Editors note: This blog post was originally published in May 2016 and has since been updated with additional information.
Achieving successful business transformation is not easy. Not all transformations are successful at improving performance and equipping the organisation to sustain improvements over time.
This being true, the risk for senior leaders is high. However, business transformation and continual evolution are unavoidable in today’s global marketplace. Changes in customer expectations, the market environment, and the competitive landscape happen more frequently - and faster than ever.
In research by BIE, an overwhelming 80% of senior executives said their company was going through a business transformation of some nature, driven by a need to reduce costs and become more efficient in this more competitive market.
So what steps can you take to ensure you buck the trend? What are the key ingredients of successful business transformation?
Firstly, let’s refresh on exactly what business transformation is.
Writing for the Harvard Business Review (HBR), Ron Ashkenas says: "Transformation is another animal altogether. Unlike change management, it doesn’t focus on a few discrete, well-defined shifts, but rather on a portfolio of initiatives, which are interdependent or intersecting. More importantly, the overall goal of transformation is not just to execute a defined change - but to reinvent the organization and discover a new or revised business model based on a vision for the future. It’s much more unpredictable, iterative, and experimental. It entails much higher risk. And even if successful change management leads to the execution of certain initiatives within the transformation portfolio, the overall transformation could still fail."
When overhauling your organisation, there are a number of key ingredients that make up successful business transformation:
1. A CLEAR VISION AND STRATEGY
First of all, it is crucial to recognise that there is a need for transformation - and then to define this requirement in detail. Every organisation is different and so there is no set formula, and undertaking a strategic review may require skills outside your current leadership team. Whatever approach you take, there are some back-to-basics questions you will need to ask. For example:
- Where are we now?
- Where do we want to be? What should our end state target operating model (TOM) look like?
- What steps will we need to take to get there?
- What leadership capability and skills will we require?
Answering these questions will enable you to take a long, hard look at your business and to be honest about what you are seeking to achieve and how you will realise this ambition.
To understand where you are now, map out the people, processes and systems that support the delivery of your product or service to customers. Use this to help you identify for your vision for the future. Then look at how you can bridge that gap.
You can then set about outlining a workable strategy that takes into account the different elements of your transformation - for example, people, skills, systems and processes - and ensures that these are all aligned. It’s a good idea to schedule in regular review points so that you can assess your progress and amend your strategy as applicable.
2. TRANSFORMATION CAPABILITY
Your transformation strategy can only be as good as the resources that you have to support it. However, there’s no such thing as a single set of transformation capabilities - and there’s a huge difference in the skills required for planning versus delivery, and transformation versus business as usual.
So what capability will you require over time as you transform your business? Do you already have the relevant people and skills or do you need to plug some gaps? Without the right people, it will be nigh-on impossible to achieve your goals. Do your best people have the capability to deliver on all elements of your strategy?
Even the most accomplished business leaders do not necessarily have the experience and knowledge to achieve business transformation without some outside help. In fact, BIE research shows that a quarter of transformation teams are made up of external talent. This external talent is more likely to be made up of interim managers than management consultants, which suggests that companies’ ability to deliver transformation internally is maturing. They are becoming less reliant on consultancy firms advising them how to set up their business transformation programme.
What you really need is to draw on the expertise of an interim leader to ensure that you are able to work towards your goals while still maintaining day-to-day business operations.
There are many benefits of an interim approach, including flexibility and agility. You can bring in the right capabilities, for the right tasks, at the right time, and for the right length of time. And one of the advantages that interims have is that they understand the human as well as the process dynamics of transformation.
During peak periods of transformation, the internal/external talent split should become closer to 50/50 due to the sheer number of functional workflows in play. This shouldn’t be a concern, but certainly highlights a need to start thinking about the legacy left after the business transformation programme is completed, so that internal staff soak up the experience of these people before they leave.
Overall, to achieve a successful transformation, it’s important to consider people, process, systems and governance holistically.
It’s not enough to transform your business. It’s also important to ensure that your organisation can function and thrive after its new operating model has been executed. The effort doesn’t just stop after the transformation programme is complete, and it’s critical for organisations to think about how they can continue to improve.
It’s a mistake to lose sight of what you have achieved - and why you set out to achieve it in the first place. By continuing to focus on honing and perfecting the new processes you have put into effect and nurturing the people that have played a vital role in the transformation, you can ensure that it’s business as usual - but on an entirely new playing field.
Ultimately, your ability to continue improving comes down to your people, and how invested they are in sustaining what has been achieved. And this engagement needs to start early on in the process. Writing for Forbes in 2018, David Michels and Kevin Murphy point out: “A transformation is twice as likely to achieve its goal, and to sustain that change, when engagement in the effort is effective and started early.”
This means creating a company culture that accepts that the business needs to continually evolve. However, it’s a considerable behavioural shift for employees to appreciate that the company they are working for is always looking for new ways to improve. What’s more, BIE research showed that almost half of senior executives said their company’s employees were becoming disengaged with change.
While every company is going through some form of incremental change, the need for companies to undertake a radical step change to their operating model is critically important in order to evolve and keep pace with the market demands.
A clear vision and strategy, building the right transformation capability, and thinking ahead to ensure you continue to improve, are all key to achieving and sustaining your transformation.