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Podcast Transcript

Sam: Welcome to Pragmatism in Practice, a podcast from ºÚÁÏÃÅ, where we share stories of practical approaches to becoming a modern digital business. I'm Sam Massey. I'm here with Gary O'Brien, Principal Consultant and Organizational Designer at ºÚÁÏÃÅ. Gary has over 20 years of experience in helping executives, teams, and individuals adopt and improve techniques to build humanistic organizations more capable of responding to the increasing pace of change.

Today, we're chatting to Gary about what it means, in practical terms, to transform your organization. If you enjoy this episode, don't forget to head over to iTunes to subscribe, rate, and leave us a review.

Gary, welcome to Pragmatism in Practice. Great to have you here.

Gary O'Brien: Great to be here.

Sam: So I'm going to start with a big question, first off. What is digital transformation? What must organizations do to embark on a transformation journey?

Gary O'Brien: Oh, I think there's a lot of different definitions. I don't think there's just one definition. But certainly from my perspective, what people talk about when they say digital transformation, is the impact that the explosion of technology has had on every industry.

I think you can categorize that by saying, well first of all, it's created an enormous amount of ambiguity. No longer is there certainty in what we're doing, so you can't plan, as far as what we used to do. You don't have the reality of information in front of your face.

The second one is the speed that's occurring in change. So that leads to things like being able to make decisions faster, more decisions, more often, of a smaller size, I guess is kind of what we're aiming for there. So, that's the second thing.

And then, I think the third thing has just got to do with that explosion of technology, which is how do you adopt the technology? So how do you adopt new and emerging technology? Which technology do you adopt? Which one do you use?

So I think when you scale it all back, it's the exponential growth in tech has led to these challenges of ambiguity, speed and tech adoption, that everyone's struggling with. And if you're a new organization, if you're born digitally native, as they call it, you don't have all the constraints from the start, you kind of work that way immediately. So, that's where we see the disruptors come into play because they just naturally work that way.

Gary O'Brien: Whereas traditional organizations, they're built on legacy of technology, legacy of thinking, legacy of process and structure and rules and regulations. The engine of an organization just works a certain way and it's really difficult to change that engine.

So for me, digital transformation is largely aimed at those legacy organizations, who are dealing with ambiguity, speed, and tech adoption issues, and how do they go about doing that.

And then yes, on top of that, there is kind of this new revenue opportunity, if you get it right, where you can start to create new digital products. And I think that probably more talks to, from a technology point of view, the data side of things. So, digital means that we're collecting a lot more data. You can productize and monetize that data by either gaining new insight from it, so there's new ways to look at it, to find new information and find more about customers.

Sam: I've watched a talk of yours from ºÚÁÏÃÅ Live, last year, and you talked about the monetizing side of things. You were talking about not necessarily being the driver immediately. It should really be about the customer, first and foremost, right? So it must be a challenge for businesses who have worked in this very traditional way, to sort of unhinge themselves from traditional ways of working. Which moves on to talking about how you talk about simplifying. It must be a huge challenge, for these traditional businesses to simplify what they've been doing for tens, maybe even hundreds of years.

Gary O'Brien: Talking first about the simplified model, well that's really quite easy. It's where you gain a really good understanding of the purpose of the organization, why you exist in society. Right? So for a bank, it's something to help people succeed financially. And what do you do? What value does the community get from your existence that keeps you in business? Because let's face it, companies are a trade of values. You deliver value to a customer and they give you money in return for it. So why do we exist is the first thing.

Gary O'Brien: Then, I kind of look for senior execs to have the knowledge, the experience, the foresight, the vision to understand the outcomes that the business needs to achieve to move the company towards purpose. That could be 25 outcomes tops. It's not like outcomes at every level. It's just the big things you need to achieve and the measure that you have that would tell you that you're achieving it.

Then the next step is to go right. So, let's get the people together, who have knowledge in how to achieve that outcome from across the business, and let them create initiatives to achieve the outcome. I think those initiatives exist in kind of three categories.

There's absolute knowledge. This will definitely move the needle of that outcome. We know it. So, just give them the money, let them go. That's just good business sense.

