Lateral leadership in the digital transformation

Lateral leadership in the digital transformation

Do we actually still need leaders in times of digitalization? In recent years, we heard many voices calling the end of the hierarchy. One reason for this is the rising speed of technological progress, wherefore, those who have the expertise should make the decisions. We are living in a know-how economy. The average level of education has increased over the decades. Experts have gained more power within the company because they get more job offers from competitors. Whether a person with certain know-how feels comfortable in the organization or not has to do a lot with the leadership culture. Good arguments should prevail. If a leader shows off his hierarchical power, the willingness of the expert to leave the job increases. The impact of decisions can also be much easier and faster evaluated since most relevant information is available within a click on the internet.

Nevertheless, hierarchical leaders don’t need to be afraid that they will die out like dinosaurs one day. This has good reasons:

  • Managing directors have legal responsibilities and have to delegate some of them. In the case of a work accident or insolvency, it is the responsibility of the top management to deal with it and not the responsibility of the experts.
  • The hierarchy also has an important efficiency function, which is: resolving stalemate situations. Probably most of us know similar situations: different opinion-makers repeat their points of view and arguments but do not adequately respond to the arguments of the others. As a consequence, not only valuable time passes but also the working climate gets worse in protracted stalemate situations. Maybe both approaches could work well, maybe it’s just that different values and personalities clash together. The more complex our world becomes, the more likely, decision-making processes can turn in circles. In this case, it is the task of the line manager to bring about a decision or to make the decision himself/herself.
  • The leaders who are legitimized by the owners tend to be responsible for the corporate strategy as well. If employees from as many levels as possible are involved, there is a higher change of identification but the leaders must coordinate this process. In some cases, they even have to give clear instructions: for example if the employee and company goals do not match when it comes to change processes.
International leadership development

In some situations, a hierarchical leader is needed, for instance in stalemate situations. In this case, the leader has to facilitate the decision-making process or make decisions herself/himself.

 

Although lateral leadership is on the rise, it still needs both leadership approaches. How many consistently democratic company government systems (e.g. holacracy) have survived for more than 10 years? Very hierarchically organized companies are currently not in the winning position either. The right balance seems to count. And what representatives of situational leadership have said for a long time already, it depends on the specific situation.

O’Reilly III and Tushman went in a similar direction with the ambidextrous idea: Businesses are facing two quite different challenges during the digital transformation:

  1. To disrupt themselves through innovation and thus avoid being disrupted by others and
  2. as soon as the innovation arrives in continuous implementation, ensure that the relevant processes fit and are actually being lived.

Innovation management needs more lateral leadership, while process management needs more of hierarchical leadership. However, when processes are being defined and continuously improved, it takes again the input of many, especially from the people who work with it on a daily basis. In that case, lateral leadership can help. Even the control of the implementation of processes can be mostly done by transparent self-monitoring, for instance using KPI boards. On the other hand, it is also helpful for the innovation management if the company or the divisional management set strategic guidelines to move the development in the direction of the company’s vision.

Summary: We can say that the right balance between lateral and hierarchical leadership increases the probability that the best solutions prevail, that the employees are happy to participate which in combination usually leads to business success.

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Transparency, Iteration and Empowerment – The 3 principles behind agile tools

Transparency, Iteration and Empowerment – The 3 principles behind agile tools

The jungle of agile methods is so big that you can easily get lost in it. Some methods such as Scrum, Design thinking, OKR are better known and used more often. But here, too, companies experience that complete introduction of e.g. Scrum is associated with too much set of rules for some employee groups and therefore is impractical. To achieve quick wins, it would be helpful to know and apply the principles behind it.

