Why disruption still matters and 5 ways to deal with it

Disruption. This word has fallen from the headlines because it’s "so 2017". But not all industries have been disrupted yet. And those that have will likely be disrupted again. Are you ready to respond? Can you keep up with a more nimble company that comes in to steal your market share? 

Last week, I watched a talk by a woman who predicts where certain technologies will go and invests accordingly. According to her, analysts are too focused on today. She predicts that blockchain, 3D printing, and eventually robotics will combine within the next few years to completely disrupt the supply chains of most companies. To me, this means that companies that thought they were relatively immune to overnight disruption could soon be ripe for it. 

Another example is the new venture by Amazon, Berkshire Hathaway and JPMorgan Chase  aimed at  disrupting the Healthcare industry. Many long-term healthcare companies are now merging in an attempt to compete. But will that be enough?

I have the privilege of talking to leaders of many large corporations and organizations to help them determine the next steps to take to be ready for whatever comes their way. We work on the steps to take to modernize their business. No matter the industry, geography, or company size, I have seen five common areas that need to change.   

1.    Invest in the right things: We’ve all heard that 60-80% of products are rarely or never used. Much has been written about whether this Standish Group statistic is fair or representative of reality. However, I have asked many leaders what percentage of products are rarely or never used, and they generally agree that their products are within this range. Those best-in-class may state that 30-40% of their products are rarely or never used.

A study by the Product Development and Management Association (PDMA) showed that 80% of products lose money (perhaps falling into the range of being rarely or never used). For many companies where I have worked, the majority of products were not profitable. A few cash-cow product lines supported the rest of the organization. This can be a strategic move as long as you have a plan for how those remaining products will become profitable. If not, you’re wasting precious resources that could be helping you compete. 

Do you invest in the projects that your loudest executives yell about? Believe it or not, this is the method many companies use to prioritize investments. I have yet to talk to a company where the loudest executive had the most profitable ideas. But I have spoken to many companies where the loudest executive was the one most likely to disrupt the flow of work and negate hard-won efficiencies. 

Now is the time to rework your strategy processes to make investment decisions based on market data and outcomes. It’s time you ask yourselves the hard questions—and answer them. How much of your current strategy is helping you mitigate disruption? Are you creating anything to disrupt your own market? Should you be?

 2.    Actually work on your strategy: This seems obvious, right? Yet, according to a study by Actuation Consulting, only 37% of Product Managers say their efforts are aligned to business strategy. That means on average, 63% of work is not aligned to strategy even when product managers are involved. How do you compare? Let's say you are best in class and only 40% of your work isn't aligned to your strategies. Does that mean 40% of your budget is wasted each year? Wouldn’t you like to know? I talk to many leaders who have no idea what percentage of the work in their organizations is in support of their top strategies. The larger the company, the less data leaders have regarding what is being done, and the higher the risk a more nimble company will capture new opportunities faster. 

Many companies are spending millions to optimize their continuous integration and continuous delivery processes. Left unchecked, the outcome will be that they can now deliver non-strategic features no one will use much more quickly than before. If you aren't building the right thing, it doesn't matter how fast you can build it. 

How easy would it be for another company to put you out of business in 3–5 years? An increasing number of executives are facing this question. Eight months ago, I met with leaders at a few major healthcare companies and this was their biggest fear. One week later Amazon-Berkshire Hathaway-JP Morgan Chase announced their new business, promising to offer lower cost healthcare. Is your industry next? It takes more than great strategies to stay competitive—your teams have execute on them. 

If you aren't building the right thing, it doesn't matter how fast you can build it 

3.    Make sure teams understand your strategy: Do the teams executing your strategy understand how their work aligns to your top goals and expected outcomes? If not, they will be much less engaged, quality will decrease, and motivation and morale will suffer. Studies have shown that the more fully your teams understand how their own work aligns to strategy and outcomes, the more interested they are in the work. Unfortunately, many companies we work with have a huge chasm between strategy and execution. They try to fill it with spreadsheets, PowerPoint documents, or their PMO. If this sounds familiar, you are not alone. 

