Preemptive Transformation

Swift organizational change can place firms ahead of the competition, and making changes pre-emptively counters a company’s susceptibility to sluggish growth and speedy failure. If your business isn’t ailing, you may hesitate to drive change. But a 2010–2014 of US organizational transformations showed that in most industries, pre-emptive change is faster, more dependable and more financially rewarding than reactive change. In the three years after a pre-emptive transformation, firms saw annualized total shareholder return (TSR) that was three percentage points higher than the TSR in firms that made reactive changes.

“Transforming pre-emptively as opposed to reactively is actually the most important success factor – in other words, timing is the best predictor of success.”

Researchers defined change as pre-emptive if firms were financially outpacing their industry at the time of initiating it. To maintain their lead, companies can’t rely on “performance momentum,” which lasts no longer than a year. Long-term “outperformance” requires preventative change, and “the earlier the change…the better.” Early timing is the top factor in transformational success, followed by spending on R&D and capital projects. “Long-term strategic orientation, leadership change,” and “restructuring costs and a formal transformation initiative” also factor in. Use six steps to optimize pre-emptive change:

“Constantly explore” – Discover new profit sources before depleting your current options. Stride into uncharted territory while also exploring options closer at hand.

“Create a sense of urgency” – Fight complacency. Test your business model and investigate emerging threats and possibilities by researching industry disrupters, listening to those who are dissatisfied with your firm and by using scenarios.

“Watch out for early warning signals” – Cash flow and profit tell you how well you’ve done in the past. Assess your preparedness for the future by using the metric of “vitality” – that is, your firm’s ability to innovate, refresh its strategy and keep growing.

“Create transformation capabilities” – Make these a fixture in your firm. For instance, diversify leadership teams to balance new thinking with experience.

“Control the narrative” – Enabling pre-emptive change involves addressing and guiding investor expectations. Gain company-wide support by communicating the company’s purpose and placing the change effort in the context of that purpose.

“Choose the right approaches to change” – A “monolithic, linear project management mind-set” won’t suit all change initiatives. Use a variety of approaches and mechanisms.

How We Can Help You

At Bentley Moore Executive, we have specialists with excellent commercial experience in behavioral change, transformation, service delivery, cost savings, cost containment initiatives, as well as operational efficiencies gained operating in the public, private and charity sectors.

If you want to know more or wish to engage us to have a consultation on sustainable cost savings for your business or organisation, please do feel to contact us.

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About the Authors

Martin Reeves, Lars F?ste, Fabien Hassan, Harshal Parikh, and Kevin Whitaker work for the Boston Consulting Group’s Henderson Institute think tank.