The New CEO’s Guide to Transformation

The New CEO’s Guide to Transformation

          
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The New CEO’s Guide to Transformation

Turning Ambition into Sustainable Results
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    Leadership transitions increasingly happen when companies are at an inflection point, and as a result, new CEOs frequently face immediate pressure to make changes. The challenges are significant. Companies are being buffeted by rapidly evolving technology and digitization, increasing globalization, blurred industry boundaries, and regulatory shifts, among other factors. As the traditional sources of competitive advantage disappear, top-performing companies are increasing their lead on poor and average performers. (See Exhibit 1.)

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    To keep up with industry leaders—or to remain a leader—it is more important than ever for companies to undergo transformations. (See Transformation: The Imperative to Change, BCG report, November 2014.) We define a transformation as a profound change in a company’s strategy, business model, organization, culture, people, or processes. A transformation is not an incremental change but a fundamental reboot that enables a business to achieve a sustainable, quantum improvement in performance, altering the trajectory of its future. Because of the comprehensive nature of transformations and the need for companies to implement them quickly, transformations are complex endeavors, and the majority either fail to fully capture the potential value or exceed the time allotted to embed new behaviors and processes. Yet by adopting a clear methodology, companies can flip the odds in their favor.

    Companies with stable management teams can also benefit from transformations, yet in our experience, a change in leadership offers a critical window of opportunity for implementation. Stakeholders expect changes to occur when a new CEO is hired. In fact, a principal risk for new CEOs is that they may resist taking action too quickly—or hesitate to make changes that go deep enough. The risk is especially high for insiders who are being promoted to the top spot or taking the reins alongside a strong chairperson. Yet through quick and decisive actions—even before taking the top job—new CEOs can seize the opportunity and put their company on the right trajectory for success.

    The message for incoming leaders is clear: You need to take action immediately. By laying the groundwork in advance, you can be prepared to lead from the front with a clear vision, solid objectives, and the tools and processes to succeed.

    The Boston Consulting Group has helped companies execute transformations that have led to significant financial impact. We have completed more than 500 transformations, generating a median annual impact of approximately $340 million through cost cuts, revenue increases, and the application of capital-efficiency levers; 150 transformations are currently under way. This body of work has helped us identify some clear principles and best practices that can help new CEOs—as well as board chairs and members of the C suite—successfully develop and implement a transformation effort.

    This report is a playbook for new CEOs. It lays out how and where to start and provides a transformation framework. The report then breaks the transformation process into four steps: the 100 days before officially starting, the first weeks on the job, the first 100 days, and the first 18 months. Because the framework applies to all transformations, while the four steps provide specific actions for new CEOs, there is some overlap. The report also includes case studies of successful transformations in various industries—retail, technology, and manufacturing, among others—to show what the process looks like in the real world.

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