When leading digital change, CEOs aren’t always having the right conversations
Change seems to be on everyone’s mind. Virtually every business leader I’ve spoken to in the past few months is focused on transforming their business digitally. From CEOs to board members to investors, it’s clear that we’re all thinking about how change and transformation are critical for creating long-term growth and value.
What’s also become very clear to me is that many organizations know “what” to do but are struggling with the “how”. In my conversations across industries and different sized companies and markets, I’ve found that some organizations are spending a lot of time on the “science of change” while others are spending significantly less.
But are we truly having the important conversations about leadership’s ability (at all levels) to drive change and focusing on the very specific details of the change process?
Transforming traditional companies into digital ones
There are two types of companies today: traditional companies and digital companies. Many, including PwC, are traditional companies. They’ve been around for decades, have built strong brands, have solid cash flows, and employ lots of great people. And because traditional companies have been around for a while and often have grown through M&A, driving change and transformation can be difficult since they tend to have older systems and processes, and layers of complexity. Digital companies are less encumbered by complexity, which allows them to move faster.
This concept of speed is critical in today’s hyper-competitive environment as customers and clients demand value, want a digital experience, and expect it at a lower cost. Digital companies are often better positioned to meet these demands because they’re not burdened by the institutional challenges and complex layers of traditional companies — said differently, they can change more quickly. As a result, traditional companies risk losing market share to those organizations that are better at “change”.
For traditional companies to be competitive, they must meet the demands of value, digital experience and cost. Therefore, the CEOs and companies that create a capacity for and culture of rapid change will ultimately gain market share and be more relevant in the long run.
Having the right conversations about change
When I speak with CEOs and boards about digital transformation, I often find that our discussions focus on the new exciting technologies, disruptions in the marketplace, and concerns about losing market share (all things I mentioned above). But it seems that some leaders are having a hard time moving beyond these basic themes.
What’s missing at some organizations is a bare knuckles discussion about how exactly change is going to be driven. For some reason, many don’t seem to want to admit what all of us know…what’s in almost every business book — traditional companies are built to mitigate risk and thus slow to change.
As leaders, we need to have a mindset of “inspired execution.” We can’t just be focused on inspiring a vision for change. We also have to inspire execution because vision and execution go hand-in-hand. We need to ensure the fortitude and speed in making the critical decisions in the business transformation process.
We also can’t be afraid to have substantive discussions on the specific kinds of conflict that will likely arise from the change process. And CEOs and boards must decide whether they’re willing to have their stakeholders bruised by these inevitable conflicts. The types of conflict that are likely to arise need to be identified and discussed before undertaking the change effort and before committing significant resources.
Here are some things for CEOs to keep in mind:
Are you investing the right amount of time and do your teams truly understand your expectations and appetite for risk? Too often, CEOs assume that their people understand what they want. Best-in-class efforts have clear and consistent CEO leadership (not just sponsorship). Change is about instilling a sense of controlled chaos within an organization. The buck stops with the CEO so it really requires personal and sustained focus, effort, and attention.
Are you allowing the change process to be “rebid” by leaders at different levels or in different parts of the organization? The middle part of most companies is about maintaining the status quo and mitigating risk. If you don’t provide clear guidance, consistently clarify what you expect, and validate that the right changes are taking place to all levels of leadership, the risk is increased that they will marginalize the change and transformation process.
Here are some things for boards to keep in mind:
Is your CEO spending enough time in the details of the transformation? Is he/she spending the time needed “in the business” to know what is really happening? Said differently — are their priorities right?
Does your CEO talk about the “how” of change or does your CEO only articulate the vision? Has your CEO identified all of the potential conflicts that will arise as a result of the change? And, how is your CEO leading inspired execution?
How are you monitoring the outcomes and progress of change efforts and investments made to support change efforts?
And let’s not forget the investor’s perspective:
Investors understand the importance of “getting things done.” They’re usually the ones asking about whether management is focused on making change happen and whether it has the ability to execute. For investors, successful digital transformation translates into greater valuations so they want to understand goals and timelines, and will assess management based on them. And with traditional companies, increasingly the target of activist investors, CEOs and boards must ask themselves whether their driving the change process with enough speed and passion.
CEOs, change and trust
In a world of constant disruption, the winners will be those who can lead their companies in continuous evolution. Doing this successfully will require CEOs to have the right conversations and to not be afraid of potential conflicts. CEOs will have to focus on inspired execution and to get involved in all aspects of the change and transformation process.
At its core, change is about trust. Why would employees or companies do things differently if they didn’t have to? Change is fundamentally based on doing something differently today for a better outcome tomorrow. So, the only way employees will do things differently today is if they have trust in their leader that it will bring a better tomorrow. And trust, like change, cannot be delegated or outsourced. You’ll have to roll up your sleeves, lead by example, and do the hard work of making change happen. The journey isn’t always easy, but the prize is worth it.