I was recently invited by Accenture Strategy, along with other thought leaders such as Bruce Weinstein and Andrew Winston, to discuss its research on trust and competitive agility. In a study of 7000 companies the firm found it found trust among a diverse ecosystem of stakeholders is increasingly becoming a competitive advantage.
One of the most interesting aspects of the discussion was how crucial trust is for driving transformation and change. We tend to think of trust as static, but Accenture's research, as well as that of the participants, made it clear that trust is especially important when you need to drive an organization to do something different.
All too often, transformation is seen as a simple matter of strategy and tactics, but nothing could be further from the truth. Nobody can drive really change alone, you need buy-in from a variety of stakeholders, such as customers, employees, suppliers, analysts and investors to make it work. So before you set out to transform your organization, you first need to build trust.
Purpose, Values and Constraints
Every change effort starts out with a grievance. Sales are down, customers are unhappy, regulation restricts a once profitable activity or something else. That's what drives the need to change, but it does little to provide a will to change. In researching my book Cascades, I found that every successful change effort starts by transforming an initial grievance into an affirmative "vision of tomorrow." To drive a true transformation, people need to believe in it.
For example, when Paul O'Neill took over as CEO at Alcoa in 1987, the company was in dire straits. So analysts were more than surprised when he declared that his first priority at the company would be safety. It was an odd vision for a struggling company, but O'Neill understood that improving safety would also improve operational excellence. The company hit record profits a year later.
Or consider Lou Gerstner's tenure at IBM. When he arrived, the once high-flying firm was near bankruptcy and many thought it should be broken up. Yet Gerstner saw that by shifting its focus from its own "stack of proprietary products" to its customers' "stack of business processes," the company could have a bright future. The result was one of the greatest turnarounds in history.
Notice how each of these visions also included important constraints. When safety is the first priority, managers can't cut corners. When customers' "stack of business processes" is the company's focus, salespeople can't wring every last dollar out of each deal. Yet those constraints are crucial in building credibility with key stakeholders, such as unions and customers.
Small Groups, Loosely Connected
Anybody who has ever been married or had kids knows how hard it can be to convince even one person about a significant decision. So it is somewhat puzzling that business leaders so often think they can convince thousands through mass communication campaigns. The truth is that change happens when people convince each other.
That's why every change efforts depends on small groups, loosely connected, but united by a shared purpose. Small groups engender trust, loose connections provide reach and a shared purpose gives a change effort a raison d'être. You need all three to successfully drive a transformation.
Consider the case of Wyeth Pharmaceuticals, which in 2007 saw sales for one of its top drugs fall by 70% due to the launch of a generic version. In order to compete more effectively, the company's leadership embarked on an ambitious effort to instill lean manufacturing practices across 25 sites employing 17,000 people.
Yet rather than try to transform the whole company all at once, it chose one keystone change, involving factory changeovers, at one facility. It had limited impact, but with the success of that one initiative at one facility, it then moved on to others, implementing the transformation in phases, speeding up as the process gained momentum.
The result was a 25% reduction in costs, an improvement in quality and a more motivated workforce. It's tough to imagine how that could have been achieved if the management had simply decided to cut salaries instead.
Training to Empower Transformation
When Barry Libenson first arrived at Experian as Global CIO in 2015, he spent the first few months talking to customers and everywhere he went they were asking for the same thing: access to real-time data. That was much easier said than done, because it meant that he would have to shift from a traditional data infrastructure to the cloud, which would entail far more than just implementing new technologies.
"The organizational changes were pretty enormous," Libenson told me. "For example, agile development requires far more collaboration than traditional waterfall development, so we need to physically reconfigure how people were organized. We also needed different skill sets in different places so that required more changes and so on."
To spur these changes, the company identified high potential employees that it thought could help drive change. It also brought in outside partners to train them in agile development, so that they could train and coach others. Those employees then became centers of excellence and helped drive change even further throughout the organization.
"Building trust was crucial to making it all work," Vijay Mehta, Chief Innovation Officer at the credit bureau stressed to me. "When you are trying to build an innovative, fail-fast culture, people need to trust that they won't be penalized for being ambitious and failing. So that had to come from the top and be constantly pushed all the way down to make it all work."
Transformation Is Always A Journey, Never A Destination
All too often, we see change through the lens of a specific objective. Paul O'Neill needed to return his company to operational excellence. Wyeth needed to cut costs to compete with generics. To provide its customers with the access to real-time data, Experian needed to shift its decades-old infrastructure to the cloud.
Yet change is never as easy as it first would seem, because the status quo has inertia on its side, which can be a powerful force in any enterprise. In fact, research by McKinsey has found that only 26% of transformational efforts succeed. The reason is that change is often narrowly construed as a series of procedures, a cost cutting target or a technology implementation project.
Yet Alcoa, Wyeth and Experian succeeded where most fail because they saw driving change as more than just a series of objectives, but as a shift in values, skills and capabilities. That's why they started not with a detailed plan, but with building trust, because leaders can't implement change, they can only inspire and empower it.
The truth is that transformation is always a journey, never a destination. O'Neil's focus on safety unlocked a passion for operational excellence. Gerstner's focus on IBM's customers led it to a highly profitable service business based on deep partnerships. Wyeth's lean manufacturing program empowered its employees to create value for the company and its customers. Experian's shift to the cloud was just a prelude to an ambitious foray into artificial intelligence.
None of this would be possible without trust, because trust is open ended. It is, in its essence, a social contract that demands that employees, customers and other stakeholders are not treated as merely means to an end, but ends in themselves.
(Disclosure: In the past, Experian has paid for me to appear at its annual conference and travel to speak to its executives)