Do you need to transform you company? V3

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?”

Footnotes

1 PWC, “PWC’s 26th annual global CEO survey”,

https://www.pwc.com/gx/en/issues/c-suite-insights/ceo-survey-2023.html

2 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/