Transformation. The word oozes with potential. Shed the skin of the old and embrace the new. Emerge better, stronger, more powerful. Companies are increasingly recognizing that mastering transformation is becoming a competitive imperative. As formerly isolated markets collide and competitors from emerging markets hone disruptive approaches, product lifecycles are shrinking and competitive advantage is dissipating more rapidly than ever before.
Case studies of sweeping organizational transformation--Nokia moving from rubber boots to mobile phones, Kimberly Clark shifting from a paper provider to a leader in consumer packaged goods, Apple sextupling its stock in five years after a decade of stagnation, Google going from a technology company to an advertising powerhouse, Procter & Gamble hopping from soaps to laundry to skin care to health care--show that successful transformation is possible.
But the breathless hype behind these stories obscures a brutal reality: Most efforts at transformation fail miserably. This unnerving and frustrating reality should not be a surprise--after years of pervasive "continuous improvement" programs, executives are reaping what they have sown. Their organizations, from executives down through the rank and file, have been motivated and compensated to focus on incremental improvement, measured quarterly and annually, along competitive performance parameters established years earlier.
Five Lessons To Transform Your Company For Growth
To expect this system to create the breakthrough innovations that power transformation is simply unrealistic. Years of continuous improvement training have caused corporate innovation muscles to atrophy.
To ascertain the scope of the transformation challenge, our company, Innosight, surveyed more than 300 managers, directors, vice presidents, and senior leaders from a wide range of companies. We asked these practitioners whether their companies were walking the walk or just talking the talk around their transformation efforts. Did they have the necessary focus, tools and talent to drive meaningful growth from within?
Their answers are sobering for any executive telling investors about their deep commitment to "growth through innovation." Most survey respondents said their companies are struggling with transformation and they don't know quite what to do about it.
However, there are signs of hope. In this article, we blend insights based on this research as well as our field work, to provide guidance for companies seeking to master transformation.
A Multi-Faceted Problem
"How do you transfer intent into sustainable and reasonable organizational action?" One respondent suggested this is the most important question to answer to make progress on transformational efforts. This question lies at the heart of most organizational struggles around innovation.
It is clear that practitioners bent on transformation face a steep challenge. They have to address a multi-faceted problem with unclear answers and inadequate tools. Our research and field work over the past 10 years suggests transformation requires four interlocking elements: dedicated resources, lead opportunities, tools and processes and appropriate mindsets.
Transformation is about change, and so the resulting acronym--"DeLTA," for dedicated resources, lead opportunities, tools and enablers and appropriate mindsets--is appropriate. We asked survey respondents detailed questions about 11 specific factors related to transformation that fit into four categories:
Dedicated Resources:
Human resources dedicated to transformational efforts: In many organizations, the scarcest resource isn't money, it's time.
Financial resources dedicated to transformational efforts: Organizations can struggle with transformation because natural forces within the company allocate financial resources toward core initiatives.. Dedicated financial resources can avoid this trap.
Senior management engagement and leadership: It is hard to overcome the hurdles inhibiting transformation unless senior management actively engages. Transformation is rarely accidental.
Lead Opportunities:
Selection of opportunity areas for new growth efforts: Companies hell-bent on transformation sometimes think they ought to let chaos reign. Our experience is that strategic selection of opportunity areas is a critical component of success.
Development of new business models and approaches in specific opportunity areas. "Doing what we've always done" is rarely sufficient to power transformation.
Companies need to develop new approaches and at times even challenge their core business model. Capability to scale new growth businesses that power transformation: Generally speaking, the development of ideas involves an "exploration" period and an "exploitation" period. Managing the second part of this development process is critically important to realize the full impact of transformation.
Tools And Enablers:
Utilization of new tools to assess and shape transformational ideas: Any well-run company has tools to manage ideas in its core business--tools that can be ill-suited for nascent opportunities, where judgment and intuition are critical.
Unique and different process for transformational initiatives: Standard processes and procedures can subtly reshape transformational ideas so they resemble what has been done before. However, separate processes can foster transformational potential.
Appropriate metrics and incentives for transformational efforts: What gets measured gets done. Even the best-intentioned companies can struggle if they do not have appropriate metrics and incentives to support their transformational efforts.
Appropriate Mindsets:
Formal approaches to overcome internal resistance to transformational efforts: Left to their own devices, "corporate antibodies" can severely impact well-intentioned transformational efforts. Specific approaches can help defend against these antibodies.
Mechanisms to teach the new mindsets required for transformation: Getting transformation right can require taking actions that can appear counterintuitive or even antithetical to most managers. Developing a "common language" can address this issue.
None of these factors are by themselves silver bullets. When given the chance to evaluate each criterion independently, 90% of respondents said all five factors are somewhat or very important, and 80% said all 11 criteria are somewhat or very important.
This is consistent with our field experience, which suggests that transformation is multifaceted. Throwing money at the problem isn't sufficient if you don't have the right ideas, tools, and leadership. Tools and leadership are worthless without resources.
The wrong mindsets can sink the most well-thought-out transformational efforts. Simply trying to create a compelling mission statement or adopt a new philosophy is insufficient to drive transformation. A few leadership memos and the addition of "innovation progress" to the monthly metrics package are insufficient: cultural change does not occur through PowerPoint.
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