Distribution and communication channels are more fragmented than ever. Market entry barriers are dissolving faster and faster, resulting in many small competitors. Upcoming talent has a different view on the world and is looking for a clear “why” when working for an organization. All of this is magnified by disruptive technologies. These fast changing dynamics in society forces organizations to ask some foundational questions. How can we maintain relevance and realize the future vision with our organization? Do we have the right capabilities in place in this fast changing society and are we ready for what is coming? A future where continuously accelerating developments in technology and social environment are affecting the consumer and customer preferences and behaviors in a foundational manner.
Many organizations come to the realization that the regular project based “change activities” are no longer sufficient to close the gap, which is required to guarantee success in the near future. In these situations there is a bigger need than “incremental change”, instead “foundational change” is needed. This is what we call Business Transformation: “A foundational change program in the organization with the aim to acquire the right capabilities and behavior to ensure a sustainable and prosperous future for the organization.”
In this white paper we will describe what is needed to successfully execute a Business Transformation program, consisting out of two important dimensions:
- Business Transformation Journey
- Transformation Success Enablers
A business transformation program has a very typical lifecycle. Every industry and company has its own characteristics and challenges. Nevertheless we have seen that this lifecycle shows itself in almost all organizations, of course in its own variation. The following phases in the transformation journey can be identified:
This is the first phase of the transformational journey and this might be the most difficult part. Both business leaders and their team members notice that something is not right, although it is not exactly clear what it is. Whilst financials are still strong, customer engagement and satisfaction is slowly but surely decreasing under the surface. The organization is mainly relying on the successes of the past. The hunger to explore new terrains and identify new unmet needs is no longer a driving force. “Predictability” is more important than actual value creation with organizations in this phase. The difficulty in this phase is that in many cases the year on year financials do not really show the imminent danger. Silently the organization is losing its winning position. Organizations can sit multiple years in this phase. If leadership is strong an organization can jump to the next phase swiftly.
The next part of the journey is to have a clear, although still limited, datapoint which reveals to key stakeholders some facts which create this collective organizational itch. This can be a report showing decline in volumes over the last 5 to 10 years, or an unhealthy dependence on a certain product market combination. It can be many more and it varies per organization what is needed, as long as it brings the leadership to the conclusion that a diligent analysis of the current state has to be performed.
At some point the “itch” becomes so evident that the organization will decide to do a thorough study on the current state vs the market and competition. We call this reflection the “Mirror Me” phase. The organization will desire a very diligent study to understand the performance of the organization in a historical perspective but also from a industry benchmark perspective.
In this phase it is very important to fully utilize the talent and experience in the organization. An internal and honest feedback round where key stakeholders are interviewed will most likely reveal at least 80% of the challenges which need to be addressed. As part of the internal analysis the organization needs to perform a (financial) trend analysis for the last 10 years to identify key trends. Key activities in this phase are: 1. internal analysis, 2. external analysis, 3. benchmark and best practice analysis and 4. a strategic gap analysis.
Critical is to find a real burning platform, evidence which is so strong and compelling that even the most conservative organization members have to admit that something has to be done and that the current situation is no longer sustainable.
After key trends and strategic challenges have been made visible, it is time to develop a plan to close the gap. Which capability and behavior do we need to change as a priority? Once the harsh reality has been revealed, there will be a lot of energy and urgency needed in the organization to tackle these key challenges. To guide the tremendous efforts needed, it is important that a clear focus and strategy for the transformation program is formulated. And even more important the transformation strategy needs to be fully supportive of the overall company strategy. In this phase the organization also needs to establish a strong governance framework, including a Business Transformation Office and relevant Steering Committees to create clarity in terms of ownership and decision making. The last step in this phase is to develop and communicate an authentic and transparent message to the organization which includes the “why”, the “dot on the horizon” and “strategic objectives” of the transformation program.
During this part of the journey the focus is on developing proposals to address the identified “strategic challenges”. Working in various project teams with internal and external resources to come with clear and measurable proposals to “close the gap”. Designed proposals are presented to a relevant steering committee. It is the role of the Business Transformation Office and its members to ensure that all designed proposals support the overall transformation strategy.
