Knowledge Area Review KAR 027 Transformation Leadership November
Knowledge Area Review (KAR 027) Transformation Leadership November 2015
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Leadership in Transformation: Contents Section Component Description 1 Executive Summary Overview of our research and findings 2 Topics in Transformation Leadership A global synthesis of transformation insights 2 a Drivers and context For each different dimension: • The key thinking from consulting firms, journals and academia as to what constitutes best practice • Examples of this best practice across different firms and industries. 2 b Putting in place the right ingredients 2 c Alternative and emerging transformation approaches 2 d Winning hearts and minds on the transformation journey 2 e Achieving and maintaining results 2 f Ensuring transformation success 3 Knowledge Sources KAR 027 – TRANSFORMATION LEADERSHIP Relevant published materials for further reading COMMERCIAL IN CONFIDENCE | © Internal Consulting Group 2015 3
Overview “Transformation is one of those overused words in business, which can mean almost anything—from a quick-and-dirty restructuring to a full-scale corporate rescue. We define transformation in the most literal sense: a cross-functional effort to alter the financial, operational and strategic trajectory of the business, with a stated goal of producing gamechanging results. ” 1 In developing our report, we have drawn from the best global thinking and practices from consulting firms, academics, applied scientists, and others to outline what transformation is and what the critical components and issues are to understand to successfully transform your business. We focus on six dimensions as follows: • • What are the drivers and context for transformation in our global marketplace? How do you make sure you have the right ingredients? What alternative and emerging transformation approaches are considered best practice? How do we make sure that we win hearts and minds of core stakeholders before, during and after our transformation journey? • What is the trick to achieving and maintaining results? • How do we ensure transformation success over the long run? Each section includes an summary of the topic, examples of points of view from leading thinkers in the area, ICG’s synthesis of the key insights, and recommended additional reading. Our aim is to provide a comprehensive, strategic, and action-focused synthesis of material, starting with the macro environment and drilling down to the nuts and bolts of how to do it. We also provide a central navigation point for a large quantity of publicly-available thinking, evidence and experience, with clear and detailed references for further reading. KAR 027 – TRANSFORMATION LEADERSHIP Source: (1) “Choreographing a Full Potential Transformation”, Bain, 2014 COMMERCIAL IN CONFIDENCE | © Internal Consulting Group 2015 4
ICG suggests that 7 critical elements need to be in place, beginning with a clear aspiration and strategy 1 2 Co r De rect s Ro ign, adm ap Seq & uen ce 7 Focus on the right Results o y t ilit Ab in s & W t ar s He ind M 6 Taxonomy of a Successful Transformation Empowered Program Management Engaged Senior Leadership 3 C Ro lea Re le r s s bi pon & liti es si ar e l C tion ira y Asp trateg & S 4 5 KAR 027 – TRANSFORMATION LEADERSHIP COMMERCIAL IN CONFIDENCE | © Internal Consulting Group 2015 5
Leadership in Transformation: Content Overview B. The Right Ingredients A. Drivers and Context Key Drivers Role of the CEO and senior leaders Prevalence The ‘Odds’ Timing The role of the HR team Compensation & rewards Quick wins Results D. Winning Hearts & Minds Along the Way KAR 027 – TRANSFORMATION LEADERSHIP Levers to fund the journey IT-centric Public Sector Service Changing competitive positioning Business/ operating model / agility Implementing a leaner organization E. Achieving Short/Long Term Results Transformation success / failure rates Execution Sustaining Long Term Results Change without obvious Index pain points Empowerment Customercentric Roles & Responsibilities Metrics Stakeholder support Digital Program Management Engagement / "energy to change" Change management / communications Design, Roadmap & Sequencing Aspiration & Strategy Definition C. Alternative Approaches Why transformations fail / pitfalls to avoid Risk Teamwork Communication/ transparency Collaboration F. Ensuring Success COMMERCIAL IN CONFIDENCE | © Internal Consulting Group 2015 6
Leadership in Transformation: Contents Section Component Description 1 Executive Summary Overview of our research and findings 2 Topics in Transformation Leadership A global synthesis of transformation insights 2 a Drivers and context For each different dimension: • The key thinking from consulting firms, journals and academia as to what constitutes best practice • Examples of this best practice across different firms and industries. 2 b Putting in place the right ingredients 2 c Alternative and emerging transformation approaches 2 d Winning hearts and minds on the transformation journey 2 e Achieving and maintaining results 2 f Ensuring transformation success 3 Knowledge Sources KAR 027 – TRANSFORMATION LEADERSHIP Relevant published materials for further reading COMMERCIAL IN CONFIDENCE | © Internal Consulting Group 2015 7
Summary: Drivers and Context for Transformation “Transformation is one of those overused words in business, which can mean almost anything—from a quickand-dirty restructuring to a full-scale corporate rescue. We define transformation in the most literal sense: a cross-functional effort to alter the financial, operational and strategic trajectory of the business, with a stated goal of producing game-changing results” 1 Why do companies transform and what are the key drivers? • Uncertainty is a key transformation driver and comes from 4 main sources: Macro, Technology, Customer and Ecosystem • In addition, the imperative becomes stronger as the performance gap between top and bottom performers grows • Disruption is a key driver for transformation; disruption itself comes from at least 8 different sources • Digital disruption in particular is forcing companies to rethink their business models in a fundamental way So what is transformation? • Transformation definitions vary somewhat but all contain references to several common elements • In particular, we would call out things such as seeking a fundamental change in strategy and operating model; aiming to alter organizational trajectory; adopting a cross-functional approach; treating it as not a one-time event, rather as a prolonged or ongoing effort; and, finally, aiming to achieve significant and/or ambitious results KAR 027 – TRANSFORMATION LEADERSHIP Source: (1) “Choreographing a Full Potential Transformation”, Bain, 2014 COMMERCIAL IN CONFIDENCE | © Internal Consulting Group 2015 8
Summary: Drivers and Context for Transformation (2) How prevalent is it and does it work? • Transformation has become the “new normal”; the vast majority of US companies are doing it, largely with a focus on efficiencies / cost; another CEO survey suggests a similar level of focus, primarily driven by cost reduction • However, the “odds” are stacked against transformations – 3 in 4 will typically fail If a firm decides to do it, when is the right time to start? • One firm observes that one quarter of transformations are undertaken pre-emptively by market leaders – in fact, “offensive” and/or “progressive” transformations typically have a higher success rate • Two other dimensions to consider are the stability of the company’s business model and its competitive position KAR 027 – TRANSFORMATION LEADERSHIP COMMERCIAL IN CONFIDENCE | © Internal Consulting Group 2015 9
Uncertainty is a key transformation driver and comes from 4 main sources: Macro, Technology, Customer and Ecosystem TREMENDOUS UNCERTAINTY ALONG 4 KEY DIMENSIONS KEY INSIGHTS • Uncertainty and turbulence have come to characterize most global markets – the “new normal” • The key challenge: traditional approaches to strategy – analysing trends, making forecasts and committing to only the “best” course of action – aren’t calibrated for the high degree of instability many companies face • Companies using a traditional strategy process to cope with uncertainty may find themselves playing catch-up with more nimble competitors • Even worse, these linear processes can commit a company to a single course of action, and it may be the wrong one • Therefore, transformation is an available lever to ensure businesses are “future proofed” KAR 027 – TRANSFORMATION LEADERSHIP Source: “A strategy for thriving in uncertainty”; Bain, August 2015 COMMERCIAL IN CONFIDENCE | © Internal Consulting Group 2015 10
In addition, the imperative for transformation is becoming stronger as the performance gap is further extended TOP-PERFORMING COMPANIES ARE INCREASING THEIR LEAD ON POOR PERFORMERS KEY INSIGHTS • Traditional sources of competitive advantage are disappearing – as a result, the top performers have started to pull further away • To keep up with industry leaders – or to remain a leader – it is more important than ever for companies to undergo transformations • In each instance, winners must separate themselves from the pack by implementing sustainable, step-change improvements to their strategies and operating models KAR 027 – TRANSFORMATION LEADERSHIP COMMERCIAL IN CONFIDENCE | © Internal Consulting Group 2015 Source: “The new CEO’s guide to Transformation”, Boston Consulting Group, May 2015; based on BCG’s analysis of performance over time of US publicly traded companies with revenues >$50 m 11
Disruption is a key driver for transformation; disruption itself comes from at least 8 different sources BUSINESSES FACE GROWING DISRUPTION FROM ALL ANGLES KAR 027 – TRANSFORMATION LEADERSHIP Source: “Transformation: The Imperative to Change”; Boston Consulting Group, November 2014 COMMERCIAL IN CONFIDENCE | © Internal Consulting Group 2015 12
Digital disruption in particular is forcing companies to rethink their business models in a fundamental way LEADING EXAMPLES OF DISRUPTIVE COMPANIES IMPLICATIONS • Traditional, incremental approaches to evolving business models are no longer sufficient. • Companies must understand how they are likely to be “disrupted” and be brave in initiating the cannibalisation themselves, lest someone else do will do it. • However, game theory suggests that moves and consequences need to be carefully considered. KAR 027 – TRANSFORMATION LEADERSHIP Source: Inspired by Tom Goodwin, 2015 COMMERCIAL IN CONFIDENCE | © Internal Consulting Group 2015 13
Beyond disruption, there are several business performance factors which can drive the need for transformation 5 BUSINESS PERFORMANCE FACTORS DRIVE THE NEED FOR TRANSFORMATION • Relative cost positioning Cost and Prices • Product lines profitability assessment • Cost and prices trends and curves Competitive Positioning • Relative market share and return on assets (RMS/ROA) • Market sizes and trends • Capabilities Assessment • Customer segmentation: segment needs and performance Customers and Profit Pools Product and Complexity • Net promoter score tracking: customer retention and loyalty • Profit pool shifts • Products or services benchmarking • Innovation and level of product complexity • Decision making process assessment • Net working capital optimization Capital Efficiency KAR 027 – TRANSFORMATION LEADERSHIP Source: ICG Experience & Analysis • Fixed asset analysis COMMERCIAL IN CONFIDENCE | © Internal Consulting Group 2015 14
Transformation definitions vary somewhat but all contain references to several common elements DEFINITIONS FROM LEADING CONSULTING FIRMS • “In a shifting environment, most businesses must transform, meaning a fundamental change in strategy, operating model, organization, people, and processes. For most companies, the urgency is high; for others, it is an ongoing, adaptive process. In both cases, though, the transformation fundamentally alters the trajectory of the company. Equally important, it is not a onetime event but an ongoing process of evolution as market conditions continue to change” – BCG • “Successful transformation normally requires rapid, short-term improvements to the bottom line to establish traction and to position the company to win in the medium term. At the same time, organizations need to build the right team, organization, and culture to achieve sustainable results over the long term. All of these aspects need to happen in parallel” – BCG • “Transformation is one of those overused words in business, which can mean almost anything —from a quick-and-dirty restructuring to a full-scale corporate rescue. We define Full Potential Transformation in the most literal sense: a cross-functional effort to alter the financial, operational and strategic trajectory of the business, with a stated goal of producing gamechanging results” – Bain • “What distinguishes transformations from run-of-the-mill efforts? Whether applied to a business unit or to a whole organization, a true transformation is characterized by startlingly high ambitions, the integration of different types of change (organizational, operational, commercial), and a prolonged effort often lasting many months and, in some cases, even years” – Mc. Kinsey KAR 027 – TRANSFORMATION LEADERSHIP COMMON ELEMENTS • Fundamental change in strategy and operating model • Aim to alter organizational trajectory • Cross-functional approach • Initial focus on short term “quick wins” shifting to longer term change • Not a one-time event, rather a prolonged or ongoing effort • Significant / ambitious results COMMERCIAL IN CONFIDENCE | © Internal Consulting Group 2015 Source: “Choreographing a Full Potential Transformation”, Bain, 2014; “Transformation: The Imperative to Change”, BCG 2014; “Driving Radical Change”, Mc. Kinsey Quarterly 2007; ICG Analysis 15
Most organizations define transformation to be “Ongoing and Strategic”, although other definitions are possible KPMG SURVEYED ORGANIZATIONS ON HOW THEY DEFINE TRANSFORMATION • First level - Second level ‘BIG BANG’ OR CONTINUOUS IMPROVEMENT? • Surprisingly, only 18% of KPMG Survey Respondents defined Transformation as an “all-out turnaround effort that results in an overhaul of a business model” Why? • To use a medical analogy, “it’s not elective but often life-saving surgery”, i. e. in the absence of a truly burning platform, that type of wholesale transformation is not in fact necessary • Rather, the (slight) majority view transformation as a continuous process KAR 027 – TRANSFORMATION LEADERSHIP Source: “Business Transformation & the Corporate Agenda”, KPMG, December 2013 COMMERCIAL IN CONFIDENCE | © Internal Consulting Group 2015 16
Transformation has become the “new normal”; the vast majority of US companies are doing it, largely with a focus on efficiencies / cost WHO IS TRANSFORMING AND WHY? • KPMG surveyed 900 senior executives from US based multinationals and asset managers in 2013 – an incredible 93% were found to be in some phase of changing their business models • Of the 93%, a third (31%) had already completed at least one major transformation initiative and were on to another one MOST ARE EITHER PLANNING OR EXECUTING A TRANSFORMATION…. KAR 027 – TRANSFORMATION LEADERSHIP Source: “KPMG Business Transformation & the Corporate Agenda”, December 2013 …TYPICALLY WITH A FOCUS ON EFFICIENCIES OR COST REDUCTION (62%) COMMERCIAL IN CONFIDENCE | © Internal Consulting Group 2015 17
Another CEO survey suggests a similar level of focus, primarily driven by cost reduction WHICH OF THE FOLLOWING RESTRUCTURING ACTIVITIES HAVE CEOS INITIATED IN THE PAST 12 MONTHS? WHICH OF THE FOLLOWING RESTRUCTURING ACTIVITIES DO CEOS PLAN TO INITIATE IN THE COMING 12 MONTHS? KAR 027 – TRANSFORMATION LEADERSHIP COMMERCIAL IN CONFIDENCE | © Internal Consulting Group 2015 Source: “ 17 th Annual Global CEO Survey” (2014), PWC – based on a survey of 1344 CEOs based in 68 countries 18
The “odds” are stacked against transformations – 3 in 4 will typically fail THE DATA SUGGESTS FAILURE IS LIKELY… …HOWEVER, THE GOOD NEWS IS THAT ORGANIZATIONS WHO EXECUTE MORE “BEST PRACTICE” ACTIONS CAN FIND SUCCESS Mc. Kinsey surveyed over 1700 organizations globally: “Today, just 26 percent of respondents say the transformations they’re most familiar with have been very or completely successful at both improving performance and equipping the organization to sustain improvements over time” - Mc. Kinsey Global Survey on Transformation BCG’s experience suggests a similar story: “The hard reality, however, is that many transformations fail. Some 75 percent fall short of their targets—in terms of value generated, timing, or both” - BCG KAR 027 – TRANSFORMATION LEADERSHIP Refer to Section B 4 for the list of 24 actions… COMMERCIAL IN CONFIDENCE | © Internal Consulting Group 2015 Source: “How to beat the transformation odds”, Mc. Kinsey 2015; “Transformation: The Imperative to Change”, BCG 2014 19
One firm observes that one quarter of transformations are undertaken pre -emptively by market leaders NEARLY 25% OF COMPANIES UNDERGO TRANSFORMATION FROM A POSITION OF STRENGTH Further, a significant (46%) number of companies are already operating better than market average when they undertake a transformation, either to sustain change or preemptively transform Conversely, chronic market underperformers must transform just to catch up to where their rivals were last year, let alone where they are going next! KAR 027 – TRANSFORMATION LEADERSHIP Source: “Transformation: The Imperative to Change”; Boston Consulting Group, November 2014 COMMERCIAL IN CONFIDENCE | © Internal Consulting Group 2015 20
Another firm has a similar observation, noting that “offensive” and/or “progressive” transformations typically have a higher success rate DEFENSIVE VS. PROGRESSIVE TRANSFORMATIONS WHAT IS THE DIFFERENCE? • Offensive transformations include moving from good to great performance, or expanding geographically • Defensive transformations including reducing costs or turning around a crisis • N. B. : Some can be a hybrid of the two, such as merger integration and preparing for privatisation • The other dimension is what initiates the transformation, reactive vs. proactive • Mc. Kinsey suggests the most successful transformations are those that are both offensive and proactive, a. k. a. “progressive” KAR 027 – TRANSFORMATION LEADERSHIP Source: “Corporate Transformation Under Pressure”, Mc. Kinsey 2009 COMMERCIAL IN CONFIDENCE | © Internal Consulting Group 2015 21
