How to ride the wind of change: Transformation must be managed for companies to benefit, says a new study

NOW that everybody is agreed that transformation is what today's business is all about, it seems that nearly every organisation is a riot of initiatives.

Typically, there are senior programmes dedicated to such issues as customer focus, total quality management and personnel development, as well as a host of more specific projects.

An article in the first issue of a magazine produced by international management consultants, Gemini Consulting, claims the firm often finds as many as 300 initiatives in a company, with up to 40 per cent of managers' time taken up by one or other of them.

There is clearly an appetite for change, it says, but many have no identifiable benefits. And those that do generally have no system for measuring them. There is also usually no time limit, which produces 'a lot of unco-ordinated energy, but no discernible movement in any direction'.

The boss confronted by all this must first 'get a handle on what's going on', writes Dan Valentino, Gemini's chief executive, in Transformation.

Only by finding out the purpose of a programme, its expected benefits, the resources committed to it, the sponsor and timescale, will he or she be able to establish a framework for transformation.

Two of the best-known transformations of recent years, he adds, are those accomplished by Jack Welch at General Electric of the United States and Don Peterson at Ford. Both demonstrate the importance of vision, of an orchestrated and disciplined approach and of focusing on the key areas most likely to deliver shareholder value. Even so, both took close to a decade to achieve their aims.

Based on this experience, and knowledge of client companies, Gemini has developed what it calls 'the Four Rs of Business Transformation' - reframing corporate issues, restructuring the company, revitalising the organisation and renewing the business and people.

The key is to move along all four 'dimensions' simultaneously, although not necessarily at the same speed.

Reframing involves changing the way people think about their businesses. Failure in this arena explains why John Akers is no longer chief executive of IBM and Bob Stempel is no longer at General Motors, Mr Valentino claims. Nor is it enough to convince people the company has to change. 'They must change themselves.'

Restructuring is painful, he admits. It involves the chief executive becoming 'a tyrant, sacrificing people on the altar of shareholder value'. But it has to be done. 'All working processes, and their associated systems, must be under constant review,' he insists.

Revitalisation focuses on the revenue and involves not just improving existing businesses but inventing new ones. This idea is based on the work of a London Business School professor, Gary Hamel, and his mentor, C K Prahalad, of the University of Michigan.

They believe that most growth in corporations comes from the intersections between businesses.

For example, NEC of Japan was able to challenge the much larger IBM and AT & T by linking its computer and communications technologies. In much the same way, Canon, also of Japan, broke into the copying business to take on Xerox by marrying the optical and small motor know-how of its existing photographic business.

The final dimension is renewal, which Mr Valentino concedes is somewhat underdeveloped. It is designed to counter the negative effects of the previous three dictums - a 'therapy for the traumas of constant change'.

He envisages renewal as addressing both organisational and human needs. It involves recognition of the company's role in society and the way that reputation can help it compete, he says. It also concerns willingness to look into new work patterns, such as flexitime and job sharing.

Finally, Mr Valentino admits that he and his colleagues are still learning about business transformation, since it is always changing. But he emphasises the value of three rules.

First, do not look for one absolute answer; be holistic. Second, set up a system of key measures centred on shareholder value and track them. Finally, and this is related to the first, be flexible. Be prepared to improvise.

(Photograph omitted)