At some point every large organization comes face to face with the need for fundamental change. The decision to act may be prompted by a variety of circumstances: a sharp slide in profitability, enticing new prospects in distant markets, the gathering threat of fleet-footed competitors. Whatever the motive, leaders seldom meet greater demands on their skills than they do when they embark on a major change effort.
What distinguishes transformations from run-of-the-mill efforts? Whether applied to a business unit or to a whole organization, a true transformation is characterized by startlingly high ambitions, the integration of different types of change (organizational, operational, commercial), and a prolonged effort often lasting many months and, in some cases, even years.
Countless surveys, including our own, attest to the difficulty of achieving good results. Only 38 percent of the global executives responding to a 2006 McKinsey Quarterly online survey,1 for example, reported that the recent transformation they knew best had a “completely” or “mostly” successful impact on performance. Around a tenth acknowledged that a change effort they had been involved with was either “completely” or “mostly” unsuccessful.
We have studied what goes wrong in many attempted transformations and what distinguishes those that achieve...