Here is an excerpt from an article written by N. Anand and Jean-Louis Barsoux for Harvard Business Review and the HBR Blog Network. To read the complete article, check out the wealth of free resources, obtain subscription information, and receive HBR email alerts, please click here.
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Corporate transformations still have a miserable success rate, even though scholars and consultants have significantly improved our understanding of how they work. Studies consistently report that about three-quarters of change efforts flop—either they fail to deliver the anticipated benefits or they are abandoned entirely.
Because flawed implementation is most often blamed for such failures, organizations have focused on improving execution. They have embraced the idea that transformation is a process with key stages that must be carefully managed and levers that must be pulled—indeed, expressions such as “burning platform,” “guiding coalition,” and “quick wins” are now common in the change management lexicon. But poor execution is only part of the problem; our analysis suggests that misdiagnosis is equally to blame. Often organizations pursue the wrong changes—especially in complex and fast-moving environments, where decisions about what to transform in order to remain competitive can be hasty or misguided.
Before worrying about how to change, executive teams need to figure out what to change—in particular, what to change first. That’s the challenge we set out to investigate in our four-year study of 62 corporate transformations.
When companies don’t choose their transformation battles wisely, their efforts have a negative effect on performance. Consider what happened after Ron Johnson took over as CEO of J.C. Penney: He immediately gave store design and pricing an overhaul to attract younger, trendier customers. Sales sank by a quarter, and the stock plummeted by half.
Johnson’s first priority should have been a better integration of JCP’s in-store and online operations. At that time customers could not find in the stores what was being showcased online, and vice versa. The two channels were run separately, each with its own merchandise and supply chain. Johnson’s eventual replacement, Marvin Ellison, recognized the misalignment and restored JCP to profitability. Under Ellison’s leadership, JCP became nimbler and more responsive to customers looking for deals (who had left in droves because of Johnson’s changes). The retailer redesigned its shopping app to make it easier for in-store customers to find discounts, improved its website, and caught up with rivals by offering same-day in-store pickup of items ordered online.
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Here is a direct link to the complete article.
N. Anand is the Shell Professor of Global Leadership and the dean of faculty and R&D at IMD.
Jean-Louis Barsoux is a senior research fellow at IMD.