You sit down with a cup of coffee. You resist the urge to check new emails or Slack messages. You want to spend a few minutes to plan out, in your mind, how you will keep the momentum going for your transformation agenda or your innovative product. After a lot of resistance, all the pieces have finally started to move in the right direction. Just a few more months of hands-on progress, and you will have reached an inflection point, so things will not regress back to how they used to be.
But the new year has come with new goals, new budgets and new distractions. Will everyone still be focused on your initiative? Will some stakeholders check out because they have something new to chase or they never truly believed in the mission anyway?
You begin to worry about how to sustain your agenda. You start to wonder how you should drive it differently this year.
Sounds familiar? Read on for a time-tested way to make sure your transformation and innovation agenda succeeds.
What makes transformation stick?
Transformation isn’t all about a wonderful brainwave or an iconic product. Most of the companies that are considered leaders in innovation (think Amazon, Google, even Tesla) and companies that are successfully transforming themselves (think Microsoft, New York Times even Walmart) are often not the first movers. They are often taking existing ideas and existing products and reassembling them in a more compelling, more meaningful way for the customer.
Why do they succeed where other large and experienced companies fail?
My belief is that the successful companies – or their specific divisions – embed transformation and agility in their DNA. Their cultures and internal processes are no longer designed solely to protect today’s franchise. Instead they are focused on moving steadily toward the franchise of tomorrow as well as moving away – quickly – from failed ideas and plateauing business models.
What does the transformation DNA look like?
Three intertwining strands make up the transformation DNA in an organization. You need each of them in order to succeed.
- Strategic clarity. You can’t transform or innovate without a strong hypothesis about the direction of change in the economy or the society and a strong belief about how you, specifically, will capitalize on or drive that change. While it is important to be agile and course-correct your strategy as needed, aiming for the wrong strategic quadrant or trying to conquer multiple quadrants at once is often a recipe for failure.
- Precise, yet nimble, execution. Bold strategies, great ideas and soaring visions are worthless if they don’t survive in the day-to-day realities of your organization or industry. To that end, you need a well-thought-out plan to execute them. You also need a mechanism to sense when to fine-tune your plan based on changing realities.
- Critical mass. Out of three strands of the transformation DNA, this is the most elusive one. Many organizations are great at strategy, many are great at execution, but most fail to truly build the discipline needed for scaling. You need to set meaningful milestones and only scale your investments if you meet those milestones. This discipline ensures that ideas or strategies that do not pan out in the marketplace don’t become a bottomless pit and starve other more potent ideas.
See also: Culture Side of Digital Transformation
How do we know we have sufficient strategic clarity?
Get your core cross-functional team together and collectively answer the following questions in an open-minded manner. If you identify any areas of weakness, brainstorm as a team how you can define that aspect of your strategy better.
- Concise strategy: Can you articulate your strategy in a succinct way? With today’s fleeting attention spans, you will not win converts or allies for your endeavor if you can’t give them a quick but clear view of where you are going. This is not just a matter of playing with words and semantics. Is your strategy based on a strong hypothesis about the future and about your own strategic play?
- Clarity of outcomes: Are you clear about what success will look like? Will you gain market share, cross a revenue threshold, leave certain competitors behind, save a material portion of costs or measurably improve customer experience? The intended outcome of your strategy needs to be clear, both as a measuring instrument and a rallying cry.
- Clarity of approach: How will you realize your strategy? Will you build or buy or partner? Will you optimize what you have or invent something? Will you build a product or a platform? Often, there are many ways to reach a goal, and knowing which ones you will be following is crucial to ensure alignment and efficiency.
- Clarity of priorities: No matter how well-planned your quest is, there will be moments of truth when you will have to choose one path over another or provide resources to one effort over another. Do you have a clear prioritization framework that will help you make those decisions?
How do we assess and strengthen our ability to execute?
