By Richard Parcia, Ph.D.
(Editor?s Note: Below is the speech delivered by the author in a digital transformation forum organized by CIO Asia)
Curiously, let me ask this question: Anyone here who has read a transformation proposal, page by page, raise your hand? Anybody who slept with it underneath their pillow?
The truth is that it is easy to lose sight of things when time is spent going through the process of getting something. In our desire to prepare and knock out the goals of an idea, we lose sight on what is important. Yes, the ?Idea? often overwhelms us. It triggers an obsession that we peg our very existence with the realization of that idea.
No doubt about it. Digital transformation is an ?Idea?. But I digress.
Today?s theme ?Digital Disruption: Unleashing the Next Wave of Transformation? is quite close to an unforgettable experience. I was part of a global organization that was playing an important role in a company?s transformation. This transformation was triggered by a business need which in turn was caused by a market change and the mixing of an organization whose cultures and approach to things are different from one another.
It was a massive undertaking and, yes, the kitchen got too hot for me.
Our transformation was significantly disruptive. If not for the peculiar setup of a tried and tested business model, the thought of a total collapse was not far from my head. To make things worse, the transformation wasn?t just a globally driven agenda. There were sub-transformations that were being initiated all throughout the world. My organization was one of them.
Now, transformations like these are not unique. However, what made this complex is that the transformation that was ongoing coincided with the need for a robust organizational development (OD) plan.
Without a proper OD approach, the implications of a transformation will unravel not just the inefficiencies that were already suspected and became part of the list of assumptions. Without proper OD, one will be blindsided with things you never imagined even existed.
In short, what we thought was a massive undertaking, turned into, at least to my own personal opinion, a nightmare.
That experience led me to challenge the idea of a ?Transformation?. You might suspect that the experience traumatized me. However, my alter-ego, the Academic, became a very effective coping mechanism.
Instead of being repulsed by the experience, I made it a specimen. Instead of being disgusted when the shit hit the fan, I studied it. I wish the topic will linger in your minds. Minus the shitty part, of course.
And so goes my question for today: What is the true cost of transformation?
I would like to offer my insights on possible source of costs that are not often given enough discernment of those who undergo or is about to undergo a transformation.
And just like any good stuff in the universe, they come in threes. Namely: People. Risk. Business Need.
I will start with the one dearest to me: people. Most often than not, we, IT people, often come from three backgrounds: engineering, finance or any discipline that that has the word ?computer? in it. Just like everyone else in this room, I have those three.
Plus economics, to compute my salary, and philosophy to explain to my boss why I crashed and burned that last project. I will throw in theology too when I am about to ?Go Live? or when a backup and restore is about to fail.
And because we came from these disciplines, we structure our approaches based on what we were molded from. It?s inevitable and the success of the industry has proven that the model works.
We tend to be precise. We are hardcore when it comes to numbers and, in fact, when the telco bill reaches our desk, we go god-mode and invoke analytics. That?s how we do it. Our bosses require it. Our job depends on it. We take pride in it.
However, by being who we are, we have forgotten to be human beings. I am not criticizing our propensity to be cold-hearted. For sure, there are times that we really need to do a job.
But when I say we have forgotten to be human beings, I mean, in our desire to get the job done, we tend underestimate the importance of people in the pursuit of that transformation.
Transformations entail a lot of FTE rationalization or otherwise knowns as layoffs. The more experienced in our business know that there are a lot of ways to rationalize. We can repurpose or we can rebadge are examples.
Nevertheless, by going through the motions of such rationalization there is a possibility that we lose sight of the people factor of the transformation. You need people to transform. You need people to normalize. You need people to sustain it.
Contrary to conventional thinking in light of the BPO and ITO boom, competencies are not easily commoditized. You outsource because you were successful in dissecting a process and can predict an outcome. People tend to forget the latter. They outsource first then deal with the problems later. Then process hell ensues and the talk to in-house the process again becomes a cafeteria agenda.
When I was with a small company called Intel, we took pride with our concept of operational excellence. We often say that we are not a technology company. We are a manufacturing one. The late great Andy Grove often quipped, jokingly, ?I don?t know why they keep buying our crappy products?.
Andy knows the answer of course because he made sure it was in our brains. The answer was: We are the only ones who can make a million units when you order it. We didn?t just send our lines to subcontractors after a ramp up. Even when the ?lines? are already normalized, sub-contracting was not an automatic step. Why? Because we needed to ensure that we can control or predict the output.
In a transformation, operational excellence should be the goal. Operational excellence is enabled by machines run by people. In a transformation, your IT processes are your lines and the people who man your lines are driving the output which is the value added service you want to talk about when you discuss your appraisal with your boss.
