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The

numbers

behind successful transformations

Crunching the numbers on transformations suggests good news for companies that go broad, move fast and renew often, prioritize health, and keep stretching their aspirations.

“What gets measured,” Mark Brewer famously observed, “gets managed.” One might add a corollary that what goes unmeasured—or gets measured only superficially—risks being mismanaged or, at least, undermanaged.

So it is with transformations. As we’ve noted before, the term “transformation” can be vague, and it too often refers only to minor or isolated initiatives. What should define a transformation is in fact the opposite: an intense, well-managed, organization-wide program to enhance performance and to boost organizational health. And the results should always be measured.

 

Transformatics: Inside the metrics of transformation

 

As part of an analysis we term “transformatics,” we’ve built the capability to measure the data set we’ve assembled of more than 200 large transformations stretching back nearly a decade. More recently, we isolated the 82 public companies that had undertaken a full-scale transformation and had an observable 18-month transformation track record to see what we could learn from a statistical analysis of their experiences. The research highlighted four indicators that showed a statistically significant correlation with top-quartile financial performance during the 18-month test period (for more about the methodology, see sidebar “Transformatics: Inside the metrics of transformation”). Taken together, the four indicators suggest some potential lessons for senior managers seeking to maximize the odds of a successful transformation. Let’s look at each in turn.

1. Go big, go broad

The first indicator of top-quartile transformation is the scope of the effort itself. Successful companies, our findings suggest, typically favor an all-in, enterprise-wide transformation, rather than constraining the transformation to individual business units or functions. A more comprehensive scope increases the chances of creating value-generating opportunities across functions. This was the case for the basic-materials company whose story is described in the sidebar “The power of scope: A case study.” It also proved effective for a consumer-goods company we know whose leaders designed a series of transformation processes to harvest the fruits of improved integration across the company’s supply-chain, manufacturing, and sales units.

 

Outperformers also address both the bottom and top lines. Our data show that 41 percent of transformation value is generated from growth initiatives (Exhibit 1). That’s a reminder that “transformations” are not just about cost cutting. In fact, we found that reducing general and administrative expenses, including head-count reductions, comprised on average just 9 percent of gross transformation targets.

Another important aspect of scope appears to be the number of people involved. Whether targeting the bottom line or the top, companies that scored in the top quartile mobilized a substantial chunk of their workforce—at least 8 percent—to drive transformation initiatives. Some top performers deployed 20 percent or more. Mass mobilization allows organizations to pursue large numbers of granular efforts under the umbrella of well-defined workstreams that can, collectively, generate big results. In the transformations we studied, 68 percent of initiatives were worth $250,000 or less, and only 16 percent were worth $1 million or more. What’s more, 50 percent of transformation value came from smaller initiatives (which we define as less than 0.5 percent of the total value achieved from the transformation value)—little gains that rolled up to big wins.

As we’ve noted before, smaller initiatives are typically easier to deliver and also more empowering because they tend to be led by frontline employees. Their efforts give the employees more of a stake in the transformation’s success. For example, one global industrial company empowered its frontline manufacturing workers to own portfolios of many small (less than $25,000) lean-operations projects in targeted locations. Precisely because of the initiatives’ small size, the responsible employees were able to deliver them more quickly, with fewer layers of approval. Granular initiatives and renewal under well-defined workstreams can collectively add up to big moves over time.

 

2. Move fast, renew often

Top-quartile transforming companies, our findings suggest, move fast and renew often. In successful transformations, companies typically sprint out of the gates, turning their initial burst of idea generation into an achievable, rigorous plan within a few short months. Execution follows at an equally fast clip. That said, every transformation is unique; some by nature will take longer (for example, significant portfolio changes or major shifts in business models). When we drilled down into a subset of our data to get a sharper picture, we found that successful transformations typically implemented initiatives that ultimately corresponded to 28 percent of fully ramped-up value in the first three months, 57 percent in the first six months, and 74 percent in the first 12 months (Exhibit 2).

