In a survey of enterprise level companies* released by Capgemini Consulting in partnership with the Economist Intelligence Unit, Western European businesses have launched on average seven major transformation programmes in the past three years.
Of these, 44% are motivated by the growth of international competition, 34% are motivated by industry consolidation and 34% are motivated by increased competition in domestic markets. Whilst 86% of those questioned feel that managing these business transformations is now an integral part of management, only 30% believe it is something at which they excel.
These transformation projects tend to focus on reducing cost due to new economies of scale at an international level and, increasingly, on achieving growth by seizing each and every opportunity offered by emerging markets. Whether the intention is to boost turnover or to improve profitability, the study underlines the extent to which economic globalisation impacts on the number and content of these transformation programmes.
The analysis reveals two major forms of transformation:
- Fundamental change that generates a strong impact on results in less than two years, such as mergers and acquisitions (57%), outsourcing and offshoring (53%), restructuring (46%) or strategic changes (46%). These programmes involve external players and generate major transformation within the organisation
- Programmes that generate comparative improvement, such as value-chain optimisation (33%), cross-functional performance improvement (44%), information systems redesigning (54%).
These programmes require the long-term commitment of a large number of internal players Sonia Artinian, Director of Capgemini Consulting's "Transformation University"**, says: "The sheer number of programmes being implemented simultaneously implies that every manager is an agent of change and must have a comprehensive command of the new skills and forms of behaviour in order to launch, steer and achieve major changes in collaboration with their teams. Moreover, since the key players are in such great demand, they have to learn to do all this ever more rapidly, while relying more and more on their employees."
Senior executives are not satisfied with the results of their transformation programmes.
Lack of control over the outcome and inadequate project ownership are considered to be the chief causes of failure. In fact, 46% of the executives cite the failure to achieve a project's original objectives, and 41% cite the inability to achieve buy-in from employees.
More specifically, the majority testify to the difficulty they have in handling their programmes' critical implementation phases.
Of the executives questioned:
- 70% express dissatisfaction with the communication of objectives to employees, and 75% express dissatisfaction with training, commitment and people management
- 73% consider themselves to be unsuccessful in avoiding slippage in execution time
- 70% say they are not in a position to properly assess the success of their programme
Jean-Franois Lendais, Vice President in charge of the Transformation Consulting unit at Capgemini Consulting says: "This feedback reaffirms some fundamental principles: business transformation is successful when it is demonstrated that the results do, in fact, feature in the company's accounts and when working methods have been profoundly altered - that is the only proof of change sustainability."
Whilst globalisation imposes constant and rapid changes it also makes these transformations more complex. For example, on average only one-third of the revenue generated by France's top 40 companies is actually made in France. So, major transformations generally involve several countries with different languages, cultures and management styles, making implementation even more complex.
Making a major transformation programme a success is a matter of commitment.
The first stages of developing transformation projects do not seem to pose significant problems: two-thirds of the executives questioned say they perform well in identifying the need for change, setting objectives or convincing their shareholders. They therefore pay great attention to the preliminary studies when justifying the launch of a major transformation project.
However, executives are much less confident about maintaining strong momentum throughout the transformation process. Consequently, strong leadership and consistent support from senior management are considered important levers to ensure the project's success (65%), followed by alignment with overall business strategy (42%) and buy-in from employees (32%).
Interviewees unanimously agree that senior management must constantly remind employees of the importance of the transformation process to the business's success and that management must make regular demonstrations of its commitment to this success.
* "Trends in business Transformation" is a white paper produced by Capgemini Consulting and written in co-operation with the Economist Intelligence Unit.
** "Transformation University" - Founded in 2006, Capgemini Consulting's Transformation University offers tailor-made training programs dedicated to executives and managers.