Executives, managers, and business consultants often use the word “transformation” to describe any kind of change initiative. This generic application has diluted the meaning of the term and often contributes to failure. This is because managing transformation is completely different: It’s a wholesale redesign of an organization or a value proposition.
The focus of a transformation is the future, not the past. Executives analyze the current state of business to determine future direction. If the “transformation” involves any of the following, it is NOT a transformation:
- Improving a single process
- Trying a new sales methodology
- Deploying a new software application
- Impacting one or more departments, but not the entire organization
- Has a firm start and end-date
- Has a set budget
- Has known parameters and steps to success
It’s not easy – transformation requires a rewire. The good news is that the results are worthwhile. As one CEO told McKinsey: “I’d never have launched this agile transformation if I only wanted to remove pain points; we’re doing this because we need to fundamentally transform the company to compete in the future.”
This is the objective of managing transformation, whether it is digital, operating model, organizational, agile, or another type. Executives set a vision and strategy that the organization can rally around and work towards. It involves risks but done right, transformation can generate rewards such as financial growth, greater market share, agility, and sustained innovation.
The risks are big, because forging new ground takes people into the unknown. Managing transformation involves every department and employee in the organization, and there’s no manual. It is not a traditional, top-down project with set timelines, budgets, and milestones.
As a result, success requires transforming mindsets and cultures as much as processes and technologies. Employees have to buy in to the shift from the bottom up, ready and willing to disrupt their status quo. The role of leadership is to inspire and empower them rather than manage everything from the top down.
In addition, managing transformation must be cross-functional. This is especially applicable in organizations where survival depends upon employees and teams working on complex projects and innovations across departments. Leaders need their ingenuity and collaboration to start and sustain the transformation.
For example, recent events have accelerated the need for digital transformation at many companies. Some organizations made fast progress by organizing cross-functional teams to collaborate in a heightened environment. Others discovered the difficulties of transforming the digital experiences of customers and employees using standard operating procedures, organizational boundaries, and bureaucracies.
Writing in Chief Executive Magazine, Nigel Thurlow addressed the need to remove traditional hierarchies and silos during a transformation:
“The problem with this approach is that value flows to your customers horizontally across an organization, which means that we need to remove the barriers to flow, and that means those silos. This means leaders need to be working together as a real team to achieve flow.”
When managing transformation, everyone, including the leadership team, needs to be comfortable with uncertainty, experimentation, and failing fast. Employees should have the freedom and resolve to make decisions with limited information. Executives must remain committed to the transformation or risk the organization backtracking to familiar behaviors and processes.
For years, the failure rate of transformation initiatives has remained at around 70 percent, according to McKinsey & Company. By understanding what transformation is and what it entails, executive teams and their employees can create a more successful, sustainable business.