This first article in our three part interview series with Antonio Queiroz, Chief Digital Officer at Euroclear focuses on the Foundational Elements for Industry 4.0 Transformations.
We discuss major changes in operations over the last decade and how these changes have now become “table stakes” for companies preparing for Industry 4.0 leadership.
The key topics we cover can serve as a checklist to assess readiness for a successful transformation:
1 | 2 | 3 |
Focusing on the end customer | Expanding accountability
| Pivoting and budgeting for success |
1. Focus on the end customer
Antonio began with a topic that’s well-known, but still often lacking in practice: the consistent Customer perspective:
“In the past, especially in IT and ‘back-office operations,’ your customers were your internal customers. IT would say: ‘I’ve done my project. I’ve delivered on my end goal.’ However, the end goal is to achieve something valuable for the end customer. If you haven’t reached that, you haven’t done your job.”
The key point here is to have all teams that work in one value chain focused on the same end customer perspective.
2. Expand accountability
Working consistently for the end customer requires practicing Antonio’s second point: expanding accountability.
“The biggest change here is that we need to look at a different type of accountability: You’re no longer just accountable for your part of the solution, you’re accountable for delivery to the end customer. That includes accountability for some parts that are outside of your control and an increased need for support from other teams to realize your deliverables. That is very challenging.”
A focus on the end customer means a team is no longer just accountable for the metrics and objectives under their control.
He explained, “Often, you’re changing from single, hard metrics such as cost and leadtime to more complex objectives such as customer satisfaction/engagement and sustainability. In the past, if I was just managing on costs and on-time delivery, I could break it down mathematically. Now, if my key objective is to drive sales through improved customer satisfaction, there might be no easy mathematical connection between my Net Promoter Score and my sales volumes. So, I have to trust that if I take the right actions to drive NPS, I will see a sales uplift.”
Added to this is the fear many leaders have in expanding accountability: Will it be so broad as to seem vague and result in no accountability at all?
Antonio offers a three-step process to getting to expanded accountability:
“First, you need to agree on what good looks like, what is the target state you want to reach. You need to do this in a very precise way and be sure there is a common understanding of it. Building full alignment based on true understanding of the target state is key.”
“Second, you need to define metrics (like OKRs or SMART metrics) that match this target state. These might include metrics that the team cannot directly influence. But it’s critical that everyone is clear on how the team will measure progress to the target state. This way, even if the team can’t directly influence the metric, there will still be no doubt as to whether we reached our target state or not. With the data points provided by these metrics, leaders can then help teams course correct. This is how expanded accountability becomes actionable.”
“Third, and most important, is agreeing on our process and building the right culture: how will we review progress and work as a team towards the target state?”
“If something doesn’t work, you don’t allow anyone to pass blame. You look at all angles. Maybe the requirements weren’t right. Maybe we need a different solution. The metrics might not capture your full objective, but they show how close you are to the objective."
3. Pivoting and Budgeting for success
We went on to identify the positive impact that expanded accountability can have on cost savings. Antonio explained, “Large organizations almost never stop projects before finishing the full budget, even though most people readily agree that over 30% of projects fail. Once organizations get so big that they can absorb the waste of continuing projects that are failing, they begin to accept inefficiencies by design.”
He elaborated, “By contrast, in the start-ups I worked in: You try something, it doesn’t work out, you stop it, you pivot and try something else. These smaller companies don’t have the resources to continue spending on things that don’t work.
Pivoting is critical for both organizational learning and cost savings:
Learning: Your team can only learn from failure if they stop to recognize the failure.
Cost savings: The habit of pivoting can stop “zombie projects” sooner than later.
However, pivoting requires one critical shift in budgeting: “You have to stop budgeting based on last year’s budget. If I know that if I don’t spend my $3M this year, my budget for next year will be lowered by $3M, then, of course, I’ll spend my full budget. If you want to foster true honesty and true pivots, next year ‘s budget should be based on what I will deliver next year. The fact that I gave back the $3M should be rewarded.”
While the themes that Antonio and I discussed might seem straightforward, we’ve both seen many companies unprepared to implement them. We’ve also seen how powerful these ‘small early steps’ can be.
Key takeaways:
Leverage a shared end-customer understanding to drive Operational Excellence across the value chain.
Build expanded accountability through clear communication on target states, metrics and process.
Capture fast learning and cost savings through rapid pivoting. Enable pivoting through ‘budgeting for success’.
Next up:
Strategies for Managing Technical Debt.
Whilst it shouldn’t be a reason not to start the transformation, technical debt should be managed carefully.
Key success factor is collaboration between business and IT focusing and targeting the same objective/goal in term of business outcomes adressing our customers needs to support our company profitability and future evolution.