AWS re:Invent 2020: Digital transformation: Attributes of a 21st-century agile organization

welcome to this session on digital transformations and 21st century agile organizations my name is phil lebrun and i'm part of the aws enterprise strategy team having previously held senior technology roles at mcdonald's corporation as former technology leaders we use our backgrounds in leading transformations to help thousands of customers around the world in customer meetings we typically hear the world agile used every six minutes closely followed by the phrase digital transformation we find that many customers struggle to understand what this all means for their business today i'll dive into the attributes of truly digitally transformed companies who are able to rapidly and resiliently adapt to changes in the environment and customer demands this is primarily a business perspective with technology as a critical enabler for some of you this might affirm what you already know but for many others i hope that it will provide some insight into practices that are helping companies evolve unfortunately we still regularly hear companies state why digital transformations don't apply to them often because of their perceived strengths they consider their strengths to be what warren buffett calls protective moats surrounding their enterprise castles were protections that were once hard to compete against such as brand loyalty employees physical assets and access to capital for most businesses these moats are no longer sufficient to retain and grow market share in many cases they inhibit companies reacting with speed or even blinds them to the need to change in the face of nimbler competitors history is littered with companies that did not see disruption come into their industries or were unable to react when they did today it's believed that at least 60 percent of enterprises are digitally vulnerable potential fodder for more agile companies this is reflected in the dwindling average lifetime of companies on the major stock indices with a large number likely to cease trading in the next decade it's no wonder that agility is such a heavily discussed topic we are all asked to go faster with more initiatives with volatility and change characterized in the environment in which we operate it is only by quickly being able to really understand what customers want in an iterative way that most companies will prosper talker transformation is common but few companies have made significant changes become more agile and resilient digital transformation is a team sport involving your entire company today we'll help you understand the central components of such an agile transformation including a deeply shared purpose a continuous learning environment and the use of agile cloud-based technology agile companies those that learn quickly with their customers and deliver value constantly rather than just through large initiatives massively outperform their competition on average they demonstrate super superior profitability spend 40 percent more time on meaningful work and are nearly twice as likely to outperform on non-financial measures the excitement about the opportunities that a digital transformation can unleash are tempered though by their success rates the majority of these programs do not achieve their intended potential there are a number of reasons for this but one is very pertinent to this session we consciously and unconsciously use mental models to make sense of the world and to make decisions quickly based on our beliefs and experiences for example one mental model amazon uses is the minimum lovable product based on the belief that it helps us validate what appeals emotionally to customers other models become dated and irrelevant for instance there used to be a common belief that owning your own data center was the cheapest securest approach to host your applications but then the cloud came along old mental models hold companies and individuals back from changing or even acknowledging changes required views that have made you successful but are no longer appropriate are really hard to unlearn though the good news is we've been here before while the technologies behind today's transformations are different the patterns that we see have happened several times previously while the past cannot predict the future we can learn lessons that will help us on our journey to become more agile looking back every era of human progress has been marked by inflections centered on technologies and materials of that age each age saw the introduction of one or more technologies that became pervasive what academics called general purpose technologies they have three common attributes they became common and taken for granted over time they continue to improve in terms of quality usefulness and cost and finally the very innovations themselves that became gpts fuel further innovations for example during the industrial revolution the water world replaced the strength of humans and animals with something more powerful and less prone to needing rest and feeding the steam engine replaced the water wheel and even more powerful former driving factories but ultimately just a replacement technology electricity then displaced steam whilst more powerful and reliable still the fundamental nature of how work got done in factories didn't change the technology itself was treated as a dark art managed by new roles such as the chief power officer seemingly yesteryear's version of the chief digital officer what came next was more disruptive how work itself was done was fundamentally changed candlelit factories built around the steam engine drive shaft were flexibly reconfigured operating 24x7 using electric lamps the technology became a utility low value activities that did not help a company compete what today we call undifferentiated work were retired or outsourced work was divided into