Tuesday, 5 August 2014

When designing an operating model for digital, keep an eye on your cadence

A non-trivial amount of the work we do in Digital Strategy at the moment is focused on the design of digital operating models. I don’t particularly like the name, but the sentiment is about designing a business fit for the New Machine Age. As I’ve mentioned before, this philosophically means that it ultimately needs to become outcome- rather than process-centric. Making that happen means applying some new organisational and operational concepts to the business, one of which is an idea we’re beginning to talk about a lot: cadence.

Cadence basically means the rate at which you do things. Businesses always have them. They’re part of the culture. In a PLC, they are quarterly to match the reporting cycle. In the public sector they’re often annual. In digital startups they could be as fast as weekly, to correspond with the tempo of an agile delivery ethos. Usually though a business has a natural speed and struggles to operate outside of it. The public sector struggles to act outside of the annual plan; startups struggle to think even as far ahead as a year.

This is problematic because even if you are able to design work to have the right combination of people, the processes that surround the work operate at the typical speed (and thus precision and robustness) of the rest of the business. So the formal or ad-hoc design of the route to an outcome is compromised.

What we do to solve this issue is pretty self-explanatory. We build teams that are designed to operate at a particular cadence, then we build functions around them that are designed to operate around them at that cadence, so that the finance and procurement teams that surround an agile digital development team can operate at the same rate rather than trying to cram a monthly or weekly request for resources into an annual budgeting process. This is a development of something I’ve talked about here before – the necessity to break up functions like finance and HR into their functional components, rather than assuming that because they deal with ‘money’ or ‘people’ they should all have the same reporting line.

Clearly you can’t have endless fragmentation of speeds. Two or three is probably right to start with. We usually go for something annual to deal with things like infrastructure; something monthly to deal with iteration of the business and the build of new initiatives at a relatively small scale (this is the majority of the business) and then something multi-annual that looks at the horizon for new innovations, acquisitions, strategic repositions and the like. The latter is important as my observation of my clients is that many have lost the ability to do real strategy as the requirements to report to markets and create financial plans have grown.

Which brings me to another cadence-related issues. The need to produce anodyne quarterly reports for investors is a costly and disruptive blight on listed businesses. Perhaps we’d be better moving to a world where businesses are transparent about their numbers to their investors on a daily basis (letting them know as they do so that there is a degree of imprecision in the numbers) and that they’ll reconcile everything annually?

Controversial, I know… we’re probably not adult enough as an industry to adopt it. Ah well.