Scaling agile portfolio management for large enterprises

Everybody seems to agree that agile methodologies are best practice. Pretty much all the customers I work with are agile to at least some degree, and typically have a multi-speed (or “bi-modal”) operating model consisting of entirely new businesses that have been built agile from ground-up and older legacy businesses that work with more traditional, slower clock speeds.

Agile portfolio management

However, after the initial enthusiastic wave of adopting agile methodologies is over, most companies seem to hit a stone wall. Agile just doesn’t seem to fit big businesses. And I’m not talking only about old giants, encumbered by legacy systems and large organizations. I see this even in new school technology companies.
There’s a gap between business strategy and what the agile teams are doing. Nobody seems to be able to link individual teams’ activities to the big picture of enterprise strategy. IT struggles to prove its alignment with business goals.

Interdependencies start creeping in and coordination between different, self-contained teams becomes difficult. For example, although your CRM development may be agile, its progress may be blocked by issues with the ERP – which has a one-year release cycle. The legal department may want a cumbersome regulatory acceptance process before go-live, which thus forms a waterfall gate in the process.

How do you scale agile from a bunch of small teams to larger, strategic projects and an enterprise-wide way of working – without losing agility?

Agile portfolio management

The answer is clear. You need a comprehensive agile portfolio management system reaching all the way from the company’s strategy to individual agile teams:

– The corporate strategy process clock cycle needs to be intensified (e.g. a rolling 3-month cycle), and there needs to be more constant feedback from both customers and operations back to decision-making.

– There needs to be a process for cascading the strategy to a portfolio of themes, within given financial and resource constraints, as well as a governance structure and portfolio-related ownership.

– If it doesn’t already exist, a clear program management layer must be built for the purpose of prioritizing projects arising from large, strategic initiatives into more operational projects, and bundling groups of e.g. 5-10 project teams under unified management (e.g. those with a shared vision and backlog, as well as common coordination).

The changes may be significant, but the benefits will be tangible. You’ll get more innovations and shorter lead times for testing new ideas. Employees will be happier, because they’ll understand the big picture and find purpose in what they’re doing. You’ll increase the alignment between IT and business. Due to the continuous updating of business cases, it will be easier to kill projects that aren’t delivering, or are no longer strategic. You’ll get more trust and transparency throughout the enterprise.

Many customers have adopted the Scalable Agile Framework (SAFe). It’s a robust approach, but only a part of the solution. It does not cover the full scope of changes required for an agile enterprise – in other words, how to make a high-level corporate strategy process more agile. And ultimately, all frameworks and governance systems require tailoring to your organization. You need a comprehensive system without gaps that fits the purpose and suits your needs. And that’s something you can’t just buy off-the-shelf.

Toni Heinonen works as a Senior Manager in KPMG’s Global Strategy Group. He has 17 years of experience in management consulting, ranging from growth strategies and M&A to large-scale transformation projects. Toni has worked extensively with technology, media, telecoms, consumer services and other industries that have been heavily disrupted by digitalization.

Outside of his work, Toni enjoys jogging, outdoor activities with his dog, playing musical instruments, and photography.

Understanding organizations’ unwritten rules in post-merger integrations

Post-Merger Integration (PMI) has been a challenge for many companies, as is amply testified by the countless articles and books written on this subject around the world. Global research indicates that, in most cases, a clash of corporate cultures or incompatible cultures are among the top five reasons why PMIs have not been successful.

post-merger integration

Companies are very seldom really interested in understanding cultural issues during the pre-deal phase. In most cases, resources are focused on the negotiations, and on financial and legal Due Diligence (DD) for the purpose of closing the deal. In some cases, companies spend time on operational DD, but very rarely from the perspective of corporate culture.  Even those companies that claim to take cultural issues into consideration during the pre-deal phase often face just as many challenges during the post-merger integration as those that neglect this area entirely.

In my opinion, one of the major failures related to culture is that companies are unable to identify the unwritten rules of their organizations. What companies see and observe during the negotiation, the interviews they conduct with key individuals and the various kinds of DD carried out, relate to what I call the written rules – policies, procedures, descriptions, codes of conduct, etc.  After closing, when the sweet talk about the deal is over and the integration process starts, the unwritten rules slowly make their presence felt through simple expressions such as “yes, but” or “however”.

