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Defining a Path to Successful Company Transformation

By Juan Montoya - Rokk3r
CEO

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By Juan Montoya | Chief Cobuild Officer - Thu, 10/20/2022 - 09:00

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In our work over the last decade partnering with established companies to build and scale technology-enabled corporate ventures and business models, it is increasingly common to encounter companies wishing to leverage their assets and experience, combined with new technologies, to transform their businesses or create entirely new ones. The pandemic exposed many companies to the very real risks of ignoring or delaying these actions, and, although there seems to be a consensus around the need to implement these types of initiatives, the question of how to do this successfully is often harder to answer.

We see a tendency from companies to start by focusing on selecting corporate and operational structures to birth and execute new initiatives. These include open innovation programs, corporate venture funds, internal accelerators, or sometimes a combination of these and other initiatives. Unfortunately, it is common for companies to spend significant resources on implementation and still not be able to produce or capitalize on results. The reasons for this are many but, in our experience, they often boil down to a lack of understanding and planning around desired outcomes and goals. This, in turn, leads to erroneous conclusions and can doom these important initiatives, severely affecting a company’s appetite to continue pursuing them and ultimately hindering its ability to adapt to changing landscapes and maintain long-term relevance.

Established companies can and should think about the future intentionally and seek to implement the best portfolio of initiatives they can support internally, given a number of factors that include the company’s size, ability to invest, and its ability and willingness to absorb and promote the cultural shifts required. However, there are no “one size fits all” solutions and simply observing and trying to adapt initiatives that are successful elsewhere is not a sufficient condition for success. Nonetheless, we find that it is possible to substantially mitigate the risk and increase the chances of success of any long-term transformation strategy by following some guiding principles, which I summarize briefly below.

To begin with, companies should firmly establish what they seek to accomplish and what their leadership is willing to commit and expect as initiatives are defined. Examples of questions that may be explored at this stage include: Is the leadership seeking long-term reinvention, perhaps by branching into or creating entirely new businesses? Does it seek to learn from and potentially absorb promising startups in its market? Or is it looking to incorporate new technologies and modernize its existing business? Similarly, what are they willing to commit, in terms of time, resources, and capital to achieve the desired goals and what importance will these be given when weighed against traditional and existing business operational needs? Ultimately, what is the risk-return relationship and time horizon that the company will be comfortable with or able to manage?

Answers to these and other questions are crucial at the early stage of defining any strategy. Coupled with a clear and consistent message communicated to other stakeholders such as key managers and board members, they facilitate planning and provide a baseline framework of guiding principles. This, in turn, allows teams to consider and define important aspects, such as the need for partnerships and the types of funding alternatives that should be considered, including the potential need and sources for outside investment.

Once these decisions are made and communicated, structures, departments and teams can be defined along with budgets and expectations. The ultimate portfolio of projects and initiatives and the structures under which these are executed will depend on available budgets as well as defined goals. As an example, if the aim is exclusively to modernize the organization by implementing a machine learning or data strategy or opening up digital channels, this is a task best completed in coordination with existing company departments and not one where external capital, new business models or even development of new or proprietary tools and products may be necessary. On the other hand, strategies that are more focused on finding and acquiring promising startups or leveraging organizational assets to create entirely new businesses may require setting up new business units, bringing in external experts or consultants, and hiring personnel with different skill sets. In these cases, and depending on the size of the company and specific characteristics of the initiatives being pursued, external capital or a separate capital source, such as a fund or special purpose vehicle, may make sense. Each of these options comes with specific considerations that are important to address or fulfill early in the process.

Finally, regardless of the overarching goals and chosen structural decisions, a few conditions are necessary to increase the resilience and chances of success for any chosen set of initiatives. These include:

  • An unwavering commitment from company leadership to seeing them through, along with clear and consistent messaging about their importance; particularly if the strategy and initiatives constitute a departure from existing company culture and norms.

  • Autonomy and decision-making power must be properly designed into chosen structures, prioritizing the empowerment of key team members and decision-making speed. This autonomy must be framed within a strong but agile communication structure that ensures alignment across every relevant organizational level.

  • The definition of success should be established from the onset, supported by metrics and KPIs that change and evolve in tandem with the maturity of each initiative.

  • A culture of experimentation and a bias toward constant delivery and gathering of real-world empirical data to support decision-making should be fostered.

  • An appetite for controlled risk and a willingness to absorb short-term failures as part of a process rather than an outcome is key to enable long-term thinking.

Although there are, of course, many other factors that influence positive outcomes, we find that addressing the principles above can substantially improve the chances of success for any company seeking to implement a long-term transformation strategy.

Photo by:   Juan Montoya

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