Business Transformation /Corporate Transformation.

Five Truths (and One Lie) About Corporate Transformation.”

What are the 4 R's of business transformation?

As always, there's been a lot of learning, but all that has led me to believe this: to be successful, it's certain we all need effective programs for recruiting, recognition, retention, and referrals. “The 4 Rs” if you will.

Change can be daunting for any business. It can even be painful. But when change fails to deliver short- and long-term value for a company, it can land a CEO in the unenviable position of having led a failed transformation.

The odds are certainly stacked against success. A new BCG global analysis shows that only 1 in 4 transformations deliver value-creating, enduring change.

A 75% failure rate is sobering for any CEO mulling a transformation path. But BCG’s analysis has brought to light five truths CEOs can embrace to improve their chances of leading a successful transformation, as well as a common lie they should never tell themselves.

Business transformation is an umbrella term for making fundamental changes in how a business or organization runs. This includes personnel, processes, and technology. These transformations help organizations compete more effectively, become more efficient, or make a wholesale strategic pivot.

What are the four stages of business transformation?

FOUR PHASES OF TRANSFORMATION Source: adapted from (Llewellyn 2018) As shown in (Llewellyn 2018) the BTM (Business transformation management methodology, contain four steps or four phases of transformation: (Figure 2) • Envision; • Engage; • Transform; • Optimize.

Five Truths

1. CEOs can (and should) fix things before they break. Starting a transformation when a company’s total shareholder returns (TSR) are level pegging or ahead of industry averages delivers significantly more value (2.7 percentage points higher TSR over three years) compared to change efforts launched after a company has fallen behind its peers.

In an increasingly turbulent world, the need for and the challenges of corporate change remain remarkably persistent. Empirical insights reveal how change leaders can beat the odds.

A forward-thinking CEO agenda has never been more crucial. Our insights give you greater clarity on what lies ahead, helping you lead with confidence.

2. Leadership will make or break the transformation. Success often pivots on whether a company’s leadership fully demonstrates their willingness and commitment to change. Sometimes, this necessitates an organizational restructuring. BCG data shows that launching a leadership change during a transformation can deliver 4.1 percentage points greater TSR performance over a five-year arc (compared to a previous downturn period). The impact on TSR can nearly double that if the new leadership comes from outside the company.

3. CEOs cannot cut their way to greatness. One year into a transformation launch, investor expectations drive over 70% of TSR outperformance (compared to peers), while efficiency improvements account for only 13%. This disparity underscores the need for CEOs to craft a compelling transformation plan and shareholder narrative at the start of their efforts. Five years into a transformation, cost reductions do play a bigger role, driving more than 30% of TSR outperformance. But even that share is eclipsed by revenue growth, which accounts for more than 40%—indicating that when it comes to long-term transformation success, execution is key.

4. Transformations require a long-term orientation. Transformations with a long-term strategic orientation are associated with 12.5 percentage points higher TSR over five years, BCG analysis shows. Organizations that strike a forward-looking stance often have an entrepreneurial culture that continuously develops new ideas and is unafraid to try unproven models. To support this bold, innovative orientation, companies can complement traditional, backward-looking performance metrics with more forward-focused ones.

5. CEOs cannot make things up as they go. Establishing a formal transformation program is associated with 5.9 percentage points greater TSR over a five-year change effort. In the same vein, CEOs who put their money where mouth is can also unlock greater transformation value. According to BCG’s analysis, a higher-than-industry average restructuring investment is associated with 5.7 percentage points greater TSR in the long run.