Dinosaurs ruled the earth for about 165 million years, out-competing other animals of their era - until they were obliterated by the impact of an asteroid, and the small mammals who had lived in their shadows evolved to fill their niche.
Fast-forward some 65 million years, and today’s dinosaurs are also facing possible extinction. The upheaval caused by rapid advances in technology, a growing global creative workforce, and massively lower barrier to entry have resulted in a hyper-creative marketplace - a niche much better suited for smaller, more nimble startups than large, lumbering corporate giants.
So is the reign of big enterprise at an end, or can they evolve, adapt to, and thrive in a newer, faster, leaner business environment?
Sonja Kresojevic thinks they can. As co-founder of Spinnaker she is focused on helping companies become lean enterprises. In her former role as SVP in the Chief Product Office at Pearson, she led the implementation of the Global Product Lifecycle, an award winning innovation program focused on transforming product portfolio investment management and delivering a faster and more entrepreneurial focused organization.
In prep for her masterclass during Intrapreneurship Conference Toronto, we sat down with Sonja to get her take on lean transformation in the enterprise, and find out how she helps her corporate clients get their journey started.
Lean transformation in the enterprise sounds like a contradiction. Is it really possible?
Yes- it is possible. In fact, it is already happening. It’s extremely painful, it’s very hard, but it’s what companies absolutely have to do if they want to survive. Look at the Fortune 500 list - GE is the only company that has been on it for 100 years. They’re there because they are continually transforming how they work: their culture, processes, everything.
Especially nowadays with disruption happening at a rate we haven't seen before, with new business models, emerging, disruptive technologies and higher customer expectations, enterprises are forced to redefine their place in the new value chain- they absolutely have to transform.
Whether some of them realize that before it’s too late is a different question.
And then even if they are brave enough and they have leadership support, it’s not easy. It’s the hardest thing they’re ever going to have to do.
When we talk about the transformation journey we map four stages.
The first stage generally starts with some ad hoc activities mostly in product teams, where you have pockets of good practice happening in the organization (what I call hero efforts) but nothing is coordinated, and there is still no real awareness at the executive level that transformation needs to happen across the organization. Or even worse: you see transformation being driven as a yet another organizational design effort, or solely focused on technology without any measurements as to how is it contributing to the overall business success.
When these ad hoc efforts start to be aligned, they mature into the next stage, with clear goals and measurable KPIs and with full support of the executive team. As these efforts mature further, and organizations move from ad hoc to thinking and then doing stages, they are transforming both mindset and mechanics of how they operate.
The ultimate stage is really being the lean enterprise, which means you are so adaptable as an organization that you can react to whatever change is happening around you, and inside your organization change becomes business as usual.
I have to say I haven’t seen an example of a traditional enterprise achieving that level yet, but there are few I know approaching that stage.
What needs to happen in order for enterprise to move into the second phase, where there’s more alignment between the product teams and the executive level?
Those ad hoc activities usually start in technology, where a number of product teams start to apply agile or lean startup methods to how they build products. Yet until the leadership understands the burning platform for the organization, nothing happens from an enterprise transformation perspective.
All those efforts, from training to pilots, sooner or later run into the wall that’s called traditional enterprise... there is only so far the product teams can go.
Unless you change things from aligning strategy with portfolio and product decisions to how you enable incremental funding, to how you start to transform the mindset, incentivize the teams and build that entrepreneurial culture that is so much needed, nothing will happen.
Obviously it doesn’t help that most executives of public companies are primarily focused on short term results and shareholder value, while transformation requires a long-term focus and investment.
Funny enough, they struggle at the end of each quarter to actually produce the real results, because it’s not connected to the strategy or portfolio in any meaningful way, and those are again not connected to what product teams are doing. Until that connection is made they cannot really even know whether their strategy is solid and sound or not, whether they can deliver those results.
Ultimately, strategy is also just a set of hypotheses. We need to be nimble enough to admit there are a lot of assumptions in our strategy that we need to test and validate.
Just because the speed of change has opened up, because we are being disrupted due to regulations, due to startups playing in our field, and due to our traditional competitors changing as well, it doesn’t mean we need to start playing in all parts of the value chain.
We still need to understand where we play and where our sweet spot is. But it’s all a set of hypotheses. Those three to five year plans are not worth the paper they’re written on. Until the leaders start to understand that and be nimble about it, nothing changes.
Yet even when that realization happens it’s important how they actually go about transformation. It’s not just training a bunch of people, it’s not just changing incentives, it’s ultimately transforming the whole company. Every single part of the organization needs to change. There is a really good quote in one of Eric Ries’ books around how it really takes changing DNA, and that is indeed what it takes.
You end up as a very different company that’s organized differently: where the leadership is behaving differently, where people are incentivized differently, where people operate differently, where there’s that connection to strategy.
Wouldn't it be better to just build a new company rather than trying to transform your existing one?
I spent four years doing it at Pearson and it was the hardest thing I ever had to do. But I think there is something profoundly important about going through the journey, and taking the whole organization on that journey with you. I really believe it is possible. You end up with a very different enterprise, one that has transformed its culture, one that is adaptable and can react and behave differently and I think that vision is worth the pain.
