In this blog, I focus on the question: What makes a business transformation successful (or not)? Today, it is less about methodology and more about what, in my experience, are the decisive levers, success factors but also stumbling blocks.
Of course, no one wants a failed transformation, everyone wants success (although in reality many transformations fail or at least miss important main goals). Hence my deliberate question: What makes your business transformation a success?
Now, many hope for a ‘ready-made recipe for success for transformations’, which of course does not exist, because every transformation has its own algorithm. But – and these are the levers – there are elements and sequences in this rhythm that make a difference and are decisive for success.
I’ll get to those in a moment. But for now, let’s take a look at the factors that prevent successful business transformation.
Table of Contents
The biggest stumbling blocks on the road to successful business transformation
For me, these are: The lack of a motivating, powerful vision or the absence of consistent leadership by example in the change process. In addition, a failure to address the willingness of the employees concerned to change can also have fatal consequences.
Today, companies are faced with a huge challenge: the motto is: transform! But what does that actually mean? How should decision-makers proceed? And when is transformation complete? The fact that companies have to transform themselves in order to stand a chance against their competitors is not fundamentally new. Why is the topic of business transformation on everyone’s lips again right now?
People and companies have always had to adapt to new circumstances in order to survive or seize new opportunities. This necessary change is largely driven by external changes. As the number of megatrends affecting all industries simultaneously, such as digitalization, globalization, energy transition or mobility, has grown in recent years, companies today have to deal with their future in a more fundamental way than was the case 10 or 20 years ago.
How capable are companies of change?
Company transformations are reported in the business news on an almost daily basis. Digital transformation is currently on everyone’s lips. But other megatrends such as climate change, demographic and social change, or rapid urbanization also require companies to change their previous business processes and models, in some cases radically. Company takeovers or a generational change in management can also be the trigger for far-reaching upheavals in the company.
According to international studies, however, over 70% of such business transformations fail. Therefore, the question arises as to which factors must be fulfilled in order for your successful business transformation to succeed.
Three factors that must be met for successful business transformation to succeed
How business transformation affects the success of your company
A business transformation is a combination of fundamental changes in strategy, business model, processes, technologies and culture in a company or business unit. The goal of this medium- to long- term evolutionary, iterative process is to maintain or even expand competitiveness in a rapidly changing environment. In its implementation, a transformation project is made up of a large number of short- and medium-term change management projects, each of which focuses on a single process, system, technology, team or department.
For a successful business transformation, you need to ask yourself the following questions:
What is the first step in your successful business transformation?
In the context of fundamentally changing market and competitive conditions, management must develop a shared conviction that fundamental change is imperative in the organization. This is often much more difficult than it might seem at first glance: for example, many companies are still doing pleasingly well (despite COVID 19). Why, therefore, should the management of a listed company even bother with what is undoubtedly a risky undertaking of transformation and jeopardize the short-term performance of the share price?
What goals should be set and how?
In contrast to the mere further development of the current strategy, for example by expanding its product range, the company wants to reinvent itself step by step within the framework of a transformation. On the one hand, existing strategic competencies are to be expanded, on the other hand, new ones are to be built up. Since this process has a highly explorative character, visionary goals are in the foreground in the first steps, which can only be concretized successively.
How does your company create value?
Quite simply, by offering customers a product or service that meets their needs. Today, these needs have changed – and so have the business models. New customer interfaces, payment models and data-driven insights are creating new ways to build customer intimacy and generate sustainable value. Truly transformed companies, however, do not limit themselves to reacting to changes as they occur: They look to the future and prepare for upcoming changes.
How does a company manage the balancing act between transformation and day-to-day business?
What is needed here is so-called organizational ambidextry: in humans, ambidextry refers to the ability to use both hands with equal skill. In a company, this can be achieved in different ways: Depending on the situation, the separation of existing and new business is a good idea for a certain period of time.
What are the biggest sins in change management?
John P. Kotter has extensively studied the challenges associated with transformation and change. Of the points he identified in this regard, the lack of a motivating, powerful vision or the failure of managers to act as consistent role models in the change process seem to me to be the biggest sins. In addition, a failure to address the willingness of the employees concerned to change can also have fatal consequences.
