Transformation Management

Every corporate leader hopes they're not going to be the next in line to face up to new competition that can render what their company does either inferior or obsolete. 

While for many years there was resistance to the notion of disruption, most leaders have now accepted that no organisation can remain the same and that they need to quickly deploy effective countermeasures that can rival the new kids on the block, and protect their position in the market.

But often the changes that companies are being confronted with are happening far too quickly for many of them to respond effectively, with the assets and capabilities they already have. The theory of responding effectively and the reality of doing is successfully are two very different things. 

Most companies talk about transforming, but aren't really doing it. Many talk about innovation, but aren't really doing it. And often transformation is easier said than done, particularly when many organisations don't have people that are professional innovators or orchestrators of transformation with a proven track-record. And just as with any other area of business, to be successful, you need experts and processes. Because while a good heart and good intentions are noble, it's simply not enough.

An increasing number of executives are also recognising that transformation is so much more than digital marketing, cutting costs and new technology. They understand that to transform, their organisation needs to innovate. But when innovation has never been a core part of the organisation, they realise that they're missing a vital prerequisite for transformation. 

And while some companies attempt to set up Innovation Labs, many eventually learn that there's more to innovation than multi-coloured post-it notes, whiteboards, bean bags, pizza and enthusiastic staff.

Companies often lack a clear framework for managing innovation. So even though there's a focus on cool new products and services, there's no consideration for process-driven innovation or an underlying business model.

Another problem with some of these innovation labs is that what comes out of them often fails to see the light of day because of resistance from leaders that are still stuck in the past and don't want to see their old products or services put under any threat - especially by their own company.

More CEOs are also coming to terms with the fact that while they have a CIO with an IT department, it's typically staffed with traditional IT folk who are skilled at keeping the lights on.

Coupled with the fact that many companies have struggled for years with executing basic change projects, it makes the odds of stepping up to the transformation challenge quite unrealistic for many. The truth is, most organisations aren't prepared for transformation.

So what's a CEO to do when the board is expecting them to transform? But they don't have an organisation that's up to it.

One way is to transform the organisation so that it's prepared to undergo transformation. And another is through acquisition. Because if you can't build it, you can often buy it. 

You can buy great innovation, great capabilities, and great new products and services, and an increasing number of CEOs are recognising that their best chance of transforming their business is to look outside their own four walls.

There's a growing trend to acquire start-ups for product or service innovation, that are predicated on a strategy of building new capabilities or business models. Because buying an existing business can be a much more appealing option for a CEO.

We only need to look at the behaviours of some of the most successful companies of our time to see that there's a lot to be gained from acquisition. Because when some of the most forward thinking companies on the planet know that they need to look outside for new capabilities, that's a good sign to others that they might consider thinking the same way.

Digital native companies, such as Amazon, Facebook and Alibaba are constantly buying other digital companies to expand their capabilities.

Often these acquisitions aren't the traditional deals aimed at building market power. Instead they're deals that enable them to acquire capabilities that accelerate growth, or enter faster-growing product or service segments or geographies.

Manufacturing, technology, or human knowledge – whatever the capability, acquisitions are a way to acquire it.

It can take years to build distribution networks or gain a foothold in a particular market. While acquisitions, can accomplish that for a company much faster. 

Amazon acquired PillPack to get a foothold in the online pharmacy space, with their sights set firmly upon disrupting that industry's incumbents. Salesforce acquired MuleSoft which connects data, devices and applications, and Microsoft acquired GitHub.

If you can look across industries you'll see that both old-traditional companies and digital natives are acquiring start-ups. Which are often tech start-ups, but not always.

Remember what Unilever did to compete with Gillette? They paid $1 billion for the Dollar Shave Club, which was a new market disruptor in the shaving market. The Dollar Shave Club was hardly a tech firm, but it had a disruptive business model that Unilever wanted.

These and countless other acquisitions were to enhance capabilities and open up new markets. Because they create a fundamental shift in a company’s ability to win in its chosen markets or change the dynamics of an industry. Businesses aren’t acquiring other businesses simply to expand what they’re already doing. They’re doing it because, strategically, they have to – if they want to survive and thrive in the medium to long term.

