Over the past decade, more than 100 companies have tried to implement business transformation to remake themselves into significantly better competitors, including both small and large organisations, international companies, organisations on their knees, and those that were earning good money like General Motors, Ford, Bristol-Myers Squibb, and Eastern Airlines; as well as British Airways and Landmark Communications.

These efforts have gone under many banners—total quality management, reengineering, right-sizing, restructuring, cultural change, and turnaround—but in almost every case the goal has been to make fundamental changes in how business is conducted in order to help cope with a new, more challenging market environment.

Most corporate change initiatives have been only moderately successful. A few have been utter failures. The lessons that can be drawn are interesting and will probably be relevant to future business environments.

No matter the organisation, transitioning from a traditional to a more modern management structure requires several phases. Typically, each phase takes an extended period of time and skipping steps creates only the illusion of speed and never produces a satisfying result. A second very general lesson is that critical mistakes in any of the phases can have a devastating impact, slowing momentum and negating hard-won gains. Perhaps because we have relatively little experience in renewing organisations, even very capable people often make at least one big error.

Never Forget to Instill Some Sense of Urgency Into your Work

Beginning most significant change efforts requires some individuals to look critically at a company’s competitive position, market trends, and technological advances. These individuals focus on the impending expiration of a crucial patent; leaner margins on one core product; or an emerging market that seems to be ignored by competitors. They find ways to communicate this information dramatically and broadly in order to motivate others to get involved with their program. This first step is essential because many people must cooperate with the effort in order for it to get off the ground.

Although it can be hard to generate the momentum for change in phase one, many companies struggle with this stage. What are the reasons for failure? In some cases, executives underestimate how hard it can be to drive people out of their comfort zones. In other cases, they overestimate how successful they have already been in increasing urgency. Some executives lack patience: “Let’s not waste time with preliminaries; let’s move on to other steps.”

Many executives become paralysed by the downside possibilities. They worry that employees with seniority will become defensive, that morale will drop, that a crisis will spin out of control, and that they will get blamed for creating a crisis. And when senior management lacks vision and fails to provide clear direction, the entire company can be adversely affected.

Phase one of a transformation process often goes nowhere unless managers and executives who are willing to lead are promoted or hired into top positions. Business transformations typically begin when a new leader is appointed who can see the need for change and has the ability to communicate that need effectively to others. If the change is needed throughout the entire organisation, it is imperative for the transformation to be led by a CEO who is committed to that change. If change is needed within a specific division or department, it is essential for the general manager of that division or department to be committed as well.

A company’s financial performance can offer clues about the need for change. Losing money, for example, is an obvious sign of trouble. A lack of profits or revenue growth can mean that a firm is losing market share or that its products are becoming dated or obsolete. And in the most successful scenarios for management teams are either to hire an outsider to bring bad news they are reluctant to hear or gather facts themselves and then constructively discuss them with employees.

Regardless of a company’s financial situation, there is always room for improvement by making some changes in how the company does business. Wall Street analysts, customers, and consultants can all be helpful in this regard. The CEO of a large European company described the purpose of this activity as being “to make the status quo seem more dangerous than launching into the unknown.”

Many organisations have faced the challenge of creating a need for change among employees and customers. One CEO deliberately engineered the largest accounting loss in the company’s history, creating huge pressures from Wall Street in the process. One division president commissioned first-ever customer-satisfaction surveys, knowing well that the results would be terrible. He then made these findings public.

On the surface, such moves can look unduly risky. But there is also a risk in playing it too safe: when the urgency rate is not pumped up enough, the business transformation process cannot succeed and thereby jeopardises the long-term future of this organisation. The urgency phase of the change process needs to begin when 75 percent of the company’s management believes that business-as-usual cannot continue.

Guiding Coalition Can be a Powerful Force in the Workplace

Renewal efforts often begin with just one or two people. But whenever a minimum coalition of supporters is not formed early on in the process, renewal efforts fail to succeed.

In successful renewal situations, the head of an organisation typically leads the coalition, along with 5–15 other influential leaders within the company, such as senior managers, who join forces and develop a shared commitment to excellent performance through change.

