Virtual Roundtable – Summary of Discussion on Overcoming Barriers to Transformational Change

The aim of the Beyond Default Roundtable discussions is to give practitioners in strategy and change an opportunity to share their experiences, challenge conventional wisdom, brainstorm ideas and network with peers who share the same interests and challenges.

In August 2022 a group of executives, consultants and academics met virtually to discuss overcoming barriers to transformational change. The discussion was led by David Trafford, co-author of Beyond Default and moderated by Chris Hallam, founder of CH Coaching Solutions.

As the Roundtable followed Chatham House Rules, the summary below only attributes information that is in the public domain.

Moderator: Welcome everyone. I see that we have some familiar faces on the call and also some new ones. Thank you for joining us. Those who have joined us before will know how it works, and for those that haven’t we aim for the conversation to be open and flow as freely as possible, so feel free to share examples, challenges and issues that you have. I’ll try and get to you if you’ve got a point so please raise your hand or put something in the chat.

These Roundtables are hosted by Formicio, a consulting and advisory services company that David Trafford and Peter Boggis set up over 10 years ago, and we have both of them on the call. Formicio is also the home of Beyond Default, a book on strategy and change that David and Peter co-authored.

As the topic of this discussion is overcoming the barriers to transformational change, I do think it’s worth thinking about what we mean by transformational change so to get us started I’d like to share a definition that I’ve found to work with my clients.

“Transformation is the emergence of an entirely new state prompted by a shift in what is considered possible, which results in a profoundly different structure, culture or level of performance.”

That’s the sort of change we’re talking about. We’re not talking about incremental change, installing a new bit of software or anything like that. It’s about making significant and lasting change.

So, David your thoughts on that as a starter.

David: Thanks Chris, before I respond to your definition I’d also like to welcome everyone. It’s good to see some familiar faces and also to see some new ones. As Chris has said the purpose of these quarterly calls, of which this is sixth, is for a group of people to get together and develop a shared understanding about how we can increase the chances of developing successful strategy and also executing that strategy successfully.

Coming back to your definition Chris, for me it’s about achieving a fundamental change, not only to how an organisation operates but how it feels to be part of that organisation. And for the avoidance of doubt, a transformation can bring about a better future state, but it could also bring about a worse future state. Just because you’re embarking on a transformation it doesn’t mean that life will be necessarily better when you’re finished. I mention this because I’ve known some transformations that have been a complete disaster.

I also think it’s important to understand the domains of what you’re trying to transform. I see there are three domains – the WHAT, the HOW and the WHO.

The WHAT is the domain that defines what an organisation does, what it offers its customers and the value it delivers.

An example of an organisation that’s currently transforming WHAT it does is Daimler Financial Services, whose parent company also owns Mercedes-Benz. It’s transforming itself from a financial services company that solely offered auto finance and leasing, to a provider of a range of mobility services. To reflect this, they recently changed the name to Mercedes-Benz Mobility AG. That’s just one example of an organisation that’s going through a transformation whose focus is on the services it offers and the resultant value it provides to its customers.

There are of course many other examples of organisations who failed to transform. Kodak is a classic example, along with Blockbuster and Xerox. If you get the transformation wrong it can be expensive. For example, in 2016 the Australian retail-to-coal conglomerate Westfarmers acquired the UK DIY and hardware retailer Homebase from Home Retail Group for £340m. It rebranded the stores to Bunnings Warehouse and went about transforming the offering, to something its customers didn’t like. In 2018 Westfarmers cut its losses and sold Bunnings for £1. In all Westfarmers lost about £1bn.

Discussion: Was it that Westfarmers changed their business model and in doing so lost their way?

David: It wasn’t that they were changing their business as they already had a DIY and hardware retailer in Australia, also called Bunnings. Their intent was to acquire the UK stores and transform them into the ‘Bunnings’ model. While they were successful in transforming the stores to the Australian model, it was not a model that UK customers liked.

The second domain, which many organisations focus on, is the HOW. It’s how the WHAT is delivered and is very often called the operating model of the organisation. It comprises many facets including processes, structure, roles, partnerships and enabling technology. Many organisations focus on transforming the HOW because they believe it will transform their performance. All too often when consultants are brought in to help their first question is ‘what is your target operating model?’, which is impossible to answer without clarity of the WHAT.

The third domain of transformation is what I call the WHO. I call it the WHO because it defines who people think they are within the organisation. Often called the operating state it includes such things as people’s identity with the organisation, how they identify with it and the degree to which they want to be part of it. It also defines their degree of empowerment and engagement within the organisation.

I make this distinction between the three domains because too often I see the lack of clarity as to what the transformation is trying to transform, or where it is focusing. Is it WHAT, is it HOW or is it WHO? Or is it some combination of all three? Obviously there will be a degree of overlap between these three domains, a bit like a Venn diagram. This is because you can’t really transform the WHAT without transforming, to some degree, the HOW and the WHO.

