Changes for the Organization that lead to Transformation, Pt. 1

Changes within an organization have a variety of effects, often depending on the magnitude of the change.  Some changes are small and can go unnoticed, while others are more cumbersome, take longer to implement and/or take longer to see the benefit. 

It is from the more robust organizational changes that companies find themselves in truly transformational efforts.  Some of the most common large-scale organizational changes that lead to transformation are new leadership, standing up a Business, Enterprise Architecture or Advisory practice, modifying a company's operating model, or moving silos into a more enterprise focused role.

Often when there are changes in leadership, leaders are in a position to implement their ideals. This can initiate a transformation.  This change can lead to transforming either a specific business unit or can spread across larger areas of the organization.  Changes in leadership can result in a transformation simply as a means to evolve from a previous leader’s direction. 

When arriving in a new position, new leaders identify where they can impact direction for an organization. Transformational leaders will attack the opportunity and steer towards new methods and innovative designs. These changes can easily drive large-scale business transformation.

On the other hand, if an organization has a leader that is resistant to change, it can often halt new or prevent existing changes from becoming successful. Having such a leader replaced with a more transformational leader, will allow transformations to occur and with perhaps fewer challenges.  [Note: Politics and differences in ideals among leadership is one of the biggest roadblocks for why transformations don't' occur or are not as successful with implementation and/or timing for the completion of a Transformation.  This topic will be addressed in the near future.] 

Despite the reason for changes in leadership, each leader has their individual ideas and vision for how the company should run; some of these visions align with the current state, and other visions can lead to transformation.  Change Management is an important aspect to ensuring proper execution of a transformation initiative. Change Management specifically addresses the problems around culture and leaders and their willingness to face the change with open arms or closed a closed fist.

Regulations and Compliance Drives Transformation

One primary reason companies take on transformational efforts is due to regulatory and compliance demands.

Business transformation has become commonplace because of regulations which developed from the financial crisis of 2007-2010. Since 2008, numerous pieces of legislation have forced corporations of all industries to transform major parts of their business, if not their entire business.  Regulatory and compliance acts are now driving companies towards transformation because of even stricter rules.

One of the most impactful pieces of legislation is the Dodd-Frank/Wall Street Reform Act. The Act, enforced in 2010, has brought transformation necessity to many industries, including Banking, Financial Services, Energy Trading and Insurance among others.  The Act has forced companies within these industries to implement a number of changes ranging from re-engineering investment and banking rules, restrictions around trading of commodities and derivatives, and monitoring aspects of the insurance industry, including gaps in regulation of insurers that could contribute to further financial crisis.

These rules can drive a number of changes across an organization, including but not limited to:

• Modifying, developing, and/or purchasing new technology

• Improving processes that have to be absorbed and integrated within operating models

• Facilitating changes in the company culture which must support and align with the transformation

• Modification of intellectual property, including employee knowledge bases.

These changes are usually necessary for companies to maintain compliance with the legal and regulatory parameters of their respective industries.  Non-compliance often becomes expensive based on paying for fines or other legal battles.

Business Transformation

One of the many consistent factors companies face in their existence is the need to change.  Companies seem to be always in the midst of constant change, and at times, the act of changing can to be a company's main focus.  For periods of time, companies enjoy periods of success without disruptions and being confronted by factors that will force or be a catalyst for a company to transform.  Yet, with or without warning, companies will find themselves in unfamiliar circumstances with uncertain outcomes and the desire for Transformation. 

As the company transforms, no matter how painful and laborious the process, the Transformation itself is most always for the betterment of the customers in order to return the company to a more sustainable state of financial success, customer growth, and a more competitive position in the marketplace.  With that, transformation is becoming a more desired imperative of a company’s focus and vision for their future.  

The need or even requirement for transforming can be drastically different for each company.  Companies that are in different industries, work within different products, and provide different services can all find themselves with a different purpose for Transformation.  Occasionally, companies are put in a position where they have ample time to adjust and be much more comfortable with the complexity of Business Transformation, while other companies are put in a positions where transformation is needed within a limited time frame and the companies’ focus has to immediately shift to not only adapt to any behavioral changes, but to strategize, plan, and execute the Transformation. 

In future posts, I'd like to talk through the many reasons why companies go through Transformations.