tasks with each worker given just one job to do to drive efficiencies a model that persists today reflected in hierarchies and silos so historically technology has not magically driven profound change rather these changes have happened when work itself has been reconfigured and then reimagined digital transformations are no different rewiring an organization's culture from the top down to respond to customers in a more dynamic relevant way ultimately transformation is a change to business approach not just a technology we believe the information age is in many ways just this first phase of the next transformation from the first telephone call in the first generally available public computer through to pervasive network technology tedious manual calculations can now be performed faster and at scale but much of the actual nature of the work itself such as financial record keeping has not changed but these gpts fueled the growth of the internet from the 1990s launching the digital age apis enable programs to be developed independently but communicate with each other predictably the aws cloud took this to a new level starting in 2006. compute became smaller and cheaper embedded in everyday devices launching iot at scale and new capabilities such as amazon sagemaker for machine learning the ubiquity of these technologies and their ongoing improvements have led to the re-imagination of new and old industries and how they serve their customers who would have thought that 20 years ago at home from my living room i could stream the latest movie all the food to be delivered have new books downloaded and then have a taxi turn up all from my mobile phone unlike futurologists and their predictions we won't try to guess what the future holds what is evident is that the future will be powered by today's technologies such as cloud computing the new gpts just as ceos no longer have chief power officers we know that cloud computing will be considered as a given i'd make one prediction load those leaders in the future who continue to believe that technology is just the domain of the cio will become increasingly rare so treating new technologies as just a replacement is a good starting point but insufficient it's analogous to the navy cling into traditional wooden naval ships long after iron was available due to a reluctance to adopt new shipbuilding techniques only with the introduction of the artillery gun did iron ships become a defensive necessity the crisis of defense overcame the comfort with the status quo and the fear of change traditional on-premise data centers are our modern day steam engines and wooden ships today any individual can invent and globally scale any applications from anywhere in the world so why would you competitively constrain yourself the transition from on-prem can compute to the aws cloud is a differentiator and is the start of reconfiguration of work itself it frees up valuable knowledgeable resources to work on business initiatives rather than performing mundane tasks such as running data centers it's early days but just like history before we are seeing a major evolution in how organizations operate efficiency as the primary goal of an organization structure and processes is being supplemented with a new operating model that taps deeper into employees motivation passion and creativity our mental models are changing previously we planned for what we believed a customer might want based on subjective research and old mental models when we found the customer wasn't happy course corrections were often expensive and slow having an agile culture in those areas of your business which need to be more responsive and more customer-led is at the heart of the 21st century organization this requires leadership from the very top many companies still believe they understand and respond to their customers better than they actually do today's customers are in the driving suit they are often the first to adopt new technologies and so demand that businesses meet their higher bar the mental model we use to define an agile organization is simple the fundamental change required is to your mindset and culture this both informs and is supported by changes in skill set and in the technology this is not a linear process rather an ongoing transformation rooted in the concept of a learning organization so let's take a deeper look at these elements in agile organizations the first success factor for transformations is clarity of purpose a purpose known to all employees and which is embraced by head and heart it guides and it inspires while this may sound simple it is estimated that half of change initiatives failed due to this lack of senior management alignment and clarity in one business survey only two percent of employees could name their company's purpose or priorities too many companies still have their dilbert like vision statements which are uninspiring and unremembered how can a statement like this inspire and help individuals to make decisions day to day on what they should be working on companies like amazon strive for simplicity and clarity our vision is bigger than just a job it is known to all employees and helps frame up our responses regardless of the roles we have capital one's founder richard fairbank declared that the company's purpose was to change banking for good research indicates that such a simple sounding step that drives alignment at a leadership level on down can boost the chances of success for a transformation by up to six times agile companies also declare principles which support that purpose many companies claim to have strong cultures but cannot easily describe them amazon's 14 leadership principles drive everything hiring through to how meetings are held and everyday work performed these principles are not static quotes dreamt up by management committees and barely remembered they are true living signposts of the