Transforming Mega-Enterprises

The following is an abbreviated version of an article that appeared in the Spring/Summer 2002 edition of CSC World.

Transforming Mega-Enterprises

By Anton Lahnston & Kathleen J. Murphy

Many very large organizations -- what we call mega-enterprises -- have undertaken large systems integration projects over the last several years. Real transformation, however, has often proved to be elusive.

The reason is that change programs face different, more complex challenges in mega-enterprises. We have identified some of the key gaps that impede progress, as well as some of the factors that enable mega-projects to attain their goals.

From IT projects to enterprise projects

A mega-enterprise is distinguished by the fact that it has more business units, more layers, more varieties of governance structures and process approaches operative simultaneously within a single, overarching enterprise structure. The added layers of complexity make real transformation more difficult to achieve.

Although mega-projects initially tend to focus on IT integration, it has been our experience that enterprise transformation is what is needed to fully realize project goals. IT integration involves a radical shift in the IT operating model. In contrast, enterprise transformation requires a radical shift in an enterprise’s mission, operating model, procedures, and practices so as to create a new, more effective way of doing business.

Enterprise transformation is characterized by the speed required to execute the change, the bold leadership needed to mobilize the enterprise, and the discontinuous nature of the resulting change.

Mega-transformation requires a dramatic break from the past. The following factors have proven to make a substantial difference in the velocity and magnitude of the change accomplished and the resulting impact on overall business value.

Four factors that make a difference

Allow enterprisewide mission success to drive the transformation. An IT change program is not just about infrastructure, but also about mission success. Our experience at mega-enterprises has been that focusing on infrastructure and applications modernization never overcomes the typical "silo" resistance to change.

Shifting the focus to the enterprise itself empowers IT change agents to partner with business constituents to achieve both business and systems improvements. Enterprise value is achieved through the judicious alignment of process, organization, people, and technology with overall mission goals. Structuring the change program and managing processes to address the full purpose and intention of the IT integration in accomplishing the enterprise-level mission transforms the very character and quality of change commitment among all stakeholders.

Synchronize the IT operating model with the governance model. Moving a mega-enterprise toward a shared IT infrastructure operating model requires careful coordination across many previously autonomous and independent business groups. Evolving the business governance model requires that core IT change agents respect the prerogatives of business unit leaders. SLAs and pricing negotiations provide a basis for coordinating the interface between business unit and core technologies.

Allowing IT governance to become a shared responsibility between core and business-level IT units enables further synchronization. Consolidating procurement and sourcing practices have proven to play a key role in achieving a successful IT transformation.

Adapt the transformation program content to business entity context. The change agenda forms the transformation content -- the official blueprint of the IT transformation being pursued. Each business entity’s stakeholders, such as shareholders, customers, and government agencies -- how they do things, the way they work, their existing processes and procedures -- form the context of the transformation program.

Each entity’s stakeholders have their own interpretation of what the transformation vision means to achieving their individual entity’s agenda. Addressing stakeholder agendas openly reduces barriers and creates new opportunities to pursue transformation. Adapting a transformation schedule and remedial actions to accommodate and overcome resistance can convert impediments into catalysts for transformation.

Define success by IT impact on business-entity value propositions. Different business areas have different strategic roles and value objectives. Changes to the IT infrastructure or applications can either enhance or impede an entity’s ability to realize business value. Homogeneous change or "one size fits all" solutions rarely serve business area needs. Effective centralized management is only possible when a commitment to collaborate across entity boundaries to achieve measurable enterprisewide results is present.

Each entity may have a unique value proposition. One entity may be working on productivity, which they can maximize through streamlined logistics management; another may need to achieve breakthrough levels of agility to make their organization ready to respond at a moment’s notice. Others may be striving to improve process efficiency and cost control, or pursuing intensive research to sustain differentiation through product, service, and/or process innovation. A project that fails to address these differences will fail to deliver the business value expected.

Differentiate to consolidate

At first glance, this prescription appears paradoxical. We’re asking mega-enterprises to accommodate the different directions in which their constituent entities are moving as the means for ensuring that the enterprise as a whole moves in only one direction. Yet this is very much like what companies already do with their customers.

Successful companies analyze their customers to identify their needs, then differentiate the services they provide customers to retain their loyalty. But when these companies move to a new IT platform or system, they probably require constituent entities to adapt to it rather than adapting it to them. By applying the same kind of differentiation to internally provided services, mega-enterprises will satisfy internal "customers" and gain their loyalty to the overall program.

Anton Lahnston and Kathleen J. Murphy are partners in CSC’s Consulting Group.

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