Transform the whole business, not just parts (2022)

That’s the conventional wisdom: improve one part at a time, then move to the next, methodically and consistently. But it’s clear that this traditional view, with stability as the primary value, is increasingly wrong. It misses the intersections between the parts, which are where value tends to be lost. Research by our colleagues (see Kevin Laczkowski, Tao Tan, and Matthias Winter, “The numbers behind successful transformations,” McKinsey Quarterly, October 2019) shows that the most successful performance transformation efforts cut across business units and functions, target both the top and bottom lines, and engage a substantial share of the workforce.

At best, we find, improving the parts improves only those parts, without necessarily reaching the whole. And because the whole doesn’t change, the improvement in the parts themselves isn’t likely to last.

Instead, it’s more accurate to say that improving the parts is much more likely to pay off if you first work to improve the whole, seeing it in its entirety from end to end. Then, the parts and the whole reinforce each other.

This basic rule applies across industries, where businesses of any size naturally divide their operations into areas and functions: procurement, manufacturing, and supply chain for a manufacturer, or client advising, risk-assessment, and fulfillment in a service-sector institution.

Thinking and working in these types of silos isn’t typically a way to extract an organization’s full potential. Our studies have repeatedly confirmed that about two-thirds of transformation efforts fall short of their goals or are ultimately unsustainable. By contrast, organizations that break through silos in an end-to-end operating model operate more effectively. Accordingly, our colleagues have defined transformation with a capital “T” as “an organization-wide program to enhance performance and to boost organizational health.”

To understand why, think about other team-based endeavors. Improving a single athlete’s performance can help improve a basketball team’s record, for instance, but improving all the players while also teaching the group to work better as a team leads to far stronger overall improvement. Or consider an orchestra. A top-flight oboist can’t improve a group’s musical performance nearly as much as a conductor who works with every section in the orchestra, emphasizing the ways their musical parts interact.

Indeed, we find that cross-functional operations transformations typically outperform their single-function counterparts by between 30 and 40 percent. Cross-functional transformations can also reduce enterprise risk, enhance resiliency across the organization—especially helpful during the current period of economic volatility—and help businesses keep pace with lightning-quick changes in the competitive and macroeconomic landscapes.

By considering the ways that product development, procurement, manufacturing, supply chain, capital expenditures, and services intersect, a firm can unlock its full operational potential and build the capabilities and agility it needs to sustain improvements (Exhibit 1).

(Video) Cubase Fix - Change Project Tempo without Moving Parts

Transform the whole business, not just parts (1)

We strive to provide individuals with disabilities equal access to our website. If you would like information about this content we will be happy to work with you. Please email us at: McKinsey_Website_Accessibility@mckinsey.com

For example, a chemicals company tended to react to commodity price reductions by restructuring the organization and cutting costs— measures that were traumatic for the organization and proved unsustainable over time. After a cross-operational transformation, the company was able to navigate a commodity price decline of more than 20 percent by maintaining its EBITDA margin at around 40 percent. At the same time it also increased employee involvement, morale, and overall organizational health.

Don’t wait for distress

Why don’t more companies commit to cross-functional transformation? Because transforming even a discrete area is hard, and adding the complexity of examining the whole of a business is harder still. After all, “if it ain’t broke, don’t fix it” is a catchphrase for a reason. It recognizes how difficult change is, and how uncertain the rewards can be if change is pursued only for its own sake.

But too often, it’s easy to believe that something “ain’t broke” when it actually is—or soon will be at today’s pace of change. In a sense, an organization that’s in real distress has a small advantage over better-performing peers. It’s easier to open minds to change once it’s obvious that existing practices aren’t working. But, by then, the business may find itself with only a very narrow set of options (if any) for turning itself around.

The better balance comes from undertaking a broad-based operational transformation while the organization has a lot more opportunity to create and capture value. Moreover, by following a rigorous (yet flexible) approach to quantifying the opportunity, designing a transformation process, and implementing it, the business is much more assured of achieving results that more than justify the effort involved.

The road to a cross-functional operations transformation

The increase in scope and scale that a cross-functional transformation entails means that careful attention to detail is critical at every step. Everything from the diagnostic before the transformation begins through to the future-state design, the leadership model, and the implementation plan will involve greater complexity—which leaders can manage by mastering a few key points along the way.

