The Fight Against Corporate Inertia

People do not resist change, companies do.

Companies are designed for inertia. They are made up from standard processes to drive productivity and policies to ensure people do not cross lines. We hire people who are like us and place them in an organisational structures where they sit with people with the same skills. We set higher performance targets each year but the default mechanism to achieving them is to work harder rather than change the way we work. To drive improvement in this environment is to push against the very fabric of the organisation and any brute force attempt to do so is destined for failure. Only by systematically addressing each of these components will a climate for change emerge where people can embrace change and sustained transformation becomes possible. In parallel, leaders need to be the enemy of the status quo and create the expectation that improvement across the company is the norm. There are 3 essential areas for leaders to focus on.

Create the expectation to improve

Over a decade ago, when I was studying lean principles, I travelled to Japan on a study trip to tour to and learn from respected manufacturing plants. I was guided round one of the factories by a sensei (quality guru). At one of the stations he stopped, glanced at some documentation displayed and proceeded to scream at the section supervisor in Japanese. Once he had finished he explained to me very calmly that the supervisor had not updated his standard work for 6 weeks meaning that he had not found any improvements on how the job should get done. He added that the role of leaders is to solve problems and drive improvement. Otherwise why did we need leaders? He expected that each supervisor should update their standard work at least weekly. Whilst I did not support his fear-inducing leadership style, his drive of continuous improvement was a light bulb moment for me. The sensei had created an expectation for improvement. He went on to tell me that the 2 most important questions for a leader to ask were firstly “How are you performing to standard?” in other words: given the current resources and processes are you hitting the expected levels of productivity, quality etc. And secondly “What experiments have you run to move to your target state?” You will only be able to improve if you change the way you work – it is not about working harder and this is best achieved through experimentation.

These two questions may seem very operational in nature but they can and should be adapted to all parts of an organisation. People across the company should be rewarded for improving how the job is done not just performing the job.

Create the bandwidth to change and then move to BAU

Back in 2009, shortly after I joined DBS my team ran a programme aimed at taking customer waiting time out of our processes. DBS was known as Damn Bloody Slow since we were famous for long queues at our branches, ATMs and call centres. My team set up a program of process improvement events (PIEs) which were week-long workshops attended by employees who between them knew the target end-to-end process. They physically walked the process identifying issues and then back in the room ideated improvement ideas and implemented as many as possible in the week. In the first year we ran close to 50 PIEs and we dramatically reduced the customer waiting times, taking an estimated 250 million waiting hours out of our processes. We went from the bottom to the top of the customer satisfaction scores in 12 months. The PIE program could only have happened had there been a dedicated transformation team driving it from the centre. The team designed the approach, scheduled the workshops, provided the training, facilitated the sessions and reported on the progress to the CEO. We were highly successful for a couple of years but as focus moved onto the next transformation and since the people participating in the PIEs had day jobs, the focus began to wane. The improvement workshops were seen as one-off exercises. The expectation for improvement was episodic and not continuous.

We realised that we had to embed the need for improvement into BAU. We pivoted the program after a couple of years to replace the workshops with DMS (DBS Management System). Business reviews were no longer conducted in meeting rooms but on the operations floor at visual management boards. Leaders asked a version of the 2 questions from the Japanese sensei – “What are the issues that are preventing you performing to standard levels of quality, productivity and risk?” and “What experiments are you planning to get to the target improved state?”

With this approach the onus was on the leader to walk the floor, to ask the right questions and create the expectation that driving improvement was part of the day job, not a one-off project.

Create a safe environment to challenge

There are points where even the most empowered team feel that they have hit a brick wall. This typically happens when they run into an ingrained corporate habit or out of date policy? Common comments include “We cannot change, it is against the policy” or “our compliance team will never agree”. For people to be able to overcome such situations, it is important to put in place mechanisms to allow anything to be challenged safely. In the PIE program we ensured that there was a compliance person in the PIE team to address concerns early and be part of the solution. Later we set up a Kiasu committee (Kiasu is a Singapore dialect term meaning fear of missing out or to be overly conservative). Anyone could bring a policy to a Kiasu Committee to be reviewed. The committee was chaired by the Compliance head (who dressed up a like a judge and had an over-sized gavel) and made up of a “jury” comprising senior and junior employees who deliberated whether the policy was “guilty” of being Kiasu. If found guilty the process would be amended. The environment was fun and good-natured. In the first year, around 100 policies were challenged with over half being found “guilty” and amended. Quite often the owners of the policies that were deemed to be “not Kiasu” felt that they could improve and amended their policies anyway.

