OCM Revisited – Part 2: Organizational and Individual Change Management

Per my previous post, there are a number of frameworks that may be used to transition a change strategy to a useful plan. It would be difficult to do them all justice without writing a book (which will not be happening here).

Fortunately, there is a wealth of change management information on the web that you may peruse at your leisure. Most often, search engines will find these frameworks:

•    ADKAR: Awareness, Desire, Knowledge, Ability, Re-enforcement
•    Lewin: Unfreeze, Transition, Refreeze
•    Kotter: 8-Step (Urgency, Coalition, Vision, Communication, Empowerment, Short-term Wins, Consolidation, Anchoring)
•    Kubler Ross: Transition Stages
•    McKinsey: 7-S (Strategy, Structure, Systems, Shared Values, Skills, Style, Staff)

All are worth understanding, however, as one of my mentors once told me, “Eric, all models are wrong, some models are useful.” The same wisdom applies here.

The change process cannot – and should not – be reduced to a simple formula. While each of these frameworks has its pros and cons, none is the magic silver bullet for change.

Each framework addresses the major transformational questions with a different perspective on the change process:

1.    Why do we need to change?
2.    What are we going to change?
3.    Where are we making the change?
4.    Who will be impacted by the change?
5.    When are we making the change?
6.    How are we making the change?

The Kotter model is closest to the method that I use. In practical application, I’ve found “Urgency” can be the most challenging for leadership to address, as the status quo may be well suited to current conditions and may well be one of the pillars of current business success. It takes particularly courageous, forward-looking leadership to sponsor or initiate change in a successful business environment.

These are my fundamentals of transformation:

•    Building a Vision (or Future State, if Vision seems too squishy) based on the needs of the business
•    Partnering with Stakeholders (to refine and describe the metrics and measures of success)
•    Communicating the Vision and Setting the Stage for Transformation (describing the plan and engaging change leadership)
•    Developing Communication and Feedback Mechanisms (setting expectations for regular dialogue and check-pointing progress)
•    Adapting Management Systems to Support the Transformation (rewarding new behaviors, enabling new capabilities)
•    Declaring Victories and Moving On (celebration and building on achievements)
•    Adaptation and Ongoing Continuous Improvement (the cycle of change really doesn’t end)

Hopefully, this post has shed some light on the process side of OCM and, along with the previous post, has successfully delineated between that and change strategy. The two are obviously related, but at the end of the day are both different, interdependent and both necessary for successful transformation.

OCM Revisited: Change Management Strategy

Whenever I’m consulting on IT Transformation, the topic of Organizational Change Management arises, either directly or indirectly. For folks who have read my blog for some time, it is a familiar topic, as it is a particular passion of mine.

In recent consulting engagements, some confusion has arisen between two elements of OCM:

•    Process of change at the individual level
•    Change strategy at the organizational level

This post will focus on the delineation between the two and briefly discuss change strategy.

For a transformation to be successful, it must have three characteristics, all of which require a robust OCM program. Let’s define success as follows:

1.    The Transformation has achieved the outcomes that it set out to accomplish. (ref. BCC #1).
2.    The Transformation has not done significant harm to the remaining transformed organization, to other functions, or to the business.
3.    The Transformation is sustainable and able to endure for a period of time that justifies the investment in the program.

The supporting OCM program deals with both the:

•    Needs of the individual in moving through the change process
•    Strategy that is used by leadership, which drive tactics at the organization level

There are four major change strategies defined in The Planning of Change by Bennis, Benne and Chin (Holt, 1969). They are quite useful in framing what different approaches look like and are very descriptive in their names:

1.    Rational-Empirical (people will act in their own self-interest, therefore key tactics are communication and incentive-based)
2.    Normative-Reeducative (people will follow the herd on redefined norms and values, therefore key tactics are participative and group-based)
3.    Power-Coercive (people will do what they are told to, therefore key tactics are authority and sanctions-based)
4.    Environmental-Adaptive (people will adjust to new situations, therefore land them in the new world and burn the ships)

It’s interesting information and I highly recommend reading the book. In real-life organizational transformations, however, it is not practical or advisable to use only one strategy. Each transformation will have a unique set of tactics from each strategy, depending on:

•    Scope and Scale
•    Degree of Resistance
•    Size of Organization
•    Degree of Risk
•    Time Frame
•    Internal Expertise
•    Current Staff Dependency

The “amount” of each of these considerations will drive the selection of strategies and tactics employed for the organizational transformation. There is no “one size fits all” strategy/solution set and getting it right will either position your transformation for success or doom it from the outset.

