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November 5, 2014

Transformation ─ the "T word"

Transformation is a popular word these days. But what do we really mean by the "t word?" Most of the time what we really mean is improvement instead of transformation. In my opinion, marketing deemed the term "transformation" more powerful.

Real transformation means that we change the rules of how we engage, how we make decisions, and how we do business. Transformation means seeing the world through a different set of lenses and using a different set of responses than we have used before. Fundamentally, it is a culture change, not an improvement program. Business Transformation must include a new business strategy, portfolio transformation, performance transformation and a cultural transformation. The market you are in (unconventional resources) or the technology you are using (Big Data Platform) must be telling you that something big is happening and that you need to respond in a fundamentally different way.

Business Transformation is hard work. We are usually trying to fix a specific operational problem (too many data centers, too many suppliers or too many projects) or improve a process (governance around investment decision in acquiring technology or identifying and leveraging existing standards).

Don't get me wrong, I have nothing against needed improvement efforts, nor do I underestimate the challenge and value to be derived from successfully delivering on the objectives of improvement projects. However, transformation means leveraging technology to create a new playing field, not just a better organized version of the current one.

For me, transformation would mean seeing data as a critical corporate asset with each user having a data management responsibility.

SHAKING UP THE STATUS QUO
When you get down to details, most people don't really like the idea of transformation, at least when it is getting done to them. It is another thing if they are the ones transforming someone or something else. The author Peter Senge said, "organizations have complex, well-developed immune systems aimed at preserving the status quo." In other words, change the other guy, but leave me alone.

A lot of people are comfortable with the status quo. Their current position, power and relationships are defined by the status quo. A little change to improve a few things is fine, but they are not sure about that "T word." We often fail to come up with the real motivation for most of us to want to go through the pain a real transformation would bring.

There are attributes of our culture that make us good, but may also be barriers to get us to a different level ─ being great. A good read on this concept is Jim Collins bestseller, "Good to Great." Some traits are noted below.

Conservative companies have a strong financial position, strong credit rating, good discipline around investment criteria and high credibility in reporting of proved reserves. These traits put a company in position where they can struggle to compete with firms willing to take strategic big bets or different ways of looking at value chain opportunities.

Consensus Oriented companies have involvement of many stakeholders. This usually slows down decision process but protects against the big mistake of funding from business units, not corporate and leads to practical, tactical investments. This behavior also leads to funding many smaller projects for local needs from many sources, rather than fewer larger ones for highest impact.

Cautious companies' attention are always paid to external and internal reputation, and business ethics. However with governance by many different voices, it only takes one to say no, but requires many yeses to proceed. A positive response from senior management usually just means you can talk to the next level of management and see what they say ─ not that you can proceed. This behavior limits entrepreneurial behavior to local initiatives. The focus is lots of small wins and few big bets.

Operational Excellence focused companies favor incremental improvement as best way to get support and funding for projects. Current frameworks are more about spreading today's current best practices through assessments and reviews, not transformation. Documentations and process definitions are there to help the laggards raise the bar to the best performers not to help the top performers get to another level.

MY TWO CENTS FOR CHANGE
Many current programs are about the enablers of change (data, governance, data quality, master data management) ─ not about transformation. There isn't much strategic thinking in the annual business process, but a lot of attention to operations metrics and root cause analysis. We seem to believe a good enough future state can be achieved by fixing today's problems and keeping the good in what we are already doing. We are satisfied with small percentage gains and don't see real competitive threat or compelling reasons for more dramatic change.

We are conservative at operational risk taking in an overall risk investment business. We improved our exploration success by understanding and taking less risk. We want to be thought of as technically competent, a good team player ─ but not as mavericks, breakthrough thinkers or risk takers.

We want to be great, but are mostly planning on being good. We write performance plans with the expectation of achieving average results. We work hard to avoid any low performers at the expense of letting a good one become really outstanding. High performers are usually left alone with supervisors tied up with administrative duties, never ending meetings and problem intervention.

So how do you view the current "transformational" programs? Are you expecting small progress on operational practices or real breakthroughs? Or are you secretly hoping they have no effect on you at all?

In my humble opinion, what we really should be doing with these initiatives is taking a real hard look at what we need to do differently in the next ten years ─ not just fix the next item down on our things to do list. Companies need better decision making capabilities to get ahead. We are living in a data-rich world, but only have a very limited ability to gain insight from the tidal wave of data that is available. Cross-functional integration would bring better insights into our operations and value chains but that is getting outside of our comfort zone.

I guess until we get there a little improvement is not that bad.