So, we got down to work at MDI to filter out the principles behind the main agile methods. We came across 3 main principles: Transparency, iteration, and empowerment (TIE)

Behind each lie a few detail principles:

 

Transparency:

  • Visualization and if possible making it tangible
  • Simplicity and standardization in the method

 

Iteration:

  • Early and continuous delivery
  • Experimenting is more important than detailed planning
  • Frequent evaluation and incremental solution development
  • Short work cycles (time-boxed) and prototyping
  • Fail fast to succeed sooner
  • Lean management and continuous improvement

 

Empowerment:

  • Lateral leadership is more important than hierarchical guidance
  • intrinsic instead of extrinsic motivation
  • focus on the purpose
  • Multidisciplinary team focus instead of lone fighters
  • Interactivity

The 3 principles behind agile tools – empowerment, iteration & transparency can be a good starting point for successfully managing your way through the agile jungle

Many companies are agile in their corporate culture. The 3 Principles (TIE) are a good starting point to tie an agile leadership and corporate culture. As a check-in we can start with a position determination in which we ask ourselves as a person/ team/organization the following questions:

 

How transparent are we?

  • Can e.g. everyone in the company see the goals and goals achievement of everybody else including the CEO?
  • Is there clear visibility on which projects are currently being worked on and does everybody have the opportunity to provide input?
  • Do we have clear internal processes for structuring everyday business? (e.g. Kanban Board, Daily Stand-Ups, Meeting Structure, …)

 

How iterative do we proceed?

  • Do we first want a perfect solution before we show it to the customer or is the (internal or external) customer regularly involved in the development of the solution?
  • Do we make regular interim evaluations?
  • Are we open to adapting our solution to changing requirements during the process?

 

How much empowerment do we allow?

  • Is our leadership more based on convincing and commitment, or hierarchical authority?
  • Are our employees motivated by autonomy, mastery, and purpose (DRIVE)?
  • Are our teams organized in an interdisciplinary and autonomous way to work as efficiently as possible on a project?

 

In addition, we can use these main principles to make the training and development concept of a company fit for digital transformation. By e.g. evaluating if and how these principles are currently used in the

  • Competency Model
  • leadership and cooperation principles/rules of play
  • and possibly even in company values.

 

If e.g. an automobile producer defines himself by perfection and thus needs long innovation cycles, it will make sense to consider to what extent iteration should replace the delivery of perfect solutions.

Or if confidentiality plays a central role in the financial service, then it might make sense to create a culture of transparency in at least some areas, where e.g. MbO is replaced by OKR (insert link to past blog).

As a third example, let’s take a look at retail: Here, in many businesses, it is common for a small number of head office employees to define the processes and rules for many thousands of employees in the stores. A shift towards empowerment means at least interaction on eye-level and a much greater involvement of employees at the point of sale.

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The agile transformation at MDI

At the beginning of 2017, we started to implement agile methods at MDI. The first method we introduced was the agile goalsetting system OKR (Objective and Key Results). Since then, we tried out many other agile methods and learned many new things. Being inspired by the story map of HR Pioneers, we as well visualized a “Change journey map” and looked back on almost two years agile leadership at MDI.

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Agile transformation – our experience at MDI

Agile transformation – our experience at MDI

The whole agile leadership idea is based on the observation, that accelerated change is the norm. What does that mean for change management? The classical concepts of Kübler-Ross (change curve) and Kotter (8 steps model) are still a good inspiration to describe what happens in change and what to do, but perhaps not sufficient to deal with agile transformation.

Agile transformation usually means that a whole company or business unit is becoming agile. Many companies are striving for that. There are 2 main approaches: Big bang and incremental.

Paypal is an example for a successful big bang transformation moving 510 cross-functional teams from waterfall to agile within less than a year. They moved from project-driven to product-line discipline in order to develop clear accountability and intense customer focus. Productivity and profitability rose significantly.

Most companies go for incremental, which can also work fine. It depends on how big is the urge for change and on the organizational interdependencies. If e.g. agile teams depend on waterfall teams and the delivery does not work smoothly, it might be better to change the approach in the whole business unit at the same time. Incremental is already an agile principle and it is better to start somewhere in the organization than to postpone to a future far away.

As I only want to write about things, that I have personal experience with, I want to share our own agile transformation story. I am the CEO of MDI – Management Development International. MDI provides leadership development solutions. In 2016 we have been invited to support the implementation of OKR (objectives and key results) in an international top brand company with approx. 300.000 employees. We decided to introduce OKR to our own company with about 40 employees and 150 freelance trainers first.

