In a rapidly changing world, business transformation must be quick and decisive

Transformation is never easy, but a leader’s ability to pull it off can be the difference between grand success or epic failure.

In a world of rapid disruption, this becomes even more critical. And while transformation can be difficult to execute, especially on an accelerated timeline, if you don’t proactively disrupt your business on your own terms, you may find someone else eager to do so on theirs.

A number of recent corporate upsets demonstrate just how critical it is to take the right action, in the right way and at the right time in the face of change.  For example, global conglomerate WPP has been one of the UK’s great business success stories. But change can come from unexpected places and wrong-foot even the most gifted management teams.

In WPP’s case, this change came from both from its own industry (the rise of big tech and social media companies) and those of its clients (the impact of activist investors and “zero budgeting” on multinational consumer goods firms’ investment budgets, for instance). And so, a company whose success was built on combining a broad range of different businesses has so far found it difficult to effect the necessary change at the necessary speed.

The British automotive and aerospace components company GKN is an extreme example of the impact of an unwillingness to transform. While Melrose Industries -- the turnaround specialist who executed a hostile takeover – ended up being the ultimate agent of change, concerns had been raised long before that firm’s arrival.

Investors had previously called for a new leader, in the face of a host of claims around waning productivity. At that point, the case was clear for fundamental and wide-scale transformation. If the company had set about rigorously identifying its “must-do” priorities and a clear path for achieving them, it would certainly have bought GKN more time.

I was reminded of both situations as I scanned through recent headlines about Facebook, which focused on issues such as: executives leaving the company (CNBC), whether it should be investigated for violating antitrust laws (The New York Times), and its storage of user passwords (NPR).

Whether you are a fast-growing tech giant or a traditional company that is facing disruption without making front-page news, it is important to remember that inertia comes with a significant price.

On the flip side, Unilever has demonstrated the benefits decisiveness can bring. When finding itself in the crosshairs of Kraft-Heinz, it had the courage to look at itself with a fresh perspective, making a number of hugely significant decisions that had a fundamental impact on the shape of the business.

Unilever communicated its transformation clearly and consistently. As a result, it was duly rewarded by the market, with the share price now above that of 2017’s Kraft-Heinz bid. Interestingly, Kraft-Heinz’s share price has declined steadily since the bid, trading at $96.65 in 2017, compared with $32.41 at the time of this writing.

Or what about Whitbread? With an activist on its board, the company recently sold Costa Coffee to Coca-Cola, placing its focus on its core hotel and hospitality business. They essentially “activist-ed” themselves proactively, to positive results. Coca-Cola paid full price for the coffee platform, and Whitbread maintained control of its destiny.

The issues facing today’s businesses are diverse and profound. Digitization, generational divides and continued social change are just three phenomena that are putting companies under acute pressure.

How should businesses respond? There are seven keys to bear in mind.

1. Know what needs to change. Companies must be brutally honest with themselves about where their vulnerabilities lie.
2. Think small as well as big. Developing a transformation program is a brick-by-brick process. High-value, high-impact initiatives will be important. There is a propensity towards spending lots of money on standalone large-scale change, yet significant change can also come from the accumulation of smaller initiatives.
3. Work together. Once a strategy has been developed, driving progress from the top of the organization is important so the entire business can successfully transform as one.
4. Communicate. While there are several attributes leaders must demonstrate during times of change, the ability to communicate the strategic vision is paramount. Stakeholders will need to understand where you are going and how you plan to get there.
5. Speed is everything. The real enemy of a successful business transformation is a lack of speed. Businesses must be dynamic, with the ability to change direction and bring in fresh perspective as needed.
6. Innovate. Innovations in technology, particularly in how to analyze and automate, can significantly increase the pace of transformation.
7. There is no one-size-fits-all approach. This might be the most important principle. There needs to be true understanding of a company’s strategic, operational and cultural nuances to be able to proceed in a way that’s right for the business.

Put simply, against the backdrop of unprecedented technological change, unpredictable consumer behavior, economic turbulence and continued geopolitical uncertainty, businesses, old and new, do not have the luxury of time. If you do not transform in the face of these challenges, transformation may still occur – with someone else in charge.