Manas Deb – Enterprise Transformation Circle

Project Execution In Large Transformation Programs

Digital Transformation Cookbook — Mon, 20 Feb 2023 08:00:16 +0000

Transformation initiatives typically aim at ambitious goals such as maintaining a competitive edge or driving revenue and growth opportunities.

This article gives a summary of four chapters of the digital cookbook which explain how the ambitions on the program level can be broken down to individual projects.

Regardless of the concrete methodology any project undergoes several typical phases in a more or less iterative and dynamic way:

Ideation: understand the value of what is being developed
Development & Design: understand how the product shall work in detail and deliver its functionality
Testing: apply quality assurance measures to ensure the proper functionality before it’s released
Implementation & Deployment: put the product and processes into operation and make sure everything runs smoothly
Evaluation: ongoing analysis of the results in ongoing operations

Implementing a project which is part of a large initiative requires a few adjustments to traditional project methodologies For example, traditional project methodologies can be limiting due to rigid planning structures and funding constraints.

1. All Projects Must Contribute To The Strategy

In order to achieve the goals of a large transformation initiative, its goals must be implemented via a sequence of smaller yet coordinated transitional steps in the form of individual business projects. Those projects must meet several criteria: Most importantly they must deliver results in a quick and agile way, and prove their strategic contribution at any time. Furthermore, the projects must be capable of reacting to changes and new insights on the level of the transformation program. In addition the projects must interact efficiently with many parallel projects and coordinate tasks and deliverables.

How do companies manage to find the best way for them when traditional project methods are often not suitable for meeting these criteria?

Let’s take a look at the different methods. For example, the so-called waterfall model emphasizes linear processes and cannot support the necessary speed and coordination required by simultaneously executed activities. While purely agile approaches may also have their limitations in supporting strategies or implementing innovation at the enterprise level, the ability to adopt agile into your digital project methodology is key to running a successful digitalization project. By pursuing planning as a series of smaller, reoccurring activities to ensure that the product or service can deliver on the highest business value, it can improve processes and performance, increase speed and team efficiency, elevate user experience and, above all, drive customer satisfaction.

In the article Modeling At The Project Level, we highlight in detail why we recommend dividing every important project into three phases, each with increasing granularity.

2. Start With Business Modelling

A method for iterative business model development is required. This starts at the highest level with the business model of the entire company. Since the business model is changing in the course of a transformation, the individual projects contribute to this comprehensive change.

A suitable technique here is the Business Model Canvas (BMC) by Osterwalder [1] or the St. Gallen Management Model[2].

The BMC, which we will focus on here, enables a simple visualization and step-by-step clarification of an otherwise rather “cloudy” subject of discussion – the elements of a business model.

The method is based on the concept of dividing a business model into nine core building blocks – customer (segments), value proposition, channels, customer relationships, revenue, resources, activities, partners, and costs.[3]

The BMC approach helps to systematically and structurally substantiate the business model and enables the evaluation of new ideas and their differentiation from the status quo. It shows competitive advantages as well as customer benefits and thus helps to estimate the potential success of a new business idea. The application of the BMC methodology is in line with the idea of an agile approach and can contribute significantly to reaching agreement on a “start set-up” for the business model discussion. The implementation scope is already well defined by the BMC and the “start set-up” can be used as a basis for further, more detailed specifications.

In the article Modelling Business Ideas we show how this technique can be applied in detail.

3. Service Modelling - Breaking Down Of Business Goals Into Business Services

In the next step the analysis becomes more detailed and the business services are broken down into discrete services using a service-oriented analysis. It is crucial to design manual as well as automated services with one common comprehensive approach. This avoids both a split between the analogue and the digital world, and between a business and an IT perspective.

Ultimately, we want to ensure that the business purpose is decomposed into implementable components, both in the business organization and in the IT application landscape.

The determination of the business service building blocks must be done quite quickly, using a light and agile approach in the first step. This requires an informal ‘whiteboard-enabled’ methodology that allows for seamless collaboration among different stakeholders.

Based on the functional target structure, once it is aligned within the enterprise, the IT services are modeled. This includes mapping onto existing or new back-end systems, data and security architecture, and message design. We recommend distinguishing between the layers ‘Front End’, ‘Process’, ‘Composition’, ‘Basic’ and ‘Back End’ due to different characteristics of artifacts within those layers.

With the help of various graphics, we outline the different steps and the detailed process in the Service Modeling article.

4. Customer Journey Mapping: Maximizing Customer Value And Understanding Customers

We have already learned that a “digital project methodology” is urgently needed for successful enterprise transformations and highlighted that such a methodology must start with defining the business purpose and customer value. Having derived services, designed a service hierarchy, and discussed the importance of remaining agile in service modeling, we conclude the topic of digital project methodology and now go into more detail about the customer value already examined at the beginning of the process. As mentioned earlier, customer value is at the heart of the Business Model Canvas recommended for modeling the business purpose.

At this point of the project process, we devote our focus to the customer journey. The term “customer journey” refers to the comprehensive experience that the customer has with the offered products or services in all his interactions across all suitable interaction channels. It begins with the customer becoming aware of the offer, then exploring and comparing the offer, and finally selecting, purchasing, and using the product or service.

To address the customer journey and also the associated emotions, we need to understand who the customer is in the first place and the context in which they interact.

Our article Customer Journey Mapping gives a description of the underlying concepts including – for example – the persona concept. We explain why this strategy brings customer and company closer together through new understanding conditions and why such a human-centered methodology fits perfectly with the concepts of design thinking.

Here you can find the individual articles:

Chapter 4: Defining Digitalisation

4.4 Digital Maturity

6.2 Indigo Digital

4.1 Digital Communication Patterns

Agile Sin #2: No Business Vision

Manas Deb — Mon, 08 Mar 2021 02:14:27 +0000

Nowadays, quickly changing markets are the norm for most industries. As a consequence, products, sales channels, brand image, and business models of any enterprise require ongoing attention. From time to time, tough decisions are needed, which change the direction of the business – for example, if companies abandon outdated product lines or enter new business areas with all their risks and uncertainties. These decisions typically have to be made by the top management. For the managers concerned, these decisions mean a lot of personal trouble and risk. In times of “agility” we increasingly often see that inconvenient and risky decisions are delegated to the “teams” or postponed after agile reorganizations.

