What makes a successful transformation? Many companies understand the need for change before disruption, but few are able to emerge victorious after long and at times contentious transformation programs. Here we summarise the findings reported in an a long-form article in our sister publication, strategy+business: “The four building blocks of transformation.”
Many business leaders are sick of transformation. Anyone who has gone through a conventional top-down restructure – complete with cost-cutting, tech overhaul and often, with very little change to show for it afterwards – knows how difficult it is to achieve the intended results.
Yet in most industries today, disruption is rife and business models are regularly challenged, often by digital upstarts with nimble business models. If you’re a business leader facing this kind of pressure, a major transformation of your company may be inevitable. How then can you overcome the odds against success?
An article in strategy+business, ‘The Four Building Blocks of Transformation,’ by our PwC colleagues Al Kent, David Lancefield and Kevin Reilly, reports on an analysis, undertaken by organisational change experts at PwC, of successful transformations during the past five years. What they found, despite differences in industry, region, circumstance and leadership style, were four essential building blocks pivotal to transformation success.
1. Create a
“Articulate a single desirable future for your enterprise and focus all your efforts on achieving it.”
It’s easy to underestimate the importance of a clear view of where your company can go in this new world. This is not about building a brand or a simple vision, but a comprehensive identity “in which the company’s value proposition, core capabilities, customer and employee experience, and culture all reinforce one another.”
This new identity must incorporate many factors, not least of which is what the business wants to be known for. What challenges do you expect to tackle, based on the strengths you have and the capabilities you can build? How can this identity help you forge new partnerships, raise your reputation, and attract and retain employees who will support your new way of working?
A significant piece of your work on strategic identity is grounded in the need to gain buy-in from key stakeholders: employees, suppliers, investors, and community members. Key to this will be telling a compelling story about your company’s purpose, particularly those aspects of it that go beyond making money. They need to understand their role in the transformation, and why it, and they, are important.
You can reinforce the power of your strategic identity by inviting employees and other stakeholders to participate in designing it. Winnowing multiple ideas down to a critical few will help with digestibility, aligning staff and enabling the transformation to happen more quickly and effectively.
“Develop ways to attract and deserve the commitment of everyone related to your enterprise — particularly customers and employees.”
If you want people to trust the initiative, you have to focus on how it makes people feel. Transformations are tricky, and often confronting. There are many moving pieces, and not all of them will result in pleasant outcomes. However, if people see reason for hope, they will “trust the enterprise to deliver what it has promised”.
Trust is created by your company’s behaviour over time: hence the need for careful planning, diligence and care. This means being strategic in how you set up your transformation initiative. Design each move with the awareness that people are generally more willing to change than you expect, especially when they recognise the value of the transition.
There may of course be resistance. But with the right motivators and opportunities, you can design your initiative to engender trust, not erode it. Moreover, if you don’t believe people can change, your beliefs will become self-fulfilling prophecies, and will likely seal the fate of any transformation attempt. Trust is not a one-sided equation. When you have to deal with persistent naysayers, be firm about what you expect, but treat them with care and respect, to show everyone that they, too, will be treated fairly.
Top leadership, which often influences the rest of the firm’s culture through behaviour, must be in sync with the transformation goals. So must employee incentives such as flexible ways of working and educational opportunities. This is an exercise in fulfilling fundamental employee needs and wishes – not in buying people off. Customer trust should be approached with equal integrity.
3. Master the pivot
from sprint to scale
“Test new practices in an intensive, experimental, startup-style manner. Pick the approaches that work, and rapidly implement them throughout the larger system.”
Internal innovation is difficult. It needs to be protected from the traditional practice of an organisation to be truly novel, yet at the same time, ideas must be integrated enough to be able to become reality. As the authors note, “It takes a great deal of on-the-ground skill to resolve this paradox.”
An agile way of working can help, combining the speed and experimentation of a startup with the execution capabilities of an established business. Agile development brings together small teams of diverse, cross-functional people who are given a finite amount of time to devote to a problem. Teams build and prototype ideas – incrementally testing and refining quickly, moving forward with the parts that work.
Once an idea has proven itself, the larger organisation steps in to replicate the resulting idea throughout the business. It’s important to consider whether the leaders deciding which ideas to scale, and the leaders implementing the scaling itself, have the right characteristics needed for each task. They may not be the same people.
Central to navigating an innovate-then-scale approach, which is often counterintuitive to established business culture, is using customer need as a guiding star. Design-thinking approaches – which put human requirements at the heart of innovation – should help in this regard.
4. Treat your legacy
as an asset
“Save the best of your past, divest the rest for advantage, and use the income to fund the future.“
Transformation does not need to throw the baby of your best practices out with the bathwater of your old bureaucracy. After all, the company has survived to this point. It’s important to allow your company to evolve, while managing the legacy of the past for the greatest possible advantage.
In other words, maximise value even as you remove the bits that no longer align to your new vision. Being strategic about restructuring, thinking through costing and divesting with care at the appropriate moments will be crucial. Ensure that people wedded to the legacy brand don’t feel as though their work has been for nothing; balance nostalgia for past success with the prospects of future innovation.
Legacy management can’t be an afterthought. It is “as critical to transformation success as the other three building blocks, and probably only a small group of executives in your company have the critical thinking skills and dispassionate temperament to master it.” In other words, it calls for bold, talented people who are adept at navigating the old and the new — and who can move on from this assignment to take charge of future prospects.
While these four building blocks have been universally critical in all the successful transformations studied, the way they are applied will vary from one company to the next. For a list of questions that can help with the implementation of each building block, visit the long-form version of this article on our fellow PwC publication, strategy+business.
Deep reflection on each of the four aspects of transformation is important. They can help you fulfill your change objectives today, and play a pivotal role in making it to the destination tomorrow.
To view the expanded version of this abridged article, visit strategy+business’ piece ‘The Four Building Blocks of Transformation.’