Tag Archives: change

Business Architecture & Design Thinking

I often take on the role of Business Architect for my clients to design for them front-to-back enterprises that embody future state visions, innovation, and sustainable competitive advantage. Business architecting is a blend of science and art with the role of the Business Architect requiring the integration of multiple perspectives and multiple disciplines to create a tight package for the client. Some call this “Design Thinking”.

Tim Brown, CEO of IDEO, and Roger Martin, Dean at the Rotman School of Management, currently evangelize the application of Design Thinking in the context of entire businesses, going well beyond traditional product development role of designers. Brown and Martin have both developed powerful frameworks that drive mindset change for interdisciplinary teams as those teams develop creative solutions to business and social problems. Brown and Martin have authored books on Design Thinking (among them, “Change By Design” by Brown and “The Design of Business” by Martin) which I highly recommend.

Multi-Layer Business Architecture

Here is a Multi-layer Business Architecture framework that I have used successfully on consulting engagements with numerous senior executives over the years. Layers and “plumbing” comprise the architecture model, which provides an executive a means to envision the transformed business. The framework also gives interdisciplinary, cross-functional teams a hard deliverable to create as they formulate the right, insightful problem statement and develop innovative solutions to tackle the complexities of transformation.

By design, the framework sets up detailed planning, management of business impact, mitigation of risks, establishment of implementation teams, integrated execution, and comprehensive transformation management. Business architecting applies Design Thinking to an entire enterprise. The Multi-layer Business Architecture helps business design teams organize work, provides structured play areas for creativity, and serves as an integrated rendering of a senior executive team’s vision.

Substructures of the Architecture Serve to Both Inform and to Define the Outputs of the Business Architecture Process

The Layers and Example Substructures

  • Macro-economic environment
    • Trends and forecasts
    • Growth or decline
    • Globalization
    • Deep and prolonged recession
    • Slow recovery to the new normal
  • Context of the industry or industries
    • Industry constructs and constraints
    • Eco-systems and sub-systems
    • Influencer maps
    • Porter’s 5 forces
    • Disruptive innovations and chasms
  • Business strategy
    • Chosen markets
    • Unique, attractive, and defensible value propositions
    • Portfolio of companies and products
    • Growth scenarios
    • Long term vision and short term objectives
  • Financial model
    • Revenue generation processes
    • Internal strategic costs
    • Capital structure
  • Interactions with the Enterprise
    • Interaction design
    • Empathy and insight
    • Customers’ experiences with the enterprise’s products and services
    • Ease of doing business with the enterprise: channel partners, suppliers, service providers, financial capital providers
  • Organization and process
    • Organizing principles
    • Facilitation of strategy execution
    • Core processes along the value chain
    • Inter-organization coordination
    • Support processes
    • Key performance measures
  • Information technology
    • Information strategy
    • Technology and systems architecture
    • Competencies
    • Right-sourcing
  • Business integration
    • Frameworks
    • Connections
    • Dependencies
    • Communities
    • Performance measures and performance management

The  Plumbing and Example Substructures

  • Leadership
    • Decision process
    • Leadership style
    • Management changes
  • People
    • Human capital strategy
    • Staffing levels
    • Skills and development
    • Organization knowledge and learning
    • Rewarded behaviors and cultural alignment

Change Spectrum

Change is not an absolute. Degrees of change reside along a spectrum ranging from incremental change to larger scale, strategic change to up-heaving, fundamental change. As a Business Architect, I map the change occurring or required along each layer of the Multi-layer Business Architecture. The end goal is to aid an executive to achieve or sustain competitive advantage and other measures of business improvement for the executive’s firm. The leadership of a firm might choose to lead change in certain layers, follow a leader in others, and do nothing for the rest. Senior executives pick their spots. Map it out. Select a change strategy. Manage it. Beat the competition.

Reverse Architecting and Forward Implementation

For implementation, an executive team cannot simply jump in and start transforming an enterprise into the vision captured by a Business Architecture. The team must know enough about the current state to know where to begin the transformation. Here, a process of Reverse Architecting lays out the current state of an enterprise in the same framework as the future-state vision. With this construct, leadership and implementation teams have detailed blueprints and plans for transformation. Consider the remodeling of a kitchen. It is best to know where the plumbing and wiring are behind the walls before beginning to tear down, re-plumb, re-wire, and re-build.

