Change the way you lead, then lead the way to change

Stop transforming your organization. Nine principles to really change.
Despite the growing spotlight on organizational agility and many well-intentioned efforts toward transformation, most large organizations continue to be structured in ways that hinder progress. These multilayered, complex structures make it difficult for any organization to take decisive action, bring innovative products and solutions to market, and become truly customer-centric.

Over the past few years, business models have transformed to meet fast-evolving consumer requirements and embrace technological advancements, but organizational models and governance structures have largely remained the same since the 1990s. While the COVID crisis has further exposed these weaknesses, it has also shown that they can be overcome with the right sense of urgency.

Now is the time to revisit the traditional approach to multiyear transformations. Below we share nine guiding principles we’ve developed through our recent discussions with global CXOs. We believe that these principles, when properly addressed and executed, will help companies really transform the way they operate and see them outperform the market.

1. Define a simple and ambitious vision of success
Just as an organization’s purpose needs to be crystal clear and inspiring to shareholders and stakeholders, so does its vision of success. This requires internal alignment on exactly what this vision looks like and how it will position the company relative to the overall market and competitive context. It has to be simple and ambitious.

2. Focus on a maximum of 10 priorities that really move the needle
Based on their vision of success, leading organizations develop an agenda that they dynamically revisit and adapt as often as necessary. First, this involves prioritizing the strategic choices with the highest value attached, then deciding on the right delivery initiatives with a set of clear targets to hit. To be successful, leadership should focus at least 80 percent of their time on items with the most amount at stake and delegate the rest. The approach should then cascade across every area of the organization, ensuring that each team has its own priorities and a clear understanding of how their efforts contribute to the overall vision of success.

3. Allocate the most valuable resources as a venture capitalist would
Organizations should redirect capex, opex, management time, and key talent toward fulfilling the firm’s top 10 priorities, redirecting resources from non-priority areas. These priorities and the corresponding allocation of resources should be managed as it would be in a venture capital fund—using performance contracts with clear objectives, milestones, and investors to owners discussions. It works best when resources are allocated both top-down (corporate/cross-area priorities) and bottom-up (unit/area priorities), and come together to support the vision of success. Finally, companies need to be clear on what not to pursue, moving fast to stop activities that don’t advance the agreed priorities.

4. Kill the matrix organization
In order to drive decision-making across the business and deliver on the agenda, corporates shall rethink the way they assemble their teams in three typical combinations:

Decision cells—small cross-functional teams with best-in-class capabilities focusing on the top 10 decision agenda priorities and driving decisions at all levels of the organization
Delivery teams—fully empowered and accountable teams driving or supporting execution of the prioritized delivery agenda across areas of the organization
Functional backbones—internal or external capabilities setting high standards for functional excellence and supporting the other two groups as clients
In light of these new organizational requirements companies should stop repetitively changing their organizational structure (switching the key steering dimensions, optimizing G&A, …) and accept that in this priority-driven world, successfully managing the decision and delivery agenda means that some parts of the organization might emerge as superfluous.

5. Maximize customer value instead of optimizing costs
With a recession looming, many companies are deciding to manage costs. However, the organizations that will emerge from this crisis as winners will be those that focus on delivering maximum customer benefit in the most efficient way. They will integrate innovation and cost efficiency, rather than opting for one over the other. The creation of customer value becomes a guiding light for how they operate, and as such, they don’t waste money optimizing activities that fail to do so.

6. Reimagine your capability and talent agenda
Today companies must start rethinking their approach to talent management. This means matching the requirements of 21st-century business with a capability and talent agenda and shifting from a job strategy to a skill strategy. Leading companies focus on what they are best at and form valuable partnerships for everything else. They see their role as the managers of ecosystems.

7. Select leadership for high performance
More than ever before, companies need to be uncompromising in their selection of senior leadership, committing to choosing the most talented and collaborative individuals who personify the desired company culture. The makeup of the executive team should be flexible, ensuring that the right team is in place to execute the specific decision and delivery agenda at that time. Above all, future leaders should be selected and evaluated based on their ability to realize the company’s vision of success, putting the interests of the organization above any personal agenda.

8. Rethink performance management
Performance should no longer be evaluated against budget or traditional KPIs in annual reviews, but instead against achievements of real value, namely how successfully teams and individuals have delivered on the prioritized agenda. As well as promoting for performance, actions that exemplify an organization’s purpose and culture should also be acknowledged and rewarded. Agile companies replace time-consuming and political budgeting processes with real-time simulations of financial and operational performance. This enables them to make decisions, reallocate resources, and deliver quicker than their competition.

9. Stop cultural indulgence: there is a right or wrong culture
Performing companies have a clear set of strongly held beliefs around which they build their culture, such as customer obsession, high standards of performance, exigency, “reaching for more.” They dare to constructively challenge their teams, even if uncomfortable; they collectively commit to decisions and execute quickly. By acting with empathy and conviction, even when it’s uncomfortable to disagree, they remain true to their vision of success. In the same way, by celebrating creative experimentation and embracing lessons learned from failure, they build the resilience required to stay ahead in an uncertain future.

For many CXOs, each of these nine principles represents a fundamental change in the way they manage their company. Unlike the traditional, long-winded approaches to transformation that can take multiple years to implement—and will never truly change the game—these changes can be adopted quickly and don’t need to be enacted all at once. Whatever the chosen areas for improvement, once the vision of success and top 10 priorities have been defined with a set of clear objectives and owners, progress is inevitable.

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