Acquisitions are very challenging, but when we see their importance to the continued growth of the world's most prolific companies, we see that they are seen by many as a way to stay relevant during this period of economic change.

For the past two decades, Google and its parent company Alphabet have spent tens of billions of dollars buying new products and ideas. The firm’s smartest acquisitions have been in areas where it had no special expertise, but were still close fits with the company’s core search business. 

Google acquired Android for $50 million in 2005 because it wasn't strong in mobile operating system development, but it saw mobile search as the future. They were right and now a large proportion of the world’s smartphones are powered by Android. Then Google acquired YouTube 2006 after it had failed at its own attempt at Google Videos. Again, this was great foresight on the part of Google's leaders.

Similarly Facebook is regularly buying start-ups, many of which most of us have never heard of, such as Parse, which was developed to follow other apps and their analytics to see how they are growing, or dying. This was a capability that Facebook lacked but wanted. So instead of trying to build it they bought it for $85 million and absorbed it into its ecosystem.

Meanwhile other acquisitions by Facebook such as WhatsApp, Instagram and Oculus Rift are more well-known to us. But most of their acquisitions are of small unknown start-ups created by brilliant young people with no corporate background. Often the words digital and transformation don't even exist in their vocabulary of the people that create these start-up.

These are just some examples of how important acquisition is for even the best companies.

Digitally advanced start-ups are disrupting the norm in a way that doesn't happen naturally in controlled corporate environments. The people in these start-ups couldn't care less about how things have been done in the past or what is an industry norm.

The 20th EY Global Capital Confidence Barometer was published in April 2019, which gauges corporate confidence in the economic outlook. It revealed the sentiment of 2,900 executives in 47 countries and 14 sectors; 68 percent of whom were CEOs, CFOs and other C-level executives. 

25 percent came from companies generating annual global revenues of less than US$500m, while 24 percent were from companies with up to a billion dollars in revenue. And the remaining 50 percent enjoyed upwards of that.

59 percent of the 2,900 execs said they expect to acquire in the next 12 months, many of whom intend to use M&A as an accelerated route to reshape their portfolios. And 59 percent also aim to add new markets, customers and intellectual property in their effort to reinvent their business models.

The report clearly showed that for the majority of the 2,900 respondents, the fastest way to achieve transformation is through M&A.

The changing economic landscape has led to a growth in buy-to-transform business thinking, and it's not just the tech giants that have developed an acquisition mindset and a keen eye for promising start-ups. Because an increasing number of CEOs from non-tech industries are beginning to appreciate that their continued success could well be determined by their ability to acquire the right start-ups.

And those with deep pockets are happy to pay large premiums to get access to new or disruptive technologies, and the people who know how to exploit those technologies. Big companies sometimes make offers that small companies find hard to refuse. After all money's a great motivator. 

While every acquisition is different, those doing the spending are normally after the talent, technology, platform, brand, market, or business model.

But there's a lot for a CEO to consider when buying a start-up, and I don't just mean the due diligence, profits, and revenue. Because successful start-ups have often been built by people who have no corporate experience and no desire to conform. Their success is often built on having complete contempt for how many corporations operate - and for how some of their managers and leaders think and behave.

Some of the most successful start-ups look crazy from the outside. Their cultures are often complete opposites to what we see in an established corporate environment. So it's extremely important to consider how two polar opposite cultures could work well together.

It's also easier than ever to acquire a start-up because there are so many of them. And while around 90% of start-ups fail in their early days - despite their great ideas - there's still plenty of choice left on the table for executives to consider buying. 

Because while it might have cost $1 million to launch a start-up ten years ago, now it can be done for just a few thousand - thanks to the affordable access to new technology, which enables entrepreneurs to build new products and services and go to market extremely quickly and inexpensively. This also makes start-up failure quite affordable, because trying again needn't be expensive for persistent founders.

