Top 8 Reasons Why Transformations Fail

 

Top 8 Reasons Why Transformations Fail

Scott Rottmann, Managing Director and Market Lead, MorganFranklin Consulting
Thomas Roland, Managing Director, MorganFranklin Consulting

Corporate America’s definition of transformation has shifted considerably over the past few years. Once the norm, most senior executives now consider full-fledged transformations a waste due to the high associated costs and lengthy timelines. Management is pressed to demonstrate cost takeout in real time and execute on a more tactical scale to realize efficiencies. A more targeted approach is beginning to take hold and unseat traditional views of transformation.

The term “transformation” has demanded the corporate spotlight for years, but it is now being dissected to extract realized benefits versus cost and time to implement. As large-scale “Big T” transformations begin to taper off, less invasive and more strategic “Little T” transformations are quickly gaining popularity. In addition to having lower associated costs, the approach focuses on utilizing existing assets to deliver the highest return on investment. Little T does not call for full system or process overhauls, and the less daunting time frame and more moderate price tag make for an easier business case to endorse. With fluctuating markets and rapid advancements in technology, Little T gives organizations increased control of change efforts and enables rapid course adjustment rather than engrossing businesses in 18-month transformation programs.

Why Do Transformations Fail?

Despite the evolution of corporate transformation, both Big T and Little T still have potential to fail. In fact, corporate transformations have an alarmingly high failure rate of more than 70%,1 and transformation fatigue often sets in as the result of repeated lengthy, mismanaged, or failed efforts. Organizations can ensure transformation success by avoiding eight primary pitfalls.

  1. Lack of executive sponsorship. A clear tone at the top is imperative when trying to see a transformation effort through to completion. Senior management’s buy-in affirms the transformation’s legitimacy and verifies it is not an uncoordinated, ad hoc initiative.
  2. High costs. System redesign and new technology implementation are costly. A detailed business plan will ensure transformation efforts stay within scope and budget. Establishing a clear roadmap will eliminate sticker shock and keep the end goal in sight.
  3. Lengthy timelines. Implementing systems, designing new processes, and training employees require significant time. Prioritizing transformation efforts and setting tangible, short-term goals will keep employees motivated and establish check-ins to evaluate progress.
  4. Intimidating process. Announcing a full-fledged transformation can overwhelm  employees and cloud priorities. Using a precise approach—aligned by process or department—will allow the organization to focus on pain points, avoid transformation fatigue, and realize a faster return on investment.
  5. Lack of agility. The economic and regulatory environment is constantly in flux and impossible to predict. Engrossing an organization in a two-year transformation project may limit its ability to adjust quickly to changes in the market. A more pointed approach to transformation will allow the business to adjust course if needed.
  6. Poor communication. Transformation teams need clear, firm direction around what they are attempting to install, create, consolidate, or eliminate. Otherwise, transformation initiatives can be perceived as offloads from management. Communication is not merely an array of emails, but rather tracking, managing, and communicating progress—and celebrating the small successes.
  7. Unclear goals. A team with an end goal of reducing costs by 10% needs to refine its objective. What is creating the excess cost (or the perception of excess cost)? Cutting headcount by 20% may create short-term savings, but it can also negatively impact the long-term viability of the business.
  8. Misaligned talent. While beneficial to have internal personnel invested in a transformation effort, it is critical to understand the strengths and weaknesses of the project team so external resources can be brought in to supplement. Internal know-how combined with fresh, external perspective will drive the best chance for transformation success.

Ingredients for Success

In addition to understanding why transformations fail, it is important to address two key factors that lead to success: buy-in from influencers and defined project scope. Transformations big and small require investment, and an influencer is needed to build the foundation of a business case. The most common influencers of transformation include external forces (regulations that force businesses to adapt to new processes in order to be compliant), self-instigated drivers (companies focused on transforming into industry leaders), and survival-focused drivers (companies transforming for the sake of survival or to increase competitive presence).

After the influencer launches the business case, scope must be determined. Is Big T necessary? Does the transformation require an overhaul of systems and processes following a merger or bankruptcy, or can the company’s goals be achieved by adhering to a more strategic and pointed transformation approach? Without management buy-in and a strong tone at the top, transformation efforts—no matter how big or small—will struggle to be accepted and promoted by the organization at large. This enterprise-wide buy-in is arguably the most important ingredient for success.

A Changing Process

Once deemed an all-encompassing effort, transformation itself is changing with Little T’s more strategic and agile approach. While the deployment of Big T is sometimes unavoidable when facing significant corporate events, Little T is emerging as an affordable and efficient way to enable change. As today’s marketplace evolves and more technology is centered in the cloud and easily integrated, Little T will continue to redefine change in corporate America.

1 A New Standard for Transforming Finance, CEB Finance Leadership Council, December 5, 2013, http://bit.ly/1pH2K4y
2 Findings from a 2013 study conducted by MorganFranklin Consulting and FierceCFO