Isn’t Business Transformation Just For Big Organisations?

From reading the literature, you’d think so. I’ve been on the research panel for McKinsey & Co for quite a few years now and when you read the material and reports it is ALL focused on big corporate. If your profits are less than $10 million – apparently a lot of the stuff just doesn’t apply. Yet I disagree. Even where there is mention of smaller businesses – that is very US-centric and frankly not helpful.

There are lessons to be learned from looking at how really big organisations could and should handle transformation. That’s not to say they should be copied – let’s just learn from their problems and mistakes. The rest of the world doesn’t operate in the US bubble of capitalism and, particularly in Europe or the English-speaking countries of the Southern Hemisphere, there are more liberal social values to consider.

You Work in an SME?

Maybe you don’t just work there but actually own or run it. So what should you be looking for from the material about running business transformations in large organisations that can help you?

One of the quoted reasons for seeking transformation is to move up and out of the middle range of companies that make relatively little economic profit. (That’s the profit they make after allowing for the cost of the capital employed.)

The book Strategy Beyond the Hockey Stick (Wiley, 2018) describes the odds of a company succeeding in moving up as being largely explained by its economic endowment (such as its size and debt capacity), its trends (a declining or expanding industry) and the application of various big moves.

(This was documented by Bradley, Hirt and Smit in McKinsey Quarterly, February 2018.)

I’m not about to pick apart those big moves other than to say that they relate to things like high percentage performance relative to the sector. It’s all about big relative to competitors. By all means try and beat industry averages – but do you know where to find them? Not so easy if you are a specialist manufacturer or boutique hotel chain.

However for an SME to transform I argue that the starting point should be change relative to where you started from. It’s more of a niche strategy. The transformation should indeed be significant and noticeable by the customer base. However that may be more qualitative than quantitative in nature.

Measures to Think About

Here are a few that seem more appropriate to a smaller organisation. It’s perfectly possible that as a result of innovation and transformation you might become a world leader. On the other hand, in the real world, transformation should be aiming for excellence – no matter at what scale.

Speed of response: Just how fast do you react to changes in demand or market conditions? Can you get this down to being the quickest out of the blocks, irrespective of what has happened? The reason I think this is a good area to focus is that, over time, it will incrementally make your organisation much more agile and people will notice and appreciate that. Likely outcomes would be more/better business but by focusing on the speed of change rather than pure profitability of what you do is actually likely to lead to more and better without ripping the heart out of the team.

Sustainable new ideas: The more sustainable the things you do or produce, the better. In a way this runs counter to the throwaway society or inbuilt obsolescence. So be it. Slowly but surely people are coming round to the idea that we should have a circular economy and that includes making things to last. I’m likely not the only person who hates the way that you can’t get anything fixed – you just have to buy a brand new replacement. Your business model shouldn’t rely on the latter to work – it’s bad economics.

Better experiences: Seriously, do you think through the customer experience? What about it would annoy you if it happened? What could be done that is outstanding? How can you make that happen?

Consider the following example:

In the hotel trade we have seen a blossoming of different propositions on offer that supposedly improve the customer experience. Pillow menus are one idea – relevant if there are significant numbers of guests who want to specify what they lay their head on at bed-time. But do all the toiletries from boutique names make that much difference? Fragrances are a very subjective thing and for 50% of the population who are male, they might not even be appropriate, given the options that tend to be on offer.

What do you want the hotel room to feel like? Living in a luxury apartment where everything is on call or simply a very relaxing home from home? Are you trying to pamper one-off stays or do you want a regular clientele who treat the place as their special retreat? The answers to these questions will change the direction of any planned transformation.

Doing it different: Truly a challenge but it can be done and if you are adept at change, then easier to get right because you will be constantly checking and changing. The COVID-19 crisis led to a shortage of ventilators and there were two different routes to solving the problem. On the one hand a number of engineering companies sought to switch production to produce versions of existing designs. Quicker to market was Dyson who started from scratch and built something completely new. An example of just what being different and speedy can achieve.

Being the best place to work: Although this isn’t directly going to make your organisation more profitable or effective you might consider how valuable this attribute is to the people you work with. After all, since you also work there, it might be a really good goal to aim for. The side-effect of this when linked to one or more of the earlier suggestions could be a real masterstroke in terms of beating your competition or exceeding customer expectations. Being a great place to work is likely to lead to fewer days lost due to sickness – each of which is effectively a gain in overall productivity. I’m sure you can think of other similar intangibles that would benefit the organisation over a year. Cost of recruitment might fall dramatically with better staff retention.

What’s the SME Advantage?

Simply put, it’s being nimble and not being part of a very large herd. Don’t try and fight for air in the crowd. Create your own micro-climate that is designed specifically for you and your stakeholders. With big corporates continually focusing on cheapest production and Just In Time, we’ve seen that falls apart when the supply chain is disrupted by a pandemic or something like the Kobe earthquake which, in 1995, nearly brought Toyota to its knees.

People are now realising that the offshoring or outsourcing of huge swathes of stuff might be a case of chickens coming home to roost. The SME doesn’t have to follow this foolish path – instead build a local network with short supply lines and multiple channels. It’s not all about volume, it’s about value.

Consider this Tweet from Andrew Neil, Chairman of The Spectator:

“When even President Macron says supply chains will have to become more French, from food to pharma, then you know globalisation will be in serious retreat in 2020s.”

Why Should You Care?

If you don’t care about making these kinds of change, then what is it you are seeking?

We have years of experience of asking our clients the hard questions and – in the fashion of all good coaching – helping people to work out what’s best. We won’t tell you what to do but we will help YOU to decide. With nothing to lose, starting the conversation is the least you owe to yourself. So drop us a line and see where it takes you.

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Rob Wherrett can be contacted at https://robwherrett.com/contact/

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