Moderator: In walking us through that have you uncovered the first barrier. Is it the lack of clarity on what you’re aiming to transform?

David: Yes it is. Before we get into some others, and I’m sure people on the call will have lots of experiences and examples of barriers that they’ve come across, it might be worth talking about what we mean by a barrier. It’s a widely used term and the dictionary defines it as an obstacle, obstruction, hurdle, stumbling block, a bar, impediment or hinderance. A snag, a catch, a drawback, hitch, a handicap, deterrent, complication, problem, difficulty or disadvantage. It could be a spanner in the works or, as our American colleagues would say, a monkey wrench in the works. Simply put, it’s those things that get in the way of you achieving what you want to achieve.

Coming back to your question about examples of barriers I’ll share a few and then I’m sure more will come in the conversation. The first, which I’ve already mentioned, is the lack of a shared understanding of what you’re trying to transform. I often see different parts of an organisation getting involved in their own transformations. Furthermore, I’ve seen people say that they’re focusing on transforming the culture of the organisation. But, if culture is how we do things round here, how can you transform the culture without transforming the operating model and operating state to some degree? Probably the biggest barrier is a lack of understanding of what’s to be transformed.

The next example is believing that ‘if you have a hammer everything looks like a nail’. The CEO or director of transformation believes that their approach to transformation is the correct and only one irrespective of what’s being transformed. To give you an example, a few years ago I was advising a financial services company on their technology transformation programme. Their aim was to replace their legacy applications with a modern digital platform. My role was to provide quality assurance to the CEO through periodic reviews. The transformation was a great success, customer data was transferred seamlessly, there were no customer outages and everybody was extremely pleased with the outcome. In fact it was so successfully that it won awards. Wanting to build on this success the CEO then wanted to transform the customer experience. Understandably, what he did was to appoint the director of the technology transformation programme to be the director of the customer experience transformation programme. Unfortunately the programme soon got into trouble and he asked me for my advice. The problem was that the approach being taken was entirely appropriate for a technology transformation, but not a customer experience transformation. The transformation director had ‘one hammer’ and ‘everything looked like a nail’! The CEO’s only option was to replace the transformation director with one whose approach was more relevant to transforming the customer experience. Simply put, when you’re transforming a technology landscape the focus is on the HOW, and when you’re transforming the customer experience the focus is on the WHO. It’s more about empowering people on the frontline to deliver a compelling customer experience, to encourage them to use their own initiative and have the confidence to engage with customers. As the outcome is very different, it required a different approach.

Another example is a complete lack of line of sight between what it is you’re trying to achieve and what you’re doing. When you ask people what outcomes they’re aiming to achieve they don’t know. They’re just doing transformation stuff that they’ve been asked to do.

Another is ‘absent without leave sponsors’, or sponsor in name only, where a senior executive has been made sponsor of the transformation but is never seen and has no clue as to what is going on. Another is ‘skirting the issues’. Everybody knows that this transformation is going nowhere or is going in the wrong direction, but nobody does anything about it in the hope that the problem will go away. Yet another barrier is the the reluctance to innovate. We aim to transform but we won’t do any innovation. I don’t see how you can transform without some form of innovation. This takes you into the barriers of innovation, which include thinking that innovation will cannibalise existing sales – which we’re not prepared to do; that you can’t use a competitor’s product because we didn’t invent it and that innovation requires skills we don’t have.

Another example (before others share their examples) is the complete lack of understanding of the purpose of the transformation, which in turn results from a lack of understanding about strategy. If, as we put in the strap line for this Roundtable, the purpose of transformational change is to realise your strategic intent, then transformational change is a form of strategy execution. I see no reason to transform anything unless it’s to realise your strategic intent.

Moderator: Let’s catch up on some of the things that people have put in the chat. One comment is that most operating models end up being job structure charts. Another is that leadership and organisational culture is in the third domain that David talked about, which I think is absolutely right.

Discussion: I just wanted to give more emphasis to the WHY part. What is the problem that we’re trying to solve by the transformation, what are the triggers and what’s the business case? Having that clarity is very important in the entire transformation process and could throw some light on the assessment of the WHY – the case for change.

David: You are right. The WHY is very important and relates to strategy. It’s the link between the strategy and the transformation. Those of you familiar with Beyond Default thinking will know that the purpose of strategy is to change the trajectory of the organisation, from one that’s taking it to its default future to one that will take it to an improved future. One of the things you have to do at the outset when developing strategy is to ask what’s the default future? This is a place an organisation will end up if its leadership takes no action other than currently planned. If the default future is acceptable, then just sit back and enjoy the journey. If it’s not then you have to figure out what needs to change in order to change the trajectory to one that leads to an improved future. The WHY is because the default future is unacceptable. Of course we have to have a business case, but this is not the WHY, it’s an audit trail to give accountants the feeling that everything’s under control.

