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The hard truth of change

By Perry Keenan, Jeanne Kwong Bickford, Peter Tollman, and Grant Freeland

No-one reading this article will need any convincing that many businesses today are operating in an environment of rapid, possibly unprecedented, change. The stakes are high. Depending on complexity, 50 to 75 per cent of change efforts fail. And these days, the bulk of the change being undertaken is at the complex end of the spectrum, with the straightforward things having long since been done.

Framing and quantifying this dynamic, the business world, like the geopolitical world, has entered a new age of uncertainty. Turbulence is affecting more sectors, more frequently, and more severely. One-time market leaders or corporate giants can fall rapidly from grace, having failed to adjust to new realities, or losing out to more nimble competitors. Blackberry and Blockbuster are among the high-profile casualties. In fact, companies are expiring more quickly than ever before: the expectation is that one third of all public companies will disappear within the next five years. For a striking impression of the landscape, see the sidebar, “Most sectors are experiencing volatility unmatched in decades.”

 

Adapt or perish

Most of the drivers of today’s fast-paced business environment are well recognized – economic turbulence, disruptive technology, globalization, and fierce competition being the main culprits. The imperative for many businesses is to adapt to the changing conditions in order to boost their company’s performance. Traditional sources of competitive advantage, like scale and proprietary assets, are less valuable and less sustainable in this volatile environment.

To this unpredictable mix can be added digital transformation, advanced data analytics, robotics, artificial intelligence, and more agile methods of cooperation and delivery. Potentially, these forces have the power to make the way we will work in 10-20 years from now almost unrecognizable to today’s business leaders.

Collectively, these dynamics will create both great challenges and great opportunities. Paraphrasing Darwin, it is not the strongest of the species that survives, but the most adaptable.

 

Most sectors are experiencing volatility unmatched in decades

Since the start of the S&P 500, company fortunes have become far less stable across industries and geographies, particularly since the early 1990s. Exhibit 1 shows the volatility of all US public companies, via their annual changes in market capitalization. The light shading represents periods of stable company value; the dark shading represents periods of widely fluctuating company value. Note how even historically calm sectors, such as energy and telecom, have been experiencing high volatility in the last decade or two.

Exhibit 1: Industries across the board are experiencing heightened volatility

1. Average five-year rolling standard deviation of % firm market cap growth by sector, weighted by firm market cap

2. 95th percentile of standard deviation across Note: Based on all public U.S. companies

We could talk a lot about the common fatal flaws in big change efforts, the criticality of vision, leadership alignment and activation, activist governance, stakeholder engagement, “always on transformation”, and so forth. However, for the purpose of brevity, we will restrict ourselves to two points.

First, the bulk of adaptation to the new fast-paced environment will rely on an organization’s people significantly changing their behaviours and actions, to take on new roles, to cooperate with their peers in very different ways, to move at pace and with often uncomfortable uncertainty, to make tough decisions and to support their friends and colleagues who struggle with the transition. An absolute premium will need to be placed on thinking through the people considerations in conjunction with whatever exciting technological or data capabilities may arise.

Yet, comparatively little has been written on the specifics of the people-related components of the changes ahead. This is all the more surprising given that there are fundamental forces on both the supply and demand side dynamics for people and talent that are likely to further fuel the dramatic pace of business change.

Second, much of the upcoming changes that organizations will face will be launched and landed though strategic programmes and initiatives. The ability of organizations to adapt and survive hinges on the delivery of these programmes and their component initiatives. Therefore, a premium will exist for having the right capabilities to ensure their success.

 

People AND technology

Our BCG colleagues Vikram Bhalla, Susanne Drychs, and Rainer Strack have led an extensive effort examining global megatrends and how they will impact both the demand for, and supply of, talent. They have grouped these megatrends into 12 primary forces. These forces are summarized in terms of their impact on the supply and demand for talent in exhibits two and three, overleaf.

Together these forces will revolutionize the way that work gets done in companies and will compel leaders to rethink even the most basic assumptions about how their organizations function. They will need to discover new ways of organizing, performing, and leading, along with new approaches to recruiting, developing, and engaging employees – all this in organizations with limitless data, open boundaries, employees and machines working side-by-side, and with a rapidly evolving employee value proposition.

