How to Boldly Transform: An Imperative for Today's Business Leaders

I recently had the privilege of speaking to over 100 senior executives in Paris following our annual TED@BCG event about what it means "to boldly transform" in today's business world.  The following is an excerpt from those remarks.

Business transformation used to be largely synonymous with cutting costs or building margins. Today, though, most business leaders recognize that it represents something much more fundamental. In transforming their businesses, leaders need to simultaneously address:

• How they position their companies to win over the medium team (typically a 3-5 year horizon) in an environment where it's hard to grow, competition is intense, and technology is changing the world around them;
• How they fund this journey by reshaping business portfolios and improving productivity—often while dealing with impatient investors; and
• How they build up the leadership, culture, and organizations that are aligned with the businesses they want to create, not just where and how they have operated historically.

This is not an easy agenda, but the urgency to get on with it is felt in many businesses, and the pressure to transform is not likely to ease up anytime soon.

But in the context of today's world, what does it mean to boldly transform? Four elements come up most frequently in my conversations and our work with leaders around the world as they search for new ways to gain competitive advantage and remain resilient for the years ahead.

First, we need to re-imagine ourselves in a digital world. Businesses across nearly all sectors of the global economy are facing enormous challenges and opportunities to embrace a digital world. The digital imperative touches every part of the business: how companies innovate their existing products and services, introduce new products, rewire their organizations, leverage big data with advanced analytics, communicate with their customers, and redesign factory floors.

Second, we must be adaptive in an uncertain world. As the pace of change accelerates, businesses must be able to sense the shifts in their environment more quickly, prepare for multiple scenarios, and respond more effectively. A culture of experimentation, rapid learning, and improvement must complement a traditional focus on the strong execution of well-defined processes.

Third, we should seek simplicity in an increasingly complex world. We can probably all agree that the world has become much more complex. The concept of a two-speed world is long gone, and differences in customer needs, profitability, and competitive threats make working across business boundaries essential but hard. Unfortunately, the result is frequently more complicated organizations, more metrics, and more processes—making it more difficult to understand what is really going on and to foster cooperation. As my colleague Yves Morieux would say, while the world around us is complicated, we must strive to reduce complicatedness inside our own organizations.

And finally, leaders must be purpose-driven in a world searching for meaning. Our employees strive for authentic meaning in their work as a prime source of motivation and affiliation, while our customers genuinely value brands that speak to them at a human level. But companies frequently lose touch with their roots and their underlying purpose as they grow bigger and more diverse. Leaders must recognize that their "why" is as important as the "what" and the "how".

To make these elements come alive, I want to talk about just one company (though there are many) that has boldly transformed. It is one we all know well and our children know even better—the LEGO Group. The LEGO Group, while built around plastic bricks, recognized early on that it needed to re-imagine itself for the digital world. It developed digital toys, packaged LEGO blocks with video games and programmable robots, and successfully created a large online community with LEGO YouTube videos. But it also did the hard work of investing significantly in its own IT platforms and processes, consolidating multiple HR platforms, and implementing new global manufacturing and product life cycle systems. The LEGO Group has also adapted through several shifts in its global supply chains and streamlined its management team to reduce complexity and increase effectiveness. And finally, the LEGO Group's mission: "Inspire and develop the builders of tomorrow". The company has asked its top 200 executives to each define "my why"—in essence why they believe in the LEGO Group and get up and go to work. Naturally, this deep sense of purpose tends to be very energizing for the LEGO Group's people.

Our world has many challenges, but we should remain highly optimistic about the years ahead. A positive future, though, will not be handed to us; it is ours to shape. To do this we must seek to boldly transform—to re-imagine our companies for a digital age, to push for adaptability and simplicity, and to provide a sense of purpose to our teams, our customers, and society more broadly.

This is not an easy mandate, but, as leaders, I believe we can and must step up to it boldly.