By Gary O'Brien, Thoughtworks Digital Transformation Director
The digital divide has become blindingly obvious in this COVID era. Technology-driven organizations found it much easier to adapt; they moved quickly as part of a nimble network, and identified unmet needs and new ways to create value. These organizations were already optimized for continual transformation. And they will be the ones that survive and thrive in the future.
In my first two articles on the evolutionary organization (see Part 1 and Part 2), I explored similarities between the theory of natural evolution and the principles of transformational change in business. The characteristics of successful businesses have evolved, and many of those traits are being handed down through mutations of emerging business models. Tech-enabled ecosystems may well become the common ancestor for the next generation of transformational organizations.
COVID has also created a catalyst for organizations to wipe the slate clean and leave behind old behaviors and structures that no longer serve us. This creates a unique opportunity for any business, regardless of tenure or legacy platforms and processes, to become an evolutionary organization.
It’s a moment in time we cannot ignore — a chance to completely redesign our operating models to lean into constant change. If you’re ready to embark on this journey, start by taking these three steps.
1. Simplify the business model
Evolutionary organizations can change course quickly, make decisions faster and create new offerings at speed. By making their operating model — the way work flows through the organization — as simple as possible, they can move at pace. Simplicity provides visibility and clarity. Every aspect of workflow aligns with value to the customer — how it's created and measured, and with continual feedback loops.
Imagine what your business could achieve if you could remove current constraints around thinking and acting — autonomous groups who are guided by clear goals. They start with the customer outcome, set measures, design the work, break the work down, set the measure again, design the work again.
As the work cascades, it remains aligned to the outcome. The measures give teams the guardrails and autonomy to deliver the ‘right thing’ rather than the ‘planned thing’. The work also cascades across the organization simultaneously. It is not about testing and iterating in one siloed area, but redefining the entire business.
So how do you simplify a complex operating model? Start by connecting the reason your business exists with the value you provide customers. Rather than focusing on the goods or services you sell, understand how these things help customers achieve their own goals or purpose in life.
Then, identify incremental shifts towards specific customer outcomes — the goals that unite customer needs with your purpose.
This is the thin slice approach. Take a slice across the organization (not just one function or product) and make one change around a unifying focus. In doing so, you will expose antibodies to change — areas of resistance, such as legacy technology or risk controls. Modify the change to minimize the impact of resistance, and then kick off the next slice with the modifications.
As you continue slicing, ensure you are measuring the impact on customer value. Align everything to the work — from teams and budgets to decision-making — and make sure the impacts are visible and transparent.
It’s important to note there is no ‘best practice’ evolutionary organizational framework — so if you were looking for a quick fix in this article, I am sorry to disappoint you. Every industry, enterprise and customer outcome is unique and constantly evolving. The thin slice approach allows you to learn and adapt to those changing needs.
2. Create the right environment to challenge dominant logic
While much has been written on why digital transformation programs continue to deliver underwhelming outcomes, the truth is transformations don’t necessarily fail. Companies are almost always better after setting out to make change happen. However, they inevitably make compromises along the way. They hesitate and hedge their transformation bets. For example, we might agree we want to do things completely differently and optimize for customer value — but we also still need to make profit targets for the quarter.
That’s why the journey to becoming an evolutionary organization is also a mindset shift. You need to be able to embrace the change by living it, experiencing it and learning from it. These normative learning experiences can help you learn how to learn — and potentially unlearn everything that has made the business a success to this point.
This starts at the top. Leaders need to believe profound transformation will ultimately be better and overcome the dominant logic like ‘the budget doesn’t work like this’ or ‘we might lose our best people’. At a time when everything is changing, traditional assumptions are at best limiting — if not fundamentally flawed.
This also means adapting management styles so you can effectively lead autonomous ‘thin-slicing’ groups. The pace of change is too great to have teams waiting for permission to act. Instead, you need to give people the power to prioritize and achieve outcomes using their own talents. And this requires a great deal of courage and trust.
3. Avoid traditional structure traps as you evolve
Evolutionary organizations are willing to take a leap of faith because their leaders understand that the more value they deliver to customers, the more profitable they will become. But they need the right structures to empower everyone in their teams to take the journey with them.
Evolutionary organizational structures are designed to continually optimize for customer value — not for shareholder value, costs or revenue targets. Even, and perhaps especially, as they grow.
This means rethinking our traditional industrial-era approach to scaling for operational efficiency. Too often, we see wildly successful digital native organizations get to a certain size and then collapse into structure. They take on traditional governance and risk management construction, and in doing so, acquire the same legacy issues as the incumbents they once disrupted. Red flags might include more rigid ways of working, an obsession with job titles or fixed team frameworks.
Evolutionary organizations don’t have time to build a legacy structure — they’re too busy continually adding new blocks or networks to it. Instead of pursuing stability, they set out to make sure they can sustain their speed. And they do this by employing the three guiding principles of evolutionary organizations.
A 2021 study indicated that the 30–35-year average lifespan of S&P 500 companies in the late 1970s is forecast to shrink to 15–20 years this decade — this means that many of the current S&P 500 companies will have been replaced in the next decade or so. The pace of change will only continue to accelerate — and the threat of extinction has never been closer. If you don’t embrace the chance to change and become an evolutionary organization, you could be amongst those companies that simply won’t survive.
The risk of lagging behind will be, to put it bluntly, devastating.
There is no longer any boundary between business and technology. And that is why transformation never ends. It is human nature to continually learn, adapt and evolve — and for organizations, this is the only way to stay one step ahead. To constantly create value and maintain a competitive edge in the digital age.
Begin with a conscious commitment: make sure you have the skill sets, mindsets, systems and structures to make decisions at pace. Only then can you continue to evolve.
Evolutionary organizations reimagine the future
In this MIT Technology Review Insights report — created in collaboration with Thoughtworks — we unpack survey results from 275 corporate leaders to see how they’re approaching digital transformation today and the obstacles in their way. The report reveals why digital transformation takes more than just implementing new technology, and why organizations need to broaden their lens on change and develop new core capabilities to become evolutionary organizations.