Five guidelines to tackle your debt and increase Business Agility | Deloitte Netherlands

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Five guidelines to tackle your debt and increase Business Agility

Business agility transformations cannot accelerate fully without tackling ‘burdens from the past’ that reside in technical and organizational debt

Initial steps towards increasing organizational adaptability in large organizations may require a number of 'tough' decisions that many have dreaded to make so far. However, over the past daunting year it became clear that companies that actually made the proper steps to tackle technical and organizational debt, were better equipped to adapt and outperformed competitors.

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In two previous blogs we described how technical and organizational debt impact business agility, and what the symptoms of these types of debt are. In this third blog we will look into ways to start tackling technical and organizational debt. Just like with financial debt, for large enterprises this is not a matter of ‘repaying’ debt as a one-time-off intervention. It requires an approach to continuously monitor and reduce these types of debt to its lowest possible levels.

During COVID-19 we have seen different degrees of adaptability, for example in the banking sector. Many banks were able to quickly provide large numbers of loans to entrepreneurs in need. Despite operating in a dynamic, complex and highly regulated environment, they were able to shift gears quickly because of their experimentation in the areas of FinTech and Challenger Banks in recent years.

In terms of making ‘tough’ decisions, these organizations have taken on significant modernizations of their legacy enterprise systems in recent years by moving to cloud platforms, introducing low code technologies, adapting clever outsourcing arrangements, reengineering the business case and creating partnerships in new ecosystems. The Deloitte Tech Trends 2021 Report defines these technical debt mitigations as ‘core revival’. This refers to a more revolutionary approach to tackle technical debt.

Some organizations realized there is even more to gain when combining these interventions to ‘revive the technology core’ with measure to address organizational debt. The article ‘Enterprise Adaptability: Designing Organization Around Our Best Impulses (Versus Controlling Your Worst)’ describes how these organizations make considered choices to redesigning their structures for ‘multi speed’. This means that work that requires flexibility and proximity to customers in (fast) changing environments is organized in adaptable teams. Work that mainly ensures efficiency (volume), stability, consistency, and standardization remains organized in functional teams. An optimal balance between the two ensures that the need for speed and flexibility can be met where needed, without losing control due to pressure for ‘speed everywhere’. Optimizing organizational structures for flexibility in combination with modernized technology (digital workplace) unlocks an environment that empowers employees to make them best at doing their work and serving customers at best.

The following five guidelines can help you realize a reduction of organizational and technical debt while increasing business agility:

1) Refresh the modernization business case and start measuring. Just like financial debt, the ‘payoff’ of technical and organizational debt requires a business case with KPIs to monitor and a plan to manage their impact. For technology debt a proper business case does not only look at traditional IT cost, but includes benefits around innovation, time to market and competitive advantages. An essential component of an effective business case are metrics that quantify your technical and organizational debt. These metrics articulate the direct or indirect business benefits that could be gained.

  • An example of a technical debt metric is the resolution time to fix newly released code, which can be an indicator of grown inefficiencies in the development pipeline.
  • Indicators of organizational debt are an excessive number of management layers, or management spans of control which can be too wide or too narrow. The latter for example causes inefficiencies when it leads to micro management.

2) Organize around value. Tackling your debt and improving business agility requires a holistic view. Thinking big is about end-to-end customer value delivery involving system thinking along a chain of IT components and teams necessary to autonomously deliver value. Start small within a specific scope in your IT landscape and a few agile teams to learn as effectively as possible. But never ignore the bigger picture in the area of IT architectural, structural coherence and resilience to gradually move towards a ‘fit for purpose’, customer-oriented organization.

3) Optimize autonomy. Autonomy for teams is increasingly important to experiment, especially in environments where complex, ‘wicked’ problems need to be solved. Autonomy can be increased or optimized for example through:

  • Designing clear decision rights to divide accountabilities between teams and roles that coordinate work across teams. One Norwegian telecom company is adopting trust-based leadership to increase team autonomy through what they call ‘tight, loose, tight’. Leaders are expected to be ‘tight’ on defining tangible results for teams, based on strategic priorities. ‘Loose’ refers to empowerment given to teams to figure out the best way to meet their targets. The ‘tight’ at the end ensures leadership follow-up with workers on their accountabilities, achieving results in an aligned manner. Autonomy implemented within clear ‘boundaries’ empowers teams to achieve results in a focused manner and strengthens complex problem-solving capabilities.
  • Arranging ‘decoupling’ in the technology landscape. A team that needs to deliver features to its customers with the right quality at the right time needs to have all IT capabilities and skills onboard. This can only be achieved with the right decoupling of IT components from the slow-moving rigid IT back-end. This autonomous delivery goes for both the ‘Change’ as well as the ‘Run’ of a delivered product or service, ultimately leading to near autonomous BizDevOps teams.

4) Make it as simple as possible but no simpler. Customer value delivery should be made as simple as possible, without oversimplifying things, for example causing security, stability or complicate risks. Complexities are often caused by cross-team dependencies and technology/organizational burdens from the past (see some examples in our previous blog).

  • A serious IT rationalization and simplification exercise is needed including the lift and shift of applications towards the cloud, introducing low code platforms, business rule extraction and refactoring, introducing of microservices and APIs.
  • Tackling organizational debt requires reducing the burden of bureaucratic constructs like ‘siloes’. However, a mindful approach is needed to ensure ‘flattening the structure’ does not become an all-or-nothing game. Different types of work require different structures, and careful redesign to avoid damage to work flows that operate highly efficiently already.

5) Own it. Too often, executives view investments in IT technology or restructuring of an organization mainly in terms of immediate cost rather than future value. This is shortsighted as in most organizations technology and organizational structures are long living, essential foundations that impact all business performance results. It is therefore a joint C-suite effort to tackle organizational and technical debt in a holistic way:

  • The CTO or CIO own the technology modernization business case
  • The COO owns the business case for organizational debt
  • The CFO owns new funding models that enable a responsible transformation
  • The CHRO owns the employee experience that supports workforce to get work done in an environment and ‘structure’ where technology drives high performance
  • Finally, the CEO connects all of the above into an aligned and continuous effort to ensure tough decisions are made when needed, balancing stability and (financial) risks versus opportunities to increase business agility

A holistic approach that makes technical and organizational debt a topic of continuous monitoring and optimization, up until board level, will help achieving better performance outcomes with business agility. Our blogs have shown this is not a one-time-off fix, but rather requires continuous effort, persistence and a strong business case to allow tracking of trends and outcomes. We hope that the tips shared in this blog post will inspire you to start or persist in experimentation. It will pay off, starting with brave leadership to take the tough decisions.

Read the previous blogs here

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Business agility transformations cannot accelerate fully without tackling ‘burdens from the past’ that reside in ‘technical and organizational debt’