These caveats tell us what drives each individual’s day-to-day behavior and reveal the existence of “unwritten rules”, or what I call it “The internal politics of the business”, – the honest advice one would give to a friend about how to get on in the organization.

These unwritten rules are neither good nor bad, only appropriate or inappropriate for what you want to achieve from the integration. You must be aware of them, and plan well in advance on how to tackle them.

But where do the unwritten rules of companies actually come from? They typically start with top management. On the one hand, they derive from the way top management thinks and acts, and, on the other hand from what can be conceived of as the “written” rules that they establish or maintain.

The unwritten rules are what help people survive and thrive. They are a set of highly sensible coping skills adopted by all employees – not just by those destined for the top.

Bozorg Amiri is Partner and Head of the Global Strategy Group in KPMG Finland.

Building a bridge for strategy implementation

Over and over we hear the importance of strategy implementation. You can have a great strategy, but if you are unable to put it into practice, it is worthless. So if it is already old news that implementation is the key to success, why do we still see many companies failing at this stage? Well, simply because the complexity of implementation is underestimated.

Though many rely on external support to develop a new strategy, people consider implementation more of an internal activity or separate task. I met a client who told me “Strategy is developed in the ivory tower, and then it’s up to us to figure out how to make it work”. That got me thinking what had gone wrong in that particular case. In my experience, development and implementation go hand-in-hand. So how can we help to build a bridge between strategy development and implementation?

Here are three key points:

Involve key stakeholders from different organizational levels

If you involve different organizational levels at the development stage, not only will you develop a strategy that addresses the points that are important to your team and has a practical approach, but you will also get easier buy-in to the strategy.  Selecting the right people to involve will also take you one step further when it’s time to execute the strategy. In this respect, it’s not only expertise that is important, but leadership skills and the ability to influence others will also be key to ensuring successful implementation.

Make your strategy implementable

Make a robust plan that considers funding, phases, tasks, timetabling, resources, and well-defined roles and responsibilities. Furthermore, be realistic about the resources you need to implement the strategy and how daily work will be affected by the additional tasks. Getting an extra pair of hands and expert advice at this stage can pay off, if it paves the way to a smoother transition.

Communicate and manage change

Unfortunately, this is many times overlooked. Clear, timely communication doesn’t just happen. Spend time thinking exactly what needs to be communicated, when it should happen, and who will do it. This will benefit by getting your organization onboard faster and avoiding negative feelings due to people not knowing what’s going on. Remember, the larger the scale of change, the more effort you need to exert in order to make it happen. A proper change management plan will make your life easier by accelerating the pace at which changes are adopted in the organization.

What’s your view? Can you think of any other points to add to the list?


Claudia Salto
is an Assistant Manager at the KPMG Global Strategy Group. She has experience in Operations Planning, Procurement, Change Management and Process Improvement. She has worked for several international companies in industries such as Telecommunications, Retail, Consumer Durables and FMCG. In her free time, she enjoys being with her family and friends and travelling to sunny places that remind her of home.

Industrial B2B companies need to join the Data Race

data & analytics

I’ve noticed that Finnish companies, especially in the industrial sector, have only scratched the surface in utilizing the huge amount of data and information gathered from their manufacturing and service processes. The problem in most companies is that the potential of the masses of data is diluted to a small stream instead of a gushing waterfall – from both the business and Data & Analytics perspectives.

Digitalization, Data & Analytics, Big Data, leadership and management by information – whatever we choose to call it – is an inevitable evolution. It’s highly likely that you are dealing with competitors who have already passed you – or who are about to pass you with the boost that comes from harnessing information in a way your company has not.

From data underutilization to process optimization

Especially in traditional settings such as manufacturing – unit, batch or process – there is much to gain in taking the next step to utilize data better than your competitors. Chances are you are already gathering enough data – there just hasn’t been a good way to clean it, combine it and analyze it. With current technology and the right people, making your data truly work for your benefit may require smaller investments than you think.