Do new employees need to be found or existing ones trained?
While in the existing business it is primarily employees who should be trained further, in the new business to be established new competencies and a high degree of diversity are also advantageous.
Do you need a new type of manager for successful business transformation, and what qualities does this manager need to possess?
In addition to classic transactional leadership in the operational area of the existing business, transformational qualities are also required to a large extent in transformation. Managers need to encourage and value different views and potentially conflicting behaviors rather than demanding uniformity. This may involve testing new ideas and experimentation to determine what makes sense and what does not. Skillful management of mistakes and setbacks, genuine collaborative skills, agility and a high level of creativity and communication skills are key skills here.
How can we prevent the transformation from being isolated in the project team and in individual initiatives and from not affecting the rest of the company at all?
As I said, depending on the initial situation, it can make sense not to include all areas comprehensively, at least in the first phase of the transformation. If this is to happen, however, it makes sense, for example, to have cross-divisional projects for which a member of the executive board acts as sponsor. In addition, specific vision contributions must be defined and implemented for each division. Finally, changes in the corporate and leadership culture are usually a prerequisite for success in transformations – a broad anchoring of new normative standards is often what makes change possible in the first place.
Transformation needs investment: How do you convince the CFO of this and provide sufficient resources?
As mentioned at the beginning, the united conviction of the top management is important for the initiation of a transformation – GL and VR – this also includes the CFO. It is also possible to save oneself to death – the statement by Jack Welch, the former CEO of General Electric, is also apt in this context: “If the rate of change on the outside exceeds the rate of change on the inside, the end is near.” In addition to additional resources, it is particularly important to optimize the use of the regular innovation budget, for example by shifting funds from incremental to radical innovation projects.
How does a company keep the time factor under control during transformation?
Even if a transformation has a medium- and long-term time horizon, milestones must be defined for the various initiatives running in parallel. Interim results also have an enormously important function in a transformation on the way to the goal.
Is your business transformation ever completing and if so; what comes next?
With a strategic transformation, a company wants to meet a strong change in megatrend-driven market and competitive conditions. These strong trends last several decades: during this time, agile companies develop continuously. We are in a very agitated world with now enormous dynamics. I therefore assume that there will not be a sudden calm and that a successful company will reinvent itself regularly as a result – unless it is in a highly regulated market.
My challenge to you: Identify the business model of tomorrow
In the past you paid money for a cinema ticket, today for a monthly subscription to a streaming service. People often talk about the “new normal” – but the truth is that evolution will never stop. Adapting to big changes is now a constant part of business and life in general.
Discuss what changes will take place in your industry
With the right technologies and digital insights, you can not only uncover the trends of the future, but also act on them – with a flexible, future-proof business model that keeps you one step ahead of change.
Focus on what matters: the customer
Currently, many companies are shifting their focus away from the traditional product-oriented model to a new model that focuses on customer requirements. Customers today care about more than product and price: they expect personalization, service, convenience, and proven sustainability. Service-oriented, software- and data-driven business models are designed to ensure that these expectations are met: It is not about selling a product, but about building a relationship based on solving customer needs. The age of customer centricity has already begun. It is enabled by modernized IT systems that use cloud computing and AI-powered analytics to their advantage.
Transform your business to unlock growth potential
Business model transformation is not something to worry about – in fact, it is an opportunity if implemented efficiently and with the right partners. By moving to a digital ecosystem, businesses can discover new models and growth opportunities without compromising their core processes. Digital tools can automate repetitive tasks and free up key staff to focus on innovation. At the same time, they provide their own insights by examining the data. Through transformation, even long-established companies can act like a start-up: launching new services, expanding their offerings and preparing for the future.
How I can support you in your business transformation
For more than 25 years, I held executive positions and was a member of the management team in medium and large, national and international companies. In doing so, I was privileged to support companies in the areas of: Retail, Pharma, Industry, as well as Associations/Federations and Foundations on their transformation journey. If you are a CEO or business owner and need support during your transformation process, feel free to drop me a line at email@example.com. Let’s work together to ensure that your business transformation is crowned with success.