Become a Draftsman

Consider adopting the role of Business Architect when your enterprise is challenged with the need to transform. Use the mindset, techniques, and tools of design thinking to create a vision for the transformed business. Develop a Multi-layer Business Architecture to provide detailed blueprints and plans to implement the vision. Do not neglect the Reverse Architecture to know what you are changing, where to start, and how to direct implementation teams.

A Strategic Change Diagnostic: Critical Success Factors of Transformation

fall-berlin-wallSuccessful business transformations are few and far between. A business transformation is a major shift in a firm’s strategy and the subsequent execution of that strategy. Transformations necessarily involve an entire organization and can include extensive work in strategy formulation, mergers & acquisitions, core business process redesign, organizational change management, performance metrics development, and management information systems alignment.

Symptoms of corporations in need of transformation initiatives include:

  • Obsolete business models
  • Stalled growth
  • Eroding marketshare
  • Ineffective innovation engine
  • Uncompetitive cost of goods and costs to serve
  • Organization misaligned for profitable growth
  • Excessive, ineffective high cost processes
  • Unmanaged customer defections
  • Threats to industry structures and norms
  • Underperformance to financial stakeholder expectations
  • And others.

Success of a business transformation is measured by the degree of relief to the original symptoms and improvement in a firm’s business performance. That performance can be measured by top-line growth, market share gains, improved long-term customer relations, sustainable cost reductions, bottom-line increases, speed of transformation, minimized business disruption, and other tangible factors.

But what are those things that must be in place and happen well in order to achieve a successful business transformation? I see twelve critical success factors (CSFs). All CSFs are equally important so there is no priority associated with the order in which they are listed. These CSFS are:

  • Business urgency
  • Clear value add to shareholders
  • Unswerving focus on business case and value metrics
  • Shared vision of the transformed state including new cultural norms
  • Visible top executive leadership
  • Management alignment
  • Multifaceted, integrated approach
  • Disciplined governance and program management
  • External and internal stakeholder involvement
  • Sustained organizational momentum
  • Relentless embrace of change
  • Continuous learning and tolerance of minor missteps

The Diagnostic

Applying these critical success factors, a diagnostic can be used to assess which CSFs are in place and which ones need shoring up. A series of management interviews and organizational surveys can be used to gain the internal perspective. External perspectives can be obtained through interviews of customers, supply chain partners, channel partners, strategic allies, and service providers including outsourcers.  However, the risk of “opening the kimono” must be weighed against the benefits of capturing the outside viewpoint.

Slide1Responses can be summarized using “Harvey balls” for a quick visual report on where a firm is doing well and where the firm needs improvement in its transformation efforts. In the example above, one sees a business with a high degree of urgency for transformation yet clear gaps exist in other critical success factors such as management alignment and stakeholder involvement. This diagnostic provides leadership of a transforming firm guidance on execution and management of a significant undertaking.

Key Questions of the Diagnostic to Probe Each Critical Success Factor

Business Urgency

There must be a compelling reason to undertake a transformation. What are the competitive pressures? What are the pressures laid on by investors? What are the internal cost pressures? Is there a strong sense that major change should have happened “yesterday”? Is the sense of urgency ubiquitous throughout the organization or minimally, throughout the management ranks?

Clear Value Add to Shareholders

Will shareholders realize gains as a result of the transformation? What are the tangible targets? Which ones are quantifiable in both financial and non-financial terms? Do the board of directors and influential investors agree with the objectives of the transformation efforts?

Unswerving Focus on Business Case and Value Milestones

Has a comprehensive business case been developed? Does the business case incorporate competitive, customer, strategic, operational, financial, organizational, and intangible benefits? Is the business case sufficiently quantified with linkages to the top-line, costs, and bottom line impacts? What mechanisms have been implemented to ensure focus on the business benefits? Have transformation metrics been articulated so that the organization understands why transformation is necessary? Is there a process for benefits tracking, communications, and management?

Shared Vision of the Transformed Business

How will you know it when you see it? How will others know it when they see it? Has the vision been clearly articulated? Does the vision include both external and internal elements? How will the culture of the organization change if at all? What specifically will be different in competitive actions, business model, business processes, and how the firm is managed? Who does not share the vision?

