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Currently viewing the tag: "Transformation"

AI-2Artificial Intelligence (AI) is one area considered by many executives to enable Automation and steer positive growth.  A couple of years ago, most executives thought that deployment of Artificial Intelligence isn’t a big deal.  However, revamping traditional systems, implementing AI, and scaling it, in reality, is not as simple as it seems.

A survey by PwC Research in 2020, which gathered responses of 1062 business leaders, validates that scaling and industrializing AI is not straightforward at all.  Only 4% of the respondents asserted that they plan on implementing organization-wide AI in 2020.  A year earlier, the same survey revealed 20% of the executives planning to do that.  The survey shows a significant decrease in the number of senior leaders thinking of executing AI.

The reason for this dwindling interest in AI deployment is mainly because of the tough prerequisites necessary—contemplation, resources, preparedness, overhauling legacy systems, and integration of technology applications—for enterprise-wide AI implementation.

A robust AI Implementation Strategy needs to be first devised in order to assist the organizations in moving forward with their AI deployment plans.  Research reveals 5 key priorities of AI Strategy that businesses should follow to position themselves as AI leaders and reap value from Transformation in future.  These priorities not only highlight the key requirements for AI deployment but also pinpoint ways to maximize pay offs associated with the initiative:

  1. Boring AI
  2. AI-ready Workforce
  3. Responsible and Ethical AI
  4. AI Operationalization
  5. Business Model Innovation

Let’s delve deeper into a few of these key priorities.

Boring AI

One of the key reasons to employ AI, as cited by PwC research, is to automate routine administrative functions—e.g., using AI to pull information from tax forms, bills of lading, or invoices that can otherwise take up long hours of human effort.  44% of respondents revealed that AI will help them operate more efficiently.

To ensure AI adds value to the business, leaders should develop a strategy to identify the areas where AI can have a much deeper impact; build capabilities to do that; develop AI solutions, govern them, and embed them with existing systems.

AI-ready Workforce

Building or enhancing the capabilities of the workforce to become AI ready is critical today not only for technology enterprises but also for other businesses.  Organizations should identify the skills required for AI and train their people to deploy AI solutions.

However, thinking of achieving this through traditional means of offering training sessions isn’t a viable strategy to tap the opportunities offered by AI.  In addition to training people, organizations should cross-skill their people in multiple trades and provide them the opportunities to apply and hone in the skills learnt.  In fact, organizations should reward people who apply what they learn into real-time problem-solving and productivity enhancement.

Responsible and Ethical AI

AI can be perilous if adequate understanding of its responsible use and necessary procedures to protect against its risks and negative usage are not taken.  There are growing apprehensions around AI related risks e.g., biased algorithms, facial recognition tools, and deep fakes.  As per PwC survey, a large majority of respondents, using AI routinely, declared readiness in their organizations in terms of taking sufficient measures to protect against AI risks.

However, in reality most organizations are quite far from implementing controls around data and decisions generated using AI.  Just about 33% businesses mentioned having the ability to fully tackle risks associated with data powering AI, AI models, outputs, and reporting. It is imperative to have rigorous Risk Management processes in place to effectively use AI in the workplace and address the risks associated with it.   AI risks can be mitigated by integrating processes, tools, and controls needed to address AI bias, explainability, security, accountability, and ethics.

Interested in learning more about the other key strategic priorities essential for AI deployment readiness?  You can download an editable PowerPoint on Artificial Intelligence Strategy: Top Priorities here on the Flevy documents marketplace.

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– Roderick Cameron, Founding Partner at SGFE Ltd

Change4With most Transformation initiatives people gradually revert back to their old habits of doing things.  Sustainable Change Management necessitates 4 key processes:

  • Chartering—defining the scope, rationale, and team for the change initiative.
  • Learning—testing and refining ideas before a full-blown execution of the initiative.
  • Mobilizing—using symbols and metaphors to engage people and gain their buy-in for the change program.
  • Realigning—redefining the roles and responsibilities and managing performance of the initiative and the people driving it.

These processes are critical to enable an Organizational Culture which encourages execution of lasting change.

In addition to these key processes, for the change to entrench into the organizational fabric, Leadership needs to put in place the environment necessary for the people to embrace and own the new processes, systems, and desired behaviors.

The 4 critical processes aid in creating the enabling conditions necessary for institutionalizing change in the organization.  These enabling conditions for sustainable Change take place in 3 settings:

  1. Structural Context
  2. Procedural Context
  3. Emotional Context

The environment for sustainable change must be put in place way before the actual execution of the Transformation initiative.  These enabling conditions encompass making changes to the organization’s structure, procedures, and sentiments / behaviors.

Let’s dive deeper into the 3 conditions critical to enable sustainable change in the institution.

Structural Context

The first element of the enabling environment requires the change leadership to work on reshaping the organizational structure.  The 4 key processes have a direct bearing on the organization’s structure.  Their effect pervades over:

  • The organization’s hierarchy and reporting lines.
  • Compensations, benefits, and rewards systems.
  • Monitoring and control systems.