“Insistence on Improvement” is the first of the 6 essential habits of leading transformation. I will be covering the other 5 in coming weeks.

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A Ticking Timebomb

When the pandemic first hit most of us were surprised at the effectiveness of distributed virtual workforces. We also learnt how relentless Zoom calls and lack of demarcation between work and home can lead to burnout and other mental health issues. However, as we gradually emerge from COVID 19 it seems that most office-based companies intend to reap benefits of reduced real estate cost and employee flexibility by adopting some version of hybrid working. Whilst such a move has clear upsides, there is a ticking time bomb that is not receiving enough consideration. Unless we have a radical rethink on how to protect corporate culture it will whither to the point companies will be destroyed. The impact will affect the very nature of work for future generations. What can leaders do now to halt the decline?

Back in February 2020, a son of a friend of mine was excited to join a financial services company straight from college as a software developer. The company was located downtown of a vibrant city and he was looking forward to both learning new skills and forging new relationships in the office, over lunches and drinks after work. Five weeks later and before he was able to make any meaningful relationships he, like many others, was working from home. Meetings switched immediately to Microsoft Teams and were largely camera-off affairs. When he needed help, rather than chat to the person sitting beside him he was told to schedule a meeting. As the pandemic eased, as soon as he was allowed to do so, he returned to the office but he discovered that he was alone – his colleagues preferred to continue to work from home. After two and a half years he still has not an inkling about the company culture, has become disengaged and is now looking for a new job.  

Because of COVID, employees of companies worldwide have experienced the flexibility of working from home and the elimination of painful and expensive commutes and are now choosing to work from home and are prepared to move to companies that allow them to do so. They are prioritising convenience and flexibility over comradeship and culture. This is not only impacting the minority who are looking for an office-based experience (especially those new to the company) but is putting entire companies at risk over the long term. It is hard to see how corporate culture is going to survive. Given weaker culture, less and less people are going to engage with the companies and work will become increasingly transactional.  

Interestingly most of us did not feel the way about our families as we emerged from the pandemic. We did not decide to move to a hybrid model for hanging out with our friends. We have returned to the traditional model of hanging out face to face. In this case we have prioritised camaraderie and relationships over “flexibility”.  What does this tell us about what we really think about work?

Leaders, especially those driving transformation need to focus more than ever on building culture. When your team is physically in the same location it makes it far easier to drive engagement and culture. Observing the informal rituals, having conversations in the corridor, even seeing how people are dressed inform people of the culture. Leaders of transformation have more opportunities to impact the culture when people are in the office. For example the characteristics of the physical office space drive behaviour more than most give credit for. At one point in my career in addition to my role as Chief Transformation Officer, I oversaw the real estate and facilities for DBS. It was during that time I discovered how powerful physical space can be as a driver of positive change. People tend to behave based on the physical environment around them – you behave differently in a library and a supermarket.

Left untended desired culture will decay over time. When people are not physically together the culture half life reduces dramatically. As people leave and new people join the culture will be lost and engagement will drop. As people feel less engaged they will look for higher pay and flexibility elsewhere. Companies will not be able to attract talent. There will be no engaged army for future transformation.  Companies will erode and ultimately whither.

Leaders need to act now. They should understand the drivers of decay. Some of the factors are as follows.

  1. Starting health of culture
  2. Attrition rate
  3. How much effort leadership puts into maintaining and developing culture. Taking a culture by design approach is key.  Scott Anthony and I wrote about this in HBR.org and the approach is detailed in our book.

 Leaders have 3 choices.

  1. Do nothing.  Believe corporate culture is a thing of the past and accept that work will be increasingly transactional. 
  2. Insist people come into the office and work on the employee experience so that more employees will prioritise camaraderie and culture over flexibility and reduce the risk of people looking to other companies that provide flexibility and offer higher pay.
  3. Continue with hybrid working and work ten times harder on developing culture using a “culture by design” approach.

