Why Many Transformation Efforts Don't Achieve Breakthrough Performance

An Executive Viewpoint

Transformation Breakthrough Performance

Introduction

Today’s intensely competitive business arena and the increasing pace of change in technology place companies in a time of unprecedented transformation, shaping and reshaping the way they do business. KPMG’s 2016 Global Transformation Study estimates that 96percentof the 1,600 surveyed companies are undergoing or planning some type of transformation, and many participants predicted they are entering a mode of continuous transformation.

But the challenges to this new state are formidable, and most transformation efforts fail:

  • 47 percent of the KPMG surveyed companies stated they will not be able to realize sustainable value from their transformation
  • A McKinsey study in 2013 found that 70 percent of transformation efforts fail
  • Among the 30 percent that succeed, “success” actually meant they either broke even or finished the change program; but they didn’t deliver the anticipated business results

No company should undergo the challenge, effort, and expense of transformation only to break even or remain in the same relative competitive position.

All companies reach a point where their current business approach is fundamentally challenged and at risk of not delivering future success, no matter how successful they have been or for how long. Even iconic companies. IBM went from adding machines to mainframes; then just on the brink of collapse, the business transformed from mainframes to software and services. Kraft Foods, the largest food and beverage company in the US, began underperforming and went through a three-year transformation to become nimble and organize for long-term growth. Microsoft, despite its longstanding triumphs in desktop computing, is still in the midst of transforming to a mobile world. And to compete with nimble startups born in the cloud era, software giant Oracle is transforming its business to a cloud model.

New technologies put companies at risk for being overtaken by competitors. New market entrants can react faster since they do not have constraints such as sunk investments or concerns about cannibalizing existing business to take into account in their decision making. Companies need to move with speed and courage to find ways to respond, expand their capabilities, and deliver new value to customers.

Cecilia Edwards

Cecilia Edwards
Partner
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