A blueprint for successful transformation
Organizations need to orchestrate transformation across two distinct fronts if they are to confront the existential challenge of disruptive change, says Innosight’s Scott Anthony.
Two decades ago, with the publication of the bestseller The Innovator’s Dilemma, Harvard Business School professor Clayton Christensen identified why most big companies are destined to fail. As they mature, he outlined, businesses fix their processes around creating ever-greater efficiency and lowering costs. But in doing so, they move further and further away from their innovation roots, which leaves them open to disruptive change from nimbler challengers with new innovations.
In the past, that process might play out over several years or decades. But today, in the throes of the digital revolution, it is a reality that companies are having to face at an unprecedented pace and scale. According to Scott Anthony, managing partner at Innosight, the consulting firm co-founded by Christensen, companies in every sector are having to confront the existential challenge of disruptive change.
Having seen the same challenge at hundreds of companies, Anthony is convinced that the greatest chance of successfully navigating it comes through an approach he calls ‘dual transformation.’
First, the aim has to be nothing short of full business transformation, he says. “By definition transformation is a change in form or substance. This is not simply doing what you’re currently doing better, faster or cheaper. That’s important but transformation is fundamentally changing who you are, the corporate equivalent of the caterpillar becoming the butterfly.”
But the transformation effort must be enacted across two fronts. “Transformation A involves repositioning the existing business to make it more resilient. Transformation B means creating tomorrow’s growth engine,” says Anthony. “Both of those are important. Both of those are different.”
As he details in Dual Transformation: How to Reposition Today’s Business While Creating the Future, this only works if these two are managed as separate entities. “One of the big mistakes that we see people make is that they try to smash those together. If you don’t manage these things distinctly you’re going to get one of them wrong: you’re going to miss great opportunities for growth or you won’t deflect the most critical disruptive threats that are coming at you.”
That means effectively splitting company’s operations in two, he says. “They require different mind-sets, different metrics, different approaches, even different organizational structures to get it right.
A structural separation may be vital in dual transformation, but he argues that there still has to be a link between the current and future company that taps into some existing capabilities or assets and provides it with an unfair advantage over competitors in the new market.
“You’ve got to be careful,” he says. “You don’t want to go for an approach that’s totally disconnected. You want to very carefully create a link between today’s business and tomorrow’s business. Because what you’re trying to do is say a large organisation can do something that no start-up can. If you create a disconnected entity, you might as well just invest in a start-up.
“It’s finding this careful balance where you’re separate enough to be different but not so separate that you’re isolated that allows you to realize the innovator’s opportunity.
That dual nature of the organization calls for a new kind of leadership. “The job of the leader is to pick [the new direction] and make sure there’s purpose for both of the organizations,” says Anthony. It is also to manage the inevitable tension that will exist between the two entities.”
Transformation on the rocks
Indeed, Anthony talks of a whole series of predictable crises that are likely to arise during the dual transformation journey.
• Crises of commitment that question whether management is serious about allocating sufficient resources to both elements of the transformation
• Crises of conflict, in which the transformation A group will actively try to sabotage transformation B and vice versa
• Crises of identity that arise from the change in the fundamental nature of the organization.
“This is why leadership is so essential for dual transformation,” says Anthony. “Of course you’ve got to get the structures, systems and strategy in place but the company’s leaders need to be constantly vigilant and prepared to deal with these crises because this is the toughest problem a leader will ever face.
“Think about what you’re asking them to do. They have to run today’s business with ever-increased precision. They have to change what they’re doing today and they have to invent tomorrow — all at the same time. Unbelievably hard, but the rewards are worth it.”
Culture with a difference
Anthony draws a prime example of dual transformation in action from Innosight’s client base in Asia-Pacific, where he has led expansion since moving to Singapore in 2010.
“The typical Asian organization will be more hierarchical than a comparable western company. And that can be a real challenge when it comes to innovation and disruption because often the most senior, most seasoned people in the organization are the wrong people to make decisions about it. You’ve got to flip the hierarchy if you are to succeed with transformation and use the energy of people who are lower in the organization and closer to the trenches.”
One Asia-based organization he thinks is boldly and successfully executing a from-to transformation is Singapore’s DBS, the largest bank in South-East Asia. “This is a company in a regulated, conservative industry, in a process-obsessed country, yet DBS is moving from a culture focused on compliance to a culture of innovation and experimentation.”
Since taking the helm a decade ago, CEO Piyush Gupta, along with technology and operations chief David Gledhill, have been pursuing a company commitment to ‘make banking joyful.’
As Anthony recounts: “They have said: ‘We’re going to create a culture where we feel like a 23,000 person start-up, where experimentation is natural. We’re going to be the best bank in the world and we do this by really bringing agility and experimentation to everything that we do.’
“That is still a work in progress but at DBS you see a place where people are trying new things, where offices have opened up, where you’ve got incubators coming up with new ideas, where you’ve have a lot of innovation energy that is being unleashed and harnessed and amplified. And, as a result, DBS is going to have massive impact in Singapore and beyond in the years to come.”
• Portrait photography: Scott Woodward