Transformation Success – how to achieve it
This is part 2 of a 2-part series on transformation failure and what you can do to improve your chances of success. In part 1 we talked about the six key reasons why 70% of transformation programmes fail and therefore the traps that you need to avoid. In this article, we talk about the nine transformative actions that you can proactively take to shift the scales towards success to give you a fighting chance of being one of the 30% of transformation programmes that successfully achieve their aims.
It’s important to note that these transformative actions are not merely responses to the six reasons why transformations fail. Instead, they should be considered as actions to take in addition to those things that you should also avoid.
Let’s look at these.
#1 Transformation Starts with Why
It’s critical to know why a business needs to transform or why it might need to transform. Leaders need to, regularly, ask themselves ‘why’. Why is our performance dipping ? Why are sales falling ? Why are margins getting slimmer ? Why are new entrants taking market share away from us ?
The mobile phone company, Blackberry was incredibly successful with their phones… until Apple launched the iPhone. When they saw their sales falling, did they ask why ? If they did, they would have realised that the iPhone represented a major disruption that challenged the dominant design of the time – which was phones with key pads. The iPhone, not only, introduced touch-screens but also the idea of apps. Yet, Blackberry continued with their outdated frame of reference and what they perceived to be the dominant design and history has rewarded them for their choice.
Another very successful company was Blockbuster, the video rental company, until Netflix came along. Did they ask the question : “Why are new entrants taking market share away from us ?” No, because they didn’t see them as a threat. They also didn’t see the threat of on-demand streaming technology and history has rewarded them for their myopia.
Once leaders understand why they need to transform, they need to communicate this to their workforce, in a way that makes sense to them. In our experience, most people are not stubborn objectors to change, most welcome it once it’s explained and that explanation makes sense to them.
Although the threat may come from the outside, through technology disruption, new competition or changes in consumer behaviour, we firmly believe that transformation comes from within an organisation. We have heard a lot about antibodies during 2020, well organisations have antibodies too, and they will fight unexplained change. This is not an irrational action but a biological one. Neuroscience shows us that when we understand how the brain works, we can work with the psychology, not fight against it.
Leaders need to regularly ask themselves if and why they need to transform. If they do, then they need to incorporate that ‘why’ into a meaningful change story that is honest, authentic and gives meaning to their workforce. This becomes the platform from which to build the dialogue with their workforce which is the one of the most important tools the leader and his/her team have.
#2 Transformation Requires Strategy
To transform your business, you need to be clear about what it is that you want or need to transform into. This requires a clear and compelling transformation strategy that’s underpinned by a thorough understanding of why and how your ecosystem is changing and your response to it both in terms of your business model and your operating model.
Let’s say you’re a car manufacturer and you know that the age of autonomous electric vehicles, or self-driving electric cars, is coming. The potential implication is that fewer people will want to own their own car and favour on-demand transportation (think Uber without a human driver). Will your strategy be to continue to make and sell cars to individuals or do you consider a different business model where, perhaps, you look to become an on-demand transportation provider.
The point is, transformation demands a transformative strategy, one that will change your company into something different. If your eco-system is changing, it is unlikely that doing what you’ve always done will be an effective response. Think Blackberry and Blockbuster !
Once you’ve worked out the strategy, the ‘what’ that goes with the ‘why’ you need to marry these up in a compelling change storythat resonates with your people.
When it’s time to transform, leaders need to take a bold step to reimagine what they need to transform into. This demands a transformative strategy, not timid incremental tweaks that result in a slightly better version of what you are and do today.
#3 Transformation Demands Leadership - The Role of the CEO
Peter Drucker claimed that “culture eats strategy for breakfast”. We agree, and would add “for lunch and dinner too”. The true scale of a corporate transformation requires leadership from the top of the organisation. That leadership not only needs to understand why the organisation needs to change and workout the appropriate transformative strategic response, they also need to commit themselves to lead the transformation.
The CEO needs to understand the difference between being involved and being committed. The CEO is accountable, yes!, and also responsible to the workforce, customers, shareholders, and wider stakeholders for achieving the outcomes that will deliver the strategic goals. The CEO needs to be the ultimate role model and create the environment that will enable the transformation to thrive. Other board members also need to support the CEO in this task. Delegating to senior executives or external consultants does not constitute commitment. This is where the two-worlds issue of running day-to-day operations and leading the transformation can be resolved. If the CEO and board own the strategy, and the transformation is the means by which this will be achieved, then there should be no debate. The CEO and the board need to trust their senior managers, who are closer to the operation to run the day-to-day while they lead the tougher, higher risk of delivering the strategy.
