Why Organizations Need to Transform

Why Organizations Need to Transform
Last Updated: July 2, 2022

Why is there a need to transform? was one of the questions that have been coming up quite frequently after we published the report Building the Transformational Company. While this wasnt part of the original report, we went back to our work, our notes, and our case studies, and looked into why there was a need to transform.


What we found was that there were six fundamental reasons why companies need to transform. You may have other perspectives and have probably seen other reasons why, and we would really encourage you to share your thoughts and opinions with us, and have a discussion around how that fits in.

Six Fundamental Reasons Why Companies Need to Transform


1. Declining Profits


With profits steadily on the decline, and limited opportunities to turn that around, being locked in a declining core business model is a recipe for disaster. You may be locked in the newspaper business, or oil and gas, or maybe an outdated software business. If your declining profits cant be solved, the need for transformation is imminent. If its not already too late, and you end up in a \"shock\" type of scenario.


2. Structural Industry Change

Deep, structural changes to how an industry operates and how value is created and captured. These structural changes may take decades to play out, but you can’t fight against them. It is like the surf and the tide, you can try to compete it, swim against it, but deep structural changes will play out, no matter how you position your business. An example of this would be the gradual shift from oil & gas to renewables. Most executives today would say that \"over a timeline long enough, we will transition. It is just a question of when,\".


3. Rapid Technology Shifts

Swift and rapid technology shifts are similar to structural industry change but happen at a much faster pace. Theyre much more dynamic and much quicker. Expect to see a significant number of startups, scale-ups and investors operate in this space.

You can already see examples of this playing out in the mobility space with ride-sharing, micro-mobility, scooters, and in tourism with the sharing economy like Airbnb.


4. Financially Underperforming

Companies financially underperforming on the stock market will often be pushed to transform – even against their own will. Activist investors, PE funds, and other investors may acquire enough leverage to force through a radically new direction. 


Examples of this abound but are often less known from the outside. Starboard’s transformation of Darden Restaurants is a great example of how an active investor came in, sacked the board, changed management, and led a transformation. While Blockbuster is another example where an activist investor actually blocked a transformation into streaming (you can learn more about this in the online program).


5. Strategic Preemptive

Often led by an internal strategy review or a new CEO, the strategic preemptive route is often driven by foresight, some level of anxiety about a shifting landscape, and a desire to transform before it is required.


Often, a new CEO will have the momentum and opportunity to lead this reinvention easier than an established, internal CEO will. 


6. Markets Fallen Off a Cliff

In times of economic shocks and crises, markets may vanish virtually overnight. The oil and gas crisis back in 2014, the financial crisis back in 2008, 2009, and today in 2020, the economic fallout thanks to COVID-19. These economic shocks happen, and when they do, companies go through three phases - they start with \"shock\", they cut, and for those that make it, they transform. From hospitality to oil & gas crisis, these moments will push many firms into bankruptcy, while others are able to use the crisis to generate a compelling case for swift transformation. Very challenging. 


So those are the top six reasons that we find. Again, these are just based on our own findings. I would love your insights and would be very happy to discuss this further with you.


One of the many conversations we had in our early findings was this question:

\"is it only just the one reason, or can it be multiple?\"


So we did a little bit of research, and what we found was that very often, there are several reasons that come together at the same time. For example, a company could be seeing declining profits over time, experiencing structural industry change, and also on top of that, going through some more rapid technology shifts. Of course, if you are going through all of these, it is a very challenging environment to manage a transformation in.


Another example, one that is more crisis-driven, would be a company (like many today in the wake of COVID-19) facing markets that have fallen off a cliff, and rapidly declining profits.


Finally, you could have a company that is transforming due to a strategic preemptive, maybe through a new CEO or a strategy review, rapid technology shifts, and also a deeper underlying structural industry change.


So what are the implications for you? You may be a consultant, an executive, a strategy leader, or an HR, L&D executive?


We have developed a tool that can guide you on this journey - and here we are sharing a beta version of it.


The Why Transform Canvas is specifically designed to assess whether you are in need of transformation.


Assess Your Organizations Need to Transform



Its a simple and straightforward tool - which you can use to assess your company on a scale of 6 - 30. The higher your total, the lower your need is to transform.


You can access the PDF and high-quality JPEG format of the Why Transform Canvas - as well as the entire toolkit and know-how you will need to guide your companys transformation within the online certification program - Building the Transformational Company.



The post \"Why Organizations Need to Transform\" was first published by  Christian Rangen here https://www.linkedin.com/pulse/why-organizations-need-transform-christian-rangen/


About Christian Rangen

Christian Rangen is a strategy & transformation advisor. He works with CEOs, companies, innovation clusters, and countries on strategy & transformation. He is also an author, keynote speaker, and faculty. Chris serves as a board member at firms like Zaptec (IPO), Solar Duck, and Link Capital - a leading Nordic venture fund.

Chris advises strategy leaders, top management teams, and corporates on strategy, transformation, new growth, and business model innovation. His expertise lies in large transformation cases, often linked to the energy transition.

He also works closely with national governments, innovation agencies, economic development agencies, and innovation clusters on national transformation and building Innovation Superclusters. He has worked with 250+ innovation clusters and 20+ national cluster programs around the world.

He does extensive work on venture capital, investor readiness, fundraising, and how to build venture funds.

Recent clients include the World Bank and 2X Ignite (venture capital), the Canadian Government (Innovation Superclusters), Equinor (Energy transformation), The Finnish Government (National Innovation Cluster Program), Washington State (Innovation Cluster Program), MIT D-Lab (entrepreneurship) and Katapult Accelerator (Investor Readiness).

Chris is the co-founder & CEO of Engage // Innovate – strategy & innovation consulting company, co-founder & CEO of Strategy Tools, a strategy platform company, and co-founder & CEO at X2 INC, part of Norway’s transformation agenda, accelerating the nation from oil & gas to a series of new growth industries

Through Strategy Tools he is on a mission to change the future of strategy. He has developed 250+ new strategy tools (canvases), 5 Strategy Simulations and trained 1000’s people in the Strategy Tools Digital Academy.

In 2021 he was nominated for the Thinkers50 award in Strategy.

He is also visiting faculty at business schools like IE, Zigurat, Duke, BI, teaching strategy, venture capital, and the clean energy revolution.

His recent publications include Building the Transformational Company: a CEO Handbook, Cluster Business Models, Building Innovation Superclusters, and The Shifting Energy Arena.

He is an active public speaker at international conferences like Drucker Forum and Horasis. He holds 50+ keynote talks a year and is represented by leading speaking agencies in Europe, the US, and Asia.


Christian Rangen
This article was written by Christian a Guest at Industrial Psychology Consultants (Pvt) Ltd

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