Until very recently, I’d worked in businesses in the tens of billions in revenue all my life. I am no management scientist, but what’s been remarkable as someone on the inside of all these colossues (colossi?) is that they have all ended up in a similar pattern.
- They have a model that works
- The environment changes
- They keep doing what they’re doing because they know how to do it
- It becomes obvious that something out there is shifting in real time
- They keep going, because this model is what they’ve based everything around, so they make small tweaks and hope things go back to normal
- Results go south, alarm bells ring, the number of meetings in calendars doubles, there’s more finger pointing than analysis
- They (let’s be honest, normally the Board) decides they need to do something REALLY different
This is a homemade observation, so if anyone has a cleverer theoretical model, please tell me! I know the cycle because I’ve lived through every stage of it. Having worked in Corporate Strategy and Investor Relations, I’ve even been part of explaining it to employees and the outside world. Take my time at a branded conglomerate you may never have heard of, but you probably have their brands in your cabinets right now.
How hard can it be to sell mayonnaise and deodorant? You have no idea
In 2004, I was working at Unilever when it issued its first profit warning in its 80+ year history. Plenty of businesses issue profit warnings, and it’s not a thing to aspire to, but it happens. But it doesn’t happen in a place that prides itself on its tight financial management, its powerful array of brands, its world class marketing, or its very publicly declared “Path To Growth” strategy. It’s not a good look when your Path To Growth eventually becomes a declining topline.
What went wrong at that point in Unilever’s trajectory is probably in a number of case studies. But it’s best summarized in a way I heard it described by a top exec at the time: the leadership team pulled all the business levers they always had… and they just didn’t work anymore.
The management structure of local fiefdoms run by all powerful business unit chairmen that had historically been the enviable strength and differentiator of the company, the way that it stayed close to local consumers and national retailers, was becoming less and less relevant. Is there really such a difference in people’s armpits in the UK and Poland that they need a completely different deodorant? Probably not. But that was the kind of thing that would have people working in both countries on formulation, packaging, advertising, creating separate sales pitches to Tesco who was in both markets. If something had to change, if the business needed to react, it needed to go to all of those people doing duplicative work, become mired in the politics of who is making the calls here, and in the meantime any nimbler competitor was skipping past. And something was increasingly having to constantly change because it was the start of the ecommerce boom, the rise of the retail own brand, and the age of the relentless march of Walmart and a thousand other factors that needed real time responses.
Beyond changing an org chart or getting some new suppliers
Transformation isn’t an HR exercise where you give the same people new titles, but it’s true that if you’re not changing job descriptions then you’re not doing the job. Nor is it, as some people perceive it, a supply chain task of identifying one common supplier of cardboard boxes and negotiating a discount.
Although I don’t for a second want to diminish the role of Sourcing in Supply Chain harmonization; the so-called “low hanging fruit” that smart people can identify by poring over product bills of material line by line is only easy to find if you know where you’re looking.
But if you’re serious about transformation then don’t restrict it to those places. Action is only transformative when you know what you’re trying to create. In other words, it’s predicated on a well-defined strategy, not a series of projects. And because it’s based on a business strategy, it can (and should) touch any part of your business, from your marketing briefing process to your sales terms structure to your design talent.
Long term change, not just a kickstart
In Unilever’s case, the goal was straightforward: the holy grail of business, profitable growth. How many times have you had the conversation, is the priority growth or profit and the answer is “both”? At least the Unilever management team were explicit about it.
The one paragraph version of the story is that the business went through a (I’ll be honest) painful transformation whose biggest strategic move was to embed a matrix structure that delineated long term innovation and product development from what we would now call demand creation. It invested resources in topline drivers like R&D and innovation incubators, with the goal of finding the next big game changing products, not the next 10,000 little derivatives. And it freed up the funds to do so by looking for all the opportunities it could to create shared services for the tasks that were being duplicated and weren’t a source of competitive differentiation – a payroll is a payroll – and common suppliers for the commodity supplies – paperclips are paperclips, and you get a better deal if you buy them for all your UK businesses instead of one person at a time.
The point is not to tell you how to design and deliver a transformation. Unfortunately, although I know a number of big box consultancies with different philosophical opinions, there’s no magic one-size-fits-all formula. It really does depend on the business, the strategy it’s driving and the legacy it has at its base.
If there were a panacea and I knew that magic formula, I would be living on my own island with a helicopter pad and Alexander Skaarsgard as my butler.
But I can say that I’ve lived through transformation, and I’ve been its architect, and its implementer. So I know how it works. It was trying, it was sweeping, it went on for multiple years, it looked into every crevice. It was, at times, deeply unpopular. Especially when it came to a new world order where power was wrested from the places it had always been, and processed had to be redesigned to go with new decision rights. But it had to happen, it was non-negotiable. Had it not; I don’t know where that business would be today. If you’re wondering where Unilever is now, 16 years later, it has been through more than one iteration of a transformation since, but in July this year it officially became the biggest company on the UK stock exchange. A far cry from that shame-filled profit warning press release.
The bottom line
Transformation is easy to bandy around as a buzz word, but to be successful it takes real commitment. You have to start with a very clear north star: what exactly are you transforming to become? And if you’re doing it right, it will touch every part of the business you need to be firing on all cylinders to deliver the future you have envisioned; it’s not just a supply chain exercise.
The key is getting someone to help who’s done it before. But not someone who thinks they come with all the prepackaged answers; like I said, it’s different for every business. Find a partner who wants to work with you and do exactly that, partner, learn your business, learn the nuances and the special cases, and come up with something that’s right for what you need.
It’s hard work but do it right, with the right people at your side and it can be, well, transformational.
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