Failure to Transform: It’s Time for a New Paradigm

“It is difficult to get a man to understand something, when his salary depends upon his not understanding it!”

–Upton Sinclair

Transformation has become the buzzword for change. In the past, these programs have gone by various names such as re-organization, downsizing, turnaround, right-sizing, restructuring, and re-engineering. Technology and consulting firms spend millions of dollars marketing digital transformation, the idea that companies can revitalize their businesses and capture part of the fast-growing digital market.

The transformation term quickly spread to encompass any large-scale change program. A quick survey of Linkedin now lists over 3,600 people with titles like Chief Transformation Officer. And, as you are probably aware, every major consulting firm has a transformation offering designed to support this new c-suite role.

Transformation is big business for the consulting industry, generating over $22 billion in fees based on a 2016 research report by Source Global Research.1 The size and scope of these substantial change programs make them extremely attractive to consulting firms. Each large program can generate tens of millions of dollars for the primary consulting firm that supports the change effort.

Despite the enormous amount of money spent on consulting support to provide “bulletproof plans”, surveys reveal that big transformations almost always fail or disappoint. The Standish Group analyzed 5,140 transformation projects and found that 95% of big transformations either failed completely or did not meet expectations. ² A separate academic study³ of 412 projects found that projects requiring more than 2,400 person-months underperformed 100% of the time.

This dismal failure rate may sound familiar. Every wave of large-scale change has failed at about the same rate for the past 25 years according to ongoing surveys by the Standish Group.

And our assumptions about why they fail haven’t changed much in decades. In 1995, John Kotter, then a professor at the Harvard Business School, published a seminal article in the Harvard Business Review called Leading Change: Why Transformation Efforts Fail.

Kotter’s concise list of reasons:

1. Not creating a sense of urgency
2. Not creating a powerful coalition to guide the change
3. Lack of vision
4. Under communicating by a factor of 10
5. Not removing obstacles to the new vision
6. Not systematically planning and creating change
7. Declaring victory to soon
8. Not anchoring the change in the culture

In the past few years, McKinsey, The Boston Consulting Group, and other large consulting firms have surveyed thousands of executives to figure out how to improve the success rates. And the surveys reaffirm Kotter’s analysis that poor communication, failure to engage staff, lack of top leadership involvement, etc. are the primary reasons for failure.

The one apparent insight from this more recent analysis is that you must do all these things right or trouble will emerge. McKinsey’s survey found 24 factors for success. BCG used cluster analysis to boil its many variables down to six factors. However, perfection is very elusive. The Standish Group studied 50,000 projects and found only 639 perfect projects.4 And every one of the 639 perfect projects was a restart from a failed project. The other thing to note about these perfect projects is almost all of them were completed within six months or less.

Insanity is doing the same thing over and over again and expecting different results.

unknown, often attributed to Albert Einstein

It’s time to rethink the problem and questions we are asking. Is the problem that we don’t know what to do or is it the problem that we can’t seem to effectively implement what we know? Is there an unexplored root cause that prevents effective execution of the known good practices? Is something blocking us from finding and acting on that deeper root cause?

Kotter’s factors play a role in failed transformations. However, are these root causes or are they symptoms of a deeper root cause?

When you examine the evidence, there is a deeper and simpler root cause of failure. Project size is the best predictor of success vs. failure. Big projects almost always lead to complete failure or disappointment. Small to moderate-sized transformations are over 11 times more likely to succeed than very large efforts.²

Big projects take a long time, and the longer they take the bigger they get. It’s a self-reinforcing transformation doom loop that leads to exponential growth in execution complexity, which in turn makes us ineffective at executing on the basic factors of success.

Given the high likelihood of failure, why do companies continue to pursue big transformation (Big T)?

The Pursuit of a Flawed Paradigm

Paradigms are extremely powerful. Once a paradigm becomes popular, it gets adopted and the underlying assumptions are forgotten or ignored. Trying to overturn a paradigm that has large commercial support is risky and disruptive to the established order.

Big T is a big business for large consulting firms and it’s in their commercial interest to focus on how to make big transformation work. These firms are caught in a classic Innovator’s Dilemma. Recommending that companies focus on smaller, but faster projects would completely undermine their economics. As a result, the prevailing wisdom from large consulting firms is that you should go “all in.”

Given the prevalence of the paradigm and the clear advice from prominent strategic advisors, leaders feel pressure to pursue Big T. And if they don’t act, board members will ask why not, everybody else is doing it. Further, leaders who object to the Big T paradigm run the career risk that they will be perceived as resisting change.