Two other dimensions to consider are whether a company’s business model is stable or not and its competitive position COMPETITIVE STRENGTH & BUSINESS MODEL STABILITY DETERMINE THE RIGHT TYPE OF TRANSFORMATION KEY INSIGHTS • The right point of departure for a potential transformation stems from two key questions: 1. How far must a company’s business model shift to sustain (or revive) its growth? 2. How strong is its current business, both financially and competitively? • Interestingly, the authors observe that defining the right type of transformation for company that is in distress can be much easier than doing the same for a company that is still evolving and growing • Without a “burning platform, ” determining the magnitude and timing of transformation can be difficult KAR 027 – TRANSFORMATION LEADERSHIP Source: “Choreographing a full potential transformation”, Bain 2014 COMMERCIAL IN CONFIDENCE | © Internal Consulting Group 2015 22
Leadership in Transformation: Contents Section Component Description 1 Executive Summary Overview of our research and findings 2 Topics in Transformation Leadership A global synthesis of transformation insights 2 a Drivers and context For each different dimension: • The key thinking from consulting firms, journals and academia as to what constitutes best practice • Examples of this best practice across different firms and industries. 2 b Putting in place the right ingredients 2 c Alternative and emerging transformation approaches 2 d Winning hearts and minds on the transformation journey 2 e Achieving and maintaining results 2 f Ensuring transformation success 3 Knowledge Sources KAR 027 – TRANSFORMATION LEADERSHIP Relevant published materials for further reading COMMERCIAL IN CONFIDENCE | © Internal Consulting Group 2015 23
Summary: Putting in place the right ingredients As we know, transformations are often large, complex and often lengthy endeavours that require both agility and dynamism to react to unforeseen circumstances along the journey. That said, there are several ingredients that define successful transformations. This section lays out the key components and shares multiple perspectives on each. In particular, we highlight 5 areas: 1. Clearly defining and communicating the organizational aspiration and the strategy to get there • Establishing and communicating the point of arrival is paramount • Setting a bold aspiration is a key ingredient of successful transformations 2. The transformation design, including approach and sequencing of a roadmap of initiatives • There are many different types or approaches possible…supported by many enablers 3. The critical role that the CEO and the senior leadership play in supporting and driving a transformation effort • Successful transformations require engaging the extended leadership team, from the CEO through the top 150 -200 senior managers in an organization – the CEO has a critical role to play; in particular new ones KAR 027 – TRANSFORMATION LEADERSHIP COMMERCIAL IN CONFIDENCE | © Internal Consulting Group 2015 24
Summary: Putting in place the right ingredients (2) 4. The requirement that roles and responsibilities of everyone involved in the transformation need to be clearly defined • Transformations where this has occurred are seen to be 3 x – 4 x more successful 5. That the transformation program needs to be effectively and efficiently managed to ensure benefits realization • The options here include ‘work through the line’, ‘traditional program office’ and ‘strong transformation office’ structures KAR 027 – TRANSFORMATION LEADERSHIP COMMERCIAL IN CONFIDENCE | © Internal Consulting Group 2015 25
There are several key ingredients to a successful transformation THE DYNAMIC NATURE OF TRANSFORMATIONS REQUIRES A DISCIPLINED APPROACH ACROSS A NUMBER OF ELEMENTS ICG CALLS OUT 5 INGREDIENTS IN PARTICULAR 1 Aspiration & Strategy 1. 2. 2 Design, Roadmap & Sequencing 3. 3 The role of the CEO & Senior Leaders 4. 4 Clear Roles & Responsibilities 5 Program Management 5. KAR 027 – TRANSFORMATION LEADERSHIP Source: “Driving Radical Change”; Mc. Kinsey 2007; ICG Analysis COMMERCIAL IN CONFIDENCE | © Internal Consulting Group 2015 26
1 Establishing and communicating the point of arrival is paramount ORGANIZATIONAL CONTEXT WILL DETERMINE HOW MUCH CHANGE IS POSSIBLE, AND WHEN THE VISION REQUIRES APPLYING TWO LENSES • The vision needs to combine both: 1. What the company needs to ultimately look like amid anticipated shifts in technology, market conditions and the competitive landscape; and 2. A pragmatic reckoning of where the company sits currently and how far its business model must shift to meet its goals and aspirations • Looking at both in tandem will establish how far and how fast the company must travel and help determine a point of arrival that is truly within reach KAR 027 – TRANSFORMATION LEADERSHIP Source: “Choreographing a Full Potential Transformation”; Bain & Company, 2014 COMMERCIAL IN CONFIDENCE | © Internal Consulting Group 2015 27
Setting a bold aspiration is a key requirement for successful transformation efforts and has 4 key components 1. DEFINE THE ASPIRATION 2. DESIGN THE ARCHITECTURE 3. BRING IT CLOSER 4. CRAFT THE STORY “Sustainable step change in a company’s performance and health” Answers the questions of “where to start” and “what to prioritise” A 3 -5 year timetable can seem too distant – the midpoint is better Communicate in a way that resonates and engenders a positive response • Performance alludes to typical metrics such as profitability, market value, returns on capital employed • Leaders need to articulate bold themes whose objectives will collectively achieve the overall aspiration • Managers and employees are typically preoccupied by short term pressures • A good story bridges the gap between top management and the rest of the organization • However the reference to organizational “health” underlines the need for any change to be long term and sustainable • Then break each theme into specific initiatives, which can then be sequenced appropriately • The challenge is to translate both the aspiration and architecture into descriptions of what the company will look like at various points along the journey • It needs to address 3 things: the case for change, the challenges and opportunities ahead, and the impact of change on individuals • 3 to 6 themes are the ideal number • Each should be distinct to avoid confusing overlaps KAR 027 – TRANSFORMATION LEADERSHIP Source : “Driving Radical Change”, Mc. Kinsey 2007 1 • Spelling out changes in a series of “From-To” messages can help COMMERCIAL IN CONFIDENCE | © Internal Consulting Group 2015 28
In designing the transformation, there are many different types of approaches possible… 10 TYPES OF TRANSFORMATIONS TO ACHIEVE MEDIUM-TERM OBJECTIVES 2 KEY INSIGHTS • N. B. : the approaches to the left assumes that there has already been some initial focus on achieving short-term “quick win” targets • All 10 approaches include: broader initiatives to win in the medium-term, setting the new strategy and operating model, and building sustainable performance • Regardless of which approach to transformation is utilised, the common thread is the need to establish a fundamentally different competitive position, leading to a medium-term stepchange in performance More detail in Section C on different approaches to transformation… KAR 027 – TRANSFORMATION LEADERSHIP Source: “The new CEOs Guide to Transformation”, Boston Consulting Group, 2015 COMMERCIAL IN CONFIDENCE | © Internal Consulting Group 2015 29
…with many enablers: one firm claims to have identified the 24 actions that support successful transformation implementations KAR 027 – TRANSFORMATION LEADERSHIP Source: “How to Beat the Transformation Odds”, Mc. Kinsey 2015 COMMERCIAL IN CONFIDENCE | © Internal Consulting Group 2015 2 30
Setting the right governance starts with engaging the extended leadership team – from the C-suite through the top 100 -200 managers… TRANSFORMATION SUCCESS REQUIRES ENGAGING THE EXTENDED LEADERSHIP TEAM 3 “LEADING FROM THE FRONT” IS CRITICAL • The Concept of “Leading from the Front” is cited as a key success factor for transformations • This refers to “committed leaders who consistently embody important behaviours and hold themselves accountable for results” Why? • Transformations are complicated initiatives that take time, with significant potential for miscommunication and misplaced priorities by the time messages filter down the line KAR 027 – TRANSFORMATION LEADERSHIP Source: “Transformation: The Imperative to Change”; Boston Consulting Group, November 2014 COMMERCIAL IN CONFIDENCE | © Internal Consulting Group 2015 31
3 …which has a direct link to the likely success of the transformation A TRANSFORMATION IS MORE LIKELY TO SUCCEED WHEN COMPANY LEADERS PLAY 3 KEY ROLES… …PLUS A CRITICAL 4 TH ROLE In addition, leaders also play a critical role in winning over sceptics, who are often in one of four phases of engagement: 1. Denial. This involves making the case for change and reinforcing the transformation is for real 2. Resistance. The key here is to help air points of resistance and address them openly 3. Exploration. Here the key is direct engagement and reassurance, through quick wins, that the process is working However, we note that: • Perception is not always reality with lower level employees often under-reporting the role leaders play in a transformation (in addition to its overall success) KAR 027 – TRANSFORMATION LEADERSHIP 4. Commitment. At this point, sceptics have been converted and are willing to help on next steps COMMERCIAL IN CONFIDENCE | © Internal Consulting Group 2015 Source: “How to Beat the Transformation Odds”, Mc. Kinsey 2015 ; “Transformation: The Imperative to Change”, Boston Consulting Group, 2014 32
The role of the CEO is particularly critical in transformations – he or she must do 4 important things 1. MAKE IT MEANINGFUL 2. ROLE MODEL Make the transformation meaningful Role-model desired mind-sets and behaviour • Create and articulate a powerful transformation “story” • CEOs should adopt a personal approach, openly engage others, and ensure they spotlight successes to reinforce the story • CEO actions will typically encourage employees to follow suit • Leverage symbolic actions to generate powerful results KAR 027 – TRANSFORMATION LEADERSHIP Source: “The CEO’s role in leading transformation”, Mc. Kinsey 2006 3. BUILD A TOP TEAM 3 4. PURSUE IMPACT Build a strong and committed top team Relentlessly pursue impact • CEOs must make tough decisions about who has the ability and the motivation to make the journey • CEOs who direct their personal energy to transformation efforts typically achieve better results • Once selected, invest the time to properly align the team to the same set of goals (e. g. “team charter”) • CEOs should try to roll up their sleeves, hold their leaders accountable and ensure balance between shortterm profit incentives vs. longer-term organizational health initiatives COMMERCIAL IN CONFIDENCE | © Internal Consulting Group 2015 33
New CEOs face a particular challenge when leading transformations – a structured approach can help OVERALL APPROACH 3 THE TRANSFORMATION PROCESS FOR NEW CEO’S HAS FOUR STAGES • New CEOs need to adopt an investigative and analytical mindset – “I need to learn more” • They should consult with as many stakeholders as possible, both internal (employees) and external (customers, industry / functional experts) Note that one of ICG’s popular products (methods) is the HDP – Hundred Day Plan. Available on ICG’s website. KAR 027 – TRANSFORMATION LEADERSHIP Source: “The new CEO’s Guide to Transformation”, Boston Consulting Group, 2015 COMMERCIAL IN CONFIDENCE | © Internal Consulting Group 2015 34
Clearly defining roles and responsibilities are seen as absolutely critical to a transformation’s eventual success TO ENGAGE EMPLOYEES IN A TRANSFORMATION, COMPANIES MUST DEFINE ROLES AND HOLD LEADERS ACCOUNTABLE 4 LOOKING BEYOND ROLE DEFINITION • Not only is clear role definition important, how each role is staffed unsurprisingly is equally important • For example, many executives say, if they were to do it again, they would move faster to keep people resistant to changes out of leadership or influencer roles • Another key element is to allocate high performers and active supporters to key transformation roles, in order to increase the likelihood of success KAR 027 – TRANSFORMATION LEADERSHIP Source: “How to Beat the Transformation Odds”, Mc. Kinsey 2015 COMMERCIAL IN CONFIDENCE | © Internal Consulting Group 2015 35
Managing the transformation program can be done in different ways, depending on the circumstances BEYOND DEFINING CLEAR LEADERSHIP ROLES, CHOOSING THE RIGHT MANAGEMENT STRUCTURE IS CRITICAL 5 WHEN TO USE EACH MODEL 1. Work-through-the-line. Suitable at relatively healthy organizations with a culture of decentralisation. Can also work when transformation only involves certain parts of the business, not all. 2. Traditional program office. Useful in organizations with autonomous divisions and/or decentralisation; however, where more benefits tracking and removal of obstacles is required. 3. Strong transformation office. Typically used when scope/ complexity is high, and/or required pace of change is significant. Also best combined with a cross-functional team of the company’s most creative and talented managers who should be separated from the line for a defined period of time. KAR 027 – TRANSFORMATION LEADERSHIP Source: “Choreographing a Full Potential Transformation”; Bain & Company, 2014 COMMERCIAL IN CONFIDENCE | © Internal Consulting Group 2015 36
5 Similarly, within banking, another firm suggests a 4 -approach model to help choose the right transformation approach FOUR EMERGING TRANSFORMATION APPROACHES FOR BANKS KEY INSIGHTS • This model is largely similar to the Bain model (refer previous page) • However, it allows for the much larger size of banking organizations by introducing a new, divisional lens (refer “Multi-Tower” model to the left) • Top Down/Bottom Up • Cascaded Delivery Approach: Banks execute Approach: Project multiple projects with governance is used to divisional governance. execute multiple Their focus is generating transformation projects ideas to reduce costs and that deliver specific transform operations. benefits to businesses. • Multi-Tower Approach: Divisional governance sets strategic goals for each division and shared service. KAR 027 – TRANSFORMATION LEADERSHIP Source: “Global Transformation Challenge for Banks”, Accenture, August 2015 • Centrally Driven Approach: Targets and goals for each business and operating platform are governed centrally with a core vision. • In either model, the key decisions have to do with the amount of control / governance being placed on the program and to what extent it needs to be centrally-driven COMMERCIAL IN CONFIDENCE | © Internal Consulting Group 2015 37
Leadership in Transformation: Contents Section Component Description 1 Executive Summary Overview of our research and findings 2 Topics in Transformation Leadership A global synthesis of transformation insights 2 a Drivers and context For each different dimension: • The key thinking from consulting firms, journals and academia as to what constitutes best practice • Examples of this best practice across different firms and industries. 2 b Putting in place the right ingredients 2 c Alternative and emerging transformation approaches 2 d Winning hearts and minds on the transformation journey 2 e Achieving and maintaining results 2 f Ensuring transformation success 3 Knowledge Sources KAR 027 – TRANSFORMATION LEADERSHIP Relevant published materials for further reading COMMERCIAL IN CONFIDENCE | © Internal Consulting Group 2015 38
Summary: Alternative & Emerging Transformation Approaches Beyond the “standard” transformation approaches suggested thus far in this document, there are several other approaches which merit a closer look. In particular, ICG would like to highlight 4 alternative or emerging approaches: 11. Digital Transformation • Digital transformation involves focusing on a different set of priorities, typically centred around the online/digital customer journey • Digital transformation goes beyond traditional transformation and focused on several key areas in particular, such as the digital customer journey, omni-channel digital touch points, digital business foundation and digital business support 22. Customer-centric Transformation • Customer-Centric transformations are typically highly reliant on real-time customer data that can be quickly shared • They often require a structure that allows customer feedback to be escalated and actioned quickly 33. IT-centric Transformation • IT-centric transformations involve major overhaul of an organization’s systems • Two approaches are possible: 2 -speed approach or a Greenfield model KAR 027 – TRANSFORMATION LEADERSHIP COMMERCIAL IN CONFIDENCE | © Internal Consulting Group 2015 39
Summary: Alternative & Emerging Transformation Approaches (2) Beyond the ‘standard’ transformation approaches suggested thus far in this document, there are several other approaches which merit a closer look. In particular, ICG would like to highlight 4 alternative or emerging approaches: 44. Public Sector Transformation • For Public Sector transformations, one firm advises organizations to adopt a “lean management” methodology • Another approach, specific to transformation in Defense organizations, balances both ‘hard’ and ‘soft’ elements KAR 027 – TRANSFORMATION LEADERSHIP COMMERCIAL IN CONFIDENCE | © Internal Consulting Group 2015 40
Digital transformation involves focusing on a different set of priorities, typically centred around the online/digital customer journey DIGITAL AFFECTS THE CORE BUSINESS, OPENS NEW FRONTIERS AND DRIVES FOUNDATIONAL CHANGE 1 WHERE TO BEGIN A DIGITAL TRANSFORMATION? • One firm suggests using the framework to the left to systematically review: - The new frontiers where big changes are happening - The core elements of the business affected by change - The foundations needed to support the change • Thereafter, it’s about prioritising Customer Journeys. Why? 1. This helps ground the transformation in the practical realities of change by keeping the customer front and centre 2. It also forces a company to identify every technology, process, capability, and transition needed to deliver a great experience • Companies can then focus on each customer touch point and focus on how to make it better, faster, more efficient, and fully integrated into one coherent experience KAR 027 – TRANSFORMATION LEADERSHIP Source: “Nine questions to help you get your digital transformation right”, Mc. Kinsey October 2015 COMMERCIAL IN CONFIDENCE | © Internal Consulting Group 2015 41
