It’s been almost 10 years since HBR published John Kotter’s classic article, "Why Transformation Efforts Fail.” And although his suggestions for how to improve the odds have been widely accepted, the success rate of major transformation programs remains essentially unchanged — it still hovers at 30%.
Given the amount of research that business schools have dedicated to understanding change management, the number of books and articles published on the subject, and the investment that companies have made in consultants and training, one would think that we would be doing better by now.
Based on consulting experience with dozens of companies over many years, however, my sense is that there’s an underlying semantic problem, stemming from confusion between what constitutes “change” versus “transformation.” Many managers don’t realize that the two are not the same. And while we’ve actually come a long way in learning how to manage change, we continue to struggle with transformation.
Let me explain. “Change management” means implementing finite initiatives, which may or may not cut across the organization. The focus is on executing a well-defined shift in the way things work. It’s not easy, but we do know a lot more today about what to do.
For example, when a large technology firm integrated specialized engineers into its regional sales teams, there were shifts in roles, client coverage, compensation, goal setting, and teamwork. The change affected hundreds of people. By applying well-known change management principles and tools — such as making the business case, building a coalition of leaders, getting early results, engaging stakeholders, executing with discipline, etc. — the new sales approach was implemented successfully, and is generating improved results.
I could cite similar examples of other companies successfully executing discrete change initiatives, like introducing a new performance management system, shifting from decentralized to centralized marketing support, and utilizing new personal productivity tools. The point is that all of these initiatives were reasonably well-defined. The change management work focused on execution.
Transformation is another animal altogether. Unlike change management, it doesn’t focus on a few discrete, well-defined shifts, but rather on a portfolio of initiatives, which are interdependent or intersecting. More importantly, the overall goal of transformation is not just to execute a defined change — but to reinvent the organization and discover a new or revised business model based on a vision for the future. It’s much more unpredictable, iterative, and experimental. It entails much higher risk. And even if successful change management leads to the execution of certain initiatives within the transformation portfolio, the overall transformation could still fail.
I recently met with the senior leadership team of a large technology company that had been successful because one unique product constituted 90% of its sales. When competitors started developing a less expensive version of the product, it became clear that they could not survive as a one-product firm. As a result, the CEO launched a transformation strategy with the goal of figuring out a more sustainable business model. It included a number of major “must-do” initiatives: get more immediate revenue from the current product, create a leaner support organization, shift from internally-focused to externally-partnered product development, and ramp up the search for acquisitions and adjacencies. The transformation also called for a new set of cultural principles and a revised performance management approach aligned with these initiatives.
While each of these initiatives required change management disciplines, leaders also had to learn a broader set of transformational leadership capabilities, such as more flexible and dynamic coordination of resources, stronger collaboration across boundaries, and communication in the midst of uncertainty. And since so many people were engaged in the changes alongside their day-to-day jobs, managers also had to figure out how to prioritize and stop lower-value activities. In doing this, most of the top 150 managers were treading through totally uncharted territory. And while they knew that the goal was to make the company look very different, nobody knew for sure what the final outcome would be. In other words, the transformation was as much a process of discovery and experimentation as it was of execution. Success wasn’t guaranteed no matter how effective the change management skills.
It’s easy to beat ourselves up over failures in change management and the various studies that show we’re not getting better at it. But we really do know how to execute discrete changes. What we know much less about is how to engineer a transformation. And if we want to get better, let’s at least start by being more clear about which one is which.
Editor’s Note: A version of this blog was cross-posted on HBR.org.