(Video) Change My World Part 1&2 {2022 New Movie} - Ken Erics|LizzyGold|2022 Latest Nigerian Nollywood movie

Cross-ops diagnostics

It starts with two questions: How much potential value lies in a cross-ops transformation? How much change is required to reach that value? To answer them, a company assesses its current operational system and interfaces—processes, digital and analytics, management practices, mindset and behaviors, and capabilities—and estimates the full improvement potential.

A basic-materials company started with a seemingly narrow problem: a need to maximize the way it used its fleet of trucks, which carried raw materials to manufacturing centers. The executive team hoped improvements would save the company $5 million.

But by taking a broader perspective on ways to maximize truck usage, leaders found that every string they pulled and every question they asked connected the trucks to some other part of their operation. Truck use could be better if the company redesigned its internal road system, and shaped and loaded its raw materials more thoughtfully in ways that matched the production process for the products made from different feedstocks. Thinking about trucks led to reconsidering the long-term planning process.

In the end, the executives realized, how they planned their operations was essentially how they planned their business. No part of the company stood by itself. Every function connected to other functions. And that meant the company needed a diagnostic not only of its truck fleet, but of its entire end-to-end process, from understanding its customer needs through to the delivery of finished products. The company wouldn’t be able to solve the immediate problem without addressing the entire chain of value— and by doing so, would highlight much larger opportunities for the business to grow.

Future-state design and road-mapping

With initial questions answered, the company is in a position to decide on the longer-term objectives it must achieve, and how to accomplish them. The vision that top management creates must be especially compelling, providing a roadmap for future operations performance that will motivate the entire organization regardless of function, business unit, role description, or tenure.

Leaders can’t do this by cloistering themselves with spreadsheets, and then issuing a call from on high. What motivates an executive board isn’t likely to be what motivates the middle manager, the specialist expert, or the frontline worker—yet they are the ones whose work determines whether the transformation succeeds. Instead, including representatives from every important stakeholder group in envisioning the company’s future increases the chances that the desired future state will be shared among everyone, and will therefore be sustainable.

For example, the top management of a financial institution made a deliberate effort to adopt ideas and principles they’d seen on visits to other companies that had achieved real operational excellence. They hoped to change their company into what they thought it could become, and to do so they shared their experience across a cross-section of colleagues to identify which messages resonated. The institution served a significant proportion of its home-market’s population, so the idea that operational excellence could bring financial security to more people resonated powerfully. Each group within the company could adapt the message to their day-to-day work and make it meaningful. In this way, the cross-operational program began with full commitment and engagement throughout the institution. People were in it to win not just economic results, but also to improve their customers’ lives. That made the hard work of changing the culture worthwhile.

(Video) The Monday Show Ep 15

In similar fashion, the basic-materials company changed its initial plan. Instead of simply maximizing its truck operations, or even maximizing each piece of its overall operations, the firm rethought its value stream: identifying the places where each piece of operations intersected with others, in order to maximize value while minimizing resource use.

Talent-led transformation

Employees then lead the implementation. Management sets the goals and overall direction, but don’t simply hand employees a new way of doing things. Instead, employees help build the new system, and that ownership helps implementation engage initially, then stick for the long term.

The company makes the transformation a top priority and moves key people and resources into positions that support this priority. Senior leaders role-model the change, and influential employees drive it at the grass-roots level. In other words, the company sets a vision, gets behind it in every way, and decides how the firm will implement the changes necessary to realize that vision.

In fact, our experience has found that implementations led by the workforce are five times more sustainable than those led by management. Organizations that embark on successful cross-operational transformations keep this in the front of their corporate minds.

But it means changing mindsets from the top—a challenge in any industry, whether in service sectors such as finance and health care, or heavy industries like oil and gas or metals and mining. Leaders should be deliberate in choosing the people who will drive the transformation and role-model the change, turning the culture toward collaboration and away from top-down orders.

A vice president of a basic-materials company says, “My style as a leader used to be to exercise as much control as I could about what happened in my area. I thought that was how I created value for the organization, so I made a lot of decisions, even small ones. I think I really was a bottleneck. Now I obtain better results if I try to develop people more and ask questions, so that they can make the decisions rather than me.”

Another vice-president says, “We used to say, ‘We work as a team,’ but most of the time it wasn’t much of a team—the supervisor gave an order and the workers followed. Today, it’s more of a conversation; people are more open to hearing each other. Anyone can give a presentation or express an informed opinion. And because of that, people work more as a team to try to solve problems. Many more of our people now see themselves as problem solvers. Before, they would take problems to their supervisors or managers, but now, step by step, they are learning how to refine what we can do as a company.”

