Traditional business transformation dooms your company to failure? V2

 What is the purpose of this article?

Help shareholders, investors, founders, the board of directors and C-Suite discuss and improve business transformation.

This article does not provide tax, legal or financial advice.

You must do your own research and fact-based analysis using current and relevant information.

You can download a PDF of this article from: Traditional business transformation dooms your company to failure V2

What are the critical learnings in this article?

• Most transformation efforts fail and destroy company value.
• The failure is due to leadership flaws with the company leadership: the board of directors, CEO, and C-Suite.
• The leadership has limited understanding of employees and how to gain employee commitment to transformation.

What are some definitions of business transformation?

#1 “Transformation is about improving performance, not just cutting costs. Companies boost the odds of achieving breakthrough results when they simultaneously improve their operating discipline and make portfolio moves that collectively redefine their business.”¹

#2 “Transformation spans your entire organization, to address all the changes needed to reach your full ambition.“²

#3 “…rapid, visible, and sustainable step-change improvement in business performance; strengthen their organizations to win in the future; and turn their companies’ upside potential into radical performance gains.” ³

#4 “Business Transformation is the process of fundamentally changing the systems, processes, people and technology across a whole business or business unit, to achieve measurable improvements in efficiency, effectiveness and stakeholder satisfaction. As such, a business transformation project is likely to include any number of change management projects, each focused on an individual process, system, technology, team or department”⁴

 What is the Oxford Dictionary definition of transformation: “a thorough or dramatic change in form or appearance. “its landscape has undergone a radical transformation”

Transformation usually fails.

• Major changes almost always fail. 12% achieve their target; 20% are total failures; 68% diluted the value of the company.⁵
• More than two-thirds of large-scale tech programs are not expected to be delivered on time, within budget, or within their defined scope. ⁶
• Efforts to recover a poor business typically fail. 33% of the companies grew; 35% went bankrupt or were acquired; 32% stalled. Only 10% of the stalled companies recovered.  ⁷
• Roughly 70% of transformations fail.⁸
• More than half of M&A deals destroy value for investors.⁹
• McKinsey research shows that companies who disregard analysis of employee mind-sets NEVER have an extremely successful transformation.¹⁰

What is one consulting firm’s perspective on why most transformations fail?¹¹

I have paraphrased the comments from the article.  Any misinterpretation is my fault.

• CEO doesn’t set a sufficiently high aspiration.
• CEO unable to persuade the C-Suite regarding the need for transformation.
• CEO and the leadership team doesn’t address skills needed to drive transformation.
• The organization doesn’t buy in.
• The organization won’t make the effort to make the change happen.
• Lack regular performance management discussions.
• Lack leadership oversight meetings.

Why do I think transformation efforts fail and doom your company to failure?

• The consulting firm above points out the leadership flaws, especially with the CEO and C-Suite.
• But where was the board of directors? Did they appoint and retain the right CEO? Did they approve the transformation plan?  Did they monitor the ongoing execution.  Did the have the appropriate skills to make decisions regarding: CEO appointment & retention, transformation plan approval, and monitoring of the transformation plan?
• The board of directors and C-Suite are excluded from the transformation. The culture, skills, processes, values morals, and ethics of the board of directors and C-Suite do not change.
• The CEO and C-Suite have not built the urgent need for transformation and ensured that every employee understands and will support major change. g. Telling employees that they need to make major changes in order to increase company profit and C-Suite compensation ensures failure.
• The board of directors and C-Suite don’t understand the employees and therefore don’t have the understanding necessary to craft a successful transformation plan and communication’s plan.
• The C-Suite does not have good two-way communications with the company.
• The transformation does not make the talent and processes changes to ensure that future transformation will not be required. The transformation does not create a company which is continually changing and improving, driven by deep understand of the customers, employees, competition and how the company’s ecosystem is evolving.
• A continuously successfully evolving company does not need two sets of organizations structure i.e. does not need a Chief Transformation Officer, Transformation Office, and transformation managers/teams throughout the company.
• The word “Transformation” is usually misused and thus causes confusion. Many large projects are called “Transformation” when all they actually are a large project.
• The Transformation is not driven by the future scenarios for customers and the company ecosystem, but is rather focused internally. One major consulting firm (I won’t share the name) states that their approach to transformation is “Start with the balance sheet and then profit and loss statement.”

 What are your next steps?

#1 Define the words/concepts you’re using, in a glossary.  I’ve seen major confusion when the same words mean different things to different people.

 

#2 State the facts as to what is driving your need for transformation:

• Declining customer and employee satisfaction, declining market share, declining profits, declined return-on-equity, ecosystem pressures, etc.?
• Passion to increase customer and employee satisfaction, increase market share, increase profits, increase return-equity, position company to succeed in more of the future scenarios, etc.