There are a number of change management frameworks that help transition the strategy to the tactical level. A discussion of these models will be the starting point for my next post on the process of change at the individual level.

Status Check II

As an FYI, progress on the new “Green” business continues apace. Our schedule has a planned launch of the web site at the end of July!

Look for an update of my personal information both here and on LinkedIn that reflects my role in the organization, along with a link to the web site. There will also be a few new posts that will provide more depth about my part in the creation of the business.

In addition, there will be new posts from recently received email questions on  organizational change management.

Thanks for reading!

Business-Centric Change #4 – Coda

After the last milestone of the transformation program, the IT Organization always has one question: “Are we done?”

The true and discomforting answer is “No.”

Despite the great effort expended in identifying “The Problem,” refining “The Solution,” and executing it with particular attention to Organizational Change Management and counsel, the change is not complete – simply because it never can be, as the transformed organization is always evolving.

The true and perhaps more comforting answer is “No, and here is why.”

•    “We will have Process, Technology and Organizational changes due to Service Delivery Failures and failing to meet Service Level Agreements brought about by Problem Management and Root Cause Analysis.”

•    “We will have improvements to our IT Services caused by the Continual Improvement Process led by our Service Managers.”

•    “We will have improvements to our IT Service Management Processes caused by the Continual Improvement Process led by our Process Managers.”

•    “We will have new IT Services demanded by the Customers of our Business and our Business Customers.”

•    “We will have changes to Technology as new technologies become available and other technologies mature.”

•    “We will change our Organization to reflect the changes in our Business Strategy, IT Services and Technology.”

These changes are on the surface smaller than the recent transformation, and can be every bit as full of impact on the organization, particularly if the change is in the sourcing of IT Services.

The Transformation Triangle can be used to assist in the explanation, as it has arrows indicating a cycle of impacts around the vectors of Process, Technology and Organization. None of them are static for long.

With all that said, do no forget to take the time to declare victory and celebrate the completion of a successful transformation with your organization. It’s been a tough road and you’ve all earned it. But you must also create an expectation that the process of change has not ended as the organization continues to evolve within the new paradigm.

Business-Centric Change #3 – Counsel

One of the greatest quotes on the frustration of executing a plan comes from a poem by Robert Burns called “To a Mouse.”

The line from the poem that most people are familiar with is

“The best laid schemes o’ Mice an’ Men,
Gang aft agley,”

The poem is about a farmer who turned up the nest of a field mouse with his spade during fall plowing. The mouse had built her nest and planned to spend a comfortable winter in it. Now, she would have a difficult time surviving the winter because there was no time or material for her to build a new shelter. The poem is an apology to the mouse and a display of empathy by Burns who compares his lot in life to that of the mouse.

The quote from the poem is generally thought of as a resigned recognition that with any plans, issues are inevitable. True enough, but in the context of the poem, I see the meaning somewhat differently.

People get sick and tasks get delayed; changes need to be made to the plan. This is work that good program and project managers handle all the time, no worries.

Getting whacked by the farmer because you built in a place that gets plowed every fall is another story. The revised moral of the story – don’t set yourself up for failure.

The remainder of this post is my “Top Ten” list of considerations to minimize the potential of “getting whacked” during program execution.

1.  Leadership Time Impact: Recognize that the transformation is a large amount of work and will require dedicated resources. It cannot be managed “off the side of the desk” in a part-time I-still-have-my-day-job fashion. The program team (including support resources from Finance, HR, Procurement, Legal, etc.) needs to have that as their only job, with ample time for your leadership team included as well – perhaps as much as 30-40%. Your time will also be in high demand – anticipate well over half of it being consumed by the transformation.

2.  Alignment of External Resources: If you opt for external help (consultants), make sure that they and their rewards structure are aligned with the results that you seek, and not only the process or other aspect of the solution executed in isolation (a sure recipe for an “extended engagement”).

3.  Communication Management: Understand that transformational change is hard. Your job is to lead the organization though it. If you have a capable program team, your best return on time invested is in Organizational Change Management and communication activities. Remember that if you are not managing the communication, it will very soon be managing you (which is a really bad place to be, trust me).