Digital transformation goes beyond traditional transformation in a few key areas ELEMENTS OF DIGITAL BUSINESS (CIRCA 2015) 1 HOW IS IT DIFFERENT? In digital transformations, one must address some or all of the following: • Omni-channel digital touchpoints, which includes both internally controllable and external influence-able drivers • Digital business foundation, which demands interfaces with external platforms (e-commerce, collaboration) and 3 rd party developers • Digital business support, which involves an evolution of traditional support services to take on more of a digital focus KAR 027 – TRANSFORMATION LEADERSHIP Source: Inspired by source : Huffingtonpost / CXOTalk / Accenture Digital COMMERCIAL IN CONFIDENCE | © Internal Consulting Group 2015 42
Customer-Centric transformations are typically highly reliant on realtime customer data that can be quickly shared 2 PRINCIPLE #2 – FRESH CUSTOMER FEEDBACK: USE OF TEAM HUDDLES & N. P. S. AT TELSTRA 5 KEY PRINCIPLES According to one firm, there are 5 key principles for a customercentric transformation: 1. Credible commitment from the top 2. Fresh customer feedback at the heart of the system (refer sidebar to right) 3. Changing company culture in order to change the customer experience 4. Folding customer priorities directly into decision making (refer following page) 5. Better for customers means better for company economics • Telstra chose to use Net Promoter Score (NPS) as it was practical and easy to communicate, and aligned with the company’s aspiration to earn advocacy • In its first year of the transformation, Telstra collected over 11 million pieces of near-real-time feedback which could be acted upon quickly KAR 027 – TRANSFORMATION LEADERSHIP Source: “Transforming a company by learning to love customers, ” Bain 2015 COMMERCIAL IN CONFIDENCE | © Internal Consulting Group 2015 43
Customer-Centric transformations often require a structure that allows customer feedback to be escalated and actioned quickly PRINCIPLE #4 – “ADVOCACY” SHOULD BE EMBEDDED INTO THE TRANSFORMATION MANAGEMENT STRUCTURE: TELSTRA EXAMPLE 2 BRINGING CUSTOMER FEEDBACK INTO DECISION -MAKING • In customer-centric transformations, it is critical to quickly harness insights into decision making • At Telstra, they incorporated several key mechanisms, including two in particular: - Quarterly day-long advocacy reviews (similar in stature to existing financial performance reviews) chaired by the CEO - Fortnightly meetings of an advocacy board to discuss issues that cross business units or functions • Telstra then built customer advocacy goals into the annual planning processes, with targets set for each major customer segment, product, and element of the experience KAR 027 – TRANSFORMATION LEADERSHIP Source: “Transforming a company by learning to love customers”; Bain 2015 COMMERCIAL IN CONFIDENCE | © Internal Consulting Group 2015 44
IT-centric transformations involve major overhaul of an organization’s systems – two approaches are possible EXECUTIVES CAN CONSIDER TWO I. T. TRANSFORMATION MODELS 3 KEY INSIGHTS • Situation: Established companies typically try to get as much as they can from their investments in legacy systems, often devising patches or workarounds to overcome limitations. While useful in the short term, over time these remedies can create incompatibilities among discrete layers of the technology stack and among applications within a layer • How to address it? Two options to consider: 1. 2 -speed model: the IT organization produces quick iterations and launches of front-end customer-facing applications while continuing to ensure the stability of slower, back-end systems that handle foundational transactions and record keeping. Two to three high value customer experiences are prioritised for fast-tracking while the remainder of the team continues at a more moderate pace on the longer-term architecture 2. Greenfield approach: a replacement of core legacy IT systems. This approach works best when businesses require a total transformation that the existing legacy system simply cannot support—such as when a completely new set of functionalities is needed. Implementing this approach successfully also requires a bit more lead time. Companies can build from scratch, choose best-of-breed hardware and software products and integrate themselves, or go with a bundled, pre-integrated suite KAR 027 – TRANSFORMATION LEADERSHIP Source: “Two ways to modernize IT systems for the digital era”; Mc. Kinsey, August 2015 COMMERCIAL IN CONFIDENCE | © Internal Consulting Group 2015 45
For Public Sector transformations, one firm advises organizations to adopt a “lean management” methodology WHAT IS LEAN MANAGEMENT? 4 LEAN MANAGEMENT METHODOLOGY IN THE PUBLIC SECTOR LOOKS AT CHANGE THROUGH FIVE LENSES • A new approach that integrates “hard” operational principles, such as just-in-time production, with the “soft” side, including the development of leaders who can help teams make continuous improvements. Why does it work? • As services get faster, better, and more efficient, customers are more satisfied, employees become more engaged in making improvements, and managers can spend more time on coaching and less on paperwork, creating a virtuous circle KAR 027 – TRANSFORMATION LEADERSHIP COMMERCIAL IN CONFIDENCE | © Internal Consulting Group 2015 Source: “Transforming government performance through lean management”, Mc. Kinsey centre for Government, 2012 46
Another approach, specific to transformation in defense organizations, balances both “hard” and “soft” elements DEFENCE TRANSFORMATION BLUEPRINT, FROM ACCENTURE 4 THE APPROACH • Traditionally, transformation activities in this sector have tended to focus only on the “hard” elements (i. e. the process transformation element). • Accenture suggests that defence organizations need to also balance many of the “soft” elements in their approach (e. g. managing the elements of the transformation journey). • Tackling both in parallel will allow organizations to achieve true reform and realise the benefits from transformation. KAR 027 – TRANSFORMATION LEADERSHIP Source: “Optimising transformation in defence”, Accenture 2012 COMMERCIAL IN CONFIDENCE | © Internal Consulting Group 2015 47
Leadership in Transformation: Contents Section Component Description 1 Executive Summary Overview of our research and findings 2 Topics in Transformation Leadership A global synthesis of transformation insights 2 a Drivers and context For each different dimension: • The key thinking from consulting firms, journals and academia as to what constitutes best practice • Examples of this best practice across different firms and industries. 2 b Putting in place the right ingredients 2 c Alternative and emerging transformation approaches 2 d Winning hearts and minds on the transformation journey 2 e Achieving and maintaining results 2 f Ensuring transformation success 3 Knowledge Sources KAR 027 – TRANSFORMATION LEADERSHIP Relevant published materials for further reading COMMERCIAL IN CONFIDENCE | © Internal Consulting Group 2015 48
Summary: Winning Hearts and Minds Strategy Execution is a complex process. In fact, it's a mix of several processes—and the ideal process picture is different for each organization. Winning Hearts and Minds through culture and communication matters, but most organizations act as though it does not. Winning hearts and minds depends on five dimensions of leadership communication. Leaders who have mastered even one of these skills are twice as likely to feel that they can lead through change. With all five, they are four times more likely. The five skills are: meaning, framing, connecting, engaging and managing energy. Leaders help people understand agree with the need to transform the company, and its future steps required to realise this future. Each executive tries to build exemplary leadership teams and all must be adept at building relationships with widely scattered people. The Human Resource function needs to be a transformation enabler and strategic partner in the process. Along with transformation, people need regular boosts to maintain their willingness, motivation, and energy – three energy boosters. Change has the best chance of cascading through an organization when everyone with authority and influence is involved. In addition to those who hold formal positions of power, this group includes people whose power is more informal and is related to their expertise, to the breadth of their network, or to personal qualities that engender trust. “Culture eats strategy for breakfast every day. ” – Peter Drucker KAR 027 – TRANSFORMATION LEADERSHIP “Strategy is a pattern in a stream of decisions. ” – Henry Mintzberg COMMERCIAL IN CONFIDENCE | © Internal Consulting Group 2015 49
Strategy execution is a complex process, “The 8” simplifies its important components THE 8 PROVIDES A SIMPLE FRAMEWORK EXHIBIT: THE 8 Strategy Execution is a complex process. In fact, it's a mix of several processes—and the ideal process picture is different for each organization. But even with a different mix, each best-in-class strategy execution process should include some basic building blocks. Luckily, many of them are readily available within most organizations. They include: • Tried and tested approaches for reviewing a strategy • Strategy cascade tools, the Balanced Scorecard being the best known • Techniques to structure, execute, and monitor strategic projects • A proven approach to set, monitor, and evaluate individual objectives What is lacking however, is a simple framework to integrate and align all of these different building blocks. And that’s where the 8 comes in. It combines the most important building blocks into a coherent image. The 8 doesn’t cover all of the ins and outs of the strategy execution process. It’s not supposed to. It’s not a rigid step-by-step task. But it does provide a necessary, simple framework for strategy execution. KAR 027 – TRANSFORMATION LEADERSHIP Source: “The Execution Shortcut, ” Jeroen De Flander, 2013. COMMERCIAL IN CONFIDENCE | © Internal Consulting Group 2015 50
Importantly, clear insight is necessary into the human dynamic behaviors and challenges impacting strategy execution – thus the seven bad guys SEVEN “BAD GUYS” THREATEN TO DERAIL TRANSFORMATION EFFORTS MEET THE “SEVEN BAD GUYS” 1. If we want people to understand our idea, we have to overcome the Curse of Knowledge. 2. If we want people to make the right choices, we have to combat Decision Paralysis. 3. If we want to keep the core of our idea visible, we have to fight Message Distortion. 4. If we want others to challenge questionable decisions, we have to circumvent Mitigated Speech. 5. If we want the whole team to perform at peak level, we should understand The Pygmalion Effect and tackle its counterpart: Golem. 6. If we want to speed up decisions, we should reduce CO 2 mplexity. 7. If we want people to keep pushing our idea forward, we have to outwit Willpower Depletion. KAR 027 – TRANSFORMATION LEADERSHIP Source: “The Execution Shortcut, ” Jeroen De Flander, 2013. The seven bad guys offer us an insight into the strategy execution people challenge and how to overcome them. COMMERCIAL IN CONFIDENCE | © Internal Consulting Group 2015 51
Culture and communication matter, but most organizations act as though they do not CULTURE CAN MAKE OR BREAK TRANSFORMATIONS WHILE MANY FIRMS REALISE CULTURE’S IMPORTANCE, IT IS RARELY ADDRESSED WITH RIGOUR • Senior business leaders often vent their frustration with ingrained behaviours and attitudes that hamper progress. • An ATKearney study of over 100 wellperforming companies identified culture as the main challenge to successfully implement nextgeneration business models. Image / Graph / Table • Yet, only 18 percent of companies studied regularly and comprehensively monitor their company’s culture. • Only 43 percent regularly monitor their culture, and even fewer (25 percent) use insights derived from monitoring culture to drive strategy. KAR 027 – TRANSFORMATION LEADERSHIP COMMERCIAL IN CONFIDENCE | © Internal Consulting Group 2015 Source: “Cracking the Culture Code: How organizations Get Where They Want To Go, ” AT Kearney, 2015. 52
Winning hearts and minds depends on five dimensions of leadership communication – Meaning & Framing LEADERS WHO HAVE MASTERED EVEN ONE OF THESE SKILLS ARE TWICE AS LIKELY TO FEEL THAT THEY CAN LEAD THROUGH CHANGE; WITH ALL FIVE, THEY ARE FOUR TIMES MORE LIKELY 22. Positive Framing: Optimists have an edge over pessimists in this dimension. 11. Meaning: Of all the dimensions of centred leadership, meaning has the most significant impact on satisfaction in both work and life. Indeed, its contribution to general life satisfaction is five times more powerful that of any other dimension. Whatever the source of meaning, centred leaders often talk about how their purpose appeals to something greater than themselves and the importance of conveying their passion to others. These skills are particularly applicable for executives leading through major transitions, since it takes strong personal motivation to triumph over the discomfort and fear that accompany change. Three-quarters of the respondents who were particularly good at positive framing thought they had the right skills to lead change, compared with 15 percent of those who weren’t. 5 1 Leaders who don’t naturally see opportunity in change and/or uncertainty create stress. When faced with stress, a natural fight or flight reaction can be triggered. 4 2 This behaviour conflicts with creative thought and has a tendency to breed fear and negativity – not good for transformation. 3 KAR 027 – TRANSFORMATION LEADERSHIP Source: “How centred leaders achieve extraordinary results, ” Mc. Kinsey 2010 COMMERCIAL IN CONFIDENCE | © Internal Consulting Group 2015 53
Winning hearts and minds depends on five dimensions of leadership communication – Connecting, Engaging & Managing Energy LEADERS WHO HAVE MASTERED EVEN ONE OF THESE SKILLS ARE TWICE AS LIKELY TO FEEL THAT THEY CAN LEAD THROUGH CHANGE; WITH ALL FIVE, THEY ARE FOUR TIMES MORE LIKELY 33. Connecting: Information travels quickly in today’s world and leaders depend increasingly on their ability to manage complex webs of connections that aren’t suited to traditional, linear communication styles. Even though this environment can be challenging or even overwhelming, the value of broad contributions and engagement can’t be underlined enough – generating wisdom, new ideas and commitment. Executives must build exemplary leadership teams and all must be adept at building relationships with widely scattered people – the right people, offering meaningful input and support in solving real problems. 44. Engaging: Many of those surveyed indicated they were poor at engaging – only 13 percent thought they had the skills to lead change. The upside is in the midst of change are risk aversion and fear. Leaders who are good at acknowledging and countering these emotions enable courage in their teams and unleash tremendous potential. Encouraging others to take risks can be extremely difficult and the responsibilities that CEOs feel for the performance of the entire organization can make supporting risk taking extremely uncomfortable. To acknowledge that there is risk, leaders must admit that they don’t have all the answers (which can be an unusual mind-set for many leaders). KAR 027 – TRANSFORMATION LEADERSHIP Source: “How centred leaders achieve extraordinary results, ” Mc. Kinsey 2010 55. Managing Energy: Sustaining change requires the enthusiasm and commitment of large numbers of people across an organization for an extended period of time. All too often, though, a change effort starts with a big bang of vision statements and detailed initiatives, only to see energy peter out. The reverse – “relentless enthusiasm” can be equally problematic. Leaders find it hard to sustain energy and commitment within the organization unless they systemically restore their own energy (i. e. , physical, mental, emotional, and spiritual) as well as create the conditions and serve as role models for others to do the same. COMMERCIAL IN CONFIDENCE | © Internal Consulting Group 2015 54
Leaders help people to understand agree with the need to transform the company, with its future steps required to realise this future. RATIONAL • Rational energy-to-change is generated by helping people understand agree with the need to transform the company, with its future steps required to realise this future. • A clear story with strong arguments must be laid out based on objective facts and figures. • That story will rely on: - A burning platform: which describes the firm’s future without the implementation of a transformation, based on market and industry dynamics. If forecasts are negative, this drives consensus on the need to act. - The strategic direction: this describes where the firm would like to be in the future and explains why a given strategy was chosen. This will shape a common goal and vision and drive buy-in. - A roadmap: which describes step-by-step the actions that will be required over time to achieve the strategic direction. This step is critical to transparency and expectation-setting. It is important to continuously update and refine this roadmap and communicate to ease anxiety. KAR 027 – TRANSFORMATION LEADERSHIP 1 EMOTIONAL • Incredibly important (and often neglected) is the emotional aspect of creating energy-to-change. • To build this energy, leadership must inspire people to dream about the future and create an environment where people feel trusted and encouraged to successfully contribute to the transformation. • Strong and inspirational leadership is needed to unite people towards a common goal and curb internal politics that could hamper the process. • The CEO and senior executive team must make time to engage in one-on-one conservations rather than sending e-mails company-wide. - The CEO is only one person. They must engage others to fuel their energy and in turn encourage them to do the same, cascading the energy throughout the organization. • In the absence of a strong CEO, companies must decide whether to develop or promote internal talent (with ideas for immediate improvements), or consider an external hire (who will bring new ideas and is potentially more capable of breaking cultural inertia). COMMERCIAL IN CONFIDENCE | © Internal Consulting Group 2015 Source: “Strategic Business Transformation: Why managing people's ‘energy-to-change’ is key in a successful transformation, ” Roland Berger, 2015. 55