Moderator: Has anybody else got any any thoughts about barriers or examples that they would like to share?

Peter: For me transformational change is driven by a significant shift in context where in doing nothing is not an option. As David said, shifting our trajectory to an improved future is not incremental change, it’s a step change that’s grounded and underpinned by a business case, a rationale, an argument that says if we continue as we are we will fail. That’s our default future and here’s the reasons why success looks like this. My second point is that transformational change, as David said, involves changing different facets of an organisation and the pressure points are not the same. Approaching everything with the same sledgehammer simply does not work. When you’re transforming customer experience you need a different set of tools to when you’re transforming the technology platform. And when you’re transforming an organisation’s culture – or operating state – then a different set is required. My final point relates to mergers and acquisitions, whose purpose is to change the trajectory of the respective organisations. Often these do not succeed. In fact all the evidence indicates that up to 90 percent fail to deliver the expected value, in fact it destroys, rather than increases, shareholder value. Having clarity of strategic intent and clarity of the trajectory you aim to travel is absolutely essential to galvanising everybody in the organisation, and some will not feel comfortable on that journey.

Moderator: When you were speaking it reminded me of some of the theories of change, like Kotter’s burning platform and the work that was done at Berkeley on the elephant and the rider, where the mistake that lots of leaders make is thinking that transformation is about sitting on the back of the elephant and enjoying the ride rather than getting off and clearing the paths as the elephant already knows where to walk.

There’s a couple of questions that have come in the chat. The first relates to the three domains of transformation David talked about. The question is which of these three domains has the least academic research behind it, is there one that’s under-researched?

David: That’s a good question. I think what’s actually under-researched is the link between the three domains. Most strategy firms talk about the WHAT, the markets you should be in and what you should be offering. A lot of consulting firms focus on the operating model because that’s where they sell a lot of their services and there’s a lot of cultural transformation firms focusing on the operating state. What I do see is a lack of understanding of the interconnection between the three domains. A lack of an holistic approach is required to help executives understand the linkage and dependency between these three domains. And as we’ve said you need different approaches for each of the three domains. This I think is where the body of knowledge is lacking. Furthermore, the body of expertise in professional service companies is lacking in this respect due to the way they organise themselves along discreet service lines.

Moderator: Another question is to what extent do transformations fail as a result of not seeing the context shift? As many major transformations could be multi-year programmes the context could significantly shift during this time. To what extent is the failure to see that a reason why many transformations fail?

David: This is a good question. I think this is a trap that is caused by the old thinking about transformation where you define a vision and then put a transformation programme in place to realise that vision. The problem is that as you approach that vision the context can change and the vision is no longer relevant. Those of you who have read Beyond Default will know that the word vision is rarely used in the book. We don’t advocate building a strategy on a vision as we think that approach is no longer relevant to today’s world – if it ever was. Why? If you look at the success rate of transformation and strategy execution programmes it’s lower than it should be and it is not improving. We believe that the reason for this is that organisations, and consultants, are still perpetuating this old out-of-date approach. I’m a great advocate of understanding what your context is and how it’s changing because as it changes so does your default future. Only by understanding the drivers of the context change and figuring out a new trajectory that you’re capable of pursuing, rather than a vision that you stand no chance of realising, can you avoid this trap. I believe that’s the way strategy should be developed and transformation delivered today.

Moderator: That reminds me of a company that I worked for that recognised that their future could not be for their products to be in a jar, in a shop on a shelf. What they decided to do, in an attempt to transform, was to introduce a Produce Lifecycle Management (PLM) system, which meant that the products arrived in the shops quicker than before. They didn’t understand the context, even though they recognised the commercial threats they were facing. They didn’t understand that when the customers are not there, putting their products in a jar on a shelf in the shop faster is not going to transform anything. While they will get some value from what they did, it will leave them with a more entrenched challenge and a default future they don’t want.

Peter: If you look back over the last few years the pressure on leadership, especially during transformational change, has accelerated as a result of the ever-changing exogenous forces, that have pace and scale you could not have predicted. Even if you are a successful leader of transformational change you have to be very alert to what is going on because the context within which you’re transforming will change almost daily.

David: If we look back at the Roundtable we had just 12 months ago did anybody imagine the situation that we’re in now where there’s a war in Europe, food shortages, an energy shortage and energy bills in the UK expected to be over £4,000 on average for each household? A year ago everybody was saying that they couldn’t wait for the pandemic to end and for everything to go back to how it was. Yes, the pandemic is largely over, but we’ve not gone back to how things were before. The context has changed as a result of the impact of global exogenous forces over which we have no control. The only thing we can do is to respond to them. That’s why I think the old way of developing strategy that is predicated on being able to describe a vision is no longer relevant.

