BCG: New CEO’s Guide to Transformation

By | May 7, 2016

The title of the BCG report sounds serious, but its a bit of a gem – easy to read and understand.  Download here (1Mb pdf). Boils down to three points:

  1. Successful CEOs need to plan the transformation before they start work
  2. Transformation is expensive, need to fund the journey with cost takeout
  3. There are 10 types of transformations; see below

1. Hit the ground running. New CEOs are often brought in at critical junctures in a company’s life.  At these inflection points, there is heightened expectation that something BIG will happen – more than incremental improvement, and definitely more than just prudent management. New CEOs are under the gun to make change happen.

BCG argues that there is a “short window of opportunity” to get things going, and there is a greater danger of CEOs doing too little, too late:

“Stakeholders expect changes to occur when a new CEO is hired. In fact, a principal risk for new CEOs is that they may resist taking action too quickly—or hesitate to make changes that go deep enough.”

CEOs need to establish their ambition for change 100 days BEFORE starting the job. It’s not enough to be strategic and thoughtful after you get there. No, you have to develop your point of view months before you get your employee badge. The subsequent steps of rallying the troops, getting some quick-wins, and holding people accountable are both useful, and a bit unsurprising.

Consultantsmind - BCG Transformation Change

2. Fund the Journey. Another way to think about transformation (or any topic) is the short-medium-long term. For me, the most dramatic point is the first one. You need to fund the journey by taking short-term, “no-regret moves” to simplify the organization, reduce costs, and increase ROA. This frees up money and attention for the heavy lift of transformation.  Layoffs, cost reduction, or sale of non-performing assets are often long overdue. “Yeah, we knew that would happen eventually” is a common refrain.

Consultantsmind - BCG Transformation Framework

BCG cost takeout list. They show 12 ways to take out cost, free up resources, and fund the journey. Note that many of these are complementary or have overlap;  organizational simplification can be tied to outsourcing, or personnel costs.

Consultantsmind - Levers to Fund the Journey

3. Ten types of transformation. Transformation is an over-used word. You hear it from clients and in the popular business press to vaguely describe anything long-term and difficult to do. It’s over-used. BCG describes it this way:

“We define a transformation as a profound change in a company’s strategy, business model, organization, culture, people, or processes. A transformation is not an incremental change but a fundamental reboot that enables a business to achieve a sustainable, quantum improvement in performance, altering the trajectory of its future.”

Here are the 10 buckets which BCG groups the different types of transformation:

Consultantsmind - Type of Transformation[Consultantsmind opinion] From my experience with enterprise-sized initiatives, communications is the key. Getting managers on-board, scripting out the messages, and driving a continuous drum-beat of success cannot be overstated.  These initiatives can last 3-4 years and people can understandably get confused, exhausted, and bored. I would argue that these “transformations” should be treated like a multi-year political campaign where the candidates go from place to place garnering votes, honing their messages, and staging rallies to drive enthusiasm, buy-in, and advocacy.

BCG summarizes the point like this on page 6 of the report here (1Mb pdf):

“The message for incoming leaders is clear: You need to take action immediately. By laying the groundwork in advance, you can be prepared to lead from the front with a clear vision, solid objectives, and the tools and processes to succeed.”

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