So, let’s have a closer look. Shall we?

The title of a blog published a couple of years ago essentially stated that ‘business strategy does not matter if you are not agile’. Such a publication is not unique. Over the last two decades, “agile” has penetrated practically every facet of business activity fueled by many writings, discussions, and occasional success stories from a range of professionals, from highly reputed management consulting firms to enthusiastic blog writers. These publications are often quick to position agile as ‘the secret’ behind stellar business excellence. Are indeed agile practices the panacea for all major business issues, the ‘penicillin’ for all critical business ailments?

How about considering another statement: “agile does not matter if you do not have (the right) business vision and strategy”? Amongst other things, agile approaches provide a higher level of freedom of decision making and individual actions, and usually help speed up execution of required activities to reach a certain goal. But what if ‘the goal’ is not well-defined or even worse not a purposeful one. Would it not be like hurrying up the achievement of a wrong result with agile practices (and then, possibly, blaming agile as the main reason for the ultimate failure)?

A healthy business must have a certain level of internal operational efficiency and external market competitiveness. This requirement is even more critical for businesses that are impacted by present-day digital technologies.

Many businesses fail to produce growth or profit due to inefficient internal processes. Likewise, many well-known brands that were once industry stalwarts have succumbed to obscurity or extinction due to misalignment with prevalent and emerging market trends – examples like Nokia, Xerox, Sears (an iconic American home appliance store chain), Borders (an upscale bookstore chain) and Blockbuster (the leading in-store movie rental chain in the US) are not hard to find. If a business has the right vision and fitting goals and strategies to improve its condition, whether from throws of closure to survival or from healthy survival to sky-rocketing market leadership then by all means (agile approaches included) the required actions should be sped up.

Imagine a situation where a high-end household appliances manufacturer is struggling to gain adequate market share. The manufacturer’s products have nice styling and colours. The manufacturer is continuously pushing, using agile approaches, new hardware and software features into their refrigerators, kitchen ovens, and washing machines so new versions of the products are appearing in the market rapidly. Let’s also assume that these appliances also have to market competitive pricing. Yet, consumer uptake is slow. What can be the problem?

The appliance manufacturer in our example investigates the cause of the failure to attract the right volume of customers. As a result, it realizes that in spite of all the advanced features, many choices of models and good prices, the overall reliability of the products has been quite low – frequent failure of hardware components, buggy software controls, and so on. At this point, the manufacturer can either prioritize improving the reliability of its products and changing the market perception or continue with or even speed-up delivery of new versions of its products hoping that the customer will forget the bad experiences with older versions and try the new ones. Even commonsensical, the first option has a good chance to save the business and the second will most likely drive it to the ground, no matter how good the manufacturer is with its adoption of agile; it will be the business vision of the manufacturer that will help the manufacturer take the right decision.

Agility can not replace a business strategy

There is no merit to adopting agile in a dying business unless there is a resolve to alter the course of business evolution to a better future and to have the corresponding goals, strategies, and tactics to steer the business through that new or modified path.

This requires leadership and innovative ideas to trigger and sustain the necessary changes in organizational behaviour, processes, technologies, ambitions for products and services. Before digging deeper into the connection between business vision and agile, let us quickly refresh ourselves with the definitions of a few relevant concepts:

Business Vision and Mission – “Vision” defines the aspiration of a business, what it wants to become or be recognized as, while “Mission” captures its primary objectives and approaches to business operation. Together, business vision and mission also provide a foundation for the key “Values” of the business.

Business Goals and Strategies – “Goals” are clearly defined targets that a business sets out to achieve over a certain period of time while “Strategies” define how the business needs to act in order to achieve those goals. Goals and corresponding strategies formulated at different levels and granularities within a business fulfil the mission and vision of the business.

Business Innovation – “Innovation” is a combination of ideas and ways a business creates new or modifies existing operational processes, methodologies, products, services, and even the business model in order to achieve positive change, creating new value, and market competitiveness.

Business Agility and Agile – “Agility” is the ability of a business to change rapidly its goals, strategies, structure, processes, technology, and behaviour to either protect itself against a business threat or to grab a business opportunity. “Agile”, on the other hand, is an approach for conducting the required activities fast and often with higher efficiency. Agile approaches, when appropriate, can be used in practically all facets of business activities including development of technologies, products, and services. As such agile approaches can support the bigger concept of business agility.

Foster creativity and innovation

An agile business with the right vision and mission, equipped with appropriate goals and strategies, having the innovation capability to solve problems or cash-in on new opportunities, is well prepared to use agile approaches to reach its targets fast. Revisiting the home appliance manufacturer example described earlier, if the business had a vision of being a ‘highly dependable’ brand then in the face of market penetration difficulties it would easily take the decision to first fix the equipment reliability problem before pushing more products and features.

It is easy to find plenty of evidence that agile businesses with the capability to innovate outperform those that lack business agility. For example, a survey reported in a recent McKinsey article titled “Enterprise Agility: Buzz or Business Impact” indicates significant business performance improvements due to business agility along four key dimensions:

Customer satisfaction: 10-30%
Employee engagement: 20-30%
Operational performance: 30-50%
Financial performance: 20-30%

Current COVID pandemic has also demonstrated strong merits of the combination of business innovation and agility. Businesses that are surviving well through difficult time have quickly come up with creative ideas to serve their customers and engage their employees within the constraints of the pandemic, and have taken these actions fast.

The important thing to note here is that it is the overall business agility along with innovation and not just the use of agile methods in certain activities that provide the performance excellence of the business.

Recommendations

A 2017 McKinsey article titled “How to Create an Agile Organization” lists eighteen key characteristics (labelled as “practices” in the article) of an agile organization. One can observe that these characteristics have the foundation consisting of:

Clear vision and mission that are shared, understood and internalised by all concerned
Ability to sense problems and opportunities, and react fast
Ability to identify the right goals and strategies before jumping into action
Actionable decision making and lean (yet adequate) governance
A performance-oriented organizational culture that embraces change
A balanced strategy of ‘stable’ and ‘agile’ actions

Summary

Thus, businesses that want to derive substantial benefits from adopting agile practices need additional capabilities beyond practising “scrum”. An expert blog titled “Your path to Agile at Scale” published in August 2020 by Capgemini, a global system integrator, advises enterprises to conduct a serious introspection by asking the right questions about the organizational intent (business vision) and preparedness (strategy) for the adoption of agile approaches before embarking on spreading agile through the organization – this type of exercise is critical for the realization of ‘agile success’ and will protect the business from possible ‘death-by-agile’.

