The Agile Organization

I’ve been meandering through an extended series on digital transformation: why it’s hard, where things go wrong, and what you need to be able to do to be successful. In this post, I intend to summarize some of that thinking and describe how the large enterprise should organize itself to be good at digital.

Throughout this series, I’ve emphasized the importance of being able to make good decisions in the digital realm. That is, of course, the function of analytics and its my own special concerns when it comes to digital. But there are people who will point out  that decision-making is not the be all and end all of digital excellence. They might suggest that being able to execute is important too.

If you’re a football fan, it’s easy to see the dramatic difference between Peyton Manning – possibly the finest on-field decision-maker in the history of the game – with a good arm and without. It’s one thing to know where to throw the ball on any given play, quite another to be able to get it there accurately. If that wasn’t the case, it’s probably true that many of my readers would be making millions in the NFL!

On the other hand, this divide between decision-making and execution tends to break down if you extend your view to the entire organization. If the GM is doing the job properly, then the decision about which quarterbacks to draft or sign will appropriately balance their physical and decision-making skills. That’s part of what’s involved in good GM decisioning. Meanwhile, the coach has an identical responsibility on a day-to-day basis. A foot injury may limit Peyton to the point where his backup becomes a better option. Then it may heal and the pendulum swings back. The organization makes a series of decisions and if it can make all of those decisions well, then it’s hard to see how execution doesn’t follow along.

If, as an organization, I can make good decisions about the strategy for digital, the technology to run it on, the agencies to build it, the people to optimize it, the way to organize it, and the tactics to drive it, then everything is likely to be pretty good.

Unfortunately, it’s simply not the case that the analytics, organization and capabilities necessary to make good decisions across all these areas are remotely similar. To return to my football analogy, it’s clear that very few organizations are setup to make good decisions in every aspect of their operations. Some organizations excel at particular functions (like game-planning) but are very poor at drafting. Indeed, sometimes success in one-area breeds disaster in another. When a coach like Chip Kelly becomes very successful in his role, there is a tendency for the organization to expand that role so that the coach has increasing control over personnel. This almost always works badly in practice. Even knowing it will work badly doesn’t prevent the problem. Since the coach is so important, it may be that an organization will cede much control over personnel to a successful coach even when everyone (except the coach) believes it’s a bad idea.

If you don’t think similar situations arise constantly in corporate America, you aren’t paying attention.

In my posts in this series, I’ve mapped out the capabilities necessary to give decision-makers the information and capabilities they need to make good decisions about digital experiences. I haven’t touched on (and don’t really intend to touch on) broader themes like deciding who the right people to hire are or what kind of measurement, analysis or knowledge is necessary to make those sorts of meta-decisions.

There are two respects, however, in which I have tried to address at least some of these meta-concerns about execution. First, I’ve described why it is and how it comes to pass that most enterprises don’t use analytics to support strategic decision-making. This seems like a clear miss and a place where thoughtful implementation of good measurement, particularly voice-of-customer measurement of the type I’ve described, should yield high returns.

Second, I took a stab at describing how organizations can think about and work toward building an analytics culture. In these two posts, I argue that most attempts at culture-building approach the problem backwards. The most common culture-building activities in the enterprise are all about “talk”. We talk about diversity. We talk about ethics. We talk about being data-driven in our decision-making. I don’t think this talk adds up to much. I suggest that culture is formed far more through habit than talk; that if an organization wants to build an analytics culture, it needs to find ways to “do” analytics. The word may proceed the deed, but it is only through the force of the deed (good habits) that the word becomes character/culture. This may seem somewhat obvious – no, it is obvious – but people somehow manage to miss the obvious far too often. Those posts don’t just formulate the obvious, they also suggest a set of activities that are particularly efficacious in creating good enterprise habits of decision-making. If you care about enterprise culture and you haven’t already done so, give them a read.

For some folks, however, all these analytics actions miss the key questions. They don’t want to know what the organization should do. They want to know how the organization should work. Who owns digital? Who owns analytics? What lives in a central organization? What lives in a business unit? Is digital a capability or a department?

In the context of the small company, most of these questions aren’t terribly important. In the large enterprise, they mean a lot. But acknowledging that they mean a lot isn’t to suggest that I can answer them – or at least most of them.

I’m skeptical that there is an answer for most of these questions. At least in the abstract, I doubt there is one right organization for digital or one right degree of centralization. I’ve had many conversations with wise folks who recognize that their organizations seem to be in constant motion – swinging like an enormous pendulum between extremes of centralization followed by extremes of decentralization.

Even this peripatetic motion – which can look so irrational from the inside – may make sense. If we assume that centralization and decentralization have distinct advantages, then not only might it be true that changing circumstances might drive a change in the optimal configuration, but it might even be true that swinging the organization from one pole to the other might help capture the benefits of each.

That seems unlikely, but you never know. There is sometimes more logic in the seemingly irrational movements of the crowd than we might first imagine.

Most questions about digital organization are deeply historical. They depend on what type of company you are, in what of market, with what culture and what strategic imperatives. All of which is, of course, Management 101. Obvious stuff that hardly needs to be stated.

However, there are some aspects of digital about which I am willing to be more directive. First, that some balance between centralization and decentralization is essential in analytics. The imperative for centralization is driven by these factors: the need for comparative metrics of success around digital, the need for consistent data collection, the imperatives of the latest generation of highly-complex IT systems, and the need/desire to address customers across the full spectrum of their engagement with the enterprise. Of these, the first and the last are primary. If you don’t need those two, then you may not care about consistent data collection or centralized data systems (this last is debatable).

