One of the methods being touted for Transformation is to create a brand new organization with a new operating model and then gradually move the rest of the organization into this new model. I call this a sidecar because you are attaching an organization to ride alongside your larger organization.
I have never, not once, seen this model work for large-scale transformation. Yet consultants keep selling it and people keep buying it. Note: The sidecar model works in a “skunkworks” situation where you need to launch a new product quickly and the current organization doesn’t allow for the speed and flexibility required.
Let’s take a look at each promise, why it doesn’t work and some alternatives.
New Operating Model for the new Organization. Most organizations find it challenging to create a new organization where the processes are decoupled from the current organization. In order to handle this issue, your first option is to create redundant processes. If it’s even possible, this creates a ton of overhead for the new organization. If the process depends on shared infrastructure like say, customer invoices, it may not even be possible. Does your customer want to get 2 bills because you are doing a transformation? I doubt it.
The other option is to keep ties to processes in the old organization. What do you think will happen when someone from the new organization makes a request from the old? “What do you mean it will take 4 weeks!? I’m from new-org and we do things faster over here, I need it done by this afternoon.” Once you break up this fight, you’ll have to work on changing the processes for the old org, which you should have just done in the first place instead of creating this nonsense.
Create links back to the “mothership”. A recent article by McKinsey says “Even when we build a speedboat on the side, we’re always thinking about how to link it back to the ‘mothership,’” They talk about ensuring that they are aligned to the company’s strategy and priorities. While I don’t disagree that you should align the strategy and priorities, alignment is not enough to have that speedboat affect the battleship. If you want to transform the battleship, you need to address the battleship. Running alongside with links will not change the parent organization. And if your goal is transformation, you need to change the parent organization.
The new org will model the culture and the mothership will follow. This doesn’t work simply based on empirical evidence, but let’s go a little deeper and find out why.
- Creating a new organization of “cool kids” doesn’t sit well with those in the “old org.” An us-them situation emerges, and people in the old org become invested in their identity, they find reasons that the new org stinks.
- Assuming that a culture can change simply by modeling it, is naive and misses the real causes that drive culture. Culture develops as a result of history, policy, structure, language and other factors none of which are likely to disappear because some cool kids moved in down the block.
- What typically happens is that organizational antibodies move in and attack the new organization as if it’s a virus. It happens little by little, like this, “We have too many different reports. We need to get the new org following our reporting procedures.” and “if they are moving into the HQ building, they need to follow the facilities guidelines for the building. No more sticking things to the walls and everyone needs to be in a cubicle.” “It is a waste to have 2 separate procurement organizations!” And little by little, new org becomes old org.
What does work? What does work, is to identify and prioritize structure, culture, and practices that are no longer serving the organization. Prioritize changes and tackle them incrementally and iteratively. Reflect and learn from each change. Sometimes a single change has leverage and will positively affect a bunch of other things you didn’t even anticipate. And sometimes the opposite will happen and a change will break a bunch of things. That’s why it’s important to make changes incrementally and systematically.
What do you think about the "sidecar" model for transformation? We'd love to hear from you!