Chapter 4: Defining Digitalisation

Manas Deb — Wed, 01 Nov 2017 11:32:35 +0000

Everybody seems to be using the term ‘digital’ today. Politicians are laying the foundations for the ‘digital revolution’, product companies have off-the-shelf-solutions for being a ‘digital leader’, and consulting firms can help you with the ‘digital transformation’. However, you hardly ever find anybody who can tell you exactly what ‘digital’ is; in fact, the term means different things to different people.

At one end of the spectrum are the rather simple features, such as replacing paper. At the other end, ‘digital’ is a synonym for the transcendence of the industrial era.

Therefore, it is unsurprising that there is no consensus on the definition of digitalisation in the literature. Every author either comes up with their own definition or avoids taking a clear standpoint.

In the remainder of this book, we use the term ‘digitise’ (or ‘digitisation’) if we’re talking about modernising something with a few digital ingredients, for example converting paper to a digital format. Most of the time we take a more far-reaching perspective and use the term ‘digitalisation’ as the beginning of a new era beyond the industrial age. Businesses in the industrial age have been characterised by automation, standardisation, mass production and enormous increases in efficiency. So, what are the characteristics of their digital successors? For a closer understanding of the change encompassing us, look at an ordinary family at the intersection of the industrial and digital age: observe that parents and children have totally different preferences for maintaining social relationships and communicating.

For example, parents are used to making appointments with friends a few days in advance. Their relationships are characterised by well-thought-out arrangements. Communication is driven by the necessity to negotiate those arrangements. Young people behave differently. They are used to digital media that provide information instantly, allowing seamless connectivity with all their friends around the clock and automating repetitive tasks. They are not in favour of long-term planning and multi-step processes, but instead decide ad hoc and at short notice. They are also less reluctant to change plans.

We believe this to be the most important attribute of the digital age: the intensive usage of digital means to change and enhance the way we maintain social relationships and communicate.

Correspondingly, we define a ‘digital enterprise’ as an organisation that makes extensive use of new digital technologies, such as social media, mobile connectivity, analytics or embedded devices, to fundamentally enhance or alter its relationship with all its stakeholders, including clients, employees and suppliers, and its interactions with them.

The following table depicts the critical aspects of this new digital relationship:

The digital relationships and the fundamentally modified possibilities to interact have profound consequences: digital enterprises deal differently with innovation and have significantly different processes, organisational structures and culture, and business models compared to traditional companies.

Accordingly, ‘digital transformation’ (or ‘digitalisation’) is the organisational process of changing an enterprise towards being a ‘digital enterprise’. This transformation process is initiated purposefully to change the enterprise, as opposed to a force of nature that just happens to the enterprise.

This change is a fundamental one – it is nothing less than the reinvention of the enterprise, comprising its processes, organisations and business models.

Such a substantial change is necessary to facilitate truly digital relationships with the enterprise’s stakeholders.

4.2 Categories of Digital Products

Manas Deb — Tue, 31 Oct 2017 23:00:00 +0000

This section defines what we mean by ‘digital products’. The digital product strategy of an enterprise defines the degree of digitalisation a product is subject to, i.e., the extent to which digital features are incorporated into the product. Based on the degree to which digital features have been incorporated into them, products are divided into three principal categories.

Generally speaking, intangible products (e.g., a bank account) lend themselves to complete digitalisation, while tangible products (e.g., hardware produced in a manufacturing facility) cannot be virtualised but instead augmented with digital features. Examples of the latter would be the instantaneous usage of available product data (internal and external) to determine the state of the product and react automatically to changes via new feedback loops.

It may also be possible to leverage the analysis of big data at the time of customer contact to interact with the customer in an intelligent way.

Given the more intangible nature of services, another important digital trend is the potential for a much more comprehensive augmentation of products with services. Services can be embedded into the context of many classical products – e.g., predictive maintenance initiated or even executed by the product itself. Access to such product-related services can be fully digitised, with the customer using digital devices to seamlessly access them and incorporate them into day-to-day life. It is clear that the degree of digitalisation of the product-supporting service can vary significantly from the degree of digitalisation of the product itself. This is due to potentially different degrees of intangibility of products and their supporting services.

The digitalisation of order fulfilment can also vary: it can combine traditional and digitised (and hence mostly automated).[1] Thus we can have a fully digitised product combined with a manual service, and a fully tangible product with an automated, digital service. One example would be electronic train tickets supported by the classic service desk. Another example would be a physical part of a device with an imprinted QR code (quick response code) to access the description of the part or issue an automated replacement order.

The application of artificial intelligence is an important emerging trend for more advanced, fully automated digital services.

Imagine in the second example that an algorithm detects how the device is currently used and offers usage-specific functionality behind the QR code.

Regardless of the nature of the products and the services as perceived by the customer, the delivery of such products and services can also have varying degrees of digitalisation. Differing levels of digitalisation translate into various degrees of process automation, as in the context of the automation of production, the automation of the enterprise’s response to service requests, and the automation of product feature adaptation to demand (e.g., adapted driving behaviour of the car or on-demand delivery).

The digital strategy of B2B (business to business) enterprises must take into account the digital strategy of their customers; that is, the demand for digitalisation stemming from the customer’s own degree of digitalisation.

The supplier’s product must be able to connect suitably to the customer’s potentially more digital environment. The supplier must also be aware of the changes in demand for digital interfaces. Digital capabilities are driving the adoption of feedback processes between an enterprise and its suppliers with the expectation that the suppliers will react. This fact is even more evident once the enterprise is a member of a close-knit digital ecosystem.

Looking again at the example above of the device with an imprinted QR code: Enterprise A produces physical devices, which Enterprise B uses as part of its production chain. If Enterprise B expects fully automated monitoring, exception handling and corrective action triggering in managing its production and aftersales chain, it will rely on providers like Enterprise A for devices that can support such automation and provide the appropriate interfaces in their aftersales customer interaction. Enterprise A will feel this competitive pressure and must constantly monitor its customers’ expectations, and seamlessly integrate processes running in its customers’ environments into its own internal processes.

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[1] Chui M., Manyika J., Miremadi M.: ‘Where machines could replace humans – and where they can’t (yet)’, McKinsey, 2016.

