The Key Steps in Transformation of Enterprise Operating Models

An enterprise’s operating model is the set of principles, guidelines, guardrails, processes, technologies, and mindsets that the organization puts into practice in the pursuit of a certain set of business outcomes.

People drive this model as the heart and soul of the organization, using the capability models and operating with the available technologies and processes that are put into certain sequences with the intention of generating more means of corporate sustainment and growth.

Over the past 15 years we have seen that organizations leverage Digital solutions to optimize their business capabilities. While this approach uses the cutting edge technological leverage to push forward with the required transformation, if it is not done in a properly staged and paced structure, it will upgrade the technical ability of the corporation without enabling the people and the processes they use to act as the driving soul of the machine and would lead to a large and expensive technical shift which would not generate the preferred business outcomes that entire journey was trying to achieve.

Perhaps the largest pitfalls that organizations have experienced in recent years, have been the outcome of their lack of insights into their own enterprise operating model and how to fill the gap across the digitally-enhanced business and the operating model. This is where the combined forces of business leadership and enterprise architecture play a vital role in making or breaking the transformation.

Studies made by Harvard and Gartner show that about of half of enterprises have either started the journey or are planning for it. This is while less than 15% believe they have successfully completed their transformation. This low rate of achievement is mostly observed as the result failure in implementing the evolutionary change of the supporting operating model which serve the corporate operational business model.

It is important to understand that the Business and Operating models are the nervous system of every enterprise and in close, bi-directional interaction with the other organizational models (such as the Economic Model, Ecosystem Model, Financial Model, etc.)

The following are recommendations intended to raise an enterprise’s success rate in completing the transformation of their Operating Model.

1. Start with a realistic understanding of the Current State

To properly start the journey, we need a good, realistic and deep understanding of where we are (i.e., what is the “Current State”). This knowledge also serves as the foundation of “Baselines” for the entire Systematic Ecosystem and cascades down into all of the organizations’ Value Streams.

Let me break the news to you: Not even 2 out of 10 enterprises are doing a great job of running a live line of sight into their value delivery ecosystem nor can confidently tell you the real-time performance of their pipelines.

That being the norm, should not become an impediment to establishing our starting point in the transformation.

We need to take the time and invest the needed time and budget in the needed house cleaning and metrics re-evaluation to start with a fresh and real picture and stack up the baselines to be used for the measurement of success at the future checkpoint.

2. Decide on the Business Outcome we are targeting for

After we have a valid and detailed understanding of our Current State, we need to come to the consensus across all divisions’ executive leaders on what set of Business Outcomes we are trying to achieve through each stage of the transformation and the envisioned future state.

Business Outcomes and the Enterprises Operating Model have a mutually influential relationship. In standard terms a Business Outcome is a measurable, achievable, and time-bound business benefit that is sought after by the organization due to its positive impact (which can be in a combination of economic, reputationary or regulatory contexts).

Business Outcomes may be incremental, transformational, or remedial (and in that, they can also be categorized as net-new or pre-existing) and are chosen based by the highest impact in the shortest time (in observation of organization’s limited resources and time constraints).

Business Outcomes need to be defined with the compound intention of mapping upward into the Enterprise Strategic Portfolio (aka Portfolio Kanban) and then to cascade down through the Program Channels into Agile Release Trains (large logical structures of Agile teams functioning in service of specific Value Streams) for actual manifestation of value delivery and harvesting the benefits.

In identifying Business Outcomes, we start with a Pulse Check on the existing ones, the impediments, internal and external disruption patterns, and their transitional impacts to the enterprise as a whole.

As was the case with the starting point of the journey, we need to also be aware of the existing strategic guidelines in the organization which would help, impede, or do nothing for the achievement of the identified Business Outcomes.

The next step will be to establish the Analytical Impact Evaluation structure for the Business Outcomes to create a clear view into the opportunities and risks and the connection to the existing pipelines and the required changes across all impacted Value Streams.

We then create and expand a manifesto to cover our approach towards removal of identified impediments, mitigating the disruptions, and stabilizing the existing outcomes for growth and upgrade. This manifesto will then assist each executive to establish their cascading departmental target outcomes and sets up metrics for the future measurement of the progress.

3. Prioritize based on ROI and Criticality

At this point we have a good picture of the current status of the Operating Model and have a candidate list of target Business Outcomes which need to be planned for. As enterprises do not enjoy unlimited funding and time horizon to achieve their identified goals, they need to work at the executive leadership level to perform the needed ROI and Criticality review and create a prioritized list of Business Outcomes that the enterprise will target through the incremental transformation at each milestone.

Establishing a strong and clear vision for the Future State can guide the executive leadership in selection and prioritizations of the Business Outcomes that are compatible with the picture and can serve as the transformative medium to aggregate into its incrementally completed implementation.

As we have discussed in my previous articles in Digital Transformation, no journey can success without a proper Roadmap. At this stage, we cannot expect a detailed one (nor should we try to pre-plan the Agile Release Trains’ path for pre-fixed backlog into the future), so a high-level strategic view to show the organization where we want to go, provides us with sufficient direction and interim targets to move forward.

