From the Magazine

Four Principles for Managing Technology Transformation

The speed at which technology changes is relentless.

In last year’s Fortune 500 CEO Survey, for instance, 72 percent of CEOs cited “the rapid pace of technological innovation” as their company’s biggest challenge.

Their fears are well-founded. A recent study from Innosight found the average tenure of companies on the S&P 500 is less than 20 years — and it’s forecast to shorten to 14 years a decade from now. At that churn rate, about half of the companies on the S&P 500 today will be gone in 10 years.

CEOs recognize the need to transform to avoid obsolescence; in the same study, two-thirds “agreed” or “strongly agreed” they needed to change their core business model to compete with disruption. Yet, 40 percent said day-to-day operations were getting in the way of their transformation efforts.

I feel their pain. I’ve been a leader at Oracle through a constant series of transformations since 1998, and I know nobody had the luxury of stopping their day jobs to work on disruptive projects. We had to learn how to transform and run the business at the same time.

Now, we have it down to a system. I’ve learned there are four main principles to follow when managing transformational change:
Simplify
Standardize
Centralize
Automate

Do it in this order; and then do it over, and over — and over. By the time you get to the last step, it will be time to start again.

Transformation Starts with Simplicity

In a nutshell, simplicity is looking for best practice; it’s identifying the process that looks the simplest when you put it up on a whiteboard. One of the things I always advise CFOs taking on change management initiatives is that complexity is the killer of innovation. The more intricate your processes, systems, organizations, workflows or decision-making are, the more time, effort and money you’ll spend on maintaining that status quo. That is why simplification is such a critical first step.

But there’s a caveat: if you’re always trying to identify a better practice, the chances are pretty low that you’re going to get to the end of your project. You need to aim for the best possible practice—right now—a step that will help you succeed in the short term…until it’s time to start again. What can you begin to do today that moves you along the path of simplified best practice?

Standardizing is the Hardest Step

Standardization means getting everybody, everywhere, to do the same thing, in the same way. It often has the biggest return on investment. It’s also the step that requires people to change — and that makes it the biggest challenge.

When we need to make a change in our business model, we identify what we call a “process owner.” The process owner is a business person who is responsible for finding ways to standardize. We partner them with a solution owner in IT, whose job is to identify the technology required to support the process. Each partner brings a very different set of skills to the table.

The process owners are not just operations experts. Their key skills are communication, persuasion and influence. They must be great listeners. With any new acquisition or project, there are always lots of objections from teams about how they can’t move to the standard model. They’re special snowflakes, and they want to continue doing things the way they’ve always done them.

Process owners listen to all the objections. They don’t defend the process. They simply present the plan and share milestone indicators and KPIs. They communicate deadlines and identify resource requirements. They ensure everyone involved in the change understands what they need to do.

Then the process owners listen to all the objections again. And again. They understand. They empathize. But they keep moving forward. It’s a tough job, and it requires strong leadership skills, but they are change agent champions and cheerleaders.

The IT owners look at how technology can best serve the standardized process. Since Oracle is a technology company, we have something of an advantage here; we use our own technology, and what we don’t have, we can develop (and eventually sell to customers). However, the goal of the IT owner is to keep developments and customizations to a minimum, while also supporting that simplified best business practice.

Process owners might define a new standardized way of doing things and then their IT partners identify places where our existing technology can support the new process. When the IT owner sees an opportunity to keep the technology solution simple and standard, rather than custom and complex, they will challenge the process owner: “Can you do it this way, instead of that?” Often, IT owners will come up with a more efficient standardization because best practices are already built right into the software.

Centralize in Global Business Service Centers

Once you’ve standardized your processes, you have an opportunity to centralize them. If everyone in the company is filing their expense reports in the same way, using the same software, it becomes easy to review and process those reports from fewer places, at a lower cost.

During our first transformation phase, we began with regional shared services; however, using regional centers was taking us off the standard model. Every region started doing things a little differently from the others.

We eventually moved to global shared services where we have multi-function centers all aligned to the same standard process, no matter what geography the center is in. These centers handle everything from accounts receivable and expenses to deal management, and are Centers of Excellence for our financial planning and analysis. The cost savings are enormous, but more importantly, the efficiencies allow our finance teams to spend less time on routine tasks and more time providing guidance to the business.

Automate for Flexibility and Growth

Automation is always the step in the process that everyone wants to jump to first. It’s especially prevalent in a technology company like ours, where we have thousands of software products at our fingertips. But remember: if all you’re doing is automating a broken process, you’re not fixing anything. Simplify and standardize first. Then you can look at ways to automate.

Automation not only provides efficiencies and cost-savings — it makes you more competitive. It’s not just new business models giving an edge to disruptive start-ups; they often have young workforces used to doing everything on their mobile devices, from booking a cab to finding a date. Millennials don’t want to fill out a spreadsheet to submit their expenses; they want to snap a picture of their receipt and submit it instantly for reimbursement. Automation isn’t just a way to compete with the upstarts for market share. It’s also a way to compete for new talent with transformative ideas.

Take Four Steps, and Take Four More

The pace of technology change isn’t slowing down. It will continue to disrupt existing companies and industries, as new business models are created out of social apps, the cloud, robotics, and other tech that hasn’t even been invented yet. Existing companies must transform to compete, or perish.
Every business executive knows that transformation is tough. That’s why my advice is to never stop transforming.

Make change a part of your culture. Don’t undertake a transformative project, look around, and say, “Great job, everyone. Now we’re done.” You’re never done — because the business environment is never done changing.

Simplify. Standardize. Centralize. Automate. And then do it over, and over, and over again, every day of your career. If you’re like me, these four steps will start you on a more rewarding career path than you ever could have imagined.

Loren Mahon is Vice President, Finance Systems at Oracle Corporation and a board member of Financial Executives International.

This article was first published as part of newly issued Financial Executive magazine.