Assessing transformation readiness
When a company’s transformation ambition is mismatched to its readiness, it is the CEO’s job to close that gap. But first, the CEO must assess the current level of organizational readiness for change. Organizational readiness spans four core dimensions that combine to determine the organization’s overall readiness:2
- Leadership: CEOs need to ensure that their C-suite and other key executives are motivated and capable of executing the vision. The CEOs we interviewed consistently emphasized the importance of the leadership team supporting the transformation vision and having a positive attitude and willingness to transform. This process might entail replacing key individuals who are not ready to contribute.
According to former Dow Jones and current The News Movement CEO William Lewis, an effective CEO “has empathy and understands how building a harmonious executive leadership team is crucial for success.”
But it’s not all about bringing in new people who are favorable to the effort; it’s also about bringing existing team members on board. According to the CEOs we spoke with, being provocative, accessible, and transparent, as well as showing personal vulnerability, are all strategies to create internal engagement and tolerance for change.
- Culture: A significant potential barrier to readiness is the organization’s culture. Low cultural readiness typically takes the form of bureaucratic, reactive, and risk-averse ways of working that are at odds with the collaborative, proactive learning mindset needed for ambitious transformation.
In enacting cultural change, “communications [are] as important as the actual transformation of the systems,” said Owen Wilson, CEO of REA Group Ltd., a multinational digital advertising company that focuses on property.
In addition, a transformation-ready culture needs metrics tied to organizational change. Ohio Health CEO Stephen Markovich, for example, made a percentage of leadership compensation contingent on the transformation’s progress metrics. “It’s not just tying accountabilities; it’s tying the economic reward to the project’s success,” he said. “That way, if the project goes well, we all win. If the project goes badly, we all lose.”
- Structure: If the organization hopes to operate differently, it may need to organize differently. CEOs often will need to lead the reorganization of teams, assignment of new roles, revision of incentives, strategies to collapse organizational hierarchies or layers to increase agility, and implementation of a new governance structure.
CEOs should also prioritize securing adequate resources. Digital transformation is not nights-and-weekends work. Dedicated resources should be put in place early to work out the logistics before implementing the changes across the business. Marc Huffman, CEO of accounting automation software leader BlackLine, acknowledged the importance of a dedicated team: “Digital transformation [is] a full-time job. It doesn’t get done if you don’t dedicate full-time people to the effort.”
- Capabilities: CEOs also need to equip their organization with four key capabilities to harness digital for a superior capacity for change:
o Nimbleness: the ability to pivot when circumstances merit a significant change in direction
o Scalability: the ability to handle an unanticipated increase or decrease in demand by many multiples over a short period
o Stability: the ability to maintain operational excellence and a results orientation, even while nimbly pivoting and rapidly scaling
o Optionality: integrating new capabilities, often from third-party partners, to quickly become more nimble, scalable, and stable
These capabilities, often enabled or “supercharged” by digital technologies, are critical factors for competing in an increasingly disrupted world.3
Taking action as CEO