A successful guiding coalition of three to five people is common in small organisations. Board members, a representative from a key customer, or even a powerful union leader may be included in the team. Senior managers always form the core of the group. In big companies, however, the coalition needs to grow to 20 to 50 people before much progress is made on phase three and beyond.

It is often critical for a high level of urgency to exist among the managerial ranks. However, more is usually required. Someone needs to put these people together, help them understand their company’s problems and opportunities, and create a minimum level of trust and communication. Off-site retreats, lasting two or three days, are a good way to start this process.

When executive teams fail in phase two, they usually underestimate the difficulties of change and thus undervalue the importance of having a powerful guiding coalition at the top. Sometimes they have no history of teamwork, so they undervalue the importance of this type of coalition.

In some groups, leaders from human resources, quality, or strategic planning are expected to fill the role of line managers. But their ability to lead the team depends on their forming strong relationships with line managers. Change efforts without a strong leadership coalition may appear to make progress for a while, but they are doomed to failure.

Lacking a Vision for Your Business is Like Being in the Dark

A vision is an important tool in a transformation effort. A successful business transformation strategy includes a guiding coalition that develops a vision statement. The first draft of the vision usually comes mostly from a single individual, but after the coalition works at it for 3 or 5 or even 12 months, something much better emerges through their tough analytical thinking and a little dreaming. Eventually, a strategy for achieving that vision is also developed.

Without a sensible vision, transformation efforts tend to dissolve into a list of confusing and incompatible projects that can take the organisation in the wrong direction or nowhere at all. To fulfill your vision, use transformation frameworks. A digital transformation framework is a tool that ensures that no area of the business is left unattended during the period of change. It provides a common reference point that can be evolved as the organisation changes—thus, the digital transformation framework is key to success for organisations of all sizes in the rapidly changing market conditions that now exist.

In unsuccessful transformations, management often fails to communicate a clear sense of direction. In one case, a company distributed thick books describing its change effort. However, the line between bureaucracy and leadership is thin, and most employees were alienated or confused by the oversimplified approach to vision. A useful rule of thumb: if you can’t convey your vision within five minutes, you are probably not finished.

Not communicating your vision is the most common mistake you can make

In order for business transformation to succeed, hundreds or thousands of people must be willing to help—sometimes at the cost of their own careers and personal lives. Without communication, employees will not be motivated to make sacrifices, even if they are unhappy with the current situation. For this reason, successful transformations usually include new growth opportunities for employees and the commitment to fairly treat anyone who is laid off.

In a business meeting, executives who communicate well link their messages to the company’s vision. They discuss how proposed solutions fit (or don’t fit) into that vision and how the behaviour of employees influences that vision. In a regular performance appraisal, they talk about how employees can help achieve the goals while they are at work, as well as off the job. In a review of a division’s quarterly performance, executives explain not only the numbers but also their role in achieving those results. In an employee Q&A at a company facility, executives tie their answers back to the company’s overall transformation.

When executives effectively communicate their business transformation vision and they put it into practice, they use all existing communication channels to broadcast the vision. They turn company newsletters into lively articles about the transformation. They take quarterly management meetings and turn them into exciting discussions of the vision. They throw out much of the company’s generic management education and replace them with courses that focus on business problems and the new vision. Communication through words and deeds are important to the success of any type of progress. It is most effective when the behaviours of important people match their words.

Do Not Let “Roadblocks” Prevent the Implementation of a New Vision

It is important to involve a large number of people as the transformation process progresses. Employees are more likely to try new approaches, develop new ideas, and provide leadership when they understand the new vision and want to help make it happen. The only constraint is that the actions must fit within the broad parameters of the overall vision.

The more people involved in implementing change, the better the outcome. Too often, an employee understands the new vision and wants to help make it happen, but an obstacle is blocking his or her path. In some cases, the obstacle exists only in the person’s mind; most of the time, however, it is a very real problem with far-reaching implications for improving an organisation’s performance. For example: in some cases a narrow job classification system can undermine efforts to increase productivity or make it difficult even to think about customers.