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It’s breakfast time and digital culture is hungry

Why is it that everyone sagely agrees with Peter Drucker’s aphorism that culture eats strategy for breakfast but the vast majority of companies spend far more time on their strategy than their culture? We organise strategy offsites, strategy departments are set up, extensive strategy documentation is developed, expensive strategy consultants are engaged and we present strategies for endorsement to our boards. Yet for most companies any focus on culture is simply well-meaning lip service or a part-time hobby for an overstretched HR department.  Is this because defining and progressing towards a target state culture is hard?  Is it because demonstrating that culture yields direct business benefits is not possible?  Is it because we do not really believe Peter Drucker?  

As I wrote in the first post in this blog the single biggest insight of my career to date is that transformation is about people. Processes and technology do not change themselves. People drive change and to drive transformation at scale you need to create any army of engaged and motived people. There are many stats quoted (mainly in the presentations from those highly paid strategy consultants) on the low percentages of successful transformation programs. These failures are often due to the lack of focus on culture, not the application of the wrong strategy.

More and more strategies are centred around digital transformation. Successful digital transformation is not about the blind implementation of new technologies but the mindset of continuously improving customer solutions by the application of suitable technology. True digital leaders are impatiently curious about what works and what does not. This is a culture issue not a strategy issue – digital culture eats digital strategy for breakfast, lunch and dinner.  Strategy, digital or otherwise is important in setting direction but sustained execution depends on behaviours. Yet pretty well everyone I speak to agrees that in their companies there is much more focus on digital strategy and little or no attention to the behaviours. Part of the reason is because how to develop corporate culture is not taught in business schools, it is not role modeled by leaders – it is new for most people. The good news is that more and more companies are believing in the importance of developing a digital culture although are not sure exactly how to go about it.  The even better news is that it is not difficult if you are prepared to focus on it. Here is the high level approach.

  1. Be explicit about your desired culture. Corporate culture is the sum of the behaviours of the people in the company. You should define the desired behaviours that are going to enable the purpose and accelerate the strategy of the company.  This helps to address the link between culture and business outcomes.  At DBS we set out to be a 27,000 person startup as we wished to operate at speed and at scale.  Clearly we were not a startup, we were a fifty year old bank but we precisely defined the behaviours of a startup that we wished to emulate.
  2. Build a dedicated program to develop the future state culture based on the “culture by design” approach that we pioneered at DBS and set out in the book Eat Sleep Innovate that I co-authored with Scott Anthony, Natalie Painchaud and Andy Parker.  I shall be writing more about this in future posts so you do not need to buy the book to learn more but essentially you will need to address culture blockers through the conscious introduction of rituals, vocabulary and enablers.
  3. Measure progress.  The future state culture must be defined in terms of observable behaviours so that progress can be measured and issues identified.

The corollary of the afore-mentioned “one big insight” that transformation is about the people is that corporate culture is an important asset of the company. The leadership of a company are the custodians of this asset. The board should ensure that culture is nutured and developed by the leadership. There should be culture offsites and teams dedicated to defining and developing the culture. Progress should be reported in annual reports

And of course if you need a highly paid culture consultant you know how to reach me!!!

Leadership Lessons

  1. Spend as much time (if not more) on culture as you do on strategy.  Culture improvement is your most powerful execution enabler!
  2. Be explicit on the behaviours that are required to deliver on your strategy.  This is your future state culture.
  3. Implement a program to develop the future state culture.

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The Biggest Silo of them All

What happens in your company when IT systems fail, software development projects are late or there is a data breach?  Do the business people indignantly escalate the issues to the IT department? Do they write angry emails to the CIO?  If that is the case and you aspire to be a digital company then you have a problem. Such friction between business and tech teams is indicative of a company that does not realise what it means to be digital and is a huge obstacle to transformation. Digital companies do not differentiate between business and technology. Leaders of digital companies are ambidextrous – they know how to prioritise between investment in system performance and revenue generating features. They know that they are accountable for keeping for system stability, security, customer experience as well as  meeting financial targets. Unfortunately ambidextrous talent does not typically exist in legacy companies where organisational structures and processes tend to reinforce the tech and business silos. However It is possible to bridge the chasm.

