Now more than ever, to deliver the fruitful corporate transformation that disruptive trends demand, organisations must be able to convert ideas into action. In recent years, demand for corporate change has risen to unprecedented levels. In the post-pandemic era, rising labour markets and geopolitical tensions have ramped up stakeholder expectations that corporate executives will confront these changes and adapt to an ever more volatile, uncertain, complex and ambiguous (VUCA) world.
Torn between short-term fixes and long-term vision, business leaders are struggling to articulate strategies that best adapt to change, and to build sustainable operating models that create lasting value. Our work helping companies across sectors deliver sustainable corporate transformation in this challenging new environment has helped us to develop a vital perspective on the challenges businesses face.
The changing face of work
Every corporate executive is feeling an acceleration of change in their daily working life and the resulting increase in volatility. While the stakes for change are rapidly increasing, there is a general feeling that the traditional five-year plans companies rely on to prepare for change can quickly become irrelevant. As change experts, we at L.E.K. Consulting always look for clarity on the difference between ‘imposed’ change and ‘voluntary’ change. Imposed change is driven by external factors. These can be brutal, like the Covid crisis, or progressive, like the transition to the euro, but all call for the ability to adapt.
Voluntary change has always been viewed as progressive for obvious ethical reasons. This went on to materialise as new strategic visions to be implemented within five to 10 years. In a VUCA world, however, with the dramatically increased costs of hazards, errors and inaction, this vision can be seriously challenged. Despite this, we believe that corporate transformation has never been as useful as it is today, provided it is able to efficiently convert strategic decisions into actions and results.
It is no surprise that in Europe, sustainability is at the top of the list of demands, but demographic issues — including the retirement of baby boomers, the huge impact of technology such as artificial intelligence (AI), and geographical footprint in the midst of exacerbated geopolitical tensions — also loom large. All these issues pose the challenge of rising transition costs due to increased complexity, and generate the need to adapt to more uncertainty. Executives know they can destroy a lot of value with siloed (and ultimately expensive) responses, and at the same time they are struggling with constrained resources.
Resolving the dilemma of higher stakes and limited room to manoeuvre
We believe the massive changes at work, such as the transition to net zero, digitalisation or (to a lesser extent) footprint relocations, are corporate transformations. Clearly, they require first an ever-increasing lineup of bold commercial choices to clarify the strategy, and then the design of an agile transformation with highly efficient operational decisions. The scenario that organisations are experiencing — of higher stakes and reduced room to manoeuvre — is comparable to turnaround situations when companies face a series of critical choices to be made with limited cash reserves. Success comes from making a few key strategic choices, focusing on agility and sticking to a disciplined change process.
When looking at transition costs and limited room to manoeuvre, recognising the power of innovation is key. Technology disruption can put major business units at risk in their market, but it can also be a very powerful tool to shrink cost structures, overcome excessively high transition costs and ultimately create value. Innovation is set to play a growing role in the transition to net zero, with stakes of higher magnitude calling for commensurate responses.
Change fatigue as a block to large transformations
Change fatigue is driven by the vicious circle of contradictory instructions. A lack of leadership, unclear priorities or responsibilities, poor communication, or a lack of decisive action can quickly start to annoy the people that companies rely on. Losing momentum, the organisation burns out their change agents as they make multiple efforts with poor results, and this quickly destroys trust in the project. In contrast, we have seen corporations that really wake up when the stakes are rising, and mobilise in an unexpected way. Corporate forces contribute to change when they recognise enthusiasm — hence the importance of a strong strategic vision.
Leadership and governance are set to play a decisive role in the near future. Executives will need to make more difficult choices with more value at stake, and boards will need to form an independent view and challenge those choices to ensure optimal stakeholder value. The rise of activist investors demanding faster and deeper corporate changes to create value is a powerful example of the strengths at work to accelerate corporate transformation.
Responding to the challenges
We help companies shape their strategic choices and design transformation programmes that deliver on those strategies. Our industry experts help assess the robustness of a corporate portfolio, its competitive positioning and areas where disruption can bring potential value growth, all of which require a deep understanding of market drivers and demand very strong analytical skills to assess various options. Our ability to achieve this understanding delivers the best commercial options for management teams to clarify their strategic choices.
Once the path forward is laid out, our transformation experts help reconfigure the operating model of the company to implement their new strategy, identifying the talent and other resources needed. We also work on performance metrics and communication to prepare for change. We then design and execute the transformation in partnership with the company, embracing a hands-on role that accelerates the change with problem-solving capabilities.
Leveraging disruptive trends at work to deliver transformation
The L.E.K. Sustainability Centre of Excellence has rapidly built best-in-class expertise to share across our client base. With much at stake for both industries and societies, this sustainability expertise has the potential to benefit every client project. Similarly, our investment in a digital factory that enables us to better test new markets and accelerate the client’s experience offers a real advantage to clients. Better insights are key — we have developed new analytics and AI capabilities, enabling our experts to provide innovative ideas and deeper market simulations to inform strategic decisions.
Moreover, execution and change management capabilities have never been as vital. Our dedicated team members have the skills to deliver a proactive, analytical approach along with the ability to make a tangible impact and create measurable value. We see ourselves as a rapid-action force to be leveraged by our clients to ensure all areas of the transformation are covered. With no blind spots, all workstreams within the company will benefit from sufficient resources to be successful.
Creating real value
To make change stick, we mobilise experts dedicated to transformation, with complementary skills such as manufacturing, sourcing, salesforce excellence and so forth. Most of our senior members have held senior corporate roles, and they understand how best to resolve key operational issues relating to the transformation with bold, pragmatic and actionable recommendations. We challenge the status quo and bring best practices on both commercial and operational aspects.
We fully engage with our clients to forge a consensus around credible and executable solutions that they are eager to adopt. We also bring significant market feedback, with bespoke benchmarks and expert views that provide our clients with relevant, proven value creation levers and a clear vision of industry leadership seniority levels. We work hard to deliver rapid results that make a difference to the bottom line, with sustainable improvement measures rather than unanticipated cost cuts.
The L.E.K. view
‘More than ever, it is vital that management creates a comprehensive and mobilising vision of options, with a strong rationale and a robust assessment of feasibility in terms of the resources available. Executives should realise that “business as usual” is now the exception; for current strategic choices to be successful, major resources will need to be deployed and many more informed decisions will need to be made. When you think about the complexity of carmakers switching from the internal combustion engine to electric vehicles, it is easy to see that no sector will be immune from similar changes, in particular with the net-zero transition. This is why you need experts that bring state-of-the-art thinking on the best options available and an up-to-date understanding of the related impacts in value creation, capture and protection.’
— Jean-Philippe Grosmaitre, Partner
‘Companies should seek and value agility even at the cost of a few basis points of results. We have seen too many costly transformations that did not deliver results because of their lack of agility — cases where sticking to the plan has even jeopardised the company’s future. I am optimistic that technical progress will help overcome many of the current challenges and will create significant value if organisations take the appropriate approach to effective transformation.’
— Claudio Molinaro, Partner
For more information, please contact strategy@lek.com.
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