Exhibit 2: Technology and digital productivity coupled with shifts in ways of generating business value will profoundly affect the supply of talent Sources: United Nations Population Division, IDG, Oxfam, American Express Open Network, Forbes, BrightHouse

Exhibit 3: Shifts in resource distribution combined with changing workforce culture and values will profoundly impact the demand for talent

Exactly how these forces will manifest themselves will vary depending on the industry and the competitive context. Nevertheless, there will likely be some common threads to the opportunities and challenges to be managed.

  • “Speed and agility necessitates failing fast and learning fast”: Insight into customer needs and competitor moves, combined with the speed and agility to capitalize on this knowledge, will be increasingly Agile development models will become far more common and extend far more broadly into the organization. However, Agile needs to be more than having the product development function organized in scrums, developing user stories, executing in short iterations, using daily stand-ups and working the backlog. Easier said than done, the key to developing Agile as a component of competitive advantage is in actively investing in people and skills development to shape mature business teams with end-to-end representation, securing capable and committed product ownership from the business, developing new models of delivery and openly calling out failures, frequently challenging whether the minimum sufficient conditions for success are in place and effectively orchestrating benefits delivery and issues resolution across the teams. Delighting customers in ways that most impact business success and competitive agility are the goals. Establishing the model of experimenting, learning, adjusting, innovating and, at times failing fast will be essential to building capability and underpinning ongoing success.
  • “What’s mine might also be yours”: Organizational boundaries will increasingly blur – not just boundaries within, but also across, Traditional distinctions and frictions between employees, contractors, suppliers, customers, and, in some considerations, competitors will need to erode. Multidisciplinary teams, the use of contractors and industry learning platforms, and potentially the leverage of crowd sourcing and the sharing economy will all become increasing features in how work is done. As these new ways of working take hold, challenges will need to be tackled in terms of “What is the role of the organization?”. The nexus will likely be in balancing between fostering these ecosystems, building connectivity and energizing people for success, while also ensuring the necessary focus on the reinforcement of accountability for outcomes and the creation of economic value.
  • “Manage complexity with smart simplicity”: Increasing competitive intensity, consequent requirements for enhanced innovation and responsiveness, increasing stakeholder engagement across non traditional boundaries and greater regulation all contribute to a substantially increased level of Today’s organizational design constructs are not able to cope with this new level of complexity; they result in complicated, bureaucratic structures and processes. Performance and employee engagement are inevitable casualties. “Smart simplicity” is a new approach developed by BCG, under the leadership of our colleague Yves Morieux, that offers a superior approach to managing this complexity. Rather than adding organizational elements (structures, processes, incentives) in an effort to control what people do, smart simplicity guides leaders to create a context that promotes individual autonomy and alignment of the perceived individual interests of the employees with the interests of the company as a whole. Smart simplicity combines organizational elements in a minimally sufficient way so that it make sense for the employees to cooperate as a team.Specifically, the approach involves empowering people sufficiently for the requirements of their jobs by giving them the right resources and removing unnecessary constraints, and aligning interests by consequences to actions and results. (For full information on smart simplicity please refer to Yves Morieux and Peter Tollman, Six Simple Rules – How to Manage Complexity without Getting Complicated, Harvard Business Review Press, 2014.)
  • “Talent, talent, talent”: The stereotypical mantra of the change management industry has traditionally been “Communicate, communicate, communicate”. Arguably, for the new ways of working, the new mantra may need to be “Talent, talent, talent”. Significant demographic changes are occurring in the global workforce. Skills in digital technology, automation, and artificial intelligence will be an important prerequisite for success in most However, the skills required of employees to meet the challenges ahead are under increasing pressure. Businesses are increasingly prioritizing ways for developing and maintaining key talent, for example, through competitor or supplier acquisitions, trying to identify and incubate hidden talent in their own workforces and exploiting technology to enhance collaboration. Additional considerations include the increasing benefits and needs of incorporating flexible working models and diversity into the talent mix. A war for talent is waging, and it shows no sign of abating. Victory will go to those organizations most successful at innovation, planning, prioritization, and follow-through in talent development and retention.
  • “Active engagement counters disengagement”: There is an obvious premium edge in having an engaged However, unless carefully managed, the forces we have discussed can readily lead to disengagement. People’s attitude toward work is changing. Millennials, and more recently Gen Zs, are entering the workforce with quite different expectations around inclusion, values, work-life balance, individuality, and mobility. Their numbers are building and we will be increasingly asking them to operate in an environment of permanent and substantial change. Yet they are also typically harder to please and to retain. They want their jobs to have meaning, and they want to feel that what they do matters. They want to feel engaged and, regardless of age, want leadership interactions that are transparent, fact-based, authentic, timely and personalized. They want to feel that they are valued and listened to. The new ways of working need to factor in active people engagement in order to counter what will otherwise be a high risk of disengagement and talent loss.

