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Is it time to transform business transformation?

Contributor: Larry McManis
Posted: 04/10/2014
Is it time to transform business transformation?
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Circuit City. Blockbuster Video. Borders bookstores. These companies are hardly the hallmark of successful business transformation despite the millions of dollars and brilliant minds dedicated to their corporation’s renewal.

They’re not alone.

Companies all over the world pour resources into the illusive quest for true business transformation when perhaps where we really need to start the process is with a transformation of our own thinking.

A recent study of business transformation by KMPG as reported by Forbes boldly stated "Business transformation has taken hold across the broad corporate landscape." The study showed 93% of U.S. based multinationals are "in some phase of changing their business models," driven by macroeconomic shifts, globalization, and shifts in technology (the same drivers reported here).

Better transformation - next exit

Should we be surprised by that statistic? Probably not.

The definition of transformation included ‘continuous alignment’ of strategy (51% of survey respondents), continuously evolving processes (31%), and wholesale turnaround (18%). It sounds like the vast majority of respondents (82%) define what could be regarded as continuous improvement initiatives as a type of transformation. So, one man’s transformation is another man’s continuous improvement.

But there’s a bigger problem with transformation than just the definition:

Businesses aren't very good at it. We all know it even though we don't want to admit it to our bosses or ourselves.

Pause and take an honest look at your company’s transformation initiatives - even at the "smaller" changes. You know, the ones that miss schedule or budget and we excuse it because of "resistance to change"?

That same KPMG article says the failure rate of all transformation initiatives is at least 50%. Other research puts the failure rate much higher: 70%-80%. So, we could predict 69.75% of companies are going to be disappointed by a transformation effort (93% that claim to be transforming x 75% average transformation failure rate).

But why? If 93% of us think that we’re doing this transformation thing, why are so many of us failing? Why do we keep making the same mistakes over and over again? Why do we spend billions with consultants only to fail again and again?

The truth is, we "experts" need a new mindset to break out of our own orthodoxies and conventions, stop making excuses, and realize the most important transformation required in the future might be in our own thinking. And here are three areas of thinking where we can start.

#1: Everyone has to do strategy

Ever notice how the grass is worn down at the corners where sidewalks meet? People take stock (subconsciously) of their situation, have an objective to reduce the time and effort to get from one place to another, and use the strategy of cutting corners to meet their objectives.

Thus the grass gets worn out.

Whether it's a small department within a function or someone responsible for leading an entire enterprise, we all have some approach to strategy - conscious or not.

But in business, intentional strategic thinking is usually relegated to the executive suite.

Big mistake. Time to transform our thinking.

We all need to think and do strategy. And because strategy is a major reason for transformation failure, we all have to do it robustly.

I was working in the Oscar Mayer division of Kraft Foods when the CEO of parent company Altria - then known as Philip Morris - paid a visit. I can't remember a single reason for his visit but what I do remember about Mike Miles is two things: 1) he was kind of a weird loner who sat away from the board room table staring at his shoes (no offense, Mike); and 2) he was a brilliant strategist.

He was so obsessed with strategy that he required everyone in the Philip Morris family of businesses from managers up to Presidents and CEOs to have the same robust proprietary approach to strategy.

Executives learned it first and then they taught the exact same curriculum, case studies and all, to the next layer down. And so it cascaded through Kraft Foods. We all learned the process for developing a strategic plan that we could use regardless of the business or function or level in the organization. Situation, objectives, strategies, tactics.

To this day, if you ask any alumni of that period of time at Kraft, they'll likely tell you it was the best training they ever received in their career.

To be fair, all major strategic initiatives didn't go well just because of a robust, common approach to strategy. But since strategy is a common cause of failure, it's time for us to realize we need a robust strategic method at all levels.

That's not the only thing needed to be more successful in transformation though. Here's another transformation in our thinking that has to take place.

#2: Everyone has to do innovation

Some time ago, we were called in to help a large consumer products company with its innovation process and they had to be innovative. The industry they competed in and the consumers they served demanded a constant flow of new products – to the tune of 80% of the entire portfolio every year.

We were asked to help them incorporate some of the tools of Advanced Product Quality Planning (APQP) into new product development while at the same time they were implementing new product lifecycle management (PLM) software and restructuring.

Any one of these projects alone was considered a top priority, but combined they were a large transformation of the strategic core of the company. And although all three projects had the best and brightest of the company’s leaders steering the initiatives, not to mention a huge consulting firm implementing PLM, all three projects had stalled and failed to deliver on the objectives.