On the other hand, there are powerful reasons for decentralization of which the biggest is simply that analytics is best done as close to the decision-making as possible. Before the advent of Hadoop, I would have suggested that the vast majority of analytics resources in the digital space be decentralized. Hadoop makes that much harder. The skills are much rarer, the demands for control and governance much higher, and the need for cross-domain expertise much greater in this new world.

That will change. As the open-source analytics stack matures and the market over-rewards skilled practitioners – drawing in more folks, it will become much easier to decentralize again. This isn’t the first time we’ve been down the IT path that goes from centralization to gradual diffusion as technologies become cheaper, easier, and better supported.

At an even more fundamental level than the question of centralization lives the location and nature of digital. Is digital treated as a thing? Is it part of Marketing? Or Operations? Or does each thing have a digital component?

I know I should have more of an opinion about this, but I’m afraid that the right answers seem to me, once again, to be local and historical. In a digital pure-play, to even speak of digital as a thing seems absurd. It’s the core of the company. In a gas company, on the other hand, digital might best be viewed as a customer service channel. In a manufacturer, digital might be a sub-function of brand marketing or, depending on the nature of the digital investment and its importance to the company, a unit unto-itself.

Obviously, one of the huge disadvantages to thinking of digital as a unit unto-itself is how it can then interact correctly with the non-digital functions that share the same purpose. If you have digital customer servicing and non-digital customer servicing, does it really make sense to have one in a digital department and the other as a customer-service department?

There is a case, however, for incubating digital capabilities within a small compact, standalone entity that can protect and nourish the digital investment with a distinct culture and resourcing model. I get that. Ultimately, though, it seems to me that unless digital OWNS an entire function, separating that function across digital and non-digital lines is arbitrary and likely to be ineffective in an omni-channel world.

But here’s the flip side. If you have a single digital property and it shares marketing and customer support functions, how do you allocate real-estate and who gets to determine key things like site structure? I’ve seen organizations where everything but the homepage is owned by somebody and the home page is like Oliver Twist. “Home page for sale, does anybody want one?”

That’s not optimal.

So the more overlap there needs to be between the functions and your digital properties, the more incentive you have to build a purely digital organization.

No matter what structure you pick, there are some trade-offs you’re going to have to live with. That’s part of why there is no magic answer to the right organization.

But far more important than the precise balance you strike around centralization or even where you put digital is the way you organize the core capabilities that belong to digital. Here, the vast majority of enterprises organize along the same general lines. Digital comprises some rough set of capabilities including:

  • IT
  • Creative
  • Marketing
  • Customer
  • UX
  • Analytics
  • Testing
  • VoC

In almost every company I work with, each of these capabilities is instantiated as a separate team. In most organizations, the IT folks are in a completely different reporting structure all the way up. There is no unification till you hit the C-Suite. Often, Marketing and Creative are unified. In some organizations, all of the research functions are unified (VoC, analytics) – sometimes under Customer, sometimes not. UX and Testing can wind up almost anywhere. They typically live under the Marketing department, but they can also live under a Research or Customer function.

None of this, to me, makes any sense.

To do digital well requires a deep integration of these capabilities. What’s more, it requires that these teams work together on a consistent basis. That’s not the way it’s mostly done.

Almost every enterprise I see not only siloes these capabilities, but puts in place budgetary processes that fund each digital asset as a one-time investment and which requires pass-offs between teams.

That’s probably not entirely clear so let me give some concrete examples.

You want to launch a new website. You hire an agency to design the Website. Then your internal IT team builds it. Now the agency goes away. The folks who designed the website no longer have anything to do with it. What’s more, the folks who built it get rotated onto the next project. Sometimes, that’s all that happens. The website just sits there – unimproved. Sometimes the measurement team will now pick it up. Keep in mind that the measurement team almost never had anything to do with the design of the site in the first place. They are just there to report on it. Still, they measure it and if they find some problem, who do they give it to?

Well, maybe they pass it on to the UX team or the testing team. Those teams, neither of which have ever worked with the website or had anything to do with its design are now responsible for implementing changes on it. And, of course, they will be working with developers who had nothing to do with building it.

Meanwhile, on an entirely separate track, the customer team may be designing a broader experience that involves that website. They enlist the VoC team to survey the site’s users and find out what they don’t like about it. Neither team (of course) had anything to do with designing or building the site.

If they come to some conclusion about what they want the site to do, they work with another(!) team of developers to implement their changes. That these changes may be at cross-purposes to the UX team’s changes or the original design intent is neither here nor there.

Does any of this make sense?

If you take continuous improvement to heart (and you should because it is the key to digital excellence), you need to realize that almost everything about the way your digital organization functions is wrong. You budget wrong and you organize wrong.

[Check out my relatively short (20 min) video on digital transformation and analytics organization – it’s the perfect medium for distributing this message through your enterprise!]

Here’s my simple rule about building digital assets. If it’s worth doing, it’s worth improving. Nothing you build will ever be right the first time. Accept that. Embrace it. That means you budget digital teams to build AND improve something. Those teams don’t go away. They don’t rotate. And they include ALL of the capabilities you need to successfully deliver digital experiences. Your developers don’t rotate off, your designers don’t go away, your VoC folks aren’t living in a parallel universe.

When you do things this way, you embody a commitment to continuous improvement deeply into your core organizational processes. It almost forces you to do it right. All those folks in IT and creative will demand analytics and tests to run or they won’t have anything to do.

That’s a good thing.

This type of vertical integration of digital capabilities is far, far more important than the balance around centralization or even the home for digital. Yet it gets far less attention in most enterprise strategic discussions.

The existence or lack of this vertical integration is the single most important factor in driving analytics into digital. Do it right, and you’ll do it well. Do what everyone else does and…well…it won’t be so good.