Transformation is a core process, not a one-off activity

We’ve all seen the stats that show that 60-80% of transformations fail, and why. A lot of those figures are based on analysis at least a decade old. Latest stats show that >50% of organisations have taken on a transformation in the past 5 years, but only 12% of transformations meet or exceed their expectations.

Seeding successful transformations

In a business and organisational world that has changed so much, so fast, in the last 10 years, I thought it’s time to update my view. Luckily, Harvard Business Review and my former employer Bain have done just that, in a recent article “Transformations That Work”. I suggest you read it, but here are some of their highlights:

Fewer transformations end in abject failure, but the percentage of those considered a complete success remains stubbornly constant.

The great majority end is acceptable mediocrity, with leaders settling for improved but unexceptional performance.

Six critical practices characterise those that succeed (all quoted directly from the article):

1. Treating transformation as a continuous process

2. Building transformation into the company’s operating rhythm

3. Explicitly managing organisation energy

4. Using aspirations, not just targets, to stretch management’s thinking

5. Driving change from the middle out

6. Accessing substantial external capital from the start

I’ve seen many styles of transformations, and I’ve seen some stall, some fail, and quite a few succeed. Two in particular chime strongest with my successful experiences.

Building Transformation into the Company’s Operating Rhythm

At Axa Asia-Pacific, with Bain, we didn’t just set up targets and workstreams and a strong PMO to oversee the K5 Transformation of the 1990s. But we created a regular top-down AND bottom-up rhythm that hard-wired front line teams and BAU governance into delivering the transformation goals, whether on an annual planing cycle, monthly performance management, or weekly team priorities.

At Coal and Allied in the Hunter Valley with McKinsey (and at countless Partners in Performance clients while I was there) we took that all the way down to daily operating team stand-ups and stand-downs, with visual boards ensuring that front-line leaders were engaging ‘doers’ to incentivise and unblock the dail physical performance improvement that would add up to the transformation targets.

From Board to shop floor, organisations need to be hard-wired to deliver.

Driving Change From the Middle Out

At Victoria’s Transport Accident Commission, we turned the organisation on it’s head to focus on client segments rather than geography, building flat, multidisciplinary, leaderless teams, who then went on to define their own processes and information needs to best suit the much more coherent needs of their focused set of clients. The top-down element was limited to providing the segmentation and architecture for the new organisation - the exact ways of working were determined by the teams doing the work. And it was middle managers, team coordinators and subject matter experts in rehabilitation, acute care, actuarial risk, claims processing, and legal matters, who embraced the ambition and sweated the detail to stand up the new organisation.

I’ve also seen many examples of less successful or stalled transformations where firms did not have the courage or foresight to address key practices. The one-offs that failed to meet targets and petered out, those that did not address operating rhythm and governance (like Rio Tinto in the disastrous Anthony Albanese era). Those the jammed the pipe of leadership capacity by attempting to shove far too many changes down it at once. And those, like Lomond Capital, that just ran out of capital mid-way.

If you’re thinking about undertaking a transformation, I’d say do so with your eyes open. Most fail, or at least don’t succeed. Practices adn behaviours for success are easy to understand but hard to do. They require patience, capital, organisation, and a degree of humility in senior leaders and trust in their mid-management.

Most of all, I would say remember that transformation is a discipline in its own right. Seek out experts and expertise. People that have succeeded AND failed (given the low success rate, be sceptical of anyone that has only ever succeeded!).

And commit with all your energy and ambition.