A compensation or performance-appraisal system can also cause people to choose between aligning their work with their values and achieving goals that are important to them in order to succeed. During the first half of a transformation, an organisation’s momentum, power, and time are insufficient to overcome all obstacles. But the most significant ones must be dealt with at once to ensure that the overall change effort is not stalled. If an obstacle is a person, it is important to deal with him or her fairly and in a way that is consistent with the new vision.

But action must be taken, both to empower those who are attempting to implement the changes and to maintain the credibility of the change effort as a whole. 

Planning to Establish Short-Term Wins Can Help You Get Things Done and Prevent the Feeling of Failure

While it takes time for real transformation to occur, renewal efforts risk losing momentum if they do not provide short-term goals that celebrate making progress while laying a foundation for sustainable growth. It is important to provide clear evidence within 12 to 24 months that the journey is producing expected results.

By charting short-term wins, you motivate people to keep working toward fundamental change. By about one or two years into a successful transformation effort, you see measurable progress: quality improving on certain indices or the decline in net income stopping. You see successful new product introductions or an upward shift in market share. You see an impressive productivity improvement or increased customer satisfaction. Whatever the case, results are unambiguous and can be judged by all parties involved rather than being a matter of opinion or judgment call.

Creating short-term wins is an essential part of a successful transformation because it establishes credibility, engages stakeholders, and allows positive momentum to build. At one U.S. manufacturing company, for example, managers were able to achieve a very visible and successful new product introduction in 20 months. They set clear goals, formed a guiding coalition that operated outside the established departmental structure, and were active in pursuing their goal of producing a new product. 

Managers often complain about being forced to produce short-term wins. However, pressure can be a useful element in a change effort: it helps keep the urgency level up and forces people to think analytically about how and when change should take place.

Avoid the Temptation to Declare Victory Too Soon

While celebrating a win is fine, declaring the war won and moving on to another project can be disastrous. Until changes take hold and are adopted as part of a company’s culture, they remain fragile and subject to regression. In the recent past, a dozen change efforts operated under the reengineering theme.

In all but two cases, victory was declared and the expensive consultants were paid and thanked when the first major project was completed after two to three years. Within two more years, the useful changes that had been introduced slowly disappeared. In two of the ten cases, it’s hard to find any trace of the reengineering work today.

In general, problems arise early in the change process. At this point, urgency is not intense enough, power is not concentrated enough, and vision is too fuzzy to be of much value. As a result, victory celebrations become premature, and tradition reclaims lost territory.

It is often a combination of change initiators and resistors that leads to this problem. In their enthusiasm over an easily won victory, the initiators go overboard. Resistors climb on board, too, eager to bend reality to suit them. As a result of their combined effort, the celebration becomes a victory party; the troops are happy to return home; and the troops’ superiors decide that their work is done. By this time reality has been distorted so much that it is impossible for tradition to reassert itself completely; but it does begin creeping back into people’s minds and hearts once again. Successful transformation efforts are continuous and sustained.

Leaders who see their efforts through often start by rewarding small victories, which builds credibility as they go on to tackle larger challenges. These leaders pay attention to the big picture, including how employees are promoted and developed, and what new projects get added to the change effort’s scope. They understand that successful transformations take years—not months—to see results.

In one study of a major transformation effort lasting seven years, we found that progress continued over time. On a scale from one (low) to ten (high), the initial wins received a two rating; year two’s improvements scored a four; year three, a three; year four, a seven; year five, an eight; in year six, a four; and finally, in year seven, a two.

Anchoring Changes in the Corporation’s Culture

In the end, true change in organisations will occur only when it becomes “the way we do things around here” and is rooted in social norms and shared values. Two factors are particularly important in institutionalising change in corporate culture:

1. Communicating the rationale for changing their behaviour
2. Showing people how they have benefited from the changes.

One company was relentless in its communications to employees, and it paid off enormously. Time was spent at every major management meeting to discuss why performance was increasing, and the company newspaper ran article after article showing how changes had boosted earnings.

Although no process is perfect, some change efforts are messier than others. But even with a relatively simple vision guiding people through a major change, fewer errors can spell the difference between success and failure.