Chapter 11: Executing the Digital Transformation

Manas Deb — Tue, 31 Oct 2017 23:00:00 +0000

Now we come to the final chapter of this book. It discusses how to actually execute a digital initiative at the project level. There are three paramount aspects of digitalisation in the day-to-day business of project implementation:

How to manage projects and properly capture their requirements.
How to adapt a security strategy in highly distributed digital value networks.

How to capitalise on the most valuable asset of the digital age – the data

The first five sections of this chapter describe the methodology to run digitalisation projects successfully. An appropriate approach to project management allows enterprises putting digitalisation into practice to:

Connect the project with the broader digitalisation activities, particularly the business portfolio transformation. It provides the appropriate level of abstraction and governance touchpoints to allow the CDO to exercise appropriate influence on the project.
Measure the contribution of each project to the desired digital target state.
Obtain ‘digital speed’ – start immediately without lengthy pre-analysis or proof-of-concept studies.
Define manageable modules – not only technically, but also in terms of project organisation – allowing flexible response to changing requirements, new insights and increasing knowledge and experience of the market.
Obtain a customer-centric viewpoint. • Preserve functional order. This aspect is particularly important to prevent the build-up of unmanageable complexity from myriads of digital silos.
Coordinate activities at the enterprise level.

Effective project management is at the core of executing the digital transformation.

The proposed methodology is particularly important, because many people are simply tired of classical project approaches based upon detailed use-case analysis and process modelling. They are open to new approaches, but do not know precisely how to gather speed and maintain direction at the same time. We therefore present an approach based on modelling of the business purpose as the starting point and then breaking it down to capabilities and services (or microservices). The specification of services can be refined over several iterations, as requirements become clearer. Furthermore, adoption of DevOps[1] (for concept-to-production life-cycle automation) combined with a suitable Agile[2] (for highly iterative development) project methodology on top of this servicebased decomposition enhances the ability to create tangible versions of the product rapidly and frequently. This approach allows an understanding of requirements at an appropriate level as and when it is needed. At the same time, functional order is preserved, which is necessary for productivity and reduction of complexity. The approach also allows for an assessment of every project’s strategic contribution.

This means that digital project portfolio management can ensure that every individual project fits into the target architecture and meets the aspirations of the digital strategy. This includes, for example, use of the digital backbone, adherence to technology standards or contributing to HR campaigns such as the acquisition of strategic know-how within the staff. And best of all: the methodology is amazingly fast.

The next four sections of this chapter discuss the topic of ‘digital trust’. This topic is still seriously undervalued. Companies often ignore the fact that trust is the glue that holds social groups together. As we have defined previously, digitalisation is the enablement of efficient communication in social groups based on digital media. Therefore it is evident that digital communication must be built upon a solid – i.e. trustworthy – foundation. If companies neglect this fact, customers and employees will select a more trustworthy offering. Digital assets such as login credentials or payment records must be protected with the same care as physical assets. Digital assets can be stolen, tampered with, abused or destroyed, quickly and with minimal physical effort. The digital presence of customers, employees and business partners continues to increase and consequently so does the digital ‘attack surface area’.

Identity is the most fundamental pillar of establishing digital trust.

In any digital relationship, you must know who has produced or consumed a digital asset. Putting a focus on digital trust has a dramatic impact on the design principles of our products and it completely changes the way we need to perceive IT security. Instead of being a burden, security is a feature that pays out over the long term. Successful businesses consist of hundreds of microservices, which are often shared across data centres and interact with a variety of ecosystems of trusted partners, such as suppliers and resellers. Digital players must learn to fulfil various security and compliance requirements to become ‘part of the game’.

The final four sections of the chapter discuss the topic of data. As many people say, ‘data is the fuel of digitalisation’. Therefore it is no wonder that managing this asset constitutes a whole new discipline of its own in day-to-day business. This is similar to the Industrial Revolution where the first enterprises had to learn to manage labour or capital as assets. Company master data and transactional data have been processed digitally since the sixties. Two decades later, the same data was increasingly used for ex-post analysis.

Now – at the advent of the digital age – prediction of future market behaviour and automated individual decision-making in real time are becoming new data disciplines.

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[1] Kim, G., Behr, K., Spafford, G.: ‘The Phoenix Project: A Novel about IT, DevOps, and Helping Your Business Win’, IT Revolution Press, 2014.

[2] Martin, R. C.: ‘Agile Software Development. Principles, Patterns, and Practices’, Alan Apt Series, 2002.

10.10 Managing Comprehensive Change

Manas Deb — Tue, 31 Oct 2017 23:00:00 +0000

The digital transformation triggers massive change in the enterprise: interactions with customers, as well as those with new partners in the digital ecosystem, are established on a completely new basis. New business models for the enterprise are created and must be implemented thoroughly. New operational models in the enterprise must support these business models, usually requiring the new business processes and data usage to bridge historical departmental boundaries. All this triggers comprehensive change for the organisation. The challenges accompanying such change must be mastered carefully.

The organisation has to embrace this change and will struggle with the process; the more comprehensive the change, the tougher the struggle.

Employees’ fears, uncertainties, even their objections must be taken very seriously. Such reactions to change are normal and should be addressed in a constructive manner. At the extreme, however, such concerns might turn into resistance and even attempts at sabotage of the digitalisation initiative, requiring decisive action. But even where such negative developments are not encountered, change management during the digital transformation must have utmost priority.

Change must be managed from the top.

With a mission that is so decisive for the company’s future, the CEO and the CDO – and ideally the full Executive Board together with the next management level – must explain the rationale for change and its purpose, mobilise people, evangelise about the new digital world and create factual and emotional buy-in. We all know the ‘no pain, no gain’ paradigm. However, there is also a ‘no gain, no pain’ paradigm: employees will not wholeheartedly undergo vast change unless they understand the rewards to be reaped, the promising future of the digital world.

The CDO must describe the future rewards of the, at times, tough digital transformation programme to the organisation and create buy-in and support, generating enthusiasm for the changes ahead.

When bringing the digital transformation to the organisation, two fundamentally different approaches can be taken to conducting the transformation programme: the CDO can on the one hand decide to start the digital transformation approach in a sandbox environment; on the other, he or she can opt for a top-down approach.