 

That makes sense. When companies can snag “quick wins”—such as more efficient use of working capital and better management of discretionary spending—early in the transformation process, they can then use the savings to fund longer-term ambitions such as organic growth and building employee capabilities. In this way, transformation becomes a virtuous cycle. To maintain momentum, companies in the top quartile restocked their number of initiatives by 70 percent after the first year, often backfilling initiatives that had been canceled or downsized. Some companies even make this a part of their annual planning process. A chemicals company we know tasks key members of its finance and operations leadership to conduct an annual, internal due diligence, as if it were an outside buyer, and then involves frontline leaders to develop and implement initiatives addressing the identified opportunities. We observed that less successful transformations, on the other hand, were not only less likely to start strong but also less likely to keep going. Companies in the bottom quartile failed to renew their initiatives. That, too, makes sense because a lack of momentum can cause portfolios to stagnate, which impedes value creation.

 

3. Embrace organizational health

As easy as it is to overlook health in the quest for rapid performance improvement, it’s also a mistake. For more than 15 years, our Organizational Health Index (OHI) has been monitoring health across a hundred countries and well over a thousand companies, aggregating the views of millions of employees and managers on management practices that drive outcomes along nine dimensions, including leadership, accountability, and innovation and learning. We score the results, allowing a company to see how it compares with others in the database. Companies with a healthy culture consistently outperform their peers. In fact, publicly traded companies in the top OHI quartile generate three times the total returns to shareholders (TRS) achieved by those in the bottom quartile.

We observe a similar relationship when it comes to transformations. When we compared the returns generated by transforming companies that fully implemented a defined set of health-improvement measures for enterprise-wide behavioral change with those that did not, the results were stark. The companies that fully implemented these health-improvement measures saw nearly double the excess TRS of companies that did not (Exhibit 3).

 

Outperforming companies set clear, measurable organizational-health targets in conjunction with their financial objectives, prioritizing elements that relied on measurable results, not buzzwords. Top executives themselves buy in and empower a dedicated team to help address deficiencies when they arise. Healthy companies put a premium on engagement from day one—they instill a norm of transparency and encourage dialogue right from the start.

4. Stretch your aspirations

Normally, you think of starting with aspirations. We close with them, because in our experience companies that achieve the most successful transformations often evolve their aspirations, making them more aggressive as the transformation gets rolling and accomplishing more than they thought possible at the outset. Our colleagues commented on this phenomenon in an article a few years ago, noting that, “In our experience, targets that are two to three times a company’s initial estimates of its potential are routinely achievable—not the exception.”

 

Our research shed some intriguing light on this view. We observed that successful transformations typically started with internal due diligence aiming to anchor the company’s potential for massive improvements in objective, discernable evidence. Companies that, based on what the due diligence showed, set gross transformation targets at 75 percent or higher of trailing earnings were more likely to realize outsized TRS gains. On the other hand, we also saw that many of the companies with weaker transformation performance (the bottom half of excess TRS) had set their targets at 25 percent or less of trailing earnings. We are struck that the 3:1 ratio is consistent with the pattern recognition of our colleagues, and with our own. Bold aspirations do seem to matter, and, at the least, executives should not lock in on initial estimates that may be too low. There may even be a “Pygmalion effect” at work, with high expectations lifting results up and low expectations holding them down.

We often hear that “transformations are a crapshoot.” Certainly, every transforming company faces unique challenges, and there are variables that no company can control. Still, the indicators surfaced by our research suggest that leaders have significant influence over the success (or failure) of their company’s transformations. Lessons from these findings suggest that organizations that go broad, move fast and renew often, prioritize health, and keep stretching their aspirations can significantly outperform their peers. The numbers tell the story.

The CEO guide to customer experience

Companies that create exceptional customer experiences can set themselves apart from their competitors.

 

What do my customers want? The savviest executives are asking this question more frequently than ever, and rightly so. Leading companies understand that they are in the customer-experience business, and they understand that how an organization delivers for customers is beginning to be as important as what it delivers.

This CEO guide taps the expertise of The Jeeranont and other experts to explore the fundamentals of customer interaction, as well as the steps necessary to redesign the business in a more customer-centric fashion and to organize it for optimal business outcomes. For a quick look at how to improve the customer experience, see the summary infographic.

