Notably, our 2020 analysis highlighted these same success levers, but their positive effects are compounding in the current business environment. For example, the increase in realized value jumped from 32% in 2020 to 66% in 2021. The reduction in cost overruns grew from 10% in 2020 to 21% in 2021. The same playbook applies, but it is leading to bigger differences in performance.
Holistic Management of Change Journeys. Successful transformation leaders don’t just define a clear case for change for the transformation and explicitly emphasize how the effort will unlock value for shareholders and other stakeholders; they also embed it effectively in the organization. How? They set up transformation teams composed of groups of 10 to 15 people that are responsible for pursuing a manageable number of initiatives over a reasonable timeline; on average, programs include 10 to 20 initiatives and last one to three years. These teams function through a transformation management office (TMO), led by an executive who reports directly to the CEO or CTO. Leaders also use agile governance structures such as impact centers—physical spaces supported with meeting routines and rhythms that create transparency for leaders, encourage collaboration within and among teams, and maintain a laser focus on value.
The survey data yielded two crucial insights on this topic:
- 90% of transformation leaders articulate a clear case for change, compared with just 74% of companies with failed transformations. Transformation leaders energize and engage the organization by effectively defining and cascading its purpose and its case for change. This entails developing leader action plans (to support leaders in translating the case for change into actionable behaviors and embedding it in their daily routines) and formulating a dedicated communication on the case for change (to deliver that case across the entire organization). Both measures are critical to ensure successful long-term embedding of the case for change in the organization.
- 77% of transformation leaders establish clear value drivers, compared with just 52% of less successful companies. Transformation leaders identify, foster, and reinforce value-creating behaviors and set the right organizational context for them.
Consistent Leadership Alignment. The second major factor that differentiates transformation leaders is having a leadership team that aligns on a common goal and works together to implement the program. The senior team, including the C-suite and the board, must articulate the case for change—clarifying what needs to change and why in a way that sets the tone for the rest of the organization. They must use different communication channels, particularly digital ones, given the sprawling nature of large organizations and the fact that a significant portion of the workforce now works remotely. Using digital channels also enables companies to personalize key aspects of their communication, crafting messages that resonate with individuals, rather than issuing a single blanket statement. The survey data revealed two key findings on this point:
- 49% of transformation leaders had complete alignment of the leadership team and consistent communication throughout the effort, compared with just 26% of transformation failures. Transformation leaders align the leadership team on the scope and objectives of the transformation and help employees understand why they need to be active participants in the change.
- 60% of leaders have a communication roadmap in place, compared with just 40% of transformation failures. Top performers define a comprehensive communication and mobilization strategy that includes feedback mechanisms so that they can revise and adjust the communication plan as needed. Ideally, a senior executive is responsible for developing the overarching communications approach, with the communications department and the TMO leader taking supporting roles.
Employee-centric Change Management. The third element is a focus that places employees at the epicenter of change. Transformation leaders don’t just hand down a finished plan for employees to carry out; they explicitly engage employees in developing the plan. This approach empowers employees to contribute to identifying problems and designing solutions at a granular level, which leads to the formulation of measures that are grounded in real-world experience and, therefore, more likely to succeed.
In our survey, 46% of transformation leaders explicitly focus on employees as the epicenter of change, compared with 29% of laggards. This approach builds a sense of ownership and engagement. Employees are more likely to embrace the change because it’s theirs—they were entrusted with the task of helping craft it. As one company leader put it, “Try to create a culture where people really want to make things better, and adopt a mindset focused on innovation and entrepreneurship.”
The margin of error for transformation may have shrunk as a result of COVID-19, but companies still face an imperative to transform. They cannot cling to the status quo or wait for conditions to become more favorable. In that light, the survey data from transformation leaders is like a lighthouse in a storm. By using these insights, companies can understand the pitfalls of transformation now and focus their resources and energy in the right areas to improve their odds of success. In doing so, they will set themselves up to compete more effectively and create more value.
Kristy Ellmer, Christin Owings, Dave Sivaprasad, David Kirchhoff, and Christoph Hilberath also contributed to this publication.