Two lenses on Business Transformation: The view from two leading voices

A couple of days ago I was reading one of Roger Martin's articles about Business Transformation and I was truly fascinated, but while I was reading it, in the back of my mind I also was contrasting it with another approach that I'm familiar with: Building the Transformational Company (BTC) of Christian Rangen.

So here you have this reflection where I compare some of the points that Roger Martin shared in "Strategy & Transformation: The four keys to success" and the point of view of Christian Rangen in "Building the Transformational Company". I hope you enjoy it and it helps you to come up with your own conclusions.

1. What is TRANSFORMATION?

Roger Martin

Transformation connotes a fundamental, discontinuous change — a revolution, a reboot, a makeover — otherwise, we wouldn’t call it ‘transformation’ in the first place.

BTC

We define Transformation as a significant, lasting and non-reversible change in the company's value creation logic.

They've developed a framework to lead a transformation based on 10 elements repetitively found in successful business transformations. BTC also explores the main reasons why a company would need to transform.

Plenty of the most dramatic transformations have started with a simple question: What business are you in?, and a later one: What is actually your "idea of the firm"?

My take

Both view transformation as means to change the "idea" of what the firm is to be better prepared to navigate disruptions and win in the future. It's also worth mentioning that they both see digital transformation and innovation playing a key role here (as enablers), but their vision of transformation is broader, from the business side.

2. The role of STRATEGY

Roger Martin

A successful transformation has to be underpinned by a clear and compelling strategy. There must be a Winning Aspiration (WA). Plus, there needs to be a clear Where-to-Play/How-to-Win (WTP/HTW) combination that serves and reinforces the WA

There has to be a consistent, compelling vision of where you want the strategy to take you. But it needs to be flexible.

Take the time to think very carefully through your strategy. Test it with others. Ask what would have to be true (WWHTBT). Make sure you have a plan for overcoming the key barriers.

BTC

In any transformation, you need a clear strategy, and you should think about it in a CORE/Growth/Explore model, which is one of the 10 principles of Transformation.

When discussing your strategy, Winning Aspirations and Strategic Choices (WTP / HTW) are key elements you need to define. At the end of the day, Strategy is about making choices.

My take

One of the pillars of BTC is the work done by Roger Martin, so it's not a surprise that they share this view about strategy, and that a clear strategy is a key element to any successful transformation.

Roger puts great emphasis on the capabilities that you need to be able to materialize that strategy and also challenges it with a discussion on what would have to be true in the future to be successful.

BTC additionally splits the WTP into three horizons (CORE / Growth / Explore) to have a better understanding of how these elements play in the transformation.

3. What is the TIMEFRAME?

Roger Martin

If you want a fast transformation, my advice is don’t even start. You will fail, which is one of the reasons why transformation by way of a single big acquisition is so likely to fail.

In his examples, you can infer a transformation timeframe between 6 - 15 years

BTC

BTC classifies the transformations into three categories: Shock, Shift (around 5 years), and Evolution (+10 years).

They also propose a Transformation Journey tool that helps you identify some steps you might find in your journey and also track your progress. This is important to set expectations and visualize that the transformation journey will take some time.

A transformation journey is a multi-year journey of sensing, exploring, learning, gradual reinvention and - eventually - successful Transformation.

My take

Both see that a real transformation takes time, at least 5 years, but in some cases more than 10 years. If you expect a one or two-year transformation, good luck, or maybe you should reconsider whether you are really pursuing a Transformation.

4. What is the role of LEADERSHIP & RESILIENCE?

Roger Martin

All three transformations (that he shared in the article) took withering criticism in the early days. The leadership group for a transformation needs to be tough-minded and supportive of each other throughout.

Roger mentions that you need to build a coalition that will help you achieve resilience. Assume that you will be told you are an idiot in the early years — and told so by important, influential people. You will need the support of others around you to get through the attacks, which happily will stop when momentum starts to build.

Assume that you will be told you are an idiot in the early years

BTC

For any transformation, you need a clear Mandate, a proper Structure, and Resources. And all these depend on the C-level leadership to be available.

They also explored who starts and leads the transformation. And they came up with 8 main actors to start it or lead it. Interestingly, it's not always the CEO who leads it.

One interesting player is the activist investor, who can start, support or derail any transformation effort. Blockbuster's active investor Carl Icahn influenced the board to dismantle all transformational initiatives of its CEO John Antioco that could have saved the company, and now active investor Engine 1 who is pushing Exxon to accelerate its transformation. Both are good examples of the power these activist investors can play.

