Transformation: Crash

Peter John Mahrenholz
Jan 5 · 4 min read

When disaster strikes, it’s hard to look away. About a year ago, a Boeing 737max, two times in a row, experienced what aviation soberly describes as a “loss”. You shiver and try to understand how this could happen. And then one has to think of the transformation efforts of many companies.

The 737 is actually the reliable workhorse of countless airlines, born as early as 1967. Continuously modified and adapted over the decades, the 737 recently had to meet market requirements with the latest highly efficient engines. But the turbines did not fit under the wings of the ancient design, and the imaginary solution to the problem led to instability and jeopardized airworthiness. A workhorse on roller skates. The software designed to patch up the problem became the trigger of the tragedy.

Boeing changed the 737 for ever new requirements. At the end with large LEAP wunder engines. All companies are seeking such forward-looking leaps into the new era. Digital transformation is the way to go. Initiatives galore! The starting points are manifold: In R&D, one has to discuss big data and AI, HR dives into organizational development and creates collaborative work environments, in marketing the customer journeys are optimized and automation is advanced. Countless expert rounds and steering committees, small and large projects are set up internally and externally. One corporate manager proudly showed me how his project management tool can precisely represent the current status of 300 individual workstreams for transformation. Sobering, however, was the fact that the relationship between these efforts and the existing business model was foggy and (therefore?) no effective commitment on the part of the Executive Board was tangible.

MACRO-STRATEGIES BEAT MICRO-INITIATIVES

Many initiatives do not yet manifest a strategy, as McKinsey stated in 2018 under the headline “Why Digital Strategies fail”. In practice, we realise that individual steps are often successfully completed in their own logic — but without a lasting positive effect being observed. But why? Is the breathtaking pace of disruptive phenomena to blame? Is the perpetual character of transformation becoming evident here? Yep, all this. Above all, however, it shows that the many activities have no higher point of reference. One remains in the micro, the engine, although one should think of a new macro, an airplane, in order to address transformational needs.

The much admired Tesla story is such a “Story of Macro”. Tesla has performed the miracle of marginalizing the competitive edge of German automakers that has been maintained over decades. That’s resulting from the absence of existing conditions and beliefs, not the superiority of Teslas engineers! The BMW i3 was a similar manifestation of freedom of thought. From the electric drivetrain to the carbon body construction to the plant-based materials in the interior: it was testament of BMW’s pure innovative spirit and technological leadership. But the company’s culture and identity had not evolved accordingly. After the initial tour de force, the company fell into electro-lethargy. The result: the car, presented before the e-market awakening, was a commercial disaster, which proved the traditionalists right. The progressives on the other hand lament the loss of a leading position amongst German carmakers. The moment of inertia of the macro structure had stalled the Sturm und Drang of the BMWi engineers — leading to a considerable brain drain in Munich and happy competitors in China welcoming a cohort of thoroughbred German experts.

IDENTITY OR JUST NEW SAUSAGE?

The basic rule of any transformation should be to think the macro first: What is my identity? How does it have to adapt? How exactly does my business model look like? And what’s the futureproof revision of that? These questions are uncomfortable, are intellectually and structurally challenging. But in the long run they bring competitive advantage that cannot be achieved by technology pragmatism and market opportunism alone. Radicalism pays off, timidity doesn’t. And this applies not only to technology-induced digital transformation, but also to its twin sister, the value-induced social transformation. There is a sausage maker since almost 200 years, Rügenwalder, that fills my German supermarket today with countless vegetarian products from Liverwurst to fake Schnitzel. We observe a successful transformation beyond AI projects, Big Data applications and marketing automation. It’s another successful “Story of Macro” that adds a new, proud chapter to the corporate biography. A company that has been processing pigs for generations meets with animal rights activists to be credible in a transformational move: This is a challenging adjustment in corporate culture! New sausages are easier.

DON’T IGNORE SOCIAL DRIVERS OVER TECHNOLOGICAL ONES

The strategic transformational playground always encompasses technological as well as social developments. Both are inextricably linked, fostering and influencing each other. Technology drives change in society and opens the door to new opportunities — but ultimately remains opportunistic only. Markets depend on the social effects of change, on human behaviour, values and judgements. And a competitive advantage only emerges where technology is effective in the relationship to the value change in society and the corporate identity. If this macro context is not defined in the sense of relevant leit-motifs, any transformation becomes uncontrollable and loses momentum and thrust. Then even in over 300 workstreams, lovingly orchestrated projects will fail. A successful concept of “Lead Transformation” needs clear internal leadership from the macro ideal and the resulting leadership from customer and market motivations!

“The need for strategy work is episodic” says strategy guru Richard Rumelt and challenges us to face important transformational changes with appropriate authority and consistency. Otherwise only a “Story of Micro” remains. And, as with Boeing, could become a tragedy.

Peter John Mahrenholz
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