Three critical success factors for strategic transformations
It is a truism to say that all organizational leaders want to deliver and sustain the value of strategic investments; such as the profitable acquisition of new businesses to extend into new markets, or implementing enterprise-level technologies to transform operations. But… what you want is a far cry from actually getting it. While they put enormous efforts into getting business cases through corporate approvals, only rarely do companies have the maturity to track actual transformation progress. To succeed, they must measure actualized benefits over time for the entire investment portfolio while holding business change owners to account for the promised results. When was the last time you were asked about the benefits from a program you sponsored a couple of years ago? Probably never. It remains a mystery why leaders pour money into one major change initiative after another, all promising remarkable results, yet many are destined to fail. Is it any wonder this happens if you don’t demand accountability for measuring and reporting progress, decision making, and value for money? It’s unfair to blame the change owners themselves because we do not expect them to report back. And it’s not fair to ask project teams either, because they are long gone before the results show. Rather, this is a failure of corporate governance structure and process - which is the collective responsibility of C-suite leaders. Organizations must bridge the ‘accountability gap’ between dreaming and managing their strategic transformation investments. In this article, we describe three critical success factors to closing the gap.
Understand the logic
Actually realizing benefits from transformation is hard work. It requires a combination of modern evidence-based decision-making, discipline in measuring and reporting on progress and benefits, and mature structures and practices to manage a portfolio of change initiatives. But the garbage-in/garbage-out principle applies here. Business cases are often fuzzy or outright flawed, and poorly defined initiatives inevitably lead to unmeasurable benefits – so why bother? The answer lies is getting the logic right in the first place, and the best way to do this is by creating a logic model of how actions will lead to results. Called a variety of different names – like benefit maps, outcome models, and result chains to name a few – a good logic model depicts in a graphical format how transformation actions drive benefits, help to identify measures, and align to strategic objectives and organisational goals. See below.
Ideally, every change initiative should have a logic model which fits within an organization’s overall transformation strategy. There is no single right way to develop a logic model but typically they follow one or a combination of the following approaches:
- Decomposing Strategic Objectives: Moving from right to left, we break strategic objectives down into transformation goals, which are further divided into benefits, enabling changes and capabilities arising from specific transformation actions. In effect, we derive the actions from the envisioned objectives by iteratively asking “How so?” This aligns to a classic, top-down strategy development approach.
- Understanding Implications of Actions: Moving from left to right, scenarios of actions are planned (typically using a hypothesis approach). The implications of the actions are considered, in terms of new capabilities to the organization and how they are leveraged to affect business changes and benefits, aligned to overall strategic objectives. In effect, the benefits are derived from the actions by repeatedly asking the question “So what?”
- Envisioning Business Capabilities: This approach starts in the middle by envisioning the business capabilities needed by an organization in the future and then considering the actions required to create those capabilities (moving to the left), and understanding the implications of the capabilities in terms of changes to the organization and resulting benefits (moving to the right).
Measure and report on the right things
Measurement is hard work too, and expensive – but not as expensive as doing the wrong projects in the first place. It’s important to focus on the metrics that matter most, so how do you choose them? Let’s go back to the logic model that shows the progression of outcomes arising from a change program’s actions. Note that we’re talking about outcomes – they differ from the metrics used to determine if an outcome is actually happening. Metrics are indicators of progress against the achievement of outcomes. So, you should determine the most important outcomes by looking across the full logic model of outcomes, and then identify metrics that best illustrate whether those outcomes are being achieved. A common mistake is to focus on end-objectives – these take longer to realize and are utterly useless for potentially adjusting a program when in-flight. Just try to manage this year’s transformation programs using next year’s financial statements. We also see organizations spend a lot of time creating beautiful metric scorecards and dashboards for executive consumption, rather than collecting relevant data to drive evidence-based decisions. Leading organizations will often create a centralized group that helps transformation program teams and owners with measuring performance. What this group must not be is a needless data collection function sending out templates at quarterly intervals for completion by hard-pressed business owners. Rather, this group should provide the arms and legs to collect the data for metrics, rather than simply asking for it. The group should hold the corporate memory of all logic models and metrics developed to date, enabling initiative teams to define metrics quickly and effectively.
Make evidence-based decisions, based on a common system of record.
There is no point doing measurements if they will not be used for decision-making about the portfolio. The same executive group that previously only authorized business cases needs to develop into a portfolio management function across its full lifecycle. How are projects progressing and are they building confidence that the expected benefits will be achieved? What adjustments are required for in-flight projects, and which projects should be stopped? Answers to these questions require visibility to the projects, their outcomes and their metrics. Visibility enables more effective accountability for metrics and outcomes, which is achieved through better governance structures and processes, supported by an end-to-end transformation management system. And we don’t mean complex, indecipherable, in-house spreadsheet-based tools. All too often, organizations get bogged down with developing their own tools – and spending internal money doing so – rather than make a small investment in an existing strategic portfolio and execution management systems, such as Amplify. You don’t need to reinvent the wheel. Important features to look for in such a system include:
- Graphical logic models for effective stakeholder engagement and articulation of strategic goals, benefits and changes for transformation;
- Online, interactive business cases, which include financial and non-financial measures linked to operational measures, and scenario-based portfolio management functions;
- Scorecards, risk management and metrics tracking for target, forecast and actual performance at all levels with personal views to ensure ownership, and sustained results;
- Built-in reporting capabilities and integration to business intelligence tools, project management systems, or even just ad hoc tracking spreadsheets.
Conclusion Making successful strategic investments in change is not something that just happens by chance. Often, they cannot achieve promised benefits or organizational goals. To succeed you need to bridge the fundamental ‘accountability gap’ between business change owners who lack the tools and expectations to monitor and report progress towards investment objectives, and project teams who move on before the results of investments are seen. We described three critical success factors that are necessary to bridge this gap, and deliver and sustain value from your strategic investments, namely:
- Recognize that benefits don’t just happen. You need a logical approach.
- Measure and report on the right things. Help the business do it.
- Make evidence-based decisions based on a common system of record.
If you work to embed these factors in your organization, underpinned by a suitable system, then you may just get what you wish for. Author Chris Carter, orgshift solutions – March 2021