BUSINESS TRANSFORMATION IS RAPIDLY RISING TO THE TOP OF THE MANAGEMENT AGENDA AND THERE ARE NO END OF PUBLICATIONS ON THE SUBJECT. MCKINSEY WRITES IN THE MCKINSEY QUARTERLY THAT "TRANSFORMATION IS PERHAPS THE MOST OVERUSED TERM IN BUSINESS"1. AND NOW THERE'S A FOOD FOR THOUGHTS ALL ABOUT TRANSFORMATION? YES, AND IT'S GOING TO TELL YOU WHY WE PUT THE FOCUS ON LEADERSHIP.
We'll kick off with three theories followed by a few thoughts as to how transformation can be managed.
It's often the case that the potential to achieve more through more of the same has already been exhausted, or calls for more effort that in time will reach disproportionate levels. People with a track record of achievements and who are currently successful will often only find that "something more" in something new. And that something new might be the way, the means, or even the mindset.
Creating something new frequently means breaking with paradigms and behaviors. Regularly challenging assessment and decision matrices is a valuable exercise.
Curiosity helps, as does the ability to be an impartial observer and be open to experimenting with different ways of thinking. All this can be brought about out of pure necessity, or it can be a luxury that successful people and companies afford themselves.
Circumstances are constantly changing,sometimes so fast and so drastically that today's recipe for success can easily turn into tomorrow's leftovers. We've put together a few examples of changes that are already visible and that represent imminent challenges for many companies.
This table shows the range of potential changes; theword pairs are not complete or interdependent. There also remains the question of whether these kinds of changes mandate a transformation when we are specifically talking about a business, or whether (continuous) development is sufficient. However, if a more or less radical change is needed to the business model, fundamental rules, and associated values and target systems then a transformation is absolutely on the cards.
1. TOP MANAGEMENT COMMITMENT – NICE TO HAVE
Top management commitment is often first on the list of success factors for a transformation. But how critical is it, really? Might it possibly be no more than a requirement developed through habit, which in the end is not actually that decisive? Our experience suggests that it depends entirely on the company and how management defines itself.
Top management can see itself as a corrective figure for overzealous change-makers at the same time as it encourages and supports them in proposing and driving change. If that truly is its role and everyone is aware of their role, then it is a possible option, maybe even an especially smart one. However, it does require the ability to delegate, to let go. That's the only way to ensure responsibility for the future can be handed over to employees, and that will at least boost their commitment to the transformation. Plus, achieving broad commitment throughout the workforce is the real success factor.
If the rank and file show no allegiance to the company then even the best top management commitment won't help. Quite the opposite, in fact. There is a risk of "valve solutions" where top management turns its back on large sections of the workforce and builds new worlds parallel to the core business. This can be a powerful option, but only as long as everything is supported by the idea of a test lab and concepts are developed over time to transfer any lessons learned to the rest of the organization. Otherwise, standalone solutions can be an indication that top management does not believe in its ability to transform the company as a whole.
2. MOTIVATED, CAPABLE, AND EMPOWERED WORKERS – MUST HAVE
If commitment on the part of the workforce is the real success factor, then it's worthwhile looking at factors that foster and inhibit commitment.
Given that a transformation is a fundamental change, long-term success typically requires a change in the mindsets and behaviors of managers and employees alike. The will to change our own behaviors grows
In other words, it's all about motivation.
Why is motivation so important? That's easy. Because attempts to drive change by issuing orders and commanding obedience will be less and less likely to succeed in future. This is partly down to changes in society's values, as well as growing complexity that management alone is no longer able to keep in check. As such it is essential to turn as many employees as possible into transformation champions.
But real commitment takes more than motivation. Unless people are granted the ability to help shape the transformation, or are at least reassured that they will be able to make a contribution in the new world, all the motivation in the world will come to nothing. We need a workforce that is both motivated and capable.
Last but not least comes empowerment. Motivation and capability are of no use whatsoever if someone has no power to realize change. So it makes perfect sense to invest in all three factors simultaneously.
Below we propose four actions that are mutually reinforcing.
1. TELL A GOOD STORY
Everything starts with a good story.2 Regardless of whether the content relates to agenda-setting or is "just" a compelling story, the aim is to give purpose to changes beyond targets and performance metrics. The idea is to tell a story that is true, motivating, and plausible without being trivial.
Marketing experts will be familiar with another element of successful communication, which they call "reason to believe". Employees are not always going to blindly trust in management. So it's advisable to establish facts early on that are tangible and reinforce the credibility of that good story. This often starts with role models and consistent behaviors. To that end:
2. CHALLENGE PARADIGMS AND ADAPT
Every company has its own principles, rules, and value systems that shape behaviors and decisions. Some of these paradigms are explicit while others are unspoken and unconscious. Typical examples include statements such as "Compliance with planning is mandatory", "The boss is always right", "Machines have to be fully utilized", "The client wants it that way", etc.
Existing paradigms can sometimes be helpful in a transformation, but they can also stand in its way. What is important is that we explicitly confront paradigms and manage them in the context of our specific objectives. There are two basic approaches here: we can try to modify the paradigms in people's minds and change the rules later on. This is the usual approach if a consensus or majority infers that change is imminent.
The alternative is to change the rules first so as to reward desired behaviors, thus creating incentives for sustainable behavior change. Much in keeping with the motto "Tell me how you measure me and I'll tell you how I will behave".
Both methods have pros and cons, and a mix of the two is likely to prove the most useful.
3. PROMOTE CHANGE COMPETENCY
Change competency includes the ability to recognize the need and opportunity for change, to develop objectives and excite people about those objectives, and to derive and implement actions. There is also something called passive change competency. This refers to the ability to adapt to change.
A successful transformation calls for active and passive change competency. It's important to identify which people in a company require which mix of these competencies and who, given appropriate support, will be in a position to make a positive contribution to the transformation. We can then move on to build actual competencies. Here we recommend scheduling not just trainings but also parallel exercises in applying the competencies plus appropriate coaching. After all, it's not enough to just know about something, we also need to understand it and how to apply it.
That last point, about application, brings us to our final point:
4. ADAPT ORGANIZATIONAL AND LEADERSHIP MODELS
All the personal motivation and competencies in the world will be of no use if the general circumstances do not support behavioral change, or even hinder it in some way. If bottlenecks arise due to missing or outdated information, or to decisions made too late or not at all, frustration will build and there will be a price to pay, mainly in terms of speed. Given that we expect change to happen fast enough that no startup can overtake us, rapid information and decision-making paths are absolutely vital.
It remains to be seen whether organizational models such as Holacracy will take root in future. Yet it is already clear that conventional, often hierarchical, models will be unable to satisfy market and employee requirements in the long term. As such we need to investigate early on whether our respective organizational model actually supports the factors critical to a successful transformation.
And finally, there is one more change mentioned in our initial table: the evolution of leadership. Instead of a boss we will need coaches who are able to support employees in getting better over time.
Actively introducing this role change, which we know of from lean leadership, is almost guaranteed to pay off in the end.
The faster and more drastically general circumstances change, and there is a lot pointing to that happening already, the more important it becomes to fundamentally change our own business model. Speed plays a vital role. To put it another way:
Take heed of the first point, and secure the second by allowing change activities to develop their full potential and lead you to success.