What is transformation? Why is it important? How do we lead transformation efforts?
Last Friday, I attended the CSHSMD conference in Charlotte where David Grandy, a leader in Kaiser Permanente’s Office of Transformation, spoke on just that.
He used the example of Netflix and their transformation from a mail-order DVD business to a sophisticated digital and analytics company over two decades. In the first decade, it built a successful logistics and distribution business. In the second, it used all the data it had collected on customers during the first ten years and became a successful digital company.
Two key lessons during this twenty year period.
Transformation takes time.
And funding.
To improve the known and invent the new, it’s necessary to start early. You have to simultaneously keep the lights on and create the new.
Everyone thinks transformation happens overnight.
But it doesn’t.
Business model transformation requires time. And a lot of it. At the same time that you’re preserving the core and delivering better, faster and cheaper, you’re also developing new products, services and channels.
It takes courage, vision and persistence. It sometimes requires retiring what doesn’t work. It takes courage to divest. New things eat old things, which open up new market opportunities. It requires having a clear, compelling long-term vision. When we focus exhaustively on the near-term, we can’t focus at all on the long-term.
And for this reason, it’s important to have transformation work be independent, but connected. While production work happens in the core, transformation work happens in teams that are positioned far enough from the core to overcome resistance. Additionally, transformation work should take a portfolio management approach. Much like VC models, it spreads the risk and creates an environment for ideas and projects to be tested, iterated and incubated.
And finally, transformation takes money. And a lot of it. Most importantly, funding must be in place from day 1 to fund all phases – the speculative and visioning, the proof of concept, and the enterprise development and scale. Otherwise, you end up with a bunch of pilots. And no one wants that. Similar to the work itself, funding must be independent, but connected. Transformation can’t be funded from the same budget as improvement projects. Having a dedicated funding source helps correct for the inevitable competition between improving the known and inventing the new.
Is it worth it? Absolutely. Transformation can be a growth and differentiation engine. And one could argue that, in many cases, it’s necessary for survival. It’s also fun and when successful, can bring about large sweeping changes that build social structures and prompt collective action towards a greater good.