In organizations that are solely focused on profit maximization and are de facto managed through the lens of sales and short-term results (for our purposes, let’s call this performance within a single fiscal year, although this includes month-to-month and sometimes even week-to-week sales), and which do not have a transformational culture (or are unaware of the need for one, which is sometimes due to inadequate competencies or structure), the vision, decision - and most often simply the need - to embark on a digital transformation is a big bitter pill to swallow.
Even in such a difficult situation, there are ways not to choke on it. And that’s what we’re going to talk a bit about today.
Balancing short-term Revenue Goals with long-term Vision
Corporations have to avoid focusing too much on current performance at the expense of the future. At least those that want to survive.
In large organizations, it is the processes that should allow space for digital transformation to take place - and those processes should be respected. When they’re not there (and the less innovative the industry, the easier it is to lack them) and - worse - there’s no time to design and implement them (we can already talk about the prospect of a few years here), the opportunity is operational initiatives empowered simultaneously inside and alongside the organization - Ops.
However, things are not always so bad. Various glimpses of the need for transformation can be seen in large organizations. In the area of budgeting and sales, some of these can be highlighted.
Strategic financial planning
That is, one that goes beyond annual planning and approaches a 3-5 year outlook (preferably with keeping excessive pressure on performance here and now through cash reserves).
Balancing the investment policy
…or policies when we touch multiple industries, multiple countries (country branches) or other types of large-scale gradations. What are we talking about?
- A simple separation of the budget outside the area of current operations. This happens a lot, and usually takes the form of departments (or fragments of several departments) responsible for R&D.
- Investing in technology (and in the desired scenario and current situation: primarily in talent) over the long term and uncertainty - is to allow experimentation and verification of risks (or more broadly: hypotheses) under safe conditions.
Establish long-term KPIs
Not everything revolves around revenue and EBITDA, really. This is one of the most difficult exercises to carry out, because it in effect places responsibilities on management - and sometimes it turns out that some of them don’t have the skills to prove it, because the original job design required a different type of talent (let me guess: marketing/sales one?).
And since I’m getting so smart, I’ll write some examples - and they stem from the areas of product management, with the product in this case being the entire organization and its future fate.
1️⃣ Let’s start with the area of UX, Product Design and design in the broadest sense, all the way to industrial design (high five, Victor Papanek!), which is close to my heart.
While it may be a stretch from an organization’s perspective (sometimes treated as a make-believe or whimsical visualization instead of a seriously executed design process), it has one of the key meanings in the B2C (and/or small business) customer area - even in the coming years.
I could do a whole course on how to measure UX and the impact of Design, but guess what - fortunately it was done by someone smarter than me, Vitaly Friedman.
2️⃣ If an organization has metrics like LTV, CAC, CRR, churn rate, market share (and practically every corporation has dozens of such metrics) - one can deepen their analytics with changes over time and space, so that global values don’t dim the vectors of change.
One of my favorite examples in the Telco area in Poland is the strategy of launching a fourth operator when the market has been dominated by three telcos for decades, which have already managed to absorb many smaller brands and companies.
In a situation of lack of infrastructure (the beginnings of putting up one’s own infrastructure, and hardware is expensive regardless of the industry), a bet was made on leasing foreign infrastructure - domestic roaming from the other operators.
In the situation of the need for rapid, logarithmic acquisition of customers (telephone masts cost money, remember?) the specifics of the country were taken into account: the distribution of population concentration, migration movements and trends, and the motivations of prospects combined with their age (and at the same time: factors that may influence the decision to change operators).
The result? In the largest 10 cities in Poland, this operator has the No. 1 position. It was a long but strategic march.
3️⃣ The age structure of the customer portfolio and its flow.
It’s a topic for a small book, but what sometimes surprises larger companies in today’s changing world is the addition of new definitions of customer, because maybe it’s not always the person who pays.
Maybe your customer is the non-paying decision maker (familiar with technology and having higher and higher expectations and less and less patience), and their parents are covering the bills?
4️⃣ Technology indicators of large products and innovation area.
Here briefly to mention just a few examples and inspire you to do your own research.
- % of revenue from new products/services vs. old portfolio (and no, this ratio will not be healthy if your organization is building a new offering and extinguishing the old one).
- Time to Market. Again, this is best measured per project, per area, per technology, per product - or else. Growing Time to Market is one vector of technology debt. When you notice it in the overall view, it means you’ve missed detecting its causes.
- Is it uncomfortable? What if I told you that in the area of AI Time to Market is very difficult to predict and even needs to be measured (also granularly) in order not to panic, not to increase chaos in the organization and - above all - not to kill AI projects for the wrong reasons. We are in a situation of big changes in most areas of our lives.
- R&D success indicators …and I beg you, let it not always be exclusively ROI.
- ESG indicators. When they make sense for your product (including in the area of its manufacturing or supply chain), the market in which you sell, and/or your target customer.
5️⃣ Know your… employees.
If you measure customers, also measure your inside talent (whoever uses only eNPS loses the discussion).
Check indicators of investment in human capital (training and development), engagement (I recommend motivation and satisfaction surveys - the more in-depth and diagnostic of the organization’s relationship with an individual employee - the better). I don’t even mention retention of key talent (kudos to HR, I love you guys).
6️⃣ An organizational culture that supports the vision
This can be even more difficult than putting the above metrics in place. The larger the organization, the more readily it builds multi-year strategic plans.
