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The Business Transformation “Why?”

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The Point: I was fortunate a few years ago to sit through a Simon Sinek presentation on the power of “Why?” At the time, my daughters were young, and if you’ve ever had young ones around you know their favorite question is usually a barrage of “Why?” questions. At Tip of the Spear Ventures, we know that companies must be prepared to break away from their routine thoughts and behaviors. So “Why?” is it that when we discuss our Business Transformation consulting service, we sometimes receive the same barrage of “Why?” questions. Precisely “Why?” are there so many questions about why Business Transformation can be a competitive advantage that mostly all organizations can leverage for their benefit? In this post, we’ll explore the topic of the Business Transformation “Why?” for that competitive advantage (That’s “Why?”)… Enjoy!

The Business Transformation "Why?" Tip of the Spear Ventures

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Why Business Transformation?

Imagine if you can with me… You are the head of a company that is a technology services provider. In the last decade the global technology boom has contributed to the growth of volumes and increased prices as well as influencing your company’s procedures, culture and vision. The majority of your top employees can’t remember a time in which the priorities of the business were different. One day, you realize that the party has ended.

In every industry, situations that were once thought to be unthinkable have become all too commonplace which is prompting CEOs and boards of struggling (or possibly drifting) organizations to embrace the term “Business Transformation.”

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Business Transformation as Change Management

The term “Business Transformation” is possibly the most misunderstood term in the world of business. Most companies apply it in a loose manner, and too loosely, to any type of change, no matter how minor or routine. Organizational changes (otherwise called redesigns of the org) which are when companies redraw the roles of their employees and accountability. Strategic Business Transformations are characterized by a shift in the way business is conducted. This term Business Transformation is often utilized to describe a digital re-invention that involves companies fundamentally altering their wiring and, specifically how they reach market.

What we’re looking at here, and the things that businesses similar to the technology firm mentioned above is something completely different that is the “Why?” typically associated with Business Transformation. The “Why?” in Business Transformation as we define it is as an intensive, all-encompassing program to improve efficiency (For example, an increase in earnings of at least 25 percent) and improve the overall health of the organization. If such Business Transformations succeed they dramatically improve key business drivers that matter like top line growth rate, capital efficiency — as well as operational efficiency — cost efficiency, as well as customer satisfaction and sales excellence. Since these changes reinforce an internal commitment to an agreed-upon goal and strategy boost the possibility of renewal and help to develop better execution skills which allow companies to continue improving their performance in sustainable ways every year. These kinds of changes might involve taking advantage of new opportunities for digital innovation or an overhaul of the strategic plan. In essence they’re about making the most of what’s already in place.

The rate of failure for large-scale change plans has fluctuated between 70 and 70% for many years. In 2015, mindful of the unique difficulties and disappointments of numerous businesses that were that were undergoing changes, Tip of the Spear Ventures set up a unit that would be focused on these kinds of Business Transformation initiatives. In the past six years of operation, our Business Transformation Consulting Team has worked with more than 100 businesses, and has covered almost every industry and geography all over the world. These experiences — both successes and those that came up short — helped us create an array of practical ideas to increase the odds of Business Transformation success. When combined with the appropriate decisions making, the right Bsuiness Transformation can transform a subpar (or good) company into a top-quality one.

What is the Reason Business Transformation Failed?

Transformations, as we understand them consume a shockingly large portion of the leadership’s and an organization’s attention and time. They require a lot of effort to achieve the required amount of Business Transformation. These are the reasons for disappointment. The most fundamental lesson that we’ve learned over the past two decades is that the majority of companies do not possess the skills mindsets, mental sets, and constant determination required to successfully implement massive transformation.

The most fundamental lesson that we’ve learned over the past two decades is that the majority of companies do not possess the skills mindsets, mental sets, and constant determination required to successfully implement massive transformation.

Sam Palazzolo, Managing Director @ Tip of the Spear Ventures

In the whole economy, “creative destruction” is a common theme since 1942 when Joseph Schumpeter coined the term. For individual companies as well as their leadership, disruptions are frequent enough that CEOs and top-management teams are better managing businesses in stable conditions rather than in dynamic ones. Chances are that their education and experience primarily takes places in situations where extensive fast, deeply-rooted adjustments aren’t required. In many companies the relatively calm environment results in the “steady situation” of solid structures with regular budgeting, new goals, quarterly reviews and moderate reward systems. This leaves leaders unprepared and ill-equipped for the more rapid and more brutal task of the transformation. A long-term exposure to these efforts has revealed that many leaders struggle to shift gears and may be reluctant to be a leader instead of delegating when confronted with external challenges and successive quarters of sagging performance, or simply an opportunity to improve the level of their company.

