“Stabilize Rationalize Optimize” . . . A Model for Tackling Business Transformation

Business Transformation comes in varying shapes and sizes.  A company facing a fight for its existence due to a lack of profitability or competitive pressures has a very different set of challenges than a company seeking to push its profit margins up from competitive to best-in-class.  Properly assessing your company’s position on the continuum of change – from Stabilize to Rationalize to Optimize – for each of the three critical organizational components – Talent, Tools and Techniques – is critical to developing a clear picture of how to respond and prioritize change management activities.

The Organizational Components

Organizations are made up of three key components:  Talent, Tools and Techniques.

Talent correlates to having the right people in the right positions.  It’s as much about the organizational structure as it is about individual skills and capabilities.  Together they must align with whatever the organization is seeking to accomplish at a given point in time.

Tools correlate to technologies.  Hardware, software, systems and other innovations incorporated into an organization’s anatomy to leverage automation.

Techniques correlate to the processes and methods that facilitate the leveraging of talent and tools.  It’s about the orchestrated interactions and handoffs that are necessary to accomplish the activities necessary for a company to function and meet its goals.

The Transformation Continuum

A company seeking to transform itself is responding to some form of commercial pressure, either on a reactive or proactive basis.  The intensity of that pressure aligns with the phase on the change continuum, and each has its own distinct profile.

The Stabilize phase correlates to a company in dire straits.  It aligns with the earliest stages of a turnaround, where the capsized boat has to be right-sided before any serious thought can be given to resetting direction.  Urgency and speed of decisions and actions take precedence.  The company is ineffective in achieving its goals and bleeding economically, and any remedial pressure has to be focused on the source and may result in changes that are stop-gaps and eventually discarded.

The Rationalize phase correlates to a company operating with moderate success. It may be achieving certain of its goals, but overall it is neither effective nor efficient on multiple levels.  There is likely a fair amount of lower-hanging fruit that can be targeted to improve the organization’s performance and the focus of this phase is to identify and harvest that fruit through structured improvement initiatives. The time horizon for change can be longer than the Stabilize phase, and the profile of the changes are designed to root deeper into the organization and be longer lasting.

The Optimize phase correlates to a well-performing company that is driving toward best-in-class.  “Leading-edge” is an apt descriptor for the transformation vision, often calibrated by competitive benchmarking and driven by an emphasis on innovation.  Improvement opportunities are at the margins and more difficult to identify, requiring higher doses of creativity.

If transformation were a horse race (and in many ways it is), the Stabilize phase is the act of nursing an injured horse back to health to get it back in the race.  Achieve success and the horse will break from the starting gate to find itself in the Rationalization phase, in the middle or back of the pack and fighting to move ahead to run with the leaders.  And finally it seeks to break away from the pack in the Optimization phase, ever widening the distance from the also-rans.

The SRO Grid

Overlaying each organizational component onto the Transformation continuum provides a richer understanding of which elements are most limiting organizational transformation.  More importantly, the three organizational components must move somewhat in tandem through the phases of transformation.   These components are like three legs of the same stool, all of which have to be raised together to raise its height.  Each component leverages the other two.

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For example, deploying a sophisticated system into an environment of obsolete processes or sub-par talent will limit the benefits realized from the system.  Or bringing top-tier talent into an organization of obsolete tools will limit the impact of these individuals and will likely result in turnover.

So in developing a business transformation strategy and execution path, one should first focus on raising the level of any lagging organizational component to better align it with the other two, followed by a balanced approach which drives each component loosely in tandem through each phase toward optimization.

A Multi-Layered SRO Grid

Viewed at a single companywide level, the approach is rather straightforward.  But peel back the layers of the organization – applying the SRO Grid to each layer – and the approach has a deeper significance.   What results do you get when you apply this approach to a business unit? Geography? Functional unit?  The more complex the organization, the greater the number of relevant slices to triage transformation potential.  Adding a standardized analytical framework to the assessments results in more objective comparisons across slices.  If you imagine this process applied across a complex organization with 10, 20 or 100 slices, what emerges is the foundation for a definitive business transformation strategy supported by a tightly framed rationale.