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The Key to a Winning Transformational Strategy

An employee poses with a 5G antenna in a special measuring room at a Continental AG plant in Regensburg, Germany, Feb. 28, 2020.
An employee poses with a 5G antenna in a special measuring room at a Continental AG plant in Regensburg, Germany, Feb. 28, 2020. Photo: lukas barth-tuttas/Shutterstock

“Nearly every organization - whether private, social, or governmental - is grappling with huge strategic challenges, often with a need to reimagine its very purpose, identity, strategy, business model, and structure,” writes Harvard University emeritus professor Michael Beer in his recently published book, Fit to Compete.  

“Most of these efforts to transform will fail,” he continues. “And in most cases, they miss the mark not because the new strategy is flawed, but because the organization can’t carry it out.”

For over three decades, Mr. Beer and his various collaborators have been analyzing the reasons why so many organizational transformations fail. In general, the common root cause has been the failure to align the organization’s culture and management processes with the strategic directions they’re after. The book argues that two interrelated reasons explain these failures.

First, a transformational strategy that aims to take advantage of new technology and market innovations must involve the whole organization. But, we often forget that such transformations are truly disruptive, not only to the marketplace but also to your own organization. You cannot transform a large complex organization through business-as-usual objectives.

Any major company-wide initiative must have the strong and visible support of the CEO and other top executives in the company. The initiative must be carefully nurtured and protected in its early phases until it’s strong enough to stand on its own. In any organization, there’s a natural competition for resources between new ventures and the existing lines of business. Human nature being what it is, managers in the existing units will often feel that any new investments are best given to them to grow their businesses, rather than invested in a new, unproven area. This is one of the many challenges that leaders of the new initiative must skillfully navigate, otherwise the inevitable cultural and political – that is, human – issues will slow them down and potentially kill the new venture.

Second, the transformative strategy can only succeed if the people affected by these changes feel involved in the process, and encouraged to discover problems and correct them. Change can be a positive experience, but change can also be very difficult, even painful for many people. You’re essentially asking them to embark on a journey toward an unpredictable, uncharted future. What will be the impact on their jobs? Do they have the required skills for whatever is ahead? How will they personally fare in the new environment? A successful transformation can only come about if the organization trusts the intentions and the competence of its leaders.

According to Mr. Beer, honest conversations between top management teams and employees are essential to successfully transform an organization. But these conversations are not easy to bring about, given the general reluctance of people at lower levels from sharing vital information with senior leaders who might feel that their leadership is being criticized. The book identifies several key lessons learned that will help facilitate organization-wide honest conversations:

Move back and forth between advocacy and inquiry.  A major reason for the failure of a transformational strategy occurs because top management developed the strategy without input from influential employees across the organization.  At the same time, asking a large group of people to help define a direction without giving them a clear point of view of where management would like to take the business will also lead to failure.  “Leaders need to advocate, then inquire, then repeat as needed.”

Tackle the issues that matter the most.  Already consumed with managing their existing operations, the organization may see the proposed new strategy as more of a threat or distraction than an opportunity.  It’s thus critical to focus the conversation on the fundamental issues that will determine the company’s survival and long-term success. “Do we have a distinctive business strategy that key managers believe in?  Do we have the capabilities to execute the strategy? Is our leadership effective? Are employees on board with the leadership and its strategy?”

Make sure the conversation is collective and public. Realigning an institution around a new strategic transformation generally requires changing the very culture of the organization. This is very difficult.  Successful institutions tend to have strong cultures that reinforce those elements that make the institution great. But when the environment shifts, it’s hard for the culture to change. The culture then becomes the key impediment to the institution's ability to adapt.  To successfully transform the organization you need the passion of a clear, compelling strategy that captures everyone’s imagination. 

Allow employees to be honest without fear of risking their jobs.  An honest conversation requires banishing organizational silence, that is, suspending the hierarchy temporarily so that a safe and productive conversation can take place about the state of the enterprise and what must be done to move forward.

Be sure to structure the conversation.  “When people hear ‘honest’ they tend to think ‘spontaneous.’ But public conversations in organizations are rarely spontaneous, because the stakes are so high.” To achieve honesty and full engagement, you need to carefully structure the conversation.

Years ago, Mr. Beer and his collaborators developed the Strategic Fitness Process, a methodology designed to structure organization-wide conversations about a company’s directions, and to help it develop and implement the necessary strategy. SFP has been deployed in hundreds of companies around the world across a variety of industries.

SFP is a nine step process, typically implemented over six to eight weeks:

  1. The senior team develops and writes down a short description of the business strategic direction;
  2. The senior team then selects a task force of eight of the best people in the organization and makes sure they understand the business strategy;
  3. The task force interviews 100 people across the organization who are very familiar with the challenges at hand and asks for their frank feedback on the organization’s ability to execute the strategy;
  4. The task force identifies the major themes that emerged in the interviews;
  5. The task force presents their findings to the senior team in a face-to-face meeting;
  6. The senior team develops a plan to address the issues identified by the task force;
  7. The senior team presents its plan to the task force members and receives feedback whether the plan is responsive to their concerns;
  8. The senior team then shares their strategy and findings to the 100 people interviewed and other key people in the organization;
  9. The senior team periodically repeats the process and extends it across the various units and geographies of the whole organization.

Irving Wladawsky-Berger worked at IBM from 1970 to 2007, and has been a strategic adviser to Citigroup, HBO and Mastercard and a visiting professor at Imperial College. He's been affiliated with MIT since 2005, and is a regular contributor to CIO Journal.

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