Of course, much time and effort has been invested to create a basis for data utilization, but in my view these investments have increased the amount of information available, rather than improving how it can be used for business benefit. Especially in manufacturing, where data is already abundant, there is still untapped potential to increase throughput, optimize process bottlenecks, increase product mix profitability or reduce machinery and process downtime – among countless other uses.

Harness previously unavailable computing power

We’ve used an analytical, data-driven approach for decades. But as good as engineers are in creating analyses from different data sources, the human mind’s capacities are simply far too limited to fully understand the underlying causalities, relations and consequences in big data sets. However, currently available algorithms and analysis methodologies can process vast amounts of information from dozens of sources to highlight the concrete sources of business benefits, helping businesses to achieve growth and control costs.

Take action now!

The importance of Data & Analytics will continue to grow, but instead of joining the Information Race just for the sake of sounding “forward-thinking”, the business objectives must always be clear in mind. Check whether you or your company have done the basics:

  1. Consider and clarify your business objectives.
  2. Understand what data is available, what data is currently utilized, and where the gaps are.
  3. Create an agile plan to systematically grow your analytics capabilities, in-house or outsourced.
  4. Start pilots in specific processes to find the right approach and increase your efforts in a controlled manner.
  5. Implement changes that will arise as you understand your business better.
  6. Return to step 1.

Remember, don’t wait too long to accept the inevitable. Your competitors are already in the race, and so should you be.

Ville Huovinen is a Manager at KPMG Global Strategy Group. He has worked as a Strategy and Operations Advisor with Finnish and multinational companies for close to 10 years in various development programmes, including improving supply chain performance, designing and implementing management & performance systems, as well as building and running Program Management Offices. Outside office hours Ville enjoys cooking, cycling and travelling.

strategy forum

Mikä ihmeen disruptio?

Sekasorto, häiriö, hajaannus ─ yleisimmät käännökset strategiatyössä jatkuvasti esillä olevalle sanalle ”disruption”. Näillä sanoilla on jokseenkin haasteellista lähteä rakentamaan positiivista viestiä organisaatiolle. Suomi on valtavan rikas ja monitahoinen kieli, mutta tämä käännöstyö jättää toivomisen varaa. Positiivisen asian ympärillä me kuitenkin ehdottomasti olemme.

Tarkastelen disruptiota omassa roolissani KPMG:n toimitusjohtajana, ja tuskin koskaan asiantuntijatalossa tilanne on ollut niin mielenkiintoinen kuin nyt. Meidän on tarkasteltava omia prosessejamme ja hyödynnettävä kaikki se muutos, mitä esimerkiksi teknologian kehittyminen tuo tullessaan. Meillä on myös mahdollisuus jatkuvasti tarkastella, mitä eri toimialoilla ja eri yrityksissä tapahtuu, ja hyödynnettävä se markkinoilla.

Disruptio on positiivinen oppimisprosessi

Konsulttitalon tärkein resurssi on sen henkilöstö, ja tärkein muuttuja tämän osalta tällä hetkellä on henkilöstön muutosvalmius. Muutos on oppimista, ja oppimisessa vaikeinta on tunnistetusti poisoppiminen. Meille se tarkoittaa totuttujen rutiinien kyseenalaistamista, mikä puolestaan vaatii päivittäistä innovointia.

Uskon, että jokaisella on muutoshalukkuutta, jos se on vahvasti viestitty osana strategiaa. Organisaatiolle hyvä asia on, että ainakin meillä se tarkoittaa myös uusien, muutoksessa mukana olevien henkilöiden rekrytoimista. En yritä keksiä uutta suomen kielen käännöstä ”disruptiolle” ja kai nykyään vahvasti vieraskielinen sana kelpaa sellaisenaan arkikieleen. Itse haluan viestiä tämän ilmiön omassa työssäni, osana strategista uudistumista, eräänlaisena positiivisena oppimisprosessina.

Onko meillä muutosvalmiutta?

