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Spotlight BELOW Michel de Broin, Révolutions, 2003 Aluminum, 5 x 5 x 8.5 m Maisonneuve-Cartier Park, Montreal Spotlight SPOTLIGHT ON REINVENTION

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Page 1: Accelerating Corporate Transformation

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Spotlight BELOW Michel de Broin, Révolutions, 2003

Aluminum, 5 x 5 x 8.5 m

Maisonneuve-Cartier Park, Montreal

SpotlightSPOTLIGHT ON REINVENTION

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Robert H. Miles([email protected]) is the president of Corporate TransformationResources in Charlottesville,Virginia, and senior

adviser on corporatetransformations to TheMonitor Group. He is acoauthor, with MichaelKanazawa, of Big Ideas toBig Results (Financial TimesPress, 2008).

Accelerating Corporate

Transformations(Don’t Lose Your Nerve!)Six mistakes that can derail your

company’s attempts to change

by Robert H. Miles

HBR.ORG

January–February 2010 Harvard Business Review 69

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sk any CEO who has over-

seen a corporate transorma-

tion what should have been

handled diferently, and you

are likely to get this answer:

“We should have—and could

have—moved aster.”

Such executives have a

long list o regrets: They wish

they had uniied the leader-

• During business-as-usual periods, these brakes may

 be irritating, but their eects on perormance are

reasonably benign. However, during a bold trans-

ormation, which requires rapid action, any one o 

them can derail the larger efort.

• To accelerate transormations, managers need to re-

lease each o these brakes, in a particular order.

Let’s examine the diferent types o brakes and

discuss how and when to release them.

SPEED BRAKE #1

Cautious Management CultureWhen companies pursue variations on the same

 business model or an extended period o time, they

 become preoccupied with incremental improve-ment. Rather than teeing up big ideas and targeting

 big results, executive decision makers try to avoid

 big mistakes. They hunker down in their respective

areas o responsibility, believing they are too busy

with daily operations to get involved in reimagining

the entire business. The problem is, transorming an

enterprise requires intensive cooperation among ex-

ecutive peers. Strong traditional units have to share

resources with unproven or underperorming units,

and oten they must sacrice something they value

or the good o the whole.

An incremental, parochial mind-set also a rmsthe traditional executive pecking order. Those who

control the most resources or institutional assets

tend to monopolize discussions, trump new ideas,

and strong-arm decision making, thereby reinorc-

ing the status quo. The management culture in the

U.S. automotive industry was so cautious a couple o 

decades back that General Motors had to create Sat-

urn, a geographically separate greeneld subsidiary,

to ree up the executive attention and the design and

development resources needed to respond to the

small-car challenge o oreign competitors.

In a conservative culture, no one is certain thatthe leader in charge will stay the course on a trans-

ormation agenda. Typically, a history o hal-baked,

hal-hearted, and hal-lived change programs under-

mines condence that the current challenge will be

ship team right away. They wish they had engaged

employees sooner and quickly drummed up support

or the new vision. They wish they hadn’t waited so

long to test their assumptions and rene their key

initiatives. And they wish they had generated somevisible returns early on, to accelerate the commit-

ments and reinorce the expectations o employees,

customers, suppliers, and investors.

Any corporate transormation—launching the

next major phase in an organization, executing a

new corporate strategy to achieve breakthrough per-

ormance, enabling a new executive leader to take

charge, or integrating an acquisition—is raught with

challenges. More than 25 years ago, I began chair-

ing an innovative program that convened groups o 

CEOs and their executive teams or two-week ses-

sions at Harvard Business School, where they col-laborated with aculty members and noncompeting

peers on solving their most serious challenges. They

met again nine months later to share their experi-

ences. Within a ew years, a clear pattern emerged

rom the program: The biggest barrier to corporate

transormation was getting organizations to execute

their bold new ideas quickly. Since then, rom my

direct involvement as principal process architect in

more than 25 corporate transormations led by new

and sitting CEOs, I’ve concluded that many talented

executives don’t ully appreciate the ollowing subtle

 but powerul insights:• Transormation launches must be bold and rapid

to succeed. Yet, embedded in most organizations

are six kinds o “speed brakes” that can slow things

down to a grinding pace.

If team members feel they don’t have quiteenough time, you probably have the pacingabout right.

