Leading Business Transformation From the Top

From their inception, new agile digital disruptors have realized the importance of centering their business objectives around value and technology, making it vital for traditional incumbents to follow suit. If waterfall organizations ignore this challenge, their ability to innovate and react quickly to market changes and new customer demands is threatened. To change and succeed, the active involvement from the C-suite is essential to instill a cultural shift, placing value and people (employees and customers) at the center of any transformation.

Sounds easy, doesn’t it? Well, actually, it is.

At the heart of any transformation, there are common themes among agile organizations that, if implemented correctly, can have a major impact on productivity, innovation and the ability to grow market share, while enhancing the customer experience.

Be Value-Driven

Being value- and purpose-driven should be at the center of any organization wanting to be more agile, with a strong focus on the customer. To serve the customer, your organization, team and individual purpose must be explicit and aligned to one another. This ensures that every team member is directing their energies for the same goal to unlock the full potential of the business.

On the surface, you may think this is already happening. Some boards are setting objectives related to the customer or efficiency, but too often this message gets diluted due to an inconsistent approach to determining value and prioritization. Often, decisions are not based around customer value because customer thinking isn’t extended throughout the value chain. Frequently, when decisions are taken in isolation, work that could offer true customer value is missed altogether. For example, fixing certain tech debt is often prioritized without the consideration of customer value, which contributes to waste. Value may be lost due to legacy processes, such as planning, budgeting and forecasting, which can slow organizations down.

A lack of feedback loops and continuous planning can also impact business velocity, with the board needing to listen to product teams, as they are closest to the customer. This ensures that any reprioritization by the board is based on value, which is then filtered down once again, giving the product teams confidence to make decisions that will positively impact the customer. Traceability is increased further by implementing a story hierarchy, allowing everything from initial concepts, features and detailed user stories with acceptance criteria in a structured, easy-to-follow way.

Do

1. Ask what the value of any initiative is, even at the feature level, making sure it aligns with the organization’s objectives.
2. Create true transparency of organizational alignment via a consistent hierarchy of work.
3. Understand and organize around your value, helping teams relate to the customer and your goals. Too often teams are functional or system-based and don’t appreciate the end user experience, making systems thinking harder to achieve.

Don’t

1. Prioritize based on effort, which is a typical waterfall anti-pattern. Small, easy, quick wins will only reduce the capability to deliver true value.
2. Set up projects to deal with regulatory change. Consider these as any other non-functional requirements and add to the product teams’ backlog.
3. Organize in functional silos with work having to be passed between them to be completed.

Create Teams Around Products

In the world of agile, teams siloed by function rather than products don’t work. They’re too removed from the customer, require process hand-offs and often have competing objectives, resulting in work not focused on value. Small product teams stay close to the customer and quickly adapt to sudden market changes and differing customer demands. When done well, these teams are consistently more productive, morale is higher and better-quality products are released to market faster, with a lower risk of failure than traditional methods.

To do this, teams need to be carefully constructed with the right multiskilled people who complement the product, including non-IT roles, such as sales and marketing. They should ideally be no larger than 10 to 12 people or “two pizzas” (see Brooks’ Law), which makes them highly productive and accountable, empowered by clearer visibility and effective collaboration. Organizations with large monolithic systems will find this challenging due to the amount of responsibility placed on the team. Breaking these down into loosely coupled microservices can help by reducing the scope of accountability to a manageable size.

By having teams work this way, products can have funding associated to them, with product teams directly mapping to this. This makes it easier to track ROI, which is a better metric to measure output compared to capex or opex. As a result, legacy reporting needs to change, too; the metrics you really need are cycle time, right first time (quality) and customer experience. These are then used by product teams to understand how they are contributing value. All these metrics can be generated automatically and made available through dashboards; gone are the days when PMs and PMOs need to chase developers for updates.

Do

1. Value teams and individuals in value creation roles and remunerate them accordingly, considering product ROI. In particular, rockstar engineers should be able to increase ROI, and should be retained at all costs.
2. Break monoliths down into microservices. These are smaller in scope and more manageable for a single team.

Don’t

1. Set up project teams, which by nature are short-lived and reduce accountability. Empirical data shows that stable teams are 60% more productive and 60% more responsive to customer input than teams that rotate members.
2. Track value through project accounting metrics–opex/capex split doesn’t help make decisions, it only creates management overheads that demotivate people.