Form a Transformation Management Office (TMO) as soon as possible to coordinate, steer, and support all transformation activities COMMON RESTRAINTS • Exposure to uncertainty: Transformations often force people to leave their comfort zones and leaves them without a clear picture of the future. The more complex the transformation, the longer this feeling is likely to last, and this can cause people to start questioning the effectiveness of the transformation. • Unclear transformation framework: If the framework is ill-defined key experts may lack a clear scope, target, or may be unable to manage interdependencies or risks. A lack of transparency may delay decision-making and distract from the goals of the transformation. • Resistance by transformation opponents: Fence-sitters and opponents (on average ~60 percent and ~20 percent, respectively) must be converted to allies in a timely fashion to prevent a coalition of people resistant to the change. KAR 027 – TRANSFORMATION LEADERSHIP MAINTAINING ENERGY TO CHANGE • First level - Second level 1 RELEASING RESTRAINTS & PROVIDING REASSURANCE • Managing Uncertainty: Carefully decide what to communicate to whom, and in what stage of the transformation. The time between announcing a transformation and the moment at which individual social impact can be communicated should be kept as short as possible (i. e. often these projects should be kept confidential as long as possible). • Reassurance: Coach those that are exposed to uncertainty and provide them with reassurance and trust (a key role for managers and allies). • Structure the transformation program: Form a TMO, on a temporary basis at the outset to coordinate, steer, and support all transformation activities, i. e. : - Define and coordinate a series of key projects - Aid in defining governance and decision-making mechanisms. COMMERCIAL IN CONFIDENCE | © Internal Consulting Group 2015 Source: “Strategic Business Transformation: Why managing people's ‘energy-to-change’ is key in a successful transformation, ” Roland Berger, 2015. 56
“Head, Heart, and Hands” lies at the core of each successful strategy journey. Successful leaders have found the answers to three questions SUCCESSFUL LEADERS HAVE FOUND THE ANSWERS TO THREE QUESTIONS • How do I make others care about my idea – and care enough so they are willing to figure out how they can contribute to success? • How do I makes others aware of what the idea is all about – aware enough so they can make autonomous decisions that positively impact success? • How do I keep others going and energize them enough to keep them travelling the execution path even when I’m not around? • The name given to this triple connection – the connection between a big idea and the travelers it meets on its execution path – is the HP Connection. • It is the gateway to successful execution/ transformation. 1 BUT PEOPLE DON’T ALWAYS DO WHAT WE WANT THEM TO DO • Human nature and overconfidence in our ability to communicate (i. e. , the “curse of knowledge”) leads to an overestimate of the reach of a new idea or reinforces a self-oriented message – result, few receive the message, and the idea dies • “Decision paralysis” can take hold if we give people too many choices – we paralyze the team • “Willpower depletion” takes place when a team runs out of steam for an idea or set of ideas due to competing demands • There is a saying, “No battle plan survives first contact with the enemy. ” The same principle applies in business. The market is often unpredictable and competitors often do the unexpected. You can develop a brilliant strategy, but if the environment changes in way different from your assumptions, your plan may become useless. • The solution in a military context is instructive. Generals cascade a battle plan, but also “Commander’s Intent, ” a broad set of objectives. If things do not go as planned, officers are empowered to use their judgment in achieving the overall strategic goals. KAR 027 – TRANSFORMATION LEADERSHIP Source: “The Execution Shortcut, ” Jeroen De Flander, 2013. COMMERCIAL IN CONFIDENCE | © Internal Consulting Group 2015 57
The most effective engagement approach for a given stakeholder will depend on, among other things, their personality type 2 BUSINESS PERSONALITY TYPES AND ENGAGEMENT BEST PRACTICES Below is an abbreviated typology of business personalities based on the work of Dr. Helen Fisher, a well known author and research professor in the Department of Anthropology at Rutgers University. The typology consists of four basic types. KAR 027 – TRANSFORMATION LEADERSHIP COMMERCIAL IN CONFIDENCE | © Internal Consulting Group 2015 Source: “Winning Friends and Influencing Stakeholders, ” Deloitte, 2013, http: //deloitte. wsj. com/cfo/2013/05/22/winning-friends-and-influencing-stakeholders-lessons-for-new-cfos/ 58
Executives must build exemplary leadership teams and all must be adept at building relationships with widely scattered people LEAD FROM THE FRONT • Beyond the top leadership, a transformation initiative must engage and obtain the buy-in of the management team. • Typically, this requires convincing some skeptics who may question the validity or the urgency of the change. • This resistance may be due to a number of factors: - A change to their span of control - An increase or decrease of their responsibilities - Lack of understanding or belief in the transformation strategy; or - Many other potential factors. 3 LEADERS MUST BRING MANAGERS THROUGH SEVERAL PHASES OF POTENTIAL RESISTANCE Depending on the phase, specific interventions can be used to generate buy-in: • Denial. In this phase, leaders may simply ignore requests, assuming that the initiative won’t last. A clear and convincing case for the change, and reinforcing the fact that the transformation is for real will help to dispel denial. • Resistance. The most common sticking point. In this phase some leaders will seek, actively or passively, to undermine the transformation effort. Open and honest, twoway communication is vital in engaging these managers. Some concerns are likely legitimate, and exploring them will increase the chances of success. • Exploration. Here, direct engagement and reassurance through quick wins are key. This will increase their confidence that the process is working. • Commitment. Leaders are fully engaged in the transformation and eager to help to spread buy-in throughout the organization regarding next steps. • Assess each leader for past performance, current readiness, and future potential across four dimensions: knowledge, soft skills, experience, and motivation and personality traits. Weakness in any one of these areas can be a warning sign. KAR 027 – TRANSFORMATION LEADERSHIP Source: “Transformation: The Imperative to Change, ” Boston Consulting Group, 2014. COMMERCIAL IN CONFIDENCE | © Internal Consulting Group 2015 59
Leaders are also often faced with the challenge of influencing stakeholders over whom they do not have formal authority INFLUENCE WITHOUT AUTHORITY KNOWING WHAT STAKEHOLDERS DON’T WANT IS JUST AS IMPORTANT AS KNOWING WHAT THEY DO WANT • Authors Allen R. Cohen and David L. Bradford provide a useful typology of currencies in their book Influence Without Authority. These include: Research at Deloitte’s CFO Program has found that finance chiefs often undertake listening tours to understand what their key stakeholders want. These conversations are seen as vital to establishing relationships and to addressing any legacy issues an organization may have with these stakeholders. But despite these conversations, some CFOs often run into roadblocks to their change initiatives due to a lack of information. • Inspiration-related currencies like vision, excellence, and ethical correctness. To really know what key stakeholders want, C“X”Os should: • Task-related currencies such as people, resources, information, responsiveness, etc. • Position-related currencies such as recognition, influence with other connections, etc. • Relationship-related currencies such as personal support and acceptance. • Personal-related currencies such as gratitude, autonomy, and discretion. KAR 027 – TRANSFORMATION LEADERSHIP 2 • Understand that what stakeholders say they want may not express their entire universe of so-called wants. For example, a business-unit leader may say he needs better information and support from finance to create budgets or make investment decisions. But his true want may be “to be really listened to” by the finance organization; or he may want finance to “help support the personal initiatives he believes will advance his career. ” By understanding stakeholders’ true wants, CFOs can identify the currencies they can use to gain support and sponsorship for their agenda. • Know that what key stakeholders do not want is as important as knowing what they want. Imagine, for example, an entrepreneurial CEO who hires a CFO to help build better processes. The CFO dutifully designs those processes only to find the CEO reluctant to implement them. To the CEO, the processes he/she thought they needed undermine the collaborative, entrepreneurial approach to problem solving prevalent in the organization. In the quest for efficiency, the CFO misread the importance of the existing culture and values because he didn’t know what the CEO did not want. Thus, cultural due diligence and finding out what key stakeholders do not want is just as vital as discovering what they want. COMMERCIAL IN CONFIDENCE | © Internal Consulting Group 2015 Source: “Influence Without Authority, ” Allan Cohen and David Bradford, 2005; Winning Friends and Influencing Stakeholders, Deloitte, 2013, http: //deloitte. wsj. com/cfo/2013/05/22/winning-friendsand-influencing-stakeholders-lessons-for-new-cfos/ 60
The Human Resource function needs to be a transformation enabler and strategic partner H. R. – NOT ONLY A SERVICE PROVIDER 3 HUMAN RESOURCES MATURITY “STAIRCASE” • Transformations typically touch almost all aspects of HR (e. g. , organizational design, recruiting, performance management). • For this reason, companies need to be aware of the capabilities of their HR function and how they compare to the demands that will be placed on them during the transformation. • In the short term, many companies will need to evolve from a merely administrative focus and functional expertise to a transformation enabler and strategic partner (see graphic, right). • To enable HR to function as a strategic partner and enabler, leaders must include HR in the planning and provide visibility into the pending changes so that HR has time to prepare for its elevated role in the transformation. KAR 027 – TRANSFORMATION LEADERSHIP Source: “Transformation: The Imperative to Change, ” BCG, 2014. COMMERCIAL IN CONFIDENCE | © Internal Consulting Group 2015 61
“Yes” can often mean “no” or “maybe” – Ensure that stakeholder engagement is real MICRO COMMITMENT LADDER (STAKEHOLDER SENTIMENT) “I will get it done, no matter what” Real-time optimization Big Yes “Yes, I’d like to contribute, but I am very busy” • Secondly, there must be alternative to fake “yeses”. An environment that does not encourage people to speak their minds will inevitably end up moving forward with bad ideas. • Further, those whose opinions are not considered and addressed cannot be relied on to engage in a transformation with maximum effort. Predictive action Political Yes Differentiated action Coward’s Yes “Yes, but I will do what I can privately to undermine the change efforts” MITIGATED COMMUNICATION AND THE POWER OF “NO” • Firstly, every yes that is given or received should be challenged to determine if there is real commitment behind it. Institutional action Yes, if I have time “Yes, but only if I can’t get away with not doing it” 4 “Yes, but only because I don’t want to lose my (job/influence/etc. )” Key targets/segments Guerrilla Yes • Thirdly, the problem of mitigated communication (i. e. the softening of suggestions in the presence of authority) must be dealt with. Studies of airline pilots and first officers have shown that while both parties are aware what the most effective “strength” of communication is, in practice neither employ it. Of course, the “yes” that we are looking for (and should be giving) when speaking about a transformation effort is the Big Yes. • In the airline industry, Crew Resource Management (CRM) programs have been developed to encourage active debate in solving challenges, based on the characteristics of high-performing crews. How can a leader be sure? What are the techniques for courting the Big Yes? • Multiple studies have shown a vast improvement in flight performance in these cases (80 -91 percent). KAR 027 – TRANSFORMATION LEADERSHIP COMMERCIAL IN CONFIDENCE | © Internal Consulting Group 2015 Source: “The Execution Shortcut, Jeroen De Flander, ” 2013. Video: https: //www. youtube. com/watch? v=RRQIArfr 4 -E 62
By acknowledging and countering emotions, leaders enable courage for themselves and their teams and unleash tremendous potential “HIDDEN” INFLUENCERS IDENTIFICATION TECHNIQUES Change has the best chance of cascading through an organization when everyone with authority and influence is involved. In addition to those who hold formal positions of power, this group includes people whose power is more informal and is related to their expertise, to the breadth of their network, or to personal qualities that engender trust. These informal or “hidden” leaders can be found throughout any organization. They might include a well-respected field supervisor, an innovative project manager, or a receptionist who’s been at the firm for 25 years. There are three distinct kinds of informal leaders: • Pride builders are great at motivating others and inspiring them to take pride in their work. People influenced by them feel good about working for the organization and have a desire to go above and beyond. • Trusted nodes are go-to people. They are repositories of the organization’s culture. They are the ones approached by people who want to know what’s really happening in the organization—for example, when they’re trying to figure out if those leading a change initiative are actually going to follow through. • Change or culture ambassadors know, as if by instinct, how to live the change the organization is making. They serve as both exemplars and communicators, spreading the word about why change is important. KAR 027 – TRANSFORMATION LEADERSHIP • Informal leaders must be identified before they can be engaged. • One way to do this in a large organization is to run a network analysis. By mapping out connections and seeing who people talk to, you can complement the formal org chart with one that enables you to lead outside the lines. • Another technique, used by social scientists to study hidden populations reluctant to participate in formal research (e. g. street gangs), also has great potential: Snowball sampling. - These brief surveys (two to three minutes) ask recipients to identify acquaintances who should also be asked to participate in the research. In the business context, questions like, “who do you turn to when you have a process-related question? ” or “whose advice do you respect and trust? ” are appropriate. - This method begins with one or a small group of names quickly snowballs into more. - Trust is maintained, since referrals are made anonymously by acquaintances or peers rather than formal identification. - When names begin to recur (typically after three to four rounds) the sampling process can end. COMMERCIAL IN CONFIDENCE | © Internal Consulting Group 2015 Source: “Tapping the Power of Hidden Influencers, ” Mc. Kinsey, 2014; “ 10 Principles of Leading Change Management, ” Strategy&, 2014, http: //www. strategy-business. com/article/00255? pg=all 63
During a transformation, people need regular boosts to maintain their willingness, motivation, and energy – 3 energy boosters ACHIEVE RESULTS FREQUENTLY It is important to realise results on a frequent basis – focus on 5 elements: 1. Decomposing large targets into multiple smaller ones 2. Adjust the approach as hurdles are experienced (i. e. a new route) 3. Set priorities and focus resources on 3 to 5 key projects rather than “a bit of everything” RECOGNIZE PEOPLE’S CONTRIBUTION A business transformation relies on the effort that managers and employees make to contribute to building the company’s future. Transformations can be intense and challenging at times, groups and individuals will benefit from a motivational boost to sustain efforts and take on the next challenge. 4. Promote quick decision-making and avoid over-analysis to maintain momentum (find a balance between must-do and entrepreneurship) Transformation management should promote the sharing of sincere and personal appreciation and recognition among colleagues. While very basic, it is often neglected in the heat of the transformation. 5. Communicate results to increase the visibility of transformation successes throughout the organization Compensation linked to financial results provides some incentive but is often much less effective than a sincere “thank you. ” 5 PROMOTE AND POSITIVE TEAM SPIRIT Everyone goes through ups and downs in a transformation. Transformation should build on collective experiences vs. individual ones. Creating a spirit of togetherness and general mobilization results in stronger commitment, accountability, and pride in the initiative. This requires strong inspirational leadership and leverage of transformation allies and fans. It also requires a shared overall goal across teams to make it clear that the multiple teams are working on a single project, with a single overarching goal. This will also encourage cross-team collaboration. 64 KAR 027 – TRANSFORMATION LEADERSHIP COMMERCIAL IN CONFIDENCE | © Internal Consulting Group 2015 Source: “Strategic Business Transformation: Why managing people's ‘energy-to-change’ is key in a successful transformation, ” Roland Berger, 2015.
