transformation programs - Blog - Global Risk Community2024-03-29T04:42:18Zhttps://globalriskcommunity.com/profiles/blogs/feed/tag/transformation+programsSuccessful Business Transformation—5 Critical Success Factorshttps://globalriskcommunity.com/profiles/blogs/successful-business-transformation-5-critical-success-factors2021-04-02T08:30:00.000Z2021-04-02T08:30:00.000ZMark Bridgeshttps://globalriskcommunity.com/members/MarkBridges<div><p><span style="font-size:10pt;"><a href="https://flevy.com/browse/flevypro/business-transformation-success-factors-5561"><img class="alignright size-medium wp-image-1846 align-right" src="http://powerpointing-templates.com/wp-content/uploads/2021/03/Stock-Image-2-Business-Transfromation-CSFs-200x300.jpg" alt="Stock Image 2 - Business Transfromation CSFs" width="200" height="300" /></a>Business Transformations have become a necessity in the fast-changing technological and competitive business environment. Transformation is characterized by significant and risk-laden <a href="https://flevy.com/business-toolkit/restructuring">Restructuring</a> of a company, with the objective of accomplishing Operational Excellence and changing its future course.</span></p><p><span style="font-size:10pt;">Business Transformation is a priority for many top executives but it is usually a reaction to challenging circumstances rather than being a preemptive measure.</span></p><p><span style="font-size:10pt;">Business Transformation is prompted by a combination of 2 situations:</span></p><ul><li><span style="font-size:10pt;">Need to address inherent problems causing organizational drag—these problems may be internal and/or external.</span></li><li><span style="font-size:10pt;">Aspiration by the top management and other senior stakeholders to seize the occasion of addressing these problems, in ways that deeply alter the Business Model of the organization including Value Creation.</span></li></ul><p><span style="font-size:10pt;">Business Transformation entails not just making incremental changes but fundamentally changing all or some of the following:</span></p><ul><li><span style="font-size:10pt;">Organizational Structure</span></li><li><span style="font-size:10pt;">Core Product or Service Portfolio</span></li><li><span style="font-size:10pt;">Systems</span></li><li><span style="font-size:10pt;">Processes</span></li><li><span style="font-size:10pt;">People—the way employees work</span></li><li><span style="font-size:10pt;">Technology</span></li></ul><p><span style="font-size:10pt;">Undertaking such arduous effort requires approaching the task in a structured way. Research shows that quite a few of such undertakings are based on anecdotal beliefs instead of being based on empirical data.</span></p><p><span style="font-size:10pt;">Countering this trend, the Boston Consulting Group conducted an empirical study of financial and non-financial data-set comprising 300 U.S. public companies. The data spanned a period of 12 years from 2004 to 2016. Selection was based on the following criteria:</span></p><ul><li><span style="font-size:10pt;">Companies that had a $10 billion or more market capitalization between 2004 and 2016.</span></li><li><span style="font-size:10pt;">Of these, companies with an annualized deterioration in <a href="https://flevy.com/business-toolkit/total-shareholder-value">Total Share-holder Return (TSR)</a> of 10% or more relative to their industry average (2 years running or more) were identified.</span></li></ul><p><span style="font-size:10pt;">Based on extensive analysis—that included use of methodologies like trained proprietary algorithms, prediction models, and Multivariate Regression Analysis—a pattern pertaining to Business Transformation emerged. The pattern depicted the following themes:</span></p><ol><li><span style="font-size:10pt;">Frequency of Failure</span></li><li><span style="font-size:10pt;">Impact of Digital Disruption</span></li><li><span style="font-size:10pt;">Impact of Downturn</span></li><li><span style="font-size:10pt;">Competitive Volatility</span></li></ol><p><span style="font-size:10pt;">The study also suggested the following 5 evidence-based <a href="https://flevy.com/business-toolkit/critical-success-factors">Critical Success Factors (CSFs)</a> for achieving Transformation Success.</span></p><ol><li><span style="font-size:10pt;">Cost Management (drives short-term success)</span></li><li><span style="font-size:10pt;">Revenue Growth (drives long-term success)</span></li><li><span style="font-size:10pt;">Long-term Strategy and R&D Investment</span></li><li><span style="font-size:10pt;">New, External Leadership</span></li><li><span style="font-size:10pt;">Holistic Transformation Programs</span></li></ol><p style="text-align:center;"><span style="font-size:10pt;"><a href="https://flevy.com/browse/flevypro/business-transformation-success-factors-5561"><img class="aligncenter" src="https://flevy.com/blog/wp-content/uploads/2021/03/Slide-deck-image-Business-Transformation-CSFs.png" alt="" width="678" height="561" /></a></span></p><p><span style="font-size:10pt;">Let us examine in a bit more detail some of the CSFs.