Insight

Making Successful Transformation

Transformations can generate 10 to 30 percent EBITDA gains—if you avoid the pitfalls

Scott Rankin

Scott Rankin

National Advisory Leader, Consumer & Retail, KPMG US

David Roszmann

David Roszmann

Principal, Corporate Strategy, KPMG US

+1 858-956-9160

Leaders in every industry know that a true organizational transformation is expensive, risky and time-consuming—and likely to fall short of aspirations. They also know that every company must eventually transform to keep growing revenues and profits in a changing environment. Indeed, the pressure to transform will continue to rise with M&A activity, the emergence of new technologies, competitors and business models, and rapid changes in customer needs and preferences. The COVID-19 pandemic and associated economic challenges are also forcing many organizations to transform immediately just to survive.

To gain insights into why transformations succeed or fail, KPMG conducted in-depth research into how more than 150 public companies performed after transformations, and we interviewed 250 senior leaders who have run transformation projects.

The research yielded fresh insights into common pitfalls and the foundations of success. We found strong evidence, for example, that the most successful transformations share four characteristics: they’re ambitious but based on a dispassionate view of what’s possible; they’re proactive—launched before the organization is in a crisis; they have broad support, including highly visible senior sponsorship; and they focus on both growth and profitability, unlike most episodic improvement programs.

Even many leaders of successful transformations reported that they underestimated the planning, resources, commitment—and courage—required for success. More than eight in ten of the executives who led unsuccessful transformations said their companies:

  • Did not provide the right incentives to change behaviors
  • Set unrealistic workload expectations
  • Created too many initiatives
  • Did not mount sufficient change management efforts
  • Did too little to encourage “new thinking.”

In our paper, we offer new insights based on recent data, including proven, practical steps that can help transformations succeed, including a framework for setting up an effective transformation program.