The second one is, we've seen it work in some areas, but we need to find out whether we can scale it across the business. Is it profitable? Do we have the competency? Does it make sense? Does it fit within our culture? All these kind of things. And so with those ones, you are testing growth patterns. So, don't measure revenue, measure growth. Find out whether you can actually exploit the opportunity.

And then there's the ideas that we have, that we have no evidence whatsoever that it's going to happen or it's going to work. So, treat it like an experiment. Hypothesis-based, time-bound, small amount of investment.

Those three categories of things become the backlog of work for that outcome. And if you imagine doing that for each outcome, you'll end up with a backlog of the company.

So now, you've got purpose, you understand the outcomes, you've got a simple measure and you've got the backlog of work. That's the simplified business model. Execute that work. Bringing together the people required to do those pieces of work and let them do it.

Now, that's a nuanced statement, right? Because now comes the hard part. What it means is, I promise you your org structure won't match that list of work. It just won't. And so, you've now got a challenge. How do you bring people together from different lines of business, who don't report to the same person, because they are the best people to bring together to deliver data or customer? Knowing that if you deliver more data or customer more often you'll get more profitability. That's a simple equation, right?

That's a channel audit. Your org structure probably doesn't support it. You technology probably doesn't support it either. Your architecture's probably built for uptime and sustainable hardcore environments that are really harmed, and all of a sudden we want constant change and little pieces of work. We've got to be able to deal with that.

When I started, it's easy to know what to do. The challenge is how to take those traditional things that have been there for so long and pull them apart.

And I think there's probably two other things I want to add to that. One is the challenge of a leadership's mindset to accept that the work that needs to be done might not be their pet project, and the people that need to do the work may not fit within their empire. The simplicity needs to be maintained, right down to the team that does the piece of work. So, if you think about an outcome with a single measure, I think the biggest mistakes I see company make, is that they design the work they want to do and then they apply a measure after the fact, to try and justify that it's being done.

Whereas in a simplified business model, you have an outcome and a measure. You then design work to move the needle of that measure. And then, the group below that come up with a bunch of ideas to move the needle of the idea. And then, they apply a single measure. Below that, that group come up with a bit of work to move that measure. So, you end up within this zigzag. You've got an outcome and a measure and a bunch of work to move that measure and their measures, and then a bunch of work to move that measure. And if you followed both sides of that zigzag, the work gets smaller and smaller, until it's autonomous and could be done by a team.

Sam: It sounds idyllic. It sounds idyllic. And this is when it works.

Gary O'Brien: Yeah. Yeah.

Sam: I'm sure you've been in situations with organizations, where it hasn't been so fluid, and it hasn't been so easy to get those outcomes and to measure the success. Why did we fail? Why do organizations fail when they're trying to do this?

Gary O'Brien: It takes years to do this. It's a cultural change. It's a mind shift. It's not something you can just implement. I think the approach is quite unique. In my head, I'm sort of saying, "What makes ºÚÁÏÃÅ different in how we approach this?"

It doesn't have to be ºÚÁÏÃÅ, but what works versus what doesn't. So, implementation versus learning. There is no cookie cutter here. You can't just come in with a predetermined plan, likely from another company that's done it before, and implement that. You need to learn, what is it about your organization that you need to improve and to what degree? Because it won't be the same for everybody. The components are probably the same. The elements are probably the same. The building blocks, as we call it, they're probably the same building blocks for every organization. But the degree in which you want to actually build capability in it, it's just going to be really, really different.

So actually, you've got to take the time to learn. And the reality is that, that learning will become constant, because you'll always have to keep nudging yourself and evolving your organization to keep up with all the changes that are going on.

So to think there's an answer, and that you've got to implement digital transformation is where I see people fail. They kind of think holistically. They look for this big answer. They bring in hoards of externals and they go about implementing. They miss the cultural point. That it's about learning, not implementing.

Sam: Wherever you've seen it done well, why do those teams, why do those organizations succeed so quickly, where others don't sometimes?

Gary O'Brien: I see a lot of organizations set up a digital department. Look at the cool kids over there, and they're all doing things really fast, and it's all going really, really well. Why is that? And then you realize they're actually not integrating into the entire organization, so actually it's a falsehood. What I'm cautious about, is this kind of concept of seeing the market really strongly, which is everyone has to be Netflix, everyone has to be Google. Everyone's got to be Spotify.