(Video) Agile Leadership: Transforming teams & individuals/Being agile & doing agile - Part 1, Markus Feller

Flexible implementation planning

Depending on the business’s starting point, a flexible, scalable implementation plan can take one of several forms, such as a “big bang” for companies with high transformation competency and low complexity, or “wave based” to manage multiple geographies and major capability building (Exhibit 2).

Transform the whole business, not just parts (2)

We strive to provide individuals with disabilities equal access to our website. If you would like information about this content we will be happy to work with you. Please email us at: McKinsey_Website_Accessibility@mckinsey.com

But certain ideas carry across each of these structures, and will sound familiar to leaders who have led change. In addition to focusing on rank-and-file employees, the plan must include a pool of dedicated change agents to train and coach leaders, along with resources for building capabilities, and tools for managing both the change team and the broader implementation. Aligning personnel to support the new capabilities, behaviors, and management practices will require an updated technological architecture and organization, and revamped corporate planning to foster continual operations improvement.

The magic comes from bringing all of these elements together across the entire organization, as at the basic-materials organization when leaders introduced systems that shared information from its supply chain more broadly. By applying advanced analytics, the company optimized the positioning of raw-material processing equipment—a step that brought an additional productivity increase of 20 percent.

Yet none of these changes would have been sustainable if the organization hadn’t created new management practices. These let it guarantee the execution of standard operational procedures, while also transitioning company culture towards that of a continuous improvement organization, constantly looking for ways to improve safety, performance, and quality.

The result: a transformation program with an impact of more than $60 million. The cross-functional operations transformation saved approximately 12 times more than the project the company had initially envisioned. Moreover, by providing customers with a mix of products better suited to their needs, the company has boosted quality and reduced inventory levels.

(Video) AgileByExample The Chameleon Effect: Part 1 Transformation-Don't fall out of the tree.

The cross-functional operational transformation approach covers the whole scope of operational functions and interfaces (see sidebar, “End-to-end operations drive profitable growth in consumer goods”). It simultaneously addresses processes, digital, analytics, management practices, mindsets, behaviors, and capabilities; applies proven approaches and tools for building capability and managing change and implementation; and aligns people, technology, and strategic planning to enable radical change.

The way forward

Using the core principles described above, cross-functional transformations can create lasting, significant impact in around one to two and a half years. But it requires a commitment to seeing operations as a whole, rather than just its functional parts.

FAQs

What does transformation mean in business? ›

Business transformation is a term used to describe what happens when a company makes fundamental changes to how it operates, typically with the aim of enhancing both operational and financial performance.

Why is transformation important in business? ›

An effective business transformation means your organization can survive and thrive as you pursue new innovation-driven opportunities that emerge, as you respond to shifting market demands, and as you navigate evolving regulatory complexities.

What is strategic transformation in business? ›

Companies undertake strategic business transformations in response to significant and sustained pressures from the market. The process may involve pivoting products, services, or offerings, or it may mean realigning how a company does business to maximize consumer satisfaction and shareholder returns.

What is transformation strategy? ›

What is a Transformational Strategy? A transformational business strategy refers to big changes that need to be made in order to ensure long-term success. These changes involve an organisation's existing products, services and overall business model, as well as what processes, equipment and infrastructure are used.

How do you achieve transformation? ›

Here are six crucial steps you must implement to make sure your personal transformation is a successful one.
  1. Record the outcome. To get what you want, you must first know exactly what the final outcome will be. ...
  2. Take baby steps. ...
  3. Learn from others. ...
  4. Be the outcome. ...
  5. Be willing to be uncomfortable. ...
  6. Be your own cheerleader.
16 Sept 2017

What is the most important transformation phase? ›

The most important moment in a digital transformation is at the very start, where decision making is nimble and it's easiest to affect valuable change.

What is transformational growth? ›

Transformational Growth. Transformational Growth is a fundamental reorientation of a business into either a new direction or a different plane of effectiveness. Transformational Growth typically bears little to no resemblance to past incarnations of an organization. TaskUs is experiencing Transformational Growth.

What is a transformation plan? ›

Transformation Plan means a strategic plan developed by one or more contractors in close collaboration with target hospitals and community stakeholders to provide recommendations and actionable steps for preserving healthcare services in the target hospital community.

Why is transformation process important? ›

Transformation processes are the key to delivering value to the client by transforming inputs (such as materials, information...) into outputs, such as products or services (Slack et al. 2004).