Financial rewards are not everything, and an overreliance on them can be dangerous STRONG NONFINANCIAL MOTIVATORS 5 SURVEY: EFFECTIVENESS AND FREQUENCY OF INCENTIVES USED • A Mc. Kinsey global survey of over one thousand executives and HR professionals reveals something surprising – respondents viewed three nonfinancial levers as equally, and in some cases more, effective than the three highest-rated financial incentives. These levers are: • One-on-one meetings with leadership. • Praise from immediate managers. - These make people feel valued, and that their well-being and career development matter to the company. • Project leadership opportunities. The study reveals that while this is a particularly powerful motivator, relatively few companies frequently take advantage of this fact (54 percent). Involvement in special projects make people feel like they are contributing to the future of the company. • Over-reliance on monetary rewards may boost short-term energy at the expense of long-term commitment and compliance, as well as increased costs. KAR 027 – TRANSFORMATION LEADERSHIP Source: “Motivating People: Getting Beyond Money, ” Mc. Kinsey, 2009. Image / Graph / Table WEAK MOTIVATORS • Particularly ineffective nonfinancial levers include: - Large scale communications, such as town hall meetings or mass e-mails - Unpaid or partially paid leave - Training programs - Flexible work arrangements COMMERCIAL IN CONFIDENCE | © Internal Consulting Group 2015 65
Leadership in Transformation: Contents Section Component Description 1 Executive Summary Overview of our research and findings 2 Topics in Transformation Leadership A global synthesis of transformation insights 2 a Drivers and Context For each different dimension: • The key thinking from consulting firms, journals and academia as to what constitutes best practice • Examples of this best practice across different firms and industries. 2 b Putting in place the right ingredients 2 c Alternative and emerging transformation approaches 2 d Winning hearts and minds on the transformation journey 2 e Achieving and maintaining results 2 f Ensuring transformation success 3 Knowledge Sources KAR 027 – TRANSFORMATION LEADERSHIP Relevant published materials for further reading COMMERCIAL IN CONFIDENCE | © Internal Consulting Group 2015 66
Summary: Achieving and Maintaining Results Todays companies are confident despite a tough environment. Research suggests that the companies best prepared to face competitive challenges are those that focus on five building blocks and a of balance strength, agility and lean. Agile companies have both high strategic responsiveness and high organizational flexibility, allowing them to effectively respond to unexpected disruptions in the market. Even if we set aside a sound strategy and high levels of initial engagement as givens, leaders face tremendous challenges in maintaining transformation momentum. Stakeholders expect results – quickly. Setbacks along the transformation journey are likely to poison the well against the whole endeavour. Therefore, transformations should begin with the low hanging fruit: achievable and tangible wins, which will serve to build confidence and energize the organization for the next phase of implementation. In other words, leaders must win in the short term to win in the medium term. Revenue is the first of four types of levers that is available to companies driving the initial stages of a transformation effort. Organizational Simplification (Lever 2) can both dramatically increase punch and implementation power and reduce layers and costs. Using Capital Efficiency as a lever (Lever 3) is vital to help with short term cash needs and to improve investment returns. Finally, cost reduction measures (Lever Four) can lead to reductions of 10 to 25 percent in the cost base, making them an essential component of a transformation. Solid performance management capabilities are critical for transformation efforts. We discuss 12 critical capabilities. Not just financial goals, but personal and organizational success in achieving goals depends on selfconfidence and positive reinforcement. Importantly, beliefs and labels are self-fulfilling prophecies; expect better from low performers, and treat them like high performers, and you will be surprised by the result. KAR 027 – TRANSFORMATION LEADERSHIP COMMERCIAL IN CONFIDENCE | © Internal Consulting Group 2015 67
Today’s companies are confident despite a tough environment How do companies, large and small, see the competitive pressure in their industries – and how will they meet it? Overall what matters most is a company’s attitude toward its ability to change – to transform in preparation for the future. KAR 027 – TRANSFORMATION LEADERSHIP COMMERCIAL IN CONFIDENCE | © Internal Consulting Group 2015 Source: “European Competitiveness Study, Want to Be More Competitive? Get Better at Transformation, ” AT Kearney, 2015, n= 831 68
Research suggests that companies best prepared to face competitive challenges are those that focus on five building blocks and a balance of strength, agility and lean AT Kearney Fit Transformation Framework Structure and Governance: Processes: Such as organizational setup or performance management scheme Such as quality and efficiency Technology Enablement: Resource Configuration: Capabilities and Culture: Such as automating processes or mining and analysing data Covering aspects such as company’s make-versus-buy model, strategic alliance and geographic footprint Including training programs and staff motivation At one extreme are startups and other high-growth companies. They can, in effect, be too agile, chasing every potential opportunity without clear strategic goals. At the other end of the spectrum are large, incumbent companies, slowed by lethargic or timid corporate cultures, combined with rigid business processes and legacy information technology systems. KAR 027 – TRANSFORMATION LEADERSHIP COMMERCIAL IN CONFIDENCE | © Internal Consulting Group 2015 Source: “European Competitiveness Study, Want to Be More Competitive? Get Better at Transformation, ” AT Kearney, 2015. , n = 831; “Agility Is Within Reach, ” Pw. C, 2015 (http: //www. strategy-business. com/article/00316? pg=all ) 69
Agile companies have both high strategic responsiveness and high organizational flexibility STRATEGIC RESPONSIVENESS Strategic responsiveness is the ability to sense new risks and new opportunities in the business environment and to craft a response to those pressures quickly. Consider the disruptive effect of new technologies, such as the Internet’s impact on prerecorded music and publishing or digital fabrication’s effect on conventional inventory management. The challenge is not just to change quickly, but to change profitably: to know which products and services should be switched out and which should remain intact. To exercise this judgment, your top executives must have a thorough understanding of your industry and markets, and there must be mechanisms in place—not just traditional strategic planning and market research, but social media and even customer usage data collected through the Internet of Things (IOT)—to feed them information about trends. Their decisions must be made quickly, and communicated rapidly to every function in the company. KAR 027 – TRANSFORMATION LEADERSHIP Source: “Agility Is Within Reach, ” Pw. C, 2015 (http: //www. strategy-business. com/article/00316? pg=all ) ORGANIZATIONAL FLEXIBILITY Organizational flexibility is the facility to shift execution rapidly. In many companies, such functional skills as product development, manufacturing, marketing and sales, and customer intimacy are deeply entrenched, reinforced by IT systems and ingrained practice. But when there is a change in strategic direction, the company needs to be able to retool and rework the most necessary activities, often within a few weeks or months. Doing so requires the capacity and the willingness to innovate in every aspect of the enterprise— not just developing new products in response to perceived consumer needs and market trends, but putting in place new organizational structures, business processes, and technologies. Ask yourself, for example, whether your supply chain is resilient enough to rapidly develop new sources for parts when the product portfolio changes, or to maintain the required flow of parts when natural disasters or other external events lead to sudden breakdowns in logistics. Does human resources have the means to find the right people when new talents and expertise are needed? Are your various functions set up to respond to one another’s changes and help one another move forward? COMMERCIAL IN CONFIDENCE | © Internal Consulting Group 2015 70
Companies vary in the strength of each dimension of their operating model, in effect defining each organization’s character In what we call faux-agile companies, strategic responsiveness is high but organizational flexibility is low, leadership is visibly committed to agility, and takes on ambitious initiatives. But the company does not have all the capabilities it needs to deliver results, especially when the strategy changes. It may be that leaders are detached enough from day-to-day operations that they perceive the company to be addressing customer needs more effectively than it actually does. Functions and business units are siloed: They don’t communicate effectively, and they resist working together. Processes and IT infrastructure are not aligned with strategy and may be out of date. Fragile enterprises are weak in both dimensions are typically characterized by rigid leadership, high cost structures, and slow decision making, all of which have often evolved over many years of growth. Top executives divide the business among themselves, each chasing a different group of opportunities or serving different sets of customers, and often working at cross-purposes. Several levels of approval are needed for any significant change. The culture reinforces stasis, rather than responsiveness, in a way that encourages business as usual. KAR 027 – TRANSFORMATION LEADERSHIP Source: “Agility Is Within Reach, ” Pw. C, 2015 (http: //www. strategy-business. com/article/00316? pg=all ) Almost-agile companies, in contrast, have high organizational flexibility. Known for operational competence and skill at continuous improvement, they make and sell everything well, but don’t always make and sell the right things. Strategy is bound up with existing customers; company leaders don’t easily recognize when their needs and expectations change. As a result, they don’t develop the breakthrough products and services that their customers might respond to. Many projects are proposed at relatively local levels, and may get implemented on an ad hoc basis, but few receive company-wide support. COMMERCIAL IN CONFIDENCE | © Internal Consulting Group 2015 71
Going forward, leaders will face constant pressure to show momentum and deliver immediate results SHORT TERM LEVERS TO DRIVE BUYIN AND FUND THE TRANSFORMATION • Transformations can be long and sometimes gruelling processes. A radical transformation will typically take years to complete. However, in the short term leaders face constant pressure to show momentum and deliver immediate results. AN APPROACH POSITED BY BCG INCLUDES THREE KEY AREAS Image / Graph / Table • Early, achievable, tangible wins energize the organization and generate the buy-in and confidence of managers and employees. • In addition, they reduce costs, improve the top and bottom lines, and free up capital. • Four types of levers are available to companies driving the initial stages of a transformation effort: - Revenues Organization and simplification Capital; and Costs KAR 027 – TRANSFORMATION LEADERSHIP Source: “Transformation: The Imperative to Change, ” BCG, 2014. • First level - Second level COMMERCIAL IN CONFIDENCE | © Internal Consulting Group 2015 72
Metrics should be chosen early on in the transformation and align with strategic goals METRICS ARE INTEGRAL TO A SUCCESSFUL TRANSFORMATION SURVEY: AT WHAT STAGE IS DATA ANALYTICS INTEGRATED INTO YOUR TRANSFORMATION INITIATIVE? • According to a KPMG study of over 800 executives of US Multinational firms, the majority of organizations integrate data analytics only after the scope of a transformation is defined, or not at all (86 percent). • Over half of survey respondents integrated data analytics after specific milestones have been reached (55 percent). • Defining metrics for transformation is challenging because it requires a forwardlooking view. • The most effective metrics are outcomebased, reflecting a direct contribution to the company’s bottom line, rather than processbased. KAR 027 – TRANSFORMATION LEADERSHIP Source: “Business Transformation: People, Process, Results, ” KPMG, 2014. • First level - Second level COMMERCIAL IN CONFIDENCE | © Internal Consulting Group 2015 73
Revenue is the first of four types of levers available to companies driving the initial stages of a transformation effort Yields much as a 10 percent increase in top-line growth and a 5 percent EBIT improvement. Go-to-market optimization should focus on pricing effectively, deploying and incentivizing the sales force for the highest impact, and optimizing marketing and advertising spending SALES FORCE MARKETING AND PRICING IS THE LANGUAGE OF BUSINESS EFFECTIVENESS IMPROVES TOP AND BOTTOM LINES ADVERTISING ARE CRITICAL REVENUE TOOLS It drives brand perception, shapes customer behaviour, and ultimately propels earnings. Pricing initiatives can typically drive revenue increases of 1 to 2 percent, gross margin increases of 5 to 10 percent in the short term and gross profit increases of 50 percent or more over two years and beyond. Through improved customer targeting and engagement as well as better deployment and enablement of sales force field staff, a customer-centric sales process that is aligned with business objectives can help a company achieve improvements of 10 to 15 percent in revenues and profit. Typically up to one-fourth of marketing spending is inefficient. By reallocating those resources, companies can achieve the same level of sales for 10 to 20 percent less – or drive 3 to 8 percent higher volume. Because pricing is so critical companies need to develop it as a strategic capability, based on customer insights and an analytical approach. Typical quick wins include improving customer targeting renegotiating accounts, disciplined management of discounts, and optimizing promotions. KAR 027 – TRANSFORMATION LEADERSHIP Source: “Transformation: The Imperative to Change, ” BCG 2014 Activating the sales team is a practical, targeted approach to driving rapid, near-term results, and making the sales force the engine of a broader transformation effort. By implementing a new incentive structure and channel model, and deploying its sales force more effectively, one mobile operator was able to capture a 10 percent increase in EBIT in the first year. Achieving substantial results requires pulling levers across strategic, tactical and operational levels to create a common “currency, ” and the capability to measure it across brands, products. Locations and campaigns over time. A leading global CPCG firm increased sales by 5 percent with the same market resources by measuring returns on marketing investments across its global portfolio and to reallocate spending to optimize outcomes. COMMERCIAL IN CONFIDENCE | © Internal Consulting Group 2015 74
Organizational Simplification (Lever 2) can both dramatically increase punch and implementation power and reduce layers and costs DELAYERING IS A PROVEN APPROACH TO REDUCING COMPLEXITY DELAYERING GENERATES BENEFITS THAT GO BEYOND SIMPLE COST REDUCTIONS Recent research has found that up to half of the performance requirements are contradictory and that overall organizational complexity has risen 35 -fold since 1955. It is no surprise that employees at the most complicated organizations tend to be the most disengaged and unproductive. The layers of complexity lead them to focus on the wrong things and ultimately miss their objectives Delayering is a proven approach to reducing complexity that cuts through organizational clutter and increases the focus and performance of the team. It often yields sizable cost savings as well – typically 15 to 30 percent in indirect labour costs. Yet delayering is more that just a cost reduction exercise. By removing bureaucratic hurdles, the process enables better and faster decisions and a more effective use of talent. Cultural changes and values spread more easily throughout the organization, and managers perform better. Individual employees benefit as well, through greater clarity of purpose, performance and recognition. KAR 027 – TRANSFORMATION LEADERSHIP Source: “Transformation: The Imperative to Change, ” BCG 2014 COMMERCIAL IN CONFIDENCE | © Internal Consulting Group 2015 75
Using Capital Efficiency as a lever (Lever 3) is vital to help with short term cash needs and to improve investment returns NET WORKING CAPITAL HOLDS POTENTIAL FOR SHORT TERM IMPROVEMENTS A DEEPER ANALYSIS OF FIXED ASSETS CAN ALSO YIELD DRAMATIC RESULTS Aspects include inventory, accounts payable, and accounts receivable. In addition to outright asset sales, defunding of future capital outlays and (i. e. , asset reduction options), best-inclass companies manage both the need for assets and the way assets are utilized. Optimizing net working capital – and managing the interfaces and trade-offs between fixed assets and cost efficiency – can reduce working capital by 20 to 40 percent, often within the first year of implementation. For example, a global industrial-engineering company realised a $450 million case release through a 35 percent reduction in total inventory. It tailored quick-win actions for each plant, while a small team worked to strategically reduce inventory and optimize raw-material stocks across plants. A retail company realised a $180 million cash release in the first quarter alone, and a $270 million increase in available cash after 6 months. Over three months, a small team focused on extending payment terms for the top 1000 suppliers, representing a total of $700 million in payables. After a benchmarking analysis, the company set up and communicated specific targets for each supplier. KAR 027 – TRANSFORMATION LEADERSHIP Source: “Transformation: The Imperative to Change, ” BCG 2014 Asset needs can be lowered through reduced product ad customer complexity. As complex portfolio of products often requires broad production assets, along with rampups, ramp-downs, and changeovers. Streamlining the portfolio and rethinking outsourcing decisions can quickly improve productivity and allow for asset reductions. A large industrialized-engineering company reduced capital employed by $650 million within a year – including $200 million in the first three months – with minimal impact on EBIT. The team thoroughly analyzed the amount of capital tied up in each of the value chain steps across all three of the companies business divisions. In addition, the company conducted a strategic review of each plant and activity from a ROCE point of view. COMMERCIAL IN CONFIDENCE | © Internal Consulting Group 2015 76
