LDS On: Drags on Institutional Innovation

In this episode of “LDS On,” CEO Mimi Brooks shares the top ten list of common obstacles that impede – and even stall – successful transformation initiatives.

Transcript

Welcome to the 16th video in a series of LDS thought-leadership dedicated to the discussion of transformation management.

In each video, we address a topic of strategic interest to business leaders who are guiding their organizations through transformative change.

For most large organizations, traditional organizational design involved rigid, functional hierarchies, focused on leader-led decision-making. Workers were managed in these structures based on compliance to prescriptive job tasks and duties. Obscure internal mobility practices limited lateral exploration. Innovation was an isolated function. Greater participation and efficiency in scale, not ingenuity, was critical to growth. Change was a contained idea factored at the end of a project, and the management systems that bred success in the industrial economy can now be obstacles as the cognitive economy evolves.

It’s not surprising that these organizational systems and structures are outdated. But the challenge to dismantle these old structures to rebuild new institutions fit for now and later, however, is easier said than done.

It’s important that business leaders recognize and act when drags on realizing institutional innovation interfere with critical momentum. This means understanding the changing nature of customer and worker expectations by embracing technological change in a cognitive economy enabled by machines and algorithms. It also necessitates living and learning in organizations that cultivate the most valuable human capacities and engaging in broad stakeholder relationships that ensure a brand survives public scrutiny and delivers on societal obligations and environmental commitments.

So, this is LDS On Drags on Institutional Innovation. Let’s get started.

In our experience partnering with business leaders who are guiding complex business-digital transformation efforts for some of the largest organizations in the world, we’ve seen some common obstacles that impede and even stall successful transformation initiatives.

Here’s our top ten list.

First, leadership lacks the strategy to make bold moves.

When risk aversion gets projected onto corporate strategy, a propensity for market-focused forecasts and timid actions is the outcome. In times of great uncertainty, avoidance of the downside is paramount for many leaders, which means that big strategic moves are too rarely proposed, and even less frequently accepted.

Successful leaders have a clear business vision and a sound strategy in this new, dynamic marketplace. This is coupled with a sense of urgency to establish momentum, and the capacity to build leadership teams who can collaborate and drive substantive change. Future-sensing leaders make bold moves. They can imagine a future different than today and believe their role is to guide and inspire the organization to get there ahead of the competition.

Second, organizational siloes

The impact of silos can be devastating – literally putting the readiness of people and the viability of the organization in jeopardy. These are usually deeply embedded and operate far beyond obvious stovepipe ways of working. They build reliable but often unscalable tribal knowledge practices. They decrease social capital, favor insiders, create disorder, fuel bias, and complicate the decision-making process.

Digital remodeling means operational change across the entire end-to-end business, and the building of horizontal bridges and capabilities that unleash human potential. There is no place for organizational siloes in the pursuit of institutional innovation.

Third, defense of the status quo

Thinly veiled transformation initiatives occur when an organization appears to commit wholeheartedly to the concept of change, yet when confronted with the disruptive reality, will revert to and even defend more ingrained ways of working. Cosmetic “changes on the fringe” may occur, but the traditional actions remain the same – a situation exacerbated by conflict avoidance, as well as by thin practices that do not inform transformational efforts. Regardless of cause, this type of bureaucracy is often deeply rooted and immoveable.

Excessive compliance and defense of the status quo in a rapidly evolving era of institutional innovation negatively impacts company culture, worker collaboration and customer satisfaction. Contemporary compliance measures must be far more adaptable, technology-driven and data rich. Companies must retreat from demanding absolute adherence to industrial age frameworks and tap into the full cerebral capabilities of workers to realize sustained growth.

Fourth, workers don’t connect to new value creation

This occurs when workers aren’t understanding nor being guided to understand how their contributions — individually and in teams — connect to new value creation in new digital operating models. As a result, workers are not aligned to the value that the organization wishes to create now. This leads to cognitive overload, change fatigue, and workers feeling they can’t keep up. The company doesn’t have a systematic way to harness external resources and de-risk the environment that allows people and ideas to flourish.

Workers need to know the “why” and they need to understand how the new why affects their new work. Workers should participate in new work design.

