Transformation

All change

Introduction

A frog and a caterpillar occasionally bump into each other near a garden pond. The frog comments, “You’ve changed. You’ve doubled in size in just a few weeks!” A month later they meet again. This time the frog comments on how his friend has transformed.

This gritty Aesopian fable highlights the misunderstanding of the terms change and transformation. The latter has an optimistic tone, a new beginning. Transformation also means ‘big ticket’ sale for the vendors, so over the years they have shifted their language accordingly.

Here are some changes that are fancifully labelled as transformation:

• A new website with a digital channel to market

• The installation of a set of enterprise application modules

• Hybrid working, but still focusing on activities and not outcomes

• Wallpapering old processes with AI.

Digital transformation as a term is considered a synonym for business transformation. And that would be accurate if the transformation were driven by the need to thrive in the digital age. But usually this simply entails automation of what was previously done manually and so might best be described as ‘digitised transformation’.

It is worth knowing that using Gorilla Glue to attach wings to a caterpillar will not make it a butterfly. Similarly adding four prosthetic limbs to a tadpole will not make it a frog. But this is how some leaders think. Transformation in the real-world involve change at a cellular level - the caterpillar and frog literally dissolve creating a pool of raw material for the next stage.

What’s happening

The big three (MBB) consultancies quote the failure rate of transformation programmes at 70% and upwards. The successes are most likely cosmetically pleasing, at best.

Transformation programmes, whilst often well intended, tend to divert resources away from where they can create value. Staff are unsure if they are part of the problem or the solution, which erodes cognitive capital.

Organisations often locked into the vendor by their misguided technology choices, appear to be developing Stockholm Syndrome and so find themselves very agreeable to the idea that AI will solve everything.

In many cases, even though their transformation is going south, leaders will continue to ‘invest’. This suggests they believe that the sunk costs fallacy is itself a fallacy.

What’s really happening

Consultants love a plan. The more linear the better. A -> B. Analysis, design, implement, deliver and maintain. This approach makes it easier to slot in milestone payments. So even if delivery never happens, it has still been commercially worthwhile.

But we live in an increasingly disruptive world. So whilst we are clear on point A (our current, unsatisfactory situation), point B, whilst intended to be an improved version of A, will not necessarily be an appropriate model, given how the world is changing. In short, point B will no longer sit still.

Again this new ‘model’ reflects the solution to yesterday’s problem and so the cycle repeats and the suppliers continue to report healthy financial results.

But transformations do have their uses, particularly when the new CEO appoints a Chief Transformation Officer. In this situation the transformation programme is a form of corporate chaff, which gives the CEO cover for several years until she is rumbled. And that can be extended further by blaming and sacking the CTrO.

Whilst transformations are a waste of money, they are clearly useful to some. Boardrooms should regard the word transformation with deep suspicion.

Transformation gone right

But even if the transformation is successful, it can turn the organisation into a pressurised steam cooker that is about to lose its structural integrity in a big way. Think pinging, high velocity rivets shooting across the open plan. The organisation, in many cases based on factory principles, was not designed to be operated at such ‘high revs’.

We do not need a faster inert factory. We need a sensing, opportunistic living system that can operate in hostile conditions. The transformation sector is currently serving up frenzied sausage machines with a ‘strap on’ brain. Again transformation does not work for organisations of any pedigree, ie. those predicated on Taylorism (efficiency is everything).

Agile to the rescue

It is tempting to think that ‘agile’, which should have never left the IT function, is a smarter way forward. Incremental shifts aligned with current challenges. But that is likely to turn out in much the same way that people with self-esteem issues overdo it on the cosmetic surgery front. The results are hideous and the self-esteem issue is worsened.

My recommendation is to run the sausage machine for as long as it creates value. But make it a priority to find other non-adjacent revenue streams. Not just new products and services, but new business models that operate on living systems principles. These can be acquired or home grown.

By all means ‘amp up’ your sausage machine using AI / digital steroids but do so in a careful manner to both avoid the pressure cooker problem and reduce the real risk of your business becoming obsolete overnight.

You bet

True organisational transformation rarely works. There are exceptions. Microsoft comes to mind. The factory model with its ‘input -> process -> output’ logic was never designed to be adaptive. Your options are to run your current business into the ground or build a portfolio of adaptive organisations.

In essence the role of the modern CEO is to build and manage a portfolio of business models. In other words, a portfolio of bets.

If you’re starting to think of your organisation less as a machine to optimise and more as a portfolio of bets to manage, I’d be interested to hear how that shift is playing out for you.