culture which unifies amazon netflix have their own principles specific to their reason for being they define how work gets done and what sort of people they recruit but this isn't just about newer companies nordstrom dating back to 1901 demonstrates their principles on the shop floor and that's where the magic happens thirdly outcome measures important to your customers and business make your purpose more tangible metrics such as profitability or order cycle times are important but don't help your app developer or marketing analyst understand whether they are working on the right things mcdonald's did this well in 2017 declaring to wall street that they would have a mobile app in 20 000 restaurants by the end of that year and 8 000 restaurants enabled with delivery it fueled debates on the trade-offs needed to achieve these goals through the organization helping achieve one of the fastest deployments of technology in the hospitality sector cascading these outcomes throughout the organization verbally and even in bonus systems helps makes the relevance clear to everyone fourthly accept that much of what we do is not science we find comfort in linear plans made seemingly scientific by using gantt charts but our customers environment and environments don't act the same way these types of plans are good for low-risk projects that have well-defined patterns associated to them such as building a power plant or a house this is not your typical software project we often rely on customer proxies to find what we think customers want rather than rapidly iterating ideas with actual customers discard your assumptions and replace detailed requirements that attempt to predict the future with outcome-driven approach determine hypotheses quickly test them with customers and then either rapidly scale successful tests or learn from and shut down unsuccessful ones this agile approach can deliver significantly more value versus traditional delivery approaches by lowering risk and delivering value incrementally embracing this change this approach to experimentation and learning is dependent on the fifth change one that makes many leaders uncomfortable that's of driving autonomy of decision making deeper into the organization we hire bright passionate people and then often impose multiple layers of management to make decisions and provide oversight in the pretense that more planning leads to greater certainty employees are involved in multiple initiatives without feeling ownership for any diluting the ability to spark their excitement no wonder one report indicated that 87 of employees globally are simply not engaged at work we've grown numb to the results slow progress and finger-pointing when goals are missed given your employees purpose and trusting them with the autonomy to act towards this purpose are consistently underrated agile organizations make and act on decisions as close to the customer as possible acting on feedback quickly these small autonomous teams equipped with clarity on the expected outcomes are highly correlated to delivery success amazon's agile cross-functional teams are small enough to be fed with two american size pizzas they can think and act quickly the team's permanence creates high performance by getting through the normative storming and forming stages of team development to capitalize on the performing stage each team has a single threaded owner accountable for ensuring the team takes the right decisions with the right data to achieve the right outcome guided by the company's purpose and principles whilst easy to animate in powerpoint these changes take effort but are worth it in bureaucratic organizations teams can be waiting for others to complete work for up to eighty percent of their time with this new structure work output increases significantly undifferentiated work is reduced bureaucracy minimized and motivation improved let me clarify one thing before we move on this is not about changing your entire organizational model many parts of your business probably need to be prescriptive bureaucracy is an amazing invention but is primarily to design to drive efficiency not to deal with uncertainty and complexity that said a concern often raised about autonomy is the chaos that could result with every team pursuing their own ideas the sixth mindset change helps address this by using guardrails for instance we talk about decisions being one-way or two-way doors incorrect two-way door decisions can be reversed easily such as scaling up or down servers in the cloud one-way door decisions are harder to undo such as building a data center agile organizations ask what the most appropriate level of the organization is to make a decision based more on speed than control two-way door decisions are made lower in the organization freeing up executives who spend more time on tricky one-way door decisions guardrails can also be technical in amazon every team builds services that only communicate through apis allowing each team to work independently a new service can be built or new functionality added without breaking any service enabling tens of millions of changes to be deployed annually the combination of autonomy bound by practices that ensure cohesion are a winning combination data forms another guard rail in agile companies it is used throughout initiatives to determine which hypotheses and projects to pursue and which ultimately to scale it brings more rigor than is typically put into the average set of prescriptive requirements for traditionally run projects cfos who understand agile embrace this new way of working as the certainty of spending money wisely increases significantly foundationally a cost-effective cloud-based data lake accessible to all is needed but is insufficient unless the data literacy of the organization is increased data is freed from functional silos and made widely accessible allowing teams to identify and