Most organizations spend a significant amount of time thinking about how to transform their operations, processes, technology and structures. And for good reason. Today, incremental improvement is no longer enough: Transformation is necessary to remain competitive. The pace of change has quickened and organizations must continually transform themselves instead of taking it on only occasionally. At the same time, consumers have higher expectations and less patience; there is no room for error.
In operational transformation, organizations see the promise of generating new value, unlocking hidden opportunities for growth and cost savings, and delivering a more efficient product or service. Yet for how important operational transformation can be, many organizations struggle to do it effectively. In fact, a 2015 study found that only 26 percent of organizational transformations had been very or completely successful at both improving performance and equipping the organization to sustain improvements over time.1
Why? One of the big gaps is leadership. We find that, as much time as organizations spend thinking about transformation initiatives themselves, they often spend significantly less time thinking about the people who will drive these changes. They put the cart before the horse. Yet the person leading the change matters just as much or more than the many other aspects of the transformation that organizations plan extensively.
We looked into 50 consumer and industrial companies of $20 billion or more in revenue, with multiple manufacturing sites and a global presence. Each company had recently undertaken a significant manufacturing or other operational transformation, including supply chain synchronization, M&A restructuring and technology digitization (Exhibit 1).
The types of transformations we observed ran the gamut. Some organizations, such as Procter & Gamble, focused on integration initiatives or built centers of supply chain excellence founded on new digital initiatives. Other organizations focused on restructuring their operational setup, such as Kraft Heinz. And others introduced a data- driven, digital approach to organizing their manufacturing and supply chain processes, like GE with its Brilliant Manufacturing software.
We observed just as much variance in the intensity of transformation (Exhibit 2). Even here, we see the influence of the ever-accelerating pace of change. Noticeably, many transformation or excellence initiatives that once took five or six years to complete are now being implemented in a year or less. That means transformation leaders need to manage a significant amount of information, compressed timeframes and countless decisions that affect nearly all aspects of strategy and operations.
Background building blocks
From the 50 companies we studied, we found that leaders who have successfully driven operational transformations typically come from one of three backgrounds.
Even leaders with the right skills and background may not have what it takes to shepherd an organization through a given transformation. The likelihood of success depends not just on the tools at the leader’s disposal, but how he or she uses them—the intangible characteristics of personality and leadership style mixed with the unique challenges of the transformation at hand.
As organizational complexity and consumer demands increase, the paradigms upon which a leader used to draw to make sense of a situation and make decisions may no longer be valid. A traditional approach may lead straight to a crisis rather than improvement. Indeed, some traits that enable a leader to run smooth and efficient day-to-day operations are different from—and, at times, in sharp contrast to—those that predict their performance as a transformational leader. The complexities and transformation mandates facing C-suite roles require future leaders who break the traditional “either/or” tradeoffs many rely on to prescribe success profiles.
Russell Reynolds Associates and Hogan have partnered to analyze the psychometric data of millions of people, including more than 8,000 C-suite leaders, to develop a better way to predict executive success. We found a single dominant pattern: Executives who perform most consistently regardless of the challenges they face are not defined by skills in static competencies but rather those that span what initially seem like competing competencies (Exhibit 3).
The fast-paced and uncertain environment typical of transforming organizations only exacerbates the need for a leader who can adjust his or her capabilities to a specific context, both technical and cultural.
Core leadership skills are crucial for leadership success at any level. But when leaders reach the C-suite, they need advanced and sophisticated pairs of seemingly competing competencies to be successful. The most effective C-suite leaders with the greatest potential to lead transformational change can actively span across the following characteristics:
PRAGMATIC DISRUPTORS innovate and drive change, but they do so in collaboration with their teams. They recognize that bold visions will likely fizzle without the engagement of the broader organization, and they understand that the perfect is often the enemy of the good. These leaders are strategic and hands-on at the same time, with a solid understanding of the organization’s strengths and weaknesses, mastery over its operational issues and the ability to help define the strategy and take the lead in implementing it.
For example, a $4 billion transportation company, under the leadership of its global operations leader, adopted an enterprise-wide Lean approach that helped it reduce new product development times by 50% in just two years. Many of the company’s Lean initiatives that helped it achieve this impressive time savings were suggestions from employees at all levels of the company, showing the power of innovating in collaboration with the broader organization.
RELUCTANT RISK-TAKERS are willing to make big bets, but they do so cautiously and with a mature sense of the law of unintended consequences. They are uniquely able to resist trend chasing. They cut through the clutter of competing ideas and take risks where they matter.
One of the biggest temptations to “trend chase” may be around analytics and digitization. A transformational operations leader at a $16 billion global beverage company was able to see through the noise around these buzz-laden fields and unlock the true promise of advanced analytics, network modeling and digitization to increase packaging line speed by 50%.
VULNERABLE HEROES don’t hesitate to lead the charge, but they understand that they don’t have all the answers. They’re never paralyzed by indecision, but they’re rarely unilateral in action. They engage their teams and seek guidance, but act quickly and decisively in the face of challenging circumstances.
For example, the operations and supply chain leadership of a global food brand with more than $50 billion in revenue launched an organization-wide digital platform to crowdsource employee solutions to the company’s supply chain challenges. Through the program, the organization has gathered around 900 ideas, 15 of which are being implemented.
GALVANIZING CONNECTORS build tightknit teams while working to connect and engage their teams with a wider ecosystem of internal and external partners. They are highly inclusive but never insular. They build bonds within, and build bridges to, the team. Transformational leaders are influential and collaborative, forging connections between functions that may have never partnered before—internal stakeholders, external suppliers and more—motivating and moving teams to deliver and change.
The case of a $16 billion global consumer packaged goods company’s transformation shows the power of breaking down barriers. Under the leadership of supply chain and operational leaders, the company eliminated regional supply chain silos, reducing the number of plants by 35%, and moved to global procurement to increase leverage over suppliers. In the 10 years since starting this transformation, the company has saved more than $4 billion through its supply chain.
Running the numbers
While the demands on a transformational leader are certainly immense, many operations leaders are uniquely suited to meet them. In fact, many operations leaders already are more likely to have these traits versus the average executive. And that was even more true for a subset of transformational leaders that recently led innovative, often digital, projects at their companies—we’ll call them digital innovators.
A recent Russell Reynolds Associates survey of more than 1,000 executives across functions, levels and companies found that chief operations executives and digital innovators were more likely to have key transformational leadership traits as compared to other executives (Exhibit 4).
As the above chart shows, operations executives and digital innovators are more innovative and bold than other executives—both essential qualities to achieving operational transformation.
However, there are a few areas in which operational leaders have some catching up to do with digital innovators with a proven record of transformational success. For example, digital innovators are much more likely to think outside the box, use less traditional approaches and be able to cut through red tape. Developing these characteristics will help operational leaders have the best chance of leading a successful transformation.
DR. PASCAL BÉCOTTE leads the firm’s global Operations & Supply Chain Officers practice. He is also a key member of Russell Reynolds Associates’ Healthcare and Industrial sectors, where he advises global clients on their overall talent strategy, particularly with respect to leadership assessment and succession planning.
MARIEKE VAN DER DRIFT leads the knowledge activities and proprietary insights generation for the Operations and Supply Chain Officers practice globally across industries.