Visible Top Executive Leadership

Do all members of the firm’s top executive leadership team publicly champion and support the transformation objectives and intent? How visible is the level of support? Do major decisions and actions of each executive reflect and support the transformation goals? Does the organization believe that executive support is genuine and goes deeper than simple lip service?

Management Alignment

Do all levels of management from senior executives to the front-line supervisors agree with the need for transformative change? Where are the sources of dissent? Why does the dissent exist? What remedial actions are necessary to ensure 100% alignment?

Multifaceted, Integrated Approach

Are there direct and explicit linkages between the new strategy of the firm, operational changes, new expected behaviors of individuals, new organization structures, and new supporting technologies? Are there any gaps in the transformation teams? Which initiatives have the most risk of diverging from the objectives of the transformation? Does the portfolio of transformation and change initiatives capture all the possible synergies across the initiatives?  Is there a holistic perspective? Is the timing of all milestones synchronized to maximize benefits? Do the initiatives incorporate both macro and micro orientations?

Disciplined Governance and Program Management

Who is running the transformation and ensuring integration of all the efforts? How strong is the executive sponsorship and how committed is management? Do actions reflect words and intent? Is there a transformation infrastructure that ensures rapid, fact-based decision-making? How empowered are transformation initiatives teams to make tactical decisions so they are not waiting for weeks on end for executive level sponsors to meet? Is there a program management function and structure in place to manage the tactical integration, coordination, prioritization, and synchronization of all transformation initiatives? Who looks across the portfolio of initiatives to ensure the optimal use of resources? Is there a clearly developed transformation roadmap that shows critical workstreams and milestones? Is there a mechanism for tactical communications? If there is a program management office, is it clearly understood what its role is (decision making versus administration)?

External and Internal Stakeholder Involvement

Externally, what has been the involvement of customers, supply chain partners, distribution partners, and strategic allies? Has their input been sought? Do these external stakeholders support the changes you are making during the transformation? What is the pay-off to them? Internally, are you undertaking the transformation with horizontal, cross-functional teams?  Vertically, are you involving people from the front-line as well as management? Are there people or pockets of people who potentially feel left out of developing new business models, processes, and direction? How are you ensuring high degrees of buy-in from those who will execute the transformation and be accountable for operating the business in its transformed state?

Sustained Organizational Momentum

Is the organization capable of sustaining change during the course of the transformation which will last anywhere from two to five years? What interventions, such as communications, are in place to capture and keep the hearts and minds of the general population? What are the barriers to sustaining the organization’s momentum and what are the specific actions required to remove or overcome the barriers?

Relentless Embrace of Change

Does your firm embrace change? How flexible are your teams and other working groups? Are individuals adaptable to change and capable of working differently? Are people open to trying new things with uncertainty? Do managers promote and support change? How much endurance does your organization have? Are there naysayers who are infecting the organization with resistance? If so, what is leadership prepared to do with them?

Continuous Learning and Tolerance of Minor Missteps

By its nature, businesses that transform are delving into terra incognita with many unknowns and risks. Does your organization’s environment reward discovery and learning? With every transformation decision and subsequent actions, does a process exist for review and correction? Are “mistakes” viewed as learning opportunities without going overboard to a zero-consequence environment? Is management tolerant of missteps and can managers supervise groups that include individual risk takers?

Closing Questions: How is Your Firm Performing in Its Transformation?

Is your firm undergoing transformation on a grand scale? If so, how would you assess the effort against the critical factors for successful transformation? Is there true business urgency to warrant the investment in time and money required for the necessary changes? Which CSFs are the strongest on which to build a foundation for change? Which CSFs have been neglected and now require remediation? Over time, is the situation getting better or getting worse?

Knowledge Architecture

Slide3

Not all knowledge is created equal.  Knowledge is one of those vague, global terms of which people assume they know its definition.  Very seldom in conversations about knowledge or learning will someone raise a hand and ask, “Hey, what is knowledge anyway?” unless he is Aristotle or some philosophy major.  One can postulate that there are different types of knowledge.

A hierarchical structure is one method to use to classify knowledge.  We show here a knowledge architecture that has seven levels: null, data, facts, know-how, memories, wisdom, and connections. Notice that the model begins with a state known as “void”. In this state, even the recognition of nothing does not exist.