The Structural Context significantly affects the way employees’ work and expend their time and their interest in certain types of projects.

The structural context is altered during the Realigning process of Transformation in the way new personnel practices are employed.  The Learning process informs the redefinition of linkage between the leadership and field staff.  The Mobilizing process informs the changes to be made in the roles and responsibilities of the management and front-line people—through storytelling and metaphors.  Whereas, the Chartering process helps instill a reformed, team-building culture in the organization.  Together, these changes in the structural context cascade down across the organization.

Procedural Context

The Procedural context pertains to a feeling of objectivity and authenticity of new processes and systems.  The Procedural environment involves the perception of people that their views are taken seriously and acted upon while designing and implementing a new initiative.

Procedural authenticity is critical in gaining commitment from the employees on initiatives that were not validated by them earlier.   It involves belief of the people that the change initiative integrates well with the philosophies of the organization and the way business should be done.  It makes the people feel heard, ensures trustworthiness of the change leadership through positive track records and effective decision making abilities, and alignment of the change initiative with the core values of the organization.

Interested in learning more about the other enabling conditions mandatory for institutionalizing change?  You can download an editable PowerPoint on Conditions for Sustainable Change here on the Flevy documents marketplace.

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– Roderick Cameron, Founding Partner at SGFE Ltd

DT2Accelerated pace of technological disruption has forced organizations to change.  It has triggered leaders to think of the ways they must adopt to survive in these challenging times.

Organizations are confronting this scenario by embracing digital technologies.  Traditionally, the focus of the organizations in these Transformation initiatives has remained on speed of change.  To get the most out of their initiatives, they are making drastic changes, to include:

  • Creating Agile Teams
  • Introducing Mobile Apps
  • Building Big Data and Analytics capabilities
  • Experimenting with creative Digital Business Models.

Digital Transformation programs are launched with huge fanfare, see success early on, but fail to keep the momentum going.  The issues that plague the sustainability of these initiatives are typically:

  • Aging Technology Infrastructure
  • Incompatible Operating Models
  • Archaic ways of doing business
  • Change-agnostic culture.

Drivers of change for the Digital Leadership have changed significantly over the years.  There is an increased focus on building scale when executing Digital Transformation.  Leaders have realized that quick Decision Making is not the only element required for successful Transformation.  To achieve its full potential, they need to create differentiated offerings and scale the most viable initiatives across the organization to create value.

Traditional organizations have started following the footsteps of digital disrupters like Amazon and Tesla.  They are implementing new digital services and adjusting their operations.  However, typical hurdles—e.g., old enterprise systems, bureaucratic red tape, delayed decision making, and segregation between IT and business units—make them slip back into the outdated ways of doing things.

Sustainable Digital Transformation involves building not only the technology infrastructure but also revisiting the operating model.  Successful Digital Transformations essentially involve embracing 4 key strategies to enable an ecosystem that encourages change to stick as well as scale:

  1. Create a strong Digital Foundation
  2. Integrate and consolidate the Digital Ecosystem
  3. Front-end to back-end approach
  4. Create a new Business Model

Let’s delve deeper into these strategies.

Create a Strong Digital Foundation

Manufacturing and pharmaceutical industries are the major sectors that employ this strategy.  The typical state of affairs in organizations implementing this strategy is such that they are in need of developing new digital capabilities from scratch to tackle nimble rivals who are churning out novel value propositions using digital tech.  These companies are burdened by dated tech infrastructure, sluggish decision making, and dated business models.  The risk of disruption to these businesses is growing but it hasn’t challenged them to transform drastically.

To them, building a digital foundation warrants acquiring novel foundational capabilities.  Their approach should be to start implementing and managing small changes one step at a time.  For instance, building a smart technology architecture with advanced Big Data, Analytics, and predictive modeling capabilities.  This should be followed by testing prototypes of the new model to prove their worth before implementing a full-blown execution.

Integrate and Consolidate the Digital Ecosystem

This strategy has gained traction most in organizations from the Consumer Products industry.  These organizations are typically marred by scores of fragmented IT systems running in different parts of the organization.  There is a general inability to prioritize the most viable projects and scale them.  The need to reform and rapid deployment of Digital Infrastructure is critical for survival.

The approach to Digital Transformation in these organization should be to establish a central management position to manage the initiative and streamline dispersed technology landscape.  This entails revising the technology infrastructure and operating model, deploying a unified IT platform for gathering and storing customer data, establishing a common data repository accessible to all units to recognize customers’ needs, and creating a culture that encourages innovation, acts on creative ideas, and refines them through experimentation and advanced tools.

Interested in learning more about the other strategies to enable Digital Transformation?  You can download an editable PowerPoint on Sustainable Digital Transformation here on the Flevy documents marketplace.

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“My FlevyPro subscription provides me with the most popular frameworks and decks in demand in today’s market.  They not only augment my existing consulting and coaching offerings and delivery, but also keep me abreast of the latest trends, inspire new products and service offerings for my practice, and educate me in a fraction of the time and money of other solutions.  I strongly recommend FlevyPro to any consultant serious about success.”

