The Point: Analyzing high-risk transformations provides a number of practical lessons which increase the likelihood of the organization achieving its goals… But how can a leader ensure for on time, on target business transformation? Any business transformation worth doing starts with high-risk objectives. It’s hard enough to identify/set these high-risk objectives with companies, especially those that are habitually accustomed to a risk-averse approach of over-promising and under-delivering. However, the real work begins once the organization decides to transform the leadership’s goals into actions that everyone else plans as well as implements starting from bottom. So in this post, we’ll explore on time, on target business transformation… Enjoy!

Attend Webinars & Workshops – View our upcoming Webinars & Workshops

Why On Time, On Target Business Transformation Matters?

Any business transformation worth doing starts with high-risk objectives. It’s hard enough to identify/set these high-risk objectives with companies, especially those that are habitually accustomed to a risk-averse approach of over-promising and under-delivering. However, the real work begins once the organization decides to transform the leadership’s goals into actions that everyone else plans as well as implements starting from bottom.

The task of keeping hundreds or thousands of initiatives in line is a huge job, and one that few organizations in the world can do effectively. Recent research confirms previous results that show only 30% of transformations are successful and reach the goals that they have set during the planning phase.

The odds are unacceptably high especially when stakes are extremely high. Therefore, we looked at the transformations of 18 organizations that were in difficult conditions. Some were confronting serious operational and financial issues with rapidly declining performance or liquidity issues other were just looking for a significant improvement the performance of their business.

The Key to On Time, On Target Business Transformation

We focused on the lessons learned by these organizations in making their goals a reality. Our analysis was made possible by the Zeroing Agency’s analytics program, which generates precise reports that track the operational and financial effects of specific initiatives.

This analytics program’s data repository provided thorough analysis of aspects that contribute to the success of an initiative, ranging from the way impact targets were set, as well as the speed with which initiatives advanced through various stage reviews, as well as the structure and timelines of the programs these initiatives were a part of. Then, we complemented our findings by conducting in-depth interviews with executives from the organizations that were included in the data collection.

All of the companies were in the tech space (Hardware/Software agnostic). This allowed for greater consistency in the value tracking method and the data structure, allowing us to draw more precise comparisons. However, the companies varied in terms of size and impact of programs. The segments represented included consumer goods, construction, electric power, natural resources, mining (such as oil and gas), as well as fintech. The annual revenues varied between $2 Million and $2 Billion. Total transformation impact was between $1.5 Million and $1 Billion. We did not discover any connection with the scale of the firm and the effect the business transformation program.

Three Keys to On Time, On Target Business Transformation

The thorough examination of these materials provided us with three key insights that could serve as possible guiding principles in the design of a massive transformation program:

1 – Be Persistent. From the beginning companies should be aware that their efforts will yield a lot less than they believe. In addition, the majority of businesses in our study failed to meet their initial goals and required an additional cycle of back-to the well ideas generation. Additionally, they needed to be cautious about how they allocated the time for management, to ensure that smaller initiatives received their due. They accounted for around 50% of the value however, they were able to be lost in the whirlwind of focusing on the largest initiatives.

2 – Focus Matter. Organizations must resist the temptation of spreading their most efficient leaders too thinly. Three initiatives are the most common amount of work a leader had to handle all at once. By involving more members of the company as potential owners of initiatives lets each initiative get the help it requires without burdening just a handful of high performers. The importance of reporting must be considered too. A lot of initiatives with milestones could create unnecessary burdens. many programs attempt to record too many metrics, and typically less than 30 percent are being utilized.

3 – Plan, Implement and Adjust. Most initiatives were at a minimum, if not completely delayed in their implementation. However, organizations can cut down on delays by judiciously planning milestones, augmented by regular actions which initiative managers would be able to be able to report on between milestones.

Use the Pipeline

The transformations we looked at all used a similar pipeline method for tracking projects.