What are the key areas of business transformation? ›

The six types of business transformations are outlined below.
  • Organizational Transformation. ...
  • Management Transformation. ...
  • Cultural Transformation. ...
  • Digital Transformation. ...
  • Information Systems Transformation. ...
  • Transformation of Business Processes. ...
  • Strategy. ...
  • Establish Leadership.

What does transformation experience mean? ›

More generally, a transformative experience is one that somehow alters what matters to you. Those are really important experiences. Growing up, for example, typically involves a whole host of them. But there's even more to transformative experience than this.

What is change and transformation? ›

Look up “change” in a dictionary. It is described as “to substitute or replace something.” “Transformation,” on the other hand, is defined as “a complete change, usually into something with an improved appearance or usefulness.” There is definitely a lot of similarity.

What type of initiative is transformation? ›

A solution transformation includes the following initiatives: Understanding the problems that customers are trying to solve and shifting the mindset of the organization to think about the value or outcome that a collection of products and services provide.

What is our transformation strategy called? ›

What is a digital transformation strategy? A digital transformation strategy is a detailed plan for using digital solutions to improve the physical aspects of your business across engineering, manufacturing, and service. Digital transformation (DX) is, in and of itself, a broad business strategy.

What is an example of transformational change? ›

Examples of transformational change include: implementing major strategic and cultural changes. adopting radically different technologies. making significant operating changes to meet new supply and demand.

What makes a transformation successful? ›

Transformation is not about short-term cures, but long-term healing. Without ignoring short-term challenges, a successful transformation anticipates how to clear bigger-picture barriers and hurdles, how to achieve solutions that build sustainable advantage, while building momentum from the outset.

What are the four stages of transformational change? ›

The stages are shock, anger, acceptance and commitment. People's initial reaction to the change will likely be shock or denial as they refuse to accept that change is happening.

How do you know if transformation is successful? ›

How can you tell if a transformation experiment has been successful? If transformation is successful, the DNA will be integrated into one of the cell's chromosomes.

What are the 3 stages of transformation? ›

Collins identified three transformation stages: Disciplined People. Disciplined Thought.

What are the stages of transformation? ›

The six stages of transformation are Realize, Release, Rebound, Reinvent, Resurrect and Respond. Awareness of these stages allows readers to understand where they have been, where they are now, and where they are heading.

What is Transformation engagement? ›

Transformational engagement could therefore be about joint engagement projects which see a range of organisations working together to engage the public and other stakeholders in exploring and developing solutions around an issue.

How can you help a company grow? ›

Although growing your small business will take time and energy, there are 10 strategies you can use to help accelerate business growth.
  1. Do Your Research. ...
  2. Build a Sales Funnel. ...
  3. Increase Customer Retention. ...
  4. Participate in Networking Events. ...
  5. Practice Corporate Social Responsibility. ...
  6. Form Strategic Partnerships.

How do organizations achieve growth? ›

There are many ways a company or organization can achieve growth, including:
  1. Joint venture alliance. ...
  2. Licensing products. ...
  3. Tapping into new markets. ...
  4. Outside financing. ...
  5. Product expansion. ...
  6. Forward acquisition. ...
  7. Attracts new customers. ...
  8. Economies of scale.
15 Jun 2021

What is transformational marketing? ›

Transformational marketing campaigns are designed to connect with customers by associating positive feelings with the brand. These feelings influence a buyer's interpretations of their product usage experience.

What makes a good transformation manager? ›

He or she must be: Able to manage complex situations that combine strategic, financial, political, operational, management, human, inter-sectorial, hierarchical, budgetary, capacity, relational and temporal aspects. In short, all the keys to transformation. Able to navigate uncertainty and ambiguity.

What is a transformation roadmap? ›

A digital transformation roadmap is a plan that moves your organization from Point A (using your current digital processes) to Point B (using new digital processes). Think of it like taking a road trip — you know where you are and where you want to go, but you need to map out how you'll arrive at your destination.

What are the different types of business transformations? ›

The six types of business transformations are outlined below.
  • Organizational Transformation. ...
  • Management Transformation. ...
  • Cultural Transformation. ...
  • Digital Transformation. ...
  • Information Systems Transformation. ...
  • Transformation of Business Processes. ...
  • Strategy. ...
  • Establish Leadership.

