4 focus areas for successful change
In the last part of our series on the topic of transformation, we described the prerequisites for successful transformation and how to use opportunities in one's own situation. Read now in part 2 how transformation can succeed.
Many companies are currently facing great and urgent demands for sustainable change. Acute are needs for restructuring or reorganization as a result of the sales shock caused by the COVID-19 crisis. Costs have to be reduced in order to secure liquidity, but at the same time the long-term outlook of the company must not be jeopardized.
The digital transformation has received a massive push because of the crisis, as overdue innovations and encrusted processes have become overly obvious in the sudden move to the home offices.
These transformations are comprehensive and long-term. If they are to succeed, it is important to think holistically. Individual changes, which take place in isolation in individual areas, will fizzle out in the long run if they are not followed by consistent changes in other areas.
In the following, I would like to come up with a system that represents the essential areas in which transformation has to be designed. This does not necessarily have to happen simultaneously and with the same intensity - but each area should be examined to find needs for change, and these needs should be made transparent.
Particularly because of digitization, value chains in many industries are breaking up further and power-balances are shifting. We have digital channels available to bypass big parts of the value chain and address respective influence end consumers and other players directly. New markets are emerging that are putting massive pressure on existing businesses. Alliances and partnerships are being rethought and the search space for innovation is being opened wide. The transformation of the business model is the most demanding of all transformations, with consequences for all the other mentioned focus areas.
Another type of transformation relates to the change in strategic positioning. The existing business model may still be the right one, but the strategic positioning in key markets and the product and service portfolio are not sustainable. A review of the positioning of products along their life cycles, combined with trends and potential substitution effects, makes it clear whether we are strategically well positioned or not for the world after the transformation.
The transformation of the business model or strategic positioning must be consistently reflected in the structures and processes. A new strategy is developed relatively quickly, and changes in organizational structures take a long time. In addition, dynamic markets usually bring a certain complexity to structures and processes, which simultaneously require compromises. At the same time, we need organizational structures and processes that will bring the strategy to a successful implementation in the best possible way. The organizational structure is nothing more than the necessary vehicle for implementing the strategy.
However, the best structure does not give us any indication of how well a company actually works. It is the processes that ensure an organization's ability to act, as they run horizontally through the structures.
Transformations that primarily focus on structural and process changes are demanding and unfortunately always contain some “pain” for the organization as a whole and for many employees.
Culture and the behavior of people cannot be changed directly. They are strong realities with historical reasons and should be considered without judging good or bad in the first step. However, credible and comprehensive conditions can be created in which an intended culture can evolve over time. In larger, internationally acting organizations, we no longer speak of only one culture, but of several cultural zones with different cultural characteristics.
The perceived consistency of business model, strategy, structures and processes is one of the success factors for intended cultural development. If the digital maturity level of an organization is to increase overall, correspondingly supportive conditions have to be created. Strategic initiatives for new digital products and services, digital partner and customer management, corresponding structures and digitalized processes, collaboration tools for efficient digital collaboration or intelligent procedures for the analysis and interpretation of large amounts of data for strategic and operative control are examples of what might help.
Cultural transformation is successful if it is supported by a critical mass of the organization, if the intended target culture is desirable and if it is consistent with the strategy and structure. Cultural transformation will not work out if we do not take the people in our companies with us from the starting point where they are today and ignore e.g. the digital maturity of individual cultural zones. It will also remain ineffective if the management style continues to follow the old patterns.
During the transformation, we enter unknown territories - this causes disorientation for many people involved. In such phases, leadership is of great importance for the success of the transformation. In addition to the classic optimizing function of management, beyond steering and controlling, further skills are required: The manager has a coaching function in the sense of team leadership, he must be able to give a convincing answer to the "why" together with the employees. Managers do not have to be more intelligent than their employees. They rather have the task to establish the network between the right people and to moderate the intelligence of the others.
Leadership is the most underestimated area for transformation. More complex structures and processes demand for agility and increasing networking density in our companies make good leadership more difficult. Trust in the abilities and judgement of those involved, self-organisation and personal responsibility are becoming more important. Right and good management & leadership in transformation projects is more complex and important today than ever before. Good leadership provides orientation and capacity for action for the people affected by the change.
In Part 3 of the Transformation series, which will soon be published, we would like to propose the key success factors that are particularly relevant in transforming the above-mentioned design areas.
Yours, Ronald Herse