KPMG julkaisi juuri ennen kesää kattavan CEO Outlook -tutkimuksen, ja mielenkiintoisena yksityiskohtana nousi esille, että erityisesti pohjoismaiset toimitusjohtajat ovat huolissaan kilpailussa mukana pysymisestä: globaaleissa tuloksissa alle puolet (45 %) esitti kilpailun tuoman paineen erityisenä huolenaiheenaan, kun taas pohjoismaisista toimitusjohtajista jopa kolme neljästä vastasi näin. Toivon, ettei tämä johdu siitä, että meillä Pohjoismaissa ei olisi muutosvalmiutta, halua oppia ja hyödyntää uutta.

Tämän vuoden tuloksissa mielenkiintoista oli myös, että edelliseen vuoteen verrattuna entistä useampi toimitusjohtaja mainitsee yrityksen maine- ja brändiriskin yhä suurempana huolenaiheena. Tämä nousi kolmanneksi tärkeimmäksi riskiksi, vaikka vuonna 2016 sitä ei nostettu kymmenen merkittävämmän riskitekijän joukkoon. Löydöstä tukee se, että tutkimuksen mukaan myös kolme neljästä toimitusjohtajasta kertoo organisaationsa panostavan aiempaa enemmän luottamukseen, arvoihin ja kulttuuriin.

Maine ja brändi rakennetaan pitkäjänteisellä työllä, mutta disruptioiden maailmassa myös valmius ja uskallus nopeisiin suunnanmuutoksiin ratkaisevat. Onko meillä muutosvalmiutta, opimmeko jatkuvasti uutta ja onko meillä sellainen organisaatiokulttuuri, jossa uskalletaan kokeilla uusia toimintatapoja? Kyse ei ole yksittäisiin disruptioihin heittäytymisestä, vaan muutoksen mahdollistavasta kulttuurista.

Disruptiot osaksi strategiaa

Häiriöiden vaikutukset liiketoimintaan ovat jatkuvasti esillä keskusteluissa ja erityisesti niiden moninaisuus lisää toki myös epävarmuutta tulevaisuudesta. Tästä puhumme huomenna tiistaina KPMG:n järjestämässä Strategy Forumissa. Tapahtumassa suomalainen yritysjohto kuulee inspiroivan kattauksen näkökulmia organisaatiokulttuurista automaatioon ja strategisiin suunnanmuutoksiin.

Osana omaa muutostamme halusimme palvella asiakkaita paremmin strategiapalveluissa ja vastata erilaisten yritysten strategisiin ja operatiivisiin haasteisiin globaalissa kilpailussa. KPMG:n Global Strategy Group toimii nyt 37 maassa 1300 henkilön voimin ja Suomessa meillä työskentelee tällä hetkellä lähes 30 asiaansa omistautunutta asiantuntijaa.

Disruption takana piileskelee aina mahdollisuus. Otetaan ne yhdessä haltuun!

Kimmo Antonen on Suomen KPMG:n toimitusjohtaja.

Useful lessons from break-ups in business carve-outs

More people have real-life carve-out experiences than we think. For example, a family of four deciding to go through divorce gain more knowledge of carve-outs than just the process of ‘splitting up’.

This imaginary couple with two kids have done their yearly family life assessment (management review), have reflected on how they are not able to focus on the things that matter the most (lost focus), and have concluded that their long-term goals are too different to make it together (strategic misalignment). They therefore decide to split up, and carve-out activities begin.

Carve-outs in business can get just as intimate as in one’s personal life. In this post I will cover what to watch out for, and which valuable lessons should be put into practice in the business world.

Be prepared to get moving, fast!

Typically, carve-outs run on tight schedules that require focus, prioritization and a matter-of-fact approach to the issues at hand. There’s no time to sort out wrong moves and all areas affected must be re-organized. Regardless of whether the ‘split-up’ is personal or business-related, it can benefit from approaching the situation as it is, accepting it and making a game plan for the future, instead of having people fall into indecisiveness, emotional drama or arguments.

Negotiate good transition services agreements (TSAs)

Time pressure is often created by the length of transition service agreements by which the parent company offers required services to the carved-out ‘NewCo’ for an agreed period of time. Depending on the nature of the relationship between the Parent and the NewCo and how well the negotiations went, the agreement may not cover the required services for long enough. This will easily lead to loss of business continuity, and increased costs in either engaging third party service providers to cover the gap or extensive TSA overage fees. Needless to say, many people know that personal break-ups can be costly too, and therefore agreeing on offering ‘transition phase’ services such as cooking and fixing the spouse’s car can save a dime or two.