The gates to the pipeline start at zero, also known as “G0 – Ground Zero” with the gathering of the most ideas that are possible regardless of their the feasibility or size. The analysis begins at “L1 – Level One” after the ideas have been identified as being worthwhile to take on. At this point, the leaders of the initiative are able to confirm and improve their initial value propositions using information from other stakeholders as well as further analysis. After a strong business case has been developed and the initiative has been accepted (usually from the finance department?) and is then passed to “L2 – Level Two.” The senior leader who initiated the initiative is then able to define the necessary goals to implement the plan and creates a monthly plan of value creation that will be reflected on the bottom line at the “L3 – Level Three.” A lot of initiatives are at the L3 while they are being implemented but the initiative is not moving to “L4 – Level Four” until all the milestones necessary to realize value have been met. The finance department evaluates the initiative to determine if it is delivering value, usually at the amount that is set for L2, however that amount will usually be modified as the project progresses through the stages. Once the real value of the initiative is evident in the company’s cash flow and is reasonably likely to last, the initiative is then moved to the next stage, “L5 – Level Five.”

Through the entire process the transformation office (TO)–typically led by the Chief Transformation Officer (See our previous article, “Should You Hire a Chief Transformation Officer (CTO)?”) — sets a frantic pace of weekly reviews in order to track the progress of initiatives against their objectives, track the results they have accumulated, and provide assistance when initiatives get into difficulties. The TO’s autonomy and its role in the collection of data allows it to influence the process, especially with intense problem-solving sessions as well as the challenging self-imposed limitations.

We looked at each organization’s experiences through various stages to determine where issues were most likely to occur and how companies dealt with the issues.

Where On Time, On Target Business Transformation Issues Eminate

The first step for any business that wants to change is to discover ways to add value. That includes fighting attrition, finding a productive source, and distributing focus to leadership with diligence.

Fighting Attrition Bias

The most important priority for both business and program executives in the on time, on target business transformation is to be able to reach the impact goal. However, any executive will realize that the initial impact estimates are speculative (crystal ball?) As they are pressured to meet goals for the program which are typically aggressive both in on time and on target, let alone overall value the owners of initiatives naturally tend to underestimate the value of their initiatives (Attrition Bias). But do they believe that? What is the amount that leaders will be required to cover the leakage of the impact throughout the duration in the transformation?

The analysis of the data shows that program managers can expect large attrition bias impact. In the first few stages between L1 and L2, the initial estimate of attrition bias impact drops in a range of around 45 percent. Between L2 and L3, the smaller attrition bias impact estimate decreases by 13 percent. There are further decreases from 28 percent to 28 percent when comparing L3 and the L4 while 9 percent drop between stage L4. The result is that the L1 attrition bias estimates typically drop around 70 percent when they get to L5. Companies will need to have a business transformation plan for the total value of more than three times that of the first goal in order to offset such attrition bias.

Find a Productive Source

The solution may be to come up with new ideas early during the process. At this point, there may not be enough time to reach out to all employees and gather their input. However, CTO’s can still organize broad, disciplined ideation sessions with the team’s frontline leaders and their representatives. In establishing rules that promote participation as well as openness to ideas of all kinds (even the ones that seem “unrealistic”) and creativity, businesses can gain valuable insight from those whose daily work provides them with a unique insight into potential opportunities to enhance the business.

In reality, all of these efforts may not be enough. In one case where an organization was attempting a business transformation initiative, there were just three weeks left prior to deadline when the organization announced publicly that there were teams that were well behind their goals–by hundreds of thousands of dollars and even by hundreds of millions of dollars. Both companies discovered that returning to their respective productive sources for ideas and looking to receive from their staff suggestions helped them improve performance. Each company met its goal and thus gave them a vital motivational boost that made further improvements possible after these lower level goals were reached.

To find these opportunities later in the business transformation process takes greater effort than initial cycle of idea generation. It also generally yields less total return. Our data analysis revealed that in the end of the second month, approximately two-thirds the value of an idea had been identified, which leaves less in the subsequent attempts. However, other areas of potential remain. One approach that many organizations took advantage of information received from the program management tool to determine the amount of impact each initiative was producing. Analyzing the root cause of the initiatives that were cancelled or delayed or did not meet expectations helped reveal important insights that helped to create new value.