It takes leadership, it takes guts, it takes making hard decisions, which... I haven’t met many leaders who are willing to do.
You may focus on building new businesses, or on parts of the business, but unless you transform the rest of the organization I don’t believe you can be successful.
We are seeing big technology giants like IBM, Google, Amazon embarking on this journey, working on improving the culture, redefining and testing new strategic hypothesis, re-balancing their portfolios based on real results, real data. That balance is really important: how much you invest in innovation (i.e searching for new business models) vs execution (executing on existing products and services)?
You have to have a balance. If you invest too much only in cash cows, that’s obviously not good for the future; if you kill the cash cows and move too far to the left, you’ll never be able to finance the innovation funnel.
Reacting to the changing market, burning platforms - is the impetus for transformation in large corporations mainly driven by fear?
No, I don’t think it’s fear driven. At least, it shouldn’t be. If it gets to the point that it’s fear driven, it’s kind of too late - you’re so close to the cliff that I would question how much you can do to really change the outcome.
I absolutely think it has to be opportunity driven. The burning platform should be a booster for transformation activities. What are the new opportunities, new markets, new business models? Where can we invest? What are the transformational innovation opportunities? How do we start to test our strategy through small bets? How do we create new learning opportunities for our teams?
Being adaptable means you’re set up in a way that you can move resources, that you can shut part of your portfolio if you need to invest somewhere else. You can do that instead of saying ‘oh, there’s a new opportunity, we need to mobilize, it’s going to take us three years.’
What are the crucial elements companies should start with?
In the transformation framework I mentioned earlier, we look at two axes: one is the mindset, so people and culture; and the other axis is what I call the mechanics, all the things you need to enable in the organization. Everything from best practice, to the portfolio approach, lifecycle, governance.
It’s a very comprehensive framework that really helps organizations map their journey, and prioritize activities depending on the maturity and stage of transformation they’re in.
It is crucial to test all your assumptions through a series of pilots and not go to scale too soon; you do what’s appropriate for that stage of transformation.
So instead of training the whole organization on how to be agile or rolling out a product lifecycle across the company, start by piloting with few teams, then move to a pilot with 1-2 business units, while continually improving based on learnings.
The journey has to start with identifying the business goals that you are trying to achieve as an enterprise. What are the KPI’s you can use to measure success? That has to be the first thing that you do in any organization. It becomes your true north that you use to measure and prioritize all the work. And equally important, you use it to come up with a clear communication strategy so everyone in the organization understand why and how you are going to transform.
If you’re developing a product, you can observe customers and measure data. From a transformational perspective, how do you get your data points? What do you look for?
You start with the business results you are trying to achieve, and again with a very nimble approach: understanding that a business strategy is really just a set of hypothesis. But it has to be measurable, it cannot be pie in the sky, it cannot be a PR statement. Then you map your transformation goals to that set of business goals, and your KPI’s are how you connect them.
Your KPIs could be something like percentage of new revenue coming from innovation pipeline, or employee satisfaction or retention- it all depends on what you are measuring
This is what I do a lot with my corporate clients at the moment. We start with articulating what those goals and KPI’s are for them. The leadership team, the executive team really need to own that - they own the strategy, they need to own the KPI’s, they need to own the messaging - and then the transformation team has a much easier job.
Until executives have that lightbulb moment of connecting the transformation efforts to the business results, they’re going to support the transformation but they’re never going to truly believe in it. And they may in many cases support multiple transformation efforts that are not connected, and even are competing for efforts and resources in the organization.
Transformation: Top Down or Bottom Up?
I truly believe the only way to do this is co-design. I also think you need to have a small leadership team - I wouldn't even call it a leadership team, more a transformation team - that’s driving it forward, that’s clearly communicating the message. That way transformation becomes a centre of gravity for the organization. They’re doing everything from coordinating the efforts, communicating, mobilizing the troops, working with communities of best practice inside and outside the organization.
I can’t emphasize enough how important the role of leaders is. Unless you have a leader that is willing to sacrifice some of the short term goals and gains for the long term future of the company, real transformation doesn’t happen.
But in terms of the change that happens you have to co-create, you have to co-design. There is so much expertise in the business already- you have to bring those people on the journey, they need to feel like they’re part of the process. So when you are designing your financial processes and approvals, you need the finance team on the journey with you, you can’t do it for them. You need to have people doing that with you who are a natural part of that process.
It’s equally important to create those communities at different levels. Those communities become change agents, they push change throughout the organization. I also suggest you reach out or collaborate with external communities of best practice, because you are not operating in isolation.
What’s fascinating for me now that I run my own consultancy, is that whoever the client is, no matter what industry, the set of challenges are exactly the same. There is no more: ‘oh we are so unique because we are in education, we are in the financial sector’. Becoming a lean enterprise makes you better positioned to respond to disruption, compete in the market and attract better talent.
There are great lessons out there on how to do it, and I am strong believer in sharing those learnings- as I will do at the Intrapreneurship Conference in Toronto. Would be great to meet you there!
Ready for a deep dive in lean enterprise transformation?
Sonja is hosting a 3-hour master class on day 3 of Intrapreneurship Conference Toronto. See you there!