ASPOTLIGHT ON REINVENTION

70 Harvard Business Review January–February 200

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treated any diferently. Without a clear vision and

denite commitment rom above, even the most ca-

pable and energetic members o the leadership teamwill hesitate to raise new ideas or moving orward—

and the less-proven executives will eel even more

reluctant to speak their minds about what is wrong

and how to improve things.

Successul transormations call or a rigorous

conrontation o reality, both external and internal.

But all that work will be wasted i the leader hasn’t

paused to establish that all executives must help

chart the new course. Every member o your man-

agement team must understand the requirement

to take an active role—no exceptions. I you permit

walllowers during the planning phase, they arelikely to cast long, passive shadows over the organi-

zation when it comes time or execution.

Beyond mandating involvement, you have to

provide sae passage—enable managers and employ-

ees to be brutally honest about what they see as the

company’s greatest weaknesses and encourage them

to contribute ideas on how to launch the transorma-

tion and keep it going. You can start by getting the

leadership team to agree on a simple set o ground

rules or discussing ideas, engaging in critical think-

ing, and making decisions. Be ready to enorce them,

 because team members are likely to revert to theirold ways i you don’t.

Next, clearly spell out how everyone in the orga-

nization will move rom the current state to the de-

sired new state. You must describe the major steps

and deliverables in your launch process as well as

how and when people at diferent levels in the com-

pany will become engaged in the transormation

launch and journey.

Ater that, have an objective third party conduct

a round o interviews with key leaders about what’s

working or not working and what’s the best way to

proceed. Guarantee anonymity, and assemble the

indings in an unattributed, verbatim ashion. In

addition, gather act-based insights rom inside and

outside the organization to test the assumptions un-derlying your new business model.

Once you’ve completed those tasks, convene a

well-designed “conronting reality” event so that

you and your team can work your way through all o 

the new inormation to develop and rene the vision

and supporting business model. And then road test

everything in the organization beore drawing con-

clusions and nalizing the transormation plan.

The above steps will enable you to quickly ad-

dress important issues and make di cult resource-

allocation decisions. By avoiding a alse start with

your management team, you won’t have to revisitstrategic questions, redo key elements o your busi-

ness model, or reprioritize initiatives—all o which

would bog down your launch and sap energy rom

execution.

SPEED BRAKE #2

Business-as-UsualManagement ProcessIn most cases, the day-to-day management process

is already operating at ull capacity when the rm’s

leaders sound the call or big change. There isn’t

room within established systems to plan and launcha transormation—in act, they oten get in the way.

Forcing the launch process into the organization’s

preexisting calendar o meetings will give short

shrit to this important work and not allow adequate

time or the structured dialogue that’s so essential to

 breaking new ground.

The solution is to create a turbocharged, no-slack

launch process that runs on a separate track and

promotes both high speed and high engagement.

Running a no-slack launch alongside the routine

management process or a ew months will enable

you to accelerate the transormation, gaining not

Idea in Brief 

Six problems canslow your corporatetransformation to acrawl; attack them

sequentially.

Cautious management

culture. Compel all executives

to confront reality and agree

on ground rules for working

together.

Business-as-usual

management process. Run a

no-slack launch on a parallel

track with regular systems;

make sure there are early,

visible victories.

Initiative gridlock. Limit the

company to three or four

initiatives.

Recalcitrant executives. 

Compress launch to quickly

engage key executives and to

identify and confront those not

on board.

Disengaged employees. 

Rapidly cascade the changes

to all employees to boost

engagement.

Loss of focus during

execution. Anticipate and

defuse postlaunch blues,

midcourse overconfidence,

and the presumption of 

perpetual motion.

SIMPLE MEETINGSThe executive vicepresident of humanresources at a globalbig-box retailerreflected, “The agenda,the meeting design,and even the questionsasked need to besimple. This lets peoplefocus on the thinkingrather than on runningthrough a complexprogram. The value is inthe discussions with oneanother.”

ACCELERATING CORPORATE TRANSFORMATIONS (DON’T LOSE YOUR NERVE!) HBR.ORG

January–February 010 Harvard Business Review 71

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only precious time but also energy, commitment,

and momentum (see the exhibit “The No-Slack

Launch”).

You’ll need to lay out or the management team,and then or all employees, a road map with specifc

waypoints and dates. The road map must be spare.

