The Transformation Office - A new organisational capability for the digital economy

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  • TheTransformaTionoffice

    SEPTEMBER 2016www.shiftINpartners.com

    A new organisational capabilityfor the digital economy.

    By Rafael Lemaitre, James Creelman, Roberto Wyszkowski.

    http://www.shiftinpartners.com

  • The Transformation Office: a new organisational capability for the digital economy.2

    In the digital economy, organisations will prosper or not

    largely based on their ability to transform to align with

    ever-changing market or societal dynamics.

    Transformation encompasses the adaptation of an

    organisations value proposition and business &

    operational model to the fundamental changes brought

    by global trends, digital technologies and increasingly

    demanding stakeholders needs and expectations.

    Transformation will become a must-have core capability

    for success, be that for commercial or governmental

    organisations: given the raft of upcoming challenges

    those that are Gulf-based have a pressing need here.

    In this white paper we argue that instilling the capability

    requires the creation of a dedicated Transformation

    Office, responsible for driving complex, disruptive

    change initiatives that have a profound impact on

    both operational structures and the strategy of the

    organisation.

    We outline the required remit and key focus areas of

    a Transformation Office (led by a Chief Transformation

    Officer) and how it differs from, yet works alongside,

    conventional Project Management or of Strategy

    Delivery Offices.

    2

  • 3

    The digital economy is driving unprecedented disruption for businesses and governments across the globe. Global forces ranging from an exponential technological change, steady shifts in the demographics mix, increasing role of cities (replacing the countries as power houses) to the shift from business executed in the real world to the digital world, have changed the basic fundamental assumptions that structure the core value proposition of both private and public sector organisations.

    This fast changing environment has particular significance in the business and government environments of emerging economies. The implications are even more profound for GCC countries, where the economies are highly dependent on fossil fuel. Organisations are facing an imperative - either take the lead in transforming how value is delivered or lag further and further behind in competitiveness, profits and/or citizen/consumer satisfaction.

    While increasing numbers of business and government leaders across the region acknowledge that transformation is key, the challenge they are grappling with is precisely how to make this step-change happen. Based on rigorous research, this white paper from ShiftIN Partners introduces a new approach for driving transformation and one befitting the digital age. Central to this is the establishment of what we call a Transformation Office, led by a Chief Transformation Officer. But first we need to define transformation.

    The DemanDs of The DigiTal economy

    SHIFTIN PARTNERS Knowledge Library 3

  • Transformation encompasses the adaptation of an organisations value proposition and business & operational model to the fundamental changes brought by global trends both economical and societal, digital technologies and increasingly demanding stakeholders needs and expectations.

    Transformation nowadays is a balancing act between adapting to new realities and maintaining the agreed course of action. It requires organisations focus to the new ways of living, doing business or providing services while it already drives towards agreed long term achievements strategy - and during the execution of its key tactical and operational action plans projects.

    From our perspective transformation can take many shapes, from transforming business models to cater to a shared economy to transforming the way that critical services are delivered to residents. We categorize transformation into three core verticals and three transversal transformations:

    core Vertical Transformations

    Turnaround / Financial: The transformation that is driven mainly by a seriously underperforming business or organisation: as much as anything a survival imperative Mandate / Core: The transformation that is driven by changes in policy, mandates or of the Vision of the senior top leadership (e.g., board, owner, heads of government) Business Model: The transformation that is driven by fundamental changes on the value proposition and/or the way that products/services are delivered, the markets that are served and the cost/revenues (or value) structures.

    Transversal Transformations

    Digital: The transformation driven by digitalising the organisations DNA as well as key aspects (partially or fully) of its value proposition.

    Operational: The transformation driven by changes at the core of the operational processes in pursue of efficiency and optimisation, usually deep rooted in supply chain transformation. IT & Technology: The transformation of the current technology and IT backbone of the organisation, driven by an increase on demands from the business (or social) environment Support functions: The transformation of legacy structures in terms of support (such as legal, HR, finance) driven by an increase on demands from business (or social) environments, as well as the continuous seek for efficiency, cost reduction and service level increase.

    In practice there are no clear boundaries between these transformations, and most likely a core vertical transformation is pegged by a good share of transversal transformation. For instance, the change in a business model, where an entire new value proposition will be introduced (e.g. moving from physical products to digital services), will be dependent on a set of internal transformations in terms of digital, operational and IT components.

    TransformaTion DescribeD

    The Transformation Office: a new organisational capability for the digital economy.4

  • SHIFTIN PARTNERS Knowledge Library 5

  • When discussing transformation, we cannot but consider strategy. As transformation, whatever the scope, represents such a substantive change for an organisation, it will always be anchored to the longer-term strategy. Running a transformation program will likely be encompassed within the span of the strategic planning horizon and transformation initiatives (typically mid-term in nature) will be the key strategic initiatives that deliver breakthrough performance improvement.

    For many organisations today the requirement to transform or fail (even die) is so critical that there is a pressing need to re-think how organisations manage such mission-critical initiatives. Transformation initiatives bring an additional layer of complexity that other projects do not and often have a deep disruptive impact on the organisations prevailing structural and cultural dynamic. Transformation efforts can (and most likely will) fail if is not properly and exclusively managed as a unique set of initiatives. Such efforts can be made without interfering with the ongoing tactical or operational action while maintaining the direction towards agreed strategic or long term outcomes.

    We argue therefore that there is a pressing need for a dedicated Transformation Office, responsible for driving such complex, disruptive change initiatives.

    Why not The Project management or strategy Delivery office

    Many would counter-argue that prevailing organisational functions already assume responsibility for transformation programs. Most organisations already have well-established Project Management Offices (PMOs) and/or Strategy Delivery Offices (SDO often called an Office of Strategy Management; OSM). Both are essential for driving performance improvement, but given their inherent complexity and criticality, managing transformation cannot

    and should not be done using the same approach used for managing projects, strategy or performance. Both offices sustain key responsibilities that should not be compromised through additional mid-term complexity that may distract the organization from the agreed direction or jeopardize the ongoing actions on the ground.

    While key decision makers could be tempted to embed a transformation program within the scope of responsibilities of the PMO or the SDO/OSM, we would strongly advise against this route. The PMOs mandate is to ensure that projects are managed efficiently and to established procedures - be they strategic initiatives or large tactical or operational projects. As case in point, assume the implementation of a new finance and accounting system within an organisation: this can, and should be, steered by the PMO. It is typically a complex project with many involved stakeholders (internal and external) and so robust project management disciplines will be key to successful implementation. But this is not a transformation initiative.

    Now when it comes to strategy implementation, a major transformational effort can be seen as a key strategic initiative, hence the natural owner is often seen as the Strategy Delivery Office and this is often the preferred vehicle. However apparently logical, we argue that this is no longer a fit-for-purpose approach.

    Transformation requires large amounts of change management, coordination of complex stakeholders, and more importantly people committed to make it happen and that have the right skills. Organisations cant expect to deliver a list of transformation, projects to the PMO and tell it to get on with it, or expect that the SDO will do this with the required focus, at the same time it executes its other key processes (e.g., managing performance, strategic alignment,