With the first approach, the CDO can create a shadow organisation, which is designed using the principles of the desired target state, but at a small scale.

In such a sheltered environment, the proof of concept of core features of the new digital business model are demonstrated, prior to either the expansion of the sandbox by absorption of other traditional business functions, or the transfer of successfully demonstrated sandbox concepts into the traditional line organisation. If the digital transformation results in multiple innovation advancements, the sandbox can become an incubator for elements of the novel business model.

While the sandbox/incubator approach can be preferable from a change management perspective, the alternative scenario might also prevail, for example when there is a ‘burning platform’ that compels the enterprise to act in a struggle for survival: the digital agenda can also be imposed top-down onto the existing organisation with the CDO steering the transformation. Very strong leadership is necessary to make this second approach a success, but it might be demanded by the enterprise’s situation.

In any case, the digital transformation must be mandated from the top.

A bottom-up approach using the innovative power of small cells should only be used to drive the innovative spirit.

Implementation of such ideas, however, must always be sponsored by and directed from the Board, as it is, they who will transform the very organisation. In addition, the incubator should not begin with elements of digitalisation that only matter to unimportant parts of the business, deferring a move to the core of the company’s value creation to a later point in time. Success in the digital transformation of core parts of the business must be demonstrated early on in order to create buy-in and overcome obstacles. To execute change management in practice, a framework such as the 8 Steps of John P. Kotter{1],[2] or Kurt Lewin’s Change Model[3] should be chosen.

Furthermore, a dedicated team has to be assigned to cope with the numerous tasks inherent in such an undertaking.

Effective change management programmes exhibit certain common characteristics. Credible, enthusiastic engagement from the top is necessary, demonstrated by the extensive presence of senior executives in front of the employees, explaining the rationale, allowing employees to challenge the approach taken and engaging in a dialogue. Communication is key, and the importance of effective communication in a time of comprehensive change must not be underestimated. It is vital to be honest and open about the change.

The change programme has to have absolute priority for the enterprise’s management and time must not be wasted – the changes should be implemented with determination and speed, once the path towards the digital world has been identified and agreed. However, the viable speed of change does depend on the non-digital status quo and the organisation’s capacity to implement change. In this respect, the digital transformation does not differ much from other transformations. The only difference is that the sheer scope of change to the enterprise’s status quo can easily exceed what the enterprise has experienced in the past. Even more attention needs to be given to change management, and success should not be taken for granted once the new business model has been validated. These are simply the essential conditions for launching the transformation.

This section concludes with an interesting aspect of the pervasive availability of new digital solutions: they also give us unprecedented new means of change management,[4] allowing us to handle the fast-paced continuous change of the digital transformation.

Novel digital communication approaches meet employees’ expectation of interaction.

Communication experiences can be personalised, just-in-time feedback given, progress demonstrated transparently. Using digital tools, useful feedback regarding the transformation programme can also be easily communicated from employees to the management.

Traditional hierarchies can be sidestepped, empowering the individual and giving them a broad audience.

Such approaches build empathy, community and shared purpose. Digital communities within and beyond the enterprise get created with the purpose of actively shaping the transformation process itself. Last, but not least, modern e-learning techniques allow for an effective spread of knowledge about the new digital world.

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[1] Kotter, J. P., Rathgeber, H.: ‘Our Iceberg Is Melting: Changing and Succeeding Under Any Conditions’, Macmillan, 2006.

[2] Kotter, J. P.: ‘Leading Change’, Harvard Business Review Press, 1996.

[3] Lewin, K.: ‘Frontiers in group dynamics’, Human Relations, pp. 5-41, 1947.

[4] Ewenstein, E., Smith, W., Sologar, A.: ‘Changing change management’, McKinsey, 2015.

10.3 Acquiring Digital Capabilities

Dirk Krafzig — Tue, 31 Oct 2017 23:00:00 +0000

‘Most of life’s actions are within our reach, but decisions take willpower.’[1]

The most common reason for organisations failing to succeed, even with good strategies, is the lack of adequate supporting capabilities needed for execution. Conversely, capability-aligned organisations perform at the top of their markets.[2] Discrete capabilities can be more easily mixed and matched compared to traditional departmental functions, resulting in a more responsive organisation (BCG study)[3] – a critical characteristic for digital success. Simply stated, ‘capability’ is the power or ability to do something. Many definitions of ‘what is digital capability’ exist in published literature[4] and these range from very narrow, i.e. use of a specific set of digital features, to being quite broad, encompassing an enterprise’s adoption of digital. Our working definition here for digital capabilities is:

‘The distinguishing capabilities of an organisation to identify and assimilate appropriate technologies, adapt its work both internally and externally, to innovate and deliver digitally enabled products and services that meet and exceed the expectations of customers in the emerging digital era.’

In this section we discuss the general aspects of digital capability acquisition – the supporting organisational and technical skills are discussed in subsequent sections. Pertinent questions with regard to digital capability acquisition are: What is an organisational capability composed of? What capabilities are needed to support digital transformation? What are sourcing choices for the acquisition of digital capabilities? How do you prioritise, in terms of time and investment, the acquisition of such capabilities? How do you assess digital capability maturity?

High-performance organisations (see the above-mentioned BCG study) display a good balance of two complementary elements of organisational capability, i.e. a ‘behavioural’ element that includes culture and roles and responsibilities (agility, innovation and risk-taking, learning, collaboration, commit-and-coordinate governance, etc.) and a ‘structural’ element that encompasses a ﬂatter and more ﬂexible organisational layout, with associated operating model, competencies in digital technologies (including mobile, social, data-driven, bimodal IT), physical assets (such as cloud-based on-demand infrastructure and tools) and mobilised supplier and partner ecosystems.

Three main capability clusters that have to be focused on are: research and development (R&D) capability (identification of customer needs, rapid innovation experiments, rapid scaling up of winning innovations, etc.), go-to-market (GTM) capability (product/service features and pricing, marketing, sales, post-sales service, etc.) and back-office capability (integrated information systems, shared services, high-level of automation, etc.). Capabilities must be business-relevant (i.e., not simply IT skills) and are usually recognised at a macro level, e.g., ‘rapid delivery of mobile apps’ or ‘automation of business processes’, and these macro-capabilities typically have many dimensions of supporting sub-capabilities. Using the capability decomposition style of the enterprise architecture standard TOGAF 9.1, we can depict a given capability using its component dimensions (e.g., people, process, material) and associated skills (a combination of knowledge and experience) as the figure below shows.