Transformation is the XXI century #1 leadership challenge

My take

Both see that leadership is vital to achieving a successful transformation, and also see the need to involve not just the C-level, but other key players to be able to face initial criticism, and possible crises about the idea of the firm.

BTC stresses the importance of understanding who begins the transformation, and the stand of other stakeholders to take actions to minimize potential risks.

5. How do you FUND it?

Roger Martin

Growth greases the skids of transformation. If your dominant mode is the reallocation of existing resources, you will create immediate enemies of every group from whom you take resources. If instead, you grow the top line, you can put all the new resources behind the transformation and slowly scale back the things that don’t fit.

Finally, have a growth plan. Only if you will have considerably more resources at the end of the transformation relative to the start is it even worth commencing. If the transformation involves shrinking first, don’t do it.

BTC

You need to change your resource allocation process to fund the transformation. Otherwise, the CORE won't free resources to fund the transformation or it will be a constant battle (where the CORE usually wins).

Moreover, you need to understand the impact of your transformation story on Financial Markets, because if they don't clearly understand it or don't believe you will be able to achieve it, your share price will suffer the consequences. Just take a look at what happened at the beginning of 2020 to VW when its CEO (Herbert Diess) emphasized the urgency to transform the company, that it would have to be funded with their own resources, and the reaction of the financial markets, was it a coincidence that their share price suffered that decrease?

My take

Here you can find great differences. Roger recommends funding the transformation through additional resources (growth) from the CORE, while BTC states that the whole resource allocation process needs to be changed to fund the transformation (either from resources that need to be reallocated from the CORE, or from additional ones that come from the growth of the CORE)

If you have the option to fund your transformation from the additional growth, that would help you avoid heated discussions, if not, you need to take hard decisions to restructure your resource allocation process.

BTC also brings to the conversation the importance of Financial Markets in any transformation, and how negatively they can respond when they don't understand or agree with the transformation (VW, Chegg, etc and plenty others saw how their market capitalization shrunk when they announced their transformations)

Success stories to convince the financial markets are rare, but Adobe is one of them, where its CFO Mark Garret, made tireless efforts to "sell" the transformation story to analysts and other stakeholders.

6. Shall you CALL it a TRANSFORMATION?

Roger Martin

Don’t call it a transformation. Transform rather than talk about transformation. Talk instead about the end state you seek. Very few people actually like what is involved in a transformation; they just like the end state. And I can assure you that calmness is better than agitation when you are transforming.

Roger Martin: Don’t call it a transformation.

BTC

Call it transformation, have a clear understanding of why you need to transform (what's changing in the context), and clearly explain the end state (what would be the new idea of the firm in the future), and how you will achieve it.

My take

Even though both see that the end state of the transformation is key to have a clear message (and a clear and compelling story about it), they have opposite views on whether to call this process a transformation or not.

I found these opposite views quite interesting, and for instance, I've heard the same arguments about innovation (due to so many innovation failures). For some reason, it comes to my mind the "Harry Potter" movies... where you couldn't name "Voldemort" by his name.

I guess your answer could depend on the leadership style of the C-level, the board, and the organizational culture.

7. CONCLUSIONS

I hope you enjoyed, as much as I did, comparing the views of these great minds and perspectives.

There are many coincidences and some perspectives complement each other. This is not surprising because, as I mentioned earlier, Roger Martin has influenced the work of Christian Rangen.

However, the biggest differences are how to fund the transformation, and if you shall call it "TRANSFORMATION" if you decide to undertake this journey in your company.

Transformation is not an easy journey, and it will push you to fundamentally rethink what should be your strategy to create your company of the future.

In case you want to learn more about Roger Martin, I encourage you to read his weekly articles in Medium and to learn more about Christian Rangen's view on Transformation, check the Building the Transformational Company program.

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About Javier Sevilla

Javier Sevilla is the founder and director of NováreQ. He’s been involved in consulting, tech and management, for almost 20 years in projects in the USA, Argentina, and Mexico in the private and public sectors. He collaborates with management teams to promote the growth of their organizations, repositioning their current business while creating their future growth engine in parallel.

Additionally, he promotes the transformation of innovation clusters and the growth of the entrepreneurship ecosystem in Mexico.

Engineer, wine enthusiast, salsa lover, and entrepreneur. Always eager to question, help, and learn.