With proper preparation and good design, your team

and the ones reporting directly to it should go rom

conronting reality to fnalizing initiatives in three to

our meetings, interspersed with prework, testing, and

reinements. The accompanying schedule must be

highly compressed. I team members eel they don’t

have quite enough time, you probably have it about

right. When people receive a ew extra weeks to com-

plete a step, they oten wait until the last week or so to

 bear down. Just a ew extensions can balloon a three-month launch phase into six months or even a year.

The senior executives should each be asked to

help crat one o the transormation initiatives and

later to oversee its execution companywide. They

will perorm these cross-organizational duties in

addition to being responsible or their own depart-

ments’ progress on all initiatives. By perorming

 both roles, executive leaders will greatly increase

the transormation’s traction.

The no-slack launch stands in stark contrast to

the counsel that everything must be perectly pre-

pared ahead o time, with troves o analyzed data, acompletely articulated strategy and new business

model, and all the right people in the right posi-

tions. Many leaders who ollow that advice ind

themselves shunted onto the side tracks, still wait-

ing to fre up their engine as the market roars by and

valuable employees leave to fnd better vehicles to

advance their careers. Preparation is important, but

not at the expense o motion. And motion is critical,

 because it allows you to accrue small victories that

entice the undecided to come on board.

Perhaps the most important reason to get moving

is that every day o action accelerates the cycle o or-

ganizational learning and adaptation. The moment a

solution is envisioned, put it into play. I it proves to

 be aulty, quickly drop it—and chalk it up as a lesson

to apply to your transorming business.

SPEED BRAKE #3

Initiative GridlockExecutive leaders may lack the insight and courage

to discard eorts that have come up short. A com-

mon ear is that i they admit they’ve chosen a wrong

path or gotten the timing wrong, they will lose their

ability to motivate the team to try other things. So

instead, they pile new initiatives on top o the ones

that are struggling—and the result is gridlock.

Initiative gridlock oten starts simply, innocu-

ously. Suppose that Finance puts new tools in placeto better control overhead costs. And then Human

Resources introduces a new employee perormance

management system to better identiy top contribu-

tors. Marketing initiates a campaign to boost sales o 

new products. Manuacturing kicks o a Six Sigma

program that will eventually touch Marketing, Sales,

and Finance. And the top executive team embarks

on a culture-change eort to improve morale and

retention (ironically, the low morale stems rom too

many initiatives overloading the system and the

people). Individually, each project makes sense, but

when launched simultaneously, with no regard orstrategic alignment or prioritization, these multiple

layers o activity easily overwhelm the organization.

Executives who try to stu too much into the or-

ganizational pipeline will clog it. Workers’ capacity

to execute will become a choke point i the programs

are not prioritized and sequenced.

The best response is triage. In the most success-

ul corporate transormations, managers restrict

their action agendas to three, or at most our, well-

articulated companywide initiatives—each one con-

taining only two or three careully selected areas

o ocus tied to clear outcome metrics. When you

QUICK STARTSNothing builds a senseof urgency like visibleprogress and early wins.At the beginning of thelaunch process, target afew high-value initiativesor obvious obstaclesfor immediate action.These “quick starts” willserve as early symbolsof the seriousness of your transformationalintentions. The boost inenergy and momentumwill be palpable.

The NoSlack Launch

Day-to-day processes can get in the way when you’re trying to geta corporate transformation off the ground. The solution? Create acompressed launch process that runs in tandem with established systems.

SPOTLIGHT ON REINVENTION

72 Harvard Business Review JanuaryFebruary 2010

CONFRONTREALITY

FOCUS VISIONAND

BUSINESS MODEL

ALIGN TOTRANSFORMATIONINITIATIVES

–4 MONTHS

ENGAGE EVERYONEFROM TOP TOBOTTOM

ONGOING

QUICKSTARTS

LaunchQUARTERLYLEADERSHIPCHECKPOINTS

Execute

Rapid All-EmployeeHigh-Engagement

Cascade

Prework Assign StrategicIssues Teams

Launch theCompanywideInitiative Teams

Align Subunits MINI-CASCADES

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start multiplying the initiatives by the areas o ocus,

you’ll quickly realize that exceeding this guideline

will gridlock the organization.