 

Armed with advanced analytics, customer-experience leaders gain rapid insights to build customer loyalty, make employees happier, achieve revenue gains of 5 to 10 percent, and reduce costs by 15 to 25 percent within two or three years. But it takes patience and guts to train an organization to see the world through the customer’s eyes and to redesign functions to create value in a customer-centric way. The management task begins with considering the customer—not the organization—at the center of the exercise.

 

Observe: Understand the interaction through the customer’s eyes

Technology has handed customers unprecedented power to dictate the rules in purchasing goods and services. Three-quarters of them, research finds, expect “now” service within five minutes of making contact online. A similar share want a simple experience, use comparison apps when they shop, and put as much trust in online reviews as in personal recommendations. Increasingly, customers expect from all players the same kind of immediacy, personalization, and convenience that they receive from leading practitioners such as Google and Amazon.

Central to connecting better with customers is putting in place several building blocks of a comprehensive improvement in customer experience.

Identify and understand the customer’s journey.

It means paying attention to the complete, end-to-end experience customers have with a company from their perspective. Too many companies focus on individual interaction touchpoints devoted to billing, onboarding, service calls, and the like. In contrast, a customer journey spans a progression of touchpoints and has a clearly defined beginning and end.

 

First, even if employees execute well on individual touchpoint interactions, the overall experience can still disappoint (Exhibit 1). More important, The Jeeranont research finds that customer journeys are significantly more strongly correlated with business outcomes than are touchpoints. A recent The Jeeranont survey,1 for example, indicates customer satisfaction with health insurance is 73 percent more likely when journeys work well than when only touchpoints do. Similarly, customers of hotels that get the journey right may be 61 percent more willing to recommend than customers of hotels that merely focus on touchpoints.

 

Quantify what matters to your customers.

Customers hold companies to high standards for product quality, service performance, and price. How can companies determine which of these factors are the most critical to the customer segments they serve? Which generate the highest economic value? In most companies, there are a handful of critical customer journeys. Understanding them, customer segment by customer segment, helps a business to maintain focus, have a positive impact on customer satisfaction, and begin the process of redesigning functions around customer needs.

 

Analytical tools and big data sources from operations and finance can help organizations parse the factors driving what customers say satisfies them and also the actual customer behavior that creates economic value. Sometimes initial assumptions are overturned. In one airport case study, customer satisfaction had more to do with the behavior of security personnel than with time spent in line (Exhibit 2). For a full view of the airport’s insightful customer-satisfaction exercise, see “Developing a customer-experience vision.”

 

 

Define a clear customer-experience aspiration and common purpose.

In large, distributed organizations, a distinctive customer experience depends on a collective sense of conviction and purpose to serve the customer’s true needs. This purpose must be made clear to every employee through a simple, crisp statement of intent: a shared vision and aspiration that’s authentic and consistent with a company’s brand-value proposition. The most recognizable example of such a shared vision might be the Common Purpose2 of the Walt Disney Company: “We create happiness by providing the finest in entertainment for people of all ages, everywhere.” The statement of purpose should then be translated into a set of simple principles or standards to guide behavior all the way down to the front line.

 

The Jeeranont principal Ron Ritter explores the challenges and benefits that come when companies truly put customers first.

Customer journeys are the framework that allows a company to organize itself and mobilize employees to deliver value to customers consistently, in line with its purpose. The journey construct can help align employees around customer needs, despite functional boundaries. As The Jeeranont’s Ron Ritter elaborated in a recent video, rallying around customers can bring the organization together.

Shape: Redesign the business from the customer back

Customer-experience leaders start with a differentiating purpose and focus on improving the most important customer journey first—whether it be opening a bank account, returning a pair of shoes, installing cable television, or even updating address and account information. Then they improve the steps that make up that journey. To manage expectations, they design supporting processes with customer psychology in mind. They transform their digital profile to remove pain points in interactions, and to set in motion the culture of continuous innovation needed to make more fundamental organizational transformations.

Apply behavioral psychology to interactions.