In 2017 at DBS we had huge digital transformation aspirations. We had stopped comparing ourselves to our traditional competition and started to use the big tech companies as a benchmark. Our internal mantra was to put the D in GANDALF, where GANDALF was an acronym made up from Google, Apple, Netflix, DBS, Amazon LinkedIn and Facebook. But we had a hit a roadblock. The silo between our business teams and tech teams was creating a blame culture. Whenever there was a systems issue the business team finger pointed to the tech team. The CIO would get a stream of escalation emails. The IT team complained that they did not have enough budget to cover stability, security and end of life investments while the business teams accused the tech teams of sandbagging budget to fulfil their own agenda. The relationship between the two departments was not conducive to achieving our digital ambition. So we approached some our friends in a couple of the GANDALF companies and asked how they dealt with the silo between tech and business. They all looked at us as though we were stupid. They told us “Tech is business and the business is tech”.  There is no silo. But you do need leaders who can span both disciplines.”  

This was a lightbulb moment for us. We realised we needed to fuse out business and tech teams together. We looked at how tech companies were organised. We studied the Spotify model that had been embraced by fellow financial companies like ING. Eventually we landed on something that we called a Platform Operating Model (POM). 

  1. We grouped our applications, associated talent and budget into logical groups aligned to business, support and enterprise functions. 
  2. We appointed joint leadership – one from tech  and one from the business.  This “2 in a box” structure was a proxy for ambidextrous leadership
  3. Each platform had a joint (across business and tech) strategy, budget and KPIs

We took 6 months to design the details and implement.  But when we implemented the new model in early 2018, the finger pointing between business and tech stopped literally overnight.

There was immediate recognition that in a digital business keeping the systems up and running is a business responsibility not something that can be mentally outsourced to the tech leader. At business reviews our CEO started to ask business leaders to explain the tech elements of the joint strategy and the tech leader the business components.  Platforms were given a single performance rating at the end of the year.

Other challenges remained and took time to tune and resolve. But this single change to the operating model had put us on track to become a GANDALF company.

Leadership Lessons

If your tech and business teams are at odds you will never become a digital company

Develop ambidextrous talent but you may have to develop intermediate steps such as 2 on a box to get there.

Address corporate process such as budgets and performance management to reinforce alignment between the IT and business functions

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Digital to the Core

In mid 2015 a group of executives were huddled in a windowless Mumbai conference room debating how to overcome what many believed to be an insurmountable challenge. Half the room were bankers, the rest were an eclectic mix of entrepreneurs, transformation specialists and designers. The bankers were adamant that the task in hand was not possible – the regulations were too onerous and the infrastructure too immature. The non bankers, unencumbered by careers of interactions with banking regulators, were sure that it could be done. The task? To launch the first fully digital bank in India. A bank where customers could open an account without visiting a branch. A bank that could be run with 10% of the staffing levels of a conventional bank. A bank that was not just a fancy front end app supported by armies of humans, but fully digital from end to end. The team needed a new approach if they wanted to move forward. What unfolded in that room changed the course of the project.

The team tried a workshopping technique called “back-casting” that involved designing the implementation from the future back rather than from the present forward. The team described precisely the new bank’s future customer experience and operation model and then defined the bold steps that needed to be taken to get there. The technique had been designed specifically to help teams overcome big challenges. Coming out of the exercise were three stand-out principles that proved to be pivotal.

It was clear to the team that the new bank needed to be digital to the core. They could not simply apply “digital lipstick”. In order to scale, all processes needed to be digitally automated. There could be no manual hand offs to the operations teams. There could be no residual manual steps for the back office planned to be fixed later and then forgotten. In addition the customer journey had to been frictionless but could not rely on a branch network. This meant working with technology partners who could provide solutions in three areas – natural language processing AI for a sophisticated chat bot, security software to allow digital onboarding and a financial management capability. To take advantage of the AADHAR biometric verification system that had recently been implemented by the forward-thinking Indian government, the team decided to partner with an Indian coffee shop chain where customers could use thumb scanners to verify their identity and also get a free cup of coffee.