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– Roderick Cameron, Founding Partner at SGFE Ltd

change2Initiatives aimed at improving performance are often launched with great uproar, costing an organization significant investments.  Such initiatives necessitate extensive changes in the Organizational Culture and the way the enterprise systems and processes function.

However, most initiatives fall short of realizing success.  Decades of scholarly research on Change Management reveals that the issues that contribute the most to the failure of strategic initiatives are:

  • Incompetence in sustaining process improvement.
  • Lack of trust on senior leadership.
  • Failure to embrace new ways of doing business.
  • Performance relapse.
  • Inability of the initiative to produce any positive financial returns.
  • Skepticism towards the desired behaviors and return of impractical employee behaviors.

Researchers have carried out scores of studies to isolate the drivers of lasting change.  Research published in MIT SMR in 2005 discusses how leadership can design and execute Transformation initiatives that bring lasting changes in the organization.  The study entailed in-depth analysis of the strategic Customer Service Enhancement (CSE) initiative undertaken by a large clothing retailer, having franchises in multiple geographic locations.

The researchers conducted 20 semi-structured interviews with leaders, in-store operations and support function managers.  Detailed notes of the interviews were shared amongst the researchers alongside an exhaustive literature review.  A case study of the initiative was prepared using independent research to have an unprejudiced viewpoint, free from any bias.  Feedback from the organization’s management was gathered and incorporated throughout the study to seek clarifications or corrections.  Data analysis was carried out employing a coding scheme developed using Atlas.ti tool.  Comparative analysis was conducted and similarities and differences in conclusions were discussed.

The study brought to light 4 key processes necessary for change to stick in an organization.   These key processes assist in laying the foundation for successful institutionalization of change initiatives by creating a company-wide culture that encourages enduring change:

  1. Chartering
  2. Learning
  3. Mobilizing
  4. Realigning

Let’s delve deeper into the first 2 processes.

Chartering

Chartering is a process through which an enterprise classifies the purpose, scope, and the way people interact with each other on a strategic initiative.  Clear delineation of project boundaries, resources, responsibilities, and reporting lines are the elements integral for the success of a change initiative.

The Chartering process entails 2 critical components:

  • Boundary Setting
  • Team Design

Boundary Setting involves the key steps a team takes for accurate definition of change initiative’s scope.

The project team should clearly outline the problem(s) that the project is, and isn’t, going to tackle.  Ideally, while designing and executing a change initiative, the focus of the engagement should be on confronting the most crucial problem area.  The leadership should ensure not to confuse the core team by eyeing too many priorities to deal with through the strategic initiative.

The Team Design element of Chartering involves ascertaining the roles, accountabilities, and guiding principles for team’s collaboration.  Team design entails creating ground rules for team members to interact, devising mechanisms to manage conflicts.  The leadership needs to not only maintain diversity of the project team’s expertise, but also ensure they complement each other, and inculcate a standardized approach to decision making in project teams.  There needs to be fostered a culture of positive discourse and testing ideas amongst the team members.  Incorporating these guidelines helps spark thinking, learning, and decision making.

Learning

Learning aids in anticipating and dealing with hurdles during implementation of Transformation initiatives.  Learning enables the managers to improve the quality of the new processes.  it is a process through which managers develop, test, and refine ideas before full-scale implementation.  The process entails 2 critical components:

  • Discovery
  • Experimentation
For more information on Learning and Development and how to elevate your organization into a Learning Organization, check out the frameworks and tools on Flevy here: https://flevy.com/business-toolkit/learning-organization

The discovery element involves gathering data to identify the objectives of the change initiative and outlining ways to achieve those objectives.  Before rolling out a complete implementation of a change initiative, testing and refining the individual elements of the initiative immensely assists in the success of the initiative.  Gathering adequate information relevant to the initiative, setting up baseline metrics to measure performance, and identifying issues hampering customer satisfactions are the key aspects of this phase.  The team should learn from the failures of prior initiatives, introduce change in a systemic fashion rather than piecemeal, and encourage people to change rationally as well as emotionally.

Interested in learning more about the other processes critical for change to stick?  You can download an editable PowerPoint on 4 Processes of Sustainable Change here on the Flevy documents marketplace.

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You can download in-depth presentations on this and hundreds of similar business frameworks from the FlevyPro Library.  FlevyPro is trusted and utilized by 1000s of management consultants and corporate executives.  Here’s what some have to say:

“My FlevyPro subscription provides me with the most popular frameworks and decks in demand in today’s market.  They not only augment my existing consulting and coaching offerings and delivery, but also keep me abreast of the latest trends, inspire new products and service offerings for my practice, and educate me in a fraction of the time and money of other solutions.  I strongly recommend FlevyPro to any consultant serious about success.”

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“As a niche strategic consulting firm, Flevy and FlevyPro frameworks and documents are an on-going reference to help us structure our findings and recommendations to our clients as well as improve their clarity, strength, and visual power.  For us, it is an invaluable resource to increase our impact and value.”