Too many companies have strategies planned for the next 12-18 months and expect Product or Program Managers to somehow magically parse that work into 2-week sprints for the teams. I have never seen this happen without defined and operationalized processes. You need a method to ensure your teams understand how their work directly applies to outcomes and strategy. 

Review how your company currently links strategy to execution, and the latest market approaches for doing so (SAFe, DAD, LeSS, etc.). Then combine practices to best fit your organization. As a leader, it is up to you to make sure the work in your area is valuable, necessary, and that your teams are engaged. 

Done well, these processes can help create a solid pipeline of data that flows from strategic outcomes to the execution teams. Throw in a standard Definition of Done and a few best practices and suddenly you have a mechanism to report status back up the pipe as well using real data. 

4. Eliminate status reporting waste: If your status reporting is still based on people sitting in a bi-weekly status meeting and verbally reporting whether their team's work is done, you are way behind the times. We recently asked companies how much time their people spend trying to consolidate project status information. By translating that time into labor costs, we’ve uncovered staggering results.

One Fortune 250 financial firm told us that in one division 1000 Scrum Masters spent at least an hour each week manually reporting on the status of their teams. 500 Product Owners spent 4 hours each week managing dependencies and rolling up metrics. At least 100 people in their PMO spent at least 8 hours per week collecting, managing, and reporting data up. 

The total cost to this one business unit was $9.5M annually. Taken across the entire corporation, they estimated they were spending a staggering $100M on simply reporting status. 

Now take into consideration that the data in those status reports is based on conjecture, sanitized for leadership, and smoothed to make the state of the project appear more positive, and you can easily see why so many companies have no idea about the true status of their most strategic projects. If your teams are truly following agile practices and principles (and not just playing at agile), the data you need to understand the daily status of any strategy exists already; it needs to be rolled up and made visible. Implement a tool that allows you to see direct ties between work and strategy, and then use the data the teams naturally create when working to tell you the actual status of the projects. Access metrics from your agile tools, not spreadsheets. It is no longer enough to track your top strategic projects through verbal updates and dreaded status meetings. Instead use real data to determine if your strategies are on track to deliver the desired outcomes. You should know within 2-3 sprints whether the project will be completed as planned. 

5.    Optimize the whole flow: How efficient is your organization? How fast can you monetize a new idea—from concept to outcome? Just as important as aligning and running your business on data, is having an efficient organization. Not doing so is a recipe for being disrupted.  Outdated methods, processes, and data models that rely on long-term detailed plans, verbal status reports, and spreadsheets of irrelevant metrics have no place in 2018. Nor do bonus programs that motivate leaders to work against each other rather than collaborating. 

Sometime in the 1980s-1990s, a whole bunch of management books were written that told us to pit leaders against each other. That this was the way to have a top-quality organization because everyone would strive to be their best and would push their teams to continually improve. What really happened was the leaders optimized processes for their own area, to the detriment of the entire corporation. 

I used to work for a CTO whose bonus depended on meeting dates for strategic projects. Our best practices included enabling our customer-facing teams, but this work did not factor into our bonuses. As schedules slipped, we eliminated things that would keep us from having the product ready by that all-important date. For many top strategic projects, we made sure the product was ready even though the customer-facing teams like Services, Support, Sales and Marketing were not. So technically the company could not effectively sell, implement, or support the product, yet the technical teams earned bonuses because the product was ready on the date promised. 

Look at your entire organization. Make sure all areas are updated to optimize for efficiency and executives are rewarded for working together as a whole team, to achieve your strategies.

So, ask yourself: are you investing in the right things, truly working on your strategy and making sure teams understand that strategy? Are you tracking your strategies using data and not sanitized, verbal reports? And finally, are you optimizing the whole and not a portion of the organization? If you answered “no” to any of these, it’s time to take a step back and figure out how to change that answer to a “yes”.  

The only way we can ready ourselves for disruption in our markets is by following these five steps. I encourage you to register for my upcoming webinar, where we’ll discuss each of these points in more detail. Register here.