4.  Organizational Resistance: As the vision or end state is communicated, there will be perceived winners and losers. Those who believe that they are “losers” in the new world will resist the change and can be quite effective at it. Spend extra time and effort with this group to help them understand the future state and the opportunities that they will have there.

5.  Organizational Pulse: Remember that people move along the change curve at different rates. Have feedback loops built into the OCM process reflecting where the organization is so that the process can be adapted to the changing needs of the organization.

6.  Participative Change: There are different change management styles. The transformational change that you are bringing about almost always needs to be a collaborative style to be successful. More coercive approaches only usually work in the short run and almost never result in organizational buy-in to the change.

7.  Positive Confirmation: Make certain that there are detailed transition plans to the future state and that they are well communicated and understood. My simple rule for the organization during this time is that nobody can give up a job responsibility until the new-world recipient says affirmatively, “I have it.”

8.  Customer Service: Mechanisms for “Business as Usual” must be well known by both IT and by the customers of IT. If the customer is used to having a particular service provided by “Joe” and he is now part of the transformation program team, then the customer has to know now to go to “Rick” for that service. Perhaps there will be an entirely new method to get that service, like via an intranet form, and that needs to be understood as well.

9.  Face Time: There is no such thing as over-communication or too much contact with your organization during the transformation. You and your leadership team are the face of the change and need to be out and about, not sequestered in your offices or in back-to-back planning meetings all day.

10.  Cut the Cord: Once the transformation is in its final stages, find and complete any activities (usually projects in-flight and well-intentioned folks who want to do favors for friends) that are being done outside of the new model. There’s a reason that Cortez burned his old boats after landing in the New World; it greatly increased the commitment of his men to going forward and exploring. You’ve committed to the new model, now make it work.

There are probably a few more, but upon refection, these seem to be my most valuable experiential learnings on execution of a transformation program. As always, feel free to respond with any comments, additions or questions.

The final post in the series will be Business-Centric Change #4 – Coda.

(From FAQ) Isn’t IT transformation to a managed services model a big deal – and what about the people in IT?

Before going further, let’s make an important distinction between transforming to the managed services model and outsourcing or multi-sourcing. One is not the other.

Implementing a managed services model gives you the tools to run IT like a business. That includes the ability to source services in different ways (insource, outsource, multi-source), but does not require it. The changes for IT people during the implementation of a managed services model are primarily in roles and responsibilities that correspond to new or modified service delivery processes. People’s jobs are changing. When implementing a multi-sourcing strategy, jobs are at stake.

The transformation to a managed services model is a big deal. It involves fundamental changes to processes, organization and technology. Extensive support is required from the Finance and HR functions. Customers of IT will interact differently with IT in procuring services. It’s a lot of change. In my experience, IT people can learn and operate successfully in the new paradigm fairly quickly – a matter of a few months – so long as the management team invests heavily in time to communicate the vision and value of the new managed services model (not just speeches, true interactive sessions) and provide training.

Implementing a multi-sourcing strategy is much more difficult to manage from a staff impact perspective. Presuming that you have already done the diligence and have a compelling case to pursue significant outsourcing of services, my advice is for full disclosure as soon as you have any sort of timeline for the process. If you are in an IT leadership role, you will soon find that your communications and staff interaction on this topic consume the lion’s share of your time. It’s time well spent, since you’ll want to minimize attrition – particularly of your best people, who know that they have options and can easily make a move.

Unfortunately, the answers that IT people most want to know (what happens to me, specifically) aren’t generally available until the end of the process. That is deeply unsatisfying to someone who is directly impacted. What I’ve found to be of value is to communicate throughout the process about what the various steps of the process are and will be known when.

The bottom line is that people will have choices to make and a time frame in which to make them. If someone is in the outsourced services scope, then the choices are generally pretty straightforward:

• A non-IT role at the current company
• An IT role that is not in-scope at the current company
• An IT role with the company that the services are sourced to
• Severance Package
• Retirement

The timing of when each of these will be known and available varies; so impacted staff will probably have multiple decisions to make. HR will be your best friend in helping to manage the information and processes for the various options.

Successful transformation programs invest heavily in an Organizational Change Management program of work that runs in parallel to the transformation workstream. These efforts are mostly communications-based and are vital in keeping the IT group informed and engaged during the transformation.

