Business transformation, in particular digital transformation, is fashionable. Advocates of business transformation emphasise the need to be bold. Many of them see large scale culture change as a desirable or even essential aspect of business transformation.
Unfortunately, a high proportion of business transformation initiatives fail. In the 1990s John Kotter estimated that 70% of business transformations fail: in 2008 he wrote in his book A Sense of Urgency, “From years of study, I estimate today more than 70 per cent of needed change either fails to be launched, even though some people clearly see the need, fails to be completed even though some people exhaust themselves trying, or finishes over budget, late and with initial aspirations unmet.” A recent Harvard Business Review article found that only 22% of corporate transformations are successful, and in late 2021 McKinsey reported that only 31% of survey respondents claimed a successful transformation.
Some culture change may indeed be necessary for business transformation, but consultants and their clients should not underestimate how difficult it is to achieve. Kirsty Bashforth’s book Culture Shift, a guide to bringing about culture change based on her experience of improving BP’s safety culture after the Deepwater Horizon disaster, emphasises how long it takes to embed culture change and how difficult it is to retain the top management attention essential for success over a prolonged length of time.
Culture is a fundamental aspect of how people feel about the organisation they work for. Organisation consultants have reported how unsettling people find culture change and the potential downsides of attempting such changes, and emphasise that change rooted in continuity is more likely to be successful than heroic attempts at social re-engineering. Senior managers should think very carefully about the amount of culture change they need to achieve their business transformation objectives, and keep it to the minimum necessary to meet them.
Beyond a certain point, it may be preferable to start up a new organisation from scratch on a green-field site to embody the new business model rather than attempt to transform the old one. For example, it may be advisable for banks wishing to offer digital-only services to set up a new business in parallel to their existing operations. The leadership of the new organisation could foster a start-up mentality and a totally customer-centric focus, a culture that might be difficult to embed in an established banking operation.
Dr Karol Szlichcinski is a Fellow of the Institute of Consulting, a Chartered Psychologist and a member of the CMCE Leadership Team.