The CEO and the leadership need to fully commit to the transformation and personally lead their organisations through it. In doing so, they need to role model the behaviours that will define and shape the future culture of the organisation and create an environment that ‘pulls’ the transformation in.
#4 Transformation is Fuelled by an Engaged Workforce
Most would agree that an engaged workforce is a more productive workforce. But do we truly understand what engagement is? Town hall meetings, PowerPoint presentations, the annual staff survey and communication plans in themselves do not constitute engagement.
To achieve engagement there must be dialogue and this must be two-way. We mentioned the change story earlier, which should be crafted to ensure relevance and resonance with specific groups or teams. One-off or sporadic and generic communications rarely succeed in creating meaning for individuals and taking this approach is unlikely to achieve the levels of intrinsic motivation from the workforce necessary to transform.
Listening is imperative. Leaders need to listen to their people and be guided by their response. There’s no point pushing change onto people, especially if they don’t believe that the changes will work. As Steve Jobs once said “It does make sense to hire smart people and then tell them what to do. We hire smart people so they can tell us what to do.”
Nowadays, there are digital tools readily available on the market that can help the leadership engage in an ongoing dialogue with their workforce, even if that means thousands or hundreds of thousands of people !
Transformation is fuelled by an engaged workforce and leaders need to engaged them through honest and authentic dialogue. That dialogue needs to be two-way and listening is imperative.
#5 Transformation Recognises the Truth - Mind the Gap!
One thing that has been consistent in all the transformation and change programmes we have been involved in over the years is the lack of consistency in the Organisational Truth. Put simply, this means an answer to the question, “what is the story here?” The real story about how the organisation actually works and the impact it has on your ability to transform.
The truth for those at the top is not the same for those throughout the enterprise. Most organisations today, that have reached a certain size, have become far more complex than anyone single person can fully understand. So there exists an inherent gap in the way the leaders at the top perceive what’s going on and those at the ‘coal-face’. This gap is often made wider still when leaders cling onto old and outdated frames of reference .
Not addressing this, by uncovering the organisational truth, will impair the level of workforce engagement for the required transformational changes, and any messages from the leadership will feel unauthentic, hollow and will militate against success. It may also give leaders a false sense of the actual gap that they will need to traverse to achieve their transformation goals.
Traditionally, a ‘discovery phase’ is initiated to kick-off a programme – but these are often lengthy exercises and focused on the mechanics of what’s happening – that is, the process and technology. They rarely capture the human perspective that sheds light on why certain things are done in particular ways and why certain things are not working. Without a thorough understanding of this truth, means that leaders will fail to appreciate the real gap between where they are today and where they need to get to. Once again, digital diagnostics tools are readily available on the market that can help with this.
Leaders need to uncover and face the truth within their organisations, as told by their people at all levels of the organisation and not rely on the views of the few or their own outdated frames of reference.
#6 Transformation Requires Thinking and Working Differently
Fundamentally, transformation requires people in the organisation to think and work differently. By uncovering the organisational truth, which we outlined above, leaders can identify the limiting mindsets and behaviours that is holding the organisation in its current ‘mould’ or ways of working. Therefore, to transform, it isn’t just about changing process and technology, which would help people to work differently, it’s also about changing mindsets so that people can think differently and thereby behave differently and transition to the culture of the organisation that it needs to become.
Leaders need to understand the limiting mindsets that hold their organisation in its current mould and create an environment to shift these to allow people to think and work differently.
#7 Transformation Needs Expertise - The Role of Consultants
Our philosophy on transformation is that it must be pulled into an organisation. It cannot be sustained if it’s pushed or imposed. It follows therefore that the internal leaders throughout the organisation must lead their people through it.
The role of external consulting firms and advisors must primarily be there to support those leaders in this important task and not necessarily do it for them. Although the message from consultants is one of partnership, their remit is often to execute and do it quickly. Whereas the role of consultants is there to help the leaders and the workforce to transform, the task is often delegated to them, whilst the leadership continue to focus on the day-to-day operation. We don’t think this is necessarily the best use of consultants. In fact, in some cases it can be down-right damaging, where the consultant’s steadfast focus on execution is seen as imposing change on a workforce that is not ready for it and don’t want it.
