A Roadmap to Successful Enterprise Transformation
Jan 24, 2019
By Deborah J. Nightingale and Jayakanth Srinivasan
Let’s be blunt: Most transformation efforts fail. That's what we see from our experience working with many organizations. By "fail," we mean either the efforts are not sustainable or they do not achieve the desired strategic objectives.
Why do they fail?
The reasons behind the failure of transformation efforts seem to fall into one or more of a number of categories. One of the most frequent occurs when organizations undertake only local projects, with no consideration for their impact across the enterprise. This type of failure tends to be a function of a lack of awareness. We saw this at a defense manufacturer, where the engineering function had decided to downsize significantly the number of its engineers working with the process engineers in manufacturing. Why? The engineering leaders saw no value-added from an engineering perspective. Only after the decision had been translated into action did anyone recognize the critical downstream implications in terms of delays in production and associated cost overruns were the implications evident. The transformation effort turned into what we call an only in my backyard failure.
Sometimes, organizations just feel the need to do something, anything, to gain traction for what they (incorrectly) characterize as transformation, but they never really make any progress. These organizations, whose transformation efforts suffer what we call activity failure, tend to measure activity rather than progress, and they may even value activity more than progress. A major government organization we know focused on measuring the number of improvement events it undertook and how many people it trained to do what it called improvement. Yet it never reflected strategically on whether those events were actually moving the organization forward on its transformation journey.
At a large aerospace company, we found an emphasis on reducing direct labor costs on the shop floor, even though it represented less than 5% of the company's total costs. The reason for this effort was that addressing direct labor was easy to do, and the company's transformation suffered from low-hanging fruit failure.
Several types of transformation effort flow directly from senior leadership behaviors and decisions taken only because they are leaders (i.e., they can), often for little or no strategic reason. Sometimes, power and politics intervene to cause pet project failure—working on the wrong things and not getting at root issues. A hospital recently avoided pet-project failure by conducting a deeper enterprise analysis of the root causes of delays in the emergency department. The executive in charge had been pushing to introduce a self-check-in kiosk to improve the flow of patients, but the analysis showed that the delays in the system were being introduced not because of long check-in times, but the lack of in-patient beds.
Similarly, failure often results from a new leader insisting that the organization set out on his or her path, regardless of where the organization has been and is going. As an example of this new leadership failure, when Christian Streiff took over as the CEO of Airbus in July 2006, he initiated a review of all programs currently under way. Presenting the results three months later to the Airbus senior leadership team, he proposed sweeping restructuring plans, including moving A380 production solely to France. The proposal was met with significant resistance because it did not meet the needs of key stakeholders, including those of the corporate parent EADS. Although he had been brought in for his previous successes as a turnaround specialist elsewhere, Streiff could not relate to the Airbus enterprise as a whole and ultimately was forced to resign.
Conversely, some leaders simply refuse to lead. They aren't engaged and delegate all the transformation work to others. We're sure nearly every reader has seen this in action at some point in her or his career. We call what results leaders-who-don't-lead failure. When Larry Bossidy was CEO of AlliedSignal, he became well known throughout the business world for his approach to making sure that this type of failure didn't happen, holding leaders accountable for personally leading change efforts. He shares some of his experiences in leading transformation in his bestselling book Execution.
Some leaders manifest their unwillingness to be involved by bringing in consultants or anyone else they think can transform their organizations for them. One of the U.S. defense services hired a major consultancy to develop and implement transformation. When the consultant left, there was no actionable transformation plan to follow, nor any commitment or drive within the service to move the effort forward. The organization suffered a hire the transformers failure.
Linked to the problem of bringing in outsiders to do what the enterprise itself needs to do is the tendency to undertake transformation efforts that shift from one methodology to another in a continual quest for a "silver bullet"—with constant rebranding of the transformation effort. We found change fatigue had set in at one organization. A tired employee told us, "When I started here, we did Quality Circles, then we called it TQM, and then they had a new program, and finally now we have Lean Six Sigma. Nothing works!" That organization ultimately suffered flavor-of-the-month failure.
Here are three steps to address the problem:
- Strategy Cycle: The business case for transformation is made as the organization's leadership becomes engaged.
- Planning Cycle: This involves analyzing and defining both the current and future states of the enterprise, and then articulating a transformation plan to achieve the future vision.
- Execution Cycle: During this stage, the plan is put into practice.
Excerpted, with permission of the publisher, from Beyond the Lean Revolution: Achieving Successful and Sustainable Enterprise Transformation by Deborah J. Nightingale and Jayakanth Srinivasan. Copyright 2011, Deborah J. Nightingale and Jayakanth Srinivasan.
About the Author(s)
Deborah J. Nightingale and Jayakanth Srinivasan Deborah J. Nighingale is Professor of the Practice of Engineering Systems and Aeronautics and Astronautics at MIT and director of MIT’s Center for Technology, Policy, and Industrial Development. Jayakanth Srinivasan is a Research Scientist at MIT’s Lean Advancement Initiative. He conducts research across multiple industrial sectors of on performance measurement, innovation, and architecting, with a focus on enabling knowledge-intensive organizations to achieve sustainable enterprise transformation.