Executives who are embarking on a change management initiative may resemble professional commercial air pilots who are thrust in the cockpit of a fighter jet. They’re still piloting an aircraft, but they’ve been trained to prioritize stability, safety as well as efficiency. They lack the equipment and pattern recognition skills to react appropriately to the requirements of a combat aircraft. But, because they’re in the cockpit of an airplane and are not able to see the many threats and challenges the new scenario presents. A technology company executive who had to learn that lesson in the most painful way, revealed to us “I simply put my back into my work and started working more. While this has helped get us out of a tight spot in the past, more effort on its own did not suffice for us this time.”

The Odds are Tipped Toward Success

The most crucial beginning point for a Business Transformation (regardless if it’s a digital business transformation or change management initiative) and the most reliable indicator of success is a leader who understands that only a fresh strategy can dramatically enhance the performance of the business. However powerful the aspirations, convictions and ferocity of the CEO, our experience has shown that businesses must get five additional important aspects right for them to break through organizational inertia, get rid of the deeply ingrained steady-state mindset and establish a new longer-term upward momentum. They must (1) determine the business’s potential to the fullest, (2) establish the pace for the future with the creation of a Transformation Workplace (TW) which is empowered to take decisions, (3) strengthen the executive team by establishing the role of a Chief Transformation Officer (CTO) to (4) change the managerial and employee mental models that are holding the company back, and (5) create an entirely new mindset of execution across the company to ensure the transformation. This last point is in some ways the most difficult job of all.

1 – Stretch for Full Potential

In most companies, targets are derived through negotiations. Line managers and leaders go back and forth, they always push for more than they can, and the latter will expose all the reasons as to why the targets they propose typically are not achievable. Naturally, the same scenario is seen when it comes to Business Transformation initiatives, which can lead to compromises and small changes — rather than dramatic changes. When the managers of one firm located in an extremely competitive, highly asset-intensive industry were provided with solid external evidence of their ability to boost millions in revenues over the amount they had envisioned, the company’s CEO immediately dismissed the targets proposed. They believed that targets were their responsibility and, when not achieved these missed-targets provided a negative impact on themselves and their compensation. Their default response was “Let’s underpromise and maybe overdeliver.”

To combat this normalcy behavior, leaders must insist on a thorough analysis of the firm’s complete potential for value creation — specific targets for cost and revenue supported by solid facts. We’ve found it useful for the CEO and the top leadership team members to adopt the mindset as well as the independence/toolkit of an activist investor, or private equity acquirer. In order to achieve this it is necessary to break out of the mindset limitations that they have set for themselves and establish what is truly possible. It’s time to make a self-confident leap instead of taking a series of small steps that don’t go any further. According to our experience, goals of two to three times the company’s estimations of their initial future potential are usually achievable, not the exception.

2 – Modify the Cadence

Our experience has taught us that it’s crucial to set up a hub to manage the transformation and also to maintain an unpredictably different pace from the typical day-to-day routine. We refer to this hub as “the transformation workplace.”

What are the factors that make the TW work? One company that had a plan to increase EBITDA by over $25 Million created an unorthodox, but highly effective TW. To begin, the TW was situated in a circular space which was without chairs and had only a standing space. The wall that was in the room was referred to across the company in the business, as “the scorpion” as a tracker for the week which tracked progress towards the target. When the time came to end the process the scorpion had eaten its prey, as the company significantly over-performed its financial goal.

Every Tuesday, during each regular TW meeting, leaders of the work stream together with their groups reviewed their progress in completing the tasks they had taken on (the prior week) to finish and committed to measurable targets for the following week before their peers. They only used whiteboard notes written by hand — no death by PowerPoint presentations — and only had 15 minutes each to make their report-outs. Individual leaders within each work stream discussed their particular initiatives on a regular basis, and third or fourth-level managers would meet with the leaders at the top in order to boost the level of accountability and ownership. The divisional President was also a regular participant in these TW meetings when they went to the company which has since convinced him that this TW procedure was far more vital than anything else in transforming the culture of the business.

For leaders at the top, attention deficit is their constant adversary (Think of it as a Leadership Attention Deficit Disorder – LADD). The majority of them prefer to discuss potential customers’ needs, M&A potentials, new strategic options. This is why there is a temptation for top management to delegate the responsibility to a steering committee, or an old-fashioned program management office responsible for providing regular project management reports. If top management’s attention gets diverted elsewhere, the line managers will follow suit in deciding their personal priorities of where to focus their efforts/energy.

With all the distractions available to most leaders, the majority of projects are capable of moving too slow. Parkinson’s law says that work is expanded to take up the available time and business executives have no excuse If they are given a month in which to finish a task that takes an effort of one week They will typically begin working on it one week prior to the date. When it comes to successful transformations, a week is a week which is why the transformation workplace is constantly asking “How do you move faster?” and “What do you require to make changes happen?” This shortened time period expectation is among the primary aspects of transformations that have been successful.