For most businesses, these changes will challenge many traditional structures, teaming models, comfort zones, and cultural norms. The edge will go to those organizations that excel at gaining new insights from an ever-changing business environment and can quickly respond with the right decisions, actions and adjustments to both strategy design and delivery. There are no cookie-cutter solutions. Success will not come easily, and will never be able to be taken for granted, but herein is a key element of the future basis for competitive advantage. Organizations will need to experiment and adjust. They will need to launch both integrated and discrete initiatives to build the operating model, structures, aligned leadership behaviours, integration mechanisms, talent, and culture to win. The people considerations need to be every bit as much in the foreground, and closely integrated with, the technology considerations.

This serves as a natural segue to our second topic. Specifically, how to think about those initiatives needed by companies to adapt to and win in the changing environment, both at the overall portfolio level and at the initiative by initiative level. Once again it is worth remembering 75 per cent of major transformations fail. Getting the component initiatives set up for success is a powerful means to flip these odds around.

 

Flipping the odds in favour of success

We now would like to share with you, DICE, a simple intuitive framework and tool that has proven its worth in rapidly assessing whether critical change initiatives are set up for success, failure or indeterminate outcomes. As a result, DICE helps identify the means for identifying and turning likely failures into successes – often prior to the initiatives even being launched.

Our research at the Boston Consulting Group and practice with clients worldwide shows that by rigorously focusing on four critical elements in each of the key initiatives , organizations can load the odds of in favour of success.

Duration, Integrity, Commitment and Effort – what we label the DICE factors – help predict the outcome of any transformation initiative. Working with companies engaging in ambitious change programmes, we have evolved the DICE framework which provides a common language for change and allows companies to tap into the insight and experience of their employees. This standard, quantitative and simple framework, enables the frank conversations needed about strategic change initiatives in order to surface and powerfully address critical issues and flip the odds in favour of success. The DICE framework is agnostic to the delivery method chosen and has proven its worth in both waterfall, agile and hybrid delivery models.

Now, let us consider each of the DICE factors:

 

1: Duration

Perhaps the most asked question in any change endeavour is ‘How long is this going to take?’ The assumption is that the longer something stretches into the future, the more likely it is to hit the corporate buffers. For organizations – and executive careers – there is little worse than a long-drawn out failure.

In fact, our studies at BCG show that the real issue executives should be worrying about is how often and how rigorously they review a key project for its progress and to identify any emerging issues that need course-correction. A lengthy project which is subject to regular, rigorous and issues-focused reviews is more likely to succeed than a project which is short in duration, but not regularly or effectively reviewed.

The key consideration is not the total duration of a project, but the time between properly structured and time effective reviews. The question executives should be asking is, ‘How regularly and effectively are we going to be reviewing this?’

Our experience suggests that monthly reviews are the minimum level. If projects are allowed to progress beyond eight weeks without a review then the risks of encountering trouble increase exponentially. More complex projects require more frequent reviews – perhaps every two weeks.

Integral to having effective reviews is defining a set of milestones which provide senior leadership with a basis for operational insight into how a critical initiative is progressing. Of importance is that the milestones are written for the purposes of providing senior leadership with clarity on progress. Collectively these milestones constitute in effect a “roadmap” for a critical project, as such they are distinctive from the typical main activities on a project plan. There are usually 15 to 25 milestones per initiative that will be updated for progress on a monthly basis by the initiative owner.