Why? Well, a lot of reasons. But most importantly for this discussion, the leadership of the initiatives and all the players underneath them carrying out the implementation plans lacked innovation skills.

Innovation is the development of an idea, any idea, into a commercialized reality. Like the idea of using the tools of APQP. Or the idea of using PLM software in the process. Or the idea that we could restructure our organization to do the work differently.

All three ideas were new to this company. New, as in "we've never done it this way before" new. Yet, they'd approached all three initiatives in the same way companies approach transformational initiatives that have a 75% failure rate: traditionally… like always… like any other project.

Let’s revisit that definition of innovation for a moment: the development of an idea into a commercialized reality. Sounds a lot like a transformation, doesn’t it?Transformation is a process to make a "new product". And like a new product development process, there are many tools, methods, and paths to get the innovation to market.

So, transformation leaders need to be innovation experts. But unfortunately most transformation leaders don’t use tools like Voice Of the Customer to understand the problems to be solved or Failure Mode & Effects Analysis to identify where things can go wrong and mitigate those failure risks ahead of time. Nor do they use a lean startup approach and create validated learning loops or use "pivots" to get their transformation "product" successfully designed and commercialized. And most process people have very little experience in things like positioning, benefit ladders, and marketing; all essential skills in bringing ideas to market; even internal "markets".

Unfortunately, we tend to think innovation expertise resides in the new product development group but it’s time to bring innovation and transformation together.

#3: Get used to changing habits

Several years ago, I was asked to accompany the CEO (Bob Eckert) and the CIO of Kraft Foods to Altria headquarters on Park Avenue in New York City. I had never been to such a high profile meeting before and was a little awed by the enormity of the situation.

We arrived early. I stood in the doorway staring at the massive conference room where the CEOs and CIOs of all of Altria’s companies were going to give a progress update to the CEO of Altria and his staff. Thankfully, Bob told me exactly where to sit. I watched as everyone filed into the meeting, went to a specific chair, and took a place at the huge table. One chair remained open. That was the big guy’s chair. No one ever sat in his chair. He came in last, took his seat, and the meeting began.

Over the ensuing years, I’ve watched how people select their chair in a meeting and I’ve run a little experiment. I offer people $1 to change seats. Usually, people laugh. Then I offer them $5 to change their seat at the table and a few people start to consider moving. But when I throw a stack of $20 bills on the table, everyone will change their seat.

I’ve noticed that people choose their seat for a meeting out of habit, almost always sitting in a very similar place at every meeting. And if I offer an incentive, I can usually get them to temporarily change their seat at the table. But you can be sure that at the next meeting they go to, they’ll be back in their original chair.

The point is this:Much of what people at all levels of the organization do day-in and day-out is driven by habit; the chair they sit in at a meeting, driving to work, the things they do at work, the reports they create or review, countless things. Including how people do projects.

And habits are hard to change. The vast majority of heart patients fail to change their lifestyle even though their life depends on it; the collective habits of an organization are even harder to change and yet most approaches to change management do not recognize the power of habit.

Change management is often relegated to just getting people to change their seat at the table temporarily. Do most process change experts know the habit cycle? Are we familiar with cue-routine-reward? Do we know how to successfully change habits at the individual level? Are we even aware of the organizational habits that are driving the business? Do we even suspect that our change management needs to change? That we need to change?

So what next?

I’m not advocating an immediate transformation of our business transformation process. I’m suggesting we do three things. First, we all learn and use a robust method for strategy and not relegate it to the executive level only. Second, we all embark on a path to becoming expert innovators that know how to get from idea to market, even if the "market" is an internal one. And finally, we all adapt our approach to changing habits.

The current business transformation process isn’t working. All the evidence shows that on a good day, we only have a 50-50 chance of success… at best.

We don’t have to do this all at once. Let’s take a lean startup approach. Begin with a strategy, create a minimum viable product, develop some validated learning loops, pivot when necessary, and begin to understand some of the deeply entrenched habits of individuals and our organizations. Perhaps then we can begin to transform our own thinking enough to actually begin transforming business transformation.

But what do you think? Does our approach to business transformation need to change? Is there anything missing from this list?

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Thank you, for your interest in Is it time to transform business transformation?.
Larry McManis
Contributor: Larry McManis