Create an Engaging Working Environment

Globally, two-thirds of employees are not engaged. This means employees turn up for work but do not apply themselves and offer minimal effort. By having an agile mindset, implementing a set of principles based around value that everyone works to, gives employees the confidence when making decisions. Even if the outcome isn’t exactly what was expected, having a fail-fast attitude can allow continuous learning and improvement to flourish—the only way to evolve is to fail. It also helps create a culture where engaged employees feel valued and psychologically safe.

With an engaged workforce, people collaborate more, helping knowledge and skills to be shared, boosting innovation. This notion is supported by the Medici Effect, where the greatest innovations are created by the “intersection of ideas, concepts and cultures …” This environment doesn’t just have an impact on innovation: According to Gallup Business Journal, engaged employees can be directly related to increased revenue. That isn’t all: Compared with disengaged teams, engaged teams show:

• 24% to 59% less employee turnover.
• 10% higher customer ratings.
• 21% greater profitability.
• 17% higher productivity.
• 28% less shrinkage.
• 70% fewer safety incidents.
• 41% less absenteeism.

Leaders should make space and time for diverse new ideas to emerge but must maintain an overall sense of purpose. It is their responsibility to help people resist the urge to converge quickly on a solution without feeling they lack direction.

Do

1. Empower your people by trusting them to do their jobs, which in turn will create value for the customer. As Richard Branson said, “I have always believed that the way you treat your employees is the way they will treat your customers.”
2. Embrace failure and learn from it. The fastest way to innovation is through experimentation and learning. Delivering in smaller increments reduces the risk and investment and gives results quicker.

Don’t

1. Assume you have all the answers. Allow your employees to develop a collaboration of ideas to identify one possible solution to a product or process design challenge and find seven possibilities.
2. Expect innovation to happen in a vacuum. It’s not the responsibility of a few individuals but rather one big team. Value new ideas from your employees and create an environment where innovation can flourish and is rewarded.

Outside-In Focus

Although trust in your employees and understanding their motivations promote increased productivity, if organizations ignore their customer pain points and don’t have the ability to adequately respond to customer feedback, all other efforts will be in vain. Leaders need to consider what is happening outside the organization and be aware of customer demands, as well as market trends and behaviors.

In one of the most recognized cases, Blockbuster’s demise, many consider digital disruption paved the way to administration. In reality, it may well have been the company’s difficulty to innovate quickly enough compared to more nimble competitors. Blockbuster was savvy enough to see the rise of Netflix as a threat, but internal legacy processes made it more difficult to react. When it did act, its traditional way of working led to a proposed solution costing circa $400 million, which led to investors struggling to see ROI, so deemed it too risky.

A more agile organization could have responded quicker and with smaller increments (MVP), making its overall solution cheaper. Further analysis would have also identified that the cost of technology advancement would decrease and support services would evolve. Being set up as an agile organization and assessing outside influences, Netflix had also foreseen the move from the traditional VHS-versus-DVD market to what customers really wanted: video on demand.

This is no longer a choice; all leaders must be aware of outside influences (PESTEL) and emphasize the use of consumer analysis and encourage their employees to put themselves into the end user’s situation. By doing this, agile organizations can adapt to market forces and customer feedback quickly, helping to prioritize the backlog and provide value.

Do

1. Take feedback from the customer early, feature toggling and canary testing are great ways of enabling this.
2. Constantly research, analyze and understand the effects outside influences can have with business and customer alignment, and the impact on value.
3. Respect your competitors and the new kids on the block. They may have seen something you don’t.
4. Understand how technology can and will change consumer expectations and habits. Evolve your products accordingly.

Don’t

1. Rely on past successes to survive. Phrases such as, “We’ve always done it this way,” and, “We’re too big to fail” should never be spoken.
2. Dismiss information (shoot the messenger) because it’s a tough pill to swallow and will require significant change within your organization.

If the above organizational attributes are not realized, the chances are that your business is not agile, so a shift in mindset is necessary to establish a new way of working. This will only happen if the CEO leads from the front, embraces agile personally and creates an engaging working environment where work is prioritized by value and people (employees and customers). Then, and only then, can innovation thrive, boosting productivity and helping your business to react fast enough to changing market forces and remain competitive.