Working with senior executives across the entire organization In collaboration with senior leaders across the entire business, the TW must possess the discipline, grit, determination, and energy to push forward five to eight main work streams. They are subdivided into possibly hundreds (even the lower tens of thousands) of distinct initiatives, each of which has the specific name of its owner as well as an in-depth, cost-effective bottom-up strategy. Most importantly is the fact that the TO should always push for decisions, so that the business is aware of any slowing faction whenever the progress is identified as too slow.

3 – Bring forward the CTO

Managing a complicated corporate-wide Business Transformation requires a permanent, executive-level job (See my previous article titled, “Should You Hire a Chief Transformation Officer – CTO?”). This position should be held by a person with the power to propel the company to its maximum potential and also the expertise — as well as the experience and the personality of a veteran fighter pilot!

A Chief Transformation Officer’s task is to ask questions or push, praise or prod — and other ways — to irritate the company that has to think and behave differently. A CEO introduced a new CTO to his senior team by saying “Sam’s task is to make me and you feel uncomfortable. If we’re not feeling comfortable and uncomfortable, then he’s not performing the job he’s supposed to do.” Of course that’s not true. The CTO isn’t supposed to take over the duties of the CEO. He (on contrary) should be at the forefront constantly promoting the notion of this being a Business Transformation.

Many of the program managers in traditional departments are able to manage processes, but they are not able or willing to challenge the CEO and the top management team. The best CTO could originate within the organization for this reason — or maybe they shouldn’t? One of the most common errors we see companies make at the beginning is selecting the CTO exclusively from the internal pool of candidates. The CTO must be active and respected, not afraid of conflict, and ready to challenge the established corporate norms. These traits are difficult to come across among those who are worried with protecting their legacy, seeking their next position or trying to tamper with long-standing internal tensions in the political realm.

So exactly how should a CTO perform? Think about what transpired at a firm that launched a large-scale Business Transformation program that we worked with. The new CTO was frustrated as the executives focused their attention on specific technical issues instead of the increasing cost and the slipping of successfully producing at established schedule. While they had no experience in the program’s technical aspect, they outlined the facts and warned personnel on the operation team that they could be fired and the entire project would be shut down unless things were back on track in thirty days. The conversation then changed to reallocation of resources, and the operation team formulated and executed a fresh approach. Within two weeks the project was back in the right direction. Without the CTO’s impartial viewpoint — and honesty — this would not have been possible.

4 – Remove Barriers & Create Incentives

Many businesses fail to reach their full potential not due to structural weaknesses, but due to a mix of inadequate leadership, insufficient culture/skills and misaligned incentive systems. In normal or even good times, when companies can manage to get by with their sluggish pace the path of least resistance, these obstacles could be a manageable obstacle. However, the transformation will be successful only if these obstacles are dealt with in a timely and explicit manner. Commonly, the mindsets that cause problems are based on placing the “local entity” above that of the “enterprise” in general or being too proud to seek help and blaming external forces “because it’s not our responsibility.”

Another technology firm was unable to function because its employees were “waiting to hear” instead of taking action. Based on their past, it was clear that they had no input in action to be taken, since they’d never been asked before. However, should they do the proposed Business Transformation processes and make mistakes, the results could make for news headlines. Their bureaucratic culture was the root cause of the paralysis. In order to make progress the company needed be able to confront this very real anxiety.

Tip of the Spear Ventures’ Influence Model is a tested tool to change these mental attitudes based on the importance of telling a compelling story about change and role-modeling by the top team members as well as creating reinforcement mechanisms and equipping employees with the abilities to adapt to changes. Although all four steps are essential to the process of transformation, the company must consider the narrative of change and reinforce methods (particularly incentives) from the beginning.

Step 1 – An Engaging Change Story. A majority of companies don’t realize how important it is to communicate what’s the “why” of the transformation too often they think that a simple email from the chief executive or slides from the corporate office can be enough to ensure that the organization is engaged. However, it’s not enough just to simply say “we haven’t made our budget” or “we have to become stronger in our competition.” Engaging with managers and employees has to be supported by an agenda, a purpose and an imperative appeal to actions that can resonate with each individual. This type of individualization is what drives employees.

Step 2 – Leaders Model. For one business we worked with, a person not known for their public speaking skills was present at the launch of the transformation program and spoke about being raised as a child of a small business owner, enduring the effects of a worsening market, and watching his parents struggle and put off their retirement. Their goal was to improve the company’s performance based on an obligation to the people who came before him, and an ambition to be a reliable small business owner’s partner. All the other employees rallied around his tale more than the financial arguments of the CEO.

