Video
Before beginning a transformation effort, a company should know what type of change it needs. Manny Maceda, who leads Bain's Global Transformation practice, describes the vital factors that determine the magnitude of required change.
Read the Bain Brief: Choreographing a Full Potential Transformation
Read the transcript below.
MANNY MACEDA: In choreographing a transformation, it's first important to understand what kind of transformation the company situation really is, because there are many different flavors. Think of it in two axes, and perhaps a classic consultant two-by-two will be helpful.
On the vertical axis, how stable is the business model, the basis of competition that the company is operating in—is it pretty stable for the next few years, or are all the transformative forces in the industry making it obsolete?—and how companies compete in that industry will have to dramatically change?
A horizontal axis, then, is also how strong is the competitive position of a company? That one might be easier to figure out. Are you a leader? Are you the market share player? And where you stand in the quadrants on those two dimensions will have meaningful impact on the nature of your transformation agenda and ultimately your choreography.
Let me explain. If you're a company in the upper left, we call that a classic turnaround: Stable industry, but you're a follower—weak market share position. The choreography motions to move to the right are pretty straightforward: Cut costs, gain share, perhaps improve your go-to-market processes.
If you are a company on the bottom right, where you are in a very strong competitive position but in an obsoleting industry—you know, perhaps you are Intel and you're focused entirely on PC semiconductors and the world's changing, but you have a strong enough position and an ability to reinvest with time—we'd call that reinvention. And you need strategies to build second engine.
The bottom left might be more challenging but perhaps simpler. We call it "go big or go home." You have to make a big strategic investment to totally change the company. And perhaps the answer is go home. For example, Alcatel-Lucent in global networking equipment, subscale player, the answer for them ultimately was sell the business to a competitor. But in the act of going home, they gained meaningful enterprise value.
And then perhaps one of the harder ones, the upper right: essentially, a company some would argue doesn't need to transform. In a world where forces are constantly coming, Walmart helped coin the phrase for us: "burning ambition" as opposed to a "burning platform"—because if you want to stay ahead, you almost have to transform in advance of the forces in industry driving changes to your business model.
Once you understand those starting points, then the choreography really comes into play. And we can lay out the classic set of levers in about seven boxes to achieve an integrative transformation vision. And some of them might be obvious from left to right. You might have to change strategy and the product, business unit, segment, geography level. You might have to change your customer strategy. You might have to create a reinvestment capacity by launching a performance improvement or operating excellence program. You might have to change your organizational structure and operating model. Ultimately, you might have to change your capital structure.
In the case of Dell Computer, for example, as they transform to Dell Technologies, Michael and the team found that by going private, it was actually easier to achieve some of the transformational changes. And then ultimately there are also two integrative and horizontal levers. One is digital, where just the act of going digital today has implications for your strategy, for your supply chain, for your customer interfaces, for your organizational structure—in many cases, even for your evaluation.
And then lastly, Results Delivery, or change management, because while there are some logical ways you choreograph each of these pieces that are dependent on what quadrant you are in, the actual constraint to choreography might be the organizational capacity for change—the bandwidth, if you will.
And so managing all of these together, creating an appropriately choreographed set of moves to achieve a transformation that might be different, and is different, but will probably have a pattern consistent with where your starting point was: That's the art of the transformation, perhaps. But we like to think of that more than art. That's also the science. That's the sophisticated pattern recognition that you see. And that's what makes transformations both interesting, challenging—and, if you succeed, actually quite rewarding.
Read the Bain Brief: Choreographing a Full Potential Transformation