Each layer of the hierarchical knowledge architecture is separated from other layers by a specific type of insight. Insights differ according to the particular level of knowledge on which they are acting. Seven insights elevate knowledge through the hierarchy: instinctual, definitional, contextual, utilitarian, experiential, reflective, and networked. The progression of insights up through the hierarchy represents increasing sophistication in thinking with “connections” as the highest order of knowledge.

Void + Instinctual Insight = Null

We see “instinctual insight” acting on the void to create null, the first layer of knowledge. This is the base level of knowledge. Null emerges from void as primal instincts create an awareness of one’s environment. This level of knowledge is deemed null because this level is the level at which simple consciousness of existence or non-existence occurs. Expressed another way, null takes on a binary state, 1 or 0. In the void even this simple a consciousness does not exist. Note that null represents the “whole” as within Zen philosophy.

Null + Definitional Insight = Data

We see “definitional insight” acting on the null to elevate knowledge into data. At this level, thought processes give definition to objects and actions in the null. In other words, definitional insight labels a collection of unnamed and unidentified things so that distinctions are drawn between them. Each object or action is now defined and becomes data.

Data + Contextual Insight = Facts

“Contextual insight” acts on data to create facts in the next layer in the hierarchy. Facts represent a richer and fuller set of knowledge than pure data. For example, if we take the word “coffee” as data there is no context for what coffee actually means. Given some context such as the commodities trading market, coffee takes on the meaning of a traded good. If food service is the context, then coffee takes on the meaning of a beverage. Contextual insight allows distinctions be made between data to create different facts.

Facts + Utilitarian Insight = Know-how

“Utilitarian insight” acts on facts to create know-how. How is an object to be used and for what purpose? In our coffee example, utilitarian insight emerges to provide the know-how for what to do with coffee. In the commodities market context, know-how would be how to trade coffee on the spot or futures markets. In the food service context, know-how would be how to prepare coffee for consumption. Without utilitarian insight, coffee has no real value. Simply speaking, utilitarian insight provides the knowledge of utility.

Know-How + Experiential Insight = Memories

“Experiential insight” acts on know-how to create memories. Actions taken or the execution of know-how generates experience that can be remembered and used for improved execution. Following the coffee example, experience in making coffee enables a barista to remember how much foam to put on top of a latte.

Memories + Reflective Insight = Wisdom

“Reflective insight” acts on memories to create wisdom. Reflection works on a “meta-plane” of thinking and takes on a new layer of abstraction in the knowledge hierarchy. Insights are not simply generated on single points of execution but on a set of memories. For example, remembering how to make a latte is a memory but being able to forecast demand in a coffee shop during the course of a day takes wisdom. Wisdom emerges as a person can take a step back to reflect and learn from prior actions and decisions.

Wisdom + Networked Insights = Connections

“Networked insights” act on wisdom to create connections, which represent the highest order of knowledge in the hierarchy. Making connections links related or unrelated pieces of wisdom to generate knowledge that would not emerge otherwise. For example, connecting the preparation of a perfect latte to the film “Seven Samurai” in which one of the samurai has dedicated his whole life to perfect his skills as a swordsman represents connecting two topics that on the surface are completely unrelated. Networked insights create connections that drive thinking further and generate the highest order of knowledge, connections.

At what level of knowledge do you work most of the day? At what level do you believe your colleagues, subordinates, and superiors work? Do you drive yourself to think at higher levels within the knowledge hierarchy? At what level do you believe you can add the most value to your work group or your organization during times of large-scale change?

Risk and Change

Risk-Change Matrix

People love control and abhor chaos.  Yet most of our daily lives are filled with uncertainty and change.  The first step to maintaining a sense of order amidst the chaos is awareness of change and awareness of the type of uncertainty (risk) with which you are faced.  An understanding of the current state of your environment will inevitably benefit you in your quest for control.

To aid awareness of the chaos-control state of your environment, we can use the simple matrix shown here.

Type of Environment

Type of Risk

Static

Dynamic

Deterministic

1. Certain, stable state

“Business as Usual”

3. Certain, changing state

“Transformation”

Stochastic

2. Uncertain, stable state

“Non-linear”

4. Uncertain, changing state

“Chaos”

Risk is broken down into two types: deterministic and stochastic. Actions and decisions in a state of deterministic risk produce outcomes that are linked to past and present known behaviors in the system. In other words, future system behavior can be predicted with certainty based on the knowledge of previous outcomes. We label this state’s risk as “certain” but one must realize that this is an extreme case. Nothing is ever certain but to serve the purpose of this matrix we assume that this deterministic state can exist.

