10 Reasons Why Business Transformations Fail

Many transformations are successful and give the transformed company a new lease of life, very often surprising their competitors and becoming more than relevant in the market again. This is why companies go through the trauma of a transformation. Otherwise why bother.

However, a large percentage of transformations either never get off the ground or fail mid-flight.

Why do they fail?

Over the last 25 years of helping companies transform, I have seen patterns of behaviour which repeat more or less often. Sometimes it’s just one reason, other times – more frequently – it’s a combination.

Here is a list of reasons I have experienced in order of importance:?

1. Cold feet

The most common reason transformations fail is that management gets scared. There is great enthusiasm at first:?

• We're going to redefine the company's place in the market
• We're going to modernise
• We're going to become competitive?
• We're going to rule the world (well sort of)

Then the reality sets in. Transformation means changing processes, habits, culture, and yes, sometimes people. It also requires inward investment – sometimes having to take on significant debt for the first time ever. This is scary. Instead of being able to do what you know, you have to be able to learn what you don't know, change the way you have done things for 20 years. So doubt sets in. What if the new processes are wrong? After all, if we change them and we get them wrong doesn't it mean we're stuck with them? (See point 2 for the answer).?

So the board or senior management start watering the changes down on the basis that it’s “too much change” or “too much too fast”. They go back to what they know and the transformation programme withers on the branch.?

2. Believing that newly defined processes can't be improved

This is a funny one. A company requiring deep transformation have processes which haven’t been changed for years, leading to sclerosis, excess costs and eventually, failure to respond to changing market conditions and inevitable company death.

The answer to the above is to implement new and improved processes quickly and enter into a cycle of continuous improvement. This is what external auditors very often fail to apprehend: instead of focussing on what doesn’t work (quite a lot) they should be focussing on the culture in place. If there have been regular improvements over a relatively short period of time, then the direction of travel is the right one. Change doesn’t happen quickly. It can take a year or two in a tech company to implement enough change to start having a major effect on the bottom line.

3. Being afraid of the hockey stick effect

As you enter into a period of transformation, things initially get worse. Your costs temporarily go up, and productivity goes down as people adjust to the new way of doing things. You can mitigate the effect by outsourcing operations to companies already familiar with best practice and who can implement your changes immediately, but there is no getting away from a year – even 2 years – of below-par performance. No pain, no gain.

4. Wrong-headed culture

One of the top reasons of a failed transformation is that the board hires the wrong profile of executive: they hire corporate types to run an SME or they hire entrepreneurs to run large enterprise. Both are mistakes. Entrepreneurs tend to understand agility, quick wins, deep, surgical strikes to disrupt. This can be useful if you have to pivot a small or mid-cap quickly and efficiently. This doesn’t work in a large enterprise (unless you’re Elon Musk) where you have 40,000 employees who need a very careful management and long term strategic planning and there tends to be a “right” and “wrong” way of doing things. Transformation fails when enterprise inertia is not taken into account.

The same applies to corporate types in an SME. They think too conservatively, talk incessantly about McKinsey and PwC and commission endless expensive studies to reach a decision. Eventually, the consultancies take over and the transformation dies a quick death as people go into meeting after meeting to come to some non-existent consensus. Mid-Caps and small companies need and can handle quick and decisive action.

5. Indecision

Not deciding is actually deciding to do nothing which is the same as not being there at all – or perhaps even worse. It stems from executive fear and has no place in a transformation. If you’re an executive afraid for your job, you’re in the wrong job. Make decisions. Be fired for standing for something. As an executive or senior manager responsible for? transformation, you will inevitably come under fire. Whilst it’s not comfortable, it’s your job. Deal with it. And make decisions for the organisation, not yourself.

6. Speed

If you take too long, you will hit the “cold feet” syndrome (see top reason why transformations fail) before you’re done. The trick is to go as fast as possible so that reversing the programme is impossible. Commit the company to the transformation, achieve some results,? and the board will probably let you finish. Take too long and the budget and goodwill will disappear. This is not always possible but it should be attempted anyway.

7.?Resistance

Resistance comes in many forms. It can be active such as senior managers openly questioning your ability to execute the transformation – even calling you a liar -? or passive, such as teams refusing to fully implement new processes – or even semi-passive – where teams refuse to report on productivity, for example.

This is really one of the most soul-destroying aspects of being a transformation expert: you know you can deliver given the past experience, but you are constantly told you can’t: it’s impossible or it doesn’t correspond to some pronouncement from some random external management consultant.

All that is noise, but it can be a very large contributor to company failure. Only when the money and staff are exhausted do the management consultants magically disappear with their loot - only then it's too late...

8. Lack of skill

If you embark on a transformation, you know that you’re in for a rollercoaster with magnificent highs and terrible lows. It is the nature of things and the events that shape it are largely out of your control – even if you’re the CEO.

The one thing you can control is who you hire. For the time of the transformation, hire the best you can afford – try better than you can afford because they’re worth their weight in gold. If you’re a software company, you need a top rate programme manager who can shepherd the products to completion, you need first rate product directors, ?dev managers, QA directors and data visionaries. That means hiring people in for a year or two so they can mentor and coach staff in new techniques, new ways of operating and above all, inject some urgency and fun into the mix. Then the trick is keeping them. Put too many barriers in their way and they’ll just go help someone else.

9. Poisoners

This is a bit like resistance, but it goes much deeper. Outwardly pleasant and polite, they are sneaky and operate undercover. They are difficult to detect whilst they poison the well and spread dissatisfaction and disinformation throughout the teams. In the end, it doesn’t matter how good they are, they have to be dealt with – identified and then controlled or fired. Often the damage is too great and cold feet syndrome sets in (c.f. point 1) and the transformation fails.

10.?Not enough beer

Ok so perhaps not enough G&Ts or whatever, but you have to have fun. Transformations are hard and it is vital to be able to let off steam at company drinks or pizza, laser tag (!) or something equally crazy. It costs far less to do these things than to have to hire brand new people

Epilogue?

This list is not exhaustive but it’s things I’ve seen quite a lot. If you're at the start of your journey, ask yourself whether you have the nerves of steel you need to see it through. The worst outcome is to start and stop mid-way - having spent significant amounts of cash with nothing to show for it.

Have you made different experiences? Do you have other reasons why transformations fail? I’d love to hear them. Share in the comments. .