act on opportunities highlighted by data i am in awe of the minority of companies that approach their data with an open mind looking for problems and opportunities not just data which supports their point of view so i've described the major attributes of an agile organization's mindset but it'd be disingenuous to pretend it's easy culture acts as a corporate immune system protecting the status quo underestimating resistance to change whether because of fear cynicism or rational concerns is fatal to change efforts taking the time to bring the entire organization along on the journey will help embed an impactful and sustainable new future for your organization while obvious it is often done poorly this brings us on to the second element of the mental model skill sets whether in our personal professional lives we often experience the same emotions when significant changes happen to us including denial anger and resignation we doubt our own ability to be successful in the new world these are natural feelings given changes often feel like they will undermine our skills and value but it doesn't need to be this way understanding how to manage change is a critical and yet underappreciated leadership skill you have to bring to life the future vision of what could be excite people about it and lead them there through their own apprehension and resistance this is hard which is why successful organizations typically change through a continuous set of small changes rather than through large-scale transformation initiatives they also invest a significant amount of their transformation budget and focus in communications and training as part of change management leaders need to address three aspects we all crave the autonomy to be in control of your own destiny the mastery of skills required to be successful and the clarity of purpose which unites and directs your organization most contemporary work here focuses on reskilling your employees on which we have other sessions i'd recommend hearing here though i want to touch on two critical changes to leadership behaviors which if ignored can easily derail transformations servant leadership and your digital iq for the agile parts of your organization leaders need to move away from being the expert and decision maker the so-called highest-paid person's opinion to someone who empowers and coaches their employees you need to help them deliver exceptional results and become competent leaders in their own rights who own the decisions for their work culture is set from the top and is often inadvertently killed in the same way consciously modeling the behavior expected of others is important including continuous learning and changing command and control habits it's so easy to fall back on our desire to give answers while still believing you give autonomy one survey indicated that while many ceos believe they gave their direct reports autonomy 50 of their reports didn't believe this was the case part of this was because ceos were reverting back to giving answers rather than coaching reports part of it was because the reports didn't feel the confidence to take decisions by themselves to operate in an agile world you also need to improve your and your organization's digital fitness each enterprise strategist has been through our own journey i follow leaders on social media take certifications read extensively and use mentors at all levels who are candid with me on my performance but mainly i run experiments let me give you an example of an experiment you can run if you want to try agile concepts out find a business problem put a team of people together you think have the right skills to solve the problem clearly state the expected outcome and let them at it this is the first step many organizations take in starting on their own agile journeys don't overthink or over plan it we also have a responsibility as a teacher of the c-suite in many cases bringing their knowledge of technology out of the stone age can you imagine hearing your ceo claim that they know absolutely nothing about finance so all money questions should go to the cfo they'd be fired and yet this is common with technology executives cannot fight tomorrow's battles with just yesterday's tools they need to become more versed in general purpose technologies and how they can and can't be used to power organizations it's simply too important nowadays just to be outsourced to the cio executives need to be able to effectively discuss challenge and support decisions with the cio and understand that technology alone is often not the solution so if our culture now supports more agility and the leadership skill sets from the ceo down to do too what about the technology well it doesn't take a giant leap to understand that agile organizations require agile modern technology that can keep pace with the rate of change large upfront investments are the antithesis of this traditional methods that companies follow to host and operate their own products invariably are expensive and time consuming let's take a hypothetical experiment with machine learning one that might not work but if it does you want to scale it quickly so you acquire a data center for testing and a managed service provider you purchase and install and configure the technology and test it fixing issues as they arise invariably you miss something and have to go back and fix it only then do you select install and configure your machine learning software based on some best guest requirements and of course you find more issues to fix i'm sure your business colleagues have a lot of empathy and understanding here right you then have to connect your data as most of it is in disparate data sources in traditional data centers just as you get to run your experiment low and behold you find your load balancer loses its state your operating system needs to be upgraded and you end up with esoteric network issues