Gary O'Brien: No. If you go look at those companies, they will tell you ... Spotify model's classic. The amount of companies implementing the Spotify model from two and a half years ago, well that's not Spotify of today. They've evolved. The whole point of that model was how they evolved themselves. Yet people are still taking the white paper and implementing it the way it was written all that time ago. That doesn't work for Spotify anymore either.

Gary O'Brien: So, I think for me, you've got to really be thinking about, as I said before, what's right for you. What does good look like for you? How does your organization reach its maximum potential for challenging those three early problems, right? How do you deal with ambiguity well? How do you operate at a speed that allows you to maximize the amount of value you deliver to your customer so you can maximize profits? And then how do you build an environment where you can adopt emerging technology that's going to be critical to your survival? The answer will be very, very different for everybody. So don't be Netflix, don't be Spotify, don't be Google, don't be Facebook, be you. And I think that's what makes it really successful.

Sam: We'll talk about emerging tech, actually, in a second or what technology's role within this. They're almost like the hero within the outer story. But you're really saying, actually, your digital transformation journey is about changing your company's thinking and your ways of working, essentially. So, what role should technology play in all of this?

Gary O'Brien: The evolving organization is one who provides an environment where employees just love to work there. The way that you engage, the way that you interact, the fluency in which you can work home. I talk about work-life synergy as opposed to work-life balance. Because I think work-life balance says there's work and there's life, and the two things are separate, and you got to try and find the right balance.

I think that's no longer possible, and I think it's a great thing. Work-life synergy says, "My work is part of the enjoyment of my life. The things I enjoy doing socially, I can do with work." It interacts. So, I think the companies that are really nailing either the environment of the workplace, the ability to work from home and have flexible working hours, all that kind of thing, is they are companies that are succeeding in attracting top talent. That's all tech.

Then the way customers engage with you. The expectation of the customers as heightened so much, like the simplicity with which they expect to be able to transact with you, the way they expect to be able to transact with you on multiple devices, anywhere, anytime, all of that. The experience they expect to have, the consistency of the experience they expect to have. And then how we deliver the value and what value is, has moved to, whether it's supply chains or product development or virtual products, or the insights as knowledge and information that we deliver to clients, it's all tech. So, the whole thing for me is tech.

So that has a massive change on business executives. Because now there is this kind of minimum set of technical knowledge that every exec needs to have, to successfully run their company. That's a big shift.

I think if you look across the world, the amount of ex-CIOs or ex-tech-competent people who are moving into business executive roles is phenomenal. Phenomenal. So to me, the big shift here is technology has to move to the boardroom, has to. At the moment I think it's moving to the business execs. It'll eventually move to the boardroom, which is the next step. But right today, technology moves to the execs. So, there's this minimum set of technology knowledge you're going to have to have. That now means that every company is a technology company. So, the competency needs to be in-house. You can't keep outsourcing it. The competency needs to be in-house. This order-taking mentality of business versus IT has to go away. It has to go away.

Sam: Are you still seeing that?

Gary O'Brien: Oh, absolutely. Yeah, absolutely. In fact, I still see companies building up IT as a service. To me, that's a massive amber flag. IT as a service says, "We serve the business, and therefore, for your objective is efficiency." There's quality but it's also efficiency. It's going to be money-driven. You're going to look for ways for scale, efficiency of scale, all these kinds of things that are anti-patterns of maximizing value delivery.

The opposite of that is there is not IT in business, there's groups of people with the competencies of skills to deliver the outcome, who come together, who would be across a broad spectrum of tech and business type competencies. And that group owns their own architecture to deliver that value.

Therefore, the bucket of money that supports the outcome is one bucket of money. Not a business bucket and an iT bucket and whatever else have you. It all sits together. So, the bucket gets bigger to deliver the outcome. It's actually a bigger pool of money.

It also means that the business have to take responsibility for the ilities of IT, scalability, reliability, testability. You've got to now know about that stuff and why it's important, and make sure you're investing in that for your tech stack to deliver on that outcome.

So, that's a lot of change going on in there. But to me, that's the big move, is the cats and dogs living together, as they say. So this is about business and IT not being separate things, that the outcome is what we organize ourselves around now. The collaboration now becomes co-creation between business and IT.