</span></p><h3><span style="font-size:12pt;"><strong>Cost Management</strong></span></h3><p><span style="font-size:10pt;">In order to launch the Transformation effort on the correct footing, <a href="https://flevy.com/business-toolkit/cost-management">Cost Management</a> is key, in the short term especially. Predictably, empirical analysis suggests that the leading driver for organizations recovering from severe TSR deterioration is a determined Cost-cutting effort during the 1st year of Turnaround. By year 3, Cost Reduction is accountable for the major share of TSR growth as companies divert their portfolios and make available funding for growth investments.</span></p><h3><span style="font-size:12pt;"><strong>Revenue Growth</strong></span></h3><p><span style="font-size:10pt;">Merely short-term operational improvements do not augur well for a sustainable Transformation. There has to be a long-term <a href="https://flevy.com/business-toolkit/growth-strategy-growth">Growth Strategy</a> put in place. For this to happen, leaders have to challenge the foundations of the company’s Business Model.</span></p><p><span style="font-size:10pt;">Research divulges that Revenue Growth progressively becomes the driver for TSR recovery after year 1 in all the successful Transformation efforts. Revenue Growth overshadows, by far, all the initial drivers for TSR recovery by year 5 of all successful Turnaround efforts.</span></p><h3><span style="font-size:12pt;"><strong>Long-term Strategy and R&D Investment</strong></span></h3><p><span style="font-size:10pt;">Turbulent competitive environments, particularly, require long-term Strategic Planning and investment in Research and Development for fruitful Business Transformations. Empirical research and analysis demonstrates:</span></p><ul><li><span style="font-size:10pt;">A 4.8% difference between Transforming companies showing above-average long-term strategic direction compared to companies with a below-average orientation.</span></li><li><span style="font-size:10pt;">More pronounced findings in transforming companies operating in turbulent competitive environments—long-term orientation linked with a TSR increase of 7%.</span></li><li><span style="font-size:10pt;">Companies with above-average R&D investments had upwards of 5.1% TSR impact in contrast to those with below-average spending.</span></li></ul><p><span style="font-size:10pt;">These CSFs strengthen the odds of success in Business Transformation individually. When used together, most of them produce an impact that is larger than the totality of their individual parts.</span></p><p><span style="font-size:10pt;">Interested in learning more about the <a href="https://flevy.com/browse/flevypro/business-transformation-success-factors-5561">5 Critical Success Factors for Successful Business Transformation</a>? You can download <a href="https://flevy.com/browse/flevypro/business-transformation-success-factors-5561">an editable PowerPoint on 5 Critical Success Factors for Successful Business Transformation here </a>on the <a href="https://flevy.com/browse">Flevy documents marketplace</a>.</span></p><h3><span style="font-size:12pt;"><strong>Want to Achieve Excellence in Business Transformation?</strong></span></h3><p><span style="font-size:10pt;">Gain the knowledge and develop the expertise to become an expert in Business Transformation. Our frameworks are based on the thought leadership of leading consulting firms, academics, and recognized subject matter experts. <a href="https://flevy.com/browse/stream/transformation">Click here for full details.</a></span></p><p><span style="font-size:10pt;">"If you don't transform your company, you're stuck." - Ursula Burns, Chairperson and CEO of VEON; former Chairperson and CEO of Xerox</span></p><p><span style="font-size:10pt;">Business Transformation is the process of fundamentally changing the systems, processes, people, and technology across an entire organization, business unit, or corporate function with the intention of achieving significant improvements in Revenue Growth, Cost Reduction, and/or Customer Satisfaction.</span></p><p><span style="font-size:10pt;">Transformation is pervasive across industries, particularly during times of disruption, as we are witnessing now as a result of COVID-19. 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