BCG Guide to Transformation - Simplified
CEO can be an external recruit or an internal recruit. But people expect changes in the organization. At the same time, they have self respect and feel proud of what they have done till that day under the guidance of the outgoing CEO. How should the new CEO go about his job?
In a guide to transformation, BCG defines a transformation as a profound change in a company’s strategy, business model, organization, culture, people, or processes. A transformation is a sustainable, quantum improvement in performance, altering the trajectory of its future.
Stakeholders expect changes to occur when a new CEO is hired.
An insider CEO may not be able to change things quickly, yet through demonstration of quick and decisive actions—even before taking the top job—new internal CEO can seize the opportunity and put their company on the right trajectory for success.
The guide breaks the new CEO action-transformation process into four steps: the 100 days before officially starting, the first weeks on the job, the first 100 days, and the first 18 months.
Three important steps in the action-transformation process
Finding the Resources for the Journey. Launch short-term, no-regret moves to establish momentum and to free up resources to fuel new growth engines.
Winning in the Medium Term. Modify business model and operating model to increase competitive advantage.
Building the Right Senior Management Team, Organization, and Culture. Develop a transformed business model and operating model to set up the organization for sustainable high performance.
Incoming leaders should talk with as many critical stakeholders as possible, both inside and outside the organization, in order to educate themselves about the company:
Employees, to determine if there is a consensus regarding the changes that are needed; ideally, leaders should speak with 30 to 50 employees from across all units and at all levels
Customers, to get opinions of the company’s products and services in addressing their needs
Industry and functional experts, to understand the company and the complexities or disruptions in the market
During these conversations, a new CEO should primarily listen, encourage open and honest discussion, and make sure that all possible dynamic factors and all possible solutions are being brought to the forefront. Through this dialogue process, the CEO must start to diagnose problems and create hypotheses regarding which aspects of the company require improvement. This step will determine immediate areas to focus on and indicate transformation opportunities in specific functions, markets, or divisions.
New CEOs need to start identifying rapid, no-regret moves—initiatives that are relatively easy to implement in the first 100 days and that can generate results in 3 to 12 months. These no-regret initiatives should close performance gaps in a few critical areas, reduce costs, improve top- and bottom-line performance, and free up resources in order to fuel longer-term initiatives.
During The First Weeks: Energize the Organization
New CEOs must make efforts to energize the organization and build momentum for the collective transformation ambition.
The CEO should acknowledge the company’s heritage and the hard work of employees, and at the same discuss external factors (such as the customer base, competitors, and capital markets), internal metrics (for example, operational and organizational performance and employee engagement), and the necessary measures the company needs to take in response.The case for change can be made to internal stakeholders in various venues, such as workshops and town hall meetings through a questioning process as attempted in sales dialogues.
The First 100 Days: Prepare and Launch the Transformation
The new CEO kicks off the rapid, no-regret moves that will deliver impact within 3 to 12 months, creating and enabling initiative teams, setting up the overall governance.
Leaders must put the foundation for transformation in place during this time, balancing development of a long-term vision with day-to-day reality. As the transformation plan takes shape and the case for change becomes clear, the CEO must shift gears from planning the transformation to actually leading it.
The no-regret initiatives build momentum for the larger effort, win over internal skeptics who may doubt that change is actually happening, generate credibility for the new leadership team, and often free up resources that can be used to fund subsequent measures. As a result, these initial initiatives when successful further help energize the organization.
The four primary levers for releasing resources for supporting the new initiatives of the journey are revenue, organizational simplicity (delayering), capital efficiency, and cost reduction.
Leaders should not abandon the initial initiatves prematurely declaring victory and moving on to other priorities. It is critical to maintain focus and ensure that initiative teams are on track to achieve results. Project tracking has to be in place and everybody must have full transparency into the progress of each initiative. Regular review sessions, facilitated by the program management office (PMO), should provide sufficient information for leaders to know whether—and how—they need to intervene to sustain the progress of new initiatives.
Winning in the medium term requires initiative like driving growth, modifying business model, revamping commercial processes or operations.
The medium term initiatives are usually more difficult to conceptualize. They require breakthrough thinking, usually in areas that are less familiar for the current organization members. These initiatives are also harder to staff and implement, and they call for involvement across functions and business units. But this is essential for the CEO to establish the credibility of coming out with totally new models and processes.
Setting the New Strategy and Operating Model. Aong with driving short-term and medium-term initiatives, the CEO has involve the senior management team to look at their overall strategy and operating model. A targeted workshop-based approach with the senior leadership team—and the appropriate data and analysis—can lead to a strong outcome and do so in a highly efficient manner and it does not distract the leadership team from executing the current operations and initiatives. This approach ensures that there is buy-in from the top team and that the strategy change paths are identified. At an appropriate time more involved strategy creating exercise can be initiated.
Building Sustainable Performance. Many organizations that deliver results during the first year have a tough time sustaining their hard-won performance improvements. The goal of every new CEO should be to achieve success during the first 18 months of the transformation program and then maintain it well beyond that point. It is imperative for a CEO to own this phase and closely involve the chief human-resources officer and other influential leaders across the company to communicate to the people inside.
Changes to the Organization
There are five important aspects to developing the right people and organization required to support a successful, sustainable transformation:
Ensure the commitment of the executive team and enhance their capabilities, including their ability to set the right priorities, mobilize and energize initiative teams, and hold themselves accountable for the results.
Deploy change-management tools and processes (such as an activist PMO, roadmaps, and rigor testing) to engage stakeholders and deliver results. (For more on rigor testing, see “The Hard Side of Change Management,” Harvard Business Review, October 2005.)
Install an HR team that participates as a transformation partner, anticipating talent and leadership needs, rather than as a mere service provider.
Build a talent pipeline that can help fill crucial roles, and develop capabilities in areas critical for the transformation.
Simplify the organization and culture to sustain high performance in conjunction with the new strategy.