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Two Phases of Business Transformation

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Information about Two Phases of Business Transformation

Published on May 19, 2017

Author: flevydocs

Source: slideshare.net

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1. This is an exclusive document to the FlevyPro community - http://flevy.com/pro Framework Primer Two Phases of Business Transformation Presentation created by PHASE 1 PHASE 2 Trigger Operational Turnaround New Strategy Adaptive Innovation TSR Time

2. 2This document is an exclusive document available to FlevyPro members - http://flevy.com/pro Contents Overview Transformation Trajectories, Phases, and Stages Factors for Long-term Success Transformation Traps The content on this page has been partially hidden. FlevyPro members can download the full document here: http://flevy.com/browse/flevypro/two-phases-of-business-transformation-2744

3. 3This document is an exclusive document available to FlevyPro members - http://flevy.com/pro A Business Transformation undergoes 2 phases—characterized by Cost Reduction and Growth & Innovation Presentation Overview Transformation projects are common in organizations these days. However, based on a study conducted by the Boston Consulting Group, about 75% of such efforts fail. Based on this same study, BCG identified 2 phases that exist in all business transformation projects, which traverse through 4 stages: • Trigger • Operational Turnaround Triggered by a performance or industry shift, the first phase is focuses on Cost Reduction. The second phase focuses on Growth and Innovation. Other topics covered include the factors to long-term success (Turning the Page, Creating a New Vision, Foundational Innovation, Commitment, Imposed Distance, Adaptive Approach, Shots on Goal, Patients) and transformation traps (Early-Wins, Efficiency, Legacy, Proportionality, False Certainty, Persistency, Proximity). Transformation projects become more pervasive, as markets become more turbulent and likewise market leadership becomes less durable. 1 2 New Strategy, Vision, or Business Model Adaptive Innovation 3 4 The content on this page has been partially hidden. FlevyPro members can download the full document here: http://flevy.com/browse/flevypro/two-phases-of-business-transformation-2744

4. 4This document is an exclusive document available to FlevyPro members - http://flevy.com/pro 75% of business transformations ultimately fail Transformation Projects Study Ursula Burns, CEO of Xerox, said in 2012, “If you don’t transform your company, you’re stuck.” Source: BCG Analysis, 2013 • This data is based on the analysis of 48 companies that were publicly undergoing corporate transformation efforts. • Total Shareholder Return (TSR) is adjusted by S&P 500 growth, where 1 is the same growth rate as the index. Long-term growth refers to a period of 5 years of a period that is going—i.e., transformation initiatives that begun since July 2008. 1 2 6 7 1 0 2 3 4 Long-term relative TSR growth Year one relative TSR growth The content on this page has been partially hidden. FlevyPro members can download the full document here: http://flevy.com/browse/flevypro/two-phases-of-business-transformation-2744

5. 5This document is an exclusive document available to FlevyPro members - http://flevy.com/pro Contents Overview Transformation Trajectories, Phases, and Stages Factors for Long-term Success Transformation Traps The content on this page has been partially hidden. FlevyPro members can download the full document here: http://flevy.com/browse/flevypro/two-phases-of-business-transformation-2744

6. 6This document is an exclusive document available to FlevyPro members - http://flevy.com/pro Based on the study of organizations that have undergone transformation initiatives, we find there are 2 common transformation trajectories Transformation Trajectories The full business transformation process goes through 4 stages: Trigger; Operational Turnaround; New Strategy, Vision, or Business Model; and Adaptive Innovation. There are 2 common transformation trajectories: 1. Short-term recovery with a long-term slow decline 2. Short-term recovery with long-term restoration of growth and performance New Strategy, Vision, or Business Model PHASE 1 PHASE 2 Trigger Operational Turnaround Adaptive Innovation TSR Time 1 2 1 2 The content on this page has been partially hidden. FlevyPro members can download the full document here: http://flevy.com/browse/flevypro/two-phases-of-business-transformation-2744

