Digital transformation
Engineering culture is a key pillar of modern digital businesses
As we continue to weather the impacts of the COVID-19 crisis, organisations’ resilience and their ability to adapt to and navigate new realities have become more important than ever. Nevertheless, the relevance of resilience in the business and technology agenda is not new, it had actually been gaining momentum for quite a while, particularly in the face of heightened market volatility and increasingly widespread cyber attacks. In fact, at the start of this year, weeks before the coronavirus started making headlines, we kicked off discussions around the concept of operational resilience, which had become prevalent in much of the financial services sector literature.
Towards the end of 2019, the Financial Conduct Authority, Prudential Regulation Authority and the Bank of England released a consultation paper on new requirements to strengthen operational resilience in financial services, and consultancies including Deloitte and PWC published their own outlooks on the subject. Operational resilience was looked at as the organisations’ ability to protect and sustain their core business, both during business as usual and, more importantly, when experiencing stress, challenge and disruption. In the financial world, this meant that organisations were asked to identify their core business services; map the people, processes and technology required to deliver them; set their impact tolerance; and test and demonstrate their ability to respond and recover from disruption. The idea was to get financial services organisations to think about the impact of disruption, not just on their own results but on the wider financial system.
While all this was being studied from an industry perspective, to increase prevention and better position the sector ahead of the next crisis, it became clear to us that the concept could (and should) be considered cross-sector. Organisations of every size, across every vertical, face perpetual market upheaval — the rapid change in technology, new regulation, shifting consumer mindsets, new market entrants, more sophisticated cyber attacks — you name it. Dynamic change is the only constant in the world we live in.
We also considered widening the perspective of operational resilience, to look at it as an organisation’s ability not just to protect their core services, but to rapidly adapt to make the most of disruption. Beyond mitigating or avoiding a threat, we wanted to encourage business leaders to consider the approach of reorganising their operating models to face into threats and turn them into opportunities or accelerators, turning change into a source of competitive advantage, leveraging shifting dynamics to lay a foundation for future growth — generating value from volatility.
Little did we know when we were having these discussions, that the world would be shaken by the largest crisis in modern times, and this ability to remain resilient in the face of adversity would become so crucial. COVID-19 has brought about an array of drastic changes: a remote workforce, a purely online restricted consumer, financial strain, unreliable business forecasting, more regulatory scrutiny, the need to seek new revenue streams...
And though it is true that certain industries will be hit harder, this crisis is a resilience test across the board, whether you’re a grocer facing unprecedented demand or an airline seeing its operations halted. And not just in the short-term. In the long-run, once we emerge from enforced social distancing and countrywide lockdowns, those organisations that are quick to adapt and make the most of the new market landscape will come out on top.
In our experience, adaptive (and resilient) organisations have a clear purpose and accept everything else is fluid. It’s important for business leadership to set an overall vision (and then strategy), not based on a particular product, project or performance measure, but on the outcomes they’re aiming to deliver for customers. By establishing the what but not the how, they allow teams much closer to the action (and to the customer) to determine the way in which those outcomes can be best achieved. This gives teams autonomy and accountability, and the ability to swiftly adapt to shifts in customer needs and expectations.
This is crucial, not just throughout this unpredictable, fast-moving crisis, but more generally in any type of unforeseen event or disruption. Organisations need to be nimble and give their workforce the flexibility and autonomy to launch decentralised initiatives where necessary, reframe plans and models on an ongoing basis, re-prioritise plans and shift operations. The same applies in post-disruption times; when the time comes to navigate new realities, a customer outcomes-based strategy is key to guiding changes in product portfolios and offerings, sales channel mix and the relocation of labour to new activities.
And this has various technology capabilities implications. To really make the most of change and volatility, organisations need to make adjustments, often painful ones. These range from breaking down barriers across functions, to creating an engineering culture and empowering teams with readily available consumer and operational data to enable better, faster decision-making. They also include building a robust, versatile technology platform capable of small-scale experimentation and developing new products and services in a ‘plug and play’ manner.
In fact, feedback from China Merchant Bank, one of our largest customers in Thoughtworks China, which is starting to see the other side of the COVID pandemic, highlighted the importance of a solid, flexible digital platform. "One of our biggest learnings from this health crisis is that creating a robust digital platform has been crucial to our ability to continue to deliver; enabling seamless collaboration and integration across teams," says Zhanwen Chen, China Merchants Bank.
