Framework 147 McKinsey's 'What' and 'How to' in Transformation
Introduction
Organisations
"...Must avoid routine thinking and behaviour and embrace wholesale transformation to ensure they remain at the top of their game......Routine leads to complacency......complacency can be deadly..."
Michael Bucy et al as quoted by Editor, 2022
What has been successful in the past is no guarantee for success in the future.
The aim is to transform to
"...Boost growth, productivity, cost efficiency, operational effectiveness, customer satisfaction and sales excellence..."
Editor, 2022
If your organisation is in financial stress, the focus is on immediate and radical cost reduction and/or revenue increase to survive.
However, many organisations are in relatively healthy financial situation and keen to realise their full potential and/or respond to an external challenge or opportunity.
Most successful transformation revolves around the holistic approach to how the business operates, ie
"...tackling all factors that create value for an organisation, including top line, bottom line, capital expenditure, and working capital..."
Michael Bucy et al, 2016
However, many executives tend to focus too much on individual initiatives, rather than on how the whole business must change.
The 'how' is broken into 2 parts
i) change management
ii) performance infra structure
1. Change Management (5 step guide to transforming your business)
i) identify your organisation's potential (4 ways to handle
a) refuse to compromise (don't under promise and over-deliver
"...targets of 2 to 3 times a company's estimates are achievable in the majority of cases..."
Michael Bucy et al as quoted by Editor, 2022)
b) demand the facts (use facts to get a clear picture of your organisation's potential)
c) take a step back (look at your organisation objectively, ie like a new investor)
d) think big (don't be cautious; take a giant leap rather than a series of small steps)
ii) build a team (as new targets require a new way of working, establish a new team based on
a) divide but rule (establish workgroups dedicated to particular tasks; have tight deadlines; quick decision-making to maintain momentum)
b) follow the snake (record every stage of the team's progress)
c) review your progress (have weekly meetings to report on progress and set tasks for the next week; at these reviews, every level of management should be represented; need to hold people accountable, ie
"...enforce 'closed loop' accountability and accelerate implementation by preventing 'pocket vetoes', other delaying tactics, and slippage.........This discipline is not a comfortable, consensus-led approach; the Chief Transformation Officer (CTO) should be willing to be confrontational when managers don't meet their commitments..." Michael Bucy et al, 2016
Focus should be on reducing costs, revenue generation, refining plans, evaluating and managing competing priorities, quick decision-making, developing new talent by identifying people who can best contribute to a certain initiative, etc.
If required meetings can be held more frequently than weekly; focus on execution and operational daily decision-making; value analysis to ensure and quantify bottom-line impact, etc)
iii) appoint a leader (appoint a full-time CTO with the responsibility for managing the process, ie ensuring everybody remains focused; CTO reports directly to the CEO, ie CTO is an extension of the CEO; sometimes it is best to employ a CTO from outside the organisation ss he/she will have new perspectives, etc and less concern about internal politics.
"...The CTO could bring a perspective focused on what is possible, combining objective view of best-in-class performance and the company's current capabilities with a realistic plan spurring disparate groups to act in a coordinated manner..."
Michael Bucy et al, 2016)
iv) think differently (focus on whole organisation impact and less on individual departments; empower individuals and unite them with a common goal.
"... McKinsey has devised a method of creating such an environment that involves telling a compelling change story, ensuring that members of the senior team have bought into a new mindset and are willing to act as role models, creating mechanisms to reinforce the new mindset and providing your staff with tools to change their ways of thinking. To begin with, focus on your change story and reinforcement mechanisms..."
Editor, 2022
a) change story (to get staff buy-in, you will need to sell the right story, ie why change is necessary
"... Simply stating that the company is not hitting its financial targets will not inspire your staff; you must appeal to their emotions to convince them that they are all vital characters in the grand narrative of change that will benefit not just senior management but every employee..."
Editor, 2022)
b) reinforcement mechanism (use incentives (both financial and non-financial rewards) to encourage staff to buy into the change)
v) don't stop (as many transformations lose momentum, you need to continually reinforce new ways of doing things and discourage old ways/routines; some ways to do this include
"...Every member of staff should feel they have a stake in the company; responsibility should lie with and not solely with management; and management should constantly look for ways to motivate the team members..."
Editor, 2022)
NB Transformation will only work
"... If you are willing to raise ambitions, challenge outdated mindsets, investing in your staff and commit to fully sustainable change..."
Editor, 2022)
2. Performance Infrastructure (strategy, structure, business practices, etc)
"...It serves as the central nervous system for a transformation effort..."
Michael Bucy et al, 2016
Need to use performance infrastructure as a basis to determine 'how to do' transformation. At times this can be more important than 'what to do'.
The performance infrastructure is
"...made up of people, processes and tools that enable successful execution and sustainability of results..."
Michael Bucy et al, 2016
Need to have a robust tracking and reporting system to monitor performance, ie
"...organisational-health assessments, benchmarks, value-capture models, and visual management and planning aids......these tools should make it easy to spot delays, observe trends, monitor impacts, and create rich yet user-friendly reports..."
Michael Bucy et al, 2016
The diagram below embraces both are 'what' and 'how' of transformation.
(source: Michael Bucy et al, 2016)