 "Lars Faeste is senior partner & MD, and Amit Ganeriwalla is partner & director, The Boston Consulting Group")
If you want to achieve big change, you cannot delegate the process, Lars Faeste and Amit Ganeriwalla tell Ritwik Sharma
What are the major factors forcing transformation and what are the after-effects that organisations need to watch out for?
Faeste: I guess digital is the key thing. So, you see many new business models, start-ups, many of them from India, attacking established players in different ways. It may be that they provide an easy way of doing business for customers. It may be they create a platform, but in addition to that it is macro-changes like what happened in the UK with Brexit.
What we often see is that companies are triggered by some of these disruptions to do a comprehensive transformation. I think one of the issues is that once you've gone through such a thing the organisation is tired and maybe also there's some cynicism and then what happens after two years of doing your best all of a sudden you need to go through another round and people totally need to change again. Getting ready for an always-on transformation mindset is important. Companies need to be almost in a schizophrenic mindset.
Ganeriwalla: One of the triggers of transformation is around innovation. Either you feel the need or the world around you is innovating. The other of course is more a common one around profitability, pressure-driven transformation where you are left with no choice but to transform afresh. If you take either of these situations and when you get into a transformation journey the burning platform that you create in the organisation has to be two-sided; it has to be innovation-led, it has to be top line-led, it has to be new ways of doing things as well as saying "How do I get the cost structure right, how do I get my consumption of material and resources correct, how do I get my sales to perform better?".
Companies transform because of market changes, merging with or acquiring new businesses. Then there's technology-led transformation. What are the three things one has to remember in order to transform in a positive manner?
Faeste: We had just done an analysis of listed companies in the US that shows that with a high likelihood one out of three companies will cease to exist in the next five years. And the same number 50 years ago was one out of 20. So, it shows the turmoil has gone up six times in 50 years. No matter how you look at things, it is really proven that the speed and the changes are enormous. And that's why we see that many companies are embarking on really transformative journeys. And when we say transformative journeys, we don't mean individual efforts, we mean comprehensive changes, not only to take cost out or right size but really to change the business model for the set-up of the company.
First of all it's very important to have a clear sense of the need for change or burning platform. Companies have a culture of being proud and saying what they have achieved. And it's important to create that need for change that not only the CEO understands but that the management understands. I think the second thing is to address the transformation both for the short term and the midterm. The third element is how to get the organisational side on board, but also to develop a plan. So get the capabilities in place, but also sometimes the need to change the company culture towards a more performance-driven or change the culture of the company.
What are the leadership challenges that come with transformation?
Faeste: Delegating leadership styles don't tend to work so well. So, if there are three different leadership styles, there's delegating, there's involving the leadership and there's directive leadership. Then I would say if you want to transform and achieve big change in high speed you cannot delegate it. The best transformation managers are the ones that can both set the directions and involve the team and not kind of delegate everything.
Ganeriwalla: Leadership plays the most, if not the single most, important role in a transformation journey. The CEO and the board, their behaviour and way of dealing with this journey are very informative and send signals down the ranks. As he said, you cannot delegate responsibility of a transformation journey.
Faeste: Basically the point is that leadership needs to be paranoid and constantly so. It's not very nice to be paranoid, but that's the reality. And I have to say when we look at the transformations we built, around 40 per cent of the ones we are doing are actually for market leaders and companies that are doing well.
