10 Strategies to enable a successful organizational capabilities transformation
The world is changing at seemingly breakneck speeds, with technology and innovation being one of the driving catalysts for disruptive change, creating new markets and reinventing business models. Both small and large companies are facing organizational challenges, forcing businesses to move with speed and confidence, and continually innovate to stay relevant. Competitors can undercut your prices. Sometimes market conditions change and margins decrease which cuts into the bottom line of profits.
There are many opportunities for growth, but to get there they are going to need to figure out market strategies, as well orchestrate new ways of working that will leverage new technologies and prepare to start embracing things like automating business processes and artificial intelligence. Businesses need to think about their costs strategically, as investments that will fuel their growth. They need to continuously cut bad costs and redirect resources towards good costs that build or strengthen differentiating capabilities.
Corporations across almost every industry vertical, sizes and phases, whether it be solid growth, stable performance, or in distress – all need proactive cost management. Unfortunately more times than not, they lack the internal experience, capacity to substantially improve cost and cash flow. It could be a strategic, short term cost reductions such as staff reduction, employee benefit plan restructuring, tax planning, corporate real estate portfolio financing, reducing inventory, working capital optimization. Or longer term structural strategies like supply chain improvements or organizational restructuring.
Companies are starting take on organizational or business transformation, but if you still have not started or you are not sure what areas your business should be focusing on? Here are 10 transformation strategies to implement in 2019. You may have questions such as “How do I motivate my organization for transformation?”
1. Make the Case for Change
The easiest way to go about making the case is to start with a clear, unbiased assessment of your industries business conditions and the particular challenges that are the biggest threats or hurdles for your company. It may be useful to take a customer-focused lens or viewpoint, connecting transformation objectives to certain customer needs as well as marketplace dynamics. Kind of like a swot analysis, describe your business’s differentiating capabilities or services, and highlight the importance of directing more resources to these crucial areas of competitive advantage. Finally, end with an inspiring vision of the company’s potential if takes the rights steps to achieve sustainable growth.
2. Align the Top
Cost or business transformations are not successful unless upper management is on onboard, as well as committed to reaching the goals. The thing is with change, the more revolutionary or big it is, the more likely that those with status and power in the old regime may resist or push back on it. What should you do? You need to move swiftly to win over the key influencers to get behind your transformation initiatives. If your company has leaders for each business department or function, it might help to give each executive a stake or role in the overall transformation goal, not just activities affecting his or her department. And the best way is to tie in incentives – financial or something else – to hitting key transformation milestones.
3. Announce a “New Day” and Pardon the Past
In addition to giving brutally honest views of threats to your organization, also offer a positive, thoughtful vision showcasing the upside of business transformation. Declaring a new day also conveys the message that past arguments for not wanting to evolve no longer make sense and you are also not interested in criticizing past mistakes or decisions. It is more useful to paint an inspiring picture of a leaner company poised for faster growth.
4. Celebrate Quick Wins to Keep Momentum
Transformation planning and implementation should follow an agile model to ensure early momentum and realistic plans. Showing quick wins is a great way to get buy-in from a board or management to keep going. So it’s a good idea to find areas within your operation where you can achieve savings quickly, without large transaction costs. Focus on immediate actions to reduce costs, bring stability and capture savings to avoid deterioration of the business. So, by finding places to reduce spending that are not supporting differentiating capabilities that add value propositions to customers will help to build confidence and momentum to invest in areas that enable growth.
How do I Achieve Cost Efficiency While Also Enabling Growth?
5. Everything Should be Put on the Table for Further Examination
If you go call a large management consulting agency like a Bain & Co or Mckinsey & Company, they will send high priced business analysts that will tell you where to cut costs which could mean laying off certain departments or changing processes. So a thoughtful, and constructive cost transformation initiative examines every single expenditure. Such as how Google’s CFO Ruth Porat came in 2015 to cut costs and scrutinize business units. By putting every business unit and cost on the table signals the importance of strategically aligning costs, while discouraging individual managers from trying to lobby for special exemptions. This is important so then you can reallocate resources to invest in winning projects. It also sends the message that “we’re all in this together.”
6. Question the What, How and How Well
Significant cost improvements are attained from a deep fact-based analysis that not only know how or well a business performs certain functions or activities, but also what does it do in the first place. It’s important to examine the product line, the supply chain, customer base, the business portfolio, operations and the administrative footprint from a calculated lense. Look for justification of expenditures only when it bolsters a capability, product or service that sets your organization apart in the marketplace.
7. Reallocate Resources From Cutting Costs into Capabilities Investments
Your company may have partners, investors or shareholders. Some companies will make the mistake early on in a strategic cost transformation project to focus more on the cost cutting and not enough into capabilities development. This short-sided approach can undermine the transformation objectives by laying off or demoralizing employees and possibly stunting potential growth. A successful strategic operational transformation will invest into building capabilities as they are cutting costs from less profitable areas, and using the savings or new capital to spark step-change improvement in returns and revenue.
How do I manage the Transformation and Make it Sustainable and Lasting?
8. Set Up a Parallel Organization to Run the Transformation
Depending on how big the organizational transformation is, you may need to continue conducting business while you are trying to change it. It might not be best to ask managers to have to undertake both tasks. So you can hire a business advisory consulting company and or set up a separate program management team who is in charge of overseeing the transformation goals, led by someone from the senior executive level.
9. Meet and Discuss Things Before, During and After the Transformation Initiative
The best way to make sure any transformation effort does not fail is by having frequent and consistent meetings or communication throughout the whole project. Well thought out messages that convey a precise strategic vision, as well any addressing any potential problems, can help to win confidence and support from key people both inside and outside of the organization.
10. Employee Culture Matters in Any Transformation
Sometimes business models have shorter lifespans or need to be changed. Sometimes processes or certain facilities are no longer working or are not as profitable as they used to be.
But if you think that putting a PowerPoint together, that lays cost adjustments and the deliberate course corrections is all you need to call the organizational transformation a success you are mistaken. What is equally crucial are the changes in employee attitudes, culture, behavior and work habits. You need to have the culture of the company on board and ready for change.
Companies that are open to change can set the stage for growth. By building a scalable cost platform for growth and investing new or existing capabilities, which both enable the business strategy and manage costs accordingly, should be the goal. Conducting cost reviews which could include depending on the industry equipment rationalization assessment, workforce optimization of support pools and overhead costs assessments. Thomas Huckabee CPA helps businesses transform their operations by taking a holistic view that connects operations to strategy, transcends business unit siloes and focuses on the opportunities that will create the greatest value. From the back office function and research lab to the factory floor and across your supply chain, Thomas Huckabee CPA can help you develop an unconstrained, end-to-end plan to achieve your full vision. Eliminate ineffective, nonessential spending, and redirect the savings to the investments that will power your growth. We offer a wide range of Outsourced CFO and business advisory consulting services.