Hard Truths of Business Transformation

Business transformation is hard on people at all levels. People issues are the primary reason that more than 70% of transformation efforts fail. Be prepared to be uncomfortable. Leaders, in particular, need to embrace the discomfort that comes with transformation, so they can help the rest of the organization through it. This requires courage and unfortunately, not every leader is up to the task. Also, true transformation shouldn’t be confused with continuous improvement (CI), which many people are familiar with and can share many of the same theoretical underpinnings (business process foundation, critical thinking, Lean, etc.) as transformation. Transformation is strategic change; CI is program of tactical improvement. An enterprise embarking on business transformation must be willing to change everything but its core to become a higher quality, faster, and more efficient value-delivery machine to all stakeholders. It’s hard, but not impossible. To succeed, you will need to first embrace discomfort, remember to not mistake significant transformation for a continuous improvement program, and be ready to question almost everything about how your enterprise has historically operated. Business transformation is not for the faint of heart, but it is better than the alternative. Many enterprises that don’t transform themselves will not survive long in today’s rapidly changing business environment.

Prepare to be uncomfortable.

Brené Brown, the renowned academic and management thought leader, nailed it on the head when she said, “You can choose comfort, or you can choose courage. You cannot have both.” Most enterprise leaders got to where they are because they have become masters at knowing how their business works. They understand how to engage people, process, and technology levers to create value for customers, employees, and the business entity itself. There is comfort in knowing how things work. The call to transformation requires personal courage from a leader to be prepared to abandon previously successful ways of operating and build a new recipe of business process, digital technology, and people roles to ensure future success of their enterprise in a highly competitive, rapidly changing commercial environment. Talk about uncomfortable.

Human beings are animals and as such they have an instinct to seek comfort and avoid unfamiliar situations. This instinct manifests as a fight-or-flight response in the wild, but I’ve seen it show up in business transformation contexts as well. It can take the form of active resistance (fight) which confronts the change movement and attempts to stop it in its tracks or running away from change (flight) through passive-aggressive and culturally protective behaviors. It falls upon organizational leaders to have the courage to move their people forward when human instinct tells them otherwise.

Transformation is not the same as continuous improvement.

The best way to understand the difference between transformation and continuous improvement is to use a graphical lens. In math, a continuous change shows up as a smooth line of constant slope with each new point on the x-axis equidistant from the previous one as the function moves along the y-axis. Transformation, however, is discontinuous change. It is more of an unpredictable ride as the slope of the line changes over time.

In many businesses, Kaizen programs exist that spawn many projects that improve a small aspect of the existing operating model. Added together, these programs consistently improve overall performance, leading to success over time, as long as the rules of the game remain the same. If the basis of competition in an industry has changed, upping your continuous improvement capability will not result in success. In this situation, small improvements to an outmoded operating model are not enough to keep up. Significant change (Kaikaku, in Japanese) sees many aspects (people, process, technology) impacted and results in a fundamentally different/new operating model which can be subsequently continuously improved through a Kaizen approach. In times of significant change, continuous improvement may not be sufficient to survive and thrive.

Be willing to change everything but the core.

A true transformation initiative must challenge nearly all assumptions, unwritten rules, and sacred cows that have become part of an organization’s cultural fabric as the legacy business has developed. Alignment first needs to happen among the top leaders about what is core to the enterprise. The core consists of unique capabilities which form a strong foundation from which an enterprise can deliver value to customers and stakeholders, as well as seize new opportunities and grow. A good example of casting off something not critical to the core is General Electric’s recent decision to sell off its famous Crotonville, NY executive learning center. This is a place deeply entwined with company culture/folklore and where decades of GE leaders were indoctrinated into a management approach that drove one of the most successful enterprises of the 20th century. But that was then, and this is now. GE’s current transformation is getting them back to its core of engineering innovation, big ideas, and inventions which will create the future in healthcare, energy, and aviation. Crotonville isn’t core to that. Changes to the name and brand logo are coming, too. They aren’t core, either. An articulation of the core needs to presage transformation and continue as it proceeds so the rank and file can make sense of the changes, but the top managers need to align on it first.

Transformation is hard. The process and technology parts of people, process, and technology can be mastered with requisite expertise and technical knowledge. Managing the people element during a business transformation is more of an art than science, though. The issues and obstacles that need to be overcome are the primary reasons that more than 70% of transformation efforts fail. It starts with leadership. As they say during the passenger safety briefing before every flight, “Put on your oxygen mask before trying to assist others.” If leaders aren’t prepared to be uncomfortable, they won’t be able to help everyone else navigate the significant change that transformation brings. Also, business transformation is not synonymous with continuous improvement. It’s different and not a minor tweak to the existing model but operating in an altogether new way. It’s vital that any enterprise embarking on business transformation must be willing to change everything but its core to become a higher quality, faster, and more efficient value-delivery machine to its stakeholders. Business transformation is hard, but not impossible. Those who succeed will embrace discomfort, not mistake transformation for continuous improvement, and question many things that were thought to be core to how the company operated in the past. Business transformation is not for the faint of heart, but change, even for the better, is never easy.