One of the most important points in these communications is that the transformation to a managed services model does not mean that IT jobs are being outsourced. In fact, unless both the goals of the business and IT transformation are best met by outsourcing as soon as possible, I would strongly suggest against the two efforts (IT transformation to a managed services model and IT outsourcing) being done as one – and then even so, I would caution that it will be a very bumpy ride for both the business and IT.

Again, the transformation to a managed services model positions IT to be able to source its services internally, externally or in any combination along the sourcing continuum. I believe that this multi-sourced model is the only way for IT to be competitive from cost, service quality and capability dimensions in today’s continuously changing global technology marketplace. However, it is highly advisable that the managed services structure first be in place and operational before implementing a multi-sourcing strategy.

Be prepared that no matter how well you communicate and execute this process, you will be the least popular person in IT for some time. Read Colin Powell’s Leadership Presentation – particularly the last page on “Command is Lonely.” It may help you though a difficult time.

Business Executive Series #5

Business Imperative, Access to New Capabilities, Avoidance of IT CapEx

Representative goal statement -   “I need IT to enable short-term independence from (previous Parent company); put in place a flexible mechanism to address future requirements and avoid competing for capital with critical business investments.”

Business Merger, Acquisition, Divestiture and Integration activities are huge programs of work for both the business and IT. Different MADI scenarios will vary on where they are along the scale of work continuum, but I’ve never been a part of one that wasn’t complex and intense.

In this post, I’m going to focus on the Business Imperative (New Company “Newco” as a result of a divestiture), with a few synergistic opportunities to gain access to New Capabilities and Avoid IT CapEx (similar topics as covered in BES-3) during the process. Also, this post will only deal with a scenario where the “spin-off” is either an IPO or a sale to a financial buyer (there would be more integration with a strategic buyer or a joint venture partner, and a much longer post).

Divestitures are inherently detailed and time-consuming activities for both the Parent and divested entity. The Parent has plenty of work to do to unravel the new enterprise from existing systems and operations and help it stand up on Day 1 with services. As the new CIO of the divested entity, you however, have the mirror situation, plus the added bonus of your loving ex-Parent company now making decisions based on what is in their best interests, not those of Newco.

To frame the discussion, I’ll offer a few themes:

•    Be ahead of the curve
•    Keep it simple
•    Directly manage the change

Be Ahead of the Curve
Whatever consultants have been hired to assist with the activity probably have IT playing a limited role in setting up a data room and assisting in satisfying due diligence requests. That is insufficient.

IT needs to be an early and important player in the due diligence process. Because of its unique view of the way in which the business functions of the company operate, IT brings the ability to identify potential issues and opportunities that could significantly change the value proposition of the deal (cost, timing, risk).

If IT hasn’t been involved in the due diligence or if it was not conducted sufficiently, you are now behind the curve in having to figure out what needs to happen, how it needs to happen (but unfortunately, probably not when it needs to happen).

The connection to the program team is vital to understanding the strategy behind the creation of Newco, and how the business and business functions are thinking about operating. Obviously, they will be counting on IT services being in place to support their plans. They may, however, not understand how tightly the integration is with the old company from an IT perspective.

For example, if the Parent has a single, integrated ERP environment (application, database, infrastructure), the split will be more complex than if Newco is currently on its own instance. Data and access also become interesting intellectual property and security problems, particularly if Newco is planning on leveraging existing Parent company systems for an extended period of time.

This example illustrates what IT can see that will in some way impact the cost, time or risk involved with the divestiture. Being a full partner in the diligence efforts will pay dividends in speed of execution, more realistic costs and operations impact to the business.

Keep it Simple
As much as I’d like to recommend implementing a fully services-based IT strategy, unless the Parent is currently operating with one, there are practical limitations as to how much can be done in the time frame for the divestiture of Newco. There is already enough change on the plate for the organization.

Nonetheless, because of the realities of your IT services situation, there are some parts of the model that will need to be implemented. The options for provisioning Newco shared services are driven by how they are currently sourced by the Parent, the existing level of integration, and the time constraints of the divestiture. In the short run, tightly integrated functions have little choice other than to be supplied via the Parent process (internal or third party). Less tightly integrated functions may have some other options, however, focusing on pursuit of these may not be the optimal use of resources right now. Day 1 the business will expect to have IT capabilities capable of supporting not just business-as-usual activities, but also critical projects in-flight for new solutions delivery. To simplify and solidify these basic services, I’d opt for provisioning via Temporary Services Agreements with the Parent or 3rd party provider.