Step 3 – Incentive programs. Incentives are especially significant in influencing behavior. According to our experience, traditional incentive plans with many variables and weightings – say six to ten goals that average weights of between 10 and 15 percent are too complex. When undertaking the case of Business Transformation, the incentive program should not exceed three goals and an exorbitant payout for over-performing; the time of transformation in the end is expected to be among the most demanding and difficult of all professional careers. The typical arguments — such like “our incentives program has already been in place” or “our employees don’t need any special rewards to do the best” — shouldn’t stop leaders from considering this crucial incentive reinforcement tool.

Step 4 – Non-Monetary. The non-monetary rewards of Business Transformation are equally important. One CEO set a goal every week of handwriting a note to each person who was part of the Business Transformation initiative. The cost was minimal, yet it resulted in a maximum effect on the morale of employees. In another firm one employee went over the line to carry out an extremely challenging task. The CEO learned of this and decided to gather a group of employees — which included the employee’s wife and two children — to celebrate an unexpected Business Transformation success story to be celebrated. After a short time, the news of the party had been shared across the entire company (Yes, it went viral!)

5 – The End of the Road

Business Transformations tend to degrade instead of being able to clearly fail. Managers and employees put an enormous initial effort, while corporate results rise at times dramatically; and the people involved are congratulated and celebrate their victory. But, gradually the company falls back to their old habits. Have you ever heard from leaders who share that “We have gone through three changes over the past eight years — and every time — we’re back to the place we began 18 months later?”

The real test of the success of a Business Transformation then, is what happens after the TW is disbanded and the life returns to its regular pace. The most important thing is that the leaders seek to preserve the lessons learned from this transformation as it progresses and instills into the company the same process in order to provide superior results after the formal end. This usually means using, for instance, the TW meeting frequency and robust manner towards the annual financial reviews and budget cycles for the year or even daily performance meetings — the fundamental routines of business. It’s not a good idea to begin this process at the conclusion of the plan. Incorporating the processes and strategies for the transformation into everyday tasks should be done earlier in order so that the speed of performance doesn’t slow down even after the transformation has been completed.

Businesses that generate this kind of momentum stand out so much that we’ve begun to see the interlocking processes, abilities and attitude required to accomplish it as an individual source of competitive advantage — Value proposition. This is what we refer to as “an execution engine.” Businesses with a well-functioning execution engine are able to take on everything from an impartial perspective. They act as investors. All employees are treated as if it was their own. They make sure that accountability stays within the company and not with the central team or with external advisors. Their focus on execution stays unwavering even as their results improve and they continue to search for innovative ways to inspire their staff to strive for greater potential. Contrarily, those who are doomed to fail often fall back to high-level objectives that are assigned to the line with no concentration on execution or using the creativity and ideas of their employees. They usually lose the brilliant employees responsible for the initial accomplishments to headhunters or other positions within the organization prior to the process becoming established. To avoid this, leaders must ensure they keep the passion, dedication and focus of these staff members until execution has been fully incorporated.

Summary

Our process of Business Transformations isn’t unique or complicated. It’s not a strategy only for the “strongest” individuals and businesses. We know from our experiences at Tip of the Spear Ventures that Business Transformation is only effective for those who are the most committed. Our main conclusion is that to realize the desired Business Transformation, companies must set higher goals, develop new skills, as well as challenge their existing mindsets towards fully committing to the Business Transformation execution. This can result in remarkable and lasting outcomes!

Sam Palazzolo, Managing Director @ Tip of the Spear Ventures

Should You Hire a Chief Transformation Officer (CTO) – Eight Questions?

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The Point: At Tip of the Spear Ventures, and our Business Transformation consulting firm — The Zeroing Agency — We know that a highly skilled and experienced leader will significantly enhance the odds of an effective business transformation. This leader — the Chief Transformation Officer (CTO) — is the key to Business Transformation! But what if your organization doesn’t have a CTO? Through our experience with a variety of organizations that have taken this path and have seen CTOs who are devoted to driving the company forward, and held accountable to those responsible for the numerous (even thousand) of activities and projects that comprise the typical business transformation plan. Effective CTOs are able to inspire employees and serve as role models for the kind of behavior required to inspire and instill changes. So in this post we’ll look to answer the question, “Should you hire a Chief Transformation Officer (CTO)?” along with eight questions… Enjoy!

Should You Hire a Chief Transformation Officer

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A Chief Transformation Officer’s (CTO’s) Job Description

At the core of the CTO’s job is the capacity to achieve the proper equilibrium between carrots and sticks in achieving short-term improvements as well as long-term value and between ensuring that line managers take personal responsibility for change , and ensuring that they can deliver their results swiftly and with the appropriate level of expectations. This judgment is crucial when it comes to allocating the resources that are often at resources to address the diverse needs of a change.

