Transformations That Work

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Strategy & Business Model | 1

Transformations That Work

By Michael Mankins and Patrick Litre | Harvard Business Review Magazine | May–June 2024 Issue

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Nearly every major corporation has embarked on some sort of transformation in recent years.  Unfortunately, most transformation programs aren’t all that transformative. Though they typically start with great fanfare—complete with big announcements and proclamations of wholesale change—most fail to deliver. The authors’ research indicates that only 12% of major change programs produce lasting results. Too often, leadership accepts disappointing outcomes and moves on, only to launch another program in a few years’ time.

Clearly, the prevailing approach to transformation in most companies is not yielding the desired results. It’s time for a new model—one incorporating six practices that the authors’ research has shown are key to successful programs.

1. Treating transformation as a continuous process. Most companies are (or should be) in a state of constant transformation. It’s simply no longer possible to refreeze and step aside. The most successful efforts recognize that transformation must be continuous and orchestrate their programs accordingly.
2. Building transformation into the company’s operating rhythm. Too often transformations are viewed as separate from company operations and handled by a distinct program-management office. In most instances, however, working on both should be considered part of every manager’s day job.
3. Explicitly managing organizational energy. Transformations fizzle when they consume more energy than they generate. That’s why their tendency to continually disrupt the work routines of the same group of individuals is problematic.  The author’s research shows that if an organization tries to change more than two primary routines simultaneously, the odds of failure increase dramatically.  Changes should be carefully sequenced to limit disruption and prevent widespread organizational fatigue.
4. Using aspirations, not just targets, to stretch management’s thinking. In typical transformation efforts, especially turnarounds and restructurings, the initial step involves examining external benchmarks.  Relying on benchmarks tends to confine “the art of the possible” to what others have already achieved, effectively setting the bar too low.  True transformation calls for breakthrough thinking and pushing beyond current practices, often with the help of new technology.
5. Driving change from the middle out. Most transformation programs are top-down.  Senior executives frequently are too far removed from day-to-day operations to understand what truly needs to change. Consequently, top-down solutions tend to be superficial or at least short-lived. Frontline managers, meanwhile, often lack the contextual understanding to challenge existing processes, and so trim around the edges rather than propose major changes. But midlevel executives tend to have enough experience to see the shortcomings in current operations—and aren’t so close to the ground that they get lost in the weeds.
6. Accessing substantial external capital from the start.   In the authors’ study nearly all failed transformations were underfunded. Many leaders tried to finance them through cost-cutting measures. While that strategy may sound appealing, it typically falls short. Efficiency gains and waste reduction alone usually can’t provide enough financial resources.

3 key takeaways from the article

1. Nearly every major corporation has embarked on some sort of transformation in recent years. Unfortunately, most transformation programs aren’t all that transformative.  Too often, leadership accepts disappointing outcomes and moves on, only to launch another program in a few years’ time. 
2. In the 1990s John Kotter and other scholars identified the most common reasons for ineffective transformation attempts—notably, a lack of urgency, insufficient leadership, limited vision, poor communication, and a shortage of “quick wins.”  But there’s a catch. Despite the decline in outright failures, success rates have not risen.
3. It’s time for a new model for successful organizational transformation, build on research, suggests incorporating six practices: treating transformation as a continuous process; building transformation into the company’s operating rhythm;  explicitly managing organizational energy; using aspirations, not just targets, to stretch management’s thinking; Driving change from the middle out; and accessing substantial external capital from the start.

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Topics:  Strategy, Transformation, Leadership, Middle Managers, Initiatives, Innovation