This will, of course, require that the Parent, 3rd party providers, and Newco have some sort of Managed Services infrastructure standing up and functional. If the Parent is currently using 3rd party providers, then there is already some of this capability in place and that will need to be extended to the directly provided Parent services, with a mirror capability for these services to be managed by Newco IT.

If the Parent provides services through 3rd parties, those contracts must be extended to Newco across geographies and corporate entities (this can be a big deal on a global basis, with companion agreements, etc.). New scale and volumes may become issues for both companies. The Parent strategic sourcing group will need to take point to work this through with you and the 3rd party providers. Note that continuity of services is necessary and not sufficient for normal business and IT operations. Additional governance mechanisms will need to exist between service providers to ensure that both basic operational processes and existing project deliverables and timelines are supported.

Under this scenario, on Day 1 of Newco operation, IT services will likely be provisioned as follows:

•    Commodity services (data center, end user, network) provided by the Parent directly or via 3rd party.
•    Business process services (ERP and shared systems/services) provided by the Parent directly or via 3rd party.
•    Business analyst and business-unit specific systems hired as Newco IT.
•    Service delivery managers and service management hired as Newco IT.

Be aware that this scenario will place extra burdens on the information/network security teams to allow appropriate access to data and shared capabilities. Depending on the sophistication of the current environment and the ability of the Parent and Newco to come to logical and practical solutions, this activity could easily be more time-consuming than planned.

There will be the need to develop a “Day X” agreement and attendant program of work for the weaning of Newco from Parent services. While this is an important program of work for both companies, it needs to be considered in the context of the complexities driving the initial provisioning, with realistic expectations set for the completion of the work.

As a reality check for Newco IT services, ensure that you have a macro level benchmark of your costs versus that of your industry and/or Parent (IT as a % of revenue for example). If your projected IT costs are over the benchmark, you might successfully argue to the Parent that this situation is putting Newco at a structural disadvantage and the deal economics or cost of IT services need to be revisited. If that is not successful (higher costs could be driven by loss of scale or new functions), programs will need to be developed with the business to drive to the benchmark (as balanced against other business needs).

Directly Manage the Change
For your staff, Newco has been an open secret for some period of time. You probably have already had to address rumors about the path forward for IT staff working directly or indirectly for the Newco business unit. Your people want to know as soon as possible what career choices they will have, what decisions they will need to make (if any) and when they will need to make them. The decisions that you make now about provisioning services will determine the answers to those questions.

Your commitment to implementing a managed services model has already been balanced with business risk. Unless the Newco business unit was run independently, there are some shared business functions and some shared IT services. The resources that will be first hired into Newco IT (usually business-facing and development skill sets) are easily identified and can be protected early in the Day 1 planning process*. Resources providing shared ERP-type functional, analytical and infrastructure services are the ones with the most ambiguity and uncertainty to deal with during the process and need to be a special focus of the organizational change management activities by the Parent, Newco and any 3rd party vendors who may have a role (consistency of message, focus on the groups).

During all of this change, you and the rest of your leadership team will have the critical job of hands-on change management. The job of creating and communicating a vision that will be somewhat of a work-in-process is difficult at best and will be extremely time-consuming. Now is the time you need to engage most directly with your organization to be effective in addressing their issues and concerns. Keeping in touch and getting first-hand feedback in a timely fashion will help accomplish that.

I’m not going any further in addressing OCM activities, as that was the subject of an earlier post (ref. Organizational Change Management).

As you are now going to be part of a new business (defined earlier as either an IPO or investment by a financial buyer), it stands to reason that your primary goal will be to increase the value of the business to the shareholder(s). To directly support that goal, your job is to create an IT capability that optimizes the IT value proposition to the business (ref. FAQ: IT Value Proposition). Based on your background with the Newco line of business, you probably have a good idea of how to segment services between the value proposition categories. Post-Day 1 is the time to build the full services-based IT strategy to align with your map of services. This can then be worked into a more complete vision for your organization.

Finally, during this transition period, every business function will now be thinking along service lines and looking for some thought leadership – and an enabling partner. IT will be in a position to make that offer due to the existence of the initial Newco IT managed services framework and take advantage of the opportunity for thought leadership and potential synergies down the road. This will position IT well as a business partner in the future.

