In 2017, many factors contributed to the significant growth of OVH: hiring in Europe; the acquisition of a company in the USA; the construction of 14 new data centers; and the start of activities in APAC. In fewer than 18 months, we doubled the number of employees from twelve hundred to twenty-five hundred. I don’t recommend scaling this fast!
OVH is a digital company in that we use software to deliver the service ordered by the customer. Like other companies, we serve our customers in many ways, but the actions of our employees do not have the same why. Toward the end of 2017, I realized that many who joined us did not understand what the unique qualities of a digital business are. In other words, they didn’t get the why. To train our teams quickly, we had to create simple tools that incorporate principles, tools, and often common sense to educate everyone about the fundamentals of a digital company.
One of the tools I developed has the acronym “BFLNT”. The name is not very sexy but it gets the job done. I proposed using this tool to examine the entire OVH organization to answer some simple questions that must be asked when recruiting in a digital company. Some of those questions are:
- When recruiting new teams, how do we ensure that we are still building a digital company?
- How do we know that we are focusing our efforts in the right place?
- How do we describe the mission of each employee?
- What is involved in the transformation of a business into a digital enterprise?
- What is the impact of this transformation on the business model?
This is not the only framework for defining the structure of a digital enterprise. If you know of other similar tools, please do not hesitate to share them on Twitter @olesovhcom
B: BAU = Business as Usual
In BAU, we consolidate all the projects, tasks, and daily actions needed to execute the processes necessary to deliver the service sold to the customer. These business processes remain constant over time.
The Digital Revolution consists of digital companies conducting BAU through the use of machines powered by software. BAU processes are identified in the context of an ideal company, with no glitches or bugs. Software, robots, drones, and artificial intelligence are used to carry out the processes, based on data. In this type of futuristic and ideal digital enterprise, no one is employed to deliver the specific services ordered by the customer. BAU processes have been so carefully thought out and automated that there is no need to have employees do this work.
Let’s take a real-life BAU example: initiating a bank transfer. Before the Digital Revolution, the customer spoke to a teller and signed documents to initiate the transfer. Then the bank executed a series of processes, using off-shoring for many of them.
Today, with one click of his or her smartphone, the customer can initiate a bank transfer using the app or software created by the digital bank. This is classic BAU, with no human intervention. Similar types of transactions are possible in doing business with hotels, insurance companies, movie theaters, and purchasing music.
By reducing the costs of BAU, improving productivity, and reducing costs for customers, software is propelling digital companies and drives the Digital Revolution. Customers also improve productivity by initiating business themselves through mobile apps and websites. Behind the scenes, companies use robots, drones, and will soon use autonomous container ship and cars to execute client orders.
A comparison of standard vs. digital company business models shows that in a standard business model, the cost of BAU is proportional to income. In a digital enterprise, BAU is a fixed cost. Digital companies continue to invest in and to use software, robots, drones, and anything that can be automated in order to further reduce costs. Thus, a digital company recruits employees not to carry out BAU processes, but to further automate them.
When I started OVH, I immediately wanted to use software everywhere. Why? First, I was born with a computer in my hands and wanted to make a box where I could code crazy stuff. In addition, I started OVH with nothing. In software, I saw a solution to do much with little and to lower costs for clients. From the beginning, we coded all the business processes. Today a customer can still go to the site, order a service, pay, and the software will configure the infrastructure and deliver the service. There is no human intervention. Historically, our prices have been cheaper because of this software attitude in our DNA.
However, the technology doesn’t exist that can automate everything, so outside of our core business, the rest of BAU is not (yet) fully digitalized , though software, robots, and automation do support each of the following areas of our work. Support services answer our customers’ questions about the use of products and services. The sales reps listen to the customer to understand client needs in order to select the right product. Factory teams assemble servers and ship them to data centers. We haven’t digitalized the building and expansion of our data centers. The finance, human resources, and legal teams are needed to support the activity of OVH. So even in digital companies like OVH, BAU with no human intervention is not (yet) true. We know that market pressure to offer even cheaper, more scalable products will keep us always questioning ourselves. OVH is committed to further industrialize, automate, develop, and innovate in order to reduce the cost of BAU and thus reduce prices for our customers.