Companies must model new behaviors to demonstrate what good looks like. The latitude and room to explore and learn is critical.

Fifth, legacy technology drags on the business ecosystem

Inter-operable business ecosystems are foundational to digitalization and the new digital economy. Legacy information technology systems that linger too long in a cost-center financial model are the Achilles heel of business transformation. Organizations with legacy infrastructures need the same speed, agility, and economics that digital-native competitors exhibit in order to stay competitive.

From the front-office – where new digital tends to be built first – to the back-office, where organizations tend to avoid replacing legacy systems due to cost and complexity, the entire value chain needs to deliver on customer and worker expectations without unnecessary roadblocks caused by an inability to power modern digital interactions. If legacy systems can’t become integral to that objective, they need to be replaced.

Sixth, technology changes but work practices don’t

Ingrained, non-aligned and rigid work practices are a constant barrier to transformative efforts, particularly in established organizations. Even the most innovative technological solutions are doomed to fail if challenging established work practices is considered to be too time-consuming and difficult.

This is a race digital age organizations cannot afford to lose. Adaptation of work practices involves rethinking how workers can use technology to collaborate and share critical knowledge.

Every work practice and process must be reviewed from a technological perspective. This includes consideration of new data sources as well as KPIs that align work practices with transformation initiatives. In this way, businesses can embrace the core digital capabilities realized and avoid a disruptive clash between outdated work practices and the rapid pace of change.

Seventh, undervaluing momentum and experimentation

Being excessively procedural often stems from an aversion to ambiguity and a concern about following any sort of unprescribed plan of action.

Rules and procedures work well when the route ahead is clearly marked. However, these can also become bottlenecks and roadblocks when the value proposition is more subjective.

Future-sensing organizations who make their digital transformation initiatives purposeful also demonstrate the ability to deal with uncertainty, where momentum and experimentation are the alternatives to having a clear path forward.

Eighth, absence of cognitive diversity on teams

Cognitive diversity may not be seen as essential in well-established companies, where the need to change may not be immediately apparent.

The pre-existence of an established way of successfully doing business inhibits efforts to employ cognitive diversity as a transformational tool. Diversity of opinion clashes with the traditional ‘if it ain’t broke’ mindset and over emphasizing one has the potential to undermine the other.

Cross-functional teams are foundational to successful projects of innovation, but this has to be more than a representative mix of people from different organizational entities. Cognitive diversity means exploring a range of mental models that include diverse ways of thinking as well as diverse personalities that can help organizations understand “what is” and how to cope with dynamic and complex business environments.

Ninth, inability to balance operational excellence with innovation

Over a quarter of a century ago, organizations were guided to focus on operational excellence, innovation or customer intimacy. Today, we are faced with a business domain where companies must excel at all three of these areas to succeed. Our contemporary failure to balance operational excellence with innovation excellence means that new technologies, new regulations, new business models and new start-ups will inevitably disrupt and render the original vision obsolete within a short time.

Organizations must embrace iterative learning processes, experimentation, and the building of new conceptual and physical models as part of digital transformation in order to achieve not just operational excellence, but also to leverage imaginative ideas on innovation.

Tenth, not connecting imagination to growth

A mistake many organizations make today is not tapping into the full humanity of the people who work for them. Leveraging workers capacity for imaginative solutions to the problems encountered in any digital transformation effort is key to successful institutional innovation. We live in an era where the competitive advantage realized through even the most successful organizational transformation is short-lived. In order to grow, companies need to reinvent themselves again and again.

Harnessing the collective ingenuity of an organization represents a totally different approach to transformational growth – one that brings institutional innovation to life. Imagination and creativity must be cultivated as a new normal. This means infusing a mental model of the company’s purpose in the mind of every worker. Each and every human affiliated with the day-to-day operation of the business must see the purposeful value of their role in bringing this mental model into reality through the rules, protocols and processes that fulfill the overarching business strategy.

In summary, it will come as no surprise to any business leader on the road to digital transformation that rigid hierarchies or structures, dominant siloes, and culture that disenfranchises contemporary workers are all drags on new value creation and growth models in the emerging cognitive economy.