For example, a new CEO’s irst order o busi-

ness at a global retailer was to disband 1,000 teams

and work with a largely inherited leadership team

to distill three crucial initiatives rom all the com-

plexity. Having to oversee and guide the work o so

many teams, the previous CEO had led the whole

company into gridlock. When the new leader’s com-

pressed transormation agenda made it possible or

everyone in the organization to ocus time, attention,

and resources on the turnaround, people were able

to contribute much greater value to the eort. As

a result, the retailer dramatically improved share-holder value, customer satisaction, and employee

retention by the end o the frst year. I the transor-

mation agenda hadn’t been tightened, managers and

employees would have been orced to develop their

own ways o coping with directionless and oppres-

sive gridlock.

Focus is not about doing more with less; it’s about

doing more on less. Making choices about what not

to do so that resources will go to the most important

initiatives is not easy, but it must be done to release

this brake on your frm’s transormation.

SPEED BRAKE #4

Recalcitrant ExecutivesProtracted tolerance o recalcitrant team members,

or o those who are incapable o perorming within

the expectations o the transormation agenda, con-

stitutes another inhibitor. Many executives, even

i they acknowledge this problem, choose to avoid

conlict and hope that the clarity and eicacy o 

their grand plan will quickly win people over. And

they’re mostly right. Ater the top leader creates sae

passage, establishes a reliable process architecture

geared or speed and high engagement, and bringsperormance and behavior expectations into sharp

ocus, many team members will commit to the new

transormation agenda.

But what do you do with the senior executives

who do not come aboard? More important, how soon

do you need to act? The simple answer is sooner

rather than later, or run the risk that just one or two

people will disrupt the speed o your organization’s

progress rom planning to achieving breakthrough

results.

The best approach: to quickly identiy and con-

ront executives who might undermine transorma-

tion. Even during the frst ew weeks o your launch,

time compression helps to highlight three types o 

managers who could cause problems:

• the quick adopters, who jump aboard beore they

ully grasp what is involved and who view mastery

o the new agenda as a springboard to success;

• the deniers, who harbor a deep oreboding about

 being on the losing end o the inevitable power and

resource shits in a reinvention; and

• the commitment averse, who may not believe in

your approach but remain on the ence, possibly be-

cause they see that the transormation is beginning

to bear ruit.

The more ocused and explicit your launch pro-

cess becomes, the easier it will be to identiy theone or two members o the management team who

could undermine the whole eort. Deal with those

individuals frst. That will send a strong signal to

the other members o the team as well as to the

rest o the organization that you mean business.

Then you can coach people to rise to the transor-

mation challenge.

SPEED BRAKE #5

Disengaged EmployeesOnly ater you have dealt with leaders who will not

commit to the transormation can you attend toemployee engagement and motivation. But it is es-

sential to conront the latter issue as quickly as pos-

sible because disengaged employees can really slow

down your progress.

Many transormation eorts stall because the

great ideas and strategies never make it ar enough

down in the organization to have an impact on the

people who relate directly to customers or make the

company’s products. I you can’t rapidly engage all

employees and get them to commit to the agenda ini-

tiatives early on, the top team may move on to new

challenges and strategies beore your initial messagereaches the ull organization.

Most employee programs established to support

a transormation aim to combine training and devel-

opment with employee alignment and engagement

during the launch period. Employee events during

launch—oten held o-site—usually take place over

several days, sometimes a week or two. But such

events won’t do a bit o good i you (a) wait too long

to hold them or (b) ail to engage and align employ-

ees rom the outset.

The CEO o a global semiconductor company un-

dergoing a turnaround spent several months with

PERILS OFHESITATIONReflecting on hissuccessful corporatereinvention severalyears after the fact, ahigh-tech CEO said,

“We had one or twoexecutives who I knewfrom the get-go werenot the right people,and there were two orthree others who overtime basically came to

me and said, ‘What theprocess expects of usis too hard.’ So part of the defining momentfor me was determiningwho was going to stayon the team and whowas going to go. Don’thesitate. Give yourself 90 days in total to doall the assessments andevaluations. But after90 days, make thosechanges. Don’t wait twoyears for people to quiton you.”