Cost Reduction measures (Lever 4) can lead to reductions of 10 to 25 percent in the cost base, making them an essential component of a transformation. BETTER MANAGEMENT OF COGS AND PROCUREMENT CAN CREATE TREMENDOUS VALUE Measures such as these can lead to a 2 to 5 percent margin improvement and have a tremendous impact on value creation. A leading European retailer, for example, had basic procurement practices and limited coordination across business units. The company created a procurement centre of excellence and began running coordinated, analyticallybacked negotiations with all of its main suppliers, an approach that unlocked annualized savings of 3 percent of the addressed COGS in the first year. PERSONNEL COST REDUCTIONS ARE OFTEN NECESSARY NON-PERSONNEL COST REDUCTIONS ALSO IMPROVE OVERHEAD As market conditions change, companies must adapt their workforce, accordingly personnel reductions can drive 20 to 40 percent reduction in labour costs, in many cases within the first 12 to 18 months. Roughly 50 percent of overhead costs to not come from labour. By addressing these, companies can realise reductions of 10 to 30 percent. A leading European contractor was facing major margin pressure. A benchmarking analysis showed sales, general and administrative costs that were 30 to 50 percent higher than peers. A further review revealed overlapping roles and management layers across the organization. The company launched an effort to reduce personnel, delayer and simplify the organization. The company closed the SG&A gap in less than six months. KAR 027 – TRANSFORMATION LEADERSHIP Source: “Transformation: The Imperative to Change, ” BCG 2014 Primary cost levers include buildings and equipment, utilities, travel management, fleet management, IT, and business services A European bank faced a sharp increase in operating expenses because of price hikes and inefficient and ineffective use of share services by its subsidiaries. By creating cost transparency, the bank identified its high-impact cost categories, thereby clearing the way to achieve a 20 percent NPC reduction within the first year COMMERCIAL IN CONFIDENCE | © Internal Consulting Group 2015 77
Solid performance management capabilities are critical for transformation efforts TWELVE CRITICAL PERFORMANCE MANAGEMENT CAPABILITIES 1. 2. 3. 4. 5. 6. Strategic and Insightful. Focus on a limited set of KPIs that are relevant to the company’s business strategy and aligned with long-term value creation. Backward and Forward. Combine historical data on past performance with strategic insights into future opportunities and challenges. Internal and External. Measure performance against internal benchmarks (plan, forecast, etc. ) as well as external benchmarks (market competition, investor expectations, etc. ). Single Source of Truth. Create consistent data definitions and a common language to achieve accuracy, integrity, and timeliness of data. Cascaded Through the organization. Reflect corporate priorities at all levels of reporting through a clear hierarchy of reports with the capacity to drill down and roll up information. 360 -Degree Views. Integrate information from finance, human resources, operations, and sales. Evaluate performance in an end-to-end holistic fashion. KAR 027 – TRANSFORMATION LEADERSHIP Source: “The Art of Performance Management, ” BCG, 2015. 7. User-Friendly. Standardize and visualize to enhance insight identification. 8. Agile and Responsive. Include responsive real-time business analytics. 9. Embedded Throughout the organization. Build a culture of data-based decision making based on a strategic partnership between finance and the business. 10. Talk, Challenge, Act. Encourage challenging discussions and debate around reports to foster ownership and accountability. 11. Sustained and Adaptive. Define clear responsibilities for data and reporting governance and adapt reporting as strategic and business needs change. 12. Efficient and Automated. Automate low-value-added processes and focus the finance organization on valueadded activities. COMMERCIAL IN CONFIDENCE | © Internal Consulting Group 2015 78
Not just financial goals, but personal and organizational success in achieving goals depends on self-confidence and positive reinforcement BANDURA’S THEORY THE PYGMALION EFFECT • Research done by Albert Bandura of Stanford University found that an individual’s self-efficacy (i. e. belief in one’s capabilities) plays a major role in the success or failure of goals. • The insights of Albert Bandura can also be applied at the group level. The Pygmalion effect can be described like this: if a leader believes that a subordinate has the ability to be a great performer, their performance increases. The reverse is also true, belief that subordinates lack ability will decrease performance. • According to Bandura’s Theory, there are four major ways to boost self-confidence: 1. Past Successes. Having triumphed over a similar challenge in the past. Bandura identified this as the strongest source of self-efficacy. Implication: Handson training and capability building in advance of the transformation will significantly boost the success. 2. Modeling. “If they can do it, so can I. ” Share strategy success stories educate and to inspire. 3. Verbal Persuasion. Praise or denunciation is internalized and becomes a self-fulfilling prophecy (see right). 4. Emotional Arousal. This describes one’s perception and interpretation of unpleasant events or discomfort. The capacity to view discomfort as something that is temporary, and will be overcome, was found to be one of the critical qualities of successful people. KAR 027 – TRANSFORMATION LEADERSHIP Source: “The Execution Shortcut, ” Jeroen De Flander, 2013. • Dov Eden of the University of Tel Aviv conducted an experiment on the performance potential of 105 soldiers in a 15 week army training course. He provided the 4 instructors with a briefing that included a ranking of the recruits into 3 categories of Command Potential (CP), high, medium, or unknown. • What the instructors did not know was that the rankings had been assigned randomly (in other words, the worst quality recruit could be placed in the high CP group). The result? The soldiers who had been randomly ranked as high-potential consistently outperformed their classmates in their evaluations following their training course. • The difference in performance from the best group to the worst was 15 percent. • Beliefs and labels are self-fulfilling prophecies; expect better from low performers, and treat them like high performers, and you will be surprised by the result. COMMERCIAL IN CONFIDENCE | © Internal Consulting Group 2015 79
Has your organization assessed the potential risks of transformation? A CHECKLIST FOR LEADERS Bring the future to life q Case for change: Have we convinced the organization that the status quo is unacceptable? q Compelling intent: Is our story of the future meaningful to our people and securing emotional buy-in at all levels? q Credible solutions: Are the proposed solutions appealing to the organization, and will they work in our culture? Inspire deep commitment q Aligned top team: Do we have the right top team? Is it cohesive and aligned around the transformation? q Committed sponsors: Do we have the right line leaders at all levels actively and visibly supporting the transformation? q Influential supporters: Are the most credible and trusted opinion leaders actively involved and visibly supporting the change? Help individuals succeed q Personal commitment: Are we anticipating disruption and managing resistance? Are we communicating to build informed commitment? q Critical capabilities: Do we have plans to retain, develop, and acquire the talent and expertise we need for this transformation? q Desired behaviours: Have we identified the critical behaviours that drive results? How do we reinforce them? KAR 027 – TRANSFORMATION LEADERSHIP Source: “Choreographing a Full Potential Transformation, ” Bain, 2014. Deliver the value q Achievable plan: Can we deliver the change on time while protecting our business’s performance capacity overload? q Decisive governance: Do we have the right program governance to make and execute sound, timely, and efficient decisions? q Leading indicators: Do we have the right information to track results, identify risks, and address potential roadblocks before it’s too late? Build to sustain q Effective organization: Have we addressed the organizational obstacles – such as structure, culture, performance and systems, etc. – that might hinder the transformation? q Enabling technology: Do we have the right systems and technology to deliver the results on time and budget? q Continuous improvement: Have we designed fast feedback loops to learn and improve our solutions over time? Critical High risk Medium risk Under control COMMERCIAL IN CONFIDENCE | © Internal Consulting Group 2015 80
Leadership in Transformation: Contents Section Component Description 1 Executive Summary Overview of our research and findings 2 Topics in Transformation Leadership A global synthesis of transformation insights 2 a Drivers and Context For each different dimension: • The key thinking from consulting firms, journals and academia as to what constitutes best practice • Examples of this best practice across different firms and industries. 2 b Putting in place the right ingredients 2 c Alternative and emerging transformation approaches 2 d Winning hearts and minds on the transformation journey 2 e Achieving and maintaining results 2 f Ensuring transformation success 3 Knowledge Sources KAR 027 – TRANSFORMATION LEADERSHIP Relevant published materials for further reading COMMERCIAL IN CONFIDENCE | © Internal Consulting Group 2015 81
Summary: Ensuring Transformation Success “Young firms are a great source of innovation. But effective collaboration requires established corporations to be faster and more agile as young first have neither the time nor the patience to wait for the process that is typical for established corporations. Only then will the elephant and the mouse be able to dance together” 1 While this section will primarily focus on issues surrounding executing one’s chosen strategy, there a number of irrational, “human” factors that need to be taken into account at the strategy formation stage. Strategy is nothing without execution, but the corollary is also true: the best execution of a poorly laid out strategy will get you nowhere. As such we provide the following advice: • Don’t succumb to behavioural pitfalls when formulating a strategy • Be on guard for the many ways that ineffective leaders can undermine your transformation effort • Communication will be a critical change enabler - with 3 key types (i. e. , top down, upward and rumour mill) to be carefully managed • Managing risk during large scale change requires four foundational capabilities • The balance of innovation efforts is predicted to change drastically in the financial industry, especially towards “breakthrough” business models – ensure internal capability, move quickly and don’t be afraid of cannibalization • Follow the 9 rules for organizational redesign KAR 027 – TRANSFORMATION LEADERSHIP Source: (1) This Jurgens, Vice President Innovation, Royal Dutch Shell COMMERCIAL IN CONFIDENCE | © Internal Consulting Group 2015 82
Don’t succumb to behavioural pitfalls when formulating a strategy Pitfall Overconfidence Description Mitigation techniques While confidence is often a good thing (e. g. it inspires the taking of calculated risks), studies have shown that people tend to be overconfident in their ability to assess a situation and their own abilities. 1. Test strategies under a much wider range of scenarios 2. Add 20 -25 percent more downside to the most pessimistic scenario. 3. Build more flexibility into your strategy to allow the company to scale up or retrench as uncertainties are resolved. Over-optimism is closely related. It tends to colour ability to see negative outcomes that strategies must be tested against. Mental Accounting Richard Thaler defines mental accounting as: the 1. Always remember: a dollar (or pound or inclination to categorize and treat money euro) is a dollar, no matter the category. differently depending on where it comes from. In a Judge all investments based on business context, this could manifest in: consistent criteria. • Being less concerned with value for money on 2. Be skeptical of any investment labeled expenses booked against a restructuring charge “strategic. ” than on those taken through P&L. • Creating new categories of spending, such as “strategic investment”, or “revenue-investment spend. ” KAR 027 – TRANSFORMATION LEADERSHIP Source: “Hidden Flaws in Strategy, ” Mc. Kinsey, 2003. COMMERCIAL IN CONFIDENCE | © Internal Consulting Group 2015 83
Don’t succumb to behavioural pitfalls when formulating a strategy (2) Pitfall Description Status quo bias Psychologists believe that the status quo bias is 1. View all parts of the business as “up for related to risk aversion (i. e. people tend to fear sale. ” Is the company the natural loss more than they are excited by potential gains). parent, capable of extracting the most This tendency, combined with what’s known as the value from a subsidiary? If not, endowment effect (i. e. the mere fact of owning divestment is not a failure, it is a healthy something tends to inflate it’s perceived value to renewal. the owner) combine to make leaders reluctant to 2. Subject status quo options to risk divest parts of the business or change asset analysis with the same rigour as allocations. change options. Strategists must be able to see the risks of failing to change. The sunk cost effect Mitigation techniques This effect is likely connected to loss-aversion. It can occur when large projects overrun their schedules and budgets, the original economic case no longer holds, but companies still keep investing to complete them. This has been common in large IT projects. KAR 027 – TRANSFORMATION LEADERSHIP Source: “Hidden Flaws in Strategy, ” Mc. Kinsey, 2003. 1. Don’t “throw good money after bad. ” Apply the full rigour of investment analysis to incremental investments in strategic experiments. 2. Be prepared to kill strategic experiments early. Jettison the losers early to ease the pain of exit. 3. Use “gated funding. ” Release the next portion of funding only after strategic experiments have met previously agreed-upon targets. COMMERCIAL IN CONFIDENCE | © Internal Consulting Group 2015 84
Be on your guard for the many ways that ineffective leaders can undermine a transformation effort • Individual accountabilities among the executive team are not aligned with business requirements. Lack of Clarity or Purpose Internal Competition • The team is not clear on governance bodies and roles. • Multiple leaders are vying for the top job, which can erode the open and trusting climate needed for constructive group dynamics. UNDER DELIVERY • Senior executives have been promoted for individual achievement rather than team efforts. Individual Personalities • Talent and leadership styles vary widely. KAR 027 – TRANSFORMATION LEADERSHIP Source: “Transformation: The Imperative to Change, ” BCG 2014 Team Structure • Some structures foster a focus on personal accountability and individual business units instead of the overall organization. COMMERCIAL IN CONFIDENCE | © Internal Consulting Group 2015 85
Communication is a critical change enabler – manage the 3 key types to be carefully Top down communications Executive Upward communications “Rumor Mill” Executive X Directors GM’s X Managers Employees Directors X X Managers Employees X X GM’s X X Current state (hypothesis) • Less communication between levels than is ideal • Other than through informal channels, upward communication is difficult • Rumor mill is alive and well, but messages are not monitored and are poorly managed Desired end state • Information ‘cascades’ through the organization from the executive to all affected employees • Well defined opportunities and methods (including anonymous) exist • Timely response to upward communication • Set of key individuals that start and perpetuate rumors are identified and messages managed, using change agent network KAR 027 – TRANSFORMATION LEADERSHIP Source: ICG Analysis COMMERCIAL IN CONFIDENCE | © Internal Consulting Group 2015 86
Breaking down silos is essential for effective communication and accountability, particularly if growth has been driven by M&A UNICREDIT’S TRANSFORMATION JOURNEY RESULTS Uni. Credit has grown since the mid-1990 s by acquiring other banks. These banks each had their own services staff, processes, and cultures. The multiservices company, created by integrating and consolidating 16 existing Uni. Credit services companies, now has 11, 000 staff in 11 countries, from Singapore to the United States, and manages a cost base of € 2. 5 billion. For any group of products and services, the new operating model puts all the service areas involved under a single point of accountability. One person is responsible for both IT and operations; for managing services delivery, people, and costs; and for driving innovation in an end-to-end value chain. • The first step, at the beginning of the 2000 s, was to centralize by country operations and IT services as well as real-estate services and procurement. • The second step was to create shared-services units across national borders and to form global functions that guaranteed synergies and harmonization of services across countries. • This allowed them to develop banking products such as credit cards and consumer loans in specific “factories” that served the main and sometimes all the countries in our group. Information and communication technology, backoffice functions, and other support services were centralized to locations where they had the best human and other resources for the tasks at hand. • The third and most challenging step was a transformation that rests on six pillars: flexibility, agility, time to market, innovation, transparency, and cost efficiency. “…One result is that we are faster and more flexible in reacting to market changes…We are more effective on the cost side. Even with the start-up costs of bringing together thousands of people from many companies and countries, we managed to beat [our] cost target… A third result is that we have taken the first steps in building an organization where the distinction between IT and operations is disappearing. People…are beginning to work together rather than just doing their own thing. ” – Paolo Cederle, CEO, Uni. Credit Business Integrated Solutions • The aim: to increase the value created for Uni. Credit Group by reducing costs further and truly integrating the services side to better support the commercial side in the development of solutions that benefit their end customers. KAR 027 – TRANSFORMATION LEADERSHIP COMMERCIAL IN CONFIDENCE | © Internal Consulting Group 2015 Source: “Creating a business-integrated services company: An interview with Uni. Credit’s Paolo Cederle, ” Mc. Kinsey, 2013. 87
Managing risk during large scale change requires four foundational capabilities – transformation, options, agility and resilience A Transparency and information flow • Capture detailed, diverse and granular data to enable : – – – Independent aggregation for structured analysis and forecasting Recognition of pattern hot-spots Unstructured root cause analysis Empower network response of front-line Measure inputs, outputs, engagement and confidence • Continuously review to inform interventions and improvement System resilience Transparency and information flow Understand events B • • Contain Events Real Options Hedge impact Real Options Modularize project design and delivery process Encourage front-line to innovate and respond within smart rules Pattern recognition requires senior expertise both business and IT Design in order to maintain ability to re-bundle, re-sequence C Agility D System resilience and emotional empathy Agility Respond to events • • • Mediate information (inside / outside, cross function) with experience Don't rely on linear forecasting, look for trouble Encourage diversity of approaches Continuously adapt Modularize system to create circuit breakers Support the individuals’ experience under stress Promote diversity of staff (experts / generalists / experiences) Standardize components where possible Understand interfaces and dependencies between modules – Monitor changes in communication frequency and clarity between groups – Understand impact of change on a complex system • Let small fires burn KAR 027 – TRANSFORMATION LEADERSHIP Source: ICG Analysis COMMERCIAL IN CONFIDENCE | © Internal Consulting Group 2015 88
