Transformation: Inertia to Agility

 
 
By Faisal Hoque  |  Posted 2008-03-17
 
 
 

Jeff Bezos is not one to let dust settle on his shelves. The founder and CEO of Amazon, the world’s largest online reseller, routinely abandons operations and ideas that aren’t yielding their intended results. He calls these “defects,” or inefficiencies in operations. When these defects are eliminated, costs fall and result in Amazon being able to offer customers lower prices and new frills.

Innovation and refinement are in Amazon’s DNA, as the company continually reinvents its processes to reap greater efficiencies. For instance, Amazon figured out a way to fit two items in the same box no matter where they’re shelved in its 700,000-square-foot fulfillment center, saving time and money. This is especially important to a company that lives and dies on the satisfaction of its customers.

Amazon has moved far beyond innovative startup to a transformed state with mature management capabilities. Whatever Bezos calls them, certain capabilities are evident in any company that has reached this stage.

Read Baseline’s report on how Amazon is disrupting the fledging Web services market.

Who would not want to claim victory on behalf of a company that has the ability to successfully negotiate its path through the ever-shifting competitive landscape--a company structured and organized to continuously transform itself as opportunities and threats appear.

This nirvana-like company repeatedly maintains three characteristics:

  • Ongoing assessment of activities, eliminating those that don’t serve the core business strategy
  • Continual refinement of activities for greater efficiency and productivity
  • Redirecting resources to new products, processes and business models

Building an agile organization such as this isn’t easy. Growth through innovation must become part of an enterprise’s soul. Bringing in a charismatic leader might help the transformation, but the change management skills they bring to the table will certainly be necessary to make the journey successful. More important, however, a new way of doing business must be baked into the company’s management systems and business processes. This means new organizational structures, the creation and sharing of new kinds of information, and new decision-making processes. Only in this way can growth through innovation become repeatable.

Companies that have mastered this trifecta are prepared for whatever the marketplace brings. It should be obvious that this state of being is more than a mindset or a clever mission statement. By the time a mission statement is crafted and distributed, the competitive environment has often shifted leaving good intentions in the dust.

There is no doubt that a company embarking on a transformation requires a clearly articulated strategy, but this state of continuously sensing and responding requires several management disciplines to achieve this overhaul.

The three critical types of transformative practices – innovation, efficiency and abandonment – are threatening to someone somewhere.  Although each is considered positively in the abstract, they are often greeted with fear and loathing. Consider what individuals, divisions or entire corporations might say about:

Innovation: “We have to meet this quarter’s numbers or we’re toast.” “That’s a tiny payout for a three-year horizon.” “You know most new products and most new businesses fail.” “How are we going to fund it?” “That’s not one of our core competencies. That’s not who we are.”

Efficiency: “Eliminate that, and the customers will complain.” “They’re asking us, the employees who do the real work, to bear the burden.” “That’s not the way we do things around here.” “You can’t cut your way to greatness!”

Abandonment: “I’ve spent 10 years on this. The margins may be low, but they’re reality, not a dream.” “What will we tell the customers?” “We should ride this sure thing a few more years.” “I might lose my job.”

Most organizations are not set up to challenge these forces of inertia. The habits that make companies successful can sabotage them in the face of disruptive innovation. What is called for is a new business model, one that incorporates innovation, efficiency and abandonment.

Transformation is an enterprise-wide activity, and the first step is to get a clear picture of the entire enterprise. First, this picture can be created with an effective Strategic Enterprise Architecture (SEA). SEA has two parts: a business architecture describing business strategies, operating and organizational models; and processes, and a technology architecture describing the infrastructure, applications and data needed to achieve enterprise goals. Companies should create a current state SEA and a desired future state SEA.

A second source of information will provide more guidance: a Strategic Investment Management portfolios of all of the firm’s assets and activities. Among the types of portfolios that can be developed are asset portfolios (financial, human, intellectual property, business technology, physical), program and initiative portfolios, potential new product, process or business model portfolios, and risk portfolios.

With an SEA answering what are we trying to do and how, and investment portfolios answering what we have and need, an enterprise can then begin to address some fundamental issues, such as:

  • Is this the right set of customers?
  • Why are we doing this? Could we do it more efficiently?
  • Do we have unused assets that could be applied to a new initiative?
  • Is this operation still part of our evolving mission?
  • Can we outsource this?
  • Do we have the people and skills we need?
  • How can we develop a new product to attract new customers?
  • Do we have the right infrastructure?

A transformed company develops the necessary management capabilities to create a comprehensive picture of itself today and where it wants to be, discover the activities that no longer make sense, bring on board new ideas, and create the structures, processes and information to achieve all of this.


FAISAL HOQUE is the Chairman and CEO of BTM Corporation. BTM innovates new business models and enhances financial performance by converging business and technology with its unique products and intellectual property (IP). For more about business transformation imperatives, visit BTM Corporation’s Web site at http://insidebtm.btminstitute.org/Home. © Faisal Hoque