The key to success in every business transformation is the human factor. It is the catalyst that ignites the change. One can design the perfect process, functional specifications, or technical requirements, but if the people that must work with it in the end do not adopt the designed processes and tools, they still are worthless.
Business transformation implies building up new capabilities in the organization. Implementing a new capability requires the existing workforce to change significantly. To manage this change, we often use a framework called ‘the building blocks of change’. It is a powerful framework, developed by McKinsey, describing four key actions that will influence employees’ mind-sets and behavior.
What we have learned over the years is that it is important to tailor the four building blocks of change for specific stakeholder groups. This means that for a successful business transformation, one should have a clear strategy that takes different stakeholder groups and their drivers into account. During large (global) business transformations we have used the building blocks of change, in combination with the stakeholder groups, as a structure to define a change management strategy. We made them concrete and actionable, which resulted in strong results
Figure1. This article focuses on the change strategy part of our Transformation Bridge methodology
Business transformations at a global scale typically involve four types of stakeholder groups:
C-level – usually this stakeholder group is involved from the start, but in case of a large transformation that crosses country boundaries or business division boundaries, some additional change strategy is needed for this group as well. This group is typically driven by a positive business case, a better ROI and a competitive advantage.
Business – this stakeholder group refers to the part of an organization that is responsible for the development and the sales of a product or a service. This group is typically driven by product innovation and better (easier) sales.
Service – this stakeholder group refers to all the parts of an organization that are responsible for servicing the business, for example analytics, legal, HR, production and supply chain and finally the IT department. One would expect that these stakeholder groups are typically driven by a happy customer – thus the business – but in general these departments are more likely to be driven by efficiency gains.
Clients – of course in the end the client is one of the most important stakeholder groups. A client should either benefit from it by a better product, service or customer journey, or should not notice the change at all.
The influence model consists of four building blocks of change that we have made concrete and actionable with our experience.
The first key action is role modelling. When employees see their company leaders and direct colleagues expressing the desired mind-set and behavior shifts, they are more likely to follow.
The second action is fostering understanding and conviction. This action is focused on making employees understand why the new mind-set and behavior are important. By doing so, employees are more likely to support the change.
Thirdly, by reinforcing with formal mechanisms, employees will experience that the company’s structures, processes and systems are supporting the required change. This will help employees in adopting new mind-sets and behaviors.
Lastly, developing the required talent and skills is key for employees to be able to adopt new behaviors. By assessing the current – and newly required skills, gaps can be identified that are essential to fill before change can be adopted.
Within this change management framework, we have filled the building blocks with concrete actions for key stakeholders that are typically required to adopt a new mind-set and behavior when implementing a new capability.
Figure 2. The building blocks of this framework are inspired by McKinseys’ building blocks of change
Further elaborating we would like to point out some highlights of the matrix;
It goes without saying that leaders must be role models for their teams. However, do not underestimate the power of peers, ambassadors and other influencers that are not hierarchical superior to the change population. By having multiple people elucidate the positive effects of the intended change, you can create a movement catalyzing the change.
The endorsement from C-level stakeholders is key for success in a digital transformation. To create understanding and conviction within this stakeholder groups, we typically set up a value realization office (VRO). Depending on the size of the transformation, this office helps to quantify the initial value for C-level stakeholders and shows the value that has been realized during the transformation so far. Value is broadly defined here, from pure economic value to environmental - and social impact, displaying the full range of benefits the transformation is realizing.
For business - and service level stakeholders purely focusing on value is not enough. These people are often directly affected in their day-to-day activities due to the transformation. Therefore, it is important to include them in the design phase of the program or involve them in an impact assessment workshop to ensure their most important requirements are captured and dealt with.
There are some typical company structures that, when utilized correctly, can support change. For C-level stakeholders this means that a new capability should always have a clear owner. It should be positioned in the portfolio of a board member and contribute to their overall business case. This can be formalized by assigning new KPIs that person can be accounted for.
KPIs should be designed in a holistic way, meaning they should be integrated across all levels of the organization and balanced with existing responsibilities. C-level KPIs are typically of strategic nature and can only be achieved when multiple tactical and operational KPIs are met. These tactical and operational KPIs are embedded in the work of the business- and service level stakeholders.
When organizations’ capabilities change, it most likely requires new talent and skills as well. The development of these talents and skills can range between training current employees and sharing skills between different regions or departments to hiring new talent or even outsourcing parts of the business.
Choosing between these options should not be taken lightly, as it can have a large impact in the daily work of employees. Imagine someone being overstretched in a task, or even worse, someone losing ambition because an inspiring part of the job is outsourced. From our experience it is best to gather input for these decisions through an impact assessment workshop.
It becomes clear after putting the building blocks of change into practice that the actions formulated based on the framework must be tailored to each stakeholder group. Each group has different drivers, ambitions and KPIs to be accounted for. All these factors need to be considered during the roll-out of the intended capability.
Figure 3. An explanation of some of the tools mentioned in the article