Nimbleness, flexibility, and the ability to rapidly change direction to adapt to changing business realities are now survival traits for companies. While companies once had the luxury of taking several years to overhaul something like IT or HR, the new way of doing things involves transforming entire business models in the same amount of time (or less). KPMG recently released a report on the subject of Succeeding in Disruptive Times, which found, among other things, that a whopping 96 percent of companies are in some phase of the transformation process. And it's a trend that will only continue, says Steve Hasty, Partner and U.S. Innovation Leader, KPMG. Consulting sat down with Hasty to talk about the report and this trend line.
Consulting: According to the report, 96 percent of companies are in some phase of the transformation process, is that a trend you see on the rise?
Hasty: We've seen that for the last three years. This is the third year we've done this survey, this one is broader in scope in that it's global. That metric has been over 90 percent consistently for the last three years and we expect it will stay that way in the future. The reason is that transformation is becoming the new normal. The first time we did the study we were expecting companies would transform and go to a steady state for a period of time. We thought we'd see some ups and downs in that statistic, but I think what we're seeing is the world is so fluid today. Technology is changing so much, you have new types of customers, Millennials who do things differently, you have fluid economic and regulatory changes. The world is in a continual state of change, which means there is no steady state for a company. If a company thinks there is a steady state, they're not likely to sustain competitive advantage.
Consulting: What surprised you most about this year's report?
Hasty: About 40 percent of clients expect within three years that they will have a significantly transformed business. To me that was a really surprising statistic. I knew it would be a large number, but to think 40 percent of companies today say within three years their basic business model will be transformed is a pretty amazing statistic. If you think about five years ago a company might say they're going to improve their IT systems within three years or improve the way we manage the supply chain in the next three years, but to say the basic business model is going to be transformed is just amazing. We're kind of at a point where companies have to adapt to a continually changing environment, so agility has become a core attribute that winning companies are going to need to have—from the CEO on down there needs to be a culture of continual change and everyone within the organization needs to be prepared for that change.
Consulting: What are some of the most common transformations companies are undergoing?
Hasty: Every year we've done the study clients have been studied on operating effectiveness, still dealing with the after effects of the recession. Two years ago it was regulatory; clients were dealing with the impacts of Obamacare, Dodd-Frank and whatever regulatory requirement was facing them. This year loud and clear it was customers. It was clients saying we're dealing with an evolving customer set, we're dealing with customers who seem to want things differently than customers in the past. When you think about Millennials, they just do things differently. They research products and services differently, they buy it differently than other customers might, they want it delivered to them in a different way. The experience they have with some other product or service that's unrelated to your product or service, they look at that and say 'well if we can get this product or service this way, why can't I get your product or service this way?' There's a real uncertainty around what are next year's customers going to be wanting, how to adapt the organization to those preferences, and to adapt quicker than our competitors.
Consulting: What are some reasons transformation efforts succeed?
Hasty: It has to be led from the CEO's office. The type of transformation we're talking about cuts across an organization when you think about organization that affects business and operating models. The only executive that can really drive that is the CEO. If you have a transformation that's more narrow like a finance department a CFO can drive it, but when we're talking business and operating model the only one who can really drive that across and organization is a CEO—it has to come from the top in order to be successful. This culture of change also needs to be something that permeates up and down the organization. That really requires getting the organization accustomed to change and accepting of change.
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