What is the purpose of this article?
Enable the board of directors, C-Suite, investors, and founders to understand whether there is a need to transform the company.
You can download a PDF of this article from: Do you need to transform your company V3
What are the critical learnings in this article?
- Many business leaders think that they need to change the direction of their company, in order to be financially viable.
- Company profitability will be impacted by external factors.
- Lack of trust in the company impacts profitability.
- Often the board of directors and C-Suite do not know that their company is in crisis or heading toward crisis.
How did 4,410 in 2022 CEOs think about the need to transform?1
- 39% don’t think their companies will be economically viable a decade from now if they continue on their current path
- 49% believe the following will impact profitability in the next 10 years: Changing customer demand, regulator changes, talent shortages, technology disruption.
- CEOs currently spend 53% of their time driving operating performance and 47% evolving the business to meet future demands. CEOs believe the ideal should be 57% of their time on future demands.
- 43% of CEOs said their leaders don’t often encourage debate and dissent. 53% said their leaders don’t often tolerate small-scale failures.
- Less than 30% of companies collaborate with external ecosystem members (to a large or very large extent), in order to create business value. Less than 20% of companies collaborate with external ecosystem members (to a large or very large extent), in order to address societal issues.
What did the analysis of 4,446 CEOs in 2021 reveal about the impact of consumer trust?2
- Consumer trust and company performance are linked. Consumer trust is the second biggest determinate of performance variance, after industry conditions.
Most business leaders have little understanding of their consumers. 87% of business leaders said consumers highly trust their company. 30% of consumers said they highly trust.
What are the symptoms of a need for transformation?
The obvious facts demonstrate that the company is in crisis. E.g.
- Losing customers or losing market share. Net Promotor Scores dropping. Customer churn increasing and customer retention decreasing. The lifetime value of customers is exceeding customer acquisition costs.
- Benchmarked performance is poor compared to competition.
- Debt and interest payments are causing major losses and negative free cash flow. The company is profitable with positive free cash flow, if debt and interest payments are not considered.
- The company is unprofitable with negative free cash flow, even if debt and interest payments are not considered.
- Employee turnover is unacceptable.
- Employee ratings of the company are unacceptable.
- Potentially valuable employees are not applying or accepting offers.
- The overall market size is shrinking.
- Not being able to meet payroll in the short-term or meet covenant requirements in financing.
Your scenario planning highlights future uncertainties, risks, and potential crisis.
- Your scenario planning process also require challenges from external advisors, consultants, and experts.
- Challenges are required to: your process, your scenarios, and the decisions you make after considering your scenarios.
Often the board of directors and C-Suite do not know that their company is in crisis or heading toward crisis.
- No ongoing monitoring and analysis of: the number of customers or market share, the Net Promoter Score, customer churn and retention; lifetime customer value and customer acquisition costs.
- No benchmarking relative to the competition.
- No free cash flow forecasting and related scenario analysis
- No monitoring and analysis of employee turnover.
- No monitoring or analysis of employee ratings.
- No forecasting of long-term ability to meet payroll or meet covenant requirements in financing.
- No monitoring and analysis of the market size i.e. the number of customers with urgent problems and needs who are willing and able to pay for the company’s solution.
- No scenario planning.
- No challenges from external advisors, consultants, and experts.
What is the root cause of the need for transformation?
The leadership talent (i.e. the board of directors and C-Suite) is the root cause of the need for transformation.
The leadership talent may not know what skills, experience, and knowledge they personally need in order to:
- Continuously evolve the company to keep pace with customers, users, and the overall ecosystem.
- Identify if the company is heading towards crisis, as noted above in the section regarding not knowing if in crisis
- Avoid decisions which can result in crisis.
The fundamental question is: Do you need to transform your leadership talent?
The leadership of a successful business may decide upon transformation for two reasons.
- The leadership talent may have decided to launch new businesses e.g. Google.
- The leadership talent may have decided to be ahead of the ongoing evolution of the ecosystem. e. Transform before there is the need to transform.
Your next steps
- Ensure you know whether or not your company is in crisis or heading towards crisis.
- Collect the facts and conduct the analysis noted above in the section “What are the symptoms of a need for transformation?”
1 PWC, “PWC’s 26th annual global CEO survey”,
2 PWC Strategy + Business, “Translating trust into business reality”
What further reading should you do?
- What is business transformation?
- Is your company planning to fail?
- Do you understand your customers?
- How do you succeed with transformation?