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Why Transformation from Small to Large Fails

Updated: Oct 26, 2023

(Chech the Summary for the Busy Manager - below)



Transformation

An entrepreneurial company, a family business, which had achieved success over the years. With revenues ranging from 10 to 100 million euros and a team of 20 to 100 employees, they had firmly established themselves in their niche market.


The founder possessed a deep understanding of management and leadership theories. Yet, despite knowledge, they faced challenges in their pursuit of transformation and growth from a family business to a large organization.


The urgency to transform their business became evident as external factors came into play. Rapid market changes and increased competition loomed on the horizon, threatening the stability of the business they had built. The market had become increasingly saturated, making it difficult for their organization to grow beyond a certain point. It was this sense of urgency that took them from their comfort zone.


One of the challenges they faced was the resistance to change. It was a formidable enemy, hang around within the company, borne out of risk aversion, fear of the unknown, concerns about job security, and the unsettling loss of control.


The owner, having been accustomed to their established practices and success, found it difficult to embrace change and expansion, choosing to stay within their comfort zone rather than exploring new opportunities.


It became evident that a sense of urgency was essential to mitigate the risks of inaction, to shake the organization out of its complacency, and to initiate a transformation that was long overdue.


The scope of change was often misunderstood, leading to overly ambitious goals that spread resources too thin, causing frustration and burnout. The founder understood that to succeed, they need to prioritize to several strategic objectives, ensuring that resources were channeled effectively toward success.


Leadership was another major obstacle they faced. Despite their extensive knowledge of management theories, there were gaps in their ability to lead effectively. A lack of clear vision and alignment on strategies and objectives hindered progress. Leadership inconsistency and cognitive biases and heuristics further compounded their challenges.


Overreliance on theory without considering their unique circumstances held them back, as did a short-term focus that prioritized immediate gains over long-term benefits and progress.


This myopic approach delayed sustained growth. They also faced an internal resistance to delegation, with the owner being heavily relied upon, making it difficult for the organization to grow independently.


The human side of change, often overlooked, created additional complications. Intrinsic motivation and engagement at the team level were necessary to propel the transformation.


The loss of key experienced people and the lack of skilled talent for adaptation and growth presented a roadblock.


Cultural barriers and differences were often underestimated, as was the power of symbols and rituals in fostering unity. Inadequate and ineffective communication of complex ideas disseminated misunderstandings and mistrust.


Processes within the organization were another challenge. Lack of accountability, due to unclear key performance indicators and monitoring systems, blocked progress.


Misallocation of resources or a lack of expertise created constraints. Operational hurdles and practical bottlenecks generated inefficiencies, while a general lack of discipline further complicated the matter.


The rapid changes in the market landscape added to their desperation. They struggled to adapt to evolving customer needs, and unexpected crises and increased competition took them by surprise.


Financial constraints further limited their ability to invest in growth initiatives, exacerbated by ineffective financial management that led to insufficient capital.


Recognizing the urgent need for transformation, the founder decided to develop a comprehensive plan. The first step was to establish strong leadership to drive the new vision.


They embraced a phased approach that combined urgency with minimal disruption, setting clear timelines and measurable quick wins. A guiding transforming team and coalition were formed, leading by example and galvanizing commitment to the change initiative.


Establishing alignment between personal and professional interests of the old and new management became crucial. Involvement and participation were encouraged, with former owners engaged in leadership workshops about transformation.


A unified vision and strategic plan were developed, providing a clear and inspiring future. Open, transparent, and effective communication was adopted to convey the vision, reasons, benefits, and potential pitfalls. Broad-based action was empowered to remove obstacles and overcome resistance.


A customer-centric approach was adopted, tailoring services to meet customer needs and expectations. Market positioning and analysis played a vital role, maintaining core competencies while adapting and evolving into new areas. Flexibility and agility were embraced to remain ready for unforeseen challenges and changes in the environment.


Talent development and restructuring formed a core aspect of their transformation. Change management plans and support systems were put in place, with a focus on generating short-term wins to maintain momentum and demonstrate that change was working.


The emotional and instinctive side of change was addressed by shrinking the change into smaller, more manageable steps, which resulted in growing people's confidence in their ability to change, and shaping the path to encourage new behavior.


The analytical and rational aspect was also tackled, with a focus on finding bright spots, scripting critical moves about change, and pointing to the destination.


Sustainability and resilience were priorities, anchoring new approaches in the culture as the new norm. The external environment was tweaked to make changes in the context and environment. New routines and habits were encouraged, leveraging social influence and peer pressure.


Change agents were identified, and champion success stories were highlighted. Frequent and transparent communication was extended to all shareholders and stakeholders. Employee empowerment played a critical role in being part of the transformation solution.


Collaboration and compromise were encouraged for conflict resolution. Ongoing consulting, coaching, training, and workshops addressed employees' concerns, fostering innovation and product development to stay competitive and relevant in the market.


Resource allocation was balanced, recognizing the transformation effort alongside daily operations. Recognition and acknowledgment of former owners and management for their past successes provided a sense of closure and appreciation.


Operational integration and streamlining aimed to eliminate redundant processes. Success was measured and monitored, with a focus on results and tangible benefits, making sure they were well measured and understood.


Progress was monitored continuously, and adjustments were made based on stakeholder feedback. Financial restructuring efforts cut unnecessary expenses and divested underperforming business units.


In the end, the entrepreneurial company embarked on a transformation journey, learning from their challenges and implementing a well-structured plan. The founder realized that by embracing these changes and addressing their shortcomings, they could unlock the full potential of their organization.