Creating start-ups is no longer about finding investors. Or at least it needn't be. All you need is a problem big enough to be worth solving, and the entrepreneurial spirit and mindset that can be found inside every successful founder these days.

Business leaders also need to consider the process they’ll use to capture sought-after strategic benefits once they conclude an acquisition. Because that's when the real hard work begins. 

The last thing that should be allowed to happen is for old cultures and mindsets from the established organisation to kill the characteristics that made the start-up such an attractive proposition in the first place. 

So after acquiring a start-up, one of the first activities for a CEO to consider drawing up a plan which describes the first 100 days of ownership, and how they'll communicate their vision to both the old and new workforces.

PMI Ascent - Digital Business Transformation Management Course

Demand for skills and talent looks different now to how it did five years ago, particularly in relation to digital transformation. This means that the challenges and opportunities HR professionals are faced with have shifted.

Talent acquisition strategist Matt Alder shares his insights on the fascinating topic of recruiting innovation and the new strategies organisations need to consider.

PMI Ascent - Digital Business Transformation Management Course

Whether the aim is to respond to disruption, create strong and sustainable value, or fulfil your organisation’s purpose, transformation is now an essential habit. People and companies that fail to learn how to really transform, will eventually become obsolete in a world which is increasingly focused on transformation.

CEOs are now under increasing pressure to continually balance short and medium-term objectives with long-term goals. They not only need to ensure their business runs well but they also need to reinvent the business model and enhance customer experiences. 

They need to foster the right mindset among their leadership teams, which in turn needs to nurture the right culture across the wider organisations. The best CEOs do a great of doing all that, so they can achieve their long terms goals, and short to mid-term objectives.

But the words goal and objective are often confused with each other. They both describe things a company wants to achieve or attain but in relative terms may mean different things. Both are desired outcomes but they're not the same.

Goals are broader than objectives, in the sense that goals are general intentions and are not always specific enough to be measured. Objectives are narrow and are set for certain specific tasks.

In the context of transformation, a goal is a broad primary outcome. It's the purpose towards which a transformation endeavour is directed. For example, a CEO might say; "I want our company to be the disruptor in this market". That's a very generic goal, which many other CEOs might also want to achieve. It's an outcome they want in the longer term.

An Objective, on the other hand, could be something that certain projects and programmes are intended to attain or accomplish. For example; a business leader might say; "I want this project to increase our annual profits for this product by 20 percent." It's a very specific action for the mid or short term. In a nutshell, objectives enable the achievement of goals. But what helps us achieve our objectives?

Imagine two versions of your company three years from now. Both versions have the very high-level well-intentioned goal of transformation that many companies share these days. 

It's too easy for any company to say, "we are innovative and transformational". The reality in many firms is very different when you ask to see the evidence of transformation because often the processes and systems for it don't exist, and the words "innovation" and "transformation" are often empty ones.

But I digress. Back to the two versions of your company.

One version of the company is the result of exactly what it's doing right now in terms of transformation. Keep all the bad habits that you know have been happening for years and which you know don't help transformation.

The cultural challenges remain the same, the level of your project success remains the same and the trend-lines for profit and market share continue along the same trajectory. If habits today at your company continue, what would your company look like in three years from now? Despite any goal to be transformational. 

Will your company still exist? Will it be ripe for being made less relevant or even obsolete when new disruptive business models appear?

The other version of your company is the result of the new habits and systems required to achieve transformation objectives and goals. Would the company look very different from what the company looks like right now? Would it be introducing its own new disruptive business models to the market?

The habits exhibited throughout your organisation (good ones and bad ones) will largely determine the success or failure of your company's transformation goals.

Stephen Covey taught us to begin with the end in mind. It's Habit #2 in his book The 7 Habits of Highly Effective People.

He suggested that while we know there's value in setting and having goals, the greater value is in leading those goals to fruition. 

A workforce can’t help leaders drive towards the company's goals unless those leaders share not only the goals, but they also provide the resources, authority, skills, tools, and expectations for the transformation journey.

That, in turn, requires new habits to form in people. Habits that play a part in the many different aspects of transformation.

