The Rise of the BTO Function

According to a McKinsey article, "Why most digital banking transformations fail—and how to flip the odds," 70 percent of transformations fail. This is true in banking and the industry at large. This post explores an operating framework that improves the odds of transformation initiatives.

The failure modes cited in the article - poor planning, silos, technical debt, lack of talent, culture, and slow pace of change are well reasoned. But I see these as symptoms.

Business, Operation, and IT functions are often charged with the execution of transformation initiatives. The challenge is that these functions are built for tactical, daily execution and have difficulty rising above the trees to slot in strategic projects. I posit that this is the root cause of the failure reasons listed in the article.

In my experience, organizational design is the missing link. A part of the organization must be capable of facilitating meaningful change and driving projects while at the same time acting like Switzerland with the rest of the company.

So to create this engine, I often recommend clients spin up a Business Transformation Office (BTO) with direct oversight from the C-Suite. With marching orders to facilitate planning and execution above the fray of the daily grind.

I use the word facilitate purposely, as the strategy and initiative ownership should extend to the core business, leadership, operational, and IT functions. The BTO empowers change in an organization but should avoid power. Enrollment from the rest of the organization is critical to success and can be poisoned if the BTO is perceived as a 'black box.'

Further, I believe it is essential to consolidate shared and project-oriented functions under the BTO. Four standard components in this structure include - strategic planning, data & analytics, PMO, and Business Intelligence. These support services benefit the entire organization and work better in harmony illustrated in the opening image.

Strategic Planning - Transformation initiatives are usually outcomes of a strategy or from the BOD. Yet depending on where planning lives, it is often not holistic or realistic, which leads to idealistic strategies, cost overruns, and missed milestones. Strategic planning working with PMO, data & analytics, and BI aligns the teams on what is achievable with proper checks and balances. Additionally, the PMO understands technical debt and the cost of unwinding, which should be built into planning.

Data & Analytics - I advocate for self-service data & analytics infrastructure. For example, this may mean 90+ percent of reports, tables, and dashboards are already built (this takes time). And leaves the 10 percent not covered as executive requests, support for strategic hypotheses, or bespoke analyses. All are types of projects and can be managed with the same prioritization and management motions as the PMO.

Business Intelligence - This is a catch-all for the customer, competitor, product, and other research and intelligence capabilities. BI is usually a combination of routine reports and projects. Projects which can follow PMO SOPs and platforms. And like D&A, BI generates inputs for the strategy and supports PMO initiatives.

PMO - The PMO might be the most undervalued group in an organization. This group is the facilitators and problem solvers that keep initiatives on track. Whether an organization is Waterfall, Agile, or Hybrid, the personnel should be in sync with the strategy, BI, and D&A teams. Further, by not having the PMO in Business, Operations, or IT, the organization avoids siloed behaviors (and pet projects).

The real value of the BTO structure is to create space in a company to activate strategies and company-wide initiatives like digital transformation. It is also a luxury of larger organizations. But even with mid-market, small BTOs can punch above their weight.

Another point, the PMO project teams aren't exclusive to the BTO. Project team members are curated from functions across the organization. Having the BTO nurture these projects helps ensure accountability, identify roadblocks, and maintain momentum.

In summary, most digital transformations fail. The reasons for failure are not surprising for anyone that has worked on transformation projects. And creating a BTO is not a cure-all. However, a BTO structure enhances a company by extracting personnel to concentrate on transformational initiatives. Thus improving the probability of success. At least, this is my experience.

What is your experience with BTOs? If you have experienced failure on transformation initiatives, what were the reasons? And vice versa, what were the drivers of success?

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