Often, capabilities are built up in increments. This evolution of capabilities should be tracked, for example by radar charts or dashboards, so as to guide capability acquisition.

In the book ‘Leading Digital’,[5] the authors articulate a recipe for building digital capabilities using three focus areas: creating compelling customer experience, exploring the power of core operations, and reinventing business models.

Since rapid acquisitions involve new skills, organisations must be open to both developing them internally as well as leveraging external talent (hiring new employees or consultants with specialised skills) and enabling mergers and acquisitions (M&A).

Sourcing digital capabilities may require certain changes to existing sourcing procedures.[6]

For example, a greater focus on talent (vs. cost), engagement of niche players (vs. large system integrators) and contracting for evolving project scopes with ﬂexible terms and conditions (vs. fixed scope) are seen as more fitting for digital capability acquisition.

In order to properly balance current bread-and-butter business and emerging digital ambitions, organisational leaders must suitably identify certain parts of the organisation or activities as candidates for building out new capabilities and provide sufficient investment and attention to them with the right sense of urgency. A strategy to achieve this is to use a technique based on time horizons (short-, near- and long-term) for return on investment (ROI) and the creation of focus ‘zones’ for segregating organisational activities (see diagram above).[7] In the Sustaining Innovation column, the Performance and Productivity zones contribute to the main revenue earnings and efficiencies of the current business; in the Disruptive Innovation column, Transformation and Incubation zones provide the focus for the company to attack future markets, with fewer, faster and more drastic bets in the Transformation zone, and with a systematic and relatively wider, slower-paced portfolio of explorations in the Incubation zone. Acquisition of most of the digital capabilities falls under the zones in the Disruptive Innovation column to begin with, and the digital outcomes from these zones eventually feed the zones in the Sustaining Innovation column.

Generally speaking, each capability combines a set of organisational and technical skills.

Capabilities are, after all, organisational assets and as such they must be managed as a portfolio; their maturity must be measured from time to time and the capability-building roadmap must be updated accordingly.

This is a matter of choosing a suitable multi-level Capability Maturity Model and using the same for managing the portfolio; this is covered in the ‘Modelling for Digital’[8] book, under Digital Maturity.

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[1] McKee, R.: ‘Story: Structure, Substance, and the Principles of Screenwriting’, HarperCollins, 2010.

[2] Osak, M.: ‘Why companies should be organized by capabilities and not functions’, The Financial Post Online, 2013.

[3] Roghé, F., Toma, A., et al.: ‘Organizational Capabilities Matter – Organization of the Future: Designed to Win’, bcg.perspectives, pp. 6-8, 2012.

[4] Freitas Jr., J. C., Maçada, A. C. G., et al.: ‘Digital Capabilities as Drivers to Digital Business Performance’, 22nd Americas Conference on Information Systems, 2016.

[5] Westerman, G., Bonnet, D., McAfee, A.: ‘Leading Digital: Turning Technology into Business Transformation’, Harvard Business Review Press, 2014.

[6] Daub, M., Wiesinger, A.: ‘Acquiring the capabilities you need to go digital’, McKinsey, 2015.

[7] Moore, G. A.: ‘Zone to Win: Organizing to Compete in an Age of Disruption’, Diversion Books, 2015.

[8] Krafzig, D., Deb, M., Frick, M.: ‘Modelling for Digital – Best Practices for Digital Transformation in Everyday Project Life [Practitioner Edition]’, Digital Cookbook Series, Dr. Dirk Krafzig, 2020.

9.8 Preparing the Implementation of the Digital Transformation

Manas Deb — Tue, 31 Oct 2017 23:00:00 +0000

More than 2,000 years ago, Sun Tzi said in his famous book, ‘The Art of War’:

‘Opportunities multiply as they are seized […] Management of many is the same as management of few. It is a matter of organisation.’[1]

We are now at a stage where the CDO, the CDO’s team and the rest of the organisation, all major stakeholders of the digital change, have shaped the transformation ahead. The thrust of this comprehensive transformation has been laid out and agreed upon. The specific purpose and direction of the digital transformation have been shared and ratified. The CDO now must drive the transformation both within the company and with partners and customers. Before doing so, this comprehensive change must be carefully planned and prepared. While an agile approach is key to success, the CDO must be aware of all the ramifications of the digital transformation and must mobilise sufficient resources in order to be successful. This section focuses on how certain ‘soft’ factors in the context of the digital transformation must be addressed early on.

Looking at the outside world first, digital transformation not only impacts on the internal optimisation of the enterprise, it also has a massive impact on how the enterprise interacts with partners and customers. In fact, it has been designed to do so. Therefore, the CDO must make sure early on that there is a credible market communication plan, and that these communication efforts are synchronised, consistent over time and supportive of the targets of the digital programme.

Intense interaction with existing and new business partners is required so that they have enough time to adapt their habits and enter into a new form of interaction with the enterprise as it creates a digital ecosystem. Customers must be ready to consume digitalised products in the future. Some will be involved in shaping these very products, but the vast majority must be prepared for the new products and services. In many cases, this requires a great deal of informative communication and image campaigns.

It is the ultimate aim that customers perceive the enterprise to be a digital innovator and accept the new generation of products.

In short, the CDO must inspire the market.

Together with the CEO and other fellow executives, the CDO stands for the new direction the enterprise is taking, projecting digital competence to the marketplace. Special attention needs to be given to aligning the new external digital brand of the enterprise with the novel digital set-up and culture of the internal organisation. Misalignment in this respect endangers the authenticity of the digital transformation and hence its very success.

The CDO then has many tasks to prepare the enterprise for the transformation ahead. From a practical viewpoint, the necessary change and investment capacities of the enterprise need to be directed towards digitalisation. The speed of transformation must match the organisation’s capacity for change, both from the existing culture’s perspective, and also from the perspective of the sheer financial means of the organisation.

Digitalisation will take the enterprise to its limits, and if it does not, the approach has not been bold enough.

The famous envelope must be pushed.

Project portfolio management is a very powerful tool as it allows direct influence on the allocation of the enterprise’s resources. Early on, the CDO must take over responsibility for project portfolio management and shift the enterprise’s focus of change towards the desired digital target state, ensuring that this focus remains throughout the multi-year transformation phase ahead.