The milestones describe the major intended actions or achievements within explicit time frames and include leading indicator metrics to assess the drivers of critical risks, and that the planned delivery of major interdependencies remains in scope and on time. The milestone dates serve as triggers for this forward looking testing and assessment. Practically this results in potential show stopper issues being elevated to senior leadership much sooner than would typically be the case, and at a stage when senior leadership are more likely to be able to make a difference – particularly through fast tracking decision making, removing roadblocks, resolving silo issues, and adjusting resource levels. Milestones also need to describe the financial and operational metrics that the project is expected to meet.

This not only ensures that the critical initiatives are built around the right actions and measures – that is, that the organization is doing the right things – but also that there is absolute clarity and accountability for delivering the expected business impacts. And, that based on regular updates from the initiative team leader (and likely the sponsor), there is a basis for sufficient operational clarity on progress and any emerging issues to support senior executives in being effective in their leadership roles during the implementation effort.

This is an obviously serious undertaking. It requires formal meetings (typically monthly) during which senior management, the sponsor and the project leader discuss a key project’s performance on the dimensions that have a bearing on success and failure. The team must provide a concise report of its progress against milestones and attached metrics, and any risks or roadblocks that may be emerging.

 

2: Integrity

Any project is a human endeavour and a group effort. This requires what we describe as (team) performance integrity: a highly motivated and thoughtful project team with a bias for action, clear on its objectives, with a strong leader and sufficient member resources and the right mix of skills for the effort.

Team performance integrity is never perfect. No team in any organization is universally great all of the time. And there are always issues which can get in the way of the best possible team being fielded. For example, star performers are often prevented from joining change efforts because of the fear that their regular work will suffer. But fielding the best possible teams against the most critical initiatives is essential, the best outcomes in team establishment usually come from robust and structured leadership debate over trade-offs of between personnel “for running the business versus changing the business”.

The demands of change are many, varied, and relentless. Project teams encounter a wide range of activities, resources, pressures, external stimuli, and unforeseen obstacles. This demands cohesion and leadership. The selection of the team leader and the team’s composition is critical. The roles, commitments, and accountability of each team member must be clearly established.

In selecting the team leader, it is important to remember that effective managers of the status quo aren’t necessarily adept at changing organizations. Good team leaders usually have problem solving skills, are results orientated, methodical in their approach but tolerate ambiguity, are organizationally smart, willing to accept responsibility for decisions, and, while being highly motivated, don’t crave the limelight. Change demands heightened leadership capabilities. As for the team, selection needs to be inclusive. Savvy leaders solicit names from key colleagues; by circulating criteria they have drawn up; and by looking for top performers in all functions. While they accept volunteers, they don’t solely choose endorsers and proponents of the change initiative. It is important that senior executives personally interview people so that they can construct a team with the right portfolio of skills, knowledge, and social networks. They need also to make public the parameters by which the team’s performance will be measured and how that evaluation fits into the company’s regular appraisal process.

 

3: Commitment

The third DICE factor is commitment. Organizations need to maximize the commitment of two different groups of people if they want critical change projects to take root: They must get visibly, robust and aligned backing from the most influential executives (the DICE dimension we refer to as (C1)). And they must take into account the enthusiasm – or often, lack thereof – of the people who must deal with the new systems, processes, or ways of working, (C2).

Top level commitment is vital to engendering commitment from those elsewhere in the organization. If employees don’t see that the company’s leadership is backing a critical project that they realize will significantly impact the business, how customers are served and most importantly their team and themselves, then they are unlikely to respond positively, far less change their own behaviours. No amount of top level support is too much.

Sometimes, senior executives are reluctant to back initiatives. This is probably more understandable than it might first appear. Resistance to change is only human. They are often bringing about changes that may negatively affect some employees’ jobs and lives. But, if senior executives do not unequivocally communicate with one voice the need for change, and what it means for employees, they endanger the likely success of any project.

Second, organizations must take into account the skepticism – or often, lack thereof – of the people who must deal with the new systems, processes, or ways of working.

Despite repeated calls in the change management and leadership literature to engage with people, companies often underestimate the role that managers and staff play in transformation efforts. By communicating with them too late or inconsistently, senior executives usually end up alienating the people who are most affected by the changes. It’s surprising how often something senior executives believe is a good thing is seen by staff as a bad thing, or a message that senior executives think is perfectly clear is misunderstood. This is normally due to senior executives communicating slightly different versions of critical messages.