The balance of innovation efforts is predicted to change drastically in the financial industry, especially towards “breakthrough” business models INNOVATION CAN BE GROUPED INTO THREE BROAD CATEGORIES INNOVATION MIX: A PREDICTION OF THE FUTURE STATE FOR FINANCIAL INSTITUTIONS • Incremental. Small changes characterised as better, faster, cheaper products and services that do not drive above average revenue growth. • Breakthrough. Significant change to the technologies or business model of a product or service that creates significant new competitive advantages and drives above average revenue growth. • Radical. Substantial changes to technology and business model. Creates a new basis of competition in existing markets (such as a new technology platform or cost basis) or creates entirely new markets that provide customers with new value. • Success comes from finding the right mix of innovation types to achieve strategic objectives. This will depend on strategic concerns and the state of the market. • One consultancy observed that currently most innovation initiatives are aimed at incremental innovation (80 percent) and predicts that financial institutions of the future will need to rebalance their efforts to succeed against newcomers. KAR 027 – TRANSFORMATION LEADERSHIP Source: “Breaking the Rules: Achieving Breakthrough Innovation in Financial Services, ” Pw. C, 2014. COMMERCIAL IN CONFIDENCE | © Internal Consulting Group 2015 89
A focus on rapid exploration and discovery is key to success INNOVATION IS DRIVEN BY A PROCESS OF RAPID EXPLORATION AND DISCOVERY • Innovation begins by creating hundreds or even thousands of ideas, piloting a handful, and launching the most promising innovations to emerge from the pilots. • The goal is to test and learn at a high clock speed, driving towards the best possible innovations and minimizing the time and money spent on ideas that are not viable. • With luck, one or a few ideas will succeed. • Consider the example of Dyson. They developed over 5, 700 prototypes in four years before releasing the highly successful cyclonic upright vacuum cleaner. KAR 027 – TRANSFORMATION LEADERSHIP Source: “Breaking the Rules: Achieving Breakthrough Innovation in Financial Services, ” Pw. C, 2014. COMMERCIAL IN CONFIDENCE | © Internal Consulting Group 2015 90
Be brave enough to cannibalize existing business lines, or face challengers that will cannibalize them for you CONTRASTING CASES: KODAK & APPLE • Kodak is widely viewed as the classic case of an industry leader that failed to see the digital future coming. • Kodak developed a digital camera prototype in the 1970 s and launched its first commercial digital product in 1991. Its strong brand ample market power should have made it a force to be reckoned with. • Instead, it walked into a set of traps common to large companies trying to come to grips with uncertainty: Its initial moves were smallscale and scattershot. It was unwilling to invest in a business that would cannibalize a highly profitable, but rapidly eroding core until it was too late. • A last-gasp big bet was the wrong one—a failed joint venture with Hewlett-Packard to create photo-developing kiosks. Kodak’s strategy committed the company to a future that looked very much like the past. • On the other hand, Apple has historically been able to take advantage of disruptive technology advancements (e. g. the transition from CD players to MP 3 devices), and does not hesitate to cannibalize its own line of business should it become outdated (e. g. the transition from i. Pod to i. Phone). KAR 027 – TRANSFORMATION LEADERSHIP “Kodak had the solution to its own ills and chose to submarine it… the lesson: if you don’t cannibalize your own business, count on a competitor to do it for you…That is the real lesson of Kodak: no one can stop the march of innovation because it is inconvenient or upsetting. No company can duck cannibalism by refusing to acknowledge that current markets have to be sacrificed for new markets to be built. ” – Ken Goldstein, author of This is Rage: A Novel of Silicon Valley and Other Madness “Our core philosophy is to never fear cannibalization. If we don’t do it, someone else will. We know that i. Phone has cannibalized some our i. Pod business. That doesn’t worry us. We know that i. Pad will cannibalize some Macs. But that’s not a concern. ” – Tim Cook, CEO, Apple COMMERCIAL IN CONFIDENCE | © Internal Consulting Group 2015 Source: “The Real Lesson of Kodak, ” Ken Goldstein, 2012, http: //corporateintelligenceradio. com/2012/01/11/the-real-lesson-of-kodak/ ; “A strategy for thriving in uncertainty, ” Bain, 2015. 91
Cases: Several financial institutions have institutionalized an innovation capability U. S. A. A. OPEN INNOVATION LAB CITI INNOVATION CENTRE AND INNOVATION LAB • USAA developed a dedicated facility that employees can use to promote innovation. • Citi established a facility to engage the bank’s institutional clients in creating more effective products and solutions. • The vast majority of employees (95 percent) actively participate in the company’s program to submit innovation ideas. • The Centre leverages new web, mobile, supply chain, and analytics technologies and is fully interactive and global, providing a way to connect with clients, colleagues, and experts worldwide to discuss future needs and collaborate. KAR 027 – TRANSFORMATION LEADERSHIP Source: “Breaking the Rules: Achieving Breakthrough Innovation in Financial Services, ” Pw. C, 2014. BANK OF AMERICA CENTRE FOR FUTURE BANKING • The centre was launched in collaboration with MIT Media Lab. • The goal is to explore new ideas in banking by developing technologies to glean insights into everything from customer interactions to global transactions. • The Centre leverages mobile banking and social networking technologies to help customer make better financial decisions. COMMERCIAL IN CONFIDENCE | © Internal Consulting Group 2015 92
Collaborative innovation combines the institutional capabilities, resources, and experience of incumbents with the agility and/or niche specialization of young, dynamic firms AN APPROACH FOR YOUNG FIRMS AND INCUMBENT PLAYERS TO COMPLEMENT ONE ANOTHER FOR MUTUAL BENEFIT • Young firms are often structured around the development of truly novel and potentially disruptive products and services, while established firms have deep-rooted processes and value networks. • In particular, young firms bring fresh perspectives on nascent markets, and are unencumbered by complex processes, the demands of large, influential customers, or the burden of fixed capital and human costs. • Young firms can often develop, test, and launch novel products and services faster than large firms, as the processes and structures that enable large firms to successfully operate and manage risk can also slow or halt innovation processes which are not directly in line with a large firm’s core business or customer needs. • Incumbents, on the other hand, have much greater access to resources, networks, experience, and regulatory knowledge necessary to extract maximum value from truly innovative products or services. KAR 027 – TRANSFORMATION LEADERSHIP “Du. Pont has been applying science and innovation to address the world’s most difficult challenges for over two centuries… One company cannot solve these challenges alone. Our global partnerships and our collaboration with other companies, governments, universities, NGOs, and others are the key to meeting customer and consumer needs in critical areas…” – Ellen Kullman, Chair of the Board and CEO, Du. Pont COMMERCIAL IN CONFIDENCE | © Internal Consulting Group 2015 Source: “Collaborative Innovation: Transforming Business, Driving Growth, ” AT Kearney/World Economic Forum, 2015. 93
The World Economic Forum has identified four major types of collaborative innovation COLLABORATIVE INNOVATION: PARTNERSHIP TYPES These partnership structures can be differentiated according to how broad they are in terms of the life cycle of a particular innovative product or service, and how hungry they are for resources, particularly the financial and human resources required from the partners. KAR 027 – TRANSFORMATION LEADERSHIP COMMERCIAL IN CONFIDENCE | © Internal Consulting Group 2015 Source: “Collaborative Innovation: Transforming Business, Driving Growth, ” AT Kearney/World Economic Forum, 2015. 94
Follow the 9 rules for organizational redesign: a basis for self-assessment SUCCESS IN TRANSFORMATION INCREASES WITH THE NUMBER OF RULES FOLLOWED • • • EXHIBIT: OBJECTIVES/PERFORMANCE BY RULES FOLLOWED Individually, each of the rules is helpful. Research shows, though, that 73 percent of the executives whose companies followed more than six of them felt that the organizational redesign had succeeded. Executives at these companies were six times more likely to “declare victory” than those at companies that adopted just one or two. Following all nine rules in a structured approach yielded an even higher success rate: 86 percent (exhibit, right). See the following slide for a brief description of each rule and an illustrative selfassessment. KAR 027 – TRANSFORMATION LEADERSHIP Source: “Getting organizational Redesign Right, ” Mc. Kinsey, 2015. COMMERCIAL IN CONFIDENCE | © Internal Consulting Group 2015
Following all nine rules in a structured approach yielded an even higher success rate: 86 percent Illustrative Principle Description Adherence 1. Focus first on longer-term strategic aspirations Do not become unduly fixated on immediate pain points. Companies should be clear, at the outset, about what the redesign is intended to achieve and ensure that this aspiration is inextricably linked to strategy. Avoid vague goals (e. g. “become customercentric”) in favour of a specific outcome. 2. Take time to survey the scene Do not assume that the state of affairs is clear. Data used by managers is often inaccurate or out of date. The energy spent to confirm the premise of your redesign, current pain points, and the precise nature of talent and current processes will prevent unwelcome surprises. 3. Be structured about selecting the right blueprint There is too much at stake to rely on intuition. Companies make better choices when they carefully weigh the redesign criteria, challenge biases, and minimize the influence of political agendas. One size does not fit all in redesign. The key is to get the right set of leaders reviewing options in light of the redesign criteria established by the strategic aspiration. 4. Go beyond lines and boxes The reporting structure tends to receive much more attention than the “softer” aspects of redesign, such as where employees gather in communal spaces and how the organizational context shapes behaviour. Aim to target at least two structural-, two process-, and two people-related elements. 5. Be rigorous about drafting in talent Focus on roles first, then on people. To avoid internal poaching, a talent draft gives all units access to the same people enables companies to fill each level of the new organizational structure in an orderly, fair, and transparent way. Continued on following page KAR 027 – TRANSFORMATION LEADERSHIP Source: “Getting organizational Redesign Right, ” Mc. Kinsey, 2015. COMMERCIAL IN CONFIDENCE | © Internal Consulting Group 2015
Following all nine rules in a structured approach yielded an even higher success rate: 86 percent (2) Illustrative Principle Description 6. Identify the necessary mind-set shifts – and change those mindsets Emotions, beliefs, and likely reactions to change need to be managed to be successful. First, identify negative mind-sets and seek to change them (e. g. communicating a compelling reason for change, role modelling the new mind-sets, and putting in place mechanisms that reinforce the case for change and maintain momentum). 7. Establish metrics that measure short- and long- term success Simple, clear key performance indicators (KPIs) are the way forward. These should focus on how a changed organization is contributing to performance over the short and long term, as well as provide insight into early warning signs of disruption. These are best framed at the aspiration-setting stage. 8. Make sure business leaders communicate Impersonal, mass communication is far less likely to reassure employees than an interactive cascade that allows two-way communication. This process allows people to ask questions and gives leaders the opportunity to strengthen their case and highlight the things that really matter. Preparation at the early stage is critical here. 9. Manage the transitional risks Organizational redesign entails risks (e. g. interruptions to business continuity, employee defections or poor engagement, or poor execution). Companies can manage these risks by identifying important risks early on and monitoring them well after the redesign goes live. Timing, communication, metrics, and regular “pulse checks” on employee sentiment are all important tools here. KAR 027 – TRANSFORMATION LEADERSHIP Source: “Getting organizational Redesign Right, ” Mc. Kinsey, 2015. Adherence COMMERCIAL IN CONFIDENCE | © Internal Consulting Group 2015
The best execution of a poorly laid out transformation strategy will get you nowhere. How does your organization stack up? Element Key Questions to Ask Yourselves • • • Is the transformation vision bold & aspirational? Does it articulate how the company needs to look like in the desired end-state? Is it clearly communicated in a compelling way? • • Has an appropriate transformation approach been selected? Does it take into account a pragmatic view of where the company currently sits and how far it needs to shift? 1 Clear Aspiration & Strategy 2 Correct Design, Roadmap & Sequencing 3 Engaged Senior Leadership • • • Is the role of the CEO and his/her senior leaders clear? Are they able to make the transformation meaningful for the broader organization? Are they ready to role model the right behaviours and play an active role themselves? 4 Clear Roles & Responsibilities • • • Are the roles & responsibilities of everyone involved in the transformation well defined? Has appropriate consideration been given to balancing priorities vs. people’s ‘day jobs’? Does the core team have the required capabilities? If not, how will they be sourced? 5 Empowered Program Management • • • Is there a dedicated program management function in place? To what extent will it be centrally driven or not? Will it be staffed by internal vs. external executives? Does it have the support & empowerment of senior leadership? 6 Ability to Win Hearts & Minds • • • Where will the energy for the transformation come from? How will engagement be sustained over time? How are stakeholders across the organization being leveraged? 7 Focus on the right Results • • How will the transformation be funded? Is there an appropriate balance between achieving short-term quick wins to build momentum vs. focus on longer-term objectives that fundamentally change the organization? KAR 027 – TRANSFORMATION LEADERSHIP Source: ICG Experience & Analysis COMMERCIAL IN CONFIDENCE | © Internal Consulting Group 2015 98
Leadership in Transformation: Contents Section Component Description 1 Executive Summary Overview of our research and findings 2 Topics in Transformation Leadership A global synthesis of transformation insights 2 a Drivers and context For each different dimension: • The key thinking from consulting firms, journals and academia as to what constitutes best practice • Examples of this best practice across different firms and industries. 2 b Putting in place the right ingredients 2 c Alternative and emerging transformation approaches 2 d Winning hearts and minds on the transformation journey 2 e Achieving and maintaining results 2 f Ensuring transformation success 3 Knowledge Sources KAR 027 – TRANSFORMATION LEADERSHIP Relevant published materials for further reading COMMERCIAL IN CONFIDENCE | © Internal Consulting Group 2015 99
Relevant Articles by Title: featured in The Insights Review (an ICG publication) Title (with hyperlink) Source Description “ 10 Principles of Leading Change Management” Strategy& (2014) One of the best things about the writings of Booz (now Strategy&) has always been their use of rich and powerful case studies to illustrate the arguments in their articles. This article follows that pattern and, together with the other article in this section, represents a comprehensive view of what to change to (ref: Pw. C article). Just as importantly, it addresses “how to make change meaningful and sustainable”. Each of the principles in this list stands on its own. Readers should think of this as a menu of tools that can be used independently or collectively, depending on your situation, energy, and the complexity of the change challenge you face. “Accelerating the Digitization of Business Processes” Mc. Kinsey (2014) A great and easy read on the value, role, and approach to digitization of business processes. Applicable to companies of all sizes and capabilities. The authors Paul Wilmott and Shahar Markovitch lay out the simple and powerful logic for change and also the radical approaches requires to break traditional points of resistance within the idea to implementation flow. Digital initiatives must be set up to be the end-state way of doing business. Therefore, legacy business units must be “rolled-in” to this new way of work – which will eventually absorb the legacy business. This truism will feel counterintuitive and threatening to many leaders. “Agility is Within Reach” Strategy& (2015) In your struggle to be more agile, are you just ‘faux’ agile? Your company has to both embrace Strategic Responsiveness and organizational Flexibility. It’s likely that otherwise you have ‘faux’ agility, and can focus on a few strategic initiatives. In essence, it is not sustainable…. To achieve an agile organization means we can detect new opportunities and shift into execution rapidly. “Ambidexterity: The Art of Thriving in Complex Environments” BCG (2013) BCG defines Ambidexterity as the management ability to simultaneously identify new opportunities as well as manage already identified priorities. The article is a bit theoretical in approach but it does tackle an issue of high relevance to many executives. The balance between growth and transformation, or between short term and long term goals. The writer provides also interesting case examples. And it defines a very helpful framework to determine which approach to take in different internal and external circumstances. An interesting article that might lead to interesting strategic discussions. Readers who might be interested in reading this article would include executives charged with a change mission in an organization, strategy practitioners, and – indeed – consultants. KAR 027 – TRANSFORMATION LEADERSHIP COMMERCIAL IN CONFIDENCE | © Internal Consulting Group 2015 Source: The Insights Review (various editions) http: //internalconsulting. com/store/the-insights-review / 100