7. 7This document is an exclusive document available to FlevyPro members - http://flevy.com/pro Triggered by a decline in performance, the first phase is focused on cost reduction efforts Phase 1 – Operational Turnaround In theory, organizations can continuously transform themselves—however, in practice, this rarely occurs. New Strategy, Vision, or Business Model PHASE 1 PHASE 2 Trigger Operational Turnaround Adaptive Innovation TSR Time • Phase 1 is fully comprised of the Operational Turnaround stage. • Streaming business processes achieves several goals: ̶ Reduces operational inefficiencies ̶ Buys time by addressing short-term financial distresses ̶ Frees up resources to fund the journey towards future growth • Typical Phase 1 activities will lasts up to 18 months. By the end, Total Shareholder Returns (TSR) is returned to industry parity levels. • It is important to boldly cut costs at the outset, instead of holding back. If we don’t do this, we risk repeated rounds of cost cutting, thereby undermining employee morale, momentum, and leadership credibility. The content on this page has been partially hidden. FlevyPro members can download the full document here: http://flevy.com/browse/flevypro/two-phases-of-business-transformation-2744

8. 8This document is an exclusive document available to FlevyPro members - http://flevy.com/pro New Strategy, Vision, or Business Model PHASE 1 PHASE 2 Trigger Operational Turnaround Adaptive Innovation TSR Time In the second phase, we switch our focus from cost reduction to top-line revenue growth Phase 2 – New Strategy/Vision/Business Model and Adaptive Innovation Innovation is the key to long-term, sustained growth. • Phase 1 was focused on cost cutting efforts—on the other hand, phase 2 is focused on growth and adaptive innovation. • Typically, an organization would deploy a new strategy, vision, or business model that was refined over a multi-year period. The content on this page has been partially hidden. FlevyPro members can download the full document here: http://flevy.com/browse/flevypro/two-phases-of-business-transformation-2744

9. 9This document is an exclusive document available to FlevyPro members - http://flevy.com/pro Contents Overview Transformation Trajectories, Phases, and Stages Factors for Long-term Success Transformation Traps The content on this page has been partially hidden. FlevyPro members can download the full document here: http://flevy.com/browse/flevypro/two-phases-of-business-transformation-2744

10. 10This document is an exclusive document available to FlevyPro members - http://flevy.com/pro To ensure the success of phase 2, here are 8 factors to long-term success that we should follow as guiding principles Factors for Long-term Success (1 of 2) There are 8 factors that drive long-term success in transformation projects. Turning the page1 Companies make a conscious decision to go beyond the efficiency moves of phase one and refocus on growth and innovation Creating a new vision2 Companies articulate a clear shift in strategic direction, coupled with room for experimentation Foundational Innovation3 Companies innovate across multiple dimensions of the business model, not just in products and processes. Commitment4 There is persistence from leaders in the face of inevitable setbacks and internal opposition to unproven shifts in strategy. The content on this page has been partially hidden. FlevyPro members can download the full document here: http://flevy.com/browse/flevypro/two-phases-of-business-transformation-2744

11. 11This document is an exclusive document available to FlevyPro members - http://flevy.com/pro To ensure the success of phase 2, here are 8 factors to long-term success that we should follow as guiding principles Factors for Long-term Success (2 of 2) Although these factors are commonalities in transformation efforts, each transformation has its own unique set of challenges. Imposed Distance There is a willingness to shift from the historical core business model and its underlying assumptions, often by creating a deliberate degree of separation between the new business model and legacy operations. Adaptive Approach Transformation unfolds through trial and error, with ongoing refinement of a flexible plan Shots on Goal Companies do not pin growth hopes on a single move but rather on deploying a portfolio of moves to drive growth Commitment There is adherence to vision over a multiyear period 5 6 7 8 The content on this page has been partially hidden. FlevyPro members can download the full document here: http://flevy.com/browse/flevypro/two-phases-of-business-transformation-2744