CTOs must be impartial (certainly not tied to the decisions made in the past) They should have had experience in similar corporate environments that were turbulent during their previous careers, and receive the support of the CEO, the board and the upper management. Their mandate–responsibility for ensuring that the full bottom-line target gets delivered–must be clearly defined at the outset. They must be integrated fully in the team of executives (not isolated to separate units for transformation) and their pay is to be tied to their results, including a significant reward for exceeding the target. Ideally, they should act as an extension of the CEO or the board, and have the ability to hold highest-ranking managers accountable.

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The CTO – A Project Manager on Steroids?

The CTO is the top-level orchestrator of a complex system that includes a variety of distinct initiatives. The responsibility for making day-to-day decisions and implementing the initiatives is with the management, but the CTO’s role is to ensure the task is completed. This isn’t always easy.

The CTO is the persona of the change and sets the tone, encourages excitement, and challenges the conventional wisdom. Similar to a drill sergeant in the military who insists on daily push-ups as well as 10 mile runs The CTO has the goal of ensure that the organization is fit in order to maintain the efforts over the long term.

Excellent CTOs are those who believe in nothing without the benefit of facts and an independent analysis. They aren’t just business leaders and problem solvers They also have an emotional quotient that is high and excellent interpersonal abilities. The most effective transformations we’ve seen result from CTOs in generating enthusiasm and leveraging the capabilities of a wide range of abilities. They recognize and reward the best performers.

The book “Outliers,” author Malcolm Gladwell famously promoted the idea (since challenged by other authors) that it requires around 10,000 hours of work to master the area. Being a competent CTO definitely requires this kind of instruction. In this regard it is essential that CTOs are able to draw on a broad cross-functional background (as as opposed to being an expert in a particular field) and have experienced many different circumstances and issues in their professional career. With this knowledge, they be able to tell how to encourage and praise and when to work tough.

The Biggest Threat to Chief Transformation Officer (CTO) Success

We’ve witnessed CTOs fail when their authority is compromised. Here are two instances of what could fail.

  1. Poor Governance. Issues arise whenever the CTO is treated as an employee on the corporate staff. This is often the case when businesses set up the traditional office of program management. The CTO’s authority and capacity to influence the process is derived from his or her CEO. The CEO clearly lends the CTO authority as well as support to the process of transformation. Anything that violates this implicit agreement undermines the CTO. For example, when the board or the CEO are able to hold the CTO accountable, but do not give them the ability to influence the decisions of business transformation. The CTO should be able invite senior executives (including even the CEO) for attendance at meetings and, in turn, the CEO should provide regular and consistent messages of their confidence and support in the business transformation initiative.
  2. A Negative Environment. If employees and managers do not recognize the urgency of making changes, the CTO’s task will be a continuous struggle. The CTO must make a conscious effort to change these negative attitudes and behaviors, instilling within the workplace a preference towards actions. A mindset such as “that’s the method we’ve always used in this organization” are extremely destructive particularly when they are shared by the top managers and must be resisted with vigor. The time wasted in useless debate and bureaucracy indicates that the company isn’t fully supportive of the methodology and tools of the business transformation shift in which case the message of the CTO isn’t being heard now or ever.

Eight Questions for the Chief Transformation Officer

The success of a change initiative is dependent on the CTO being able to solve a vast array of business and organizational problems. Here are eight (8) important questions CTOs must consider:

  1. Have I got the complete backing of the CEO as well as the Board of Directors?
  2. Have I gotten involved with the vested interests of my current employer and killed any/all/most sacred cows?
  3. Have I created a pattern like a clock that changes the rate of metabolism in the company?
  4. Have I gotten to know the frontline team members and have I created a sense of their struggles and views?
  5. Do I have the ability to coach the CEO and top management team in successfully changing the way they manage the change?
  6. Have I got a clear perspective on where the true value is within the organization, and when/where we can’t allow ourselves to make compromises?
  7. Have I purposely made a few squabbles with the top line leaders and persuaded them to make changes successfully?
  8. Do I know the dominant mindset/culture and the areas it should change?

SUMMARY

In this post we’ve looked to answer the question, “Should you hire a Chief Transformation Officer (CTO)?” along with eight questions. This leader, the Chief Transformation Officer (CTO) is the key to Business Transformation! A highly skilled and experienced leader that significantly enhance the odds of an effective business transformation. Through our experience with a variety of organizations that have taken this path and have seen CTOs who are devoted to driving the company forward, and held accountable to those responsible for the numerous (even thousand) of activities and projects that comprise the typical business transformation plan. Effective CTOs are able to inspire employees and serve as role models for the kind of behavior required to inspire and instill changes.

Sam Palazzolo

Sustaining Business Transformation Momentum – 5 Tips!