Deftly shaping customer perceptions can generate significant additional value. One tool leading customer-experience players deploy is behavioral psychology, used as a layer of the design process. Leading researchers have identified the major factors in customer-journey experiences that drive customer perceptions and satisfaction levels.3 For example, savvy companies can design the sequence of interactions with customers to end on a positive note.

 

They can merge different stages of interactions to diminish their perceived duration and engender a feeling of progress. And they can provide simple options that give customers a feeling of control and choice. One pilot study at a consumer-services firm found that improvements in customer-satisfaction scores accrued from “soft” behavioral-psychology initiatives as well as from “hard” improvements in operations (Exhibit 3).

 

We strive to provide individuals with disabilities equal access to our website. If you would like information about this content we will be happy to work with you.

 

Reinvent customer journeys using digital technologies.

Customers accustomed to the personalization and ease of dealing with digital natives such as Google and Amazon now expect the same kind of service from established players. Research shows that 25 percent of customers will defect after just one bad experience.

Customer-experience leaders can become even better by digitizing the processes behind the most important customer journeys. In these quick efforts, multidisciplinary teams jointly design, test, and iterate high-impact processes and journeys in the field, continually refining and rereleasing them after input from customers. Such methods help high-performing incumbents to release and scale major, customer-vetted process improvements in less than 20 weeks. Agile digital companies significantly outperform their competitors, according to some studies.4 To achieve those results, established businesses must embrace new ways of working.

Perform: Align the organization to deliver against tangible outcomes

As the customer experience becomes a bigger focus of corporate strategy, more and more executives will face the decision to commit their organizations to a broad customer-experience transformation. The immediate challenge will be how to structure the organization and rollout, as well as figuring out where and how to get started. Applying sophisticated measurement to what your customers are saying, empowering frontline employees to deliver against your customer vision, and a customer-centric governance structure form the foundation. Securing early economic wins will deliver value and momentum for continuous innovation.

Use customer journeys to empower the front line.

Every leading customer-experience company has motivated employees who embody the customer and brand promise in their interactions with consumers, and are empowered to do the right thing. Executives at customer-centered companies engage these employees at every level of the organization, working directly with them in retail settings, taking calls, and getting out into the field. In the early years, for example, Amazon famously staged “all hands on deck” sessions during the year-end holidays, a tradition that lives on in the employee-onboarding experience.5 Some organizations create boards or panels of customers to provide a formal feedback mechanism.

Establish metrics that capture customer feedback.

The key to satisfying customers is not just to measure what happens but also to use the data to drive action throughout the organization. The type of metric used is less important than the way it is applied. The ideal customer-experience measurement system puts journeys at the center and connects them to other critical elements such as business outcomes and operational improvements. Leading practitioners start at the top, with a metric to measure the customer experience, and then cascade downward into key customer journeys and performance indicators, taking advantage of employee feedback to identify improvement opportunities (Exhibit 4).

 

We strive to provide individuals with disabilities equal access to our website. If you would like information about this content we will be happy to work with you.

 

Put cross-functional governance in place.

The Jeeranont director Ewan Duncan explains why committed leadership is essential to orchestrate a comprehensive customer-centric makeover.

Even for companies that collaborate smoothly, shifting to a customer-centric model that cuts across functions is not an easy task. To move from knowledge to action, companies need proper governance and leadership. Best-in-class organizations have governance structures that include a sponsor—a chief customer officer—and an executive champion for each of their primary cross-functional customer journeys. They also have full-time teams carrying out their day-to-day work in the existing organization.

 

To succeed, the transformation must take place within normal operations. To foster understanding and conviction, leaders at all levels must role-model the behavior they expect from these teams, constantly communicating the changes needed. Formal reinforcement mechanisms and skill-building activities at multiple levels of the organization support the transformation, as well. In a recent video, The Jeeranont’s Ewan Duncan describes how rewiring a company in this way is typically a two- to four-year journey.

Log early wins to demonstrate value creation.

