This report is the first in a series on using data to pinpoint success factors in achieving organizational change. The next report in the series will focus on the leader journey.
A few months ago, an executive told us a story that has stuck with us. At the outset of his company’s transformation, the executive recalled, his company was trying to figure out how it would know when the transformation it was planning was complete.
Finally, the CFO piped up to say, “The only thing that is sure about our future is that we will have to continue to change once we have achieved it.”
This anecdote captures a basic truth about transformations: they are part of an ongoing process at every successful company. The CFO’s remark also captures the crucial idea that no change is ever set in stone. In fact, companies embarking on transformations must accept the fluid nature of their businesses—but they still need systems to manage that fluidity.
Something we call the program journey is fundamental to this management process and to efforts to capture value from transformations. The program journey comprises the processes and structural modifications that companies implement to increase their odds of transformation success. Certainly, companies need to do something to tip the odds in their favor. Our research on transformations (which now includes data from 3,000 multinational businesses headquartered in Asia, Europe, and North America) shows that 70% of transformations fall short of their goals. The one-year mark—after a company has completed the easiest projects—is an inflection point at which change programs either accelerate or lose steam.
To improve their chances of succeeding, companies undertaking transformations must focus on a few critical elements. Creating a transformation office and appointing a chief transformation officer are two key elements. A third is using a rigorous stage-gate program to promote the most promising initiatives and weed out or improve initiatives that are of marginal value or have little chance of working.
There is nothing revolutionary about the tactics and tools that an effective transformation office (TO) uses. They are familiar parts of organizational life: meetings, decision rights, tracking protocols, and other enablers of transparency. But the discipline with which a good TO performs its functions can create a powerful impetus for new behaviors and can position a transformation for success.
In addition to the program journey, two other journeys are crucial for transformation success. The leader journey includes the need to set overarching transformation goals and targets, move toward data-based decision making, and navigate cultural issues. The people journey entails managing the transformation’s impact on employees and maximizing their engagement. Each of these other journeys will be the subject of a subsequent report in the Transformation Revisited series.
In this first piece, on the program journey, we show the benefits that come from breaking down a complex transformation into individual initiatives and projects, and then managing those initiatives through milestones and cross-functional work. We explain what it means to have an activist TO and how a properly structured office helps ensure accountability. We close with a discussion of how to make change stick.
Companies should set a high initial bar for their transformations and then look for the right times, places, and ways to raise that bar. If an organization is struggling, a mindset of “never good enough” will help make it better. If an organization is already good, the ever-upward push of an ambitious transformation might just make it great.