The road ahead would be difficult, but with a united team, a clear vision, and a commitment to success, they were ready to face the complexities of change and pursue a more BIGGER and BETTER future.


Summary for the Busy Manager


Why Is It Urgent to Transform Your Business?

  • External factors, such as rapid market changes and increased competition, can disrupt the business.

  • The market may be saturated, making it difficult for an organization to grow beyond a certain point.


Why Is It So Hard to Execute?

  • Resistance to change is often driven by risk aversion, fear of the unknown, loss of control, and concerns about job security.

    • The owner's comfort zone may resist change or expansion, as they choose to stay within their comfort zone rather than exploring new opportunities.

    • Establishing a sense of urgency is essential to mitigate the risks of inaction.

  • Misunderstanding the Scope of Change

    • Having too many, overly ambitious goals can lead to frustration and burnout.


  • Underestimating the Importance of LEADERSHIP

    • Lack of a clear vision.

    • Lack of alignment on strategies and objectives.

    • Lack of experience in execution.

    • Leadership gaps and inconsistencies.

    • Cognitive biases and rules-of-thumb heuristics.

    • Lack of patience, persistence, and discipline, making it hard to stick to long-term plans or strategic goals.

    • Overreliance on the owner makes it difficult to delegate responsibilities and grow independently.

    • Overreliance on theory without considering unique circumstances.

    • Short-term focus, which prioritizes immediate gains over long-term benefits, can hinder sustained growth.


  • Neglecting the "Human Side" of Change (PEOPLE):

    • Intrinsic motivation and engagement at the team level.

    • Loss of key experienced resources and a lack of skilled talent limit adaptation and growth.

    • Ignoring cultural barriers and differences.

    • Ignoring the power of symbols and rituals.

    • Inadequate and ineffective communication of complex ideas in a memorable manner can lead to misunderstandings and mistrust.


  • Overlooking the Importance of PROCESSES:

    • Lack of accountability due to unclear key performance indicators and monitoring systems, with consequences of not following plans, can lead to waning motivation for execution.

    • Constraints of resources due to misallocation or a lack of expertise

    • Operational hurdles and practical obstacles and bottlenecks.

    • A lack of discipline that generates operational inefficiencies.


  • Rapid MARKET changes and customer needs (CUSTOMERS):

    • A lack of agility and failure to adapt to changing market conditions.

    • Unexpected crises and increased competition.


  • FINANCIAL constraints can limit the ability to invest in growth initiatives

    • Ineffective financial management that could generate insufficient capital.


Transformation Plan and Execution

  • Strong Leadership for New Vision Development

    • Implement a phased approach for transformation, making it less disruptive. Establish timelines and measures for quick wins.

    • Create a guiding transformation team and coalition committed to the change initiative, setting an example.

    • Generate alignment of personal and professional interests between old and new management.

    • Encourage involvement and participation, such as engaging former owners and hosting leadership workshops.

    • Create a unified vision and strategic plan for a clear and inspiring future.

    • Ensure open, transparent, and effective communication about the vision, its reasons, benefits, and potential pitfalls.

    • Empower broad-based action to remove risks, obstacles and overcome resistance.


  • Customer-Centric Approach

    • Tailor your services to consistently meet customer needs and expectations

    • Market positioning and analysis to regenerate competitive value

    • Maintain core competencies while adapting and evolving into new areas.

    • Embrace flexibility and agility, ready to adapt to unforeseen challenges and changes in the environment.


  • Talent Development and Restructuring

    • Implement a Change Management Plan and provide support.

      • Generate Short-Term Wins to maintain momentum and demonstrate that the change is working.

        • The Emotional Mind - Address the emotional and instinctive side:

          • Shrink the Change more manageable and less overwhelming

          • Grow the People confidence and belief in their ability to change

          • Shape the Path and Modify the environment to encourage new behavior

      • Consolidate Gains - Produce more change after initial successes.

        • The Rational Mind - Focus on the analytical and rational aspect:

          • Find the Bright Spots and identify what's working and focus on them.

          • Script the Critical Moves regarding change.

          • Point to the Destination constantly.

      • Sustainability and Resilience - Anchoring new approaches in the culture as the new norm.

        • External Environment that influences behavior:

          • Tweak the environment: by making changes in the context and surroundings.

          • Build Habits: Encourage new routines and habits.

          • Rally the Herd: Leverage social influence and peer pressure.

    • Identify change agents and highlight champions' success stories.

    • Ensure frequent and transparent communication with all shareholders and stakeholders.

    • Empower employees to be part of the transformation solution.

    • Promote collaboration and compromise for conflict resolution.

    • Provide ongoing consulting, coaching, training, and workshops to address employees' concerns.

    • Focus on innovation and product development to stay competitive and relevant in the market.

    • Balance resource allocation between the transformation effort and daily operations.

    • Recognize and acknowledge former owners and management for their past successes.


  • Operational Integration and Streamlining to Eliminate Redundant Processes

    • Implement methods for measuring success and monitoring progress.

    • Keep a focus on results and ensure that tangible benefits are well measured and understood.

    • Monitor progress, be flexible, and adapt based on stakeholder feedback.


  • Financial Restructuring:

    • Cut unnecessary expenses and divest underperforming business units.


A comprehensive plan outlines a structured approach to reorganize the company, taking into account its diverse business units, cultures, and the need for profitability.


For the plan to be successful should be emphasized the importance of patience, persistence, and flexibility throughout the transformation process, along with consulting experts in organizational change management and integration as needed.


The successful execution of this plan will lead to the organization's growth (BIGGER) and healtier (BETTER) future in the face of challenging circumstances.

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