of the banks and financial services institutes that I work with, I mean, the need to change is not really there because they are making bucket loads of money still. But the senior leadership can see those fintechs speeding along, they can see them coming, and they know that a Kodak moment could be around the next corner. So once you've established the 'why' you have to talk about it. Now don't go into, "We've got a lean program. We've got - I've worked in three transformations. Oh, my gosh." They had a Lean program, a Design Thinking program and an Agile program. How do you think that went? It didn't, and we were all fighting. They had Lean coaches with Agile coaches, and Design Thinking was these cool hip guys who put up the sticky notes, and the Agile guys, - it just didn't work. So, decide - it's just a palette of values and principles that are the same, whether you're Lean, Agile, Design Thinking, Six Sigma - doesn't matter - with a set of practices. I look at the practices as a buffet. Don't select anything, let the team self-select the practices. You've got values, principles and a set of practices. That's it. Now, what are those practices?
I took the artistic liberty of imposing one on top of the other. So these are the two models. You've got the heart of Agile, you've got modern Agile, great. You pick one, you pick both, it doesn't matter. But spend some time agreeing within your company, what are these principles? What are these - you've seen from the previous speakers, they had a list of some things up there. That's great. If you don't spend that time, believe me, guess who's going to have the most arguments? And it's the most difficult group to manage - the group of Agile coaches. Oh, my God. You have ten of them in the room, you'll get eleven opinions on everything. So anybody - experience that, right? Yes, we all know that. So and it's good fun. It's good fun. So. Pick one of them. It doesn't matter, agree what you value. So can somebody just call out the values that you would put, the human values that are essential to any one of these, the heart in the middle? Can you call them out? I'll start with. Call out one, any one? Trust, thank you. Next one. Empowerment, next one. Sorry? Care. That's right. Collaboration, appreciation, respect, etc., transparency. There you go, and I never forget the mother of all values, courage. If you don't have courage, this is going to take a huge amount of courage.
So. Three things you need to agree, you need to agree your blueprint, what is your way of working blueprint, very roughly. This is a half a day sketch with your leaders. You can do a workshop with them. You don't define it and give it to them. No, let them come up with it. What does WOW - way of working - mean for us?
What is the content of agility? OK, we're looking at these principles, what are the baseline measures? So you use OKRs or whatever, we're going to talk about that in a little while. That's your beam. Take a little bit of time to set up your beam. Now, once your beam is ready, you get into the streams. So this is the three of four areas that you need to transform, and right in the middle, you see that scary one: organization model, and you go, "Really? Do I need to change my org structure? Are you serious?", and I get those looks back at me. So this is what you have to tell them before they commit. "Yes!"
And I'm going to tell you a story of how we came to this. So I started in 2006 with transformations. I did a huge bank together with Jeff Smith in Australia called Suncorp, and of course, we started with principles and training and Scrum things and standups and sit-downs, and the whole lot that you all know about. And after two years, nothing happened. I guess they were doing some stuff, but the performance did not improve. And I worked with IBM. I was working and helping, leading the IBM transformation - that's 400,000 people globally. Completely different scale, and we had to go on a tour to find out why was this not working, and that's when I found the maze.
Now, traditionally, we have an old structure: department one - in the 80s, in the 70s, coming back from the Industrial Revolution - department one, department two, HR, finance, supply chain, etc. Around about the late 80s, we went global, and then we got what is called a Matrix organization. So then we got, sectors, regions, geographies, etc. Still manageable. Something happened in the 90s that really threw everybody off. There was this culture of KPI management that actually came out of business schools, and KPI management said that if a KPI is having a problem, put control, put some management on it. So if we had a problem with innovation, let's make a Head of Innovation. If there's a problem with the sales service, let's make a Head of Sales Service. If maintenance is a problem, let's make a Head of Maintenance. If we had, and a company I worked with, had a problem in the Netherlands with gross margin, there was a head of the region, head of the country, head of the product, head of the sector - all in the Netherlands. Gross margin's the problem, let's make a Head of Gross Margin. And guess what? Each one has a vice president with armies and directors and people under this, and right in the middle is Bob. Bob has not changed. Bob is still the person doing the work. We have not changed Bob, and Bob is in there struggling. So we built an inverted pyramid above Bob, and this is how organizations grow because we think if there is a problem, we can put a VP on it and more people.
So now you've got the maze. But then there's the madness. The madness is all about how work flows through the maze. So you've got them, you've got KPIs this thing, that thing, goals, etc., and then you've got the process. This is how it should work. This is a nice big chart using Visio and it's in the cupboard somewhere. But we know that doesn't work, and there's another way that work is done. This is how it actually happens. But hey, if you want things done fast, you call Bob, and you do this and you do this, and you get it done.
So there's always at least three ways that work is done within an organization. And now what do we do? Now, we go and automate the whole lot. So we go and bring SAP, and we bring whatever else in, and we pour it like liquid cement and we do configuration and then it becomes hard. That's the end. Now we're stuck, so now try to change that! That is what organizations are faced with, and because it's so difficult to go through that, we need these people - the maze runners! Armies of project managers. So the company I worked with, a bank in Australia, 110, I was just telling them at the table, one hundred and ten developers. How many project managers do you think? You say, aaah, ten, maybe five? Ten... Ninety-eight! Because they have to run through this. They have to run through this. So what we found is that behind these values, principles is all great. If you do not, you have this dark sector, which is the maze, the madness, and the metrics, which are just crazy. You have so many metrics, but you have no data. You have no information. You can't hold anybody. So you have to focus on the org structure, the operating model and the talent if you want it to change.
