Transformation is not version 2.0

In the words of Dan Schulman, CEO, PayPal Inc, “The biggest impediment to a company’s future success is its past success.”  Organizations, most often, become victims of legacy and bask in the glory of a previous accomplishment, often ignoring the fact that success is no different from an unfaithful mistress that favors from time to time, only the boldest and the strongest. Such organizations are forced to react to the inevitable external factors that demand a sudden change. Change fixes the past. But, such remedial interventions leave the organization with zero or incremental results.

Transformation demands metamorphosis and is about leaving behind the past to create a new future and not get obsessed or complacent with the existing norms

Transformation creates the future. It has the potential to create huge value for an organization. While both Change and Transformation are progressive in nature, they are fundamentally different in their approaches. Transformation is not Version 2.0.  It demands metamorphosis. Transformation is about leaving behind the past to create a new future and not get obsessed or complacent with the existing. If only, Amazon was obsessed with Books, the world would have missed out on the largest Internet Retailer. Jeff Bezos, the visionary founder was inspired by the dictionary meaning of the word Amazon because it was a place that was "exotic and different" and that’s what he wanted his company to be.  The river Amazon which was also the biggest river in the world inspired him to make his bookstore the largest in the world. He did not stop there. The company that was started in 1994 as an online bookstore today is an e-Commerce and a cloud computing giant, which also produces consumer electronics (Kindle, Fire TV, Echo etc.) and runs Amazon Prime Video, an Internet-based video on demand services. Transformation doesn’t mean that we drop what we do well but to re-engineer it to greatness. It is important to continue doing what we are good at and do it extremely well and diversify into areas where you could have a big play.

While transformation and change have become the buzzwords for some-time now, some organizations still use these two words interchangeably. This, in my mind, is the first and foremost of the barriers to success. While every transformation leads to a change, every change does not lead to a transformation. It is important for an organization to identify the need for a change vs. transformation. Transformation is a decision internal to an organization. Transformation is inevitable. You either transform or undergo stasis, followed by a slow decline and death. Successful organizations are either transformation leaders or early adopters. The rest are simply catching up. Speed is the new currency in this age of digital disruption and any significant loss of time could render the entire transformation effort worthless, making it almost impossible to catch up, leave alone compete with the market leaders. There are lot more factors that could derail the transformation journey.

One in three CEOs (34 percent) say their organizations have failed to achieve the value they anticipated from previous transformation initiatives. Here is why:

(i) Discounting the ìbusiness firstî approach:  Transformations that begin with a specific technology (rather than with strategic objectives) are twice as likely to fail. For example, Internet of Things (IoT) has gained momentum and most organizations have embarked on the pilot deployments that aim to solve specific business issues have become successful. While IoT holds huge promise to deliver value, the organizations must understand that taking the decision to scale based only on technology would be a folly. To derive maximum value, organizations need to take a step back from the technology and adopt a business value first approach. A new thinking is required before adding technology scale. If Energy IoT can cut down costs for an organization by 20 percent through temperature sensors, it is also important to assess whether this could be done without impacting the quality and experience of the customer. Else the trade-off between cost-reduction and the client experience would end up as a costly affair. Therefore, technology should only be an enabler and not the driving factor.  

(ii)  Not focusing on the operating model changes: In a global transformation survey by KPMG, 37 percent of the executives stated that the greatest execution barrier they face during transformation is under-estimating the significance of changes to their current operating model. Organizations sometimes go full-steam with the new organization design without fully understanding how it could create value. They fail to establish the critical link between strategy and the operating model.  While it is essential to have the strategy in place, organizations need to go beyond the structure to define their entire operating model — the blueprint for how resources will be organized and operated to deliver the strategy. Unless, all the elements of the operating model — design, ownership, governance, critical behaviors as well as the way people, processes, and technology get integrated to deliver key capabilities, are not clearly defined, the transformation is set up for failure. 

(iii)  Disregarding the cultural connection: A 2016 Gartner publication identifies ‘culture’ to be at the root of many failed business transformations. While most organizations do not assign explicit responsibility for culture, the role of culture in a transformation journey should not be undermined. Culture includes the value system that drives behaviors, decision-making processes that define the pace, direction and leadership style that garner commitment and accountability, engagement models that define the winning capabilities and their imperatives….so on and so forth. All of this will have a significant bearing on value creation. McKinsey experts estimate that 70 percent of transformation programs fail to generate momentum and sustain long-term change for avoidable reasons related to ownership, structure, or communication. With the ever-increasing complexity and competing priorities in the workplace, garnering the attention and commitment of the workforce is the key.  It isn’t just sufficient to have a high-velocity decision- making environment at the top, it is equally important to drive a culture of agility and collaboration across all levels. Unless, there is buy-in from all leadership groups and deep misalignments, if any, are weeded out early on, the transformation would, undoubtedly, fail.  And, as we embrace the new avatar, it is equally important to not lose sight of why a certain culture existed in the first place. Culture needs to keep pace with how the business is transforming without losing it fundamental ethos.  

Organizations can fully harness the value of transformation only if they are able to reduce layers, fix accountability, drive collaboration and nurture winning capabilities

(iv) Inability to execute: Execution is about mobilizing and streamlining resources to consistently deliver excellence in the area of play. It begins with defining the key winning capabilities and limiting it to top 2-3 to be able to gain depth, followed by a careful assessment of what we have in the current talent landscape and the skill gaps that need to be filled. No matter how solid the strategy is or how advanced the technology is, the execution would fail if the organization is grappling with some of the drag factors like Complexity, Bureaucracy, Lack of Accountability and Skill gaps. For example, if the organization is still following hierarchical structures and waiting for sign-offs for decisions that could easily be standardized and delegated, especially in the areas that impact transformation, there is a problem. The divide between the different leadership groups having competing priorities could also pose a severe execution barrier. Organizations can fully harness the value of transformation only if they are able to reduce layers, fix accountability, drive collaboration and nurture winning capabilities. This also translates to placing high stakes on key talent and faster decisions on people that don’t live the organization’s values. 

The journey of transformation is all about making your own recipe of success. There is no one right way of doing it. There would be periods of ambiguity. There would be missing pieces of the puzzle.  There would be setbacks. But a transformation is bound to be successful if the organization has its strategy focus on the customer, encourage a culture of curiosity and continual innovation and learn to thrive to constant change! 

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References:

Design Principles for a robust operating model

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