If all you have is assumptions and opinions, get facts.

#3 Review the purpose of the company.  Ensure the transformation supports the purpose of the company.

#4 Estimate the impact and degree of change required to your: customer relationships, ecosystem relationships, talent (at all levels), technology, and processes.

#5 Based on the above facts and analysis, assess the degree of resistance to the transformation e.g. if the transformation will result in the termination of employees, why would the current employees support the change?

• Resistance to change can occur at all levels e.g. will board directors and C-Suite support the company being bought if this results in the directors and C-Suite losing their jobs.
• Be able to answer the question that everyone who needs to change has: “What’s in this for me?”

#6 Determine if this transformation is a change which can be planned, executed, and benefits achieved by the existing board of directors, C-Suite, organization talent, and processes.  If not, what needs to change?

#7 Determine if you need an interim Transformation Officer to enable the creation of a future organization which will be constantly evolving i.e. no future need for a Transformation Officer.

Footnotes

¹ McKinsey, “The truth about transformation”,

https://www.mckinsey.com/featured-insights/the-truth-about-transformation

² Bain, “Business Transformation”

https://www.bain.com/consulting-services/transformation

³ Boston Consulting Group, “Business Transformation”

https://www.bcg.com/en-ca/capabilities/business-transformation/overview

⁴ Change Associates, “What is business transformation?”

https://changeassociates.com/what-is-business-transformation/

⁵ Patrick Litré, David Michels, Sebastian Walter, Melissa Burke, “Soul searching: true transformations start within” Bain

https://www.bain.com/insights/soul-searching-true-transformations-start-within/

⁶ November 13, 2024  Boston Consulting Grouphttps://www.bcg.com/publications/2024/most-large-scale-tech-programs-fail-how-to-succeed#:~:text=BCG’s%20latest%20research%20shows%20that,year%20for%20a%20single%20program

⁷ David Jacquemont, Dana Maor, Angelika Reich, “How to beat the Transformation Odds”, McKinsey

https://www.mckinsey.com/~/media/mckinsey/business%20functions/people%20and%20organizational%20performance/our%20insights/how%20to%20beat%20the%20transformation%20odds/how_to_beat_the_transformation_odds.pdf

⁸ Harry Robinson, “Why do most transformations fail?” McKinsey

https://www.mckinsey.com/capabilities/transformation/our-insights/why-do-most-transformations-fail-a-conversation-with-harry-robinson

⁹ John Kotter, “Leading Change: Why transformation efforts fail”, John Kotter, Harvard Business Review, January 2007

https://hbr.org/2007/01/leading-change-why-transformation-efforts-fail

¹⁰ Scott Keller, Bill Schaninger, “Getting personal about change”, McKinsey Quarterly

https://www.mckinsey.com/capabilities/people-and-organizational-performance/our-insights/getting-personal-about-change

¹¹ “Why do most transformations fail? A conversation with Harry Robinson”

https://www.mckinsey.com/capabilities/transformation/our-insights/why-do-most-transformations-fail-a-conversation-with-harry-robinson

 

What further reading should you do?

What is business transformation? Koor & Associates

https://koorandassociates.org/business-transformation/what-is-business-transformation/

Do you need to transform your company? Koor & Associates

https://koorandassociates.org/business-transformation/do-you-need-to-transform-you-company/

Why is trust critical for transformation success? Koor & Associates

https://koorandassociates.org/business-transformation/why-is-trust-critical-for-transformation/

Transformation success depends upon human behaviour change. Koor & Associates

https://koorandassociates.org/business-transformation/transformation-success-depends-upon-human-behaviour-change/

Your company will fail. Koor & Associates

https://koorandassociates.org/avoiding-business-failure/your-company-will-fail-v1/

Is your company planning to fail? Koor & Associates

https://koorandassociates.org/avoiding-business-failure/is-your-company-planning-to-fail/

Do you need to transform your company? V4

 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.

This article does not provide tax, legal or financial advice.

You must do your own research and fact-based analysis using current and relevant information.

You can download a PDF of this article from: https://koorandassociates.org/wp-content/uploads/2025/05/do-you-need-to-transform-your-company-v4.pdf

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.
• Transforming while ahead of the competition is more successful than transforming when you are forced to.
• Cost cutting is not the solution to under performance.
• If your company is underperforming, compared to the competition, determine what changes are required to the board of directors and C-Suite,
• Often the board of directors and C-Suite do not know that their company is in crisis or heading toward crisis.

Global CEOs recognize that there’s a good chance their companies will not survive.