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The Point: Congratulations on your Business Transformation initiative! You’ve gotten yourself/your organization as a leader to the point where you are taking the steps towards changing how you conduct business — No small feat in and of itself. However, beginning the business transformation initiative is just that — the beginning. What follows will be the architecture of the strategy that falls in alignment with organizational goals, the implementation, and ultimately the monitoring of progress. This post is all about those final stages for business transformation success where you want to sustain momentum. Herein we’ll provide 5 tips to sustaining business transformation momentum… Enjoy!

Tip of the Spear Ventures Sustaining Business Transformation Momentum

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Sustaining Business Transformation Momentum

It may seem obvious that sustaining business transformation is important, and the actions necessary to do so are simple. They are not. This is because companies are often too focused on short-term gains and neglect the long-term imperative. They overlook the difficulties of breaking old habits and creating a healthy, new approach that can be implemented in thousands of daily actions instead of being referred to by a checklist. To maintain business transformation momentum, you will need to develop new skills, be disciplined, and have strong relationships with your organization.

To sustain a transformation, you must embed a “business transformation engine” — A repeatable process that fundamentally alters performance rhythms and decision-making in the company. It’s not about making strategic decisions, but rather about implementing daily initiatives that will change the way the organization works.

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There are five tips business transformation can be built, according to us:

1. See the World from a Different Perspective

It is exhausting to challenge everything, but companies that are open to change never settle for the status quo. They are open to new facts and not content with the status quo. They are vigilant against accepting easily accepted targets.

2. Think Like an Investor (Especially if You are a Private Equity Firm)

Although this mindset isn’t always popular within organizations, it is something that every leader should adopt. Passive employees can kill change in a company, as we all know. Successful employees are constantly challenging their colleagues and not content on just getting along. They don’t settle for a slow pace of decision-making either. They are always looking for new sources of value and how they can contribute to the organization.

3. Assure Ownership is On the Line

Management and outside advisors will have a tendency to set targets during a transformation program. This is what happened with a technology firm client. This should be avoided. Companies with large central teams who have centrally imposed initiatives embedded in budgets without manager buy-in are at greatest risk of falling back to their old ways.

4. Always Work Hard

Companies can easily allow their pace to slow down once they have achieved their initial improvement targets. It is easier to delegate. Senior executives who are unable to focus on high-level targets and don’t get lost in the details, perhaps under the pretext of not wanting to micromanage, should be notified.

5. Address the Underlying Mindsets

In our experience, motivated employees are more productive than those who live in a command-and-control culture. Managers must not only challenge, but instill meaning. Managers must be able to recognize the value of extra effort. They should not assume that employees understand why the company must operate differently in the future.

SUMMARY

These five tips brought into your monthly operational meetings, annual budget discussions, daily management routines should continue to be a part of executives who sustain a business transformation. Leaders that do realize that success in business transformation is not about the scoreboard or whether the organization can deliver $100m, $500m, or both. It’s about whether the process of business transformation has been repeated and replicated in a way that drives better results for the organization long after it is finished.

Sam Palazzolo

Setting Business Transformation Targets

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The Point: The establishment of goals is an important step in any business transformation initiative. If done well, this setting of business transformation targets exercise sets the tone for the entire program and fundamentally alters the way people think. It also allows leaders to reach for the impossible. We have learned four important lessons from our two-decade experience working with companies in business transformation (change) initiatives. During the target-setting phase of the transformation, companies should keep these four principles in mind. So, in this post we’ll explore setting business transformation targets… Enjoy!

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Principle #1 – You’re Going to Need More Money

Recently, we compared the actual savings made by the 15 companies that we have worked with to the initial numbers they projected. It was quite instructive. The average company delivered 2.7x more than what their senior executives expected when they started the transformations. One industrial company achieved a result that was 4.7x greater than its original target of $50 million.

This business was not unusual. Many managers are slaves to their past and more inclined to return to old routines than to explore the possibilities of doing things differently.

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Principle #2 – Thinking Incrementally can be Counterproductive

We recommend that companies start with the theoretically possible number and adjust this number downward when there is clear evidence that certain actions may not be realistic. Arguments for a lower number should be supported with facts and the person arguing for it must bear the burden of proof. They must ask the question, “Why can’t this be done?”

For example, senior leaders in a technology company initially opposed plans to reduce the travel time between the corporate headquarters and a regional office. However, frontline workers suggested that a sub-regional office be built in the region to further reduce transit time from work by twenty percent. This was a win-win situation for both the company and its workers. The company is now considering how they can take things a step further with work from home (WFH) suggestions received.

Principle #3 – Get an Independent Parties Opinion

Intending leaders will find it difficult to move beyond incremental thinking. Intending leaders find it difficult to move beyond incremental thinking. Third parties and an internal team that isn’t burdened by the “how things are done around here” mentality will be able to offer a true perspective. We suggest adopting the mindset of an investor or private equity firm and looking at every area of the business with objective analysis of competitors and benchmarks. Companies must move beyond “groupthink.” They need to be bold and break away from the kind of consensus that suggests a 5 to 7 percent improvement, but not more. It is important to establish a goal without giving exact details about how it will be achieved.