Having a good strategy is a good start, but it’s just one of the ingredients. You also need to make sure your execution engine is in top gear. Look for these essential elements of nimble execution:
- Alignment between execution and strategy: Have you assembled a team that has the resources and skill sets your strategy will require? Do they understand and internalize your strategy? The next step is to engage them in building the high-level contours of your execution plan. Does this plan truly reflect the defined strategy, or is it just a “copy/paste” aggregation of siloed functional plans?
- Granular execution plans: As unsexy as it might be, defining granular execution plans based on the high-level blueprint is crucial. The biggest benefit of doing so is to identify dependencies that go across functional siloes. That is where a lot of transformational efforts fail, as two functions operate at different speeds or from different blueprints and fail to support each other at the right moment of dependency.
- Frequent recalibration: Do you have a way to measure your progress against the execution plans? How frequently does the team review the progress and recalibrate? This does not necessarily mean a lot of bureaucracy and a lot of “progress reports.” If your teams use one shared, digital tracker, the progress can be visible to everyone in real time. Yes, you do have to have a conversation with the right folks if a recalibration is needed.
- Decentralized decision rights: While I recommend shared or centralized tracking of progress, decision rights should be as decentralized as practically possible. This allows quick adjustments at the ground level and often preempts bigger problems. A similar approach can be found the Petraeus doctrine, which the army follows in modern, asymmetric wars. Go ahead and empower your teams to make decisions on their own – within guardrails, of course.
How does the concept of critical mass apply to our initiative?
“Thing big. Start small. Scale fast.” You may have heard one of the many variations of this powerful adage. Sometimes people say “Learn fast” or even “Fail fast.” The core idea here is to divide your journey into distinct phases that get you to the proverbial “next level” but only launch the next phase if you perform well in the earlier one. If you don’t get to critical mass, if your metrics fall short, you should go back to the drawing board and reconsider or reorient the initiative. Follow these steps to embed this thinking in your operating model:
- Phases reflect step functions of value: Take a step back and think about the end game. What is the big prize? What is the value that you will deliver? Now, zoom in a little and think about the first “win” you can produce. Similarly, define one or two additional steps in value before you get to the big prize. Delivering these early wins will earn you street cred and buy-in. Without these, you are likely to fail or get sidetracked before you reach the big prize. Another common pitfall is that, in reality, phases are often lazily defined – just tied to quarters or based on something one function is already planning to do. To succeed, it is crucial to define the phases based on value increments.
- Phases reflect step functions of effort: Each of the phases defined above often requires a different level of resources and effort. For example, your first phase may be a prototype for which you borrow a few resources and stitch together a barely functional solution. But if that works, you may need to bring in many more resources and collaborate across functions to build something robust enough to be sold to or used by real users. Finally, as you get to the scaling phases, you may need to invest even more resources, for example in usability, in security and, of course, in marketing and sales. Ideally, your phases should reflect step-function changes in resources and investment, as opposed to just continuing the status quo.
- Structured review of phase results: Just defining the phases is not enough. Your team will need to define very clearly what success looks like for each phase. And as you come closer to the end of a phase, you should review with your board or steering committee, how the phase has performed vs. what you had expected. This review needs to be structured and methodical and should drive a clear go/no-go decision. Because each new phase represents a higher level of investment (and return), there should be an explicit decision before you plunge in. Without a doubt, this is the hardest part of the whole journey. Being able to step back from something you have invested in – financially and emotionally – is hard, but sometimes that is the right thing to do.
- Feedback loop into strategy: Last but not least, these phase reviews should feed into the continuing strategy definition. Perhaps the competitive landscape has changed. Perhaps a new technology has disrupted your previous assumptions. Perhaps you were too enthusiastic in terms of what your in-house team could accomplish in the given time. The latest, more nuanced understanding of the ground reality should inform your strategy as you move forward.
See also: Core Transformation Is Not Negotiable
Transformation and innovation initiatives can be very exciting and fulfilling. However, if they do not win in the marketplace, they can be shuttered after enjoying a year or two atop the hype wave. You can avoid that fate and ensure that your initiatives win by building the transformation DNA in your organization using the above approach. Good luck, and do share your experiences and thoughts.