• In 2023, 45% of global CEO thought that their company would be financially viable for 10 years or less, if it kept running on its current path.¹
• In 2024, four in ten CEOs believed their company will no longer be viable in ten years if it continues on its current path. The majority of CEOs believed they will not be in their current role in five years time. ²

Transforming while ahead of the competition is more successful than transforming when you are forced to.³

1. Transforming while SR (Total Shareholder Return) matches or exceeds industry averages creates significantly more return in both the medium and long term, compared to transforming when you’re behind industry averages.
2. At any point in the past 20 years, 30% of companies are significantly underperforming their sector but only 25% of transformations will result in outperformance in the short and long term.

Cost cutting is not the solution to under performance. ³

• Long term *five year) value creation TSR out performance is due 43% to revenue growth and 32% to successful (note the world SUCCESSFUL) cost reduction.

What did the analysis of 4,446 CEOs in 2021 reveal about the impact of consumer trust?⁴

• 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.

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.

Your next steps

• Define the words/concepts you’re using, in a glossary. I’ve seen major confusion when the same words mean different things to different people.
• If your company is matching or exceeding your industry peers, determine how transformation can maintain or increase your lead. In today’s hyper competitive world, your competition is changing.
• If your company is underperforming relative to your competition, first define the talent characteristics of a board of directors and C-Suite that would outperform the competition. Then assess your current board of directors and C-Suite relative to those characteristics.
• Determine whether or not your company is in crisis or heading towards crisis.

Footnotes

¹ PWC’s 27^th annual global CEO Survey

https://www.pwc.com/gx/en/ceo-survey/2024/download/27th-ceo-survey.pdf

² PWC’s 28^th annual global CEO Survey

https://www.pwc.com/gx/en/issues/c-suite-insights.html

³ Bain, April 12, 2024 “Five truths (and one lie) about corporate transformation”

https://www.bcg.com/publications/2024/five-truths-and-a-lie-about-corporate-transformation

⁴ PWC Strategy + Business, “Translating trust into business reality”

https://www.pwc.com/gx/en/issues/trust/translating-trust-into-business-reality.html

What further reading should you do?

• What is business transformation?

https://koorandassociates.org/business-transformation/what-is-business-transformation/

• Is your company planning to fail?

https://koorandassociates.org/avoiding-business-failure/is-your-company-planning-to-fail/

• Do you understand your customers?

https://koorandassociates.org/understanding-customers/do-you-understand-your-customers/

• How do you succeed with transformation?

https://koorandassociates.org/business-transformation/how-do-you-succeed-with-transformation/

What is business transformation? V3

What is the purpose of this article?

This article enables shareholders, the board of directors, C-Suite and others to discuss business transformation.

This article does not provide tax, legal or financial advice.

You must do your own research and fact-based analysis using current and relevant information.

You can download a PDF of this article from: https://koorandassociates.org/wp-content/uploads/2025/05/what-is-business-transformation-v3.pdf

What are the critical learnings in this article?

1. There is no commonly agreed upon standard definition of business transformation.
2. Your company must create your own definition and criteria for what is business transformation, which everyone understands.

What are some definitions of business transformation?

#1 “Transformation is about improving performance, not just cutting costs. Companies boost the odds of achieving breakthrough results when they simultaneously improve their operating discipline and make portfolio moves that collectively redefine their business.”¹

#2 “Transformation spans your entire organization, to address all the changes needed to reach your full ambition. “²

#3 “…rapid, visible, and sustainable step-change improvement in business performance; strengthen their organizations to win in the future; and turn their companies’ upside potential into radical performance gains.” ³

#4 “Business Transformation is the process of fundamentally changing the systems, processes, people and technology across a whole business or business unit, to achieve measurable improvements in efficiency, effectiveness and stakeholder satisfaction. As such, a business transformation project is likely to include any number of change management projects, each focused on an individual process, system, technology, team or department”⁴

#5 Business transformation has three categories of effort:⁵

1. Operational: Do what you are currently doing, better, faster, or cheaper
2. Core transformation: do what you are currently ding in a fundamentally different way e.g. Netflix changing from sending DVDs through the mail to streaming video.
3. Strategic – Change the very essence of the company e.g. Amazon from retailing to cloud computing services.

#6 Transformation is described in terms of the changes to the company’s business model. The business model describes how a company creates value for itself while delivering products or services to C&U (Customers and Users). 

There are 9 components to the business model:

1. Target C&U segments
2. C&U value proposition
3. C&U relationships
4. Channel
5. Key partners
6. Key resources
7. Key activities
8. Cost structure
9. Revenue streams

Each type of transformation is described in terms of changes to the three critical customer components of the business model and other business model changes.

