EZ-SELL is a fictional B2B distributor of a configurable line of industrial products. They also offer related setup, maintenance and repair services. For the fourth consecutive quarter, EZ-SELL has lost customers and market share. The CEO asked the VP of Marketing to conduct a Voice of the Customer survey of their most loyal and recently lost customers to better understand why they were losing share. The results of the survey showed that EZ-SELL had the strongest product lines, but customers now wanted after-sale services bundled with their product purchases. EZ-SELL’s primary competitor offered an integrated product/service purchasing experience for their customers.
The competing distributor works with customer purchasing teams to specify product and service kits, which can then be ordered immediately from sales representative’s tablet computers. In contrast, EZ-SELL requires a separate service engagement to review the products purchased and determine the complementary service package. The service package then requires a separate purchasing transaction. EZ-SELL knew they needed to transform their direct sales and customer service functions. But were they ready to begin this business transformation?
Successful Change is Tough
Business transformations are complex, large-scale changes to your company’s business capabilities and behaviors. Their purpose is to create significant improvement in performance. As with any worthwhile and complex human endeavor, business transformations are filled with challenges. In a 2015 global survey on transformations, nearly 2,000 executives – representing a range of regions, industries and company sizes – were asked if their transformations improved and sustained performance. Only 26 percent said their transformations had been very or completely successful. This dismal success rate is catastrophic given the significant investment and business disruption in a transformation. Why is the success rate so low? Typically, there is no formal approach for preparing companies to address the accompanying challenges.
All business transformations can be characterized using the simple three-phase lifecycle shown in figure 1. The Planning Phase sets the stage for the transformation and is arguably the most important phase as it clearly establishes the purpose and scope of the project. The transformation is carried out in the Implementing Phase; then the Optimizing Phase ensures value is created. The objectives of each phase are shown in Figure 1.
Companies experience challenges in their transformations because they aren’t ready to begin the work within the phases or – worse yet – they don’t know they aren’t ready.
EZ-SELL needed to transform its business because of underserved customer expectations in an environment with better positioned competitors. As a result, they were losing customers/market share. Their transformation consisted of three sizable business changes:
- Extend their offering to include bundled product/service configurations
- Launch technology to digitally enable configuration/placement of orders at the customer’s site
- Develop a product/service selling capability
EZ-SELL can’t afford to delay their transformation, nor can they afford to spend time and money on false starts. They must move forward in a careful and measured way, testing their level of readiness for the change and addressing gaps in readiness before beginning the actual work.
Business Transformation Readiness
Business transformation readiness can be simply stated as Assess and Prepare: Assess your company’s level of readiness to take on a change; if you’re not ready, then prepare your company for the change. These readiness techniques apply throughout all three phases of a business transformation. While it is beyond the scope of this article to cover readiness across an entire transformation, it is manageable and useful to look at some examples from the Planning Phase. The most important things you can do, after establishing the purpose of your transformation, are to clearly understand the change impacts and prepare your business to address them.
EZ-SELL knows it must make three large business changes to accomplish their transformation, but does the company truly understand the impacts of those changes? If EZ-SELL can’t state with certainty how these three business changes impact the various parts of their business, then they don’t understand the scope of their transformation. EZ-SELL should not move forward until they know the impacts to their business. That requires a scope assessment.
Scope Readiness can be assessed by asking yourself six questions about each of your business changes. These questions pertain to the impacts the changes have on your business.
What: Content & Deliverables – In what ways will the content/deliverables of your business be impacted due to this business change?
How: Methods & Procedures – In what ways will the methods, policies and procedures of your business be impacted due to this business change?
Who: Relationships – In what ways will the business relationships (internal, reporting, customer, supplier, regulatory, etc.) be impacted due to this business change?
Where: Locations – In what ways will your business locations (workspaces, offices, customers and suppliers) be impacted due to this business change?
When: Timing & Cycles – In what ways will business timing (start/stop) or cycles of work be impacted due to this business change?
Why: Purpose & Motivation – In what ways will your business purpose, reason or motivation be impacted due to this business change?
If you can’t answer these questions, then this assessment shows you need to better prepare your business for the change. Inaction leads to delays or paralysis, which are as detrimental as moving forward before you are ready. Action is required to bring you to a state of readiness.
EZ-SELL must develop a product/service selling capability as part of their transformation. To understand the scope of this change, EZ-SELL uses the following framework to determine how this change will impact their distribution business.
Consider these three change impacts:
How: Methods & Procedures – EZ-SELL must introduce new procedures for configuring products and services as a bundled offering. The sales and service jobs will change as a result, as will their performance measures and compensation plans.
Who: Relationships – EZ-SELL must redesign their sales/service organization structure to ensure clear ownership of customer accounts and engagement activities. New roles will likely be created, and some roles will likely be eliminated.
When: Timing & Cycles – EZ-SELL must create a new sales engagement cadence with its customers. The separate product and service sale cycles are no longer required. The sales lead development pipeline must now reflect the joint product/service offering.
If EZ-SELL stopped their transformation’s change scope analysis at “Develop a product/service sales capability,” they would miss these impacts and be poorly prepared to help their teams adopt the new product/service selling capability.
Business Change Impacts
Business transformation readiness covers the entire spectrum of change in a transformation. There are assessments and preparations at all critical checkpoints. The final one considered here is to understand whether your business is ready to begin addressing the impacts of the business changes. Gaps in readiness to address the impacts must be identified and closed prior to undertaking the change. Unresolved gaps result in unnecessary cost and delay. Change impact readiness gaps can be assessed by asking yourself the following questions for each impact.
Willingness: Where in your business is there opposition or uncertainty to address the impacts of the business change?
Ability: What competencies, licenses/permissions, or resources is your business missing to address the impacts of the business change?
If you can’t answer these questions, then the assessment shows you need to better prepare your business for the change. In this case, inaction leads to despair and a feeling of helplessness in dealing with the impacts of the business change.
EZ-SELL must consider each of the change impacts above to determine whether they have gaps in willingness or ability to address these impacts. A willingness gap can be closed using incentives or disincentives to address the opposition and uncertainty. An ability gap can be closed by acquiring or developing the missing competencies, licenses/permissions and resources. EZ-SELL must determine which method is best used in each case, but they must first clearly identify and address the gaps. The gaps create anxiety, confusion and ultimately resistance to change.
Bottom Line: Build a Change Process
A 26-percent success rate does not instill optimism and confidence in executives considering a business transformation. Too many companies skip critical assessment and preparation steps to address the inevitable disruption that comes with a large change project. However, as shown in this article, you don’t have to abandon your transformative vision. Nor do you have to passively accept the stress and uncertainty in navigating the change. You can ensure your transformation is successful by taking steps to ready your business for the changes and impacts. Assess and Prepare – it’s simple but requires thoughtfulness and discipline. Don’t skip steps and fall prey to the change challenges plaguing most companies undertaking a transformation.
This was a brief introduction to the topic of readiness in a business transformation. It is part of a much larger work that characterizes the most significant challenges and shows how they can be overcome through business transformation readiness. Hopefully it has shown you how these readiness techniques can be used to mitigate transformation challenges.