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.
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.