setting you back spending more time and money not only that but now you've actually run your experiment if it doesn't work you've just spent a lot of time and money all from out if it does work you need to repeat many of these steps to scale this idea massively globally and invariably in one geo you'll have too much capacity and will be hemorrhaging money in another geo you won't have enough capacity and will be disappointing your customers and throughout this you are praying nightly that you don't have an issue because you simply haven't had the time or money to invest in high availability or reliability particularly because you've had to forward budget for those hardware refreshes in the future may sound like a bit of an exaggeration but i'm sure you've lived through something similar many times in your own professional life but what a waste of time and energy all for a short experiment endless rounds of evaluating proposals and negotiating contracts based on dubious assumptions is not the path to success if the first steps are so difficult and expensive no wonder companies put off innovating and don't delegate these decisions traditional bureaucratic approaches are like alchemy with lots of luck and effort you might stumble on how to convert the proverbial lead into gold but it's going to cost you dearly and you won't be able to do it very often rather than alchemy how about real chemistry it's a science where applying a few simple rules to chemical building blocks allows you to create all sorts of wonders that's how we see the cloud it is much more than just another hosting platform it's a virtual periodic table of over 200 services that can be rapidly acquired and combined the ml experiment i described can be undertaken by selecting a few services and rapidly scaling or cost effectively shutting them down depending on the results your people can focus on those aspects that really differentiate your organization leaving the heavy lifting to others more time can be spent on enabling your business and less time on procurement contracts planning and support why would you spend time solving problems that have already been solved we don't talk enough about the incredible infrastructure behind this capability today we have 24 regions live with three more announced the largest footprint available some companies have a very loose definition of what a regional data center is often more reminiscent of how companies operate their own on-premise data centers this isn't the case with aws rather each aws region consists of multiple availability zones each zone consists of multiple data centers giving built-in redundancy data and applications can be distributed across these azs to achieve your availability needs i know from experience that businesses can be reluctant to invest in disaster recovery plans due to the cost now the cloud also abstracts and makes makes affordable this and more including reliability and security as part of amazon's climate pledge our approach also helps your costs and our planet by providing infrastructure that is far more energy efficient than the average enterprise data center security is another regular topic and one will that will always be our top priority pre-cloud many of us have this belief that the simple fact of owning servers in a data center meant that we could better secure our systems i look back now and laugh at my own naivety even the largest organizations cannot afford to invest in security to the degree they need or want to it's a great example of standing on other strengths the aws cloud has all the security isolations you would expect to find in a traditional data center we have a shared responsibility model with the customer aws manages and controls the components from the host operating system and virtualization layer down to the physical security of the data centers aws customers are responsible for building secure applications we support you here with best practice documents encryption tools and other guidance along with support from aws partners satisfying even the most security conscious business the results speak for themselves agile companies typically have a magnitude higher portion of their workloads in the cloud than those less agile and report nearly twice the success in keeping pace with business demand so i find it ironic that it's only at times of extreme need that we typically see the impetus to change and yet you have the opportunity to change this dynamic you have the enviable strengths in your organizations and customer bases what we advocate based on strong data is combining what makes you successful with changes that will increase your business agility the cloud is analogous to the electric engine as a gpt pervasive improving over time and spawning new innovations while moving to the cloud without changing culture and skill sets has benefits it misses the full potential of a true transformation but culture change is hard especially when it changes how work gets done harder still when your business has been successful the best advice we can give is start small and scale fast the complexity of enterprise organizations requires your journey to consist of many small deliberate steps some will work and can be embedded in your culture others will provide learnings and inform future changes thank you for your time i hope this session has given you a perspective on the attributes of a 21st century agile organization and how the cloud supports this agility please let me know if you want a summary of additional resources for each of the topics i've covered today in addition our executive briefings and other sessions at aws summits can get into more detail on many of the topics discussed today our enterprise next team can also help you on this journey please talk to your account manager for details thank you very much

2021-02-07 15:25

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