Like product companies that “design for manufacturer”, the bank recognised the need for products and journeys to be designed with operations in mind . To optimise for productivity and risk the operations teams were included in the design stage to ensure products were “designed for operations”. For the new bank this approach was not going to be good enough. The bank needed to be run with a staffing level a small fraction of that of a traditional bank. The team realised they needed to design for no operations. Processes had to be straight-through. Products had to be standard and simplified to eliminate the exceptions that drive manual processing.

Similarly the new bank needed a customer support model that not just reacted to customer problems but predicted and prevented them. Best in class customer service units focus on dealing in with customer queries completely at the time of contact and “first call resolution” is recognised as the metric that drives customer satisfaction. However the team realised that they needed to create a level of reliability and ease of use where customers did not need to call at all. The team introduced the concept of zero call resolution – involving frictionless customer journeys and the use of AI to predict problems before they occurred. The team set themselves a challenge of preventing 1 million customer problems before they occurred.

Breaking the larger problem down in these concepts energised the teams. More traditional problem solving techniques could then be employed. Not only were the concepts the foundation of the new bank in India which was launched less than a year later but also were retrofitted into the existing digital offerings in the more developed markets.

Leadership Lessons

Starting with the end in mind and defining the key steps together helps to overcome seemingly impossible barriers.

Eclectic teams are more likely to have the belief and creativity to drive ambitious innovation.

Breakthrough solutions can be usually be applied beyond the current solution.

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Are you Future Ready?

Companies that execute successful transformations seem to be able to predict the future better than others. They spot trends early and are able to make informed investment decisions that give them a head start developing innovative solutions. Do they employ psychics or have leaders with superpowers? Clearly not. It is because they follow a structured approach to understanding the future. 

There has been a lot said about agility and the need to sense and respond. Being able to quickly adapt to changes is an essential component of being prepared for the future. However not enough companies focus on improving the time it takes to sense trends.

Like everything in life to get better at something you need to put in the time. Reading articles on the plane (remember that?) isn’t going to be enough. Best in class leaders allocate significant amounts of time with their top teams getting inputs from world class thought leaders, deep subject matter experts as well as the views of their own people. Based on these inputs leading companies develop an informed view of what they collectively believe the future holds in 5, 10, sometimes even 100 years out.  With this in place informed investments can be made to best prepare for the predicted future.

It is important to remain focused on the emerging trends that are going to be relevant to the business. There is going to be hype and it is very easy to get sucked in. If you cannot see line of sight on how a new technology is going to help improve the lives of your customers or solve a business problems, park it for now and revisit. When blockchain first emerged it felt that all of the world’s problems were going be solved but to date only a tiny fraction of use cases ended up solving real problems.

While I was at DBS we spent 3 days every year with the CEO and top team focusing on the emerging trends, getting the views of the world experts, studying the best in class across all industries and asking our own people for their views. The majority of the time was spent debating the relevance of trends to the business and selection experiments to run to learn more.  

In addition each business area went through a back-casting exercise based on a board game we created called North Star where leadership teams visualised the future by prioritising a series of pre-canned technology, macro social-economic and industry statements (eg 80% of cars will be autonomous, average life span will be 110)  in terms of probability to be true in 10 years and relevance to their respective businesses. The teams then decided what areas should be invested in over the next 12 months to prepare for the predicted 10 year view. A proportion of the annual investment budget was then allocated to creating experiments to test feasibility and viability of the ideas. This resulted in a more ambitious innovation strategy.

However, there is one big danger out there – the HIPPO or Highest Paid Person’s Opinion.  No-one can completely predict the future. Those that do just are lucky. The leading innovative companies consistently estimate that one idea in 20 is a good idea. Therefore you have 95% chance of getting it wrong. Therefore you should expect to be wrong. However it is not uncommon for the entire workforce to pivot to something that the leader has said in passing in a meeting. Egos and ignorance can make it tough to change course. Therefore companies pursue what Scott Anthony would call “zombie projects” too long. Best in class companies build a culture where each idea is treated as imperfect and is tested and tuned through experimentation and data.

Leadership Lessons

Spend time as a leadership team getting inputs from all quarters to make an informed view of the future

Make sure that the focus remains on future trends that are most relevant to the business and customers and make the relevant investments now to best prepare for your predicted future.

Expect to be wrong.  No-one can accurately predict the future so you need to continually check that ego driven beliefs are not taking the company in the wrong direction.

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