Principle #4 – Opportunities Exist Where You Least Expected Them

Too often, companies limit their goal setting to the search for savings. Companies often overlook opportunities to increase productivity, implement pricing initiatives, improve sales force effectiveness, reduce working capital (in response to excessive stock buildup), or address customer dissatisfaction. Companies that are most ambitious tend to use all of the available levers. Setting aspirational targets shows the business that you are open to new ideas and ways of doing things.

SUMMARY

In this post we’ve explored the topic of setting business transformation targets. Again, the establishment of goals is an important step in any business transformation initiative. If done well, setting business transformation targets set the tone for the entire program and fundamentally alters the way people think. It also allows leaders to reach for the impossible. We have learned four important lessons from our two-decade experience working with companies in business transformation (change) initiatives. During the target-setting phase of the transformation, companies should keep these four principles in mind.

Sam Palazzolo

The ‘How?’ of Business Transformation

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The Point: In many industries, business transformation or change management programs often fail. We know that business transformation is not for the weak of heart. We’ve seen change leadership in a company not be united and/or committed before, during, and especially after transformations. So are there portions of the business that leaders need to pay attention to? Seriously, not only the specific initiatives but also the changes that leaders are making as to how the business actually works? In this post we’ll explore the ‘how?’ of business transformation in search of a performance infrastructure that is essential for a successful transformation. Once discovered, it will allow you to achieve rapid, dramatic and long-lasting business improvement. Creating an “infrastructure of performance” can help ensure success… Enjoy!

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The Case for Business Transformation – Why?

Today’s business environment is full of disruptive forces. Even in less volatile industries, disruptive forces abound. These disruptions include technological innovation, regulatory changes and pressure from activist investors. Many technology companies — both software and hardware — are undertaking such business transformations. Sometimes they do so in response to external pressure, but other times it is to stay ahead. These companies, regardless of their motivations, are trying to introduce new ways of working for large numbers of employees with the aim of achieving a step-change in business results.

The sad reality is, however, that the majority of these organizations are not able to change. Business transformations more than often fail. Research has shown that 70% of large-scale, complex change management programs fail to achieve their goals. Common pitfalls are a lack or inadequate management support, low employee engagement, poor cross-functional collaboration and a lack in accountability. A major change in mindsets and behavior is required to sustain a business transformation’s success. This is something that very few leaders are able to do.

As practitioners in Business Transformation, The Zeroing Agency — a Tip of the Spear Venture — focuses on supporting such turnarounds and transformations. When it comes to Business transformation, we’ve seen it across all industries, and we know that the hardest part of improving performance isn’t deciding what to do but rather — how to do it. This article will discuss an important component of the ‘how‘ of business transformation: the creation of an “infrastructure for performance” which is made up of people, processes and tools that allow successful execution and sustainable results.

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Performance Improvement Requires a Holistic Approach

Companies in financial trouble tend to be more focused on cost reduction and immediate solutions. Many consumer-focused businesses are able to offer stable and healthy product categories. These companies don’t see transformation as a struggle for survival. It’s about reaching the full potential of the company (going from good-to-great) or responding to external challenges or opportunities, such as learning new ways to win or moving away from a historical money-maker.

We have found that no matter what the circumstance, true transformation occurs when the leadership team accepts the idea that there is a holistic approach to changing the way the business operates. This includes addressing all factors that add value to the organization, such as top line and bottom line. This is not an easy task. Ordinary transformation approaches often produce suboptimal results.

To achieve extraordinary results, we believe a comprehensive, highly disciplined methodology–encompassing both the “what” and the “how”–is needed (exhibit). The “what” refers to the smooth flow of specific ideas and initiatives throughout three phases: planning, independent diligence, and implementation. For the experienced executive, these phases will be familiar. We find that executives are more focused on the individual initiatives than how the company must change. This is a problem that many leaders feel. They express concern about sustainability and execution risk, and know that initiatives won’t stick unless they fundamentally change the way the business operates. How can an organization transform its operating model? The “how” is broken down into two parts: performance infrastructure and change management. Many organizations find change management challenging. We will discuss this in detail in a future article. This article will focus on the performance infrastructure. It is essential for effective alignment, communication and coordination at executive level during a transformation.

Making Change Happen at Speed

Performance infrastructure is made up of people, processes, and tools that all work together to deliver superior execution and value. It is the heart of a transformation effort, and plays an important role in its success.

The People: A Governance Structure Lead by a Chief Revenue Officer?