1. Who are the target C&U segments?  Who exactly is the company creating value for? What are the geographic, social, and demographic characteristics of each C&U segment? What is the market size?
2. What is the value proposition of each target C&U segment?  A value proposition is the C&U perception of value i.e. All of the C&U perception of achieved benefits vs all of the C&U perception of incurred costs.  Benefits may include: financial and non-financial e.g. time savings, convenience, status, etc.  Costs may include financial (purchase costs, costs to switch, other adoption costs, ongoing costs) and non-financial (e.g. time, inconvenience, loss of status, etc.)
3. C&U relationships.  What type of relationships do C&U expect to have with the company?

Customer needs, the competition, technology, the economic and political climate are constantly evolving and changing.  Successful companies understand the outside world and evolve as the world around them changes.

Transformation becomes an issue when the company’s leadership no longer understands the outside world, makes decisions in this isolation, and then has a crisis.

There are five types of transformation. A company may be undergoing more than one type of transformation at the same time.

#1 Restructuring

1. Target CU& segments: The company remains focused on the same (or subset) of target C&U with the same set of problems and needs.
2. C&U value proposition: The value proposition perceived by C&U is little changed.
3. C&U relationships:  Limited changes to C&U relationships
4. Other business model changes: The actions taken have a financial focus: reducing debt, selling assets, reducing the number of C&U (Customers and Users), reducing unprofitable C&U, reviewing all components of the business model to reduce debt and costs, selling pieces of the company, etc.

#2 Turnaround

1. Target C&U segments: The company remains focused on the same (or subset) of target C&U with the same set of problems and needs.
2. C&U value proposition: Focus on fast major improvements to the perceived value proposition.
3. C&U relationships: Focus on fast major improvements to the C&U relationships.
4. Other business model changes: Changes necessary to support the value proposition and relationship changes.

#3 Operational Transformation

1. Target C&U segments: Focused on the same (or subset) of target C&U with the same set of problems and needs.
2. C&U value proposition: The value proposition perceived by C&U is little changed.
3. C&U relationships: The C&U may expect major changes to their relationships with the company e.g. move from in-person to mobile app.
4. Other business model changes: Components of the business model are improved by a large factor e.g. 10 times.

#4 Business Model Transformation

1. Target C&U segments: The focus is still on the same C&U, but their problems and needs have fundamentally changed.
2. C&U value proposition: The solution perceived by the C&U requires fundamental change.
3. C&U relationships; The C&U expect fundamental change in their relationships with the company.
4. Other business model changes: Most or all components of the business model require fundamental change. 

#5 Strategic Transformation

1. Target C&U segments: There are new C&U with new problems and needs requiring a new business model.  Think of Google.  It started out to be the best search engine.  Now Google produces the Android operating system, smart phones and has been working on driverless cars.
2. C&U value proposition: These new C&U will have different value propositions than those for existing C&U.
3. C&U relationships: A strategic transformation is basically creating a new company.
4. Other business model changes:

What are potential measures of transformation outcomes?

1. Customer perception e.g. NOS (Net Promoter Score), Customer Satisfaction, Customer perception of competitively differentiated value proposition)
2. Customer behaviour e.g. Retention, Market share, spending per customer
3. Employee perception e.g. Employee satisfaction, employee engagement
4. Employee behaviour e.g. % of desired hires who accept, retention/turnover
5. Company operational e.g. productivity measures, elapsed time for tasks.
6. Company financial e.g. Return on investment
7. Shareholder e.g. perception, total shareholder return
8. Partners and suppliers e.g. perception, ease of doing business, revenue and profit.
9. Regulators e.g. perception and compliance reports
10. Politicians
11. External analysts e.g. variety of measures
12. Society and the public e.g. a variety of perceptions.
13. Board of directors

Who needs to change or act differently in order to achieve the target outcomes?

1. It depends upon the scope and type of transformation.
2. People could include: cash paying customers, users, partners & suppliers, board of directors, CEO, C-Suite, employees.

What is the greatest challenge in achieving the outcomes?

1. Those who need to change do not understand the benefits to them and thus resist or do not change.

What are your next steps?

1. Define the words/concepts you’re using, in a glossary.  I’ve seen major confusion when the same words mean different things to different people.
2. Define for your company the criteria for what is business transformation. Not every project is a transformation project. Use some examples.

Footnotes

¹ McKinsey, “The truth about transformation”,

https://www.mckinsey.com/featured-insights/the-truth-about-transformation

² Bain, “Business Transformation”

https://www.bain.com/consulting-services/transformation

³ Boston Consulting Group, “Business Transformation”

https://www.bcg.com/en-ca/capabilities/business-transformation/overview

⁴ Change Associates, “What is business transformation?”

https://changeassociates.com/what-is-business-transformation/

⁵ Scott Anthony, Harvard Business Review, Feb 29, 2016, “What do you really mean by business  transformation”.

https://hbr.org/2016/02/what-do-you-really-mean-by-business-transformation