The fundamental point is that any initiative to deliver these technology capabilities (or any transformation, digitalisation or technology undertaking) must be governed by the customer value-add vision and purpose. Many organisations focus their transformation efforts on a desired end state as opposed to an ongoing process, putting together a tick box list of technology projects in response to changes that have often already come and gone. There’s an important distinction between responsiveness and adaptiveness: resilient organisations don’t just respond, they don’t deal with change as a game of catch-up to market shifts, they adapt, they bend without breaking, taking innovative approaches to deliver that customer value vision.
The current crisis is showing how some organisations that embarked on transformation projects with a clear aim to deliver customer value are already seeing the fruits of their labour. Take the example of Ikea China. Incredibly successful across the world with a brick-and-mortar-first business model, Ikea started investing in digitisation projects in China in 2018 by launching their website and delivery services. This was a move to widen their reach to less accessible locations in the country and to offer a wider range of products to their customer base. As part of this journey, in January 2020 they launched their first mobile app. When the crisis hit less than a month later, their relatively new website and their brand new app became crucial as their physical stores were shut. They were ahead of the curve by proactively looking into new ways of delivering consumer value, and it worked out in their favour when the crisis shook the high street.
That being said, there is no denying that the next few months will continue to challenge businesses across the board, with some industries inevitably experiencing a much harder impact. Through these difficult times, it’s critical for business leaders to maintain a dual focus of crisis response and post-crisis planning. Taking into consideration the time it takes to formulate and communicate strategy, organisations need to start thinking about recovery planning and putting in place the right capabilities for their teams to be best equipped to grapple with post-pandemic changes while they are still reacting to the crisis. Some Chinese organisations encouraged their underutilised workforce to use their time to upgrade their technology, enhance their skills, and develop new service lines, which put them in a much better position as they started to emerge from the crisis.
These are certainly difficult times, but we truly believe adversity presents organisations with a great chance to adapt and create the space to allow innovation to occur, to boost creativity and to find opportunities in new realities. As we begin to navigate a post-pandemic world, it will be important for organisations to share learnings and best practices. We are planning to explore this topic further at our upcoming Thoughtworks Live UK online event in September, discussing how to make the most of volatility and sharing our experiences of building enterprise resilience by helping organisations across the globe become adaptive and nimble.
Towards the end of 2019, the Financial Conduct Authority, Prudential Regulation Authority and the Bank of England released a consultation paper on new requirements to strengthen operational resilience in financial services, and consultancies including Deloitte and PWC published their own outlooks on the subject. Operational resilience was looked at as the organisations’ ability to protect and sustain their core business, both during business as usual and, more importantly, when experiencing stress, challenge and disruption. In the financial world, this meant that organisations were asked to identify their core business services; map the people, processes and technology required to deliver them; set their impact tolerance; and test and demonstrate their ability to respond and recover from disruption. The idea was to get financial services organisations to think about the impact of disruption, not just on their own results but on the wider financial system.
While all this was being studied from an industry perspective, to increase prevention and better position the sector ahead of the next crisis, it became clear to us that the concept could (and should) be considered cross-sector. Organisations of every size, across every vertical, face perpetual market upheaval — the rapid change in technology, new regulation, shifting consumer mindsets, new market entrants, more sophisticated cyber attacks — you name it. Dynamic change is the only constant in the world we live in.
We also considered widening the perspective of operational resilience, to look at it as an organisation’s ability not just to protect their core services, but to rapidly adapt to make the most of disruption. Beyond mitigating or avoiding a threat, we wanted to encourage business leaders to consider the approach of reorganising their operating models to face into threats and turn them into opportunities or accelerators, turning change into a source of competitive advantage, leveraging shifting dynamics to lay a foundation for future growth — generating value from volatility.
Little did we know when we were having these discussions, that the world would be shaken by the largest crisis in modern times, and this ability to remain resilient in the face of adversity would become so crucial. COVID-19 has brought about an array of drastic changes: a remote workforce, a purely online restricted consumer, financial strain, unreliable business forecasting, more regulatory scrutiny, the need to seek new revenue streams...