Discussion: I tend to disagree with David’s point to a degree. I am an advocate of vision because I think it creates a shared understanding of the future. In my experience that’s extremely helpful as in many of the organisations I’ve worked in it can be a little bit like herding cats at the top level. Having something that creates a consistent understanding of at least the direction of travel I think is helpful. But I do agree that having something that says in 10 years time we are going to be this organisation with this many trading locations, we’re going to sell these products and services, and have this much revenue, with this much gross margin, you can just forget that as you know it’s just never going to happen. If you look at Google’s vision and Microsoft’s vision, which was to have a PC on every desk, they are almost talking about the legacy of what’s going to happen in the world once they complete a set of objectives. I think that’s more helpful because it sets out the direction broadly, but it doesn’t nail your colours to the mast necessarily. It sets the direction for people and to some extent gets them excited about the future and where they’re going. I think that can only be applauded. Where it’s too rigid and doesn’t take account of the environment or the exogenous forces it is a bad way of going about change. So I wouldn’t necessarily demonise the word vision as I think it can be helpful.

Discussion: One approach I found very useful in the transformations I’ve been involved in is to develop a set of ‘from-to’ statements, where in very few words you spell out where we’re moving from and where we’re moving to in a way that people on the programme or affected by the transformation can understand pretty quickly. A few years ago I led a transformation for a law firm where early on we developed a set of from-to statements that we tested with people to get their understanding of what the transformation was trying to achieve. One of them, for example, was from every lawyer in that firm having their own way of doing things, to firm-wide process-based practices. Another was moving from being inside-out to being outside-in, thereby being driven much more by client requirements and much less by the training that they had received. I found these from-to statements very powerful when we put them in front of people and they gave us feedback on how the transformation was likely to land.

Moderator: I’ve used from-to myself and there’s an iterative addition which is ‘from-to we must do’ which binds people into being action oriented. Someone has raised a point in the chat about the order of doing things, suggesting some things should be done before the transformation.

Discussion: During the last two years I have seen consultancy companies, particularly the big ones, go straight into transformation, which maybe is not what the client needs. In my opinion what is missing is a simple way to understand if the capabilities across different areas are in place for the client to be able to deliver the transformation or not. And to see if there is something that we need to fix before or during a transformation.

Moderator: I know that in Beyond Default the capabilities needed to both develop and execute strategy feature highly. David would you like to comment?

David: I agree entirely. We’ve talked about exogenous forces that originate from outside the organisation and define the context within which you operate, but all organisations have a set of endogenous forces that originate from within and have the potential of either anchoring an organisation to its current trajectory or pulling it onto its target trajectory. One of those endogenous forces is the organisational capabilities that have built up overtime. Unfortunately what a lot of organisations do is to define a strategy – and resultant transformation programme – without being cognisant of the capabilities needed to shift the trajectory. And it’s not just people capabilities as one of the most powerful endogenous forces is that resulting from in legacy technology. Many CEOs might have the strategic intent of becoming a digital enterprise, but there’s no way they can achieve this because their legacy technology will just keep anchoring them to their current trajectory.

I’d like to come back to the previous speaker’s comments about the use of visions. It’s certainly not my intent to demonise the term. It’s just that I prefer to use the term ‘strategic intent’, which is what you want your organisation to become or achieve, rather than use the word vision, which I’ve seen so often misused.

Language is important and the prime purpose of these Roundtable discussions is to share ideas and and develop a shared understanding of the words we’re using. It’s very easy to trip up over the use of words so I think it’s important that we understand the concepts behind the words.

Moderator: We’ve got a couple of minutes left so David I’d like to hand back to you to wrap up before we bring things to a close.

David: Today we’ve been talking about overcoming barriers to transformational change, but my approach and advice is don’t overcome barriers but prevent them from occurring in the first place. Some of you will have heard me talk about the importance of creating the conditions for success at the outset. The reason is that if you create the conditions for success at the outset there will be fewer, or ideally no, barriers to overcome. All too often people start a change or transformation programme with no consideration as to what conditions need to be in place for it to be successful and what needs to be done to put them in place. Maybe this could be a topic for a future Roundtable.

Chris, I’ll leave it to you to introduce the topic of our next Roundtable. All I’ll say now is thank you very much for finding time to join us. I hope you found it interesting and I hope that we will see you again.

Moderator: Thank you David the next Roundtable is on Thursday 10 November and during this session we’ll be discussing the essential differences between a strategy and a plan.

It’s been great to talk to you, great to see some new faces and also some familiar faces. I hope we’ll see you again at our next session and feel free to email me in the meantime if you’ve have any thoughts about where these sessions should go. Hope to see you all again soon and goodbye.

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