To oversee the execution of each “workstream” (or area of activity), ensure decisions are made quickly, and keep the transformation on course, companies must create a governance structure–specifically, a transformation office (TO) comprising a few respected executives supported by analysts from the finance and HR functions. The Chief Revenue Officer (CRO) should lead the TO and be part of the company’s executive committee. The CEO should be regularly updated by the TO on progress, and highlight issues and possible solutions.

You might wonder, “Is a CRO in charge of business transformation really necessary — or appropriate?” The CEO should lead the transformation. We are unambiguous in our answer. The CEO should be the leader of the company. A full-time, experienced CRO should oversee the transformation. Why?

A CRO with extensive experience in leading sales in companies experiencing business transformation is the ideal candidate. The CRO should have a vision of what is possible. This includes a view of the company’s performance and current capabilities, as well as a realistic plan to encourage different groups to work together.

This is a demanding job, especially in comparison with the already monumental duties assigned typically to a CRO. However, the CRO must radiate confidence and gravitas from the beginning. This will ensure that the organization is motivated and inspired, no matter what the circumstances. The CRO should not be a stern, egotistical dictator. Instead, they must have the ability to see and judge how people are doing so that they can reach their full potential. The CRO should also be able to take deep dives into complicated issues important to the company.

The CRO should extend the CEO’s reach and have the authority and mandate to manage all levers and influence decisions regarding personnel, investments and operations. The CRO can be an important part of “getting people on the bus,” making key decisions regarding the addition or removal of managers.

Many companies lack the ability to find someone with these qualifications, let alone one who can step in and fill the position. Therefore, the CRO often comes from the outside. Although company leaders might be concerned about the outsider, the ability of an outsider to see the business and make decisions without being restricted by internal politics is one of the most important success factors for a CRO.

The Process: An Unstoppable Cadence of Delivery

Ineffective business transformation is possible if it takes too long. A weekly schedule of transformation meetings is essential to creating a performance infrastructure. Most turnarounds are managed by a project management office that meets once a week to discuss all workstreams. We recommend a 60-to-90-minute weekly meeting for each workstream. In addition to a weekly TO meeting of two hours, we recommend a cadence for weekly transformation meetings. This cadence works because it is relentless and aggressive. It enforces “closed loop” accountability, accelerates implementation, and prevents “pocket vetoes,” other delay tactics, and slippage.

Meetings, and in particular the question-and answer exchanges between CRO and line leaders, are essential for holding people accountable. This is not a consensus-driven approach. The CRO should be open to confrontation when managers fail to meet their promises. Meetings should be transparent and honest. This allows the organization to assess its current situation and identify the best solutions. Transparency is essential to help everyone understand the company’s priorities and decision-making process.

These weekly meetings provide a platform for discussing and debating difficult tradeoffs between revenue generation and cost reduction, as well as for refining individual plans for each initiative. The TO is able to quickly make cross-functional decisions and help prioritize and evaluate competing priorities. The weekly meetings are a valuable tool for developing new talent, and identifying individuals who can be the most beneficial to an initiative. The weekly meetings were used by the TO to identify highly-motivated and high-performing individuals to help develop and build the mobile app.

Although the weekly cadence is an important building block in the transformation process, it’s not sufficient on its own. To instill an execution-focused mindset into daily decision-making, monthly value analysis to quantify the bottom-line impact and an annual “refresh”, which plugs into budget cycles to rekindle idea generation and foster continuous improvement, it should be supplemented with daily performance management.

The Tools: Transparent Reporting and Accurate Tracking Systems

The tools and systems that are used to monitor business transformation performance make up the third component of the performance infrastructure. These might include organizational-health assessments, benchmarks, value-capture models, and visual management and planning aids. Advanced initiative-tracking tools, such as those that can be sorted according to owner, department, delivery status and other criteria, allow users to quickly see the progress of all initiatives. These tools should be easy to use, allowing users to identify delays and trends, track impact, and create rich, yet simple reports. These tools should be accessible to all involved in the transformation.

Our experience shows that the best tools for leaders to monitor the impact of initiatives have the greatest success rate in business transformations. Too many executives simply launch initiatives and hope that the money will eventually show up in their company’s bank accounts. Initiative owners can use sophisticated tracking tools to tie each initiative’s impact to a profit and loss line item. Executives can use this level of detail to make sure that each initiative has a positive impact on business results — It also builds in additional layers of accountability towards achieving the ultimate business transformation goals.

SUMMARY

Business Transformation is not for the weak of heart. Before embarking on a change management program, change leadership in a company must be united and committed. Once they have achieved this, they need to pay attention to not only the specific initiatives but also the changes that they are making to how the business actually works. A performance infrastructure is essential for a successful transformation. It will allow you to achieve rapid, dramatic and long-lasting business improvement.

Sam Palazzolo