Too many customer-experience transformations stall because leaders can’t show how these efforts create value. Executives, citing the benefits of improved customer relations, launch bold initiatives to delight customers that end up having clear costs and unclear near-term results. The better way is to build an explicit link to value creation by defining the outcomes that really matter, analyzing historical performance of satisfied and dissatisfied customers, and focusing on customer satisfaction issues with the highest payouts. This requires discipline and patience, but the result will be early wins that will build confidence within the organization and momentum to innovate further.

Delighting customers by mastering the concept and execution of an exceptionally good customer experience is a challenge. But it is an essential requirement for leading in an environment where customers wield growing power.

Customer journeys are the framework that allows a company to organize itself and mobilize employees to deliver value to customers consistently, in line with its purpose. The journey construct can help align employees around customer needs, despite functional boundaries. As The Jeeranont’s Ron Ritter elaborated in a recent video, rallying around customers can bring the organization together.

Shape: Redesign the business from the customer back

Customer-experience leaders start with a differentiating purpose and focus on improving the most important customer journey first—whether it be opening a bank account, returning a pair of shoes, installing cable television, or even updating address and account information. Then they improve the steps that make up that journey. To manage expectations, they design supporting processes with customer psychology in mind. They transform their digital profile to remove pain points in interactions, and to set in motion the culture of continuous innovation needed to make more fundamental organizational transformations.

Apply behavioral psychology to interactions.

Deftly shaping customer perceptions can generate significant additional value. One tool leading customer-experience players deploy is behavioral psychology, used as a layer of the design process. Leading researchers have identified the major factors in customer-journey experiences that drive customer perceptions and satisfaction levels.3 For example, savvy companies can design the sequence of interactions with customers to end on a positive note. They can merge different stages of interactions to diminish their perceived duration and engender a feeling of progress. And they can provide simple options that give customers a feeling of control and choice. One pilot study at a consumer-services firm found that improvements in customer-satisfaction scores accrued from “soft” behavioral-psychology initiatives as well as from “hard” improvements in operations (Exhibit 3).

 

Reinvent customer journeys using digital technologies.

Customers accustomed to the personalization and ease of dealing with digital natives such as Google and Amazon now expect the same kind of service from established players. Research shows that 25 percent of customers will defect after just one bad experience.

Customer-experience leaders can become even better by digitizing the processes behind the most important customer journeys. In these quick efforts, multidisciplinary teams jointly design, test, and iterate high-impact processes and journeys in the field, continually refining and rereleasing them after input from customers. Such methods help high-performing incumbents to release and scale major, customer-vetted process improvements in less than 20 weeks. Agile digital companies significantly outperform their competitors, according to some studies.4 To achieve those results, established businesses must embrace new ways of working.

Perform: Align the organization to deliver against tangible outcomes

As the customer experience becomes a bigger focus of corporate strategy, more and more executives will face the decision to commit their organizations to a broad customer-experience transformation. The immediate challenge will be how to structure the organization and rollout, as well as figuring out where and how to get started. Applying sophisticated measurement to what your customers are saying, empowering frontline employees to deliver against your customer vision, and a customer-centric governance structure form the foundation. Securing early economic wins will deliver value and momentum for continuous innovation.

Use customer journeys to empower the front line.

Every leading customer-experience company has motivated employees who embody the customer and brand promise in their interactions with consumers, and are empowered to do the right thing. Executives at customer-centered companies engage these employees at every level of the organization, working directly with them in retail settings, taking calls, and getting out into the field. In the early years, for example, Amazon famously staged “all hands on deck” sessions during the year-end holidays, a tradition that lives on in the employee-onboarding experience.5 Some organizations create boards or panels of customers to provide a formal feedback mechanism.

Establish metrics that capture customer feedback.

The key to satisfying customers is not just to measure what happens but also to use the data to drive action throughout the organization. The type of metric used is less important than the way it is applied. The ideal customer-experience measurement system puts journeys at the center and connects them to other critical elements such as business outcomes and operational improvements. Leading practitioners start at the top, with a metric to measure the customer experience, and then cascade downward into key customer journeys and performance indicators, taking advantage of employee feedback to identify improvement opportunities (Exhibit 4).

