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The Single Biggest Mistake in Business Transformations

If I have seen it once, I have seen it a hundred times.  A new person is brought in with a clear mandate. The things are meant to change. Out with the old, and in with the new. The new person comes in with a great fanfare, and takes over. Then he/she starts taking stock of the situation. And takes more stock of the situation. Gets the consultants. Does a study. And, more studies. And more stock of the situation.

Meanwhile, the chairman is stewing in his chair. The board is exasperated. They see a lot fancy reports from the consultants. But they are waiting for action. Which comes in small dribs and drabs. Seems like one step forward and three steps backward. They start saying things like – ‘even the wrong action is better than no action.’

And, that is when you know that the single biggest mistake in business transformation is being repeated again.

Here is a typical scenario:

It had been two months after the internal announcement about achieving a milestone, and no one had seen the spark of business transformation yet. The momentum has been lost. When employees clapped their hands a couple of months ago on hearing the speech about successfully increasing efficiency by 10%, an impressive quick win, management should have taken the opportunity to introduce the next initiative.

Unfortunately, cases like this are not rare. Driven at the wrong speed without an appropriate line-up of actions will extinguish the initial enthusiasm, causing boredom and even withdrawal. As we have seen in my book UNCHAIN YOUR CORPORATION, the journey from supply chain 0.0 to 1.0, to 2.0, to 3.0 is very interesting, and challenging. Here is the relevant framework from the book:

supply chain management

Obviously, if your company enjoys healthy margins and is in relaxed circumstances, you can move just one step at a time – from SCM 0.0 to 1.0 or from SCM 1.0 to 2.0 or from SCM 2.0 to 3.0. All you might need is a slow evolution over number of years, where your company comes to the realize the need to change over 2-3 years, and then gradually carries out that change over another 2-3 years.

During this process, if the market conditions change and, margins experience a squeeze, your company can always hasten the cycle by deploying professional change managers, where a six-year planning and execution cycle can be easily halved to 2-3 years.

However, companies can also jump one step in the process, from SCM 0.0 to 2.0, or from SCM 1.0 to 3.0 by deliberate supply chain transformation, which helps them achieve faster results, with less risk of always chasing the trend. In this particular case, the danger is real that the process can be carried out too slow or too fast, depending on how the transformation is created.

To give you an example of a transformation which was carried out too fast, let’s consider the case of British Petroleum and its oil rig in the Gulf of Mexico. The full case study is our book Outsourcing 3.0 but here we will repeat just the most pertinent facts. Obviously, their supply chain 3.0 was configured with a number of suppliers of BP, including the owner of the rig, the operator of the rig, the supplier of the underwater equipment used on the rig, which failed, and the user of that underwater equipment. Unfortunately, the transformation had been carried out so rapidly that the risks were not being managed prudently enough. As a result, a small failure in the supply chain resulted in massive losses, amounting to tens of billions of dollars and a blame-game at the end of it all.

On the other hand, examples also abound where companies drag out the transformation too long, at the pace of slow evolution or change management. We have seen numerous companies go bankrupt, rather than hasten the transformation process.

supply chain management

In fact, take a look at any company declaring bankruptcy, whether in automotive, aviation or any other sector, and you will see apparent signs of failed transformations due to a slow pace, or a lack of understanding of the various stages along the way.

On the other hand, if you want to see examples of companies that have carried out the transformation just right, try and examine those whose share prices have gone up significantly in comparison to the market benchmarks, and then discern whether this result is due to a stroke of luck – for example, a fertilizer company getting lucky thanks to the right amount of rain 3 years in a row – or whether it is the result of a professional business transformation, carried out from one stage to next in a systematic manner.

supply chain management

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Vivek Sood

  • Tependera singh saini says:

    I want to transform a small family business into a more serious business, what steps should I take to minimize mistakes and do it in an efficient way?

    • Erin Liman, Business Growth Designer says:

      To build on Tependera’s answer, there are two separate challenges. One is finding the right product/market fit to grow the business. The additional challenge is doing this within the context of your family business, which often includes interpersonal dynamics and competing priorities.

    • Jeff Schuster, Business Coach at Jeff Schuster Business Coaching says:

      It sounds like you have a successful family business. So, I’m not sure that you necessarily need to start from scratch (which is what the Business Model Canvas does). The Business Model Canvas may help you create a formal description of what your family business is already doing.

      The next step is to define systems and processes that your business needs to create revenue. Don’t do everything… just the key things. For instance, if you are a restaurant, you will need key recipe’s, how you staff different dinner rushes, how you market your restaurant, pay rates for various positions, etc.

      If you want to grow, all you do is do more of what is already making you successful. Again, in the case of a restaurant, it is a matter of duplicating your regional success in a different town. Sounds easy, but this will test whether or not you documented the right systems and processes; and whether your financial plans are accurate.

      The biggest mistake I see small family businesses make is usually in their financial records. Family tends to take money out of the business when they have some personal need… and that messes up the whole works.

      Good luck!

    • Lacy Stalmaqij, Marketing Assistant says:

      Hey, great question! If you really are serious about turning your small business into something more, there are some basic steps that you need to establish and incorporate into your business.

      You might want to look into some of these tips:

      *Learn how to build systems that can be automated. Employing the power of automation allows you to reduce human error almost complete and increase efficiency. Automation also allows your employees to prioritize important tasks rather than getting bog down doing the small, mundane parts of your processes.

      *Show your employees that you are after their welfare not just by providing the right compensation but also treating them humanely. Do not run your employees to the ground by heaping several tasks all at once.

      *Make using collaborative tools an important house rule. Tools such as Asana, Trello, and Process Stree are just some of our aces in making sure we are on the same track.

      *Invest in them by empowering them through skills development and providing the right sets of training. The right training helps them become more collaborative, productive and efficient.

      *Give them the freedom to express their ideas when it comes to helping make your processes more efficient. An open door policy where they can easily approach you about what’s bothering them regarding their roles and responsibilities helps address issues more readily and establish the right solutions.

  • Eduard Muntean, Founder says:

    Firstly, you have to write your business plan and then your business model because without a business plan your business can’t succeed or work it jus can’t.

    Now let’s talk about your “family business”. When you make a decision like this to start a business family you have to think at all situations. What I want to say is that your relationship with your family could get worse very easily or you won’t take the right decision when it’s needed to be taken just because you don’t want to destroy your family.

    As an example let’s suppose that you a man from your business which is your sister’s husband has a very dismissive behavior regarding your business. You know about it and two situations appear in your head: whether I leave him in peace to do whatever he wants because I don’t want to destroy my relationship with my sister or I fire him and hire someone new which will be much better and the business will start growing. At this point you have to choose between your family and your business and future life. That’s why I have never agreed or will agree with family businesses. You have to leave space between them but not every time. If you have a million or billion business or you have someone which you trust with all your heart then you can hire him otherwise definitely not.

    Good luck!

  • Ross Wirth, works at Franklin University says:

    The biggest mistake I have seen cost the company in excess of $1MM when you add up consulting expenses, people’s time, and operational disruption. The root of the problem was simple – thinking that a simple understanding of a change management methodology was sufficient for success – and expecting the consulting company to do everything for them. This “turn-key” approach to change is common, especially when you examine the available change methodologies. To overcome this problem, I created a synthesis of five change methodologies, identifying gaps and points of process conflicts. Further, to drill down into the many points of failure, you only need to look at each step in the Change Rx Change Management Project Methodology. Each step needs some thought and consideration of how people in the organization will respond. Always remember that organizational change needs people to commit to something asked of them.

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