Where in the previous phase the focus was on designing solutions which will bring the organization back to pole position, in this phase the organization has to have a laser focus on the execution. It is important to understand that people have the unconscious desire to keep things as it is, this becomes visible in this phase. Therefore it is very important to create a strong communication and change management package to make sure people understand why there is a need for foundational change.
Now we have clarity on the transformational journey, the next question is: “What do we need to have in place to enable a successful transformation?”. Again, a transformational journey requires much more than the regular incremental (project) based change, which is common to most organizations. What we need here is foundational change, a deep change in the organizational behavior and capabilities and this is never easy.
To really close the strategic gap to ensure a prosperous and sustainable future for the organization the following success enablers need to be in place when executing the transformation program:
To engage in a cross functional and organization wide business transformation program it is imperative to have the strong support of the key leaders. As foundational change is never easy and the people driving the transformation will have many challenges during the journey, it is critical to have support from the top leadership.
On the one hand we need the right capabilities in the Business Transformation office to drive the overall program and on the other hand we need the right capabilities of senior team members to design and develop solutions which will make the organization fit for the future. It is also important to bring in external capabilities on specific points when and if needed to get the outside in.
Mindset is all about the expectation and commitment of the key stakeholders involved. Everybody needs to fully understand at the start of the program that the journey will not be easy and unexpected problems will arise that need to be solved. During a full business wide transformation program it is impossible to exclude all uncertainties. Decisions and actions will have to be taken under a certain level of uncertainty. Transformation programs can fail if the mindset of key stakeholders is not right. Keep calm and take the actions required to ensure long term success of the organization.
This is maybe one of the most difficult topics to manage during a transformation program. How do you keep everybody engaged during this important journey? Especially your most important asset: your people. A transformation is all about adapting your organizational behavior and capabilities. As a consequence some of your employees may be impacted, which is of course a very difficult thing to do. That is why from the beginning of the program the leadership needs to build and maintain a consistent and authentic messaging to the organization.
To guide and control the energy generated with a transformation program, it is very important to formulate a clear strategy with clear objectives, which is supportive of the overall company strategy. This is also very important to ensure that all different workstreams complement each other. Subsequently, this strategy deck, including the “why”, the “dot on the horizon” and “strategic objectives” of the program will also be the communication anchor to be used during the journey: a clear and consistent story line.
With a transformation program an organization will have to take multiple critical decisions in different areas, which will influence the future success of the company. To ensure quality, coherent and high speed decision making, a strong and fit for purpose governance model needs to be in place. Of course every organization and industry is different and needs a (slightly) different governance model. However, as a minimum we would expect at least the following to be in place: 1. a relevant steering committee per workstream, 2. a Business Transformation Office controlling the different workstreams and 3. an overall steering committee which includes key leadership and members of the business transformation office to control the overall progress and direction of the transformation program. It is important that the Business Transformation Office reports directly to senior leadership to ensure that it can operate independently.
How do you take a strategic challenge, design a solution, get it approved and implement it in an effective manner without causing any significant business disruption and all this in a very controlled manner? Add to that the complexity of multiple different workstreams running simultaneously and you will understand why you need a clear process in place to manage this. The Business Transformation Office is responsible for developing a clear and transparent process to guide all the transformation efforts. From initial problem identification, to solution design and development, decision making all the way to implementation and after care, with clear milestones. This will give the organization much more (financial) control during the journey.
All efforts eventually will be reflected in the financials. That is why it is important to have a clear business case embedded in the process. On top of that it is critical that transformation decisions are reflected in the normal business planning process. However, as the (financial) uncertainty with transformation measures are much higher than normal business operations, we do advise to make the transformation component separately visible in the annual budgets, both for revenue as for cost impacts. Reality is that there can be a delay in both the revenue and/or cost component of the transformational journey.
In conclusion:
With the “Business Transformation Journey” and the “Transformation Success Enablers” you will know what to expect and what you need to have in place to achieve a successful outcome of your transformational efforts. But even if you have all of this in place, it will remain a very challenging journey for the organization. Even if you have a very diligent planning process, during the execution some things will go wrong and differently than planned. The most important thing to realize during this process is the “why”. The world doesn’t sit still and doesn’t wait for your organization to catch up. You are doing what you have to do to maintain relevance and ensure a prosperous future for the entire organization. Good luck with the journey!
