- Maintaining focus, measuring progress, and ensuring accountability on priorities is essential to transformation.
- A solid turnaround plan implemented with rigour will outperform a perfect plan executed poorly.
- A compelling vision of the company’s future is only useful if it is shared.
The COVID-19 crisis, with its myriad economic, political, and social effects, continues to present leaders with a diverse set of challenges. The new year ushered in reinforced lockdowns in many parts of the world and a slower rollout of vaccines than many had hoped. On the bright side, while it may take longer than we all may wish, we know that this immediate crisis will eventually pass.
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However, disruption – quickened on many fronts by COVID-19 – is here to stay. New technologies accelerate the pace of change at a rate never before seen in history. New business models and entrants, unburdened by the past, upend the status quo. Empowered consumers, inhabiting their own self-curated digital worlds, demand what they want, when and how they want it. Those very forces that are driving greater disparities between the top and bottom performers in industry are also widening inequalities within society.
Disruption is the new economic driver.
For business, in particular, the risks of complacency or inertia have never been higher. Executives increasingly acknowledge the need to be their own disruptors, but obstacles to successful business transformation remain significant. Necessary investments in digitization and other new technologies can prove daunting, either from a cost or logistical perspective.
Operationally, integrating previously siloed businesses or realigning production models and suppliers – to name just two examples – can be significant hurdles. However, in our experience, cultural and human factors, particularly a lack of focus and urgency, are usually the primary obstacles to overcome in any transformation programme.
For 40 years, we at AlixPartners have been helping our clients manage disruption. Our experience in corporate turnarounds and restructuring shows the absolute necessity of taking required and swift action in this fast and ever-changing landscape. For many distressed companies, the threat is genuinely existential – either a perpetuation of an enterprise or its liquidation.
For otherwise healthy companies, three priorities can be derived from these turnaround situations: 1) prioritize, 2) execute, and 3) communicate.
A fundamental component of leadership is setting priorities with limited resources. When transforming a business, maintaining a focus, measuring progress, and ensuring accountability on these priorities is essential. This means:
- Never compromise on the “must-haves.” Develop priorities to ensure that focus and attention is always on the most important levers. Do not get distracted by the nice-to-have wish list.
- Make evidence-based decisions. Challenge assumptions and ensure there are no “sacred cows.” Be willing to take bold actions in support of where the company needs to go.
- Remember that cash is king. Manage to free cash flow, not just to P&L benefit. Cash from legacy businesses can be invested into areas for future growth.
- Provide sponsorship, ownership, and accountability. Visible, senior level sponsorship is key to galvanizing the broader team into action. Transformation leaders at all levels must be responsible and accountable. Programmes should be actively tracked, benefits measured, and milestones reported upon.
In restructuring situations, one of the leading causes of companies entering bankruptcy a second time is that they failed to fix their underlying operational problems the first-time round. Short-term fixes – like a new capital structure – masked these fundamental problems. Focusing on these fundamentals and not compromising on your priorities is essential.
It’s impossible to overstate the importance of timely execution. All the best-laid plans will come to naught if they’re unimplemented or implemented too slowly. This means:
- Maintain pace over perfection. A solid turnaround plan implemented at pace and with rigour will always outperform a perfect plan executed poorly. Low-hanging fruit can provide momentum for longer-term transformations.
Keep a relentless focus.
- Maintain a laser-like focus on tackling the tasks that will get you to the end goal. Stay focused on the prioritized actions and desired outcomes. Quickly find workarounds and creative solutions to any roadblocks.
Disruption across industry after industry is accelerating and relentless. Without an equally relentless focus on speed to execution, you may never be able to build the sustainable future that your business requires.
The point of any transformation programme is not the transformation itself, but the path on which it sets your company. A clear and compelling vision of that future is only useful if it is shared and if it inspires others. That means:
- Communicate clearly, regularly, and consistently. Leaders must be their own Chief Communications Officer and clearly set out the desired end-state. It is not until leaders are tired of delivering the message that a critical mass of stakeholders have heard it.
- Be compassionate but candid. Communicate the truth, even if this results in difficult conversations. Delaying those hard conversations is human nature but can create significant obstacles to implementing needed reform.
- Lead, follow, or get out of the way. Ensure the management team is aligned on the prioritized actions and desired outcomes. Remove any blockers and invest in change agents at all levels.
Leadership, by definition, requires followership. If you’re not bringing others along on your journey – inspiring and guiding them – then any transformation is doomed to failure.
During the last 50 years there has been unprecedented progress in human indicators – life expectancy has increased to record levels; infant- and maternal mortality has fallen; more girls are staying in school; more people have been lifted out of poverty than ever before; and inequality between nations has narrowed. The market system has served us well.
But deep fractures are beginning to show: gaping inequality within almost all countries; record environmental degradation and species loss; and the broader impacts of irreversible climate change. Our markets are unsustainable – and we need a new economic model.
To tackle these challenges,Transforming Markets is one of four focus areas at the World Economic Forum's 2019 Sustainable Development Impact summit. A range of sessions will bring stakeholders together to take action that places human and environmental health at the core of market systems and value chains. These include building sustainable markets, responsible supply chains, moving beyond disposability, circularity and scaling solutions of the Fourth Industrial Revolution, among others.
In the midst of one of the most profound public health and economic crises the world has ever experienced, we saw just how quickly business could transform when necessary. New platforms for remote working and digital commerce, which had been slated to take years, were adopted within weeks.
Supply chains and distribution channels were adjusted to maintain the delivery of critical products and services. And, of course, there are the heroic efforts by pharmaceutical companies to develop, test, manufacture, and distribute vaccines at record pace, which will ensure an eventual end to this crisis.
If businesses can transform quickly and effectively in the face of COVID-19, they can also do so when confronted with the challenges from disruption. In an interconnected world, the success of these efforts reverberates beyond any one business and their stakeholders. It supports societies and communities by building a long-term and sustainable future for many through the virtuous cycle of innovation, job creation, and economic growth.
But the time to define this future is today.