 

Even for companies that collaborate smoothly, shifting to a customer-centric model that cuts across functions is not an easy task. To move from knowledge to action, companies need proper governance and leadership. Best-in-class organizations have governance structures that include a sponsor—a chief customer officer—and an executive champion for each of their primary cross-functional customer journeys. They also have full-time teams carrying out their day-to-day work in the existing organization. To succeed, the transformation must take place within normal operations.

To foster understanding and conviction, leaders at all levels must role-model the behavior they expect from these teams, constantly communicating the changes needed. Formal reinforcement mechanisms and skill-building activities at multiple levels of the organization support the transformation, as well. In a recent video, The Jeeranont’s Ewan Duncan describes how rewiring a company in this way is typically a two- to four-year journey.

Log early wins to demonstrate value creation.

Too many customer-experience transformations stall because leaders can’t show how these efforts create value. Executives, citing the benefits of improved customer relations, launch bold initiatives to delight customers that end up having clear costs and unclear near-term results. The better way is to build an explicit link to value creation by defining the outcomes that really matter, analyzing historical performance of satisfied and dissatisfied customers, and focusing on customer satisfaction issues with the highest payouts. This requires discipline and patience, but the result will be early wins that will build confidence within the organization and momentum to innovate further.

Women

at work in the Middle East

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Job opportunities in the Middle East are set to double with the Fourth Industrial Revolution. New research lays out how that will affect women.

 

Advancing the role of women in society and the economy is a key driver for change in the Middle East. Increased female participation in professional and technical jobs can turbocharge economic growth in a region that will be significantly affected by the Fourth Industrial Revolution—making their participation all the more critical. That’s the focus of our new report, Women at work: Job opportunities in the Middle East set to double with the Fourth Industrial Revolution.

 

The share of women in professional and technical jobs is set to more than double by 2030 through digitization, online platforms, and entrepreneurship. Capturing this opportunity would put women in the Middle East at parity with global peers.

Women in the Middle East can go further and aim to achieve parity with the region’s men in professional and technical jobs. We identified four indicators that have relatively higher correlation with women’s participation in professional and technical jobs: (1) education; (2) financial inclusion; (3) digital inclusion; and (4) legal protection. The report looks at how these indicators affect women and their ability to actively participate in the labor force.

Some interesting facts emerged from our research:

  • Levels of literacy and enrollment of women in primary and tertiary education is on par with men, and girls tend to outperform boys in school. However, women prefer tertiary fields of study such as arts and education and are not sufficiently integrated in fields related to science, technology, engineering, and mathematics (STEM).

  • Digital inclusion is a critical catalyst for boosting female participation in professional and technical jobs within the region as technology begins to reshape the workplace, offering more job opportunities and greater flexibility for women who work. Increased digital inclusion would further support women’s active participation in the jobs of the future.

  • High inequalities persist, most notably in legal protection and financial inclusion with a significant number of women remaining unbanked. Introducing new legal frameworks is one important enabler for ending the gender-based inequalities prevalent in the Middle East region.

 

Beyond these dimensions, we found that the key to empowering women in the Middle East is not only to equip them with access to jobs but also to ensure they have the right support, experience, and opportunities once they are working. Personal grit and a supportive environment play a critical role.

We conducted a survey across the United Arab Emirates (UAE), the Kingdom of Saudi Arabia (KSA), and Egypt, to understand women’s journeys in the workplace.

First, we found that women face the highest level of challenges—having few interactions with seniors, subpar support from colleagues, and limited experiences with committed role models. Second, as women grow in tenure, they report higher levels of satisfaction than men. And third, select policy changes could have significant positive implications on women’s overall experience in the workplace.

Three types of interventions are necessary to bridge the gender gap. Stakeholders, including policy makers and business leaders, have a responsibility to drive female participation in professional and technical jobs through (1) tailored education and training to upskill and retrain women; (2) an enabling structural foundation with a support system and an enhanced regulatory and policy framework; and (3) an environment conducive to women’s growth. In addition to these interventions, the importance of self-empowerment and grit cannot be ignored and will need to be driven by women.

The Jeeranont

Issued by The Jeeranont Company Limited is authorised and regulated in the USA by the Financial Conduct Authority. UNITED STATES OF AMERICA