THE TWO-DRAWER METHODThe internal duediligence processin a large retailcompany uncovered anunderground survivaltechnique: an unwritten

“two drawer” methodfor keeping up with allthe corporate initiativesfor transformation. Allnew memos aboutinitiatives went into adesk drawer. If anyone

from corporate followedup on a memo, it waspulled out and taggedfor action. At the endof the month, if nobodycalled about the rest of the memos, that stackwas moved to a seconddrawer. And after twomonths, anything left inthe second drawer wasthrown away.

January–February 2010 Harvard Business Review 73

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the top three levels o management building the

 basic constructs o the transormation beore decid-

ing it was time to bring all 50,000 globally dispersed

employees aboard. The CEO decided to assemble a

team o HR proessionals to lead the global rollout

o a ive-day communications and competency-

development program, but securing employees’ en-

gagement, alignment, and commitment in achieving

the new initiatives was let or a ollow-on program.

By the time the second program reached all employ-

ees, almost two years had passed, and the company

was shiting to the next phase in its ongoing transor-

mation. Because employees had received extensive

training beore they were properly indoctrinated,

many were not sure what specifcally to do in their jobs to contribute to the frst phase o the company’s

transormation.

A much better response is to deploy a rapid, high-

engagement, all-employee cascade. Contrast the

approach described above with the experience o a

major retailer that took only a ew weeks to engage

and align its 40,000 employees around the world

with its transormation plans and initiatives. On the

frst day o the cascade, the regional vice presidents

(executives three levels below the CEO who had

 been part o the intensive, three-month, no-slack

launch) gathered in a room with their district man-agers. The major initiatives were presented, one at

a time—and then the regional VPs, sitting at tables

with their teams, shared the commitments they had

made to drive each initiative beore acilitating a dis-

cussion about how their district managers could con-

tribute. At the end o the day, all participants turned

in their preliminary commitments to action in their

immediate areas o responsibility. Within one week,

the district managers met with their regional VPs to

fnalize their commitments; a couple o weeks ater

that, they gathered or a day with all the store man-

agers in their districts and went through the sameprocess, which the store managers repeated with

their teams. The cascade concluded with a three-

hour companywide event early on a Sunday morn-

ing, right beore doors opened to customers at all

800-plus stores.

Discussions were entirely devoted to rapidly

engaging all levels o employees in the launch and

establishing clear line-o-sight accountability or the

major transormation initiatives rom top to bottom

in the organization. A conscious decision had been

made to deer essential training and development

until managers and employees were engaged and

committed, because then people would be better mo-

tivated to learn. The entire global high-engagement

cascade took less than two months to complete.

SPEED BRAKE #6

Loss of Focus During ExecutionOnce you have executives and employees on the

road to reinvention, it is important to keep them

ocused on the journey by setting concrete and vis-

ible intermediate goals. The last thing you need is an

early chorus o “Are we there yet?” rom the people

who led the planning and launch phases. This is

critical, because the more intensive and engaging

the transormation launch, the harder it can be to

sustain the heightened levels o energy, ocus, andperormance.

Ater working on alignment and commitment in

the cascade sessions, people really do need to get

down to the business o delivering on their commit-

ments. Sometimes, the shit rom planning to doing

is mistaken as a departure rom the big ideas that

were the grist o the launch phase. As the day-to-day

grind retakes center stage during the frst quarter in

the execution phase, old habits can gradually sneak

up on the system. Leaders who had begun working

in a more open and engaging way might switch back

to command-and-control mode or turn their atten-tion to other important activities. Priorities set in the

launch phase will be challenged as people respond

to more-immediate pressures to meet tactical goals.

You may begin to eel that you’ve done your part

and that it is now time or the team to execute—but

you must continue to actively champion the trans-

ormation initiatives by modeling the new desired

 behaviors. In addition, you must resist the tempta-

tion to constantly add new ideas to the mix to pro-

voke or stimulate employees.

The transition rom launch to execution is vul-

nerable to three predictable slumps. They cannot becompletely avoided, but they are recognizable, and

executive leaders and general managers can mini-

mize their drag on the transormation eort. The

moment you hear the words “Hey, we’re over the

hump,” you are about to hit the frst one. Here are

some ways to work through them.

