One of the hot topics for 2016 was “transformation,” be it in marketing, digital, or the core structure of business itself. It created a great deal of debate and soul searching in senior management. It has also generated a great deal of opportunism and, dare I say it, snake oil salesmen.
As in many of these conversation topics, there is a core truth—businesses know that they need to change and adapt. It’s a core part of the management process. But how those changes are perceived and implemented is a crucial question. The “transformation” conversation seems to create a frisson in many companies. There are good reasons for this. Transformation, as it tends to be framed, is difficult. It requires a range of different things coming into alignment to be successful—culture, management, technology, and execution are all interdependent and essential elements of successful transformation programmes.
There are many excellent leaders, consultancies, and strategists who are defining the processes and roadmaps of true transformation. It’s likely that they will, in time, reduce the apparent scale of the task. But before that happens, management should ask whether a business actually needs “transformation.”
At this stage, it’s worth taking a step or two backwards and looking at what is meant by transformation. It has become one of those catch-all phrases that means profoundly different things to different people. The Cambridge Dictionary defines it thus:
“a complete change in the appearance or character of something or someone, especially so that that thing or person is improved.”
This concept of “complete change” is core to any definition of true transformation and is at least implicit in the context of many current conversations. Change on this scale is always going to be a big task, and it is no surprise that, when framed like this, it becomes daunting. It is important that businesses ask whether they do, in fact, require such a total change.
Evolution, Not Transformation
There are other ways of looking at what is happening. Evolution as a concept represents a more steady rate and process of change. I suspect that many organisations—both those advising and those receiving advice—actually mean evolution when they say transformation. Evolution should be the natural state of all businesses.
The drivers of transformation, as they are stated, are varied. But most include an element of at least one of the following:
- technology changes;
- market changes;
- changing customer behaviour;
- disruptive entrants.
Over time things are bound to change, and businesses must change with them. Put in that context, those drivers of “transformation” should become less daunting.
All industries are, to one degree or another, affected by technology change. Some gradually, and some in more sudden leaps. It can be suggested that only in the most extreme cases is there a need for true transformation in reaction to technology change. For all other cases, it’s far more appropriate to think in terms of evolution.
It’s rare that markets change so suddenly that those changes surprise astute observers. Most markets operate in cycles interspersed with occasional seismic changes. The more difficult task is predicting at which point those changes will require a significant reaction from the businesses involved.
Changing Customer Behaviour
Again, it’s true that customer behaviours rarely change suddenly. Indeed, the inertia in buying behaviour is something that many businesses rely on in their business models. In fact, it is possible to suggest that customer behavioural changes that are so sudden as to require transformation are almost totally unforeseeable. All the rest can be discerned through a process of good research and audience relations.
By its very definition, disruption in a market is the one case that is likely to call for fast and profound changes in those businesses being disrupted.
Seen in these terms, the drivers of transformation can also be viewed, for the most part, as factors in evolution. Thinking in evolutionary terms gets rid of the fear of changing everything. It is rooted in building from the strengths of a business and seen in terms of opportunities rather than threats.
The other concept that is helpful in combating transformation shock is that of the Three Horizons approach. First described in “The Alchemy of Growth” by Mehrdad Baghai, Stephen Coley, and David White, the Three Horizons approach talks about growth through innovation. Whilst the concepts of transformation, evolution, and innovation are not synonymous, they are strongly interlinked, and it’s a useful layer to add to the conversation about how change should be analysed and described.
Horizon One describes innovation (or, in this case, change) driven from the existing or core business. It has the shortest time frame for delivery and relies on those things that are already being done.
Horizon Two describes the potential for innovation or change within the business. It is about those things the business could do or emerging possibilities that can be seen within the organisation. Capitalising on these possibilities will inevitably take longer.
Horizon Three describes innovation or change coming from outside the business. It represents the things that will take longest to achieve and will be the biggest example of change from the current core.
The great advantage of the Three Horizons approach in the context of change, be it transformational or evolutionary, is that it puts things in a recognisable scale and timeline. In so doing, it puts change back into an understandable corporate context.
Three Horizons approach also shows how evolutionary and transformational thinking tie together. Horizon One is undoubtedly about evolution. Horizon Two is mostly about evolution, and Horizon Three can probably be best defined as a mixture of evolution and transformation.
Evolution or transformation is possibly the first question leaders should ask when they recognise the need for change, but even before that, there are key things that need to be in place.
- The mechanisms for recognising that change is required. This means that, whether it’s technology, markets, or customers changing, the organisation has the early warning systems and insight in place to be able to react.
- Processes that allow organisations to take an objective view of themselves. One of the really exciting outcomes of the current focus on transformation is a great deal of excellent thinking about how organisations define their challenges.
- The recognition that change is inevitable and the willingness to embrace the consequences. The absolute foundation of successful change programmes, be they transformation or evolution, is that they are driven top-down. Leadership, vision, and a strong will to execute will deliver effective responses to change.