It’s maddening. You plan a game-changing business transformation that taps the power of the cloud to launch a new business model, reinvent your customer experience, streamline your operations and lay the groundwork for your company’s future. You secure the funding, convene the team, and bring high-tech and service partners onboard, yet the program fails to achieve your hopes and aspirations. Worse, it fails to meet the expectations of your leadership or customers.
Does this sound familiar? It’s important to realize that the problem isn’t the idea — rather, it is your approach to the transformation, which may feel more like herding corporate cats and wrestling supplier alligators than moving forward together with common purpose. In short, you have both an internal coordination problem and an external ecosystem value-extraction problem.
SEE: Digital transformation: A guide for CXOs (TechRepublic Premium)
Mastering transformation is key to driving growth and differentiation
In a world where you can deploy technology solutions to solve business challenges and generate revenue and profits faster than ever before, you need to accept that transformation is not a one-off activity. It is and will be a new way of working. You will need to dramatically improve your internal coordination and your ecosystem orchestration at the same time.
To master transformation as a competency, you need a new, future-focused approach that:
- Uses adaptive planning and execution to pursue a North Star business outcome — you take small steps to achieve it, borrowing techniques from modern application development.
- Aligns business, operations and technology teams in new and more creative ways of thinking and working, often with the help of partners.
- Compels service providers to be co-innovation partners that bring together solutions, assets, alliances and communities, not just technology or people.
- Uses pricing and value-aligned term sheets as levers to motivate service providers to focus on your business goals and keep them investing in your shared success.
And, wow, does it work! Advanced, future fit firms that embrace these practices accelerated their growth almost twice as fast as peers.
To transform successfully, change how you deliver value
With credit to IBM, EY and other companies, we call this new approach “value orchestration” (Figure A) — an operating model for technology-enabled business transformation built from: 1) incentives that align and motivate internal departments to tackle the entire problem together; 2) outcome-based contracts with full-service co-innovation partners to select and integrate the technology and business capabilities available in the cloud; and 3) value-focused planning and execution to coordinate work and keep all parties on track.
Three forces come together in a successful transformation that uses value orchestration as its central tenet:
1. Common cause — leadership and motivation
If your CEO isn’t standing up to support this transformation, you may want to call it something else. If the CEO is doing so, then the transformation’s execution falls into place with aligned objectives and key results.
Internal coordination requires a shared common cause and OKR measures of contribution and outcomes. External coordination requires co-innovation partners founded on principles that create the connections and commitments that keep all parties pulling in the same direction. The key is outcome-based contracts with additional terms for contribution, coordination, and compensation.
2. Coordination — business agility at scale
Unless your business, operations and technology teams care about the outcome and have input into the roadmap, you won’t pull off the transformation. Because the transformation is software-fueled, agile techniques work, including agile-based funding that funds teams instead of projects.
Use a quarterly planning process that links strategy, design, implementation, analytics and money, and use one that also asks executives from each department to show up at the meetings. This provides the sponsorship foundation for two-week design, development and deployment sprints.
3. Co-innovation — the best of you and your partners
Tech leaders will want to make bets on technology providers that are investing in innovation pipelines aligned with their immediate goals and long-term aspirations. They also need to ask service partners to put skin in the game to keep them motivated to invest for mutual benefit.
In all cases, structure contracts against outcomes that keep their internal teams motivated and their partners investing in their purpose.
Value orchestration pays off in transformation success
Forrester has gathered reams of evidence that this approach works and works well: Major brands conducting experience-led transformations; industrial firms launching innovative IoT-fueled products; banks embracing open finance; insurers offering behavioral policies; medical device companies establishing new health protocols for diabetes; automobile manufacturers becoming mobility providers — the list goes on. In every one of these situations that we are personally involved in, the key to success has proven to be value orchestration.
To learn more about how technology executives can evolve their operating model for transformation, visit here.
Ted Schadler, VP and Principal Analyst, Forrester
Ted has 33 years of experience in the technology industry, analyzing the effects of disruptive technologies on experiences and on business strategy and architecture. His research agenda focuses on digital transformation, experience-led transformation, commerce and digital experience service providers, and the future of services. Co-author of the books, “The Mobile Mind Shift: Engineer Your Business to Win in the Mobile Moment” (Groundswell Press) and “Empowered: Unleash Your Employees, Energize Your Customers, and Transform Your Business” (Harvard Business Review Press), Ted has a master’s degree in management from the MIT Sloan School of Management, an MS in computer science from the University of Maryland, and a BA with honors in physics from Swarthmore College.
Fred Giron, VP and Senior Research Director, Forrester
Fred leads Forrester’s Greater China and Southeast Asia research teams. Fred’s own research agenda spans the domains of Asia Pacific market trends, the future of the services industry, and value-aligned technology strategies. Fred has a master’s degree in electronics and project management from ENSEEIHT in Toulouse, France.