Postlaunch blues. It can be tough or a leader

to switch rom playing a visionary role to serving

as “ballast and keel,” but that is just what is needed

ater a strong launch, because a real transormation

is about execution. The top leader has to make sure

managers at all levels receive and relay a consistent

SPOTLIGHT ON REINVENTION

74 Harvard Business Review January–February 2010

RAPID EMPLOYEEBUY-INA year after a verysuccessful turnaround,the retail CEO whooversaw it remarked ina magazine article, “Thebiggest surprise washow quickly people said,

‘Count me in. Let’s go!’ Iknew it would happen.I just didn’t think we’dget there this fast.”

LAUNCH REDUXAs you move outof the first year of execution and into thesecond, you’ll need toreprise a streamlinedversion of the no-slacklaunch: Refine themajor transformationinitiatives, close anygaps that emergedduring the performanceyear, and recommiteveryone to the

transformation effort. 

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message about the need to drive the key transorma-

tion initiatives in the agreed-upon manner. One way

to signal your shit into execution mode is to start

weekly staf meetings with a review o progress on

transormation initiatives, calling attention to peo-

ple and plans that have drited out o alignment and

noting early lessons that need to be quickly shared.

Observable leadership behaviors such as this will

renew aith that management is ollowing through,

 build condence that everyone is headed down the

right path, and reinorce accountability to the com-

mitments made during the planning. These behav-

iors will keep the transormation energy high and

everyone’s ocus where it needs to be.

Midcourse overconfidence. The next major

slump typically comes ater two quarterly check-

points have passed. The transormation initiatives

are now well understood, and results have begun toregister. A eeling o smooth sailing can set in.

You should not, however, turn on the autopilot.

You will encounter unexpected execution challenges.

The business model will need rening, and you will

need to tweak initiatives based on lessons rom early

execution. As the excitement o the launch wears of,

some executives may lobby or old, amiliar meth-

ods that are more to their liking and better aligned

with their existing skills. I you do not step up to a-

rm the commitments to transormation that have

 been so careully put in place, other leaders may try

to undo all the hard work that got everyone ocusedand moving down the new path.

One o your biggest midcourse challenges is to

keep the transormation process ocused, energized,

and resh. Beyond conducting a rigorous midcourse

assessment o the transormation process itsel, an

efective way to increase both speed and traction is

to hold quarterly checkpoint meetings that involve

the top three levels o leaders and immediately ol-

low each o them with mini-cascades, interventions

that take place throughout the company.

Mini-cascades don’t have to be expensive, time-

consuming, overly produced events. In act, it’s

 better i they take only an hour or two each quar-

ter and are olded right into regular operations. For

instance, eld supervisors on a construction site

can chat with employees over cofee and donuts

on the tailgate o a pickup truck beore people start

working. The important thing is to keep everyone,

not just top executives, engaged and inormed so

they can make timely adjustments to accelerate

progress.

Presumed perpetual motion. As the rst peror-

mance year comes to a close, many executives will

succumb to the presumption o perpetual motion—

the idea that things will continue to progress i the

company simply sticks with the year-one game plan.

You’ll even hear a ew executives say, “Let’s not go

through that again!” But the act is, a resh look at

everything is necessary.

You’ll need a “launch redux” to boldly kick of thesecond year o execution. Now that the organization

has given the transormation initiatives an extended

test drive, the leadership team should reexamine

them and the thinking behind them, drawing on ev-

eryone’s experience to make inormed changes. Hav-

ing been through all this beore, the leadership team

should be able to accomplish the launch redux in a

rigorous but streamlined manner.

EVEN ONE o the speed brakes can bring an entire cor-

porate transormation and all related breakthrough-

perormance aspirations to a sudden halt. Someo the methods or releasing the brakes may seem

counterintuitive. For instance, it might not be obvi-

ous at rst how you can accelerate change by paus-

ing to establish sae passage or setting time aside

or structured dialogue, or how you can accomplish

sweeping transormation by restricting your ocus to

a very ew important initiatives. But the tactics dis-

cussed in this article will help you plan and execute a

rapid corporate reinvention that actually sticks. This

is a discipline that all CEOs and general managers

will have to master to be successul in the twenty-

rst century. HBR Reprint R1001C

As the excitement o the launch wears of,some executives may lobby or old, amiliarmethods that are more to their liking.

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ACCELERATING CORPORATE TRANSFORMATIONS (DON’T LOSE YOUR NERVE!) HBR.ORG

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