And I think above all else, like when I talked about that simplified business model early on, once you have the backlog of work to deliver on the outcomes, and you bring together the skills and the talents required to deliver that outcome regardless of where they belong, that's when you start to learn what your company's supposed to look like. And perhaps that has implications now on what structures you should have. And they'll be a little bit fluid. But understanding how to bring those people together, understanding how to evolve all those functional roles around HR, and finance. To become servant of value delivery, rather than value delivery being constrained by those functional units, I think will become the critical challenge of the next threes.

Yeah, it's a big question, isn't it? What do we do first? I don't think there's one answer to it. It could really depend on where you're at. So for us, we've been kind of grappling with this idea for a long time, and have actually spent a bit of effort thinking through how to help organizations make the decision on what to invest in first.

One of the things that we were really influenced by was the Agile Fluency Model. The Agile Fluency Model, it's been around for a while now. Diana Larsen and James Shore put that together a long time ago. Martin Fowler blogged about it and it certainly took off a bit in its popularity.

The concept of fluency was one very much like language. If you're going to France for a week, then how fluent you need to be in the French language is quite minimal, and what you're likely to invest in to do that is probably Google Translate.

Sam: Yeah.

Gary O'Brien: If you're going for three months, now you probably need more fluency, and what you're going to invest in is perhaps some kind of online course or audio files. If you're going for 12 months, then you're probably investing a sit-down course, where you're probably, at the end of it, judged on your ability to speak French. But that's the only time out of the three that anyone should actually be judging your ability to speak French.

So, this concept of Agile Fluency is the same thing. It's understanding what you aspire to be, and then realizing the implications of what you should invest in as sensible defaults to become that.

That concept and the way they apply that to Agile teams was really good. Which is to say, not everybody has to be brilliant in every aspect of Agile. Work at what your team needs and adopt and invest in those things that make it better.

So we've taken that and started to create the Digital Fluency Model. The Digital Fluency Model says that, "We think there are some core building blocks of these modern digital businesses," what make them tick. Whether that's having this frictionless operating model, or having design and product capability, or intelligence-driven decision making around data, the the engineering and delivery mindset that needs to be had. There's just some things there. There's just building blocks there, that you really, really need to be thinking about. How much capability do you need?

Platforms is the other one. It's thinking about what platform technologies you need to adopt. What platform thinking you need to have inside your business. So, there's probably those five.

So you've got these five building blocks, and now we want to know how much really do I need in each one of those building blocks? And every company's going to be different, based on you industry, your culture, your structural set up, your competitive position at the time. It's a whole range of things.

So, this Digital Fluency Model is about identifying what aspiration you have for each of those building blocks. And then what are the sensible defaults, the investments you should make. Which then leads you to a simple, "Okay, in what order should I make those investments?" And when I get to that, I can now know, "These are the obvious things I should do first."

I know that's a bit of a long-winded answer to it, but it's just ... because it just isn't one simple answer. I could sit there and go, "Well if you Google it, these great insight companies will all tell you that you need to do this to the customer first," or, "You need to invest in cloud first," or, "You need to adopt AWS here," or, "You need to ..." There'll be so many different answers to that question, that it's all totally biased, based on what that organization wants to sell you.

Let's be serious. The truth is, you need to do ... the first thing you need to do is the best thing for you.

Sam: Right.

Gary O'Brien: The best thing for you. And so what we're trying to do is use the Digital Fluency Model, not as a ºÚÁÏÃÅ thing, as a community thing. Just like the Agile Fluency Model, everyone should be able to just access it and use it. But as a way to identify the digital you, as a way to sort of go, "Okay, given what we aspire to and our current situation, what degree of fluency do we need in each of those building blocks? And therefore, what we should invest in, and in what order." That'd be nice.

Sam: Gary, it's such a pleasure talking to you. Thanks so much for joining us on the podcast.

Gary O'Brien: Glad to be here. Thanks.

Sam: If you enjoyed this podcast, be sure to check out Gary's new book, Digital Transformation Game Plan: Tenets for Masterfully Merging Technology and Business at ºÚÁÏÃÅ.com.