We live in an age where disruption is no longer the exception, but the norm. For the majority of firms, however, their response to disruption has focused on digital strategies. Firms are looking to technology to adapt their business model, create greater efficiency, drive cost savings, and maintain a competitive advantage. The most recent manifestation of this strategy has been the adoption of platforms as a means of simplifying value chains and democratising access to resources and opportunities.
McKinsey’s 2018 transformation survey reveals that firms are still struggling to realise the benefits of their transformation activities. One of the main challenges cited by the 70% of firms that failed to realise their change ambitions, had nothing to do with technology. It related to the difficulty of managing their response to disruption while trying to keep the existing business running. Anthony, Gilbert, and Johnson in their book Dual Transformation encouraged firms to pursue a strategy of planned obsolescence, actively and strategically cannibalising their existing businesses to create new opportunities before they are disrupted.
A good example of this strategy is Gillette. Following the acquisition of Gillette by Proctor and Gamble, the marketing team sought to grow market share with a long tail strategy. Gillette introduced a large range of products that provided a small but significant contribution to their bottom line. With a focus on preserving market share, Gillette sought to dominate the point-of-sale through alliances with major retailers. And while the constant introduction of new lines and specialty-branded products cannibalised their existing product lines, the strategy enabled them to lock out their competitors and preserve market share.
While this example certainly shows how adapting core product development processes can help firms stay on the front foot in response to market-driven disruption, it does little to address the main challenge that undermines the success of transformation initiatives. Research undertaken for the Australian Transformation and Turnaround Association (AusTTA) suggests that reengineering core processes is only one half of the transformation puzzle. The key finding of this research was that firms needed to take a binary approach to maximise the success of their transformation initiatives (see Figure 1).
Assuming that firms have the environmental scanning tools to identify the need for change, the first pathway reflects where firms have already successfully adapted their core processes. In this situation, the next step is to invest in bringing along staff and building a supportive culture for change. This requires leaders that understand the requirements for transformation, and have experience and skills needed to reinvent the organisation’s culture. Often after the culture work is complete, firms realise that much of the process-related work already undertaken needs to be tweaked in line with the new knowledge about the culture.
The second pathway is for those who have already invested in their culture but are yet to identify and prioritise the processes that need to be adapted. Those surveyed argued that once the culture is in place, the reinvention of processes tends to flow much more easily as the internal resistance to change has typically been addressed. They add that effective transformation leadership is critical to resourcing this important step. Overseeing the development of a supportive human-centred culture creates the necessary momentum and trust for firms to engage staff in the long and tedious road to process renovation.
The third pathway refers to where neither the culture nor the processes are ready. Only once a supportive culture is in place, and core processes that need to be re-engineered have been identified and prioritized, should firms even embark upon a transformation journey. In many cases, sub-optimal results stemming from transformation are because firms pursue transformation prematurely without having these enabling conditions in place. Being change aware is not the same as being transformation ready.
For more information please visit https://www.qut.edu.au/study/professional-and-executive-education/courses?area=Transformation.