So we're back to this picture now, which says if you don't fall floor, sorry, focus on the org model, you've got a problem. But then there's one more thing, you've also got the operating model. So what is the right org model? And I came up with this two years ago. It's called the Org BMI or the Organization Bureaucracy Mass Index, which you can actually measure, and it calculates the the mass index between enablers and doers. It's a simple calculation. You mark out the roles, enablers and doers. Doers are the people who actually do the job. We need enablers, but how many? And organizations have this bubble shape, you know? This bulb at the bottom and there's this big middle area. So eight to 12 is fine. Where do you think most financial organizations in the financial services sector sit? You're looking 30 plus, looking 40 plus. So when you do these reorganizations, you have to be honest. There are too many chairs with too many people.
So in the company I worked with last year in Miami, we did the Org BMI calculation, we did the restructure first. We designed the chairs. Small cross-functional teams that work towards a single purpose. What's the service? Small, cross-functional team. This is not in I.T. They had 72 managers in the area. We placed out all the chairs, the teams, and work bottom up. Design the teams, then put your chairs. Hey, well, we have only 30 chairs - and the music has stopped. And you have to make hard calls, and these managers were in the room doing it. This was not some secret squirrel work done in the back room by the consultants. This was the leaders themselves understanding the impact before they committed to the change.
So you have to look at a couple of things. You look at the organization model with the talent assessment, chair design, boss design - which is your bums on seats, who's going to sit on those chairs? - and then on the other side you've got the operating model. And thanks to the first speaker, Bjarte, budgeting plays the most important role, because it's so vital. If you do not have, if you do not have your budgeting, which is the way work flows through your thing, you can have all the beautiful value charts that you all shouted out so well on the walls and posters, but that's not what the living reality is, so it has to change.
And of course, you need leadership capability. Hmm, people say, "it's not just mindset, it's actual capability", and there's three things that leaders have to learn for this. The first one is, how do you create clarity of purpose? If you have highly empowered teams with no clarity of purpose, you have got a bigger problem than if you have command and control. Command and control: just shut up, do what you're told. That's it. You don't need clarity of purpose.
But how do you do that? Using OKRs is the model I use very effectively, I call it OSKRs - objective, strategy, and key results. Control without controlling. I keep coming up to this where C-Suite people tell me, they see this, "Yeah. You know, this culture thing, it sounds nice. But I'm scared of losing control". They see it as binary. It is not binary. You can have both. You can have a great empowering culture and have control. So I focus, when I work with the leaders, on how do you get better control. Now they are happy. They come in feeling great, because now I can get more control and that's exactly what we give them. That's what measurements, the right measurements, give them. That's what transparency gives them. That's what Gemba or management, by walking around gives them. It gives you that better control. Now they feel better. This is not about the soft stuff. We're talking business results, hard core business results, great talent, the great companies.
Amazon. If you take the Spotifys, or if you take the Apples or if you take the companies that are doing very well, they don't have big room planning. They don't. So those three, we've then got the teams. Now this is key: you don't want transformation teams driving the transformation. They're just services. The transformation has to be led by the executive team of the area, the department, the company that you're transforming. If they do not take ownership for this - now, that can be a department, it doesn't have to be the whole organization - then the transformation team has no hell, no chance of success. You can set up your streams on the side, whether it's the old model, the operating system, the capability uplift, and finally the change.
So that brings us to this. Now, what are the challenges? I've got only a minute and a half left, this 20 minutes was really good and fast, so I've reduced my challenges to on. Yeah, it's only 20 minutes.
What's that one? So if you look at this picture, where do you think the collaboration effectiveness is the most - at the top or at the bottom? Where do you think the teams collaborate? The leadership executive is a team. Middle layer. It's a team. Where do you think the teams collaborate effectively? Down or up? Down, absolutely. That is my number one challenge: the top teams do not work as teams, and in most of the transformations, that's the area of focus.
Getting agility into the executive team is all about helping them collaborate, and the only way Microsoft and Satya Nadella turned Microsoft around, from forty six dollars a share to one hundred and seven dollars a share, is by focusing on his leadership team, and helping them collaborate. Because a mile of difference at the top, an inch of difference at the top is a mile of difference at the bottom. And then you get this last question all the time: are we there yet? Are we there yet? No, it's a journey. So it does take time. And with that, I'd like to say thank you very much.
Founder @ Purple Candor
Phil is a global leader helping organizations transform to a new Agile way of working that helps them get more productive and their people more engaged.
He has over 35 years of business and leadership experience and is a world-renowned trainer, coach and consultant who has helped train and transform global companies like IBM, Honeywell and Shell.
He is also an inspirational speaker and entrepreneur who wants to change the world for the better by helping to build the leaders of tomorrow.
Phil is the founder and director of Purple Candor, a boutique leadership and management consulting company based on Melbourne, Australia and Bratislava, Slovakia. (www.purplecandor.com)
He is also the founder of ‘Skill the Gap’, a global not-for-profit initiative focused on providing students with right attitude, mindset and soft skills that the businesses of today need. (www.skillthegap.org)
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