Distribute Focus for Leadership

Through opening the idea submission process to a wider portion of the business, exercises to reach productive sources teach another important lesson — That the long-tail of smaller projects are crucial. At one tech firm, for instance an engineer thought of an idea to reduce the maintenance time of servers by more than 90 minutes. After being integrated into the regular maintenance schedule for the entire organization, this concept increased the number of server working hours each year and could be in the millions.

A few of the companies we looked at expanded the idea capture process to businesses and vendors partners too. Small initiatives can make a big difference. We classified initiatives into three categories. Think of the Stephen Covey exercise involving rocks/pebbles/sand and you understand the exercise we conducted. Note, our findings suggests that typically fifty percent of total value of the program typically is derived from the sand! So, focusing solely on the rocks — i.e., the supposed most important initiatives — is a dangerous focus for on time, on target business transformation. In addition, sand initiatives tend to be easier and faster to implement — Their small size means the least amount of approval from multiple organizational layers as well as less cohesiveness (They’re often supervised by the managers and frontline analysts and managers, who have an increased stake in the success of the transformation).

Focus Your Resources

In the face of time being critical, the executives in charge of transformations have to be particularly mindful of the allocation of the necessary time and resources at every level of the company. The fact is that every minute that a manager is occupied with business transformation tasks means that they aren’t producing results for the organization as a whole in their normal capacity. This time taken away from normal tasks can help create more impact in a long-term scenario, but few leaders recognize this “forest through the trees” vision.

Make it Easier for Business Owners

What’s a realistic effort that you can expect from an on time, on target business transformation initiative leader? To gauge the impact of different changes we identified “initiative owner” as “the the most senior individual who is actually responsible for day-to-day job.” On average, we discovered that initiative owners have at best three different initiatives per year. One leader said, “It’s a rare exception that an owner can successfully oversee more than 3 different initiatives. They need to be proficient in delegating tasks to other people and then monitoring their performance.”

Our consultations shows that around 80 percent of all impact is controlled by 20 percent of the initiative’s owners (Yes, the Pareto Optimal is alive and well!) This is because the ownership of high-value projects (such such as large contract negotiations) is within the hands of only a handful of extremely senior or high-potential people.

However, it comes with both expense and risk. A business transformation leader we interviewed stated that his company lost several executives because they couldn’t cope with the demands of managing so many numerous business transformation initiatives at the same time (What would you do?)

In contrast, smaller-value initiatives tend to be more limited in scope and are governed by the managers and analysts in the frontline who do not have the time or resources to take on an extensive set of initiatives. A larger number of individuals does not just relieve the managers of more prominent initiatives, but also aids in building momentum and creates buy-in for the whole program. These benefits usually surpass the negatives of having to manage the involvement of a large amount of participants.

Make Reporting Manageable

The complexity of a business transformation initiative can rapidly surface when it comes to reporting the initiatives’ progress. A good plan for execution of an initiative comprises all the steps needed to complete the project without revealing so detailed information that the goals become a distraction to the people who are responsible for the initiative, with little added value.

The opposite can lead to issues as well. For the one company, “high plan granularity came with a lot of resistance from the owners of initiatives who were irritated and concerned about the duration required to make changes or develop goals,” a business transformation leader shared with us. On the other hand, deadlines that were too dispersed in both effort/energy (and time) hindered the ability of program managers to spot at-risk or delayed deliverables until they were too late for efficient corrective actions. A leader pointed out that some of his company’s execution plans resulted in delay that could have been avoided because the milestones initiative leaders had failed to plan meetings with crucial stakeholders for approvals, compliance reviews or votes for proxy votes.

Our consultations revealed that an equal number of milestones is typically just the right amount of time to provide an early warning of potential issues. However, not too numerous that it impedes the process of implementation.

Make Metrics Relevant

The decision on what metrics to be tracked are generally made in the planning stage of the program, when the leaders determine what is within and out of their scope, and what kinds of expenditure are best targeted for savings (as you can imagine, the list can be pretty exhaustive). The majority of the time though, financial metrics are utilized in transformation programs due to their strategic value and the availability of necessary data — and their ease of monitoring performance against non-financial metrics.