A goal of any CEO who 'gets' transformation will be to steer their organisation to digital economy success. Similarly, the goal of any professional athlete or sports team is to win. But the reality is that goals don't guarantee success - in sport or business. 

While goals are important and leaders need to set them for direction, if you want transformational results, you need to focus on your objectives, systems and habits. And most of the project management community reading this will know that culture plays a massive role in transformation and that culture is defined by behaviours and habits.

Habits are the small decisions we make and actions we perform every day. And according to researchers at Duke University, habits account for around 40 percent of our behaviours on any given day. So, a business is essentially the sum of its habits. And in our daily lives, we as individuals are the sum of our own habits.

Habits form the bedrock of everyday life - for companies and individuals. 

How in shape or out of shape we are is a result of our habits. How successful or unsuccessful we are is a result of our habits.

A habit is something we do repeatedly and regularly without even thinking about doing it. And habits are formed by performing a certain action or behaviour so regularly that it becomes automatic.

Generally speaking, when you think of having successful habits in a company with aspirations of transformation, you think of the ones that will enable your company to thrive in the digital economy. While the companies that don't transform will become obsolete.

By now, most people know that transformation is about creating a new future, without the constraints of the past. And to transform a business, we need to remove limiting beliefs which keep a company stuck in the past.

From its old ways of working and old business models to its old products, services and customer experiences. That past doesn't equal the future, and what worked well in the past for a company is not what will determine success in the digital economy.

It's those limiting beliefs that prevent a company from really transforming. They keep the company doing what it's been doing for years or even decades. From culture to leadership mindset, to the way people think about data, customer experiences, business processes, operating and business models, technology and so much more.

In that context, habits keep workforces and leaders doing what they've always done, despite their best intentions to participate in transformation. That's part of the reason why many companies are talking about transformation, while only a minority are actually doing a good job at it. 

Many aren't doing what it takes to form new habits that bring about legitimate transformation, and they settle for believing that executing a portfolio of digital projects is equal to business transformation.

Let's not forget that the words digital and transformation have different meanings and they shouldn't always be used in the same sentence. Because not all things digital result in transformation. There's enough digital sugar coating and fake transformation going on these days which demonstrates that.

While inexperienced transformation managers and leaders need to be mindful, deliberate, and conscious at their jobs, transformation experts have moved beyond that, and they do the right things simply from habit. They no longer need to be mindful, deliberate, and conscious. The right behaviours have become habit.

It's the same with project management. The seasoned experts do the right things almost as second nature, and the same can be said for many other types of experts required in transformation.

On the other hand, those that haven't formed the right habits, and who also aren't mindful, deliberate, and conscious in a transformation environment, can actually damage the company's hopes as they continue to practice old habits that were formed in the pre-transformation era.

If habits account for around 40 percent of our behaviours on any given day, and systems also help define how we work, leaders should consider doing what's necessary to ensure their people go about their work with the right behaviours and systems, to achieve the objectives required to reach the company's transformation goals.

In his book Atomic Habits James Clear refers to four stages of habit, which he describes a habit loop. And this habit loop is continually scanning the environment, predicting what will happen next, trying out different responses, and learning from the results. 

A cue for a habit triggers a craving, which motivates a response, which provides a reward, which satisfies the craving and, ultimately, becomes associated with the cue.

James then refers to four laws that provide a framework that can help bring about new habits.

The first Law of Behaviour Change is to make something obvious. This law is connected to the cue, which is the first step of the habit loop. A cue is anything that gets the attention of your employees or customers and suggests what to do next. The most obvious cue is often the one that captures someone's attention. And the cue that gets their attention is the one that can initiate a habit.

The second Law of Behaviour Change is to make it attractive. This is connected to the craving, which is the second step of the habit loop.

So often in companies, people are told what to do, without any incentive for them to do it.

Unless you can make the desired habit attractive, it's probably not going to become a habit, which means you're going to have to constantly remind people to be mindful, deliberate, and conscious at their job. While the effective leader and manager will have freed themselves from such monotony and have a team of people that have adopted the right habits.

