Business Transformation Simplified: 3 Guiding Principles

May 4, 2020 Gautham Pallapa

This is the second post of a two-part series. The first part focused on the overarching themes for a successful business transformation. The second part focuses on the guiding principles that ensure sustainability of the transformation.

The COVID 19 pandemic has been extremely challenging and stressful all over the world. It has fundamentally changed human behavior and has also challenged technologies and industries in every vertical. Many incumbent industries were not prepared for this overnight shift to an all-digital world and have been severely impacted. However, organizations that were on a business transformation journey are faring better than their competitors, and are embracing this unfortunate crisis as a compelling event necessary to accelerate their transformation.

An organization that does not disrupt itself internally can never be successful in a business transformation.

In my previous post, I talk about four predominant themes that consistently emerge in a successful business transformation: Portfolio Management, Business Outcomes, Flow Modernization, and Generative Culture. I also break down each theme into three primary steps. However, there is another lesson I’ve learned on my transformation journeys, and from my experiences partnering with organizations on their business transformations: Transformations are continuous by nature

This can pose a problem to an organization undertaking this arduous and stressful journey because the concept of a never-ending transformation is neither sustainable nor palatable to the workforce. As humans, we have become accustomed to measuring self-value and success at regular intervals. What’s more, the dopamine hit we get each time we achieve something or meet a milestone is extremely addictive. 

We create milestones and checkpoints as constructs to feel a sense of accomplishment—targets to meet and comparison metrics to achieve—all so that we are regularly feeling successful, and to enjoy the euphoria that dopamine provides. Therefore, trying to garner support for an arduous, never-ending journey is an almost impossible task. Passion for the cause and the wills of some people might move the transformation for a short duration but, eventually, it will peter out.

One effective solution to address this challenge is for leaders to clearly define what the target state for the transformation is, and to celebrate milestones and accomplishments along the way. That is, to celebrate continuous change in the state of a system. This also enables leadership to declare success when the target state of the organization is reached.

Once success is declared, however, there is a high probability that entropy will increase within the organization. As we all know, the natural tendency for anything in the universe is to lose order and decay. That is the important principle of entropy—it defines the degree of disorder in a system or environment, and always increases over time. 

This decay manifests in business transformations because the workforce, having become psychologically relieved of the stress that it has undergone in achieving the first target state, tends to relax and slow down. This results in complacency within the organization and the propensity to rest on prior laurels. The energy required to further the goal of continuous improvement wanes, and inertia sets in quickly. 

“If the rate of change on the outside exceeds the rate of change on the inside, the organization is failing to transform.” - Jack Welch 

This disorder and decay translate to cultural apathy, process overheads, and inertia within the workforce—the very things that necessitated a business transformation in the first place. Hence, it is imperative to ensure that the energy is not reduced once the target state is achieved. Organizations should introduce the concept of Kaizen (continuous improvement) and ensure that the leaders and change agents stoke the fires of transformation constantly. Kaizen also introduces continuous milestones and targets, but this can only be achieved when it becomes part of the organization’s culture.

Three Guiding Principles

In order to keep the embers of business transformation continually burning, organizations need to have guiding principles that can be used for progress review at regular intervals, along with course correction (or pivoting) as needed. I’ve captured what I believe to be the three most valuable principles in a business transformation haiku:

Heritage is past /

Improve flow for fast value /

Delight your users

Heritage is past

Revere the past, but don’t stick to it. Heritage apps (or what some people might call “legacy apps”) brought the enterprise to where it is today. But today the enterprise needs to be more nimble, agile, and cloud-native in order to scale and deliver at the needed speed. Application modernization is important in business transformation along with containerization and other cloud-native patterns, and the ability to seamlessly move workloads across private and public cloud infrastructure is a vital part of modernization efforts.

There are three predominant variations of application-modernization strategy:

  1. Migrate to modern infrastructure (also known popularly as lift and shift)

  2. Partial refactoring (deconstruct the app and rewrite front-end and other lightweight modules as microservices, while still maintaining a monolithic backend)

  3. Complete refactoring (strangling the monolith completely and redesign using modern software development patterns

This can be a daunting task for organizations that have a large heritage-app portfolio. The optimal approach to take is to analyze the portfolio, evaluating and sequencing apps that provide the most benefit to the organization— by improving the status quo around technical debt, speed to market, and/or customer experience—and then modernizing those apps in an order that makes sense. 