Next, the CDO is ultimately responsible for ensuring that the enterprise adopts the new digital business model. This responsibility is all-encompassing. It not only embraces changes to the structure of value creation towards digital domains, but also the necessary organisational changes, process improvements and the adoption of new technology. The comprehensiveness of this change and the need to adequately address all dimensions of the business model are subsumed under the notion of enterprise architecture. The enterprise architecture approach ensures the completeness and hence consistency of the approach to the transformation.

The CDO must plan for and prepare the changes to the technology architecture, the digitalisation of customer-facing, partner-facing and internal processes, as well as development of the human organisation, as digital might indeed require new organisational structures. The units and divisions governing these areas of the enterprise’s operating model must be prepared for the change ahead.

However, before launching these more technical and functional aspects of the digital transformation, modifying the business model by changing technology, processes and organisation, the CDO must begin by managing such comprehensive change. Digitalisation will have an impact on the personal situation of many stakeholders, and anxiety and resistance are typical and understandable reactions.

The CDO will therefore spend a significant part of his or her time engaged in change management, especially in the early stages of the initiative. Addressing change must be done in a proactive way. This means that the CDO should not wait for resistance in the first place, but rather communicate actively and carve out a new digital spirit as fast as possible. The CDO must be visible, even let themselves be challenged, but hold the course towards the desired target, sometimes through very tough times.

Stamina will be a prerequisite. It is better to take the bull – as in resistance to change – by the horns right from the outset.

Digital enterprises give the empowerment of customers and employees crucial importance. The digital transformation aims for a target state in which both customers and employees have more effective degrees of freedom and, from the outset, a decisive impact on the way the enterprise operates. Hence, specific attention needs to be given to how to include direct customer and partner feedback, ensure their involvement and involve employees from all facets of the enterprise. It is likely that new methods of engagement will be needed compared to those used in the business historically. Again, the internal and external approaches to empowerment must match in order to engender a single consistent perception of the company – a homogeneous brand. It is the CDO’s job to ensure that the digital initiative genuinely follows the direction that is being heralded. This will massively increase the likelihood that the customer base accepts the enterprise’s digital activities, and that its partners support its digital transformation and transition to a digital ecosystem. Such an inclusive approach is also at the core of the digital megatrend of connecting digital enterprises naturally into digital ecosystems.

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[1] Tzu, S.: ‘The Art of War’, Shambhala, 2005.

9.3 Business Portfolio Management

Dirk Krafzig — Tue, 31 Oct 2017 23:00:00 +0000

As discussed in the previous sections, the digital transformation of an enterprise requires a comprehensive reinvention of its business model. Such business model reinvention encompasses all its dimensions.

In the context of Osterwalder’s Business Model Canvas (BMC),[1] the Value Proposition dimension of the BMC is the focal point. New value propositions are created in the digital transformation and existing ones might become obsolete, because they lack competitiveness against new digital competitors and/or need to be phased out to enable the enterprise to focus strategically. In other words, the existing business portfolio needs to be revisited. Individual elements of the business portfolio can also be described, using the BMC approach, as slices of the overall business model.

Developing a long-term digital strategy requires a realignment of the existing business portfolio to match the digital world, leading to transformations in various areas, such as the value chain, digital businesses, the various product lines and regions.

To launch such a realignment, the individual businesses of the overall enterprise portfolio must be categorised according to their strategic relevance in the light of digitalisation.[2] This is core to the enterprise’s strategy process.

One possible categorisation would be to depict the business growth potential of a business line versus its competitive strength in a digital market.

The following diagram shows an example, the size of the bubble representing the business lines’ turnover. Four quadrants can be distinguished here: Cash Cows are competitive in the digital world, but have no growth potential (lower right), while the Dogs have neither competitive strength nor do they represent a business growth opportunity – these are candidates to exit (lower left). Business growth can come from the classical business units, the Wildcats fighting for survival (upper left), or from the digitally competitive Stars (upper right). This proposed classification can be replaced with others, as appropriate; for example: digital market growth potential vs. ability of the enterprise to adjust to the new market conditions; market growth potential vs. profitability of the associated digital business.

Once the business portfolio has been analysed, the enterprise will undergo the digital transformation process. It is clearly impossible to adjust the value propositions (products and services) instantaneously. The enterprise would not survive the transformation process. The revenue streams based upon the former value propositions must be maintained to finance the transition to the new value propositions. The business must maintain a careful balance between old and new over the multi-year transition.

Close cooperation between the CDO, CFO and individual lines of business must be maintained to determine an optimal, balanced approach to portfolio transition.

Ideally, the enterprise will have sufficient time in hand to optimise risk – return for the transformation.

In a rather different scenario, the enterprise may find itself in a position where it struggles fundamentally at the outset of the transformation and has to take the bold decision to limit traditional product lines in order to generate the financial means for the digital transition. The business portfolio management paradigm still holds good, but more drastic measures need to be taken. In such a scenario, the enterprise does not have the luxury of a careful transition. Even more so than in the normal approach, close risk management, change management and executive attention are required to accompany the transition.

Business portfolio management becomes an operational instrument for executive management. The transformation plan for the overall enterprise business model is derived from business portfolio considerations. Following the analysis of the portfolio, the tactical business portfolio decisions drive a sequence of steps in the business transformation, which are implemented as projects. Projects investing in non-strategic businesses must be revisited, providing potential to free up funds for the digital transformation. It is also essential to closely monitor the actual development of both the remaining and the new lines of business, as deviations from the planned path are significant and can be disastrous. There is little alternative to boldly following the strategic path.

Linked to business portfolio considerations, several fundamental accompanying adaptations must be implemented, starting with modification of the enterprise architecture (EA). This EA modification in effect constitutes the comprehensive internal digitalisation transformation programme. Both organisational and cultural transformation will need to be implemented.

The skills necessary to implement and run the new digital businesses must be acquired and the whole enterprise’s mindset must be shifted towards the new digital paradigm.

The efficiency of implementing change must be improved and resources must be reallocated to support the new business portfolio.

It is also important to return to BMC and EA considerations to keep the transformation balanced, but all these changes are necessary for a proper redirection of the business architecture.

