Transformation is perhaps one of the most overused and misunderstood words in the world of business today. These days, almost every change is called a transformation, but this creates the wrong behaviours and could be one of the reasons that 70-80% of transformations fail.
The irony is that transformations have never been so important to businesses. In a rapidly changing world of consumer trends, technology acceleration and disruption, geo-political shifts and now the huge impact of Covid-19, transformation success may be the difference between a business surviving or collapsing into the scrapheap of history.
How should you define a transformation?
So, what is a transformation then? Is it a digital transformation? A cost take out transformation? A new market transformation? The answer is that it could be all or none of these, depending on the objectives, size and characteristics.
Because it is such an abused and vague term that does not have a strong definition in the industry, we have attempted to define it:
“A transformation is a large change programme initiated due to a dissatisfaction with current business results, that cannot be rectified through “business as usual”, with a positive material impact on Enterprise Value.”Arif Harbott and Cuan Mulligan 2020
This is a functional but complicated definition… so let’s break it down:
Test 1: Large-scale change programme
A transformation is a “big change”. It is a large-scale change programme that makes a significant impact on your organization. If you have a small project or programme, we would not consider that a transformation.
A transformation is a separate and temporary structure with a clearly defined objective that exists only for a finite amount of time. It has its own team, governance, budget and objective.
At the end of a programme, the team and the projects are closed down and the programme ceases to exist. It is not a permanent part of your organization.
Test 2: Dissatisfaction with current business results
You are far more likely to make tough decisions and get executive board focus when there is a significant business imperative to succeed, i.e. your current business performance is not where you want it to be and needs to transform.
For example, your profits might be too low, your costs too high or your industry may be being disrupted and you are being left behind.
Dissatisfaction with results is your burning platform to generate urgency and momentum to get the change programme delivered. Most companies are results-focused and they are much more likely to take action when it is their results that are hurting.
Test 3: Cannot be rectified through business as usual
A transformation is a risky endeavour and it requires a lot of capacity and resources. If you can achieve your desired results through less risky, business-as-usual operations, i.e. achieved within your existing business teams, then you are not running a transformation.
For example, if your objective is to increase sales by 1%, then this should be achievable through the normal course of business. Your existing sales teams should be able to meet this target without requiring large-scale change or additional resources.
However, if your objective is to increase sales by 100%, then it’s unlikely that your current operational teams would be able to achieve that without a transformational change programme.
Test 4: Positive material impact on Enterprise Value
After you achieve your Transformation Outcome, the value of your business should be disproportionately higher than the investment cost. This means that if you spent $10m on your transformation then the value of your business should have increased by $50m.
This seems obvious but is often overlooked. There is a lot of risk in implementing a transformation, therefore, it needs to be offset by a large reward, in terms of increasing your business value.
To learn more about how to run and lead successful transformations go to https://www.herotransformation.com/