Fortune favors the bold. - Roman proverb
According to McKinsey, businesses that attempt to be bold by transforming into something better fail 70% of the time. More than two out of three can’t do it. And the rate of failure has been that bad, they say, “for many years.”
It’s about to change, and change dramatically. The future will belong to businesses who master the art of transformation. And to learn how to become a master, we need to examine the reasons why the vast majority of business leaders find transformation so difficult to pull off.
“Most CEOs and top-management teams are more accomplished at running businesses in stable environments than in changing ones,” McKinsey explains. “For many organizations, this relatively placid experience leads to a ‘steady state’ of stable structures, regular budgeting, incremental targets, quarterly reviews, and modest reward systems.”
Two major risks arise from that “steady state.” First, the business lies open to an Uber or AirBnB-like disruption that eliminates it. Second, and much worse, the business stands no chance of becoming the Uber or AirBnB that will reinvent their industry.
“Average companies,” McKinsey concluded, “rarely have the combination of skills, mindsets, and ongoing commitment needed to pull off a large-scale transformation.”
Business leaders who cringe at the thought of being average already have a mindset that’s far more aligned with transformation than with dependance upon some steady-state. In fact, entrepreneurs with fifty employees or fewer know that the entire journey to build their business was really one continuous transformation. They’re not afraid of it and they would welcome the opportunity to disrupt and and lead their market.
The challenge they face is establishing sustainable profitability so they have the power to take their business to the next level. Leaders who can align their people to attain sustainable profitability while, at the same time, embracing ongoing transformation, establish the most robust enterprises with the greatest freedom to act.
Making that happen requires above-average management. Two things differentiate it. First, it happens in real time. Businesses holding monthly meetings, quarterly planning sessions and annual performance reviews will find that the market is advancing far faster they they are. That cadence is way too slow, but simply increasing the frequency at which you do those things actually doesn't speed up your business.
The second differentiator does. Managing your business at velocity requires your staff to share a depth of understanding that makes their communications and collaboration constructive. It requires the proper level of transparency, the proper type of empowerment, and a culture that self-corrects continuously. Managers who want to accomplish this must, as McKinsey says, “embed a new culture of execution throughout the business to sustain transformation.”
Much (perhaps too much) has been written about “culture” and it’s impact. But culture’s easier to change it than we might believe, given all the ink. You’ve certainly seen it change every time you’ve replaced a bunch of spreadsheets with a new operational system. It might take a couple months for the sales department to adopt their CRM, but once they do, they’re operating at a whole new level. Same for operations, distribution, marketing, human resources — every operational system changes the culture of the department using it. It also deepens their understanding of how they can accomplish their business goals.
Leaders who incorporate them all into a unified company-wide culture can manage their enterprise proactively and intentionally. We call it "orchestration." Your cellist doesn't know how to play the flute, and your flautist can't play the cello, but they know how each other is supposed to sound, and they know how to play together. Orchestration puts every employee in a position to "hear" every other, and to align their own "instrument" with the company as a whole.
Leaders who run their companies like that never confront a fearful transformation. They never run the risk of failing to transform. For them, transformation is business as usual, and they're the ones who own the future.