What does transformation experience mean? ›

More generally, a transformative experience is one that somehow alters what matters to you. Those are really important experiences. Growing up, for example, typically involves a whole host of them. But there's even more to transformative experience than this.

Why is transformation process important? ›

Transformation processes are the key to delivering value to the client by transforming inputs (such as materials, information...) into outputs, such as products or services (Slack et al. 2004).

What is meant by transformation project? ›

What is Transformation? Transformation programs are typically established to produce a step function increase in organizational performance and to develop new capabilities that previously did not exist in the organization. These programs are usually driven by a sense of urgency and have a compelling case for action.

Which are the key areas of business transformation? ›

Globalization, competitive pressure, the digital revolution, continuous innovation… These constant socio-economic changes are affecting the activity and performance of companies, leading to the need to transform themselves to remain competitive in their market.

What is transformation and change management? ›

The change management work focused on execution. Transformation is another animal altogether. Unlike change management, it doesn't focus on a few discrete, well-defined shifts, but rather on a portfolio of initiatives, which are interdependent or intersecting.

What is a transformation system? ›

The Transformation System (TS) is used to automatise common tasks related to production activities.

What is another word for transformational? ›

What is another word for transformational?
innovativeoriginal
inventivenew
novelingenious
innovationalinnovatory
freshunfamiliar
232 more rows

What is an example of transformative? ›

The definition of transformative is something, such as a lesson or experience, that inspires change or causes a shift in viewpoint. When you meet and talk to a homeless person and you change your views on poverty and politics, the encounter with the homeless person is an example of a transformative encounter.

What is another word for transformative? ›

In this page you can discover 7 synonyms, antonyms, idiomatic expressions, and related words for transformative, like: psycho-spiritual, , performative, transformational, revelatory, emancipatory and transformatory.

What are the three primary elements of the transformation process? ›

The change process is organized around three major processes: the leadership process; the design process; and the development process.

What are the three components of the transformation process? ›

3 The transformation model

This is shown in Figure 1, which represents the three components of operations: inputs, transformation processes and outputs.

What are the four categories of transformation process? ›

As Figure 1.2 demonstrates, transformation processes can be categorized into four groups: manufacture (the physical creation of products, e.g. automobiles), service (the treatment of customers or storage of products, e.g. hospitals or warehouses), supply (a change in ownership of goods, e.g. retail), and transport (the ...

What makes a good transformation manager? ›

He or she must be: Able to manage complex situations that combine strategic, financial, political, operational, management, human, inter-sectorial, hierarchical, budgetary, capacity, relational and temporal aspects. In short, all the keys to transformation. Able to navigate uncertainty and ambiguity.

What is difference between change and transformation? ›

The Difference Between Change and Transformation

While change connotes the implementation of several finite initiatives that may or may not affect the whole organization, transformation focuses on a portfolio of interdependent or intersecting initiatives that aims to reinvent the organization as a whole.

What are transformation capabilities? ›

Transformation capabilities incorporate two separate but inter-related components: strategic focus and strategic capabilities. These combine to give an organization its unique market positioning as well as determining the ways in which it needs to change in order to retain this competitive position over time.

Videos

1. CTO Message PART 1: Is your business actually ‘TRANSFORMING’?
(SRKK Group)
2. Lecture 3.5 AI Transformation Playbook (Part 1) — [AI For Everyone | Andrew Ng]
(Machine Intelligence)
3. Why Savage Oppress is WAY More Powerful Than You Realize | Nightsister Experimentation
(The Stupendous Wave)
4. CHRO Series Part 3 - HR’s Role in Business Transformation
(HR Technology)
5. Me roasting all these crazy asian makeup transformation part 2
(kinryyy)
6. Part I: How KPIs and Metrics can Transform your Business
(Xcelerate Restoration)

Top Articles

Latest Posts

Article information

Author: Wyatt Volkman LLD

Last Updated: 01/23/2023

Views: 5651

Rating: 4.6 / 5 (46 voted)

Reviews: 85% of readers found this page helpful

Author information

Name: Wyatt Volkman LLD

Birthday: 1992-02-16

Address: Suite 851 78549 Lubowitz Well, Wardside, TX 98080-8615

Phone: +67618977178100

Job: Manufacturing Director

Hobby: Running, Mountaineering, Inline skating, Writing, Baton twirling, Computer programming, Stone skipping

Introduction: My name is Wyatt Volkman LLD, I am a handsome, rich, comfortable, lively, zealous, graceful, gifted person who loves writing and wants to share my knowledge and understanding with you.