The third Law of Behaviour Change is to make it easy. This law is associated with the response, which is the actual behaviour or habit you perform. Behaviours are more likely to be performed when they can be accomplished with ease. Business is an ongoing journey to deliver the same or better results in an easier way. The idea is to make every phase of the process as convenient as possible.

The fourth Law of Behaviour Change is to make it satisfying. The final stage of the habit loop is the reward. If there's a reward associated with a behaviour, meaning it feels good and has a satisfying ending, then we have a reason to repeat it in the future. 

In transformation we could say that by offering attractive rewards for participating in our innovation process, people are encouraged to keep trying to come up with disruptive new concepts. Or you could say that by making your product or service so satisfying, you increase the odds that customers will keep coming back. As Amazon, of course, have become masters of doing.

The speed of the reward is a crucial factor in the fourth Law of Behaviour Change. Employees and customers need to feel immediately successful, even if it’s just in a small way.

Behaviours that make the workforce and customers feel good are followed by an immediate sense of satisfaction, pride, praise, encouragement or pleasure. These are the types of behaviours you want to repeat in the future. 

But remember that work habits need to be learned, felt, and practised as second nature. They shouldn't be imposed from the top.

Most companies have some master motivators who are able to achieve exceptional performance with their teams by enabling them to adopt the right habits. They use their emotional intelligence to bring about powerful change within their people. These managers and leaders are different from those limited to a specific skillset such as technology, marketing or data.

While good managers and leaders set clear direction and create momentum by focusing on results, the best of them create momentum for results that become self-reinforcing. They focus on the behaviours required for results as well as the results themselves.

While good managers help those with strong potential to progress along their development paths, transformation leaders act as powerful agents for each one of their peoples' development needs and opportunities. Essentially, they enable people to be the “best they can be” by adopting the right habits.

These are the leaders who orchestrate successful transformation. The leaders who recognise that transformation is so much more than setting strategy and executing technology projects.

Helpful Resources

The 7 Habits of Highly Effective People by Stephen R. Covey

Atomic Habits by James Clear

PMI Ascent - Digital Business Transformation Management Course

Digital transformation in large and complex organisations continues to challenge even the best traditional managers and leaders, often because they still rely on old ways of thinking and working.

Roland Deiser is a Drucker Senior Fellow and, in this episode, he touches on three distinct arenas in which digital transformation happens, along with the ambidexterity challenge and agile architectures. Roland also explains why boundaries and boundary management are so important for leaders with aspirations to orchestrate successful transformation.

PMI Ascent - Digital Business Transformation Management Course

Transformation is about fundamental shifts in how companies do business. It changes everything about how products are designed, manufactured, marketed, sold, delivered, and serviced. It forces leaders to rethink how companies execute, with new business processes, management practices, and information systems, as well as everything about the nature of customer relationships.

The best CEOs are thinking clearly about the quality of transformation research, data and practices they work with. These are the leaders who cut through the clutter and embrace a realistic understanding of business transformation success and failure, and how digital is core to it.

Let's consider one of the most recent superstars in the world of transformation - Ocado - which has already been referred to as the Microsoft of Retail. It's a company that was established in the UK in the year 2000 and it's already the world’s largest pure online grocery supermarket.

Written-off for years by naive cynics, CEO Tim Steiner has pursued his vision and shown us how legitimate transformation can create a new future. Steiner has said, "Our biggest innovation was not to try and have a single innovation. Our biggest innovation was to become an innovation house. We’re working on innovation for every place where we interact with a customer."

Ocado has built a successful e-commerce business in the UK, are now in a powerful position to help retailers in other parts of the world do the same. And the company is offering consumers a different proposition because they're built to be online - unlike much of their competition. And they aim to allow consumers to shop online in the way that's most convenient for them.

What enables Ocado to do that is a technology estate that is both broad and deep, and which encompasses real-time control systems, the Internet of Things, robotics, machine learning, simulation, data science, forecasting systems, routing systems, inference engines, big data and more.

