Article

Business Transformation: Aim High

Successful transformations call for ambition. Executives can maximize results by smartly managing launch, refinement, and execution.

By Simon Henderson, Patrick Litré, Rasmus Wegener, and Mark Capeless

Μαρτίου 14, 2023

Test, learn, and fail fast is one of the best formulas for rapid innovation. Our study of more than 18,000 business transformation initiatives shows that this approach means even strong transformations will include ideas that don’t work out. As executives learn more they will need to revise their estimates of how much initiatives will deliver.

That’s not a failure.

It’s often just the opposite: a sign that things are being done right, that estimates are getting more accurate, and that teams are being bold. The best leaders and programs instill discipline in initiative planning and execution, improving the initial accuracy of estimates and maximizing how much of that value is delivered.

What to expect and how to manage for maximum results

1. Fail fast

Early in a program, lots of ideas will be generated that need to be structured and tested. Typically, 10% to 15% of initial projects are quickly discontinued, but companies in the top quartile reduce that to 5% to 10%.

What to do:

Document assumptions and hold leaders accountable: Initiative leads and sponsors should be able to explain simply how estimates were generated and how much confidence they have in them.

Cut the noise: Struggling initiatives should be worked on or retired quickly. Initiatives that sit in planning rarely succeed.

Keep filling the funnel: Continuously identify new sources of value and test new ideas to ensure that the portfolio of initiatives will deliver on the program ambition.

2. Refining estimates

As teams dig in and new information comes to light, estimates will become more accurate, leading to an average 8% to 11% adjustment. Top-quartile companies can get this down to zero to 5%.

What to do:

Don’t trust a number until finance approves: Finance validates that estimates are reasonable and how performance will be measured.

Make methodology clear: Understand why you are estimating and ensure the methodology is clear, consistent, and aligned with how bold you want to be.

Be bold but be reasonable: Calculate targets using clear, simple assumptions that are ambitious but attainable.

3. Execution

Some 10% to 14% of estimated value will generally be lost during implementation. Top-quartile companies can reduce this to 5% or less, and sometimes eliminate it altogether.

What to do:

Reward the right behaviors: Celebrate reporting performance—whether good or bad—consistently and on time, helping leaders to quickly amplify the good, and fix—or stop—the bad.

Pay attention: Regularly review initiatives, clear roadblocks, redistribute resources, and scale early successes.

Maintain a single source of truth: Programs that span business units, regions, products, or functions need a shared tool to track progress and performance and ensure teams are accountable and leaders engaged.