Thursday, June 01, 2023

Fwd: Change Your Trajectory: The Transformation Imperative in Uncertain Times

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This bold approach can make companies more resilient and cost-smart.
BCG - The Boston Consulting Group
Change Your Trajectory
May 2023

Business Transformation
When the Going Gets Tough, the Tough Transform

In an uncertain economy, some companies may be tempted to hunker down. That's understandable, but it risks putting them at a competitive disadvantage. In a downturn, the gap between winners and losers only widens. Instead, companies need to adopt a mindset of change in both good times and bad.  

Embrace the Uncertainty 
There's no question that executing a successful transformation today poses challenges: the level of uncertainty in the macro-environment coupled with the pace of change required makes driving change more difficult. In fact, BCG research shows that only 30% of transformations meet their goals.

But launching a transformation despite uncertainty can create real benefits. It creates a clear set of rules that everyone in the organization can use to operate. It also helps teams deal with uncertainty by giving them clear goals. And it builds new skills in terms of resilience and problem-solving.
30%
transformation
success rate
Success often comes down to leadership commitment, focusing on culture and executional excellence
How do you know when a transformation is working?
  • It's when leadership sets clear goals and maintains consistent communication.
     
  • It's when company culture is prioritized, and employees feel engaged and empowered to embrace new ways of working.
     
  • It's when people are encouraged to think more critically and to challenge their way of thinking.
Read more

Look Beyond Costs
Cost efficiency is the main objective of most transformations. But moving away from a cost-cutting mindset and considering a company's full potential is a much better path to financial and operational resilience.

For example, one retail company wanted to reduce costs in its supply chain. But a more expansive view showed that costs—while critical—were only part of the answer. Cost savings from that process (more than $100 million in year one alone) funded two other initiatives: reinvigorating the brand and revamping its operating model to strengthen customer connections.
$100m
in annual savings from a cost-led business transformation
That kind of holistic approach—call it cost savings plus—leaves companies more resilient and better equipped to face future challenges.
Read more

Reinforce the Balance Sheet
A resilient balance sheet can help companies manage tough operating environments. It provides breathing room to operate under stressful conditions and withstand the scrutiny of shareholders, creditors, and regulators. It also enables them to pursue opportunities, such as M&A and share buybacks. In BCG's experience, strengthening the balance sheet can boost EBIT by 10% to 20%.  
Learn more
"When organizations create the right environment for transformation and spend time helping the doers, results follow in the financials—and in improving the culture, employee engagement, and in upskilling people."
Kristy Ellmer
Managing Director & Partner
Boston
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