There are two common communications traps that executives need to avoid: “We haven’t got anything to say yet so it’s not worth wasting people’s time or worrying them” and “There is so much uncertainty and things in play that for now we are better off saying nothing until things become clearer”. Getting caught in either of these traps inevitably requires a lot more leadership effort to get out of them than avoiding them in the first place.

Although it is an over-simplification, “the rule of three and nine” can serve as a useful guide for senior leaders in engaging employees and demonstrating commitment. It is more helpful than simply saying “you can never communicate enough”. Specifically, leaders should communicate three times more than seems instinctively reasonable to them in order to effectively communicate during a time of major change. And employees usually need to hear a message nine times for them to realize that it actually relates to them and to understand what it means for them.

An interesting related point is that organizations routinely underestimate their ability to build staff support. A structured effort to reach out to employees can often turn a surprising number of them into champions of new ideas. Seek to engage people and they will usually discover a willingness to be engaged.

 

4: Effort

Change always requires extra efforts by people throughout the organization. The impact of this is often overlooked. But, the reality is that hard-pressed and hardworking people require convincing that any process of change is necessary and likely to benefit the organization and themselves.

At a practical level, it is important that the amount of extra work required of people is calculated rather than vaguely estimated with a promise of a better tomorrow. Ideally, no one’s workload should increase more than 10 per cent in support of embedding a new change initiative. People become overstretched; resistance rises; and morale falls. Of course for many important change initiatives, the additional workload on staff to clear the hump of implementation and embed a new initiative (or often several related initiatives) and the consequent new ways of working will often significantly exceed 10 per cent. Here the other elements of DICE need to help take the load of offsetting the delivery risk. For example through boosting actions around senior leadership commitment (C1) and translating that into additional actions and interventions to garner local commitment (C2) in terms of why the change needs to occur and supporting people through the changes. The delivery team (I) needs to be that much more on the ball in terms of designing it and structuring the intitiative(s) in the best possible way and effectively engaging with critical local stakeholders.

In terms of the effort required, organizations need to have a clear sense of what is important to do and why as part of the change programme. It will be even more crucial to think through what not to do anymore, especially for those employees who will be playing a key role in the change programme, to balance existing responsibilities with new ones.

The previous example, in the discussion of Effort and how (I), (C1) and (C2) can interplay to offset a deficit in E, surfaces an important point. While we treat them distinctively, the components of DICE are not entirely independent. They can significantly influence and interplay with each other. For example superior senior leadership commitment (C1) is more likely to result in senior leaders driving to ensure that teams get the best possible resources (I).

The elements of DICE and the consequent environment they create makes instinctive sense. An initiative with a well-structured timeline and clear metrics, led by a great team with strong senior leadership commitment and highly committed local staff, who will only be required to put in a small amount of effort to support the introduction of a critical initiative is clearly likely to succeed. On the other hand, the opposite conditions suggest almost certain failure. The reality is that most initiatives are launched at neither of these extremes, they fall somewhere in between. The robust statistics behind the DICE equation enables the likely outcome to be determined based on the DICE database of the experiences of other organizations faced with comparable DICE conditions. That is why DICE and the conversations it generates are so powerful.

The DICE equation enables organizations to quantitatively determine if their change initiatives will succeed. This is done by asking executives to calculate scores against the DICE elements for each of the critical initiatives. These scores are then combined to create an overall DICE score for each initiative. The calculation is very simple to complete. The score will range from 7-28 and predicts whether a project is set up for success, failure or an indeterminate outcome. In turn this rapidly fosters the right conversations on what interventions are needed to flip the odds in favour of success.

Our original analysis and development of DICE and the DICE equation was completed in 1994. In the years since then we have used DICE to help assess the likely outcomes, gain agreement on how to improve the odds of success, and help guide the execution of many thousands of change management initiatives worldwide. Across industry and across geography, the statistical correlation behind the DICE formula has held true and organizations’ use of DICE has materially improved outcomes. DICE has also transitioned very successfully between different delivery methods. Be it waterfall, agile or a hybridized approach, the application of DICE has proven to readily predict and help enable the adjustment of outcomes in favour of success.