– David Coloma, Consulting Area Manager at Cynertia Consulting

“FlevyPro has been a brilliant resource for me, as an independent growth consultant, to access a vast knowledge bank of presentations to support my work with clients.  In terms of RoI, the value I received from the very first presentation I downloaded paid for my subscription many times over!  The quality of the decks available allows me to punch way above my weight – it’s like having the resources of a Big 4 consultancy at your fingertips at a microscopic fraction of the overhead.”

– Roderick Cameron, Founding Partner at SGFE Ltd

Deal 2Mergers and Acquisitions enable numerous opportunities for growth.  Organizations pursue these initiatives for a number of reasons—e.g. to expand further, attract more clients, or to broaden their product / service offerings.  Scores of M&A transactions materialize across the globe each year, but not all of them achieve the synergies such deals promise.  As a matter of fact, the success ratio is just around 27%.

The M&A Growth Framework is a structured approach to enhance the odds of a successful M&A transaction.  This approach is instrumental in helping organizations capitalize on growth opportunities locked in M&A deals.  The framework comprises 10 phases scattered across 3 timeframes:

  1. Pre-deal Preparation
  2. First 100 Days
  3. Post-deal Closure

The 10 phases of the M&A Growth Framework organized under the 3 timeframes include:

The M&A Growth Framework facilitates in finding growth opportunities, aligning them with Go-to-Market Strategy, reinforcing Customer Experience, and enabling Organizational Readiness for integration after the M&A.

Let’s dive deeper into the first 3 phases of the M&A Growth Framework for now.

Growth Opportunities

The first step in achieving growth from a Merger or Acquisition deal is to identify and analyze the opportunities essential for growth.

Identification of growth opportunities necessitates:

  • Gauging the ability of the new company to enter target markets.
  • Conducting one-to-one interviews and Focus Group Discussions with key people from the management and customers to develop points of reference for existing key competencies.
  • Identifying and translating growth opportunities into initiatives.
  • Quantifying growth with timeline requirements.
  • Prioritizing opportunities based on their magnitude, viability, and potential for effective execution.
  • Utilizing clean teams to ensure confidentiality of data.

Go-to-Market Strategy

Identification and prioritization of growth opportunities necessitates delineating the Go-to-Market Strategy of the combined entity.  This phase assists in achieving the newly-formed company’s stated growth targets, business continuity objectives, and proficient utilization of unified team and resources.

Key steps involved in this phase include:

  • Combining the acquired entity’s product/service portfolio with the buyer’s offerings.
  • Ascertaining and prioritizing strategic inputs.
  • Translating the information and inputs available into prioritized action items.
  • Segmenting the customers and their needs.
  • Creating Go-to-Market plans.
  • Connecting the sales channels with the unified company’s product mix.
  • Ensuring resource readiness, sales targets, coverage, and channel mix.
  • Finalizing marketing plans: communication, branding, targeting, product mix.

Customer Experience Strategy

As part of integrating the 2 unified companies, it is critical for the senior leadership to develop and deploy a Customer Experience (CE) Strategy.  A consistent Customer Experience derives more value from existing customers, aids in the continuation of operations, and boosts customer spending.

Key steps in this phase entail:

  • Appraising the existing customer experience, interactions, and customer pain points.
  • Developing a customer-focused organization by creating seamless CE “personas” and customer journey maps.
  • Identifying and ranking CE improvement initiatives.
  • Implementing CE enhancement initiatives, monitoring outcomes, and correcting the course.
  • Integrating the customers and Customer Experiences of the acquirer and the target companies.

Interested in learning more about the other phases of the M&A Growth Framework ?  You can download an editable PowerPoint on M&A Growth Framework here on the Flevy documents marketplace.

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You can download in-depth presentations on this and hundreds of similar business frameworks from the FlevyPro Library.  FlevyPro is trusted and utilized by 1000s of management consultants and corporate executives.  Here’s what some have to say:

“My FlevyPro subscription provides me with the most popular frameworks and decks in demand in today’s market.  They not only augment my existing consulting and coaching offerings and delivery, but also keep me abreast of the latest trends, inspire new products and service offerings for my practice, and educate me in a fraction of the time and money of other solutions.  I strongly recommend FlevyPro to any consultant serious about success.”

– Bill Branson, Founder at Strategic Business Architects

“As a niche strategic consulting firm, Flevy and FlevyPro frameworks and documents are an on-going reference to help us structure our findings and recommendations to our clients as well as improve their clarity, strength, and visual power.  For us, it is an invaluable resource to increase our impact and value.”

– David Coloma, Consulting Area Manager at Cynertia Consulting

“FlevyPro has been a brilliant resource for me, as an independent growth consultant, to access a vast knowledge bank of presentations to support my work with clients.  In terms of RoI, the value I received from the very first presentation I downloaded paid for my subscription many times over!  The quality of the decks available allows me to punch way above my weight – it’s like having the resources of a Big 4 consultancy at your fingertips at a microscopic fraction of the overhead.”