In how many cases are they realistically implemented with methodical changes to the organization internally, and in how many cases are they the result of a sales pitch that must be reached at all costs, and let the possible costs (technological, but also… business) be the concern of those in the next term?
7️⃣ Stimulate the minds
In addition to open communication (primarily internal in the beginning, as I’ve already written about) and building (and implementing) a real transformation strategy, talent (especially undiscovered one) needs to be stimulated and inspired.
This doesn’t immediately have to mean creating innovation programs or internal incubators - maybe there are already structures in your organization for this.
Sometimes a periodic (e.g., quarterly) organization of an open knowledge-sharing day between departments is enough to stimulate creativity - or to arouse the desire to change a particular department before the employee himself arouses the desire to leave the company.
What’s hard about this for ossified companies? This one day per quarter has to be allowed (for both the organization and the employees) and accept that no sales record will be set that day, nor - perhaps - will any of the standard calls.
Can you let your employees have that one day? You “allow” two every week.
8️⃣ Did I forget anyone?
Yep - the shareholders and internal international communications.
Communicating a long-term strategy will help shareholders understand the change in the dynamics of the company’s performance and health - and prepare them to expect longer-term results - and perhaps encourage them to get involved in the transformation.
When you work in an international organization, infiltrate country departments, because perhaps (in fact, almost always) digital transformation can be done collaboratively and with the support of more than one CEO or country manager.
Clearing the Capacity
The second bitter pill: you won’t do transformation if you don’t create the space in your organization for it. In IT reality, we usually talk about technological debt and the satellite concepts around it (e.g., outdated systems), but the reasons can also be business-related.
An overcrowded project portfolio won’t help. When, in addition, they are so dependent on each other that it’s hard to keep track and so variable that sometimes it’s unclear what will be implemented and when - it’s a sign that the decision window for transformation has been missed and now it’s a necessity or permission for the organization to drift further.
The audit area should also include processes and procedures that inhibit or block transformation. When their job is to protect the organization (e.g., legal, financial), there is still room for change.
Is the legal department using AI? We have a great foundation in Poland founded by Tomasz Zalewski, which specializes in this (check the meetups and the catalog).
The more often the only justification for a process is “we’ve been doing it this way for years,” the more often you can think about revising it, and when that’s not possible - bypassing or ignoring it. This is ballast.
Preparing capacity for transformation is not “for the here and now.” While an Ops-type team may even have it in its DNA that it will break up after a piece of the transformation is complete (perhaps to tie up a new one and start scaling), employees can be prepared to be ready to work in a new digital environment.
Allocate Resources for Jump & Do Not Disturb
How do you quickly diagnose the extent of a tragedy in this area? Use the “allocate your best people” method - and see how many of their current activities will have an elevated or critical level of risk.
Congratulations, your most talented people are also so-called bus factors - in the scale of whole organization. At least the good news is that now the organization is aware of this and can manage these risks.
Just as clearing space in an organization is important, people in an Ops-type unit should be delegated to make the digital transformation as smooth as possible (and the best in terms of content - and it’s their job, among others, to balance the relationship between time and quality if you’re hiring specialists and geniuses).
It’s as if they cease to exist in their current roles (or departments). Allocation can’t be a sham, and it can’t be adding another daily as part of taking part in a new initiative.
Allocation is again about being uncomfortable, relinquishing existing control - and about the trust.
The Recon
In operational units, another of the key competencies is land reconnaissance skills. In corporate reality, it’s identifying the internal area and the external environment.
To recognize the internal environment is to identify areas that need change - and the blockers to that change. When these are areas with a lot of debt (technological, process or other) - Ops takes stock and makes recommendations.
And I’m not talking about any powerful reports, because they will run out of time to write them - and almost no one will read them. Fit in two pages. Model your ADR or Amazon’s approach to new initiatives at the idea level. It is the synthesis of essences that allows those to whom Ops reports to make quick decisions.
External reconnaissance capability is not just analysis of market trends, competitive or market research - but also for pulling in external resources as support.
It could be the ability to formalize and conduct multiple PoCs quickly - at the request of the unit. It could be working with an external partner who has prepared and sold a tool for years that fits our change model, which we plan to produce internally. Don’t waste your time, because “dynamic digital world” today means, above all, uncertainty.
And it is the companies that can manage such a factor (again: not afraid of it, not acting ad hoc and not panicking to save ad hoc results) that will strengthen their position in the markets.
The Plan
Recon, like transformation and like the Plan, is an ongoing process, especially in such a changing world. The closer we get to the present, the simpler, bolder and - especially in large organizations - quicker decisions need to be made, with inertia down to less than a day.
The plan in the “here and now” window is all about action. The farther into the future the action transforms into a perspective for change, then into a strategy, and this - in the longest timeline to be taken care of by the Ops team - into a vision.
The farther into the Plan, the actions will not be certain or concretized - because perhaps the solutions to achieve them then do not yet exist (both at the level of tools produced and, for example, technology readiness or the perception of the target audience).
If it is too early - we also need to know that it is too early and prepare for it.
For simplicity’s sake, I am writing here about the transformation of an organization primarily through the lens of a digital or physical product that has a digital component. And a smooth operation in these areas - and above all the ability to prepare and communicate the Plan - must require knowledge of the software development process by all Ops members (duh!), but also key members of the rest of the organization.
And about that next week.