It’s been almost 10 years since Harvard Business Review published John Kotter’s classic article, “Why Transformation Efforts Fail.” Although his suggestions for improving the odds have been widely accepted, the success rate of major corporate change programs remains essentially the same—at 30 percent.
Given the amount of research that business schools have dedicated to understanding change management, the amount of literature on the subject and companies’ investment in consultants and training, one would think that we would be doing better by now.
Based on consulting experience with dozens of companies over many years, I believe there is still confusion over what constitutes “change” versus “transformation.” Many managers don’t realize that the two are not the same.
Change management means implementing finite initiatives, which may or may not cut across the organization. The focus is on executing a well-defined shift in the way things work. Transformation doesn’t focus on a few discrete, well-defined shifts, but rather on a portfolio of initiatives that are interdependent or intersecting.
The goal of transformation is to reinvent the organization and discover a new or revised business model based on a vision for the future. It’s much more unpredictable, iterative and experimental. It entails much higher risk.
I recently met with the senior leadership team of a large technology company that had been successful because one unique product constituted 90 percent of its sales.When competitors started developing a less expensive version of the product, it became clear that the company could not survive as a one-product firm. So the CEO launched a transformation strategy with the goal of figuring a more sustainable business model.
It included a number of major “must-do” initiatives, including shifting from internally focused to externally partnered product development and ramping up the search for acquisitions and adjacencies.
The transformation also called for a new set of cultural principles and a revised performance management approach aligned with these initiatives. Leaders had to learn a broader set of transformational leadership capabilities, such as more flexible and dynamic coordination of resources, stronger collaboration across boundaries and communication in the midst of uncertainty.
Nobody knew for sure what the final outcome would be. In other words, the transformation was as much a process of discovery and experimentation as it was of execution. Success wasn’t guaranteed, no matter how effective the change management skills.
We know how to execute discrete changes. What we know much less about is how to engineer a transformation. If we want to get better, let’s at least start by being more clear about which is which.
Ron Ashkenas is a managing partner of Schaffer Consulting. His latest book is Simply Effective.
Ron Ashkenas