Relevant Articles by Title: featured in The Insights Review (an ICG publication) Title (with hyperlink) Source Description “Breaking the Rules: Achieving Breakthrough Innovation in Financial Services” Pw. C (2014) According to this report from Pw. C, the FS industry will find it challenging to return to pre-GFC highs unless they significantly innovate due to competition from new market entrants and technology. In the past, the industry has not demonstrated leadership in innovation and companies will have to develop a framework – described in this article – to address this. The latter makes for a worthwhile read, so those short on time can jump straight to it on page 16. “Bringing Out the Best in People” Mc. Kinsey (2015) The article investigates how service organizations strive to meet rising customer expectations and customer interactions, which have both increased due to technology and social media. The importance of building the right capability to deal with the demands in a reactive but effective manner, and produce a proactive agenda that benefits the business on the long run, requires clear understanding of the key success factors that support the capability to last. The author argues the importance of capability building to address the variability of service delivery, understand customer needs, identify new opportunities, and create value. The article also highlights the need to identify, build, and scale up the required capability as a prerequisite for transformation, and identifies four key success factors in support of the transformation: engage every level of the organization, create excitement and pride, apply a range of learning techniques, and institutionalize through HR. While the engagement process that facilitates action and collaborative learning during capability building activity can lead to both transformation outcomes and ongoing process improvements, the authors fail to address the crucial challenge of how HR can embed and reward the capability learning skills into their core processes. “Build a Change Platform, Not a Change Program” Mc. Kinsey (2014) A timely re-imagining of change management which resonates with the key messages on successful strategic execution from ICG’s recent international guest, management science guru Jeroen De Flander. In a succinct and easy-to-read article, the authors articulate three key shifts in approach to transformational change: from top down to activist out; from sold to invited; and from managed to organic. They conclude with five success measures of change platforms. The article reflects growing demand from our clients for our programs which enable broad organizational involvement in – and ownership of – the strategic change process and a translation of strategy into individual action with the customer at the centre. KAR 027 – TRANSFORMATION LEADERSHIP COMMERCIAL IN CONFIDENCE | © Internal Consulting Group 2015 Source: The Insights Review (various editions) http: //internalconsulting. com/store/the-insights-review/ 101
Relevant Articles by Title: featured in The Insights Review (an ICG publication) Title (with hyperlink) Source Description “Choreographing a Full Potential Transformation” Bain (2014) Bain presents the view that “identifying the need for broad transformation and implementing the change itself” require firstly defining a future state vision for the company and what is required to change. However, what is just as crucial is how this future state vision may have to be adjusted to account for the ability of the organization to align its people, manage the significant change, and maintain a strong trajectory during the disruption. We recommend a quick read for further insights in what is a brief (12 pages) report. “Cracking the Culture Code: How Organizations Get Where They Want to Go” AT Kearney (2015) Cultivating corporate culture and sustainable behavioral change to realise strategy are often not natural areas of strength for most internal consultants. However, as readers of this article will note, the same analytical prowess effective internal consultants bring to technical evaluations of value pools and competitive advantage is exactly what is sorely needed to shape specific actions to create highperforming corporate cultures that can execute on their strategic objectives. Figure 2 is a neat alignment of cascading questions to help internal consultants make a cogent contribution to their organization’s dialogue on culture and strategic execution. A helpfully-timed reinforcement of the need for ICG’s recently-launched “Strategic Execution Barometer”. “Creating a Business-integrated Services Company: An Interview with Uni. Credit’s Paolo Cederle” Mc. Kinsey (2013) Paolo Cederle, the CEO of Milan-based Uni. Credit’s new multiservice company, shares his experience while having been on a journey to transform the large, Italian-based bank. His objective is to make IT and operations work in tandem with the bank’s business divisions to improve the customer experience and achieve ambitious bottom line benefits. The article describes in a useful way the strategic intention, challenges and benefits of the multiphased transformation journey. Over the last 14 years, the bank’s transformation journey followed a three-phased approach: 1. Centralization of IT & Operations, Property and Procurement functions by country; 2. Establishment of cross-country Shared Services Functions; 3. Implementing a Six Pillar Transformation Strategy around Flexibility, Agility, Time to Market, Innovation, Transparency and Cost Efficiency. The interview concludes with Paolo Cederle’s honest remarks that, whilst he communicated and interacted with staff and stakeholders a lot, one can never do enough of it. KAR 027 – TRANSFORMATION LEADERSHIP COMMERCIAL IN CONFIDENCE | © Internal Consulting Group 2015 Source: The Insights Review (various editions) http: //internalconsulting. com/store/the-insights-review/ 102
Relevant Articles by Title: featured in The Insights Review (an ICG publication) Title (with hyperlink) Source Description “Creating People Advantage 2014 -2015: How to Set Up Great HR Functions” BCG (2014) This report is the 8 th in a series from BCG and, as per usual, delivers largely data-driven insights on a number of key topics on the radar screen of any senior HR executive and/or internal HR consultant. Most of the topics are usual fodder (e. g. link between HR capabilities and financial performance, importance of leadership and talent management) however others (e. g. deep dive on KPIs, importance of data analytics, and consistency in HR investment decisions) represent a fresh, and welcome, departure from the norm. Finally, this reviewer would highlight the section ‘What sets great HR functions apart? ’ as both a useful wrap up to the report as well as reminder of how this critical function can continue to add value to the broader organization. “CSO’s Role in Times of Uncertainty” Roland Berger (2013) This contribution is a presentation of the results of a large survey conducted by Roland Berger in collaboration with the University of St. Gallen in Switzerland. It is a long research on the evolving role of the Chief Strategy Officer. The survey benchmarks replies from practitioners highlighting the scope of the role of the CSO as well as the degree of collaboration with other functions in the organization. The presentation itself is quite long and at time repetitious, but it does cover multiple aspects describing the span of responsibilities of the strategy function in an organization. It is possibly a helpful read for executives holding a strategy position in a company, or for HR professionals assigned with the task of describing the roles and responsibility for a head of strategy. “Equipped for the Future: Reinventing Your Organization” Pw. C (2014) A very strong yet pithy article focused on the critical five attributes companies must develop to compete in the Digital Age. According to the authors, this includes: 1. Inspirational mission and brand; 2. Capabilities fit for the future: 3. Decisiveness: speed fit to risk and value; 4. Agility: fact-based iterative improvement; and 5. The right people. This thoughtful article does a great job of describing these attributes, their value, and their rationale. Better yet, it begins to get prescriptive of how the shift (from-to) can be accomplished. Well worth the 15 -30 min read for most executive teams. KAR 027 – TRANSFORMATION LEADERSHIP COMMERCIAL IN CONFIDENCE | © Internal Consulting Group 2015 Source: The Insights Review (various editions) http: //internalconsulting. com/store/the-insights-review/ 103
Relevant Articles by Title: featured in The Insights Review (an ICG publication) Title (with hyperlink) Source Description “Front-office Viewpoint – the Investment Division: Can Technology Drive Transformational Change? ” EY (2015) Asset managers are under increasing pressure to transform their front office. There are models that use a software as a service (SAAS) model, and this will drive a very different approach and discussion. Let’s remember that while transformation includes a major technology piece, it is not all about tech. However, if we go down this path, we can gain in terms of driving simplicity and focus, and also drive down costs. Moreover, we have to look at this as problem statement at an enterprise level and not just at the investment division alone. What awaits is a reward which could take the form of having a global, scalable, and cost-efficient business model. “How to Beat the Transformation Odds” Mc. Kinsey (2015) A new global survey reminding us that only about a quarter of all transformations achieve success. Mc. Kinsey uses 24 variables and finds that while the greater number of ‘best practices’ that are deployed, the more successful the transformation is likely to be, some levers are more important than others. These include: frequent open communication, leaders who are active and involved, and an organization which plans for continuous improvement. With the success rate so poor and the better practices so well defined, one wonders why more organizations don’t do it themselves with guidance from their internal consulting unit (may we suggest with a synthesized suite of best practices from across the global consulting industry, in a Knowledge Area Review – KAR – from ICG). “Results Delivery: Managing the Highs and Lows of Change” Bain (2013) The “ 15 Questions you should ask about your change journey” are a must-read for any leader of major organizational change. A charming re-write of many preceding and more insightful articles on the topic of change. The paper does a good job of characterizing the emotional states and ‘biases’ that leaders and stakeholders of organizational change will exhibit. It takes an admirable and “Socratic” angle to helping readers by assisting them to ask critical questions which ensure their change journey has the necessary winning conditions in place. KAR 027 – TRANSFORMATION LEADERSHIP COMMERCIAL IN CONFIDENCE | © Internal Consulting Group 2015 Source: The Insights Review (various editions) http: //internalconsulting. com/store/the-insights-review/ 104
Relevant Articles by Title: featured in The Insights Review (an ICG publication) Title (with hyperlink) Source Description “Rethinking the Role of the Strategist” Mc. Kinsey (2014) This article is Mc. Kinsey’s contribution to the growing discourse on the role of strategy, the evolving nature of the strategy process, and the responsibilities of internal consultants in a dynamic and unpredictable environment. While marshalling the annual strategic planning process still rates as an important priority for internal consultants, Mc. Kinsey’s survey of 350 senior strategists found a diverse range of responsibilities (thirteen by their count) for internal consultants. A further clustering yields five archetypes of a strategy leader for today’s challenges. A quick, easy read with some interesting insights which could help internal consultants hone their own value proposition. “The Strategist’s Change: How Successful Chief Strategy Officers Transform Their Companies” Roland Berger (2014) Roland Berger’s 4 th annual survey of European chief strategy officers examines the role internal consultants assume in driving corporate transformation in the age of digitalization and hypercompetition. Their big finding is that the closer and more active role the internal consultant plays in guiding the implementation of the transformation agenda, the greater likelihood of success. Conflicting incentives, however, may be making this easier said than done for internal consultants. With internal consultants often measured more by “what they promise than by what they accomplish”, deliberately seeking an active role in guiding implementation is understandably pushed down their personal list of priorities, potentially to the detriment of their companies. The 12 myths versus reality of what strategy really means for the internal consultant are also worth a look (page 5). “Transformation: The Imperative to Change” BCG (2014) A comprehensive overview of transformation drivers and solutions based on BCG’s traditional strengths as a strategy house. Organized in four reasonably standalone parts, (the case for urgency, funding levers, medium term wins, and the people component) it is a manageable commute read for internal consulting teams. KAR 027 – TRANSFORMATION LEADERSHIP COMMERCIAL IN CONFIDENCE | © Internal Consulting Group 2015 Source: The Insights Review (various editions) http: //internalconsulting. com/store/the-insights-review/ 105
Relevant Articles by Title: featured in The Insights Review (an ICG publication) Title (with hyperlink) Source Description “Transforming the Business Portfolio” BCG (2014) An unusual co-operation between BCG and a university on the critical question of corporate restructuring. The insight explores a 10 -year history of restructuring of 100 of Europe’s largest companies. The report offers internal consultants some critical levers to improve restructuring efforts and suggests three critical segments of performance: 1. Companies that have excessive diversification and performance largely achieve success by refocusing on their core; 2. Companies that are seeking diversification to grow increase their growth but at the cost of returns; and 3. Companies seeking to reposition themselves competitively typically don’t succeed. Sobering insight for those embarking on a transformation. “What Strategists Need: A Meeting of the Minds” KAR 027 – TRANSFORMATION LEADERSHIP Mc. Kinsey (2014) Mc. Kinsey has assembled an impressive roundtable of strategists from academia, leading companies, and their own Strategy Practice to debate the current state and future evolution of theory and practice of strategy. Issues touched upon include the expanding role of data and empirical testing of strategic concepts, the critical role decision biases play in gaining organizational commitment, and a rising emphasis on human behavior and the “social side of things”. As one of the roundtable participants put it, “I’ve become increasingly aware of how important non-rational issues are in strategy setting. ” Seven needs for “today’s strategist” are neatly highlighted on page 9. While not prescribing any solutions around how to meet these needs in this article, nonetheless it remains an interesting read with an array of spirited perspectives presented. COMMERCIAL IN CONFIDENCE | © Internal Consulting Group 2015 Source: The Insights Review (various editions) http: //internalconsulting. com/store/the-insights-review/ 106
Additional Relevant Knowledge References by Title (1/2) Title Date “ 10 Principles of Leading Change Management” “ 17 th Annual Global CEO Survey” “A strategy for thriving in uncertainty” “Agility Is Within Reach” “Breaking the Rules: Achieving Breakthrough Innovation in Financial Services” “Business Transformation & the Corporate Agenda” “Business Transformation: People, Process, Results” “Choreographing a Full Potential Transformation” “Collaborative Innovation: Transforming Business, Driving Growth” “Corporate Transformation Under Pressure” “Cracking the Culture Code: How organizations Get Where They Want To Go” “Creating a business-integrated services company: An interview with Uni. Credit’s Paolo Cederle” “Driving Radical Change” “European Competitiveness Study, Want to Be More Competitive? Get Better at Transformation” “Global Transformation Challenge for Banks” “Hidden Flaws in Strategy” “How centred leaders achieve extraordinary results” “How to Beat the Transformation Odds” “Influence Without Authority” “Motivating People: Getting Beyond Money” “Nine questions to help you get your digital transformation right” “Optimising transformation in defence” “Strategic Business Transformation: Why managing people's ‘energy-to-change’ is key in a successful transformation” KAR 027 – TRANSFORMATION LEADERSHIP Source 2014 2015 2014 2013 2014 2015 2009 2015 2013 2007 2015 2003 2010 2015 2009 2015 2012 Strategy& Pw. C Bain Pw. C KPMG Bain ATKearney/World Economic Forum Mc. Kinsey AT Kearney Accenture Mc. Kinsey Allan Cohen and David Bradford Mc. Kinsey Accenture 2015 Roland Berger COMMERCIAL IN CONFIDENCE | © Internal Consulting Group 2015 107
Additional Relevant Knowledge References by Title (2/2) Title “Tapping the Power of Hidden Influencers, ” “The Art of Performance Management” “The CEOs role in leading transformation” “The Execution Shortcut” “The New CEO’s Guide to Transformation” “The Real Lesson of Kodak” “Transformation: The Imperative to Change” “Transforming a company by learning to love customers” “Transforming government performance through lean management” “Two ways to modernize IT systems for the digital era” “Voices in bank transformation: Insights on Creating Lasting Change” “Winning Friends and Influencing Stakeholders” KAR 027 – TRANSFORMATION LEADERSHIP Date 2014 2015 2006 2013 2015 2012 2014 2015 2012 2015 2010 2013 Source Mc. Kinsey BCG Mc. Kinsey Jeroen De Flander BCG Ken Goldstein BCG Bain Mc. Kinsey Centre for Government Mc. Kinsey Deloitte COMMERCIAL IN CONFIDENCE | © Internal Consulting Group 2015 108
Acknowledgements This report is the 27 th in ICG’s series of Knowledge Area Reviews or KARs®, each of which provides a comprehensive perspective on global best practice in a different business area and/or function. The co-authors of this report are Gerry Purcell (Toronto, gerry. purcell@internalconsulting. com), Rajesh Gokhale (Sydney) and Zachary Purcell (Toronto). The authors were supported and advised by a panel of transformation experts including David Cartwright (Melbourne), Robert Craig (Sydney) and David Moloney (Sydney). This report is licensed for use only by the purchasing organization or individual. Further copies and licenses can be purchased via your ICG Affiliate, via the authors, or from http: //internalconsulting. com/store/product Further information about ICG, other Knowledge Area Reviews, and ICG’s range of consulting products and services can be found at www. internalconsulting. com KAR 027 – TRANSFORMATION LEADERSHIP 109 COMMERCIAL IN CONFIDENCE | © Internal Consulting Group 2015
Our Global IP Publications library is uniquely designed to meet your needs for public and syndicated reports, along with bespoke research TIR – The Insights Reviews of published insights from the word’s leading branded management consulting firms CCS – Certified Case Study Best publically available information supplemented where possible with mystery shopping KAR – Knowledge Area Review Synthesised and structured publically available knowledge from across the global on your chosen topic. BAF® – Best Affiliate Forward Fit for purpose professionals to assist with customer and confidential research, analysis and insight generation often augmented with industry leading methods GIR – Global Industry Radar Global scan of relevant market evolution, trends, and important innovations and impactful case studies ERT – Expert Round Table LIR – Local Industry Radar Local comprehensive and expert analysis of a chosen industry sector Focused collation of expert insights and opinions on a subject matter of interest. Can be convened with local and or global experts. KEY General Buying Pattern GENERAL KAR 027 – TRANSFORMATION LEADERSHIP SPECIFIC CUSTOM / BESPOKE 110 COMMERCIAL IN CONFIDENCE | © Internal Consulting Group 2015
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