Navigating corporate transformation in a rapidly changing world
In this guest article, Jean-Philippe Grosmaitre, Partner at L.E.K. Consulting, discusses how businesses can implement better digital innovation strategies.
There is no escaping the fact that we have entered a new, more volatile, business environment in recent years. In times of uncertainty, businesses want to be as adaptable as they can be, and so conversations around corporate transformation have recently gained momentum. There is now significant pressure on senior executives to earn their keep by delivering better strategic planning. The difficulty is that this involves addressing multiple, complex risk factors in their new business strategies: a volatile labour market, heightened geopolitical tensions, and a collective push for long-term sustainable development.
All of these risk factors pose major challenges, some of which even national governments appear ill-equipped to deal with. As business leaders balance short- and long-term priorities and visions, they need to understand how to define and articulate their change management strategy in a way that brings those that they are leading with them.
Change is coming, whether you like it or not
It is important to differentiate between forced change and proactive change. Forced change is usually due to external, and often unforeseeable, factors. The Covid-19 pandemic is the perfect example of this, corporate leaders had no choice in the matter and had to adapt and galvanise their workforce in order to survive.
Voluntary change is, by its nature, more scripted and progressive and comes with a strategic vision that anticipates the course of events over a set period of time. This is the framework within which we normally think of corporate transformation. The challenge for business leaders, however, is that the saliency of typical methods of planning and executing corporate transformation has come under pressure from the upheaval taking place all around us.
Multi-year plans can quickly become irrelevant when market conditions, geopolitical risk factors, and supply chains are changing as often as they are. Nonetheless, being able to effect change has never been so important, given the potential cost of inaction. When it comes to driving corporate transformation in today’s environment, the trick is knowing how to drive real results in an appropriate timeframe that responds to short- and longer-term trends.
The challenges of large corporate transformations
People like to talk about and affect change because it is exciting, but it can also be exhausting. Whether it is in response to digitalisation, inflation, or simply the vision of a new leadership team, having to retool, reorganise, and evolve systems and processes is a major undertaking.
Change fatigue can easily creep in during large corporate transformations, especially when external factors, the strategic direction, or leadership changes and the priorities, instructions, and responsibilities become unclear. The confusion and malaise caused can easily undermine engagement in the overall project, and many transformation efforts have fallen by the wayside as a result of such fatigue. In order to avoid or break free of this inertia, any transformation strategy has to clearly speak to the interests of all the different stakeholders involved and show how their commitment will pay dividends for them in the end.
Because of this need for a strong strategic vision, leadership and governance will play a decisive role in success or failure. Executives and boards both have to play their roles in this; with the former making more difficult and riskier choices – given the volatile circumstances in which this change is taking place – and the latter ensuring that executives are held to account for creating real value.
In summary, as the business world evolves, the importance of management’s role in shaping clear and forward-looking strategies has never been greater. Corporate transformation should be well-grounded in sound reasoning and practical evaluation of available resources. By taking these insights to heart, organisations can navigate their way towards new sustainable corporate models. Embracing agility and precision as their guiding principles, they can ultimately achieve lasting value.
One thing that is really important is that business leaders understand and embrace the value of agility. Recently, there has been a marked difference between the success of agile transformation strategies versus those that are more rigid, to the point that we now see companies sacrificing a couple of basis points on the results in favour of allowing increased agility.
Agility is important because many of the factors forcing businesses to undergo transformation – whether digitalisation, the onshoring or reshoring of critical supply chains, or demographic shifts that are squeezing labour markets and productivity – require bold and wholesale change. The consequences of not being able to respond to such changes can be stark, and so being agile enough to harness innovation, create value, and lower costs is going to be critical to ongoing success and even viability as a business.
Time to make a change
Whether the change is forced, voluntary, or a mixture of the two, business leaders have to ensure that they have a clear and mobilising vision that motivates the change agents within their organisation and is delivered through an agile strategy. Innovation and technical progress can and will help us to overcome many of the disruptive forces upending current business practices and models, business leaders have to be open and able to adopt that innovation without derailing their transformation programmes if they are to be successful.