– Roderick Cameron, Founding Partner at SGFE Ltd

M&A Turnaround Strategy 1The impact of the global pandemic, volatile stock markets, and slowed economic outlook across the globe has hurt the performance of enterprises across the world.  The scenario has forced leaders to consider undertaking Transformation of their strategy and operations significantly.

The strategy to buy out troubled businesses and determining to fix the issues that upset the target companies has been a focus of Buyers’ senior leadership for the past 2 decades.  In the year 2017 alone, 36,000 M&A (Mergers & Acquisitions) transactions were announced globally.  Acquisition of troubled businesses hoping to have a Turnaround account for around 50% of all M&A deals.

A Turnaround can be defined as the financial recovery of an economy or an organization after a period of inertia or Downturn.  Several issues trigger a Downturn—issues pertaining to technological disruption, regulations, processes, organization’s financial health, management, business model, hierarchy, or competition.

The ratio of success for M&As is, however, not very healthy.  Historical data of 61% of M&A deals based on a BCG’s study, carried out on 1400 M&A deals globally between 2005 and 2018, shows a high failure rate (61%), where they remained unsuccessful to show any improvement in financial performance.

The ones that do succeed offer significant revenue growth and profit margins—around 25% positive variance in TSR than unsuccessful M&As.  However, buying and fixing a business under the weather isn’t an easy job.  This necessitates a meticulous strategy.

In order to materialize a Turnaround, the leadership needs to thoroughly understand the root cause(s) of the Downturn, have a willingness and plan to reform or transform, and rigorously implement the strategy to rectify the situation (Transformation Execution).

Empirical Research demonstrates that the triumph of M&A Turnaround deals is attributable to 6 Critical Success Factors:

  • Investment in R&D
  • Long-term Horizon
  • Clear Purpose
  • Investment in Transformation
  • Synergy Targets
  • Quickness to Action

Deployment of a combination of these CSFs bring about more pronounced outcomes—in terms of positive 3-year TSR and overall Organizational Performance.

A robust M&A Turnaround Strategy—based on lessons learnt from empirical research—revolves around 4 key M&A Deal Characteristics.  These M&A deal characteristics have a profound impact on the outcome of the transaction:

  1. Level of Performance
  2. Sector Alignment
  3. ESG Factors
  4. Deal Size

Knowledge of these key Deal Characteristics allow the senior leadership to ascertain the factors liable to affect the deal outcomes.  Now, let’s discuss the first 2 deal characteristics in a bit detail.

Level of Performance

The performance of the Target company during 2 years pre-deal is a key point to consider for a M&A, as it is directly proportional to the deal success rate and Total Shareholder Return.  BCG’s research demonstrates that M&A transactions where the target entity had a 2-year TSR decline of lower than 10% were liable to be more successful than deals where target companies were in more distress (a decline of ~30% or more).

Sector Alignment

Senior leaders should not ignore the significance of uniformity of sectors of the target and acquiring company.  Based on research, the rate of success for an acquisition transaction involving the buyer and the target operating in the same industry is 5% superior to the rate for transactions involving the companies from different sectors.  The reason for this higher success rate is attributed predominantly to similar business models, customers, vendors, and processes in firms of the same sector, which make the Post-merger Integration of the buyer and target a lot easier.

Interested in learning more about the other characteristics influencing the outcome of an M&A deal?  You can download an editable PowerPoint presentation on M&A Turnaround Strategy here on the Flevy documents marketplace.

Do You Find Value in This Framework?

You can download in-depth presentations on this and hundreds of similar business frameworks from the FlevyPro LibraryFlevyPro is trusted and utilized by 1000s of management consultants and corporate executives. Here’s what some have to say:

“My FlevyPro subscription provides me with the most popular frameworks and decks in demand in today’s market. They not only augment my existing consulting and coaching offerings and delivery, but also keep me abreast of the latest trends, inspire new products and service offerings for my practice, and educate me in a fraction of the time and money of other solutions. I strongly recommend FlevyPro to any consultant serious about success.”

– Bill Branson, Founder at Strategic Business Architects

“As a niche strategic consulting firm, Flevy and FlevyPro frameworks and documents are an on-going reference to help us structure our findings and recommendations to our clients as well as improve their clarity, strength, and visual power. For us, it is an invaluable resource to increase our impact and value.”

– David Coloma, Consulting Area Manager at Cynertia Consulting

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Stock Image 2 - Business Transfromation CSFsBusiness Transformations have become a necessity in the fast-changing technological and competitive business environment.  Transformation is characterized by significant and risk-laden Restructuring of a company, with the objective of accomplishing Operational Excellence and changing its future course.

Business Transformation is a priority for many top executives but it is usually a reaction to challenging circumstances rather than being a preemptive measure.

Business Transformation is prompted by a combination of 2 situations:

  • Need to address inherent problems causing organizational drag—these problems may be internal and/or external.
  • Aspiration by the top management and other senior stakeholders to seize the occasion of addressing these problems, in ways that deeply alter the Business Model of the organization including Value Creation.

