Change or Transformation?

“Why Transformation Efforts Fail” was the title of John Kotter’s classic article written 10 years ago. Although his proposals for how to enhance the odds of success have been widely taken on-board, the success rate of major corporate change programs remains essentially unchanged — it still resides around 30%.

Given the amount of literature published on the subject, the amount of research business schools have undertaken to understand change management, and the investment companies have made in training and consultancy, one would assume that we would be better than the 30% success rate.

Based on experience, my feeling is that there is an underlying problem, stemming from confusion between what we define “change” versus “transformation.” Many managers do not realise that they are not the same.

Change management is the implementation of finite initiatives, which may or may not span across the organization. The onus is on delivering a well-defined shift in the way things are under taken.

As an example, when a large telco firm integrated specialised engineers into its regional sales teams, there were shifts in goal setting, client coverage, roles, compensation and teamwork. The change impacted hundreds of people. By applying change management tools and principles — such as building the business case, aligning a coalition of leaders, achieving early results, engaging stakeholders, delivering with discipline, etc. — the new approach was implemented successfully.

I could reference similar case studies of other companies successfully executing discrete change initiatives, such as introducing a new performance management system and utilising new personal productivity tools. The point is that all of these initiatives were well defined. The change management work focused on execution.

Transformation is a different beast altogether. Unlike change management, it does not focus on a small number of discrete, defined shifts, but more on a portfolio of initiatives, which have interdependencies. More importantly, the headline goal of a transformation is to not to jus deliver a defined change, but to reinvent the organisation and create a new or revised business model based on a vision for the future. It is much more experimental, unpredictable and iterative. It entails much greater risk. Also, even if executed change management leads to the delivery of specific initiatives within the transformation, the overall transformation could still fail.

Recently I met with the management team of a large IT company that had been successful due to one unique product constituting 85% of its total sales. When competitors started creating a less expensive version of the product, it was clear that they would not survive as a single product firm. This resulted in the CEO embarking on a transformation strategy with the goal of creating a more sustainable business model. It included a number of key “need-to-have” initiatives: create more immediate revenue from the current product, shift from an internal focused to external partnered product development process, build a leaner support organisation and ramp up the search for mergers and acquisitions. The transformation also required a new set of cultural principles and a revised performance management methodology aligned to these initiatives.

Whilst all of these initiatives needed change management disciplines, leaders also were required to learn a broader set of transformational leadership competencies, including more dynamic and flexible coordination of resource, greater collaboration across boundaries, and communication in the midst of uncertainty. As so many people were involved in the changes alongside their day jobs, managers also had to determine how to prioritise and halt lower value activities. By doing this, the majority of the top managers were treading through completely uncharted territory.  Whilst they knew that the objective was to make the organisation become very different, nobody really knew what the final result would be. Therefore, the transformation as well as a process of execution it was also one of discovery and experimentation. A successful result was not a given no matter how effective the change management skills were.

Overall, we can take heart in the fact that research shows businesses, in the main, know how to execute discrete changes reasonably well. However, what businesses need to improve upon is the art of engineering the perfect transformation. To be able to initially start to do this better, we need to start by being clearer about what it is we are trying to achieve – a transformation or a change project.