I was delighted to read a thought leadership article from McKinsey recently, “How to start building your next-generation operating model,” that emphasizes some key themes that I have been pushing for years (the quotes below are from the article):
- The importance of orienting the organization around value streams to maximize the flow of business value – “One credit-card company, for example, shifted its operating model in IT from alignment around systems to alignment with value streams within the business.
- Perfection is the enemy of good enough – “Successful companies prioritize speed and execution over perfection.
- Continuous improvement relies on metrics to identify which incremental, experimental improvements work and which don’t. Benchmarking and trend analysis help to prioritize areas where process improvement can offer the most business value – “Performance management is becoming much more real time, with metrics and goals used daily and weekly to guide decision making.”
- Senior leaders, “hold themselves accountable for delivering on value quickly, and establish transparency and rigor in their operations.
- “Leading technology teams collaborate with business leaders to assess which systems need to move faster.”
There is one “building block” for transformation in the article to which I am a recent convert and so kudos to the McKinsey team for including it in this context. Their “Building Block #2” is “Flexible and modular architecture, infrastructure and software delivery.” We are all familiar with the flexible infrastructure that cloud provides, but I have been learning a lot recently about the flexible, modular architecture and software delivery for application development and application integration that is provided by microservices frameworks such as the AnyPoint PlatformTM from Mulesoft.
While they promote organizing IT around business value streams, the McKinsey authors identify a risk to be mitigated in that value streams should start to build up software, tools and skills specific to each value stream. This might be contrary to the tendency in many organizations to make life easier for IT by picking a standard set of software, tools and skills across the whole organization. I agree that it would be a shame indeed if agile and lean principles that started life in IT software development are constrained by legacy IT attitudes as the agile and lean principles roll out into the broader organization.
There are a lot more positive ideas for organizational transformation in the article, so I recommend that you take a few minutes to read it. My only small gripe is that while the authors emphasize organizing around value throughout, they do not mention prioritizing by business value. Maybe at the high level that McKinsey operates in organizations that concept is taken for granted. My experience is that as soon as you move away from the top level, if business value priorities are not explicit, then managers and teams will use various other criteria for prioritization and the overall results may be compromised.