Why business transformation fails and what can be done

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  • July 03, 2014
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Leaders need to transform businesses to keep them alive and competitive. A well- defined and well run business transformation programme creates operational efficiencies, serves customers better and creates value for the organisation by monetising these gains.

Business transformation

Business transformation is a leadership initiative, typically by the senior management team, that aims to align an organisation’s initiatives, relating to people, process and technology, closely with the organisation’s business strategy and vision. The initiative aims to support new business strategies to meet long-term objectives of profitability and growth. Value is generated through monetising operational efficiencies gained.

The benefits of a business transformation programme are typically expressed as an end state (for example) 50% increased revenue,  30~% cost reduction or margin improvement, reduction in end to end cycle time for service delivery by 10 days, a measure of quality, or 25% improved in customer satisfaction scores.

The two key challenges in articulating and executing it are a coherent transformation strategy (not fluff) and an execution methodology that provides a clear line of sight between strategy, deliverables, outcomes and benefits.

This is not simple. Large transformation programmes fail as the strategies are not coherent with the challenge at hand, or the execution fails to realise the intended benefits.

Business Transformation fails either in the strategy phase (defining the business transformation roadmap), or the execution phase (realising benefits from transformation), or more commonly in both.

Strategy: Transformation strategies need to be coherent. They have to be testable against a business problem or challenge identified in the diagnosis phase. A guiding policy to solve the problem and steps to get there needs to follow. That is the basis of a good strategy.

Bad strategy is not just the absence of good strategy. Typical symptoms of a bad strategy are: a failure to face challenges (no recognition of the problem), mistaking goals for strategy (without expressing the desire on “how” to get there), or templated strategies (strategies that are too complex to implement).

 

 

Execution: Collaborative plans need to be developed. Transformation programmes are typically executed as an IT delivery, which fail to make the important business changes required for the transformational outcomes. Teams have no idea on how their deliveries enable benefits. Business laundry lists of plausible, but impossible to achieve benefits are not useful, since these have not been quantified. Lack of robust benefit quantification puts transformation programmes at risk from the start.

Building a robust transformation strategy that delivers its promise

Most people have experienced sitting through a strategy (presentation) that leaves them with a gnawing feeling on whether it’s doable? A (good) strategy must have a strong kernel of diagnostic (what is happening and why), guiding policy, and coherent action. In most organisational changes, strategy is presented as a complex diagram of PowerPoint presentations denying testability of whether it’s coherent, comprehensive, or doable.

Preparing for the future before it happens

The organisation needs to take a holistic view of the problem and apply methodologies drawn from leading principles of leadership in successful corporate strategy, organisation design, operations, technology and service management, and change management rather than a single discipline like Business Process Re-engineering (BPR) or Programme management.

A transformation programme is a strategy first and a programme later

Regardless of whether it is for internal transformation or market launch, a good strategy uses sources of power such as levering pivot points, riding trends, sequencing of quick wins, and chain link issues. A good strategy is achieved by design.

A transformation programme needs the underlying discipline to execute the strategy

Successful implementation of the strategy needs good project and programme management, stakeholder engagement, sponsorship, governance and communication. This is by far a well-researched discipline with robust methodologies that ensures that we have at least the necessary conditions to succeed. The sufficient condition for success is the ability to create enduring change.

A transformation programme succeeds if the change sticks

Realising benefits from a transformation programme has deep roots in embedding change, a topic we will address in separate post that contrasts a couple of leading methods and injects them with latest research on how to make change easy for the community.

Conducting “Surgeries” at various checkpoints on the transformation journey are crucial. It helps managers learn key principles, think strategically in direct relation to their own business challenge (rather than a case study), understand changes required and own them!

  1. Starting point: Recognise where the organisation is on the transformation journey (in relationship to a specific business challenge). See box above
  2. Checkpoint reviews: Run periodic spot interventions in a coaching environment to work with managers on a light-touch basis to steer programme and draw attention to leading indicators of what might be failure points.
  3. Strategy and benefit realisation “surgeries”:  Conduct transformation strategy surgeries with the leaders and managers to test whether the strategy is coherent, comprehensive, and doable. Benefit modelling surgeries allow testability of ensuring all benefits are captured, quantified, owned and managed to realisation.

Viren Lall is a business transformation expert, an entrepreneurship instructor, and an adjunct professor of management at Indian School of Business. He has been involved with startups since the 1990s and delivers entrepreneurship boot camps and continuous venture development programmes for startups. He is a key note speaker on succeeding in transformational change and entrepreneurial ventures.

 

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