Orchestrating Transformation

How to Deliver Winning Performance with a Connected Approach to Change

Michael Wade, James Macaulay, Andy Noronha

• Publisher: DBT Center Press
• Year: 2019
• ISBN:
  9781945010040
• Edition: 1
• Topic: Commerce
• Subtopic: Management

Company leaders feel the urgency to transform their organizations in the face of digital disruption. New rivals are digitizing whatever can be digitized to attack incumbents’ value chains, gaining marketshare, eroding margins, and wreaking havoc to the competitive landscape in virtually every industry.

For large and midsized companies, the imperative to transform is clear. How to transform is another matter.

The hard truth is that despite leaders’ best efforts, and billions spent in pursuit of digital transformation, the vast majority of organizational change programs fizzle, falling well short of their expected impacts. But organizations can ill-afford for their transformation programs to flop. Failed transformation programs put incumbents behind the eight ball when it comes to dealing with disruptive competition.

With this important new book, Orchestrating Transformation: How to Deliver Winning Performance with a Connected Approach to Change, the team at the Global Center for Digital Business Transformation, an IMD and Cisco initiative, set out a new prescription for getting transformation right.

The piecemeal strategies and pilot projects that are hallmarks of conventional transformation programs are hopelessly inadequate for the intricate, sprawling organizational environments found in most companies.Transformation practitioners need a different mindset and a new approach to executing change that can handle the complexity and scale of today’s market leaders. Orchestration—"mobilizing and enabling so as to achieve a desired effect”—paves the way for a new, more holistic view of organizational resources and how they work together to drive change synergistically.

The follow-up to 2016’s award-winning Digital Vortex, the book is packed with quantitative and qualitative insights from years of applied research and engagement with executives around the world.

A unique and indispensable guide for practitioners, Orchestrating Transformation moves past traditional change management doctrine to show how a connected approach to change can change everything.

Chapter 1

The Transformation Dilemma

Entangled Incumbents

The vast majority of organizational change efforts fail. Estimates vary, but failure rates range from 60 to 80 percent and don’t seem to improve over time.1

And when it comes to digital transformations, recent research suggests that a paltry 5 percent meet or exceed expectations.2 In fact, digital transformations fail so frequently that we’ve met many executives who are hostile to the very term “digital,” or who have made any phrases containing “transformation” verboten because of the word’s perceived connotations of hype, frustration, and fiasco.

On some level, reservations about the word “transformation” stem from a discomfort with change and the turbulence it causes. There’s good reason. The truth is that, despite our labors as managers, as with the universe itself, the level of disorder within organizations never decreases (in physics, this is known as the second law of thermodynamics).

The natural state of companies as they grow and mature is always towards more disorder. The word people use to take the measure of disorder in any system is “entropy.” This word derives from the English prefix en-, meaning “internal,” and the Greek word τροπή, pronounced “tropē,” which has an interesting etymology. It means “transformation.”

As noted, one of the main reasons for this transformation failure rate is that many company leaders don’t understand the problem they face. This misunderstanding flows from three organizational characteristics that, together, stack the odds against digital transformation success when traditional change methods are used:

1. Scale. Companies are awash in huge volumes of “things that need to be managed”: tasks, budgets, planning cycles, organizational changes. In addition to the number of things to be managed, there are also many different things that must be managed: processes, data, systems, assets, structures, and people. Companies face an acute case of information overload as well. The data is not merely “big” in volume, but also high in variety.
2. Interdependence. The things that need to be managed are interrelated, and the effects from any one action are felt throughout the organization in ways that aren’t easy to predict.
3. Dynamism. The things that need to be managed, and the environments (market, regulatory, etc.) in which they operate, are constantly evolving. The need to do things differently is a constant competitive reality. Simply put: things change a lot.

Because these characteristics go hand in hand and reinforce each other, we refer to them as the organization’s level of entanglement (see Figure 5).

In Digital Vortex, we coined the phrase “encumbered incumbents” to describe the challenge large and midsized companies face in adapting to disruptive competition. We noted that they are “saddled with cost structures and value chains tuned to the competitive dynamics of an earlier era.” These structures and value chains encumber companies’ efforts to compete. Entangled incumbents are hobbled in their efforts to transform.

Our interactions with companies worldwide tell us that a new approach to digital business transformation is needed—one that acknowledges this entanglement.

Scale: More, More, More

Imagine that two computers each store information. The first contains information in amount X; the second has information in amount Y. Now let’s suppose that the information on these two devices is needed by different parts of the organization at different times and for different reasons. (It would be easy to imagine the computers as servers containing employee data, for example.)

From the organization’s standpoint, the total volume of information is not merely the sum of the information on the two machines (X + Y). Additional information is required to understand how the information on one machine relates to that on the other. Is the information duplicative? Is it contradictory?

The organization may also need to know: its location; whether it’s properly secured; whether it’s accurate; when it was produced; who has access to it; how other parts of the business use it; what the data can tell us about other information we possess, and so on.

Now imagine this situation playing out across an entire organization with thousands of information stores, users, and scenarios in which the information is needed. We all know information in companies is growing rapidly (as in “Big Data”), but less attention has been paid to this organizational metadata, which is a mainspring of execution complexity. In short, information about information is a natural byproduct of organizational scale.

When Ann-Christin Andersen first started asking her colleagues about the digital maturity of TechnipFMC, she was told variations of a similar story: the company had a few ongoing efforts, but mostly there wasn’t much happening on digital. She decided to put this to the test by taking a quick inventory of the company’s digital initiatives.

The results shocked her. While the company’s customers had called out a lack of digital capability, she nonetheless quickly uncovered more than 180 digital initiatives in various stages of completion. They were scattered across the company’s three major business units and in shared service organizations such as IT, HR, and finance. Very few of the people in charge of the initiatives were aware of the others, even in cases where the work significantly overlapped in scope.

Andersen quickly realized that she’d need to get a handle on the abundance and diversity of these initiatives. Volume is one thing, but diversity can heighten problems of organizational entanglement.

Eventually, she discovered that the different digital projects, even those tackling the same challenges, were using different underlying standards, protocols, and technologies. Sometimes, identical problems were being addressed in different parts of the company in totally different ways. A lot of projects couldn’t leave the pilot stage.

Does this sound familiar?

Interdependence: Hitched to Everything Else

The complexity that comes from managing “many things” and “different things” can be made worse when those things are connected to—and affect—one another.

“There’s a lot of interdependence amongst capabilities within our organization, and that interdependence has such a huge effect,” said Michael Loughlean, director of enterprise architecture at Suncor, a $28 billion Canadian integrated energy giant. “In fact, we can understand more from the dependencies than we can from the work that we’re actually trying to get done.

“For example, we looked at the dependencies just within what we call ‘reliability enablement,’” Loughlean explained. “We came up with 40 business capabilities that you need to be good at in order to do reliability well. But we also came up with 28 other capabilities that reliability was actually dependent upon—capabilities that came from other areas. So you’ve got to be able to say, ‘This is a great initiative, but because of those dependencies, let’s not forget these other three, four groups that need to be a part of things.’”

In his seminal 1967 book Organizations in Action, American sociologist James D. Thompson described three types of interdependence, which are illustrated in Figure 6. Each demands a different a...