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

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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 organisation’s 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.

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

  1. 1. The Transformation Office SEPTEMBER 2016 www.shiftINpartners.com A new organisational capability for the digital economy. By Rafael Lemaitre, James Creelman, Roberto Wyszkowski.
  2. 2. 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 organisation’s 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. 3. 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
  4. 4. Transformation encompasses the adaptation of an organisation’s 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 organisation’s 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 organisation’s 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
  5. 5. SHIFTIN PARTNERS Knowledge Library 5
  6. 6. 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 organisation’s 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 PMO’s 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 can’t 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, managing risk, review and update the strategy, etc.). So we argue for three distinct offices that have their own remits but work together in driving performance. The Need for a Transformation Office The Transformation Office: a new organisational capability for the digital economy.6
  7. 7. Transformation Office: Case Examples Consider the case of a large Government entity with a clear Government to Citizens model, where service delivery is critical - let’s assume a Health Organisation. If this entity decides to shift its “business model” to a regulatory model where all of its services are no longer delivered by them but are spun off into a set of different entities and companies, it will have a profound impact on the way the organisation is managed. The transformation that this entity will have to endure will be substantial, and the need to maintain focus and manage change will overriding success prerequisites. Or consider a large financial institution, which operates in retail banking, corporate banking, wealth management and investment banking. If the bank decides to reorganise its operations by creating two subsidiaries - one in charge of centralising all its operations and other in charge of re-shape all its digital banking services - the impacts on the entire business will be profound. The expected implementation and the degree of change associated will be very challenging, hence having a proper governance of this transformation and a stand-alone structure can bring that focus and help to navigate through complexity. When organisations merge, as a further illustration, the transformational process is exclusively managed by a dedicated office to guarantee success but also to allow the merging organisations to maintain their short term and long term course or journey. A similar case can be considered when a governmental organisation is privatised: value or service provision is maintained while a complex internal - both operational and cultural - transformation is structured and executed. One-Size Does Not Fit All: Positioning The Transformation Office Note that we are not necessarily suggesting that all organisations will require three standalone offices - one size does not fit all. Organisational preferences regarding structure and culture will come into play. In many cases the role of the PMO can be well embedded into the SDO (most of the cases) as can, the role of the Transformation Office (TO). What is more important is to recognise the distinct, yet complementary roles of the three offices. Each requires its own remit and charter, whether merged or not. By being fully cognisant of the specific requirements from all three offices then joined-up, impactful end-to-end enterprise performance management becomes achievable (from short- term operational planning, through mid-term transformation planning to long-term strategic planning): confusion, turf- wars and the overlapping of efforts are eliminated with the three offices laser-focused on what it has to deliver and how this positively impacts the organisation more broadly. SHIFTIN PARTNERS Knowledge Library 7
  8. 8. The PMO, SDO and TO: Key focus Focus is on steering profound / disruptive change. “We are adapting to change while remaining relevant to our stakeholders” Mid-term, focusing on complex initiatives that profoundly impact operations and strategy. Based on strategic planning, the shaping of mid-term plans driving significant change. Performance managed by project milestones as well as for strategic/operational KPI achievement Co-operate and actively engage stakeholders within the transformation to make the change Deep understanding of technology, change management and a knowledge of present and emerging disruptive elements. Focus is in delivering value and manage strategy implementation. “We are gradually realising our expected outcomes” Long-term, focusing on delivering the ultimate strategic vision Big picture planning: ensuring that projects, processes and actions are always aligned to the strategy Performance managed by overall results achieved and outcomes delivered (strategic KPIs) Communicate and engage stakeholders for strategic reasons: align everyone to successfully execute the strategy Deep understanding of Strategy Execution, Performance Management and associated skills Focus is in achieving project efficiency. “Our projects are on time and on budget” Typically short- term, focusing on operational/tactical change. Though has a role in ensuring efficiency of longer- term initiatives Planning and execution of work on projects/ initiatives and deliverables Performance managed by project/initiatives milestones achieved Communicate and engage stakeholders for operational reasons: run projects without disruption Deep understanding of project management world Main Focus Timespan Approach to planning Approach to performance management Stakeholder & communication Main skills required Project Management Office Strategy Delivery Office / Office of Strategy Management Transformation Office The Transformation Office: a new organisational capability for the digital economy.8
