The subject is strategic change. The question, posed last week, is whether we can lichen business change to Agile software development — whether we can devise an Agile Business Change (ABC) methodology that “chunks” strategic change into a melange of small, manageable adjustments.
The alternative is some flavor of reengineering, business transformation, and replacing the engine while flying at 40,000 feet. Companies often wilt under the pressure of making it happen.
Lettuce peas start with a framework for describing any business. It has ten dimensions — five external, five internal. The external dimensions are:
- Customers: The people who make buying decisions about what the company has to sell.
- Product: What the company sells its customers.
- Price: What the company charges for its products, along with margin goals, contract terms and conditions and so on.
- Marketplace: The business ecosystem — suppliers, distribution channel, competitors and partners.
- Messages: How the business explains itself and its products.
The internal dimensions are:
- People: Employees and contractors — the human beans themselves, their skills, knowledge and experience.
- Process: How people do the company’s work.
- Technology: The tools people use when fulfilling their roles in the company’s processes.
- Structure: How the company is organized — its reporting structure, celery structure, policies and guidelines, and internal communications.
- Culture: How employees respond to common situations.
In healthy organizations, the ten dimensions are consistent, interconnected, and mutually reinforcing.
Companies don’t undertake strategic change just because one or two are a bit moldy. They undertake it because their salad days are behind them — because the company’s business model no longer works. Perhaps the company’s products are no longer relevant, or the customer segment it serves is shrinking, or its pricing is no longer competitive in its marketplace, or its marketplace has changed in some serious way. It’s fallen behind.
Happens all the time: Competitors turnip the heat, putting some company, whose business model is as tired as a bunch of botanical puns, in a pickle.
Many companies enter a sort of vegetative state in which doing nothing at all becomes the strategy — they pare spending down beyond the minimum, hoping someone buys them before they’re completely beet. The alternative, though, is nearly as bad, because there is no such thing as changing just one of the ten dimensions of organizational design. Any attempt to ketchup will hit a bunch of them, if not the whole enchilada.
For example:
You manufacture a line of premium products, which you distribute to hardware stores throughout the United States through a group of trusted, experienced, independent brokers.
And then, last month, a Chinese manufacturer started selling a knock-off product, direct to Lowes and Home Depot. Its wholesale price is half what you charge your brokers, and it sells direct — no intermediaries.
Sufferin’ succotash!
Your competitive challenge is pricing. But you can’t change just the price. You need a butter response than that, because just cutting price is cheesy — you’ll lose money on every transaction.
To cut prices while preserving margins you’ll need to change your processes. That means “changing” your people in some way too, because new processes wholly or partially invalidate old skills.
Most likely, you’ll have to change structure and culture as well, and reposition yourself in the marketplace (including, perhaps, bypassing your current distribution channel). All of which will require significant changes in technology.
That’s a lot to change all at once. You have to take an interconnected ten-dimensional model of the business that worked and redesign it into a new interconnected ten-dimensional model of the business that works.
Then you bet the farm, implementing the new organizational design as one massive process. And you don’t get to stop running your business during the change-over.
Enter ABC.
Unlike re-engineering, which is top-down and waterfall (and most of the time curiously devoid of actual engineers), ABC blends top-down and bottom-up design. From the top, the company’s executive team decides the basic shape of pricing goals, production strategy (process), and distribution. It also decides on any structural changes that will be required, putting the right people in charge of critical business responsibilities.
And, it will define the underlying cultural changes necessary for everything else to work.
The executive team will focus its attention on the cultural change. The rest of the company will use the 3-1-3-4 formula (3-year vision/1-year strategy/3-month goals/4-week plan) to figure out everything else and make it happen in manageable increments.
That, at least, is the theory. Whether it holds up when you peel the onion is an open question.