They use a three-dimensional grid system where 700 washing-machine-sized robots whizz back and forth an area the size of three football pitches, with just half a centimetre in between them. This is the kind of stuff that separates digital economy leaders from the rest.

Ocado is now the world’s leading pure-play online grocer and their business model offers a superior customer experience. Their business is based on a cycle of growth, investment and innovation and they pride themselves with a proven management team leading strategy and execution.

One of the main reasons that most transformations struggle and fail is lack of capability, and companies like Ocado are building their transformation capabilities with real intent. To meet the needs of companies like Ocado forward-thinking professionals are already re-training themselves to build their transformation capabilities so they can work with transformational companies like Ocado.

Just by looking at some of the key vacancies that Ocado sometimes needs to fill, you can see how they look at transformation. They've established a Transformation Office to drive change in their capabilities, teams and ways of working to be able to deliver and support multiple international clients concurrently.

And so they need transformation programme managers to help create and then own sets of projects within that Transformation Office. Those programme managers are expected to translate strategy and ideas into tangible project and programme plans, looking ahead three to five years, and deliver and control complex programmes and multiple projects concurrently.

Another role in Ocado is the Operations Model Lead, who runs a team that owns the ongoing development of the end-to-end business operating model, defining specific operating model capabilities and providing targeted design expertise.

This gives you a taste of the kind of hiring that's happening inside the world's most dynamic transformation-focused companies. Ocado is a company that's undergoing legitimate transformation, and not caught up in legacy thinking, systems and digital sugar coating.

CEOs like Tim Steiner at Ocado are now under increasing pressure to continually balance short- and long-term objectives. They not only need to ensure their business runs well but they also need to reinvent their business, enhance product and service offerings, and invest in other long-term initiatives. The best CEOs - like Steiner do both well.

While most companies have executive and senior management teams that have excellent operational expertise, transformation experience is often thin on the ground. This is another reason why people who are re-training themselves are becoming very sought-after. Because digital business transformation is about strategy and execution.

To be a transformational company like Ocado the six guiding principles of THRIVE need to be accommodated. And these principles provide a way that leaders can navigate both the strategic and execution components of transformation.

As a reminder, THRIVE is an acronym made from six words which are: Transformation, Holistic, Response, Innovation, Value, and Enterprise. 

Principle number one is Transformation. Because leaders first need to recognise the fundamental difference between change and transformation, before they can lead their companies on a journey of legitimate transformation. 

While ‘change’ is required to maintain and modernise an organisation, this isn’t enough to sufficiently elevate both its internal capabilities and external offerings. 

Too many companies are being lulled into a false sense of transformation security through siloed digital projects and change initiatives that are not transformational.

To take advantage of the opportunities and protect against threats that new digital business models present, leaders need to commit to being bold and transformational, ahead of those that remain safely within their comfort zones and traditional ways of working.

Leaders need to communicate this fundamental difference across their organisations to avoid their best resources being tied up making small changes instead of driving transformation. This is also needed to keep the company’s best people on board and attract new talent because the high-performers have an insatiable desire to be part of an ambitious transformation journey. If one company fails to take them on that journey, they’ll move to another that will.

Legitimate transformation - like the kind found in companies such as Ocado - also requires a fundamental shift in other aspects of an organisation. Appropriate governance, mindsets, business and operating models, capabilities and culture are just some of the transformation fundamentals that THRIVE addresses.

Companies need to put all options on the table, including rethinking the core business model and answering the fundamental question: What do we do? This is where companies need to zero in on their value proposition and how they deliver on it. Just like Ocado has done.

Principle number two is Holistic. Unlike business process re-engineering, which focuses on business processes, or app development which focuses on technology, or projects, which focus on producing outputs, digital business transformation requires a more integrated and holistic approach.

THRIVE helps leaders take a holistic and integrated perspective of their enterprise and its complexity. It does not reinvent individual management disciplines, but it provides a framework that integrates individual disciplines, which should be sufficiently mature to undertake successful transformation.