  9. 9. Regardless if it is a business model transformation, an IT transformation, or any other type of transformation, the TO performs three core processes: Global Steering Anchored to the longer-term strategic vision, the more mid- term transformation efforts must be well designed, managed and subjected to effective governance models. Key sub- components of Global Steering include: . Architect Of Transformation Given the inherent challenges and complexities and resource requirements it must be clear from the outset how the transformation initiative supports ultimate strategic goals. Also critical is the design of a robust governance mode for the duration of the effort. . Coordination And Custodian Of The Transformation Plan To steer successful execution a well-designed transformation plan is required that is ‘owned’ by the Transformation Office and has clearly identified roles, responsibilities and accountabilities. . Risks Management During The Transformation It is important that the key risks that might derail the transformation effort are identified, monitored and mitigated through a risk management methodology. Transformation Management For the Transformation Office, process management has to be considered through the transformation lens. This is quite different to classic approaches to process management or improvement. Key sub-components of this Transformation Process Management include: . Assess Trends And Technology That Hinders/Boost The Transformation A critical, and differentiated capability of the Transformation Office is the ability to constantly monitor disruptive trends and where appropriate apply proactive or reactive interventions to counter/exploit these trends. In particular technological trends and disrupters appear on the TOs radar screen. . Identify Process That Need To Be Changed Be they dealing with trends or disruptors or transforming existing processes within the organisation, the TO identifies those processes that have the greatest impact on the transformation effort. . Re-Design Processes That Support Transformation The identified processes need to be redesigned to deliver to the transformation goals. Clear as-is a to-be states need to be described, with clarity around how these will be bridged. Change And Stakeholder Management A transformation initiative will always be a major change program impacting multiple stakeholders. Failure to recognize this reality will lead to marginal, if any, success in delivering to the transformation goals. Key sub-components of Change and Stakeholder Management include: . Communication Planning At the outset of a transformation initiative it is critical that a strong communication plan is created, with clarity around the messaging vehicles to be used for different audiences: from face-to-face to digital. Although the overall message needs to be consistent the language will differ according to audience needs. Transformation Office Framework SHIFTIN PARTNERS Knowledge Library 9
  10. 10. . Stakeholder Engagement As transformation profoundly impacts multiple stakeholder groups, there must be a clear plan and process for ensuring buy-in and engagement. Questions such as “how does this affect me?” “how does this help me deliver greater value?” and “what do I need to do?” need to be addressed. . Capabilities Building Transformation, by implication, requires upskilling of current organisational capabilities and skills and/or the inculcation of new ways of working. . Change Management Underpinning everything above is the recognition that transformation is about change. It is by design a change program. Transforming structures, processes, introducing new technologies etc., can be extremely disconcerting to an organisation and its employees. Carefully and sensitively managing this change is paramount for success and something the TO must always keep front-of-mind, especially when they get engrossed into the more technical aspects of transformation. Communication planning Stakeholder Engagement Capabilities building Change management Assess Trends and Technology that hinders/boost the transformation Identify processes that need to be changed Transformation Management Re-design processes that support transformation Architect of Transformation Coordination and custodian of the transformation plan Risks management during the transformation Global Steering Transformation Management Change and Stakeholder Management TRANSFORMATION OFFICE The Transformation Office: a new organisational capability for the digital economy.10
  11. 11. As the ultimate responsible of the Transformation Office, we suggest a Chief Transformation Office (CTrO), who will be well versed to perform four main macro roles: become the transformation architect, provide digital expertise, manage key stakeholders and act as positive disrupter. It is important to emphasise that we are not positioning the CTrO as a permanent C-Level role. In keeping with broader changes that will be required to drive agility in the digital economy, the CTrO position can be established in an ephemeral time span, usually across the life of the transformation. To an extent, the role of the CTrO mimics the role of the head of a new product (such as the head of a new product device in mobile communications) or when a new disruptive project is launched (e.g., the head of a new space mission). 