*”protected” in the sense that these people may have a more directly visible path to Newco and mechanisms to retain key folks may be put into place quickly, along with restrictions to prevent them from being poached by the Parent.

Business Executive Series #4

Business Imperative, Corporate Alignment

Representative goal statement – “I need IT to spearhead a strategic business initiative replacing the new (core processing) system and align IT with our cultural values.”

This particular theme is one that I’ve encountered a few times in my career, where the delivery of a new technology engine was the major enabler of  critical business objectives. The cultural values dimension was added to emphasize that the delivery would be done in a way that was consistent with the values of the company.

Why was this necessary? By definition, aren’t all programs at a company executed in a way that is consistent with its values?

It was necessary primarily to mitigate risk. A large IT program has different sourcing options, with widely varying impacts on the people in IT. Therefore, potential attrition, performance and morale issues posed a significant risk to the success of the program. Making the statement at the highest level of the organization that the program would  be consistent with cultural values made a commitment to the people in IT that the impact on them would be considered and they would be treated right.

To make this commitment explicit and credible, both the business objectives and cultural values need to be made explicit and integrated from the beginning (“Get it Right and Do it Right”). Simultaneous engagement of the executive team is required for their articulation of business objectives and cultural values and to jump-start the immensely important Organizational Change Management workstream.

In thinking about the differences between this specific theme and other “merely” major projects, the creation of  this set of integrated objectives stands out as the most important one and that is where my focus will be, along with some thoughts on Organizational Change Management.

As an investment (albeit a large one that seldom has a positive NPV), this process begins via the IT Business Value Discovery function meeting with executive business leadership. The good news is that the business already knows that there is a problem. They are suffering because of the insufficiency of a legacy system to respond to changed business needs. There is already consensus by executive leadership that the business will be unsuccessful unless the system is replaced.  The challenge is to articulate what the new capabilities need to be – not what they aren’t – so that the gap can be clearly defined.

Given that core systems generally aren’t “owned” by one executive, this process requires a broad set of conversations to capture all the dimensions of business objectives. Also, this circumstance also makes it difficult to find a single executive sponsor – although I strongly suggest that this be the case (the COO or a line-of-business President will do nicely). The addition of  a company culture Subject Matter Expert as a resource for the conversation about core values with the business execs is also recommended.

In these conversations, the three main goals are as follows:

·      Solicit high-level business objectives

·      Validate core values and behaviors

·      Obtain input on program governance

The high-level business objectives may come from a common set at a company level or may be at the function or line-of-business level. In either case, the objective of the conversation will be to drill down the next level of the value discussion around service quality, cost, risk and time-to-results. These should be able to be explicitly linked to the overarching goals.

Based on the representative goal statement, I am presuming an existing set of core values, with specific behavioral dimensions for each. If none exists, the executive leadership team will need undertake a program of work to create one (not a trivial amount of work) and may choose to introduce it to the organization as a part of the major business initiative being undertaken.

The governance topic should be fairly straightforward. The executive committee has to have oversight, with the senior IT and business operations resources partnered as the program leads. The close involvement of the executive team in this process establishes program legitimacy and decision-making at the highest level of the organization. This will be particularly important when questions or challenges arise, particularly those related to behaviors and core values.

From this information, a first-cut scorecard should be created and socialized with the executive leadership team to validate the business goals & objectives, the specific behavioral dimensions of culture with which the effort will be consistent and how that will be measured.

It will be quite a bit of work to get this right and there will be several iterations. The sample scorecard in the Library illustrates the sort of information and structure that is recommended. Remember that this will be used to determine the solution rankings later and form the basis for the metrics by which the overall success of the program will be judged.

A brief note on the scorecard itself. As a past mentor of mine was fond of saying, “All models are wrong; some models are useful.”

The same is true of scorecards. The challenge is to develop them to a point that is suitable for purpose – not to perfection. The sample scorecard was derived from qualitative executive interviews and evolved to a point that was more quantitative. More metrics were eventually added, along with a weighting for each attribute. The weighting by the executive team was a particularly important effort because it determined the relative importance of each category and drove the final decision.

From an OCM perspective, direct linkages between the dimensions of value of the solution and business objectives, and the solution and cultural values will need to be made and clearly communicated. Initially, the communication simply commits to following the cultural values and the dimensions that are particularly applicable and then can explain how they are manifested in the scorecard as it matures. This provides the transparency that IT folks will be looking for in the decision-making process and set the standard for future communications.

