The main topic of the evening was the transformation story of Achmea, which started about 8 years ago. At the time Achmea had grown rapidly into a large organisation as a result of several mergers & acquisitions but had now formulated the ambition to operate as one company in the future. This required a major transformation where both business and IT needed to collaborate to simplify and merge the product portfolio and different IT landscapes. And show added value of the transformation in terms of speed, cost and competitiveness.
The results are impressive. While Achmea simplified their operating model and structurally reduced their operational cost they rationalized their IT landscape and structurally decreased the number of legacy applications. Rationalisation went hand in hand with a major shift in the run versus change cost (now about 50/50). And in recent years business-IT value chains where further accelerated by a successful agile implementation using SAFe.
This story energized us, and we would like to share 4 main insights of their transformation.
Build a strong IT backbone first
Given the M&A history the first key step of the transformation is to develop an integrated IT architecture which is capable of supporting the business in the long term. This is a very difficult phase in the transformation since most of the required changes don’t lead to immediate business results, but are essential to develop an IT landscape that is viable and competitive in the long run. To use a simple metaphor: imagine that each of the Achmea brands up to that point had their own car. The current transformation required to disassemble the engine of each of those cars and rebuild them in a single, far more powerful vehicle that can fulfil all the business needs much quicker and more efficient. However, during the phase of rebuilding the options to support immediate business needs are limited.
A key success factor in this change is the design of a clear target architecture that basically describes the specs of the new engine. Implementing such an architecture is difficult since architects struggle with communicating their designs clearly and combined with a lack of mandate, they are unable to get across their message to the business. Moreover, the business struggles with understanding the architectural vision due to the conceptuality and limited understanding of IT. Combined this usually leads to extensive architecture slide-packs with limited impact and frustrated architects and business stakeholders that both feel misunderstood.
To create an environment in which the target architecture was respected in the organization, business and IT made the commitment that IT was responsible for and had the mandate to decide on organization wide decisions regarding architecture, including technology choices and infrastructure. For an organization that had grown in the past years based on M&A with highly decentralized decision making regarding architecture this involved a major shift. But this shift was needed to make the first step in the transformation: establish a solid and future proof IT backbone.
In combination with this change towards a centrally steered architecture several other key steps were taken. For example: limiting the number of externals and always ensure internal people are on key positions, a major people development program that enabled people to make the step towards new technology, rationalizing the number of datacenters, clarifying roles and responsibilities and an investment in motivation and engagement in this first difficult phase of the transformation. In parallel with these steps in IT, Achmea also reduced complexity in their business organisation. For example: aligning propositions and powerbrands, standardizing on white label insurance products, standardizing processes, streamlining the organisation into value chains of product and distribution. In this way business has helped IT in it’s transformation and vice versa. It took a lot of effort and patience to get to the second phase of the transformation, but the result was a highly efficient IT backbone that was now able to focus much more energy on supporting business needs.
2. Start with real collaboration at the top of the organization and build an equal basis between IT and the Business.
Increasing business agility starts with effective collaboration at the top of the organization and a shared vison on both the direction of business and IT. When business and IT are not aligned, ambitions concerning IT have less priority and are thus less likely to be executed. For the board of an organization to make thoughtful decisions concerning IT, sufficient knowledge about the IT benefits, consequences and implications is crucial. If people don’t understand the consequences of decisions, this usually results in a short term or narrow focus that in the long term damages the organization.
At the senior management level a lot has been invested in knowledge building and develop change minded people who understand the importance of business and IT working together on an equal basis. For example, every year Achmea organizes summer schools where IT trains their own executives in IT literacy with the aim to make knowledge of IT equally important for managers as knowledge of finance. This is a beautiful example of how an organization can bridge the gap and create better collaboration between business and IT.
3. Organize decentrally what you can, centrally what you must
With a strong IT backbone in place and a better understanding and alignment of business and IT at the top, it is possible to reorganize IT as close to the business as possible without falling in the trap of creating more IT complexity. Hand in hand with a rationalization of the company operating model IT developers were reassigned to business units while still functionally reporting to the CIO. This enabled the developers to get much closer to the business while IT maintained full control of the overall architecture and ensured it didn’t spin out of control as a result of the decentralisation.
One of the business leaders of Achmea explained proudly that if you walk around his department you cannot separate the people from IT and marketing. There are just agile teams closely collaborating to improve customer experience and business results.
‘If you walk at my department you have no idea who is from IT and who is from Marketing.’
4. Implement the Agile way of working at least partly bottom-up
Before starting with Agile Achmea had put major effort in implementing Lean across the organization. The Lean methodology already laid the fundament for the Agile way of working due to the implementation focus on both the method and the behaviour. The behavioural components from Lean turned out to be beneficial for the transformation towards the Agile way of working. But Achmea had also learned that implementing such a method with too much of a top-down focus didn’t lead to sustainable business outcomes.
With Agile the teams were encouraged to first experiment with themselves and ask for help when needed. This worked well to a certain point where the implementation required more cross-team and cross department coordination and alignment. At this point the bottom-up approach was reinforced by an overall program management approach. Recently, the SAFe framework helped Achmea in scaling agile to the entire organization.
The evening offered inspiration and a way to connect with each other. During the evening we had enough time with all Technology leaders to reflect on the story together and share each other’s challenges and successes. Next autumn we will organize the third CIO Inspiration Dinner. Will you be joining next time? If you are interested in joining, feel free to get in touch with Floris de Bruin.
Author: Floris de Bruin