Article Synopsis :
Corporate transformations have a miserable success rate with about three-quarters of transformation initiatives either failing to deliver anticipated benefits or abandoned entirely.
Because flawed implementation is most often blamed for such failures, organizations focus on improving execution, but poor execution is only part of the problem. “What Everyone Gets Wrong About Change Management,” from Harvard Business Review, based on the results of a four year study of 62 transformation efforts, suggests misdiagnosis of what to change is equally to blame.
Before worrying about how to change, leaders must first properly diagnose what to change, and in particular what to change first. To this end, leaders and their boards should ask three questions:
- What is the catalyst driving the need for transformation?
- What is our underlying quest?
- Do we have the leadership capabilities needed to pursue it?
The trigger for any corporate transformation is the pursuit of value. Ideally, this entails both improving efficiency (through streamlining and cost cutting) and reinvesting in growth. But many transformation efforts derail because they focus too narrowly on one or the other. In some cases, attempts to streamline (e.g., outsourcing, divestments, etc.) undermine growth. The cuts are so deep that they hollow out capabilities, sap morale, and remove the slack that could’ve fuelled new endeavors.
Executives increasingly use the term ‘transformation’ as shorthand for ‘digital transformation.’ But the ongoing digital revolution does not itself constitute a transformation—it’s a means to an end, and leaders must define what the end should be. There are, generally speaking, only five possibilities:
- Global presence
- Customer focus
Should the company expand into new regions, get closer to customers, innovate with more partners, get faster and more responsive, or become more sustainable? ‘All of the above’ is too much to handle at once. The right quest should be a clear and uncontested priority. Straddling two quests (e.g., customer focus and agility) can work as long as the components are fused into one cogent focus.
When companies don’t choose their transformation battles wisely, their efforts almost always have a negative impact on performance. Specific examples are included on JC Penney, Norske Skog, Stora Enso, Lego, and Lenovo. The article also includes a ‘quest audit’ to help identify transformational priorities.
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Digital Insurer's CommentsWe like this article for how it reminds us that digital tools are a means to an end, and that end is always a measurable business outcome. The job determines the people and tools—not the other way ‘round.
Many transformation efforts fail because organizations attack the wrong problem. We agree with this article that another source of failure, often overlooked, is organizations attacking too many problems. Trying to change too much at once often leads to chaos and confusion leaving the organization worse off than when it started.
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