This prioritization practice also reveals the capacities required to allow the co-existence of transformation activities in parallel to the operations running the business (not just “keeping the lights on” but to continue to maintain a competitive advantage in the market).

4. Orchestrate the Key Points of Strengths into Competitive Business Capabilities

For any enterprise, the key to survive and stay competitive in the market stays within its ability to combine and orchestrate the strengths in its people, process, technology, and information into competitive (or even unique) competencies that can be leveraged against the strength of the competitors in any sector that the organization is active and plans to stay as such.

Since the ultimate goal of this orchestration is to achieve the Future State, we should lead an organization-wide practice that needs executive leadership and their management hierarchy in charge of each Business Outcome to work together towards envisioning the Lean Business Capabilities that would manifest their department’s share in the Future State.

These capabilities should be structured as a set of Minimum Viable Clusters that would incrementally build up into the targeted outcomes. We can assume that every enterprise has existing Business Capabilities (which may or may not have followed a Lean model) and can now benefit from its transformative changes into a driver of the Business Outcomes.

It is imperative that the teams identify and establish relevant and useful KPIs and update existing enterprise and departmental guidelines (and guardrails) to support the live monitoring of progress and post-implementation performance impact of the implemented changes.

As this journey will raise the maturity level of the enterprise Agile / DevOps practices, it would be recommended to create the relevant baselines and have checkpoints throughout the transformation to re-assess and re-evaluate the interim-state to monitor the progress and use the feedback on the delta to re-calibrate the enterprise approach.

5. Plan for the multi-dimensional evolutionary development of your people, processes, and technology

At this point we have a prioritized list of the Business Outcomes the enterprise is targeting, and we have identified capabilities that we need to achieve and have setup the needed metrics to check the progress and post-implementation performances.

We now need to create the enterprise (and problem) level backlogs of the transformative changes that the people, processes and technologies need to implement and embrace in order to establish the business capabilities we are looking for.

This can be done by work break downs through each silo, identifying cross silo synergies and existing and future Value Streams, and enriching that with live risk management to have the needed mitigations and response plans in place. As the journey continues, the risk roster must be continuously monitored and re-evaluated on the expected impacted of the risks and the effectiveness of our planned responses.

Once we have the incremental block identified in each dimension,

• The Cultural, knowledge and expertise changes for the people,
• The Enhancements, waste elimination and optimization for the processes, and
• The Digitization, transformation, and enhancement of technologies

We need to enhance the high level Roadmap that was created at stage 3 to map out the travel path for each dimension and add timeframes for each implementation and decide on the aggregation points.

As per our Risk Management practice over the backlog items for the multi-dimensional change, we need to extend the courtesy to our multi-lane Roadmap through running multiple stress testing simulations to test its resilience and impact against events causing variations in availability and timing of funding and internal / external dependencies.

The tested multi-lane Roadmap can now serve as a guideline for creating program backlog items (features) that the Program teams can take to their Agile Release Trains in the Program Increment Planning events, to prioritize and time in alignment to the Enterprise Portfolio Vision and Backlog.

Let us not forget that the multi-lane Roadmap and the Backlogs created cannot succeed nor can be allowed to run wild without considerations toward the corporate governance and compliance requirements. They should also try to maximize their benefit realization from the existing corporate cultural synergies that may exist and prep the people to embrace the upcoming paradigm shift in “how we do things”.

6. Drive the incremental change following the Enterprise and Divisional Minimum Viable Change Clusters

At this stage, with the identified starting point (Current State) and the target point (Future State), a multi-lane Roadmap to guide the needed change for People, Processes and Technology which has translated into Enterprise and Program level Backlogs feeding what the teams need to implement, it is time to drive forward.

The secret success sauce for any transformation is to find the minimum set of reasonable and meaningful changes for each incremental delivery, that would provide the best positive impact without taking too long to be delivered and / or carrying too many assumptions with them to the day of delivery.

This means that we try to strike a balance between incremental delivery and impactful outcomes by bundling together the set of features that need to be delivered together as a Minimum Viable Change Cluster, that is large enough to show a measurable change in the Business Outcomes while it is detailed enough to be properly implemented by the team without any grey areas open to a variety of risks.

Every achieved step will join the ranks covered by our Continuous Improvement culture will be live-monitored and checked for performance and impact for as long as they exist.

Conclusion

A successful transformation needs to establish itself as a “State of Being” for the enterprise to become sustainable.

Once the organization arrives at the intended Future State, it becomes the “new” Current State, only to follow the culture of relentless continuous improvement that the organization needs to embrace in order to keep the progress live and to grow the Business Outcomes into higher levels.

An enterprise transformation means that the organization did not take the path of incremental change at the depth, width and the pace required in order to stay ahead of the competition in the market and now has arrived at the “tipping point” to do so.  

When this journey is completed and the organization has arrived at the top of the level it tried to achieve, it is important to continue with the needed ongoing changes to stay sharp and at the cutting edge. Following that approach, we can “change before we have to”, and that can put us (and keep us) in a much more competitive position in the market than any future large scale transformation.