This was like a domino stone falling and generating a chain reaction. We decided to also implement a rolling budget, changed to a customer-centric team structure, adjusted our mission and vision statement and started to try out one agile method after the other. Some stayed one time experiences and others became routine and part of the company DNA.

After a while, we thought it would be helpful to have an overview of what we are doing in which areas, in order to develop in a balanced way. Being inspired by the Story map of HR Pioneers*, we visualized a “Change journey map”:

Agile transformation at MDI

This Change journey also helps to

  • become aware of the progress in the phases of agile transformation and motivates to continue
  • find the right balance between day to day business and investment in the agile transformation
  • decide what you want to try out once and what you want to make a routine.

We are aware, that there is a long way to go for us and that there will never be an end, as the digital evolution continues to speed up. But the Change journey overview helps to be in the frontline of digital disruption.

*Informatik aktuell Sept 2017, Hendericks

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Why – The core changes of digital disruption

Why – The core changes of digital disruption

Digitalization is a global mega trend that forces almost all companies to change significantly. But what are the main characteristics of those changes around us? If we understand better, what is changing in our environment, we have higher chances to work on the right adjustments within the organization in order to reach a better fit with the environment.

The starting point is technological progress: Binary code, microchip, internet, big data, internet of things, artificial intelligence, physical products (combi of digital and reality), intelligent personal assistants etc. have and will continue to change our day to day life.

This technological progress led to some main changes in how we work and live together. On the basis of Khan’s* work we identified 6 core changes:

  1. Interconnectedness
  2. Abundance of information
  3. Increased complexity
  4.  Increased transparency
  5.  Less hierarchical, more empowerment
  6. Man Machine cooperation

     


1. Interconnectedness

 

Billions of smartphone users can interact with each other without time delay. Experts are forming worldwide research networks, crowdsourcing allows to receive many ideas, financial resources etc. with little cost and time investment.

 

2. Abundance of information

 

It can be a blessing and it can be a curse. We can access most relevant info in our vicinity or from the other side of the world. Some people rather look at their Smartphone in order to see, how the weather is than looking outside the window. Highly paid software developers are pretty good in seducing us to spend more and more time with applications and to activate the push notifications.

 

3. Increased complexity

 

With the increased speed of change and more and more people sharing the same space, complexity goes up. In most cases, organizations need to increase internal complexity in order to get along with external complexity. E.g. a retail has to build up an online shop and blend the physical and online world, find a way to balance classical retail management with the agile world of online development …

speed of change in the digital disruption

With the increasing speed of change, the complexity goes up as well

4. Increased transparency

 

Nowadays it is very difficult to keep a higher level of privacy. Cameras everywhere in the city, iPhone search function, Google earth, Facebook etc. make our day to day life very transparent. If somebody wants to find out, whether the spouse has an affair, this should not be too difficult anymore 😉. At the same time, you can run a business on other continents with e.g. using Google docs, Yammer, Trello and many other kinds of cloud software.

 

5. Less hierarchical, more empowerment

 

In a knowledge economy, people want to have a say. And they also need to be empowered to make decisions close to the client or the technical challenge. Hierarchy is too slow. Laloux’s reinventing organizations, holocracy, lateral leadership etc. point at democratic alternatives. Hierarchy loses influence but will not fade totally.

 

6. Man-machine cooperation

 

Anorganic entities with some digital steering (programs, bots, robots) and humans work side to side. We find thousands of example in industry, medicine, business, travel etc.

In the metaphor of the Disruption Surfer, these 6 core changes describe, what the waves are made of. Each wave is unique. Nevertheless, waves have common patterns. If we know how to read them, we will be successful in picking and surfing the next wave.

 

Article written by Dominik Etzl und Gunther Fürstberger

*Shayan Khan/Tikkanen (Stockholm Business School 2016)

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Implementation of OKR – Experience report from a CEO

Implementation of OKR – Experience report from a CEO

Experience report from Mag. Gunther Fürstberger, CEO of MDI Management Development International.

At the end of 2016, a big car manufacturer invited us to help with the implementation of the OKR system – objectives and key results. It is important to us that our work is based on personal experiences. Therefore I decided to implement OKR at MDI from the beginning of January 2017.