However, the evidence is clear. The Big T paradigm is flawed. Continuing to pursue big transformations will only lead to more failure and disappointment, despite the best efforts and intent.

A Foundation of Flawed Assumptions

All paradigms are based on assumptions. Building a better paradigm requires finding and replacing the wrong assumption.

There are six core assumptions to the Big T paradigm:

1. Time is short, so we must move fast.
2. Changing a big company requires big effort.
3. We know what to do, we just need to do it.
4. Big companies have lots of resources and can do lots of things in parallel.
5. We won’t make the mistakes that cause programs to fail because we know the best practices and have the right support, leadership, and management structure.
6. The best way to make Big T happen is to launch a big program and start lots of projects quickly.

The first assumption is correct, given the average tenure of a Fortune 500 company is a short 7.8 years. The only other thing on the list that’s true is that big companies have a lot of resources.

The rest of the assumptions are either completely or partially false.

Small actions can trigger tremendous changes. Top management rarely understands the why of how things work deep down in the organization. Even in the largest organizations, attempts to run large numbers of projects in parallel is a recipe for a traffic jam that slows things to a crawl. There are no perfect projects. And fat programs lead to decision and resource conflicts that drive enormous complexity costs and risks.

A Different Way Forward – The Think Big, Do Small Paradigm

The key to a better way forward is to embrace the idea that substantial changes can be triggered by small, focused action that creates spontaneous change throughout the organization.

Most people assume that it takes a considerable effort to change the direction of a large ship. However, that’s not how you turn a large ship. Turning a ship starts with a tiny part called a trim tab whose movement changes the water flow over the rudder, pulling the rudder around. Changing the orientation of the rudder changes the flow of water, creating a lift that starts to pull the stern of the ship around. The flow of water around the ship does the rest of the work.

The truth is that small things can lead to big changes.

Never doubt that a small group of thoughtful, committed citizens can change the world; indeed, it’s the only thing that ever has.

Margaret Mead

The trick is to find a way to catalyze a social movement. While this can be done in many ways, here are four simple ways to engage the Think Big, Do Small Paradigm:

1. Engage your Trim Tab – The trim tab for a company is a simple and universally supported idea that orients people in the right direction and triggers actions that make everything better. While finding the right trim tab depends on the company’s priorities for change, many companies have used values such as quality and safety as their trim tabs. Making one of these the company’s top priority has a way of orienting everyone in a common direction that leads to better decisions, improvements in the chosen priority, healthier processes, and beneficial side effects like improved employee engagement and productivity.
2. Eliminate the pain – When you examine behavior closely, you find that people are highly motivated to avoid pain. They prioritize behaviors that allow them to avoid a negative situation over behavior you are trying to promote with positive reinforcement. Taking away the pain points that block desired behaviors transforms behavior much more effectively than financial rewards. When you make eliminating pain a priority, change becomes desirable and not something to be resisted.
3. Increase the amount of power within the organization – When you give people in the organization the proper orientation, guidelines, and structure to act both wisely and more independently, it increases the total amount of power in the organization. People start doing the right things spontaneously. It is incredible to see how amazing people can be and how quickly they make progress when done well.
4. Accelerate progress using focused pipelines, not fat programs – Focused pipelines work much better than fat programs and can get more done quickly. You start by selecting the twenty percent of the projects that deliver eighty percent of the value. Then, focus even more by organizing them into a small number of focused pipelines with only one active project underway. The rest of the pipeline’s projects are sequentially scheduled so that you finish existing projects before you start new ones. When you couple focused pipelines with the Critical Chain Project Management method, projects move much more quickly. Research⁴ shows that projects get completed twice as fast and are much more likely to finish on time when companies adopt this approach.

These four simple methods completely transform how change happens. Instead of top management pushing change on the organization, the organization starts to pull change through the organization.

For those that want to make transformations work, the path forward is obvious – stop trying to do big transformations that are destined for failure and start embracing the Think Big, Do Small paradigm.

Notes and Sources:

1. “Digital transformation consulting market booms to $23 billion”, Consultancy.uk
2. Special CHAOS Report on Digital Transformation Project, The Standish Group
3. The Impact of Size and Volatility on IT Project Performance, Communications of the ACM, November 2007
4. Chaos Manifesto 2014, The Standish Group
5. “Advanced Multi-Project Management: Achieving Outstanding Speed and Results with Predictability” 2013 book by Gerald I. Kendall & Kathleen M. Austin, page 95. The analysis is based on public information about 60 different organizations working in various industries that had applied CCPM.