This diagram illustrates three main things
Firstly, it illustrates (in red) what happens when Transformation Debt™
is not exposed and managed. This is typical of most Enterprises.
Secondly, it illustrates (in green) what happens when Transformation
Debt™ is exposed and managed.
Thirdly, it shows (in orange and blue) the savings produced when
Transformation Debt™ is exposed and managed vs when it is not exposed and
When Transformation Debt™ is Hidden and Not Managed
The solid red line illustrates the cumulative Transformation
Costs of an Enterprise that does not expose
and manage Transformation Debt™ and is typical of many Enterprises. The light
red line shows the resulting Transformation Debt™.
Cumulative Transformation Costs rise, but very slowly, while
Transformation Costs are kept low. During this time hidden Transformation Debt™
is slowly building up…
When this hidden Transformation Debt™ reaches a critical
point (akin to when the pile of dirt that is swept under the carpet has become
too big to ignore any longer) a very large and abrupt rise in Transformation
Costs is required to deal with it. Often referred to as “getting the car out of
the ditch”, its focus is usually very tactical - short term and only concerned
with dealing with the major issue that cannot be ignored any longer.
Having spent a large amount of money on Transformation over
a very short timeframe, the focus then tends to be, once again, to keep
Transformation Costs low and therefore we return to the low level of
Transformation Costs we saw before and the whole process repeats itself.
Not exposing and managing Transformation Debt™ is
Low Transformation Costs while hidden Transformation Debt™ builds
Followed by large, unplanned and abrupt Transformation Costs when
things get too bad…
Causing unpredictability, which leads to instability, which means
management is not in Control.
These large, unplanned and abrupt rises in Transformation
Costs, can often occur at the same time that an incumbent CIO is replaced by
another! This is obviously not good news for the CIO, but more importantly is
not good news for the entire Enterprise.
A cynical view might be this.
From the point of view of giving prospective Enterprises a
feeling that someone senior is a good hire, what could be better than for a
previous Enterprise to have been fantastically successful while they were there
and then fall apart when they left? What could be better than to say “While I
was there, they were growing well and highly profitable because I kept
Transformation Costs low. When I arrived they were in the doo doo, but I turned
it around! Then, after I left, without my guidance, Transformation Costs
increased and profits fell. It all fell apart”. Of course the reasons they
managed to keep Transformation costs low was because they were raping the
So, what could be a perfect way to engineer this outcome? Is
there one thing that could be done to achieve both of these things? Can I hit
two birds with one stone?
The answer is yes you can.
All you need to do is rape the future of the Enterprise by
ignoring Transformation Debt™. You will then guarantee short term benefits
while you are there (for which you will be applauded and given large bonuses
because everyone loves quick wins) at the same time as guaranteeing it will all
fall apart when you leave.
But that’s not the best part. The best part of it is, you
can achieve all of this by effectively doing nothing!
(Is this the definition of Management Nirvana?)
Not exposing and not Managing Transformation Debt™ is like
boom and bust in the economy, and we all know the effects of boom and bust!
When Transformation Debt™ is Exposed and Managed
The solid Green line illustrates the cumulative
Transformation Costs of an Enterprise that does
expose and manage Transformation Debt™. The green dotted lines shows the
resulting Transformation Debt™.
Cumulative Transformation Costs rises more steeply than
before, as management decisions release resources to keep Transformation Debt™
Transformation Debt™ does build up but this debt is exposed
and managed and does not get as large as before, purely because we are managing
it and spending money wisely.
Since we are managing Transformation Debt™, increased
Transformation Costs to reduce it can be planned ahead, so that when debt
reaches a critical point we can reduce it in a controlled way.
In addition, while this increased Transformation Cost solves
any short term problems that may be evident it is also aligned to longer term
After the increased Transformation Costs, we again return to
a more moderate level of Transformation Costs and the whole process repeats its
Exposing and managing Transformation Debt™ is characterised
An Increased level of Transformation Costs while Transformation
Debt™ is exposed and managed…
Followed by moderate Transformation Costs when planned…
Providing predictability, which leads to stability, which means
management is in Control.
Exposing and Managing Transformation Debt™
relieves this boom and bust investment cycle. The downside is that it requires
an increased initial investment in the short term. The upside is that it
requires lower investment over time and prevents Transformation Debt™ from spiralling out of control.
“If you don’t control your Transformation Debt™, it will
Savings Produced When Transformation Debt™ is Exposed and
Looking at the two final lines - Blue and Orange. They
essentially answer the question:
“If I utilise Transformation Debt™ how much money will I
The lines are shown negative as negative = savings. Positive
The Orange line shows the direct savings made by managing
Transformation Debt. Essentially it is the Green line minus the Red Line.
Although the Orange line does show savings over time, the important thing to
note is that it costs us more initially. It is only when the first “panic” is
averted later (because we managed Transformation Debt™ over time) that the
savings kick in. This initial increase in costs is what needs to be “sold” to
The Blue line shows the savings of the Orange line added to
the additional indirect savings we make by not incurring as much Transformation
Debt™. Essentially it is the Orange line plus the difference between the light
green dotted line and the light red dotted line.