Sustainable Transformation

We’ve been reading for a while about how certain industries and most companies are trying to come out of the recessionary slump we all have been witnessing. Of course these trying times are not going away anytime soon but companies certainly hope that the corrections they have made to their operating models are sticky and sustainable. So that got me thinking on the topic of this blog posting. 

Is there such a thing as Sustainable Transformation? Are there certain fundamental improvements one can make to their planning and operational capabilities that would make their business models more resilient against the external economic and global forces of disruption in the long run? Where do these transformations need to happen – people, process, systems, customers, markets, regulations, core values, vision – and to what extent? Lots of big, hairy questions are out there that business leaders are hopefully considering, answering, and using to fine-tune their return-to-growth efforts. 

In order to answer the questions I have posed above and to better illustrate my ideas, let’s consider my favorite industry vertical – you guessed it – the automotive industry. The US big 3 motor companies, namely Ford, GM, and Chrysler, are starting to gradually crawl out of their state of misery and back into a state where there transformational efforts are starting to bear fruit. Ford has been the cleanest of them all where Allan Mulally had the foresight and vision to recognize a need to rationalize their product portfolio, positioning, value proposition, etc. On the other hand, both GM and Chrysler had to go through the bankruptcy process to shed the excesses they had amassed over the years. The internal transformation continues but it occurs in tandem with and in relation to the external, marketplace transformation. Sustainability means different things to different people but the mega question everybody needs answered is “Can we continue to win the game?” Everybody can and is winning in emerging markets but can you win and sustain the winning streak in the depressed, emerged markets (like US and Europe)? This, to me, is the weakest link and the outcomes here will go a long way to show who these companies really are and how much of their so called transformation was meaningful! 

So what would a sustainable transformation look like, feel like, smell like? Here are the characteristics -

1. Highly responsive supply chain – Your goods and services move in a cost-effective and agile manner. You are able to respond to demand fluctuations gracefully.
2. Lean physical assets and inventory – Your asset and inventory footprint (as carried on your books) is at the right level, which includes slack/buffer desired.
3. Formidable and relevant work force – Your people are reasonable acquainted with what is relevant in the marketplace and have the skills/tools to be successful in their roles.
4. Mature and meaningful processes – Your functional processes are adequately fine-tuned, operationalized, and adopted. The processes have a nice mix of risk taken and result sought.
5. Good/clear understanding of Customer – You have excellent visibility into and understanding of the voice of the customer. You listen and you evolve as/when need.
6. Rationalized product/service portfolio – Your product/service offerings are in the right mix/balance and aligned with what your customers really want (not what you want).
7. Global sourcing strategy – You understand all the sourcing choices at your disposal and have a sound model to make the right choice when needed.
8.  Sound financial indicators – Your fiscal health is in good shape and you have the right levels/targets for all the important top and bottom line metrics – ROA, ROE, Free Cash Flow, etc.

Bottom-line, every activity that moves you closer to some or all of the above characteristics can be considered meaningful transformation. But to make your transformational efforts sustainable, you need to move to the next level by identifying the quantifiable goals (internal and external) against each characteristic, time-boxing it, and measuring your progress/trend against it. If you are serious about this and care about your future, you will not rest until you have completed and baselined all of the above for your organization.

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