Stochastic risk is risk that has uncertain outcomes, outcomes that are not necessarily linked to past history of events or occurrences. Probability does play a role in the stochastic state. Expected outcomes can be used in decision making with the understanding that the past does not play a strong predictive role in system behavior. One can look at this state as one of a complex, non-linear system. Decisions and actions can cause completely unexpected system behavior.

Environment is also broken down into two types: stable and dynamic. Stable environments do not change in the short to medium term. Drivers of a business’s state are relatively constant. For example, an industry’s competitors, customers, and suppliers are not undergoing major changes or shifts in relative power.

Dynamic environments are undergoing major changes that could be caused by industry consolidation of suppliers, customers, and/or competitors. Other drivers of dynamic environments are disruptive technologies that enable disintermediation or cause obsolescence of particular products or services.

Looking at the 2×2 matrix formed by type of risk and type of environment, we see four possible states for a business at any one time.

1.   Certain, stable state

  • Future system behaviors can be predicted by prior, historical behaviors
  • No disruptive change is occurring on the business’s landscape
  • “Business as usual” characterizes this type of environment

2.   Uncertain, stable state

  • Future system behaviors cannot be predicted by knowledge of past responses to decisions and actions
  • No disruptive change is occurring on the landscape
  • “Non-linear” characterizes this environment

3.   Certain, changing state

  • Future system behaviors can be predicted by prior, historical behaviors but only on a short time horizon given the dynamic, changing industry state
  • Disruptive change is occurring on the business landscape that might or might not be caused by an executive’s own business
  • “Transformation“ characterizes this environment

4.   Uncertain, changing state

  • Future system behaviors cannot be predicted by knowledge of past responses to decisions and actions
  • Disruptive change is occurring on the business landscape that might or might not be caused by an executive’s own business
  • “Chaos” characterizes this environment and presents the greatest challenge to an executive’s decisions and actions to be taken by an organization

Where do you see your business?  Would others agree with you?  How do you conduct your daily life and under what assumptions about the state of your business? Where are you the most comfortable?  Where are you the least comfortable? Is your business properly prepared to thrive in its current state? What about your competitors?

The 5 I’s of Change

Much has been written about major change and transformation efforts in organizations. But what roles within organizations are actually critical to successfully achieve transformational goals?  The simplistic answer is “change agents”.

But in order to provide a more tangible definition of change agents, here is a taxonomy for the various types of knowledge workers that can be applied when considering the formation of transformation teams.  This taxonomy goes beyond examples of profession and vague, global descriptions of knowledge activities.  The classification of knowledge worker types takes a process view – what knowledge workers do.  Five classifications of knowledge worker comprise the taxonomy: (1) initiators, (2) innovators, (3) integrators, (4) implementers, and (5) instigators.

5 I's PictureAll five roles must be filled by an organization undergoing major transformation and change. A balance must be struck dependent on which stage in a transformation lifecycle the organization moves. Importance must be placed on the “personality profile” of a transformation effort and all its contributors.

Initiators create knowledge through “original thinking” and trigger step-change breakthroughs in new paradigms and new business models for the transformed business.

Innovators modify, refine, and build upon ideas to generate new knowledge that go beyond the initiator’s work.

Integrators aggregate, consolidate, synthesize, and broker existing knowledge to develop holistic, systems views.  These holistic views provide new perspectives and insights.

Implementers apply, utilize, and execute the “know how” within an intrinsic knowledge base.  Implementers unleash the tangible, extrinsic value inherent in knowledge – value that is unreleased until applications are realized.

Instigators challenge ideas, old and new, throughout the knowledge process.  They drive out-of-the-box thinking as well as ground new ideas, innovation, integration, and implementation in the harsh realities of feasibility and viable economic returns.  Instigators say “Yea” and say “Nay.”

So what?  Determine the team personality required for each stage of the business transformation lifecycle.  “Profile” potential members based on individual personalities as demonstrated by past behaviors.  Develop and manage a fine balance of personalities through the change process.  Introduce new members/personalities as required.  Visibly recognize and reward specific team members for playing varying roles.