Lost in transformation?

There is big pressure on companies to rethink their strategy and business model, but a high percentage of transformation initiatives have failed in the last decade. Listen to these webinars to see what companies like Encevo, Outokumpu, Vodafone, and Yara International have done right when adapting strategy.

In volatile times where drastic changes happen in a short period of time, many companies have understood that the success of the past is no guarantee for success in the future as the rules of the game change in many industries.

Global spending on digital transformation initiatives is forecasted to reach $2.3 trillion in 2023. However, empirical studies conducted by IDC and McKinsey show that a high proportion of transformation projects do not lead to the desired goal: 70 per cent of past investments were wasted on failed programs, and among those that did not fail outright, only 16 per cent saw improvements in their performance. This means only five per cent of all transformation initiatives result in performance improvements.

What is the reason for that and how can it be done better?

Firstly, there is often a lack of a structured approach and understanding of what strategic transformation actually means. A business model follows a clear structure and essentially describes the following aspects of a company:

• The offered products/services together with the key capabilities and value proposition to distinguish them from competitors
• The customer segments with their pain points and desired outcomes and the channels to reach the customers
• The business ecosystem, i.e. the end-to-end business processes, including internal resources/assets and the relationships to partners
• The cost structures and revenue streams

A strategy hodgepodge only using slides is doomed to failure because it does not allow for clear structure, detailing, referencing and versioning. Successful companies use structured methodologies (e.g. Alex Osterwalder's ‘Business Model Canvas’, Forrester's ‘Business Innovation Canvas’ or Ash Maurya’s ‘Lean Canvas’) and suitable repository-based tools for mapping the business model.

Secondly, successful transformation means that the renewed business model is transferred into the operational reality. To do this, it must be linked to the operational processes and employees must understand what this means for their daily work. In other words, how do processes and responsibilities change and what does this mean for the role and impact of each individual employee? Companies need a clear procedure to map their business model with the operating model (processes, journeys, assets, responsibilities etc.) and a common repository to manage both the strategic and operational aspects of the ‘new way of working’.

Finally, a key factor for a successful transformation is to continuously measure and evaluate its adoption by the organization. This means that suitable KPIs with goals and milestones are needed to evaluate progress and to take corrective action. At the end of the day, a transformation is not an end in itself, but aims to improve the competitive situation of the company in the long term.

A strategic adaptation of the business model is not a secret science but should follow a structured approach; therefore, it is a good idea to learn from successful examples, such as Vodafone, Encevo, Outokumpu and Yara International.