How to Make Better Choices When Leading Transformation Programmes
“Craft against vice I will apply.”
-William Shakespeare
Empirical evidence and academic research show that transformation programmes almost always make problems worse than they already are. No matter how they are framed and organized, transformation programmes regularly fail: outcomes are unpredictable and horror stories are common. What is the solution? How should leaders cope with these problems? In this article we propose a few simple techniques for making better choices when leading transformation programmes: 1) zoom in and zoom out 2) seek an outside frame of reference 3) reframe the situation and 4) be ready to pivot.
The transformation programme
Let us begin by clarifying the terms “transformation” and “transformation programme”. Hiatt and Creasey (2003) define transformation as “the application of processes and tools to manage the people side of change from a current state to a new future state so that the desired results of the change (and expected return on investment) are achieved.” (p.10) A transformation programme, therefore, is a series of steps taken to make this abstract definition into a concrete reality. To determine how a transformation programme can be effective, a camera metaphor can be helpful: one must both “zoom out” and “zoom in”.
Zoom in and zoom out
To zoom out, view the transformation programme through a wide-angle lens, as if watching the dance floor of change management from the balcony. Zooming out creates distance and prevents leaders from acting impulsively. Musashi, the greatest samurai of all, called this technique a “distant view of close things”.
To zoom in, view the transformation programme priorities and corresponding developments through a close-up lens. This lens reveals important competitive advantages and unbiased opinions about organizational strengths and weaknesses. The zoom-in view naturally adds the texture--the details--missing from the zoom-out view.
Zooming in and out gives programme leaders a more accurate perspective on their choices when leading transformation programmes. When possible, they should do both, though either approach is helpful. Each technique will add insights that complement a more holistic approach. Zooming in and out can help to remove biases and prevent unrealistic expectations.
For instance, software implementation programme leaders can typically determine the costs of investing, but it is harder for them to determine the costs of not investing. Zooming out can identify both the direct and indirect benefits for the organization and in that way help leaders design a blueprint for change. Zooming in can bring the ‘texture’, new perspectives about whether to invest in the automation of small legal entities. However, if transformation programme leaders cannot find the ‘ground’ for making their decisions, even after zooming in and out, they should seek an outside frame of reference.
Seek an outside frame of reference
Daniel Kahneman (2012) explains the meaning of an outside frame of reference “Using such distributional information from other ventures similar to that being forecasted is called taking an “outside view” and is the cure to the planning fallacy.” (p. 251). Thus, the outside frame of reference summarizes real-world experience, rather than reflecting the subjective opinion of a single person. This outside frame of reference purposely ignores particulars and instead analyzes the larger class it is part of. As a result, it almost always gives leaders more accurate information for making better choices when leading transformation programmes.
The reference class forecasting (RCF) brings the best example of the outside frame of reference technique. This is a very simple way to analyze the transformation programme’s priorities: 1) digitalizing the process 2) centralizing the operational activities 3) re-engineering the business model and 4) outsourcing the business processes and/or capabilities.
Reference class forecasting steps (Flyvbjerg, 2017):
Step (1) – identify an appropriate reference class
Step (2) – use the statistics to generate a ‘baseline’ prediction
Step (3) – use project information to adjust the ‘baseline’
Essentially, the outside frame of reference gives an unbiased indication if and only if the reference class is properly chosen. For example, when transforming a business model, the Country Complexity Tool can be employed to organize the outside view and frame the reference class correctly. The Country Complexity Tool connects two key dimensions: 1) Business Risk and Deliberate Strategic Importance 2) Market Complexity and Legal Complexity (see the article Making the Global Operating Model Right).
Applying this tool makes it easy to identify the appropriate reference class and collect information in order to produce a ‘baseline’ prediction:
In-house operating model with local presence
In-house operating model with centralized functions
Out-source (business process outsourcing) operating model
Hybrid operating model, a bunding of internal (local and/or central) and external capacity
Even if the transformation leaders are well trained, applying 1) the zoom in and zoom out techniques and 2) the outside frame of reference technique will reveal that options are far more plentiful than they might initially think.
Reframe the situation
Experience proves that that old saying “Necessity is the mother of invention” applies to the transformation programme environment. Indeed, we cannot change how business processes or operating models are organized in isolation. Throughout the transformation programme life-cycle, leaders will be forced to reframe the business situation and discover new options.
For instance, when leading the tax compliance transformation programme, leaders should try to understand the context more deeply. They should think about the scope of end-to-end local compliance, rather than isolating their approach within the tax compliance areas only. Starting with ‘WHY’ -- their set of priorities for the tax compliance transformation -- leaders must unbundle opportunities and reframe the initial situation of the transformation. Transformation thus becomes an organic chain of change management steps, each of them enabling the following: 1) indirect tax compliance 2) direct tax compliance 3) statutory compliance.
Importantly, it is difficult for leaders to recognize when they are stuck in a narrow frame. Focusing only on the current scope and priorities of transformation means that emerging opportunities will be absent from the spotlight. But taking a wider view can dramatically improve the transformation programme by helping leaders understand the situations they are facing. When they take such a wide view, the payoff can be enormous. Indeed, when leaders 1) employ the zoom in and zoom out method 2) seek an outside frame of reference and 3) reframe the situation, they increase the likelihood that transformation programmes will succeed.
Be ready to pivot
Leaders must always remain ready to pivot. On the one hand, change is always difficult. In most, if not all cases, the transformation programme environment is challenging and unruly. On the other hand, leaders have better chances to succeed and deliver expected results if they are ready to pivot. Those leaders who keep the repertoire of the transformation programme wide open stay ready to scrutinize their original assumptions regularly. Furthermore, the process helps to win the hearts of key stakeholders and employees, motivating them for change.
Here we conclude that leaders must continue to experiment when steering transformation programmes. To do so, they should 1) combine the zoom in and zoom out method 2) seek an outside frame of reference 3) reframe the situation and 4) be ready to pivot.
References
Flyvbjerg, B. (2017) (ed.) ‘The Oxford Handbook of Megaproject Management’, Oxford: Oxford University Press.
Hiatt, J., Creasey, T. (2003) ‘Change Management: The People Side of Change’, Publisher Prosci.
Kahneman, D. (2012) ‘Thinking, Fast and Slow’, Great Britain: Penguin Books.