1. Transformation Architect/Planner: Defining and planning a transformation program is similar to defining and planning a large urban development: the ideas, concepts and master plans put in place, once executed will have profound impacts on the citizens/residents of the urban development. Same with a Transformation Office: the definition of the Transformation (which will usually come from the new strategy) and its implementation details will have deep impacts in all the employees as well as in a wide range of stakeholders (from suppliers to clients). The office should act as the Transformation Architect and Transformation Planner, which from the outset incorporates an understanding of the feasibility and usability of the plan. 2. Digital Savvy Expert: While we believe there is not such concept as a digital strategy, just strategy in a digital world, it’s a must for the officer to be digital savvy in order to be able to cope with all the technological of the transformation. 3. Stakeholders Manager: Change is embedded in transformation, and the degree of change that needs to be properly managed in the implementation will be significant and must not be underestimated. Having sound change management processes and equally robust stakeholder management processes are not just an important role of the officer, but perhaps the most critical role. 4. Positive Disrupter: The ‘positive disrupter’, is perhaps the most challenging of the four roles. This consists of challenging the status quo of the organisation structures (and its stakeholders) without antagonising the different responsibles (e. g., executives/managers) that are being disrupted. Role of the Chief Transformation Officer SHIFTIN PARTNERS Knowledge Library 11
  12. 12. The Transformation Office: a new organisational capability for the digital economy.12 As we sequence through the early decades of what is being called the ‘digital economy’, organisations (be they commercial or government) are challenged to adapt structures and working practices to the new realities. The demands are heavy and unprecedented and how organisations will be reconfigured going forward is still work in progress – and will be for some time. But what is already glaringly evident is that agility and the required focus on transformation will become hallmarks of the most successful organisations - and increasingly a perquisite for survival. Building the structures, governance and process models that make transformation a core organisational capability will become an organisational ‘must-have’. A dedicated Transformation Office, that is distinct to a more conventional Project Management or Strategy Office, is, we argue, a critical step in building this must-have capability. Call to Action / Transformation Implementing the Transformation Office The implementation of an office to manage transformation is on its own is a complex process, which requires accurate planning and master execution. Once the transformation intent is defined at the strategy level then, and based in our experience, a Transformation Office implementation span ranges between five to eight months (depending on the type, size and characteristics of the organisation) and is divided in three different stages: Design Phase, Establishment Phase and Operation Phase. The design phase spans across 1.5 to three months, and the establishment phase between 3.5 and five months. In both phases the TO organisation structure is defined, the transformation management methodology decided, the project portfolio management governance (and interactions with other areas -in particular the PMO and SDO) and the tools needed to manage the transformation identified.
  13. 13. Rafael Lemaitre – Partner and co-founder at ShiftIN Partners. A seasoned strategy management consultant who has led projects in a variety of industries and cultures in the Americas, Europe and the Middle East. His areas of expertise are Strategy Execution and Innovation Management. He holds a MSc by the Rotterdam School of Management, and currently is pursuing a PhD on Innovation at the United Nations University – Maastricht Economic Research Institute on Innovation and Technology (UNU- MERIT). You can reach Rafael at rlemaitre@shiftinpartners.com James Creelman – Founder Creelman Strategy Alliance James Creelman is an author, practitioner and advisor specialising in strategy management and the founder of Creelman Strategy Alliance. Having advised corporations across the globe, he is a recognised thought leader in the Balanced Scorecard and related fields. He is the author of 24 in-depth research- based management books, including Doing More with Less: measuring, analyzing and improving performance in the government and not-for profit sector, (Palgrave Macmillan, 2014), Risk-based Performance Management: integrating strategy and risk management (Palgrave Macmillan, 2013) and Creating a Balanced Scorecard for a Financial Services Organization (Wiley & Sons, 2011). You can reach James at james.creelman@gmail.com Roberto Wyszkowski –Partner and co-founder at ShiftIN Partners. An entrepreneur, experienced practitioner, trainer and management coach in the fields of Strategy Planning and Execution, Performance Management and Innovation. He has trained and coached over a thousand managers in both for profit and non for profit organisations across the world. Chemical engineer with an M.S. in Environmentally Sustainable Process Technology and postgraduate studies in Finance and Statistics at Northwestern University (Chicago, USA). You can reach Roberto at rwyszkowski@shiftinpartners.com About The Authors SHIFTIN PARTNERS Knowledge Library 13
  14. 14. ShiftIN Partners is a leading strategy management consulting firm focused on helping clients manage strategy and innovation programs that enable the organisation to achieve the necessary Shift, working from withIN. With decades of accumulated experience from around the world, our consultants have a track record on helping organisations in the emerging markets to overcome the challenges related to strategy execution. We are recognised for our obsession towards implementation, simplification and results. ShiftIN Partners has Offices in Abu Dhabi, Dubai, Riyadh, Chicago and Lisbon. For more information visit: www.shiftINpartners.com @shiftINpartners
  15. 15. © ShiftIN Partners September 2016, all rights reserved. Abu Dhabi Dubai Riyadh Chicago Lisbon

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