Challenge 9. Tanker or speedboat?

Nut to crack: How do you determine the transformation’s scale, complexity and impact?

The case for change and corresponding change story provide the basis for determining the scale of the transformation. But how complex is it? And what is the magnitude? Complexity and impact are often underestimated because little time is spent analysing them. I have seen business transformations for- mulated as changing the world, while resources specified in terms of the team, planning and budget seemed attuned towards changing a village at best. How can you prevent a mismatch between the actual scale, complexity and impact of the transformation and the conditions created to make it happen?

Nutcracker – Part I: Analyse the true impact of the transformation To determine the transformation’s scale, complexity and effect, it is helpful to map its true nature.

Scale

Start by determining the scale of the transformation. Are we looking at a change impacting one department, two or more departments, an entire busi- ness unit, or more than one business unit spread out over different geograph- ical locations? Or will it impact multiple entities, including the head office? Map it out. Then add the number of people who will be affected. This will reveal the proper scale.

Complexity

To determine the complexity of a transformation, you need to assess the number of organisational development dials to be tuned.

There are five dials you can tune to achieve a change in daily business op- erations:

  1. Strategy and conversion to portfolio and individual goals
  2. Organisational structure and responsibilities
  3. Processes and systems
  4. Convictions and behaviour, starting at the top
  5. People’s capabilities

The complexity of an organisational transformation increases proportionately with the number of dials you need to tune. Experience has taught me that turning more than one dial is required to keep an organisation congruent and balanced. For example, if you changed the organisational structure, typically, this structure would not work in reality if you didn’t redesign the kpis and work on the competence development of a group of people. Moreover, complexity is further increased when trying to change deeply rooted convictions and unwritten rules, which go far beyond knowledge or skills development.

Business Impact

The final significant element is the impact of the transformation on the daily business. Are you transforming primary processes in the company’s core or altering the outer edges? The level of disruption and, with it, the complexity and related risks of the transformation increases when you work on the core rather than the periphery.

Support tool

Analyse the scale, complexity and impact of organisational transformation. The elements mentioned above are summarised in the following support tool. This will facilitate your systematic indication of the magnitude of the transfor- mation, from incremental to huge. The necessary seniority and experience of the change leaders and enablers are directly connected with the magnitude of the shift. Challenge 10 will delve into this further.

Nutcracker – Part II: Test small, scale big

Chaos is a given in today’s world. The trick is to balance periods of change with relative stability, despite the chaos. You can guarantee more stability by starting your transformation in a smaller way keeping the scope the size of a speed boat instead of going straight for the size of a tanker. In saying that, I don’t mean you should implement a part of the transformation. I mean design- ing a holistic implementation on a smaller scale, touching all dials: you need to transform key performance indicators and adjust organisational design, processes, systems, capabilities and behaviour for the unit you nominate to go first.

Sometimes this can be a proof of concept you organise centrally. Alternative- ly, it can be the scaling of a success story that came about organically within the organisation. By accurately documenting these transformation processes, you develop a scalable transformation model. If the cost of waiting is accept- able, wait until you have found a workable, scalable model that can reach the desired business impact for the targeted entities. Next, you can scale up to implementing it in the entire organisation, knowing this will shake up the sys- tem. But since you have developed a proven success formula and can show business results, you are increasing the chance of a smooth implementation in the rest of the organisation. In parallel, you can start initiating new proofs of concept.

Real-life example: Creating a “Bright Spot”

Joost, the ceo of an ingredients supplier to the pharmaceutical industry, wants to move away from a company which focuses merely on volume, competes on price, where each client receives the same level of service independent of their value to the company, and where sales employees behave like they are the sole owners of the clients. He would like to focus on value creation instead. He is unsure how and where to start. Together with his Transformation Director, he decides on an approach.

First, he uses customer segmentation to categorise his clients into categories: a, b, c and

  1. Category a clients are not considered more critical than d clients, but each category has its respective service level and related cost. From category a, he nominates one client using three criteria:
  2. This client is representative of all category a clients
  3. The client is approachable and cooperative
  4. Additional investments are likely to bring in extra revenue from this client In other words:

Scalable, Doable and Winnable?

Joost puts a team together comprised of his best people from each department, freeing up their time to focus on the chosen category a client for two days a week. Freeing them up is not easy, as it must be done budget­neutrally. With his management team, he decides which meetings to stop, which projects to slow down, and which duties to hand over to others to free up this team sufficiently for their new endeavour. He also provides the team with extra support from two coaches.

During the kick­off with this new team, he decides against giving them financial targets, focusing instead on a more inspirational client­centric challenge, namely winning this client’s supplier­of­the­year award. The team is installed in a glass office space in the middle of the department, and they put stickers of the client on the walls. Their scrum board is visible to all, and the other employees are invited to join the Monday morning scrums if they like.

The team maps out the end customers’ needs and clarifies where they have contacts on the client side and how to intensify those relationships. They plot the client journey, identifying the weak spots in the value delivery to this client. The journey is then valida­ ted with the client itself through various interviews. This approach shifts the focus from pushing a certain ingredient onto the client to co­creating innovation with this client, and adding value to the client instead of pushing for volume.

After four months, Joost starts up a second team, and a few months after that, a third team is started. Joost finds it easy to scale up this approach as people have become curious and consider it an honour to be part of one of the client­centric teams.

Two years later, the team has not won the supplier of the year award, as they found out that this client doesn’t issue that award. However, they have received multiple indicators of recognition. Notably, eight senior managers received a letter from the client valuing the effort and support during covid­19. The ebit of this business unit has quadrupled since the start of this volume­to­value transformation, which is a fantastic boost for Joost and his team and a reward for their efforts.

Tip for change leader

If you feel you are dealing with a transformation the size of a tanker, I would advise starting with many speedboats. Creating those bright spots diminishes the business risk of the transformation.

Tip for change enabler

Proactively put determining the scale, complexity and impact of the transformation you are enabling on the agenda early in the process. The earlier critical stakeholders are aware of the actual magnitude, the easier it becomes to get the necessary resources.

Kernel: Do not overindulge

Each transformation is different, with the range of scale, complexity and im- pact varying considerably. By recognising the true scale early in the process and using the speedboat approach, you can address transformation risks early on and reduce them.

Let's connect

Want to join the LQ Team?