12. 12This document is an exclusive document available to FlevyPro members - http://flevy.com/pro Contents Overview Transformation Trajectories, Phases, and Stages Factors for Long-term Success Transformation Traps The content on this page has been partially hidden. FlevyPro members can download the full document here: http://flevy.com/browse/flevypro/two-phases-of-business-transformation-2744

13. 13This document is an exclusive document available to FlevyPro members - http://flevy.com/pro As mentioned, the majority of transformations fail—here are several traps organizations fall into that lead to their transformation failures Transformation Traps (1 of 2) Early-Wins Trap Companies declare premature victory after phase one and fail to declare or develop a second phase. Efficiency Trap Companies continue with multiple rounds of cost cutting and efficiency improvement measures Legacy Trap Companies fail to shed core assumptions and practices even when they are self-limiting or no longer relevant.. Proportio- nality Trap Companies make promising moves—such as a series of new business pilots—that are not proportionate to the scale of the challenge. 1 2 3 4 The content on this page has been partially hidden. FlevyPro members can download the full document here: http://flevy.com/browse/flevypro/two-phases-of-business-transformation-2744

14. 14This document is an exclusive document available to FlevyPro members - http://flevy.com/pro As mentioned, the majority of transformations fail—here are several traps organizations fall into that lead to their transformation failures Transformation Traps (2 of 2) Although on the surface, these transformation traps may seem self-evident, they are often difficult to avoid. False Certainty Trap Companies believe that the course of action can be rigorously planned in advance, and they overemphasize disciplined implementation of a fixed plan instead of continually iterating in response to new knowledge Persistency Trap Companies underestimate the time needed to see results (often up to a decade), and, consequently, they let up too soon. Proximity Trap Companies undermine the new business by keeping it too close to the core business, even when that closeness triggers competition for resources or conflicting assumptions. 5 6 7 The content on this page has been partially hidden. FlevyPro members can download the full document here: http://flevy.com/browse/flevypro/two-phases-of-business-transformation-2744

15. 15This document is an exclusive document available to FlevyPro members - http://flevy.com/pro This presentation was created by PPT Lab. PPT Lab is a PowerPoint design firm specializing in consulting-quality presentations. View our available presentations on Flevy here: https://flevy.com/seller/PPTLab The content on this page has been partially hidden. FlevyPro members can download the full document here: http://flevy.com/browse/flevypro/two-phases-of-business-transformation-2744

16. 16This document is an exclusive document available to FlevyPro members - http://flevy.com/pro Flevy (www.flevy.com) is the marketplace for premium documents. These documents can range from Business Frameworks to Financial Models to PowerPoint Templates. Flevy was founded under the principle that companies waste a lot of time and money recreating the same foundational business documents. Our vision is for Flevy to become a comprehensive knowledge base of business documents. All organizations, from startups to large enterprises, can use Flevy— whether it's to jumpstart projects, to find reference or comparison materials, or just to learn. Contact Us Please contact us with any questions you may have about our company. • General Inquiries support@flevy.com • Media/PR press@flevy.com • Billing billing@flevy.com The content on this page has been partially hidden. FlevyPro members can download the full document here: http://flevy.com/browse/flevypro/two-phases-of-business-transformation-2744

17. 1 Flevy (www.flevy.com) is the marketplace for premium documents. These documents can range from Business Frameworks to Financial Models to PowerPoint Templates. Flevy was founded under the principle that companies waste a lot of time and money recreating the same foundational business documents. Our vision is for Flevy to become a comprehensive knowledge base of business documents. All organizations, from startups to large enterprises, can use Flevy— whether it's to jumpstart projects, to find reference or comparison materials, or just to learn. Contact Us Please contact us with any questions you may have about our company. • General Inquiries support@flevy.com • Media/PR press@flevy.com • Billing billing@flevy.com

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