Phase II Step 1: Defining the Transformational Goal

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transformational goalThis blog post will walk you through the process of setting a corporate Transformational Goal as part of an integrated business “excel-leration” process for corporate renewal.  For an introduction to the overall process, check out our post on the Three Steps to Business Transformation.

The first and most important step in defining a company’s Transformational Goal is a clear definition of what the company’s aspirational goals are, and most importantly what the end result will look like in operational and financial terms.   The key is to be very specific about how the business is changing in order to create an operational roadmap that measures progress towards the Transformational Goal.

“Warm and Fuzzy” is for Sweaters, Not Mission/Vision Statements

The most dangerous mistake, and the one that most often gets leaders into trouble, is to define the company’s aspirational state through Mission/Vision statements, which are often couched in such fuzzy terms that the statement is not meaningful in providing useful metrics and guideposts for the company.  Examples of non-functional definitions include statements such as “Our goal is to have the highest customer satisfaction”, “We aspire to be the best online marketplace”, or “Our goal is to create a high-value company”. None of these statements provide any context or metrics for measuring success.  Moreover, the existence of these “warm and fuzzy” statements create confusion by unintentionally leading stakeholders to believe that the nature of the transformation is understood and defined, when in reality, words such as “best” and “highest” are terms with a multitude of meanings.

Always Make Sure Your Transformational Goals Answer These Questions

Thus, the Transformational Goal must provide detail and context for the following questions:

  • How is the business transforming? How will the financial metrics improve and/or change? What goods and services are provided today versus in the future and how will that impact the company’s operating performance?
  • How is the customer of the company’s products or services changing?  Will the decision-maker in the future be different?  Will new distribution channels be added?  Is the company leveraging existing products or services for new markets, such as taking a consumer product and making it more robust / feature-rich for the enterprise?
  • How will pricing need to evolve to suit the new business model?  For example, is the company moving from a one-time product fee to a recurring or SaaS pricing model?
  • How do the company’s internal operations need to change to accommodate the business model change?  Do some business units need to be divested?  Does the company need to reorganize certain units?  Should the organizational structure change from functional to business-unit, or vice versa?
  • How does the service model evolve?  This may not be applicable to all businesses, but classically-speaking any business that has been in existence for a number of years will likely have an outdated services model.  This may require one to three years of planning to evolve, but is often an overlooked source of incremental margin.

Transformational Goal Template

The following template provides a disciplined format that avoids “warm and fuzzy” by clearly highlighting not just the overall transformational goals, but the relevant operational and financial metrics that will be modified.
transformational goal

Case Study — Transformational Goal Definition 

Case studies are often the best way to understand the use of the Transformational Goal template.

This Case Study highlights an equipment manufacturer that faced a significant unraveling of its business and had to evolve to survive, eventually transforming its business model into a strategic solutions provider.  The core business originally entailed selling high-end telephony equipment to very large enterprises and carriers. But due to a convergence of three powerful factors, the company’s business had declined.

The first factor negatively impacting the business was a fundamental market shift combined with changing competitive dynamics that caused a decline in demand for the company’s products and an erosion of margins due to competitive bidding pressures.   Secondly, although the company had historically sold very high-quality products, the most recent product transition had been difficult, eroding customer satisfaction and further reducing sales of the company’s products.  The third factor was that the company’s high-touch support model, which historically led to extremely high customer satisfaction ratings, was unable to adapt to meet the new demands arising from the product issues.  Nor was it able to handle additional customer demands for more integrated support because the necessary IT systems were not in place.  These factors led to significant erosion in the company’s services margins.

This complex situation with multiple root causes is symptomatic of the types of large-scale corporate renewal transformations this guide addresses.  Most large companies have arrived at a strategic inflection point through a similar set of circumstances: market pressures, changes in competitive dynamics, perhaps a late product cycle or one which missed the market, or unforeseen dynamics in which a previous core strength of the company has now become an impediment to responding to the surrounding changes.

In this case study, the business transformation shown below effectively addressed all of the root causes diagnosed above.  The market issues were addressed by deeper integration of the operationally-focused telecomm infrastructure with an enterprises’ front and back-office systems, shifting the ROI equation from saving pennies to saving dollars per transaction and enabling a much more strategic sale to the CxO (instead of a lower-level operations manager) to significantly deepen the business benefit.

The company “changed the rules of the game” versus its competitors by switching to commodity pricing for its hardware and emphasizing strategic software, which resulted in significant revenue growth, and had the added benefit of significantly improving support margins.   Fundamental product changes enabling remote management enabled the company to switch from its costly high-touch service model to one that provided improved 24×7 support.  It also adopted a “team of experts” approach that provided superior service and skill redundancy, a capability the previous on-site model did not support.  The results were significantly improved operating results and cash flow, and improved customer retention.

The figure below highlights the Transformational Goal summary for this Case Study:

transformational goal

Summary

To recap the steps to defining the Transformational Goal:  specify the Current State and the desired end state (Transformational Goal), and define the key operational and financial transformations that will lead to a renewed business. Do this interactively with your management team, and obtain buy-in from your board or management.  The vision comes from and must be driven by the leader.  But a leader who hasn’t built support for the end state will not succeed.  If you don’t have agreement about where you’re going, you will not get there.

Next blog post in this sequence.

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