We prefer the player/coach approach, where consultants will take a “player” stance and roll-up their sleeves to introduce pace at the beginning and work alongside their clients to help them mobilise their transformation whilst also helping them to build capability. As the capability of the client develops, consultants can then adopt the role of “coach,” to support their client to apply their new skills to make the transformation their own.
Leaders need to appoint external consultants who can bring in the expertise to help them transform, but not delegate the execution to them. They must also learn from the consultants that they use to build capability for the longer term.
#8 Transformation Needs a Transformative Portfolio – Do the Right Things
All the companies that we’ve worked with have had an existing portfolio of capital projects that usually have a high degree of technology delivery included. Whilst technology can be a key enabler of transformation, the application of this technology needs to be directed towards transformation, not solely to optimise the here-and-now. However, our experience has shown that most portfolios are vertically structured and provide functional, siloed solutions. Often, it includes solutions that addresses current issues, rather than build capability for its transformed state. This may be appropriate for an organisation that is implementing “change” to optimise its current operating model, but not if the organisation is truly transforming.
To enable an organisation to transform, the content of the portfolio needs to be driven by a transformation design, that has been faithfully translated from the strategy. It’s about making the right bets – not just to fix the here-and-now, but also sizeable bets to build new strategic capability. Taking big bets sounds risky and it is.
However, that doesn’t mean that you can’t experiment and learn and phase the investment to reduce your risk.
We are not advocating putting a “stop” to all the current portfolio, because some of the here-and-now issues still need to be addressed, for example regulatory changes that are mandatory. We are, however advocating that a review of the portfolio against the strategic goals must take place to ensure that there is a good balance of projects to addressed urgent here-and-now issues versus strategic projects that build capability. Remember, a portfolio of incremental projects will not transform your business !
Leaders need to ensure that they invest wisely and balance the bets that they make to ensure that there are projects that will deliver transformative capabilities and not just incremental changes that are wholly focused on today’s problems.
#9 Transformation Needs a Roadmap – Do the right things at the right time
Transformation involves a metamorphosis from one entity into another. However, that metamorphosis doesn’t take place in a ‘big bang’ sort of way, otherwise the disruption would most likely be too great for your business to survive it. Instead, the transformation needs to take place through a series of phases. At each phase the organisation will transform into an intermediate state in which they are no longer the organisation that they were when they started out on the journey, but one that takes them one step closer to what they need to become . Each intermediate state is a viable operational state in its own right. It’s a bit like a tadpole metamorphosing into a frog, which transforms from a creature that lives underwater into an amphibian that can live on land. In doing so, it not only loses its tail and grows limbs but almost every organ has to change so the tadpole can go from living underwater to living on land as an adult frog.
We believe that organisations need to transform in a similar way using intermediate states, for three main reasons. Firstly, the market for your target state may not be ready. Going back to the example of car manufacturers facing the threat of a future with significantly reduced ownership of self-driving cars, being too early can be detrimental. Secondly, intermediate states provide context to align projects to achieve a holistic set of outcomes and mitigates against functional, siloed change. Thirdly, it’s simply too disruptive to undertake one very long and massive programme, whereas breaking the overall transformation journey into achievable intermediate states minimises risk and permits the organisation to experiment, learn and pivot to respond to changes in their ecosystem.
Organisations need to define a clear roadmap for their transformation journey, with intermediate states that are aligned to the market, with enough flex to pivot in response to changes in their ecosystem.
It is our firm belief, that Transformation must have an end point and if successful, the organisation should be in a more agile, flexible, and resilient state and have the ability to devise and implement change as part of their day-to-day operation.
This doesn’t mean that future transformation is ruled out, it should be encouraged. As business ecosystems evolve, so must companies that operate within them. Companies will need to devise and implement changes to their business model and operating model in order to stay relevant. Making change happen should be systemic and part of the culture and capability of the organisation. In a digital world, this will be a necessity rather than an option.
Finally, business transformation is a complex and risky undertaking. There are organisations that have successfully achieved this. They are part of the 30%. We believe that if organisations avoid the six reasons why they fail to transform (that we outlined in part 1) and embrace the nine transformative actions outlined here, they will greatly increase their chances of being a member of that 30% club.
Good luck !
Ken Leung and Chris Bevan are a Co-founders and Directors of Outvie Consulting Ltd.