Of course, the assessments of the DICE factors are subjective, but DICE provides organizations with an objective and statistically rigorous framework in order to make decisions. And, it provides a lingua franca of change as well as serves as a vital catalyst for frank discussion and debate. We believe DICE offers the hard truth of change.

 

Further reading and information

For full information on the DICE framework please refer to Harold L. Sirkin, Perry Keenan and Alan Jackson, “The Hard Side of Change Management”, Harvard Business Review, October 2005.

To learn more about calculating DICE scores and access to further support materials visit http://dice.bcg.com.

 

About the authors

Perry Keenan (moc.g1527116777cb@yr1527116777rep.n1527116777aneek1527116777) is a senior partner and managing director in the Chicago office of The Boston Consulting Group. He is a BCG Fellow, having previously led BCG’s Change Management topic globally for ten years.

Jeanne Kwong Bickford (moc.g1527116777cb@en1527116777naej.1527116777drofk1527116777cib1527116777) is a senior partner and managing director in the New York office of The Boston Consulting Group. She leads the firm’s Change Enablement Center and is head of BCG’s New York office.

Peter Tollman (moc.g1527116777cb@re1527116777tep.n1527116777amllo1527116777t1527116777) is a senior partner and managing director in the Boston office of The Boston Consulting Group. He is a BCG Fellow, having previously led BCG’s People and Organization practice in the Americas and the firm’s biopharmaceuticals sector globally.

Grant Freeland (moc.g1527116777cb@tn1527116777arg.d1527116777nalee1527116777rf1527116777) is a senior partner and managing director in the Boston office of The Boston Consulting Group. He is the global leader of The Boston Consulting Group’s People & Organization practice.

 

Resources

  • Vikram Bhalla, Susanne Dyrchs and Rainer Strack, “Twelve Forces that will Radically Change How Organizations Work”, Boston Consulting Group, March 2017.
  • Perry Keenan, Jeanne Bickford, Annabel Doust, Jennifer Tankersley and Chris Johnson, “Strategic Initiatives Management”, Boston Consulting Group, November 2013.
  • Perry Keenan, Stephanie Mingardon, Harold Sirkin and Jennifer Tankersley, “A Way to Assess and Prioritize your Change Efforts”, Harvard Business Review, July 2015. https://hbr.org/2015/07/a-way-to-assess-and-prioritize-your-change-efforts Perry Keenan, Jeanne Bickford, Jennifer Tankersley and Annabel Doust, “Pulse Executive Sponsor Engagement”, Project Management Institute, October 2014.
  • Perry Keenan, Stephanie Mingardon, Jeanne Bickford, Tapio Schrey, Trish Clancy and Annabel Doust, “How to Ensure Your Change Efforts Stay on Track”, Boston Consulting Group, March 2017. https://www.bcg.com/expertise/ capabilities/change-management/how-ensure-change-efforts-stay-on-track- rigor-test-roadmap.aspx
  • Lars Faeste, Jim Hemerling, Perry Keenan, and Martin Reeves, “Transformation, the Imperative to Change”, Boston Consulting Group November 2014.
  • Jim Hemerling, Diana Dosik and Shaheer Rizvi, “A Leader’s Guide Always – On Transformation”, Boston Consulting Group, November 2015.
  • Perry Keenan, Kimberly Powell, Huib Kurstjens, Michael Shanahan, Mike Lewis and Massimo Bussetti, “Changing Change Management”, Boston Consulting Group, December 2012.
  • Yves Morieux and Peter Tollman, Six Simple Rules – How to Manage Complexity without Getting Complicated, Harvard Business Review Press, 2014. Martin Reeves and Lisanne Pueschel, “Die another Day: What Leaders Can Do  About the Shrinking Life Expectancy of Corporations”, Boston Consulting Group, December 2015.
  • Fabrice Roghe, Andrew Toma, Stefan Scholz, Alexander Schudey and Jink Koike, “Boosting Performance through Organization Design”, Boston Consulting Group, July 2017.

This is an excerpt from Strategy@Work, a Brightline and Thinkers50 collaboration bringing together the very best thinking and insights in the field of strategy and beyond.

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