Ongoing, this program will leverage OCM techniques and program management methodologies that I have described in other posts, so I won’t rehash them here.

I will, however, note that there will be questions and challenges – not necessarily from a business goals perspective, but from a cultural one. It’s particularly important that senior leadership encourages this and takes an active role in the discussions. It is though this process that variations on the cultural values and behaviors that have evolved over time can be re-connected to their original intent and strengthened.

 

 

Focus and Change

Blog Query: From your previous post it appears that my IT will have to transform to successfully support my business change agenda. How can IT both support my critical business change objectives and transform itself at the same time?

A difficult challenge comes when the business has a critical need for the IT change enabling capability at the same time that IT is transforming itself. To be successful, IT needs clear focus on what needs to be delivered for the business, so that the IT transformation program can run in parallel and shape its deliverables to best support both business objectives and IT transformation objectives.

Similarly, I would suggest that one of the most important factors determining the success of the business transformation is the ability to focus on the investments necessary to achieve the business transformation goals across functions and business units.

For this, a new process is generally needed for the various business units to classify their investments in common categories aligned to strategic directions and financial goals. Then, standardized business cases can be developed and compared between initiatives within categories.

This process begins with bottoms-up identification of desired projects by business unit and the development of categories that will be used to group the investments. Next, a tops-down investment allocation by category is needed, with an eventual investment proposal created by category based on strategic focus, competitive analysis and operational readiness

Sound complex? Not really.

Let’s say that there are currently 400 business unit proposals, some requiring major IT investment, with a projected capital spend of $150M.

Our executive committee determines that given our strategic direction, all investments will be classified as Cost-Cased, Revenue-Based, Risk-based or Customer-based. The business cases will be built to reflect the goals for each category. The CFO informs us that due to current capital conditions that our total spend can only be $100M across all categories. After intense discussion about strategic direction and priorities, it is decided that the $100M will be initially allocated across categories as follows: 

• Cost – $50M
• Revenue – $25M
• Risk – $15M
• Customer – $10M

Each category now has an initial investment allocation, and each function and business unit is now accountable for classifying investments into these categories and creating corresponding business cases. Each investment should have an executive committee sponsor and a senior business leader accountable for the veracity of the business case (usually the function or SBU leader – remember these are business investments, some with an IT component).

Now that we have investments by category with comparable business cases, each category team (the full executive committee or a subset) can prioritize the investments as either above the funding line or below. Once that is accomplished the initial proposal for each category is submitted to the executive committee for review, discussion and approval to proceed. Once this approval is given, all functions and business units will be operating off of the same investment list, including IT.

The ongoing responsibility of the category teams is to track the progress of approved investment projects, review and prioritize new investment proposals, and report issues and opportunities back to the full executive committee.

Once this process is established, we can be reasonably certain that our investments are aligned with strategic direction and that we are all executing with the same priorities. 

Note that this, like any process will occur over multiple budgeting cycles, so at any point a category will have committed funds overhang from work in process as well as future year commitments. The $100M total and tops-down distribution are current year examples for discussion.

Clarifying Change

Blog Question: When you are talking about change (or transformation), is it for the business, IT or both?

When I am writing about change (or transformation) it can be in the context of business change, IT change or IT enabling business change. At times, IT must transform itself before it can effectively support the business change. 

IT has the role of being the most critical component of large-scale business change. IT enables common method and process across an organization of any size at a pace generally constrained only by the ability of the organization to manage it (think OCM). Unfortunately, the way that most IT organizations have grown up, they are unable to successfully execute this important role in a consistent fashion.

At some point in the life of a thriving enterprise (I think that Andy Grove’s “strategic inflection point” where something fundamental changes in the environment without it being particularly apparent applies here) it becomes more important for a business to execute across functions than within functions. At that time, purpose-built IT solutions that effectively support individual business functions with their own applications, data and infrastructure (you may have heard of these as “silos”) are inadequate to respond to the challenge of being the enabler of cross-functional business change.

Fortunately IT can transform itself to be able to execute effectively across silos, but it takes a paradigm shift in the way that IT operates to be able to do it. Implementing a Managed Services model, with its established process frameworks, is an effective way to accomplish this transformation.