// . //  Insights //  The Seven Truths Of Transformation

The world is moving fast and organizations must change to unlock their full potential, to stay ahead, or to survive disruption. Most business leaders consider transformation to be a top priority. They are also well aware that embarking on ambitious transformation programs can be daunting: such programs usually involve a huge investment of time and resources and the target value is hard to reach, even under ideal circumstances. The current business environment – the ongoing pandemic, supply chain issues related to the Ukrainian crisis, surging inflation, and macro-economic uncertainty – has made the odds of failure even higher: transformation is harder across all dimensions of performance.

Based on our experience and analysis of hundreds of challenging, yet often fascinating transformation journeys with clients, we have compiled seven truths for business leaders to improve their odds of success:

1. Focus on tangible impact to create value for shareholders and other stakeholders.

From the outset, show how the transformation enables strategy execution and creates value for all stakeholders. This purpose makes the difference, being clear where to invest into capabilities and in the organization, and where to cut costs to fund the investment. Be ready to demonstrate early wins, in areas such as optimizing pricing, launching a cross-sell campaign, or improving procurement performance. These early wins will fund the full transformation and get buy-in from the organization. Equally, waves of transformation  should be designed to demonstrate that the transformation supports itself financially. Ensure from the beginning that the results delivered are objectively and externally measurable. 

2. Be bold: Focus efforts and invest for growth.

Transformation is an undertaking that favors the bold, therefore prioritize the initiatives that will deliver the most impact. If you want different results, you need to take a fresh approach - this requires great insights and ideas and having the courage to see them through. Take risks and back them up with investment. This will make the transformation real and compelling for both employees and investors. Equally, focus on shifting investments from bad costs to good, funding new capabilities and driving performance relentlessly.

When one industrial firm embarked on a massive cost cutting exercise in response to an unfavorable market environment, they used the opportunity to reimagine the broader business and reassess their strategic differentiators. One major change was evolving their operating model and focusing on end-to-end supply chain integration. By drastically cutting costs in certain areas, they were able to prioritize investment into differentiating capabilities that helped them innovate faster and to consistently deliver above average margins.

3. Tailor the approach to fit the corporate culture and transformation objective.

Not all transformations are created equal and there’s no one-size-fits-all approach. So much about transformations depends on the context and the individual fabric of each company, so it’s vital to develop a deep understanding of what drives your unique corporate culture. To get buy-in from the beginning and throughout, it’s important to articulate the case for change to stakeholders across the entire business, such as the board, management, your workforce, and customers when directly affected. Be clear about the need to change and your goals. Pinpoint and communicate those differentiators and new capabilities that you need to grow to outpace the competition.

4. Align the leadership to build a winning team.

Take a long-term approach to building the right leadership dynamic. Invest time early on to co-build with the top team an inspiring vision and transformation story and achieve alignment on all dimensions – economic, cultural, and content. Much of the success of transformation programs hinges on accountability to deliver against that shared vision: create accountability for results, for example, through shared objectives. Equally empower local managers who will be implementing the transformation in the field. Use this opportunity to develop the leaders of the future: appoint them early, collaborate, and generate a feeling of ownership.

For example, the executive board of one services company mandated a dozen of their strongest leaders from different businesses and functions to shape their strategic transformation, deciding where to improve margins using commercial and operational levers, and where to invest to build a stronger organization. It was this core team of leaders that drove the design and shaping of the future of the company, and engaged management, employees and works council, thus mobilizing the entire organization behind the transformation.

5. Rally the whole organization behind a complex transformation.

Defining a clear vision and transformation story is crucial, but how well you embed it into the whole organization and rally the whole team will make the difference. Transformations are often large and complex, requiring the right balance of growth and performance levers to achieve your value target. It’s important to figure out how to engage and unify your employees to create buy-in, how to steer the roadmap in a simple way, and how to create a change journey. For example, you can set up transformation teams responsible for pursuing a manageable number of initiatives (ideally between five and 15) over a reasonable timeline. Likewise, some organizations set up physical spaces dedicated to transformation, supported by a regular meeting cadence and agile governance to create transparency for everyone.

When embarking on a major transformation, one financial services organization undertook a culture diagnostic early on to identify which key behavioural shifts would deliver sustainable performance. To realize this, more than 300 senior leaders were convened and guided through an immersive experience that brought to life the three most impactful behavioural shifts, to unlock, activate, and educate on how these changes should play out across the company.

6. Be pragmatic about your transformation timeline.

In our experience, big bangs do not work. Do not overload the organization with too many initiatives within a short timeline, rather execute consistently over a more sustainable time period. Establish proof points to build momentum and demonstrate to your people that that your transformation is generating impact. Rigorously craft a sequence of actions that bridges the gap between strategy and results. Implement a test and learn approach that combines program discipline and accountability with fast learning and flexibility.

7. Make your transformation sustainable.

In order to generate sustainable value, transformations must involve deep shifts in mindsets and behavior. Change management should focus not only on leaders but on all employees who are at the epicenter of the evolving business. This can be done by systematically building awareness, understanding, and belief at all levels. Look beyond the transformation timeline early on, by designing, developing, and embedding the functional capabilities that will be needed to sustain your trajectory. Equip your teams with the tools and skills they need to make the changes sustainable.

Final thoughts

Having seen many businesses transform over the years, we know that transforming is harder than it looks, and even harder in the current business environment. But leaders cannot just wait for conditions to become more favorable. Knowing and considering these seven truths will help them improve their odds of success for setting-up their business for the future.

We would like to thank Rutger von Post and Angrez Saran for contributing to this article.