The mindset of the BAU teams is quite schizophrenic. On one hand, teams must be involved in the execution of and performance of daily processes. On the other hand, these teams must deliver quality work that identifies improvements in the tools that will simplify their work, reduce their workload, work smarter, or even eliminate their jobs. Crucial to this process is a work environment in which perseverance in the present is balanced with an eye to the future. We are constantly questioning and improving.
— Octave Klaba (@olesovhcom) March 23, 2019
BAU is based on the ideal company, but we know that a perfect world doesn’t exist. For this reason, I’ve created the other 4 features of BFLNT:
- F: FIX
- L: LEAN
- N: NEW
- T: TRANSFORMATION
Because it’s impossible to deliver BAU glitch-free, FIX projects, processes, and teams are in place to solve unforeseen problems.
In OVH, our RUN teams work on 2 missions 24/7 :
- Monitor customer-ordered, BAU-delivered services and software FIXes, which automatically correct bugs in BAU software. RUN teams also intervene when FIX software doesn’t fix bugs.
- Respond to customers reporting incidents missed by monitoring. Even the best monitoring is not able to imagine all potential problems.
We continually improve our monitoring, software FIXes, and BAU software. The post mortem process is in place to eliminate recurring problems. Failing to perform this process correctly may lead to the additional hiring for FIX and so increase the cost. Or reduce the quality of the service.
Because bugs will always exist, it’s a mistake to look for savings on FIX and try to reduce its cost to zero, which is impossible. In the ever-changing digital world, clients may accept the occasional glitch, but non-functioning software is unacceptable.
American companies probably understand the importance of FIX more than European companies do. Substantial investment in FIX in these companies is due to the FIX in their DNA. Because of the huge cost of FIX, American digital companies seek volume and expansion into the world market as one way of lessening the impact of FIX spending on the business model.
With the mottos never let go and never give up, the FIX teams tenaciously persevere. They spend every day focusing on identifying and fixing problems. Not everyone can handle this kind of work. The character traits we seek for those on our FIX teams are positivity, joy, perseverance, courage, and a strong service orientation.
L : LEAN
LEAN in the digital context involves improving the effectiveness of the BAU software’s operation, in the same way that streamlining work on assembly lines is done in manufacturing. These are LEAN’s three priorities. First, LEAN can take the form of refactoring code, optimizing databases, and changing programming languages, thus executing the software faster with fewer computing resources. Second, LEAN also improves the code to fix the bugs discovered by FIX. Finally, LEAN teams also develop the ideas that come from BAU.
LEAN team members are meticulous perfectionists who work on those rare instances of problems that are certain to happen. These teams also consider general improvements to services, as well as specific challenges, such as how best to deliver services to customers in 10 seconds vs. 20.
The rationale for making such small incremental improvements in speed is not a defensive because our competitors will do it. LEAN teams passionately and constantly push against their own limits in what Simon Sinek describes as The Infinite Game. It is a sport that has no limit.
Risk-taking is in the DNA of each company. NEW for digital companies typically means developing new code to offer customers new features, new products, new services, all in the service of meeting new customer needs.
But NEW is not only about writing code. NEW must take into account customer needs and the business model, which includes price, cost, volume, and the size of the market. Once we’ve considered those factors, then we’ll focus on the software. NEW teams require marketing, technical, and financial know-how in developing new products.
NEW teams collaborate with customers in rapid cycles of iterative processes. They test ideas with customers, let go of the ineffective ones and run with the ones that work. Developing customer relationships based on trust and collaboration is crucial to this process.
Compromise and disruption are also part of the NEW Team portfolio. The client always wants 1+1 to equal 3 and we need to deliver, which requires thinking outside the box. An example of OVH success in this area involves the cooling of the data centers that we developed in 2003. From the outset, we were convinced that we’d find a way to cool the data centers with water, similar to the way liquid cooling was developed to cool car engines. We simply told ourselves it was possible and then made it happen. This example illustrates that digital companies don’t often create truly new inventions. What we’re really doing is adapting existing technology in new contexts. This is the true meaning of the word hack.