When you lose people because of a transformation, you practically lose the competency you might be needing to normalize and sustain your goal. You don?t want to lose control of the process because the people you needed to ramp it up and be productive are gone.
Worse, and this is one of the costs often overlooked, the amount of resources to rebuild what you lost in competency will end up negating the returns of your transformation. Above that, you will end up doing a mini-transformation within your organization that never stops which in turn gives an impression of cluelessness.
Transformations give anxiety to people and when people are anxious they stop being productive at worst or, at the very least they stop being knowledge workers that you want them to be. They stop being innovative. They leave.
In a transformation I was part of, we lost a few leaders who, if you didn?t read their profiles, you would have just dismissed them as usual turnovers. But we lost a technopreneur; we lost a widely respected former CIO; we lost a top-notch global project manager; we lost a highly respected global IT compliance officer just to name a few. They lost me, too. (Oops, I mean to leave that one out. But you know what I mean).
This leads to a second source of true cost: risk
IT as a profession is like what Moore?s Law would be. To stay relevant, we evolve fast. In the past, our identity as a business function, went from ROI to TCO to value-based metrics. But due to the industry we belong, the need for us to revisit these models became part of our evolution.
Currently, there is a growing appreciation of the concept of ?risk? in IT. Based on experience there are two risks that we should keep an eye on: information risk and business risk. The two are often times interchanged which in most part is okay. However, there are those who treat the former as plain IT security which is a bad idea.
In a digital transformation, information risk management covers compliance but adapts its remediation strategy based on the business risk involve. This is where the cost problem arises.
Often times, security officers focus on a list of what I call the ?scare list? which comprises everything that can happen to your landscape therefore your business. I am not about to dispute that list. As former head of information risk management for UnitedHealth Group and SISO for the Philippines, I practically know most of the items on that list.
But as a former SISO, I will make a minor confession. Sometimes, I exaggerate the ?scare list? to prove a point or just to scare the shit out of an indifferent executive.
With a digital transformation, though, to miss the analysis of the risk can lead to costs that you didn?t expect or pay for something that is not really existing. For the former, a good example is the aspect of data sovereignty. Not at a lot of IT executives know that putting something on the cloud may turn out to be illegal because of an obscure law in some countries.
I, one time, had to work on a carving out of a divested company and had to face a hostile group of executives with two lawyers on their side who are about to slap me with treason for violating their country?s data sovereignty law.
How many of us know that, apparently, Singapore has a law that allows them to look into company data if the need arises? You also don?t to want to pay for something to remediate a risk that does not exist.
One of the things I often use as an example when I teach information security is that the risks involved in companies differ. For example, the risk involving a military contractor is different from a health care facility. There are common denominators but the treatment is different.
Finally, risk management actually leads me to the last point: business need.
Bluntly, ask yourself: Do you really need a transformation? Does your organization need it? Do you want it because your competitor had it? Do you want it because you heard a consultant razzle dazzle you with 30 slides with all the color palettes?
Again, I will cite you an example. One of my former employers, wanting a transformation, once bought a full suite of an ERP that I won?t name because a consultancy firm that I also won?t name convinced them to do so.
This company bought a multi-million dollar solution and the effect was nowhere near with was promised. Why do I say that? Because they don?t have an ERP as they didn?t set up as an honest-to-goodness and by definition, a correct ERP! I don?t mean that their ERP was inefficient. I really mean they don?t have an ERP.
Worse, they wanted to buy the latest one and undergo another transformation. Again full suite. I spoke to the IT executive who was leading it. No, I didn?t want to be disrespectful by asking him a definition of what an ERP is. I explained to him why it might not even a good idea. I told him he is practically upgrading shit. You know what you have if you upgrade shit? Still shit.
They still went ahead with it. Money down the drain. No value. Not even an imagined one. The true cost of that transformation wasn?t the ERP cost. The true cost of that transformation is the missed opportunity to have something of value. By the way, there are a lot of similar horror stories in our midst. Some people are just too shy to tell them.
There. Those are three main true costs of any transformation. To close out, let me share this anecdote:
Remember those times when IT vendor account executives used to sell their products by telling you how much you will save if you use their solution? Some years go, Dr. Craig Barrett, former CEO of Intel, apparently asked his then CIO ?..where is the xx millions of dollars… (we saved because of that solution you bought; where is that in our financial statements?)?
Ask yourself that. Bottomline , you need to ask yourself, do the benefits outweigh the costs? Who knows, the transformation you need may not even be worth it. Standing still might have been a better idea.
Thank you very much. Hope you will enjoy the rest of your day.
The author is an associate professor of information systems at the Graduate School of the University of Santo Tomas. He has held various global leadership roles at Intel, UnitedHealth Group, and LafargeHolcim. Currently, he is a senior consultant for an international consultancy firm based out of Paris, France