Business Transformation entails not just making incremental changes but fundamentally changing all or some of the following:

  • Organizational Structure
  • Core Product or Service Portfolio
  • Systems
  • Processes
  • People—the way employees work
  • Technology

Undertaking such arduous effort requires approaching the task in a structured way.  Research shows that quite a few of such undertakings are based on anecdotal beliefs instead of being based on empirical data.

Countering this trend, the Boston Consulting Group conducted an empirical study of financial and non-financial data-set comprising 300 U.S. public companies.  The data spanned a period of 12 years from 2004 to 2016.  Selection was based on the following criteria:

  • Companies that had a $10 billion or more market capitalization between 2004 and 2016.
  • Of these, companies with an annualized deterioration in Total Share-holder Return (TSR) of 10% or more relative to their industry average (2 years running or more) were identified.

Based on extensive analysis—that included use of methodologies like trained proprietary algorithms, prediction models, and Multivariate Regression Analysis—a pattern pertaining to Business Transformation emerged.  The pattern depicted the following themes:

  1. Frequency of Failure
  2. Impact of Digital Disruption
  3. Impact of Downturn
  4. Competitive Volatility

The study also suggested the following 5 evidence-based Critical Success Factors (CSFs) for achieving Transformation Success.

  1. Cost Management (drives short-term success)
  2. Revenue Growth (drives long-term success)
  3. Long-term Strategy and R&D Investment
  4. New, External Leadership
  5. Holistic Transformation Programs

Let us examine in a bit more detail some of the CSFs.

Cost Management

In order to launch the Transformation effort on the correct footing, Cost Management is key, in the short term especially.  Predictably, empirical analysis suggests that the leading driver for organizations recovering from severe TSR deterioration is a determined Cost-cutting effort during the 1st year of Turnaround.  By year 3, Cost Reduction is accountable for the major share of TSR growth as companies divert their portfolios and make available funding for growth investments.

Revenue Growth

Merely short-term operational improvements do not augur well for a sustainable Transformation.  There has to be a long-term Growth Strategy put in place.  For this to happen, leaders have to challenge the foundations of the company’s Business Model.

Research divulges that Revenue Growth progressively becomes the driver for TSR recovery after year 1 in all the successful Transformation efforts.  Revenue Growth overshadows, by far, all the initial drivers for TSR recovery by year 5 of all successful Turnaround efforts.

Long-term Strategy and R&D Investment

Turbulent competitive environments, particularly, require long-term Strategic Planning and investment in Research and Development for fruitful Business Transformations.  Empirical research and analysis demonstrates:

  • A 4.8% difference between Transforming companies showing above-average long-term strategic direction compared to companies with a below-average orientation.
  • More pronounced findings in transforming companies operating in turbulent competitive environments—long-term orientation linked with a TSR increase of 7%.
  • Companies with above-average R&D investments had upwards of 5.1% TSR impact in contrast to those with below-average spending.

These CSFs strengthen the odds of success in Business Transformation individually.  When used together, most of them produce an impact that is larger than the totality of their individual parts.

Interested in learning more about the 5 Critical Success Factors for Successful Business Transformation?  You can download an editable PowerPoint on 5 Critical Success Factors for Successful Business Transformation here on the Flevy documents marketplace.

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“If you don’t transform your company, you’re stuck.” – Ursula Burns, Chairperson and CEO of VEON; former Chairperson and CEO of Xerox

Business Transformation is the process of fundamentally changing the systems, processes, people, and technology across an entire organization, business unit, or corporate function with the intention of achieving significant improvements in Revenue Growth, Cost Reduction, and/or Customer Satisfaction.

Transformation is pervasive across industries, particularly during times of disruption, as we are witnessing now as a result of COVID-19.  However, despite how common these large scale efforts are, research shows that about 75% of these initiatives fail.

Leverage our frameworks to increase your chances of a successful Transformation by following best practices and avoiding failure-causing “Transformation Traps.”

Learn about our Business Transformation Best Practice Frameworks here.

Do You Find Value in This Framework?

You can download in-depth presentations on this and hundreds of similar business frameworks from the FlevyPro Library.  FlevyPro is trusted and utilized by 1000s of management consultants and corporate executives. Here’s what some have to say:

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– Roderick Cameron, Founding Partner at SGFE Ltd

Stock Image 2 Redeployment after RestrucBusiness Transformation is a given in the lifecycle of organizations.  If an organization or business desires to continue growing gainfully, it has to keep Restructuring and Innovating with time.  Successful Restructuring can be achieved by pursuing a robust 4-phase approach.  Each incremental phase paves the way for shaping the next phase:

  1. Strategic Analysis
  2. Structural Redesign
  3. Redeployment
  4. Renewal

Redeployment is the most critical phase in the Restructuring process.  It presents an opportunity to progress towards strategically directed performance goals and establish the foundation for a new Organizational Culture.

Carrying out an efficacious Redeployment, however, necessitates navigating around the pitfalls that threaten the process.  These snags include:

  • Lack of detailed planning on how Redeployment will be handled

“If you fail to plan, you plan to fail” is an oft repeated adage that has wisdom based on experience of many failures throughout history.  The Redeployment plan should be thoroughly discussed and developed at the Redesign stage, giving out details of all aspects of Redeployment.