The arrival of AI is disrupting the software industry in many ways. NEW and LEAN code software AI which “automates” the developers. Inception. This is a great topic for a future blog post.
Business TRANSFORMATION is a well-known process. Sometimes TRANSFORMATION is necessary because the company isn’t working effectively and so has to be restructured. Sometimes TRANSFORMATION is needed because the company is highly successful and growing, so it needs to transform processes and the organization in order to work effectively on a larger scale.
In digital companies, TRANSFORMATION to flat, transversal models, in which organizations use collective intelligence, are more common. These companies don’t have the luxury to pay for organizational silos, ego battles, or slow execution due to a lack of information. Digital companies have survival in their DNA. Picture a living entity designed by Mother Nature in which the organs are autonomous and also interdependent. Thought is given to including men and women in the company from diverse backgrounds, countries, and ways of thinking, and allowing them to work together effectively. The result of millions of years of Darwinian evolution makes these companies more organic, more humane, and more robust, which helps them to survive.
TRANSFORMATION teams share the never give up ethos, but work in a quiet and empathetic manner. They specialize in the process of transforming the company. Transforming the culture is the first step and is achieved by listening, explaining, and providing meaning, thereby helping employees to go through the process of TRANSFORMATION. They encourage and reassure employees while maintaining focus.
Digital businesses already incorporate LEAN, which provides the opportunity to transform BAU. Because these go hand-in-hand, the culture will also need to transform. Once BAU is automated, the center of gravity of the company must switch to data, which will, in turn, change the organization, its functioning, and the roles of the individuals in the company.
Building BAU, FIX, LEAN, NEW and TRANSFORMATION teams requires understanding psychology, the deep motivations of all involved, and finding the best talent who can work together. At OVH, about 50% of the teams work on BAU, 10% on FIX, 25% on LEAN, 10% on NEW, and 5% on TRANSFORMATION. Our goal is to move to about 40% on BAU, 10% on FIX, 30% on LEAN, 15% on NEW, and 5% on TRANSFORMATION.
LEAN and the NEW teams are expensive. Companies have to recruit employees who develop software and need to transform the business, its organization, and culture. These are investments in current production tools for a better future. If one thinks long term, these investments are indispensable. And there’s a lot of good news. First, setting up LEAN and NEW teams allows a company to requalify all these direct investment costs. At the level of budget, all these OPEX can be invested as CAPEX and amortized over 5 years. This shows that the business has remained profitable despite a profound internal transformation. However, this does not change the cash flow situation; employees still must be paid. Increasing capital may be necessary in order to have the funds for investing in LEAN and NEW and thus reduce the costs of BAU. There are many players in the market to assist with this. Profitability will be increased and this is good in the long term.
Using the ecosystem model of interdependence will further reduce the costs of BAU more quickly. The competitive edge that American companies have over European companies is often thanks to speed and their ability to take risks. In risk-averse Europe, we are cautious, prefer to go slower and stay in control. Compromise is not actually used in Europe and one prefers to think in a binary way, in good vs. bad. In Europe, we have not yet seen that solutions come through trust and working within the ecosystem.
I remain convinced that neither a company nor an ecosystem can succeed without trust, which cannot exist without passion. A company and an ecosystem are by definition organizations built on foundations of human concerns. Bonds of trust are created in part through an understanding of one’s own limits and the willingness to be vulnerable. However, it’s not easy to create organizations in which vulnerability is a sign of maturity and not an admission of weakness. This is not the typical mindset employees bring to work. In fact, the opposite is often true. It’s imperative to know how to create an environment that fosters trust and encourages women and men to want to work together. Trust is the basis of a company, a reliable, profitable long-term ecosystem.
We are definitely living in passionate times!
Founder & Chairman d’OVH