However, even a simple set of metrics could become complex if layers of data are added. Finance departments might require the metrics reflect each accounting line item, leading to a “cutting and dicing” of the information into a variety of sub-metrics. Further variations, like separating between one-time and recurring impact — in addition to separating hard savings from cost-saving — increases the difficulty for business transformation leaders. This is before monitoring and analyzing non-financial indicators of head-count or redeployment of different personnel types.

The data we have collected shows there is a gap in the data where only 30 percent percent of all metrics that organizations claim to use are actually employed throughout the duration that the program. The remainder are an unintentional reason for confusion among the business transformation initiative’s owners trying to determine how to put the money saved from their projects elsewhere.

Therefore, organizations need to strike an appropriate balance between ensuring that the finance department is able to provide a sufficient amount of detail, while making it possible for business transformation initiative leaders to assign impact efficiently. One rule of thumb numerous organizations successfully applied was to remove any metric likely to account for lower that 0.1 percent of the total impact of the program and incorporate in other metrics.

Plan, Implement and Adjust

When the program is in place, the company must be able to respond swiftly and quickly to unexpected challenges. A careful planning process and well-structured review cycles allowed executives who were interviewed to take action when needed to ensure that initiatives and programs stay on the right track. Here are a few best practices when it comes to planning, implementation, and the required adjustments we see all too often (and all too often overlooked by business transformation leaders!):

Plan for Delays

As the value estimate for the initial phase of an initiative is likely to appear optimistic, so is the timeframe promised. Our consultations revealed that roughly 31 percent of initiatives see though to their execution-end date (the date when the stage L3 is over). More often than not, these dates are altered at least one time throughout their lifespan (Around 28 percent of them will have this happen no less than three times while 19 percent will experience it more than three times!)

The effect of timing changes are lessened when they are done at the beginning of a business transformation initiative’s cycle, supported by solid reasoning and acceptance by the TO. However, our consultations revealed that despite the frequency of changes to due dates/times, the majority of initiatives fail to meet their scheduled L3 dates (the date on which it is believed that the plans have been accepted) over a period of a week and nearly half of them fail to meet the L4 deadline (the date on which the execution is completed) by well over one week. In general, initiatives begin L3 two weeks earlier than originally scheduled, and are completed around four weeks following the anticipated completion date.

What can companies do? The length of time initiatives will spend in the initial phase of implementation will be contingent on a variety of variables that include the overall flexibility of the business and the importance of the transformation plan, and the amount of approval needed to take an initiative from one stage into the following. However, helping the business transformation owners achieve their goals is the job of the TO who’s discipline is crucial to ensure that the initiative is running smoothly. The Chief Transformation Officer (CTO) who comes from outside the company can typically be better placed to challenge traditional norms and restrictions — which can hinder the progress of an initiative.

Commit to Weekly Actions

If delays are inevitable, the business transformation initiative’s owners can minimize the negative impact by making sure that each initiative is moving forward each week — No matter if there’s a milestone in the plan or not. By requesting brief updates regarding these activities in the course of regular meetings and offering assistance to owners, business transformation leaders can help them bring up any issues in advance to ensure that they are dealt with the minimum of effort expended.

SUMMARY

As a general rule it is recommended that leaders expect at least 80 percent of the business transformation programs’ initiatives to be reviewed by implementing specific actions every week. Although that might seem like a lot, we have observed that in just five minutes of planning each initiative could be enhanced or sped up each week.

For business transformations with high stakes, this demonstrates the need to balance high expectations against a practical knowledge of what people and companies can accomplish — The genesis of on time, on target business transformation. With a few key restrictions in mind, business transformation leaders can avoid many of the inevitable challenges that arise when trying to make dramatic improvements in a relatively small amount of time. By limiting the wasteful aspects of the business transformation process, it makes the company more likely to achieve (or even surpass) its objectives, and also create an underlying foundation that will allow it to continue improving after the process is completed.

Sam Palazzolo