Leading Off

ESSENTIALS FOR LEADERS AND THOSE THEY LEAD

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Transformation. Sounds awe-inspiring, right? Yet for something billed as spectacular and rare, chances are there’s one happening right now in an organization near you. Digital transformation. Agile transformation. Organizational transformation. The fact is, transformation has actually become one of the most used—or overused—terms in business, as McKinsey senior partner Harry Robinson attests below. So, what is it, really? Mystique aside, we know that transformations in general have a terrible track record. We also know that to a knee-jerk executive panicked by pandemic shocks and competitor disruption, launching a wide-ranging metamorphosis could be an excuse to slash and burn on costs, structure, and people. On the upside, however, a comprehensive and well-executed corporate reset can make a substantive, irreversible improvement to an organization’s performance, capabilities, and culture. So, this week, let’s peer behind the magic act for a primer on what every leader should know about the real wizardry of transformation.

AN IDEA

Has the pandemic transformed transformation?

There was a time when you could easily spot the companies in need of a broad reset. They exhibited sluggish growth, complacent leadership, untapped potential, or all of the above. The urgency to get started often took a back seat to the need to “right the ship” before an organization could embark on a journey toward better financial performance, tech-enabled innovation, and better organizational health. As a result of the pandemic, however, there’s more than enough urgency to go around—and plenty of new competitive factors to address on the fly, such as your company’s stand on environmental, social, and governance (ESG) topics or how you embrace a corporate purpose. The bottom line? The calculation and dynamic for transformation must balance the urgent and the important in new and unpredictable ways. Some tips can help.

A BIG NUMBER

That’s the percentage of transformation value that comes from growth initiatives. Transformation too often refers only to minor or isolated initiatives. McKinsey research, based on scores of transformations over the past decade, points to a different approach to success: an intense, well-managed, organization-wide program to enhance performance and to boost organizational health. Rather than cost-cutting as a goal, such “Capital T” transformations position growth as a North Star to guide comprehensive change and produce results that can—and should—be measured.

A QUOTE

“Transformation is an overused term, with a terrible track record.”

That’s McKinsey senior partner Harry Robinson. Only 30 percent of transformations succeed, but those that do can offer important lessons on how to overhaul a business model, improve financial performance, and strengthen organizational health and culture. In this video, Robinson and the CEOs of Johnson Controls and Vrio speak to what it takes to shape and execute the kinds of all-in transformations that revitalize organizations and reset them for future growth and resilience.

A SPOTLIGHT INTERVIEW

“This may be a slight exaggeration, but let me say, nobody really loves their operating model.” So says McKinsey senior partner Chris Gagnon. COVID-19 has certainly overturned business models across the corporate landscape and recast the challenges that spur companies to pursue transformation. The pandemic accelerated experimentation and made it a staple not only of start-ups but also of the biggest leading companies. Businesses also upped their technology quotient as a resilience essential. And societal expectations shifted as young workers sought more purpose and meaning in their work and demonstrated a willingness to walk if employers couldn’t—or wouldn’t—shape up. In this episode of The McKinsey Podcast, Gagnon joins McKinsey partner Elizabeth Mygatt to explore what it means to “future proof” an organization along the new baseline for transformation.

All together now

The myriad moving parts of a real organizational transformation call for myriad accompanying roles for key players. Dedicated role modeling begins at the top. Too often, however, it seems that digital transformations move ahead without senior executives thinking through the technical skills that everyone should have, from technology executives to HR chiefs There is also a critical role boards can play in overseeing the scope and details of such digital overhauls. When it comes to agile transformations, a structured approach can help, whether a company is intensifying its efforts to build an agile operating model or taking its first steps toward one. Finally, transformation success often relies on whether employee skills and behaviors evolve, putting the onus on learning specialists and capability builders to make the magic happen.

Lead transformatively.

— Edited by Bill Javetski, an executive editor in McKinsey’s New Jersey office

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