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Moody's Investors Service

The long tail of Transformation - Don't forget the brooms

Transformation projects can often be like a big ticker-tape parade; there is a lot of fanfare and anticipation, and the bigshots are out in front getting the attention, but the teams at the back are tasked with getting things back to normal it can feel like we’re the ones with the shovels and buckets cleaning up behind the horses and elephants and all the excitement. After the hoopla has died down, there is still a lot of hard work to do to make these changes stick and keep things from sliding back to the same old inefficiencies (or novel new inefficiencies!).

For example, how many of you have had a transformation project that, instead of transforming the work for the business teams, found yourselves simply supporting a new, separate system alongside the old broken processes? Or have you rolled out an integrated system that promised to integrate disparate departments’ processes only to find that when the consultants left, the teams still didn’t trust the new system, found themselves LESS efficient than before, and had no clear idea of how to, or who would help them, move forward?

These examples are symptoms of a shortsighted view of how we approach transformation, and while there are no easy fixes, there are some basic things to keep in mind which can help you more quickly identify gaps in your plan before it’s too late.

How can we do this better?

Focus on the end-to-end value chain.

Business processes themselves need to change, not just the technology tooling, and processes should not simply change for their own sake or in localized pockets. All stakeholders in the effort must understand the end-to-end flow of value to your customers (both external and internal) and the best ways to optimize that flow.

Surprisingly it might be the case that this is poorly understood. More traditional and “widget” oriented businesses like manufacturing tend to do better here. In contrast, due to the abstract nature of their products, service, and technology-oriented businesses often find that they don’t have a clear picture of their value chain. Don’t try to transform without understanding this. Otherwise, you may just be automating inefficiencies.

A key takeaway is that the business must sponsor the transformation, ideally directly from the C suite. Suppose senior leadership is not focused on the benefits of the changes and is committed to the long haul. In that case, the enterprise will not have the support to push past boundaries and see it through to improve future efficiencies. Motivation should be easy to come by; today, keeping pace with change is an existential threat, including not allowing technical debt to build to the point of suffocation.

People, people, people

People are your most valuable assets, the rise of AI and automation won’t change that, they’re just new tools. Good decision-making still requires the right people in the right roles to support the updated processes. As transformation rolls out, your teams will be naturally uncertain about how their role has changed, and having that clarity will be more critical than ever. This isn’t just for the actors in these processes, anyone who now owns new functions or tools must be empowered in their new responsibilities, and you will need to communicate to the rest of the organization about these new people/roles. Without consistent and clear communication on these points, teams get confused, find workarounds and generally slow down or stop work.

You can’t manage what you don’t measure.

As we transform towards more efficient processes, we should reduce the time to market our products or services but remember that if we’re not careful, this can also be a way to turn out garbage very quickly too. Increasing speed and scale might expose other gaps that weren’t noticeable at your previous levels. And the output should never come at the expense of quality. Along with being clear about your goals, as previously discussed, each of the important objectives and key results you’re targeting should have clear indicators measuring progress towards those OKRs, not proxy metrics. Sometimes we fall into the trap of measuring what’s easiest to measure. Another common issue is that measuring improvement is difficult or impossible because our old processes were so irregular they couldn’t be measured, and we have no baseline. This topic alone has filled many books, but for now, suffice it to say that if you cannot define some measure of success and dimension(s) of improvement, it’s very likely you still haven’t fully defined the business problem and value proposition.

Transformation should not be a one-time event like a parade but an ongoing activity, and even better, a mindset focused on constant improvement and ever-changing adaption to shifting market dynamics. Please don’t fall into the trap of thinking it’s over when the last of the parade clears out, there’s still work to do.

The articles from these contributors are based on their personal expertise and viewpoints, and do not necessarily reflect the opinions of their employers or affiliated organizations.