Business Transformation: Dealing with Change in a Lean and Agile Way

Business Transformation: Dealing with Change in a Lean and Agile Way

Strategy execution remains a challenging task for many organizations. The ‘Digital Enterprise’ requires major business transformations, delivered at speed. Most organizations are in a constant state of change. The ‘unfreeze-change-freeze’ model, reasoning from the current to a desired future state, no longer applies; the current state is always in flux and the future state is a moving target.

Feedback from the ‘shop floor’ is more important than ever; that is the place where customer contact happens, market knowledge is gathered, processes are optimized, and many innovations occur. Iterative, incremental and continuous approaches to change are essential.

As we described in a previous blog, organizations invest in many disciplines that are concerned with change, to improve their transformation capability and effectiveness. These disciplines need to be coordinated and aligned, addressing:

• Goals: Where do we want to go with the organization? What are the desired business outcomes?
• Structure: What are the elements of the enterprise in its context, and how are they related?
• Change: How do we move the enterprise in a desired direction?

The figure below illustrates this.

Decision making under uncertainty
In a very stable environment, you might be able to look a few years into the future. But in a volatile environment, making detailed long-term plans does not make sense. You have to adapt your planning approach and horizon to the situation at hand. In case of larger uncertainties, it is more important to focus on the direction of change than on the current or desired state of the enterprise.

If you are in a highly uncertain environment, you need an iterative approach to business transformations with a short cycle time, re-evaluating and re-adjusting your portfolio of change initiatives every few months. You should take small steps, use short feedback loops between disciplines and reassess your direction frequently. Moreover, you should split large initiatives into smaller changes that each add business value on their own, allowing you to change course along the way and avoid the risks of big-bang implementations.

This focus on change, adaptation, and feedback is one of the core tenets of the Agile and Lean movements.

Lean and Agile principles
Rather than realizing a coordinated business transformation discipline by fixed rules, formalized documents and bureaucratic sign-off processes, we advise you to apply Lean and Agile thinking to business transformation:

• Focus on the value stream. Examine all steps in your portfolio management approach for the business value they add and eliminate waste. How many sign-offs do you really need?
• Focus on the flow. Limit work-in-progress and use a pull-based approach to avoid projects having to wait for a decision, so don’t decide on all your projects at one moment each year.
• Monitor and measure business value. Track the benefits of projects and programs, assess the value of your assets, and use the outcomes to readjust your portfolios.
• Focus on responding to change over following a plan. The current state is always changing, the future state is a moving target. Use an incremental and iterative approach, periodically re-assessing your investments and reallocating these if necessary.
• Use a life-cycle perspective to your assets and manage their value across their entire lifetime, not just at the start.
• Synchronize activities via a common cadence and time-boxing, e.g. two weeks for agile development teams, three months for releases and portfolio management, yearly for capability-based planning. This ensures a regular flow of business value.
• Pay attention to the continuous improvement of your portfolio management processes themselves: keep learning and readjusting your approach.

By applying these guidelines you can create an optimal way of working and an organizational culture that fits with modern approaches to change.