From digital business models, capabilities and roadmap design, through to culture, portfolio governance and transformation execution, leaders need to consider the big picture and not limit their focus to only some of the key enablers of transformation.

Most transformation strategies are not successfully executed upon, and only a holistic approach to transformation will produce the outcomes a company aspires to achieve. Through holistic transformation, leaders will dramatically increase the odds of success, and be among the minority that actually achieve their transformation objectives successfully and live up to stakeholder expectations.

Principle number three is Response, and we can see organisations like Ocado respond strategically to the opportunities and threats they are presented with - both inside their organisation, and externally in the market.

Internally this could involve responding to the evolutionary needs of the company’s culture, maturing the capabilities required to achieve transformation excellence and the establishment of new governance that facilitates innovative transformation while minimising bureaucracy.

Externally it could involve defensive and offensive responses to the changing dynamics of the market caused by disruption or seizing the opportunities that digital technologies and new business models can be used to take advantage of.

These and other responses form part of the transformation strategy that needs to be shaped, then planned as part of a short, medium and long-term roadmap, which is then governed and executed upon.

It’s vital that the transformation response not only strategically addresses all of the key threats and opportunities the organisation faces, but it must also be supported by the appropriate leadership mindset, workforce culture and capabilities required to transform strategy into reality.

Principle number four is Innovation, which is at the heart and soul of Ocado. The likes of Machine Learning, the Internet of Things and Robotics, can enable powerful business transformation when used strategically. Only through the innovative convergence of digital technologies can companies expect to transform in the way Ocado has.

Plugging in individual digital solutions in non-innovative ways lulls companies into thinking they are transforming, when in fact they are merely updating their technology and changing nothing fundamental about their business. This only achieves change, while business transformation should be the goal.

Innovation empowers companies to consider many new possibilities that can be part of its strategic response, and this requires effective approaches to innovation, which transcend technology upgrades and simply doing the same things faster, better or cheaper.

Companies need the ability to envisage how new technologies can be converged into a scalable architecture that is prepared for near, mid and long-term digital adoption. While the Internet of Everything will take years for most companies to derive value from, the foundations can be laid now, with capacity for the future in mind.

Principle number five Value. External value represents the benefits transformation creates for its customers, while internal value represents the benefits delivered into the business as a result of transformation investment.

External value is generated through digital business models shaped by strategic responses to what is happening in the market. This enables companies to tap into the known and unknown needs of its current and potential customers, in ways that create competitive advantages, then seize market share. These models can also be used to reclaim market share after disruption and protect a company’s position in the market. 

As markets are disrupted, the opportunities to satisfy the need for value have changed. In 1999, millions of customers were not expecting 24-hour delivery of products purchased via a smartphone, but today they do. The world has changed, but too many companies still rely on antiquated business models.

Internal value is generated through initiatives that provide stakeholders with tangible or intangible return on investment. This could involve higher revenues in a particular line of business, increased workforce capabilities, better operational excellence or more effective marketing. All of this, in turn, enables the company to serve customers better and increase market share.

And principle number six is Enterprise. Transformation needs encourage, embrace and educate people from across the enterprise and build a collaborative culture of new capabilities and mindsets.

CEOs like Tim Steiner at Ocado foster a transformation mindset among their executive teams, which is aligned with the strategic aims of the company. This transformation mindset then needs to shape the company’s culture at every level, to create an environment within which innovation and digital business transformation can thrive.

Opportunities to upgrade workforce capabilities - in the way Ocado does - need to be identified and people made to feel safe and comfortable about innovation, success and failure. The right support and training are vital to achieving this, without unrealistically expecting an operational workforce to become overnight transformation masters.

This can be a major undertaking, particularly for organisations that have been shaped over many years by operational goals, roles, processes, values, and attitudes. While this will have created operational excellence, it is also prone to preventing attempts to change “how we do things around here”. Such an environment will inhibit even the finest transformation strategy, because as the great Peter Drucker told us, "culture eats strategy for breakfast”. So creating the right internal transformation environment is vital to transformation success.