Finally, an enterprise pursuing digital transformation should always consider the maximum speed at which the organisation is able to go and adequately adjust the reinvention of the business model. The speed of change must be gauged according to the organisation’s capability to implement and digest change. Certainly, considerable transformation momentum can be generated even in a rather complacent organisation by appropriate change management, but one must not endanger the business portfolio transformation by attempting the impossible.

‘Think big, start small’ is the right approach.

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[1] Osterwalder, A., Pigneuer, Y.: ‘Business Model Generation: A Handbook for Visionaries, Game Changers, and Challengers’, John Willey & Sons, 2010.

[2] Moore, S.: ‘Strategic Project Portfolio Management: Enabling a Productive Organization’, John Wiley & Sons, 2009.

9.1 Translating the Digital Challenge into a New Business Model

Manas Deb — Tue, 31 Oct 2017 23:00:00 +0000

As the first step to meet the enterprise’s digital challenge, its digital future must be shaped alongside an understanding of the necessary transformation, which we know is all-encompassing and involves the whole company. The CDO must determine the target state in cooperation with all stakeholders, both to gather the broadest possible input for the description of the digital transformation and also to create buy-in across the organisation from the outset.

In order to mobilise truly strategic and creative thinking, intense workshops will be necessary, joining the Executive Board including the CEO, business owners and innovative internal employees, and external methodological and content experts.

Axel Springer[1], for example, took the rather bold step of immersing a prominent scouting team in Silicon Valley to explore state-of-the-art digital opportunities and then took the whole Executive Committee there for a ground-breaking extended decision-making trip. One way or another, the CDO needs to take the leadership team out of their comfort zone to trigger true digital innovation, but must also make sure, employing standard techniques, that the team sticks to methodological discipline. The digital target state must now be defined in detail. A comprehensive analysis is required rather than focusing on singular elements of the business model. Only such comprehensiveness of approach will avoid shortcomings and inconsistencies.

Ultimately, the exercise must ensure that the digital vision is firm enough to be the foundation of the company, and that no relevant aspects are forgotten.

Fortunately, well-established methods exist to support such analysis.7

The starting point is a proper description of the new digital business model. The business model describes the WHAT of the business – its role in the market and its commercial cornerstones. Such a view is augmented by the enterprise architecture approach, which describes the details of the HOW – more operational than business strategic aspects. Take a look at the business model first.

The Business Model Canvas (BMC)[2] approach has been established as the de facto standard to describe business models, regardless of whether they are classical or digital. Every business model description has to answer the same set of questions. The BMC is a tool on the one hand to ensure that all aspects of the business model are covered and consistent, and on the other to serve as an intuitively sound vehicle to guide stakeholder discussions. The Value Proposition – which is displayed in the centre of the BMC – is the starting point of the business model definition using the BMC.

On the production side, the BMC describes the internal Key Activities and Key Resources necessary, along with the Key Partners required to produce the intended goods and service. These form the Value Propositions to the market, highlighted by the Customer Segments to be approached, building Customer Relationships in the various Channels of interaction with the client. The production side defines the Cost Structure of the business model, while the market side defines the Revenue Streams.

It is evident that the digitalisation of a business will have an impact on all these components. In describing the change of the business model, or even formulating a radically new one, each of these dimensions must be studied intensively and described.

In a digital business model, new digital Channels will be deployed in the communication with customers, leading to materially new Customer Relationships and bringing new digital Value Propositions to the market.

The internal Key Activities will need to be adapted, requiring potentially new Key Resources and linking the enterprise to new Key Partners, potentially in a digital ecosystem. The interaction of these dimensions needs to be considered carefully in order to avoid inconsistencies in the planned new digital business model.

Typically, a large company has a business model that is an aggregation of multiple smaller business models. A car manufacturer, for example, would define separate business models for passenger cars and lorries, and even break down those business models into brands, regions, etc. Consequently, enterprises can even describe business models for internal services.

Once the business model has been agreed upon and gained the approval of the various stakeholders, the enterprise architecture analysis can start in order to define in detail the new operational set-up of the digital enterprise. The enterprise architecture consistently describes the means necessary to achieve the new targets of the digital business model. It helps to break down the company’s new vision into concrete targets for business units, process changes, organisational adaptations, IT, business development, etc. This is described in section ‘Breaking Down the Digital strategy at the Business Unit Level [COMING SOON]’

By combining business model and enterprise architecture analysis, the disparity between the current and the future digital state can be assessed and the concrete digital transformation programme can be specified to encompass all dimensions of the enterprise’s market approach and operational set-up.

Changing the business model of the enterprise is a formidable challenge to the organisation.

The transformation programme defines the path towards the new future. The CDO now needs to define and command the governance tools necessary to direct the company towards the desired target. Stamina and dedication are needed to keep direction. The old change management paradigm applies:

‘If you want the team to sail to distant shores, don’t give them detailed building plans for the ship, but instead tell them about those shores and truly excite them about the destination.’

The digital business model is a description of these ‘distant shores’ and serves as a compass to reach them. The CDO will need to take out this map regularly, demonstrate progress made along the way and highlight the gaps that still need to be covered. A canvas approach such as the BMC can help the broader team visualise the target and progress achieved.

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[1] Burgelman, R. A., Siegel, R. E., Luther, J.: ‘Axel Springer in 2014: Strategic Leadership of the Digital Media Transformation’, Stanford Graduate School of Business, Case E-522, 2014.

[2] Osterwalder, A., Pigneur, Y.: ‘Business Model Generation: A Handbook for Visionaries, Game Changers, and Challengers’, John Wiley & Sons, 2010.

Manas Deb – Enterprise Transformation Circle

Project Execution In Large Transformation Programs

1. All Projects Must Contribute To The Strategy

2. Start With Business Modelling

3. Service Modelling - Breaking Down Of Business Goals Into Business Services

4. Customer Journey Mapping: Maximizing Customer Value And Understanding Customers

Here you can find the individual articles:

Agile Sin #2: No Business Vision

Agility can not replace a business strategy​

Foster creativity and innovation​

Recommendations

Summary

Chapter 4: Defining Digitalisation

4.2 Categories of Digital Products

Chapter 11: Executing the Digital Transformation

10.10 Managing Comprehensive Change

10.3 Acquiring Digital Capabilities

9.8 Preparing the Implementation of the Digital Transformation

9.3 Business Portfolio Management

9.1 Translating the Digital Challenge into a New Business Model

Agility can not replace a business strategy

Foster creativity and innovation