  • Restricted access to information approach

Organizational leadership often try to avoid sharing information due the fear of losing control.  During the tumultuous phase of Redeployment, leadership should be communicating with the employees quite frequently to alleviate any concerns and build their trust.

  • Failure in immediate and full disclosure of information

Timely and full disclosure of information is absolutely essential for the process to run smoothly.

A robust communications system has to be put in place for dissemination of timely information predominantly in the Redeployment phase as employee apprehensions are at the highest level in this stage.

You can learn more about the pitfalls during Redeployment here in the editable PowerPoint on Redeployment after Restructuring.

Redeployment, in order to be successful, has to go through 7 steps that need careful planning and execution with precise timing.  These 7 steps include:

  1. Continuously maintaining a robust Communications Plan.
  2. Developing an employee assessment system based on the newly-defined business needs and goals.
  3. Creating a system of reviews and appeals.
  4. Deploying an internal placement group.
  5. Launching a severance plan for those who decide to leave the organization.
  6. Providing training to employees at all levels for them to be able to develop competencies required to assume the responsibilities in a transformed organization.
  7. Planning for the renewal phase following redeployment.

Let us delve a little deeper into this second step:

2. Develop an Employee Assessment System based on the newly defined business needs and goals.

The system should assess potential employees against required competencies for the position.  A matrix should be created to serve as an assessment tool to structure the selectors’ thinking. Each competency should be assigned a weight and the cumulative score should be the sum of weighted scores of each competency.  Input should be based on interviews with candidates, feedback from managers and supervisors.  The matrix should be used as a tool only and selection decision should not be predetermined rather based on all aspects, i.e. qualitative as well as quantitative.

The selectors should be trained to ask targeted questions to assess competencies and document them properly.  Assessment should be divided into 3 sections:

  • Go/No-Go section to assess the candidates’ ability to meet the minimum requirements.
  • Evaluation of each candidate against the competencies mentioned for each position.
  • Document modification in decision due to absenteeism, affirmative action concerns, etc.

Interested in learning more about the Redeployment Steps?  You can download an editable PowerPoint on Redeployment after Restructuring here on the Flevy documents marketplace.

Do You Find Value in This Framework?

You can download in-depth presentations on this and hundreds of similar business frameworks from the FlevyPro Library.  FlevyPro is trusted and utilized by 1000s of management consultants and corporate executives.  Here’s what some have to say:

“My FlevyPro subscription provides me with the most popular frameworks and decks in demand in today’s market. They not only augment my existing consulting and coaching offerings and delivery, but also keep me abreast of the latest trends, inspire new products and service offerings for my practice, and educate me in a fraction of the time and money of other solutions. I strongly recommend FlevyPro to any consultant serious about success.”

– Bill Branson, Founder at Strategic Business Architects

“As a niche strategic consulting firm, Flevy and FlevyPro frameworks and documents are an on-going reference to help us structure our findings and recommendations to our clients as well as improve their clarity, strength, and visual power. For us, it is an invaluable resource to increase our impact and value.”

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“FlevyPro has been a brilliant resource for me, as an independent growth consultant, to access a vast knowledge bank of presentations to support my work with clients. In terms of RoI, the value I received from the very first presentation I downloaded paid for my subscription many times over! The quality of the decks available allows me to punch way above my weight – it’s like having the resources of a Big 4 consultancy at your fingertips at a microscopic fraction of the overhead.”

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Behavior2Product managers, marketers, and designers are often confused as to what they should do to increase the chances of customers’ engagement and uptake of their offering.  Changing individuals’ behavior to enhance engagement, productivity, innovation, and happiness isn’t straightforward.

It takes a lot of effort, time, and resources to execute initiatives aimed at transforming behaviors and Organizational Culture.  However, most people aren’t interested in changing and like the status quo to prevail.  This is where Behavioral Economics can help to know how customers behave, interpret their decision-making methods, and create solutions targeting those behaviors.

Product designers and marketers aspiring to drive acceptance of their products can make use of the 3 Bs of Behavioral Change to change understand consumer behavior. The 3 Bs of Behavioral Change classify the 3 elements essential to change behaviors, i.e.:

  1. Behavior
  2. Barriers
  3. Benefits

Understanding and employing these 3 Bs helps the designers and product managers instill change, inspire design and strategy-related decisions, increase the acceptance of new products / features and product engagement levels, and build new behaviors in people.

Let’s discuss the first 2 elements in detail.

Behavior

People have an inherent tendency to maintain the status quo.  Behavioral change necessitates:

  • Identifying individuals’ existing attitudes.
  • Assessing and tackling psychological biases affecting individuals’ decisions.
  • Carefully tracking behaviors that need to be changed.
  • Ascertaining the most important desired behavior and exact action that is imperative to drive results.
  • Getting the buy-in from all stakeholders on the key behavior.
  • Deciding if the behavior should be permanent or transient.