Ensure that tools and resources are available

In carve-outs, the technology challenges differ significantly from the ones in mergers. In mergers, the choice between whose systems are adopted for which purpose is crucial. Also, the effort to integrate information systems is significant and often extremely time-consuming. In a carve-out many, if not all, automated processes and tools will no longer exist – everything will need to be designed and built anew. This can be a hard truth to break to the people involved; for example, everyone may now need to report travel expenses manually until the new system infrastructure is built.

Compare this with the family-life situation of having to explain to the kids why there’s no PlayStation at dad’s, and mom only allows playtime after the room is cleaned…

***

Psychologically, carving out an integral part of an entity triggers a feeling of loss in humans. Furthermore, the loss of something already existing is harder to accept than the possibility of creating something bigger and better, as in the case of mergers. Therefore, whoever leads the carve-out transformation project must be a tough negotiator who can ensure a good foundation for the change, including reasonable TSAs and technology decisions. To lead the human side of transformation is a topic for another day.


Katja Laukkanen is a Senior Manager at KPMG Global Strategy Group Finland, and focuses on managing M&A, operational excellence and other transformation projects. Aided by a history of carve-outs of many sorts, she is now focusing on growing her family unit, and will return from maternity leave in 2018.

Shorter business cycles call for more agile strategic planning

SU running

The time from strategic planning to execution has shortened. Most industries have already come to recognise and accept the ever more rapidly changing environment they need to operate in. Many products and services have shorter lifecycles nowadays; hence a strategic plan written years ago has little relevance.

Most companies will therefore benefit from shorter planning cycles in order to respond faster to the changing needs of their customers, suppliers and other stakeholders. In practice, this translates into a need to revisit the set plans more frequently. With excessively long strategy review cycles, the worst case scenario is that companies will plan for a market that does not exist in the same format anymore, or will otherwise plan outdated solutions.

So what to do instead?

Instead of revisiting the set plan once a year after a burdensome, months-long financial analysis period, a more agile approach that allows for easy revisits is required. It is of utmost importance, therefore, that all assumptions put into the forecasts and planning are clearly documented. If these baseline assumptions no longer make sense, all plans will need to be changed accordingly. Any significant shift in the relevant markets should trigger a review of the assumptions. By definition, no-one can predict the “black swans” in the market, but there are often subtle trends and indicators that might become surprisingly important in a relatively short period. These can easily be overlooked, and hence the market should be reviewed with great sensitivity. This more rigorous market analysis might reveal opportunities that competitors have not yet seen.

This sounds like hard work, but there should be clear, short-term action plans on how to execute new ideas. The start-up communities’ approach of “failing fast” applies to any organisation in this regard, and could prove to be an effective way of quickly acting on new initiatives, testing them, and either implementing them or moving on. The key is to have strong leadership and a governance model that supports this. An agile planning culture is not quickly built and requires consistent effort and commitment from the management.

Keeping one’s eye on the ball

Although the set long-term goals and vision are still paramount, the plan on how to get there, i.e. the strategy, should be revised more often, mirroring the changing priorities in the markets. Moreover, the strategic documentation must be clear, easy to communicate, concise and measurable, as you need to be able to determine whether the set plans were met.

Execution is crucial for success

No matter how well the planning has been done, we all know that the ability to execute is what separates the wheat from the chaff. The true test comes when plans are put into action. This phase reveals whether the planned strategy actually works and how customers react to it – and customer feedback must be noted and acted upon, rather than blindly following preconceived views and expectations concerning the market reaction.

Business model plans only take you so far; the operational changes needed in organisational models, processes, IT solutions and so on, will reveal whether the organisation has the capabilities to execute the plan and what type of revisions are needed.


Suvi Unkuri
works as an assistant manager in the KPMG Global Strategy Group. She has 8+ years of experience in management consulting, including market entry strategies/market analyses, commercial due diligence work, and integration PMO engagements. In her spare time she enjoys participating in various sports, reading, and honing her knitting skills.