Ten principles of a successful business transformation

It used to be that a business transformation was a once-in-a-lifetime event. But now, companies must institutionalise the capacity to change.

UK businesses are facing a challenge at the heart of their organisations. They can see huge opportunities for organic growth – but to realise these, they first need to reshape their strategies, design new ways of working that make the most of technology, and prepare to capitalise on artificial intelligence (AI).

This is the transformation that’s needed. But what is the role of business leaders throughout? And how can strong leaders keep business transformation on track? We’ve distilled ten guiding principles to help any leader who is either starting this journey now or resuming it after a pause for breath.
 

CEOs see organic growth as central to 2018

Percentage of CEOs planning these activities in the next 12 months

 

Executives beginning a transformation journey often have three fundamental questions. Here's how our ten principles answer them:

Question 1: How do I energise my organisation?

1. Make the case for change

Start with a clear, candid assessment of business conditions and the challenges facing the company. Take a market-back and customer-focused perspective to define your strategy, and the end-state of the transformation. Describe the company's differentiating capabilities required to execute on this strategy, and underscore the importance of channelling resources to these critical sources of competitive advantage. Conclude with an inspiring vision of the company's potential if it becomes fit for growth.

2. Align the top

Cost transformations don't succeed unless senior management is aligned and committed to the goals. Yet the more revolutionary the change, the more likely it is that those with power and status in the old regime will resist it. So move quickly to align these key influencers behind your transformation. Give every executive a stake in overall transformation objectives, not just activities affecting his or her area. Finally, remember to link incentives — financial and otherwise — to key transformation milestones.

3. Declare a "new day" and grant amnesty for the past

Along with an unflinching view of threats to the company, offer a positive, strategic vision highlighting the upside of cost transformation. Declaring a "new day" also conveys the message that old arguments against change no longer hold water, and that you’re not interested in blaming past administrations or criticising past decisions. Instead, paint an inspiring picture of a leaner company poised for faster growth.

4. Showcase quick wins

Nothing succeeds like early success. Look for areas where you can rack up meaningful savings rapidly without significant implementation costs. Highlighting quick wins builds confidence and momentum while showing you're serious about driving out costs that don't support differentiating capabilities.

Question 2: How do I achieve cost fitness while also enabling growth?

5. Put everything on the table

A credible, effective cost transformation scrutinises every expenditure. Putting everything on the table signals the urgency of strategically aligning costs, while dissuading individual managers from lobbying for special exemptions. It also sends a message that "we're all in this together."

6. Challenge the "what", the "how" and the "how well"

Big cost improvements arise from a deep analysis that questions not only "how" or "how well" a company performs various activities, but what it does in the first place. Assess your business portfolio, product line-up, customer base, operations and administrative footprint from a strategic perspective. Seek excellence only where it bolsters a capability that sets your company apart in the market segments which you choose to serve.

7. Balance cost cuts with investments in capabilities

Early in a transformation, many companies prioritise cost-cutting over capability-building. However, this approach undermines transformation goals by demoralising employees and limiting growth. Successful transformations build capabilities as they cut costs, using the savings to fuel a step-change improvement in returns.

Question 3: How do I manage the transformation and make it sustainable?

8. Set up a parallel organisation to run the transformation

You need to keep doing business while you change your business. Don't ask managers and line workers to do both. Establish a programme management office with responsibility for achieving transformation goals, led by a respected senior executive, focused 100% on the change.

9. Communicate before, during and after the transformation

Timely, frequent and consistent communication is a hallmark of successful transformations. Skilful messaging that conveys a strong strategic vision helps to win support from key constituencies inside and outside the company.

10. Keep the weight off

Completing a list of cost adjustments and strategic course corrections doesn't mean a transformation has succeeded. Far more important are changes in behaviours, attitudes and work habits throughout the organisation. If those don't stick, neither will the transformation.

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