A note of caution: Many will undertake the first phase and declare victory once they have completed modernization of the first wave of applications. It is a tedious and painstaking process but it must be seen to the end. Also, due to the rate of change in technology and methodology, the initial apps that were on-boarded might require revisiting faster than you’d expect. We need to make inspection and analysis part of our culture, and ensure refactoring is a continuous and conscious effort that must be budgeted into our daily work. 

Improve flow for fast value

Delivering features that provide delight, convenience, and utility has become essential—a reality underscored in times of crisis, such as the COVID-19 pandemic, when norms are thrown along the wayside and tools that just work can see massive adoption in a matter of weeks. Speed to market and the ability to deliver value quickly have therefore become imperative, not optional.

However, organizations also need to ensure software quality, as any growth of this digital ecosystem will also bring with it an increase in bad actors trying to exploit it. Adhering to lean, agile, and DevOps methodologies for modern software development will help ensure total quality while improving delivery.

Value stream mapping to eliminate waste

Improving processes and increasing process utilization are primary tenets of lean methodologies. A popular technique to drive this is value stream mapping (VSM), where we analyze, design, and manage the flow of artifacts and information required to bring a product to a customer. It also emphasizes the elimination of waste in processes and a reduction in handoffs, while maintaining total quality of the product.

While a value stream flows horizontally in the organization, a strategy that redirects it vertically causes a cascading waterfall.

Flow modernization

While VSM focuses on increasing process utilization, the objective of flow modernization is to reduce the amount of friction required to transform an idea into working software that generates value for the organization—through business outcomes or revenue. This is commonly referred to as concept to cash, or inception to implementation. Flow modernization relies heavily on lean methodologies such as lean experimentation, hypothesis-driven development, and agile frameworks (such as extreme programming) to develop lightweight processes for the smooth flow of value through the organization.

Delight your users

As mentioned before, in a world where there’s a heavy—and at times rapid—shift toward digital and e-commerce, and a commensurate reduction in physical footprint, customer loyalty depends on continually delighting them with usable and delightful features. These features must improve users’ quality of life and act as a digital-twin for experiences they have cherished in the physical world. 

This is a fundamentally challenging undertaking that’s amplified by the ease of multi-homing, where a customer can move to a competitor without any tangible effort. Customer-centricity is therefore core, and providing outstanding customer experience must become the mission for organizations. Embracing design-thinking techniques, empathizing with your customers, and investing in innovation are essential for customer delight.

Technology is meant to be an enabler, not the sole focus, of transformation. Many endeavors fail because they make this mistake. Customer delight is at the center of success.

While the effects of pandemics, recessions, and other large-scale calamities are horrific overall, there are always silver linings. Tectonic shifts in the digital landscape mean that revenue and stock valuation could drop for startups that might have been ahead of the curve, and incumbent enterprises that might have been playing catch-up can spend some of their excess cash on technology innovation and market capture. There’s no better time to do it, now that we’ve seen what a worst-case scenario looks like and the types of innovation that will ensure adoption and resiliency are more clear. 

Conclusion

Business transformations, while complex, do not have to be hard. Many efforts fail because organizations do not appreciate and recognize the difference between change and transformation, and are not courageous enough to fundamentally question the status quo. I have provided a simple yet effective framework to develop strategies that not only achieve a successful business transformation, but also ensure that it persists within the organization.

That is the only way to make the hard work of transformation continually relevant and valuable to customers.

About the Author

Gautham Pallapa

Dr. Gautham Pallapa is a Global CTO for VMware, where he works with enterprise customers to transform their strategy, processes, technologies, culture, and people to achieve their objectives and business outcomes. His mantra is "Transform with Empathy" and partners with organizations on their transformation journeys with customer delight and employee experience at the core. Dr. Pallapa was previously VP of Engineering at Intrado, successfully driving enterprise and team agility, lean experimentation, CI/CD, and DevOps at enterprise scale. He is a Safe Agilist, Lean Six Sigma Black Belt, an Agile Coach, sharing his knowledge and validated learnings through talks and articles.

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