And though it is true that certain industries will be hit harder, this crisis is a resilience test across the board, whether you’re a grocer facing unprecedented demand or an airline seeing its operations halted. And not just in the short-term. In the long-run, once we emerge from enforced social distancing and countrywide lockdowns, those organisations that are quick to adapt and make the most of the new market landscape will come out on top.
In our experience, adaptive (and resilient) organisations have a clear purpose and accept everything else is fluid. It’s important for business leadership to set an overall vision (and then strategy), not based on a particular product, project or performance measure, but on the outcomes they’re aiming to deliver for customers. By establishing the what but not the how, they allow teams much closer to the action (and to the customer) to determine the way in which those outcomes can be best achieved. This gives teams autonomy and accountability, and the ability to swiftly adapt to shifts in customer needs and expectations.
This is crucial, not just throughout this unpredictable, fast-moving crisis, but more generally in any type of unforeseen event or disruption. Organisations need to be nimble and give their workforce the flexibility and autonomy to launch decentralised initiatives where necessary, reframe plans and models on an ongoing basis, re-prioritise plans and shift operations. The same applies in post-disruption times; when the time comes to navigate new realities, a customer outcomes-based strategy is key to guiding changes in product portfolios and offerings, sales channel mix and the relocation of labour to new activities.
And this has various technology capabilities implications. To really make the most of change and volatility, organisations need to make adjustments, often painful ones. These range from breaking down barriers across functions, to creating an engineering culture and empowering teams with readily available consumer and operational data to enable better, faster decision-making. They also include building a robust, versatile technology platform capable of small-scale experimentation and developing new products and services in a ‘plug and play’ manner.
In fact, feedback from China Merchant Bank, one of our largest customers in Thoughtworks China, which is starting to see the other side of the COVID pandemic, highlighted the importance of a solid, flexible digital platform. "One of our biggest learnings from this health crisis is that creating a robust digital platform has been crucial to our ability to continue to deliver; enabling seamless collaboration and integration across teams," says Zhanwen Chen, China Merchants Bank.
The fundamental point is that any initiative to deliver these technology capabilities (or any transformation, digitalisation or technology undertaking) must be governed by the customer value-add vision and purpose. Many organisations focus their transformation efforts on a desired end state as opposed to an ongoing process, putting together a tick box list of technology projects in response to changes that have often already come and gone. There’s an important distinction between responsiveness and adaptiveness: resilient organisations don’t just respond, they don’t deal with change as a game of catch-up to market shifts, they adapt, they bend without breaking, taking innovative approaches to deliver that customer value vision.
The current crisis is showing how some organisations that embarked on transformation projects with a clear aim to deliver customer value are already seeing the fruits of their labour. Take the example of Ikea China. Incredibly successful across the world with a brick-and-mortar-first business model, Ikea started investing in digitisation projects in China in 2018 by launching their website and delivery services. This was a move to widen their reach to less accessible locations in the country and to offer a wider range of products to their customer base. As part of this journey, in January 2020 they launched their first mobile app. When the crisis hit less than a month later, their relatively new website and their brand new app became crucial as their physical stores were shut. They were ahead of the curve by proactively looking into new ways of delivering consumer value, and it worked out in their favour when the crisis shook the high street.
That being said, there is no denying that the next few months will continue to challenge businesses across the board, with some industries inevitably experiencing a much harder impact. Through these difficult times, it’s critical for business leaders to maintain a dual focus of crisis response and post-crisis planning. Taking into consideration the time it takes to formulate and communicate strategy, organisations need to start thinking about recovery planning and putting in place the right capabilities for their teams to be best equipped to grapple with post-pandemic changes while they are still reacting to the crisis. Some Chinese organisations encouraged their underutilised workforce to use their time to upgrade their technology, enhance their skills, and develop new service lines, which put them in a much better position as they started to emerge from the crisis.
These are certainly difficult times, but we truly believe adversity presents organisations with a great chance to adapt and create the space to allow innovation to occur, to boost creativity and to find opportunities in new realities. As we begin to navigate a post-pandemic world, it will be important for organisations to share learnings and best practices. We are planning to explore this topic further at our upcoming Thoughtworks Live UK online event in September, discussing how to make the most of volatility and sharing our experiences of building enterprise resilience by helping organisations across the globe become adaptive and nimble.
Disclaimer: The statements and opinions expressed in this article are those of the author(s) and do not necessarily reflect the positions of Thoughtworks.
