Where is your organisation on the transformation spectrum?

In this article, the authors offer up a simple model to help organisations think about the transformation that they are pursuing and reflect on whether what they’re doing meets the demands of their ecosystem.

We introduce the idea of a?transformation spectrum?which considers the range of possible strategies for business transformation. These range from transformation strategies that take an internal perspective to achieve operational efficiency through?structure,?all the way,?to those that take full account of its?ecosystem?to achieve operational resilience through?structure,?culture, and a deep appreciation of relevant?macro-environmental factors.

Introspective structural transformation?

We’ll start with?Introspective Structural?transformations that aim to achieve?operational efficiency?through structure change. Here we use the term,?structure, to cover processes, technology, and formal structures. At this end of the spectrum, the transformation is driven by the paradigm that new technology is the key lever. The belief is that improved technology will significantly improve process execution and people augment technology.

People fill in the gaps that machines cannot reach by following dogmatic processes that have little room for human judgement. The aim is to create a well-oiled machine, with high levels of automation operating within an efficient hierarchy. Whereas this is, arguably, the simplest approach to transformation, its focus on structure is likely to achieve modest improvements in operational efficiency, gained at the expense of disengaged employees whose work is often reduced to disconnected tasks that are not feasible to automate. In addition, these structure changes often miss out on more holistic opportunities to realign behaviour and achieve more significant and meaningful gains.

This ‘old mindset’, where the organisation operates through functional silos and where the core operations activity is often seen as the modern equivalent of factories, may also constrain its ability to apply new technology to transform its operating model. Instead, new technology primarily serves to reinforce the current operating model. Furthermore, the internal focus means that the transformation does not consider the implications of the wider ecosystem. For example, the impact of new technology on the marketplace and the impact of geopolitical changes on supply chains. This may be fine, if the organisation operates in a very stable environment, but in a rapidly changing world it may lead to organisations attempting to transform in a bubble.

Introspective structural and cultural transformation

Next, we consider transformations that aim to achieve?operational effectiveness?through structure and culture change. Here we use the term,?culture, to cover norms, values, and behaviours. On this part of the spectrum, the organisation recognises that it takes more than new technology to deliver a transformation – it also requires culture change. The paradigm here is that transformation is not just about changing what people do, but also how they think, feel, and behave. The outcome of this type of transformation tends to be improved operational effectiveness, where people are more engaged because the new operating model recognises the distinct roles that people, and machines perform. People no longer fill the gaps left by machines, but their ‘human-ness’ is encouraged and leveraged to apply judgement and to make use of the informal social networks, within and between organisations, to collaborate and innovate.

Transformation through the simultaneous lenses of structure and culture can also unlock new and innovative ways to think about technology. It enables the organisation to leverage a ‘new mindset + new technology’?paradigm to transform its operating model (here we use the term operating model to encompass an integrated design that aligns structure and culture). This contrasts with a sole focus on the structural component of its operating model as outlined previously in the Introspective Structural transformation. However, the lack of an ecosystem perspective, may still render the transformation ignorant of wider environmental changes.

Ecosystem focused, structural and cultural transformation

Finally, we come to the transformation strategy that aims to achieve?operational resilience?through structure, culture, and deep insight into the ecosystem in which the organisation operates. Here we use the term,?ecosystem, to cover macro-environmental factors, including technology, geopolitics, environment sustainability, and the wider stakeholder community that make up the ecosystem. At this end of the spectrum, the organisation recognises that it takes more than internal levers to transform the organisation. The paradigm here is that transformation is about creating an efficient, effective, and resilient operating model that can flex and respond to changes in the external ecosystem.?

For example, the transformation strategy needs to fully consider the implications of a ‘technology tsunami’ that is unleashing a torrent of new technology, not just by considering how it might enhance the operating model for the business that they’re in now, but how it might transform it into the business that they should or need to be in.

Then there is the shifting geopolitical landscape, where the relative global stability, under a US-led world order, is now being challenged by an emerging Eurasian supercontinent led by China. Understanding the implications of this evolving geopolitical polarisation will be essential to the redesign of supply chains as well as understanding the impact on the access to markets and natural resources.?

Finally, there is the on-going ‘sustainability crisis’ where organisations need to understand the impact of depleting natural resources, and/or restricted access to these due to the shifting geopolitical landscape. But beyond natural resources, sustainability is also becoming a predictor of financial and investment performance. In an increasingly interconnected world, there’s a greater need for organisations to foster relationships across all stakeholder groups – employees, customers, communities, and shareholders. This has been emphasised by Larry Fink, CEO of Blackrock, in his letter to CEOs in 2022:

“a company must create value for and be valued by its full range of stakeholders in order to deliver long-term value for its shareholders.”

Transformation, at this end of the spectrum, takes a holistic, whole-system perspective to create a new operating model, that leverages technology and the perspectives of all stakeholder groups to face the challenges presented by a changing environment to yield an operationally, efficient, effective, resilient, and sustainable organisation that can thrive in its ecosystem.?

So where is your transformation on the spectrum?

Please let us know where your organisation’s current transformation is on the spectrum by taking part in our poll and/or providing your commenting below. We’d love to hear from you.

Authors

Ken Leung and Emer Wynne

Interim Transformation Directors

January 25, 2023