The global business
environment has become exponentially challenging to navigate in recent years given the fiercely competitive landscape coupled with regulatory challenges, disruptive innovations, and digital and analytics. Every business
therefore aspires for profitable growth and sets up its year-over-year organisational agenda accordingly. Unfortunately, businesses tend to label the exercise of setting stretched budgets and driving a specific agenda (like cost leadership or revenue uplift) as “transformation” when, really, this is just business
The term “transformation” is one of the most common words in business. However, a true business transformation is one that holistically powers a real step-change in an organisation’s performance, capabilities, and organisational health in a rapid yet sustainable manner. Many companies set up a project-management office (PMO) to drive and track this process, but too often the PMO is rooted in the organisation’s historic way of working and old structures, so the organisation continues to move slowly and lacks rigor in its execution of initiatives.
Our experience has shown that the biggest differentiator in a successful business transformation is the setup of an independent transformation office(TO) to drive this change. The TO is not a PMO — it goes beyond setting the schedule and tracking initiatives. The TO brings an investor’s mindset to the transformation, fostering a sense of urgency, a bias to action, and top prioritisation among participants. This creates many transformation champions across the organisation. The TO also ensures that all participants have a “single source of truth” for the transformation and ongoing initiatives. This transparent view enables the transformation office to play a proactive role in breaking down bottlenecks while making the change happen.
The TO becomes the central agency driving the transformation and is led by the chief transformation officer (CTO).The CTO is someone who directly reports to the CEO and has the authority to hold an independent view — therefore, the CTO can hold line leadership and the operating team accountable for progress. The CTO is a senior person with sound knowledge of the business and has the right mix of inspiring and challenging leadership.The CEO leads the company, the business heads lead the business — a CTO leads the change.
The TO governance infrastructure has a very holistic operating model to ensure initiative and workstream-level accountabilities have been established and a relentless cadence is in place — not just to review and track dashboards and initiatives, but to actively de-bottleneck. In a turbo-charged transformation, the TO is the catalyst that accelerates decision making, cutting the bureaucratic red-tape that exists in most organisations. The TO of a metals and mining company in Asia Pacific established a service-level agreement (SLA)for a 48-hour timeline on finance approvals, or else requests were automatically approved. With this SLA in place, the organisation accelerated its decision making
by an estimated 25 days, and less than 5 per cent of requests were automatically approved. If you consider that every day lost reduces 3 per cent of in-year cash impact, such mechanisms prevent cash burners.
From our experience, we have seen that organisations fail to do ideation and implementation simultaneously. Trying to do both together leaves an organisation confused, slows momentum, and inhibits bias to action. An ideal approach is to have a distinct phase of idea generation and milestone planning, followed by a distinct, TO-charged implementation phase.At the end of a 12-month wave of transformation, the procurement head of a leading cement company in Asia Pacific recalled how focusing on implementation prevented procrastination over the procurement strategy and enabled his team to be more effective in the vendor negotiations. We have seen that in 70 per cent of cases, at least 70 per cent of the organisation’s aspirations are met in the first six to 12-month cycle. The TO can then orchestrate a “back to the well” exercise to fill in the gaps.
TO-driven transformations have delivered astonishing impact in record timelines across sectors and geographies. Organisations that have made this structural shift in their operating model and invest behind their transformation reap the rewards in not just in-year impact but through sustained momentum for years to come.
Chaddha is a partner and Jaisinghani is a senior VP in at McKinsey & Co