Nowadays, a pass through the business section of the airport bookstore or an online search of recent business publications unveils numerous titles written by prolific business consultants on the topic of “ transformation.”
“Business transformation has taken hold across the broad corporate landscape due to the confluence of several important triggers, including tipping points in globalization, a major slowdown in Western economies, significant shifts in technology and energy costs, and the challenges of regulatory compliance,” a KPMG report notes.
For corporations, this means change has become the new normal. According to a KPMG survey of more than 900 senior executives from U.S.-based multinationals and asset managers, as well as one-on-one interviews with top executives, a vast majority of U.S. multinationals are making changes, with 93 percent of the KPMG survey respondents saying their companies are in some state of undergoing or preparing for transformation.
“We are living in interesting times, with multiple transformation triggers all present at the same time, all equally intense. When four or five significant drivers are changing at the same time, the business environment becomes highly complex,” explains Robert T. Vanderwerf, U.S. Leader, KPMG Strategic Services Group.
THREE KINDS OF CHANGE
This business transformation revolution is occurring because business uncertainty and constant disruption are now the norm. There are three types of change: developmental change, transitional change, and transformational change.
Developmental change is the simplest change. It involves an improvement of what already is, the enhancement of an existing state.
Example: Training (both technical and personal, such as communications, interpersonal relations, and leadership development, teambuilding, conflict resolution)
Transitional change involves replacing something old with something new (a product, a process, a client) in order to solve a problem. This requires healthy management of the transition phase.
Example: Simple mergers and consolidation; reorganizations; creation of new products, services, or systems that replace old ones
Transformational change is necessary when market requirements force fundamental changes in strategy, operations, and worldview. The new state requires a fundamental shift in mindset, organizational principles, behavior, and/or culture, as well as organizational changes—all designed to support new business directions. And a critical mass of the organization must operate from the new mindset and behavior for the transformation to succeed.
Traditional project management and change management techniques support developmental and transitional change but not transformational change. Business transformation is distinctly different from other types of change.
“Business transformation programs are complex, performance-enhancing initiatives that cross fundamental and geographical boundaries within large organizations,” notes a Capgemini report.
Business transformation is a holistic change management process with the purpose being to align people, processes, and technology initiatives with the new business strategy and vision. These monumental changes alter an organization’s trajectory, making the future difficult to prepare for and predict. Therefore, business transformation provides a significant challenge but also an opportunity for incredible innovation.
Execution is the hardest part of transformation. According to some estimates, more than half of the companies undertaking transformation fail to achieve the desired business result.
TRANSFORMATION TRENDS
Capgemini’s EU Business Transformation European Study looked at trends in Business Transformation. Key findings from the report include:
- On average, large Western European companies have undertaken seven business transformation projects over the last three years.
- Business transformation has become a central way of working; however, less than one-third of companies feel they excel at it.
- Companies do well in the top-down dimension, but less so in the bottom-up dimension of business transformation.
- Implementation is by far the riskiest stage within the execution of a large-scale transformation.
- Shortcomings in execution and insufficient acceptance by company employees are the most important reasons for transformation failure.
- Ongoing support from senior management is by far the most important success factor for business transformation.
According to Capgemini, revenue growth has become the most important driver for business transformation. The continuing trend toward globalization is another key driver of transformation. According to Richard Scase, professor of Organizational Behavior, University of Kent, UK: “Our deepening understanding of doing business in Asian cultures will make mergers and acquisitions a more compelling growth strategy for Western companies, while companies in India and China increasingly will see such transactions as a means to create globally competitive brands.”
ENSURING A SMOOTH TRANSFORMATION
Fortunately, there are steps you can take to ensure your transformation goes smoothly, including:
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Creating the right strategic vision
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Being able to anticipate what your customer is going to want in the future
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Leveraging new and disruptive technologies
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Implementing a continuous process of aligning business models to support business strategy
- Changing leadership competencies to align mindsets and behavior
Of the above, one of the most underestimated and poorly actualized steps is the development of leadership competencies. Leadership must be unified in understanding the vision and goals for the change and prepared for the strategic steps toward the realization of the transformation.
Business transformation and the ability to reach breakthrough results requires attention to the internal dynamics of people and culture. This means the organization needs to transform behaviors and mindsets from both the bottom up and the top down, putting much of the responsibility in the hands of leaders to not only change their own mindsets but to help inspire and transform organizational, team, and system cultures, as well as individual mindsets and behaviors.
As a change leader, not understanding how mindset guides behavior can lead to many undesirable outcomes such as:
- Developing change strategies that do not fit the type of change occurring
- Being rigid and inflexible; not being able to course-correct or change process as needed
- Reacting in negative ways and not modeling desired behaviors
- Denying the need for learning when it really exists
The goal is to lead with a more comprehensive and integrated perspective. Business culture is shaped by the individuals who make up the company’s social fabric. Therefore, leading transformation is also a call to turn inward and pay attention to your mindset.
IMPLICATIONS FOR TRAINING AND DEVELOPMENT
Because transformation affects people so personally, you must get them involved in it to garner their support—and the earlier the better! Employee resistance is always in direct proportion to the degree to which people are kept in the dark and out of the change process. Here are some options for leadership development and employee engagement:
Convene senior leaders in building your case for change and determining the vision for the new state. Consider using large group meeting technologies, which can involve hundreds of people simultaneously in short periods of time.
Provide mindset, behavior, and change skill development to all employees. Use employee groups to identify your customers’ requirements for your transformation, and to benchmark what “best-in-class” organizations are doing in your industry.
Ask employee groups for their input regarding enterprise-wide changes that affect them, and give them the authority to design the local changes for improving their work. Then before implementation, involve them in an impact analysis of your design to ensure it is feasible and won’t overwhelm your organization beyond what it can handle.
When you engage your employees in these ways before implementation, you minimize resistance. Use such strategies to support your change efforts, especially if they are transformational.
If you are going through a transformation process, please e-mail your insights, challenges, questions, and experiences to be included in a future column to: ngoodman@global-dynamics.com.
Neal Goodman, Ph.D., is president of Global Dynamics, Inc., a training and development firm specializing in globalization, cultural intelligence, effective virtual workplaces, and diversity and inclusion. He can be reached at 305.682.7883 and at ngoodman@globaldynamics. com. For more information, visit http://www.global-dynamics.com.