Keeping transformations on target
Analysis of high-stakes transformations reveals a few pragmatic lessons that increase the odds of meeting the organization’s objectives.
Any transformation worth the name starts with ambitious goals. Setting them is hard enough, especially for organizations long used to the risk-averse pattern of underpromising and overdelivering. But the real work starts once the organization sets out to turn the leaders’ targets into initiatives that everyone else designs and implements from the bottom up.
Keeping hundreds or thousands of initiatives on track is a monumental task, one that too few organizations around the world do well. Recent research reconfirms earlier findings that only 30 percent of transformations deliver their intended benefits and meet the targets committed to during the program-planning stage.
These odds are simply unacceptable, especially when the stakes are high. We therefore reviewed 18 transformations at 13 organizations that were in the most critical circumstances. While some were facing significant financial and operational challenges, including rapidly deteriorating performance or liquidity concerns, others were simply seeking a substantial step up in their performance.
Our focus was on the practical lessons these organizations learned in making their ambitions real. Our analysis was enabled by McKinsey’s proprietary program-management platform, Wave, which generates detailed reports tracking the financial and operational impact of individual initiatives.
Wave’s data repository allowed for a comprehensive analysis of the factors contributing to initiative success—ranging from how impact targets were determined, and how quickly initiatives progressed through the various stage-gate reviews, to the structures and timelines of the programs the initiatives supported. We then supplemented our findings with in-depth interviews of executives at representative companies included in the data set.
All the organizations were located in Asia–Pacific: that focus ensured greater consistency in the value-tracking approach and data structure, letting us make more nuanced comparisons. Nevertheless, the organizations varied in industry, size, and program impact. The sectors represented included construction, consumer goods, electric power, mining, natural resources, oil and gas, and retail banking. Annual revenues ranged from $2 billion to $28 billion, and total transformation impact ranged from $450 million to $4 billion—but we found no direct correlation between the size of the company and the impact of its transformation program.
Our detailed analysis of these materials has allowed us to draw three main insights that can serve as potential guiding principles when structuring a large-scale transformation program:
Be relentless. From the beginning, organizations should assume that most initiatives will be worth a lot less than they think. Moreover, most of the companies in our sample fell short of their initial goals and needed an additional round of back-to-the-well idea generation. And, they had to be careful about allocating management time, so that smaller initiatives got their due—they accounted for about half of the program’s value, but they could get lost in a focus on only the biggest projects.
Focus your resources. Organizations must resist the temptation to spread their most effective leaders too thin. Three initiatives were the typical burden a leader could shoulder at once. Engaging more of the organization as potential initiative owners allows each initiative to get the support it needs without overburdening a few high performers. Reporting must be prioritized as well. Too many milestones in initiative plans can create unnecessary burdens; most programs try to capture too many metrics—and usually fewer than 30 percent end up actually being used.
Plan and adapt. Most initiatives were at least somewhat delayed in implementation.