2016 was not a very successful year for us anyway. We did not achieve our sales target and had a higher staff turnover than wanted. Responsibilities were not clear, employees were overstrained, the productivity was decreasing, the conflict culture was aimed at prevention and the management was not very happy about that.

Together with OKR, we introduced a new team structure and a rolling budget. The new team structure contributed to the reduction of complexity as it reduced the number of contact persons for the employees and trainer at MDI. The “rolling budget forecast” helped us to get rid of this rigid annual plan, which is usually out-of-date after the first quarter already. It gives us the possibility to adapt our resources to current developments.

At the same time, there are different kinds of views on the realization of OKR. I opted for an agile 80% approach: even though not everything was prepared yet, we started nevertheless. I visited a one-day-seminar, watched a series of YouTube videos, for instance about the implementation at Google, and defined some important cornerstones to start with the implementation of the OKR system.

Levels:

  1. Organization level,
  2. Individual OKR’s with the people who report to the managing level,
  3. Individual OKR’s of all other employees with their executives

Amount of the objectives: 3 – 5 objectives, max. 4 key results per objective

Ambition: achievement of objectives: 70%

Transparency: Google document and a poster with all the OKR’s in our kitchen: everyone can see each other’s OKR’s and grading, as well the achieving objects of the management.

Frequency: every quarter

All hands OKR meeting

Monthly meetings give employees the chance to talk about their individual objectives and to see where everybody stands at the moment

Meeting structure

 

OKR meeting:
  • Frequency: every quarter
  • When? Just before the new quarter starts (4th Thursday before the end of the quarter)
  • Duration: 6h meeting (from 10 am – 5 pm with a lunch break)
  • Purpose: to assess the company’s OKR’s from the quarter and define new ones
  • Who: one representative of all divisions: all in all 6 people

 

All hands meeting:
  • Frequency: monthly
  • When: 4th Thursday of a month at 10 am.
  • Duration: 30 minutes
  • Purpose: every employee talks about their OKR’s and where they stand at the moment
  • Who: every employee

 

Individual OKR meetings:
  • Frequency: every quarter
  • When: last week or first week of the quarter
  • Duration: 1h
  • Purpose: check and definition of your personal OKR‘s
  • Who: every employee with his/her executive

 

Jour Fixe:
  • Frequency: every or every second week
  • When: agreed individually
  • Duration: 30min
  • Purpose: check of the OKR’s and support for your everyday working life
  • Who: every employee with his/her executive

In December I wrote a temporary strategy for 2 years and invited the representatives from the most important divisions at MDI to the first company OKR meeting. We did not have an OKR-master back then (role as driving force, meeting moderator), therefore I was the presenter of the first meeting.

The meeting was planned to last 6h and we needed every single minute but we achieved quite a lot in the end:

  • We had one “volunteer” who wanted to take over the role of the OKR-master
  • We worked together on a concept “how OKR should look like at MDI”
  • We defined 4 objectives with each 4 key results
  • About 60% of the final OKR’s were suggestions from the team, the rest was suggested by the management

Even though we were quite exhausted afterwards, we were convinced that the OKR’s can help us to focus on the essential things. We put a poster in our kitchen with the OKR’s, which we wrote down on 4 flipcharts, our mission-vision-value-statements and our 2 years strategy. From January on we started with our individual OKR meetings. We only had one hour to define individual objectives but it worked out in the end.

To set priorities and to formulate ambitiously, measurable key results was quite an effort but saved us valuable time in the end because we knew exactly what our focus was.

We wanted to know more about OKR and therefore our OKR master attended a 3-day OKR-master-training at another institute and came back with a lot of new ideas.

Some of them were for instance:

  • A preparation template for the “all hands meetings” to increase their relevance.
  • Team OKR’s instead of individual OKR’s for every employee
  • Starting with the second quarter, we defined 3 objectives with each 3 key results instead of 4 objectives and 4 key results.

My colleague will explain more about this in another blog article.

Current results evaluation:

It looks like 2017 is going to be the best year in the company’s history. The incoming orders rose by 26% compared to the previous year. The profit has more than doubled and the staff turnover has decreased. However, the challenge now is the expansion and development of the team to keep up with the current growth. Let’s see how the journey continues.

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