In the era of digital disruption, how you choose to respond, adapt and transform will be the difference between success and failure.
Transformation in the digital era requires new approaches and techniques to coordinate the delivery of digital solutions and the renewal of the enabling capabilities that support them.
In particular, approaching change in this environment requires organizations to manage change initiatives in a layered model, the layers being innovative capabilities, differentiating capabilities and enabling capabilities.
Many portfolio and program management methods and frameworks have been developed to support delivery in the enabling capability layer. But these types of frameworks aren’t very well suited to transformation environments where the solution will evolve over the course of the delivery.
At the same time, agile software engineering practices, which are developed for environments in which technology is a differentiator, are designed for point software implementations; they don’t address the coordination of interdependent activities across the enterprise to deliver a full operational capability.
Here we look at the Transformation Management Office (TMO), which has evolved into a strategic coordinating function that supports the effective execution of a portfolio of change initiatives across the three layers, to achieve an overarching transformational purpose.
TMOs aren’t new, but they’ve evolved with a focus on digital, emerging technologies, customer experience and innovation as companies look for new ways to drive efficiency and effectiveness.
Many transformations in the digital era are about how organizations can make the most of new technologies and platforms to drive long-term shareholder return, so it’s critical to set up your TMO in a way that supports and enables this outcome.
Before embarking on a significant digital change journey and setting up new capabilities to drive and orchestrate transformation, it’s important to define what transformation means to your organization.
We define transformation as deep, fundamental, often radical, changes in an organization’s mission, strategy, structures, systems and culture. We don’t see it as simply incremental change and improvement.
When defining transformation for your organization, it’s important to consider which areas to focus on. We see transformation being categorized by three specific focus areas: the scale, focus and nature of the transformation.
Principles of transformation
Establishing principles early on is critical to the transformation’s longevity. These principles become the governing fundamentals that guide decisions, ensure alignment with the vision and help translate strategy to execution through the TMO.
These principles should be the foundation for everything that will happen in the TMO, including how it will engage, interact and integrate with other parts of the organization.
We’ve identified 10 key principles of transformation:
- Lead with purpose
- Focus on systemic change
- Be customer-centric
- Have an obsessive drive to value/outcomes
- Embed innovation into the organization’s DNA
- Make technology an enabler, not a driver
- Build in sustainability
- Break down silos and collaborate
- Create a single source of truth
Creating a TMO
In its purest form, a TMO exists to translate strategic intent into action, and then to oversee execution activities to achieve the intended outcome. High-performing organizations avoid falling into the program management office (PMO) trap by focusing the TMO on more than just tracking initiatives.
During times of change, organizations commonly set up a PMO led by somebody who has a track record of success and respect across the business. The PMO is charged with managing and tracking a collection of initiatives determined to be transformational. A cadence is established, integrated roadmaps are developed, and the initiatives are launched with updates shared across the layers of the organization on their progress. Though milestones are met, the organization doesn’t evolve beyond the old ways of doing things, and the pace of change is materially unaffected.
This is where a TMO stands apart. If enacted well, a TMO brings with it new energy to strategic direction, portfolio management and initiative execution. Leading TMOs become the beating heart of the transformation — elevating the organization forward at a new tempo, instilling with it a new culture of delivery and creating value in areas not seen before.
Great TMOs manage and execute projects in the same way a highly effective PMO does, but they break out of the PMO mold by changing the organization’s metabolic rate and setting new rules of engagement. Great TMOs aren’t afraid to reinvent longstanding practices to generate savings and, beyond that, should be able to reinvest that capital to generate and create value.
Scope of the TMO
The TMO exists throughout the lifecycle of change, and in many organizations is established as a permanent operational capability to drive continuous evolution and optimization. The key to success is bringing together complementary capabilities to manage different aspects of the change. Rather than setting up the TMO to act as a detached, administrative function, placing the right skills in the TMO allows for proactive and hands-on direction of change activity to achieve the vision.
Typically, the TMO will address five key discipline areas:
- Business solution considers transformation from the perspective of the people, process, technology and information implications, considering what needs to change to deliver the outcome.
- Transformation portfolio considers the portfolio of change activities that need to be delivered from a planning perspective.
- Business engagement and readiness considers the rational, political and emotional implications of the change on stakeholders.
- Performance management establishes a traceable hierarchy from the transformation’s original purpose through to a set of operational performance metrics that relate to the transformation delivery and operational running of the business.
- Transformation operations focuses on effective day-to-day running of the transformation, including execution of the governance model, resourcing, financial administration and reporting activities.
Types of TMO
The types and characteristics of TMO lie along a spectrum, from highly involved and directly accountable for transformation — the driver — to limited involvement and accountability, acting more in a subject matter advisory capacity — the advisor. These categories are guides — situational needs, of course, may dictate a TMO that lies somewhere between the categories.
A deliberate choice of the right type is critical to setting up the TMO in a way that will drive successful outcomes in the situational context. Typically, pace, organizational culture, degree of change and impact expected, and previous transformation history influence the type of TMO that makes sense for your organization.
Mobilizing for success
There are six key steps to mobilize a TMO with the right approach to support the needs of a particular organization. Our experience has been that a top-down approach to setting up transformation drives success, starting with understanding your transformational vision, purpose, scope and mandate (the why and the what). Once the big picture is agreed, the TMO can shift its attention to the operating model, governance, and roles and responsibilities (the how and who).
- Vision and purpose – What are the outcomes to be delivered by the transformation? What are the indicators of success and how can they be measured?
- Scope and mandate – What areas of responsibility are required by the transformation to be able to deliver on the vision and purpose? Should the TMO have an enterprise-wide scope, or should it be focused on specific initiatives? To what degree should management be centralized vs. federated to different accountable groups?
- Transformation principles – What is and is not working well today? Where can existing practices and assets be used, and where are there pain points that need to be urgently resolved? How ready is the organization to support the transformation?
- Operating model and processes – Is an operating model clearly articulated, agreed and documented? How will the TMO fit into the organization, and what integration points are required outside the TMO? What processes will the TMO need to develop versus what the enterprise already has?
- Governance criteria and guidelines – What is the governance lifecycle for each type of transformation project? What are the criteria for managing initiatives in each type of transformation project? What governing bodies are required at various layers for leadership alignment and integration, investment criteria and decision-making, stage gating, and transition back to the base business?
- Accountabilities and resourcing – What are the key roles and responsibilities involved in the transformation? Do suitable skills exist to operate the TMO, and is there sufficient bandwidth? Are the appropriate incentives in place to attract constructive participation from across the stakeholder community?