The Keys to Executing a Business Transformation
Every business transformation of the last two decades has digital roots. There's no alternative; business processes are only as good as the code and systems that support them.
Complicating matters is the variety and complexity of technology that’s now at our disposal. We live in a data-driven, app-powered, hyper-connected world where user experience rapidly determines winners and losers; where new markets and new competitors can appear almost overnight; and where established practices and processes are constantly challenged.
Being a CIO responsible for systems in that sort of environment is challenging enough. More challenging yet is retooling everything to effect a business transformation, as we did last year with the separation of Hewlett-Packard into two companies—HP, Inc., a leading print and PC business, and Hewlett Packard Enterprise (HPE), a leading enterprise technology company. Here's what we learned from the process.
Reinventing an Icon, and Unleashing Growth
At the time of the separation, HP was a 75-year-old corporation. Splitting into two operationally distinct businesses would allow for streamlining operations, eliminating calcified and unnecessary processes, and improving profits and cash flow.
As soon as we completed the business aspects of the separation (e.g., dividing responsibilities, rethinking incentives and sales strategy), we began building a new IT organization at HPE to support the new company and its evolving processes. Federated infrastructure would be assimilated and divergent architectures eliminated as we sought to close gaps and automate as much as we could— our leaders wanted HPE to move fast.
Our challenge was to create efficiency as quickly as possible, but it wouldn't be easy. Not only were we aiming to combine the assets of six global data centers into just two but we were also rationalizing systems designed to support more than 2,800 business applications. Duplication was a problem. In one extreme case, we set out to streamline the workloads handled by 19 distinct order management systems. More than 3,700 HP employees and 2,000 contingent workers contributed to the effort.
In our most recently reported quarter, HPE increased both our operating profit margin and our free cash flow on a year-over-year basis, all while serving our customers around the globe. None of it would have been possible had we failed to first develop a comprehensive plan for digitally addressing every business process.
Principles of Business Transformation: A Step-By-Step Process
There are two things to know about transformation planning. First, you can’t plan if you don't have data. Second, you can’t start implementing without first getting cultural buy-in.
But you need to start with the data. Assemble a transformation team and look at everything: organizational data, cost data, people data, productivity data, and historical data. Examine what IT delivered, and failed to deliver, in terms of custom technology. Check ROI. Get your people soaked in the data they’ll need to make informed choices.
Then, communicate. Be clear with everyone in your company—especially executives—about your plan and what you aim to achieve, and use these four strategies to stay engaged:
1. Stay Close to the Information Trail.
Make sure people are absorbing the reasoning behind the transformation you’re seeking to drive. Understand what areas are not connected and attack those areas. Listen to the feedback. It will tell you if you’re doing things well or not. The trail will also tell you about the ‘unknown unknowns’, the ‘known unknowns’, and the ‘known knowns’. The more you understand about what’s needed and what's missing, the more efficient your transformation process will be.
2. Pay Attention in the Moment.
Business transformations are rarely straight-line affairs, so don't treat them that way. Keep your eyes open and your ears perked. Look for signs that efforts are veering off course and move quickly to move things back on track. Your ability to execute over the long term depends on how well you course-correct.
3. Work with Executive Stakeholders and Partners.
Remember that business transformation is an exercise in chaos. Get buy-in before you unleash it on those who will be impacted most. Their support is crucial if you're to achieve top-down alignment. Without it, you can't be successful.
4. Provide Absolute Transparency.
Be prepared to sell your vision. Be honest and fully transparent. That way, your team will make the decision to transform—or not—in the full light of day, and in full view of the facts.
These are the principles we practice at HPE. In fact, a few of us on the IT team recently met with our CEO, Meg Whitman, to review budget priorities. We told her what we knew, what we didn’t, and we put forward a comprehensive budget for accomplishing our next stage of digital transformation. We put everything in the open and let her decide, because that's her job. Our job is to make sure she has what she needs to make the best available choice.
The Time to Get Started Is Now
Even if you aren’t working through a business transformation now, chances are you will be. Dealogic tracked $5 trillion of global M&A activity in 2015, a new record. US-based activity was down 18 percent through the first half of 2016, yet that was still enough to produce $642 billion in activity—including a $13.6 billion deal to combine the operations of Starwood and Marriott, two of the world’s largest hospitality chains. You can bet the CIOs of both companies are busy deploying IT teams to ensure the transformation goes smoothly for everyone involved.
At HPE, we’ve delivered significant value to customers, partners, and shareholders as a result of last fall’s split. We’re a brand new company with a refreshed set of strategies and team members who are excited about what we’re doing. And because we've focused on executing the necessary digital transformation, IT is truly set up to empower our company. We can move as fast as we need to move, and pivot when necessary.
Business transformation may not be an easy process, but as we’ve found at HPE, it can be defined, cultivated, and managed to produce the growth and profits every stakeholder longs for.