McKinsey: How To Gain And Sustain A Competitive Edge Through Transformation
Featured article for this week's Brief
Read time: 3 min
Big Idea
Follow four foundational elements — Will, Skill, Rigor and Scope — to implement transformational approaches that combine mindset shifts and behavior changes to drive competitive advantage.
Top Thoughts
Address both mindset and behavior changes at scale to drive successful transformation. Implement new strategies and tools while shifting the way people think and act within the organization.
Four foundational elements of transformation:
Will - The shared aspiration to reach the organization's full potential.
Skill - The capabilities and tools possessed by the organization and its individual members.
Rigor - The infrastructure that ensures disciplined execution and sustainability of the transformation effort.
Scope - The range of outcomes that the transformation intends to improve.
Actions to be taken for the Will transformation element:
Fostering understanding and conviction - ensure everyone understands why the transformation is necessary.
Role modeling - Leaders should lead by example and exemplify the mindset and behavior shifts they want. Clearly communicate expectations and provide opportunities for employees to learn.
Actions to be taken for the Skill transformation element:
Building skills - Build the required skills including technical, execution, interpersonal, and leadership skills. Evaluate and identify skill gaps to focus skill development that is linked to value creation.
Applying skills - Create opportunities to apply new skills and support positive behavioral changes. Hold regular meetings to monitor and share transformation progress.
Actions to be taken for the Rigor transformation element:
Moving quickly to realize impact - Research suggests that the highest transformation value occurs in the first few months. Drive “quick wins” in the first 6 months and set up road maps to target more complex initiatives.
Embedding reinforcement mechanisms - Initiate new policies and procedures that reflect and reinforce the desired changes. Include transformation objectives in performance reviews, financial incentives tied to transformation outcomes and hold leaders accountable.
Actions to be taken for the Scope transformation element:
Broaden the scope - Companies with a broader transformation scope tend to outperform peers. Set bold, holistic aspirations that aim to improve financial operational, employee, social, environmental and capability building performances. Aspirations should address both bottom-line and top-line growth.
Quick Quotes
"A comprehensive approach to transformation, which enables mindset and behavior changes at scale, is crucial to success."
“Nearly all respondents (96 percent) from transformations that implemented all four elements say their efforts improved and sustained organizational performance, compared with 13 percent of respondents from transformations that implemented just one.
“(Survey) Respondents whose transformations implemented all four elements report a much higher rate of outperforming peers than those whose transformations implemented just one. They are more than twice as likely to say so: 39 percent, compared with 16 percent. Yet the results suggest that few organizations are taking this comprehensive approach, with only 6 percent of respondents reporting transformations that implemented all four elements.”
"Respondents who say their transformations fostered understanding and conviction are 3.2 times more likely to report outperformance versus peers."
"Respondents whose transformations explained the rationale are 3.1 times more likely than others to report outperformance."
"Respondents reporting that leaders role modeled changes are 1.6 times more likely to report outperforming their peers… This (role modeling) commitment cascaded throughout the organization, with nearly 50 percent of the workforce involved in individual initiatives in some form by the transformation’s second year. Through the transformation, the organization saw substantial shifts in mindsets and behaviors. The company also realized massive performance improvements, including to its share price, which increased by more than ten times during the transformation."
"Survey respondents reporting that their organizations aligned employee incentives with the transformation’s goals are 2.6 times more likely to report outperforming peers."
“57 percent of respondents whose transformations realized impact in less than six months reported improving and sustaining organizational performance… Time is of the essence when organizations are making improvements on the outcomes the transformation aims to address."
Actionable Advice
Foster understanding and conviction - Prioritize explaining the rationale behind transformation and ensuring employees understand why the change is necessary.
Clearly articulate the reasons for the transformation.
Identifying key stakeholders to build internal conviction.
Create a consistent narrative that aligns the organization to its goals.
Lead through role modeling - Leaders should actively demonstrate the mindset and behavior changes they expect of employees during the transformation.
Clearly and consistently communicate new norms and changing expectations.
Provide opportunities for employees to learn directly from their leaders.
Involve influential individuals in the organization in driving important initiatives and milestones.
Source(s)
Krishnan, R., Rainone, N., Silverman, Z., & Skerritt, D. (2023, Oct 16). How To Gain And Sustain A Competitive Edge Through Transformation. [Web Article]. McKinsey & Company. (Link)