Examples of key actions to change behaviors include spending 30 minutes thrice weekly doing cardio exercises and consuming salad at lunch daily to stay healthy.

Barriers

Understanding the barriers in behavior adoption assists in creating effective solutions to improve uptake of key behavior.  The second step to induce behavioral change is to reduce barriers in its adoption.

  • Every decision that a product user has to make, no matter how negligible, increases resistance in the likelihood of completing a specific behavior.
  • These actions and decisions an individual has to take in order to achieve the desired behavior create points of friction in embracing key behaviors.  For instance, people often find it difficult to decide when presented with complex choices. They tend to procrastinate or become a victim of decision paralysis.
  • Removing the points of friction and resistance from any key behavior necessitates documenting and streamlining all decisions. The path of least resistance leads to desired key behaviors.

Examples of barriers include the thought process involved in the decision to select where to have dinner.  This thought process is, in fact, a psychological barrier in actually going out and having dinner.  Likewise, the decision to walk or drive to a restaurant is a logistical barrier and a point of friction that warrants making a decision.

To eliminate these barriers, we can either remove barriers entirely or just simplify the decision.  For instance, elimination of a non-critical, open text field from a sign-up form—that probed the users about their business, which requires significant time to think and answer—can increase page-over-page conversion.  In case choices are helpful for the users and cannot be eliminated, then it is best to simplify the decision process by giving fewer options instead of many, or by suggesting “recommended option” to the users.

Interested in learning more about the details of the 3 Bs of Behavioral Change?  You can download an editable PowerPoint presentation on 3 Bs of Behavioral Change here on the Flevy documents marketplace.

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Obstacles 1Mediocre people occupying senior Leadership positions is one of the chief reasons for the fiasco and humiliation that organizations like Enron and WorldCom faced.  The practice of recruiting average people at the top is omnipresent and often goes unnoticed until the results begin to surface, which is typically too late for any intervention.

Smart people decisions matter a lot in achieving profitability.  Research indicates that a return on average human asset of 5% is typical in many industries.  However, a senior executive selection of 2 standard deviations below the average yields -15% return on asset.  An executive selection with 2 standard deviations above average causes 25+% return, which is 5 times the average.  Increased investment in finding and hiring the best senior executives fetches returns to the magnitude of 1000%.

Attracting and selecting the best people for senior leadership positions isn’t a small feat.  The future of organizations depend on it.  However, not too many organizations succeed in getting the right people at the top.  The reason for this failure is attributed predominantly to 3 critical obstacles that hinder in making the right recruitment decisions at such a crucial level.  Wrong Executive Selection decisions due to these 3 obstacles bring about losses and negative returns:

  1. Obstacle of Rarity
  2. Obstacle of the Unknown
  3. Obstacle of Psychological Traps

Let’s talk about these obstacles in a bit of detail.

Obstacle of Rarity

The first barrier to finding outstanding executives for senior positions is their scarcity, as excellent executives are a rare breed.  Sophisticated skills that make an executive standout aren’t common.  They are distributed in a given sample.

Outstanding people perform at a much higher level than that of their peers, particularly at the top positions.  A blue-collar executive with 1 standard deviation above the mean translates to 20% more productive individual than an average executive.  With increasing complexity of job, the difference between the top performer and an average performer increases considerably.

Appointments at the senior positions do not go without assessment errors, which can prove to be extremely costly.  Even an accuracy level of 90% in executive assessment isn’t satisfactory.  This results in a number of mistakenly categorized top performers and rejection of outstanding candidates.

Obstacle of the Unknown

Another barrier to the Executive Selection process is the predictive assessment of candidates on the skills and attributes required and the actual delivery capabilities of the individuals.  It is difficult to assess the unknown.

Competencies at the junior levels are easier to define, but it gets difficult to pinpoint the skills required at the top level.  The skills required at the top keeps on changing due to the evolving political, technological and economic landscape.  The skills required today get obsolete over time.  In case the exact requirements for a position are fully known, it isn’t certain whether a candidate meets the requirements in their entirety.

Accurate assessment of the candidates’ behavior and competencies is difficult but worth investing efforts and resources.  “Soft” skills—e.g., leading people, coaching and developing teams, teamwork, and managing Business Transformation—are what differentiate the senior leaders, but gauging these skills necessitates thorough evaluation and considerable time, which is difficult at senior levels.

Obstacle of Psychological Traps

A number of psychological traps are associated with cognitive biases in humans that hinder the decision making abilities in people and incapacitate the hiring process.  8 types of psychological traps are most common in individuals:

  • Procrastination
  • Assuming incorrectly
  • Impulsive judgment based on first impressions
  • Discounting the warning signs
  • Covering mistakes
  • Bonding with familiarity
  • Emotional anchoring
  • Tendency to follow the majority
For more information on selection and hiring “the best of the best,” take a look at the Fiaccabrino Selection Process (FSP).  Download a free primer on FSP here.

Interested in learning more about the 3 critical obstacles that hinder right Executive Selection?  You can download an editable PowerPoint presentation on Executive Selection here on the Flevy documents marketplace.

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