Theory of Transformation

In the past 25 years, there has been 200% turnover in the Fortune 500.  Clearly, large enterprises find it very difficult to fundamentally change or transform themselves as technologies, markets, and economies change.  Our studies of this phenomenon led to the following “theory” of transformation that was published in Systems Engineering in 2005, and subsequently in Enterprise Transformation (Wiley, 2006).

“Enterprise transformation is driven by experienced and/or anticipated value deficiencies that result in significantly redesigned and/or new work processes as determined by management’s decision making abilities, limitations, and inclinations, all in the context of the social networks of management in particular, and the enterprise in general.”

The central elements of the theory are underlined.  Value deficiencies, either experienced or anticipate, drive fundamental change.  There has to be a reason – perhaps a burning platform – for change to be entertained.  Value is delivered via work processes.  To change the nature of the value is provided or the way it is provided, one has to reconsider the work done and how it is done.

Value deficiencies and work processes are the technical aspects of the problem of change.  Management decision making and social networks constitute the behavioral and social elements of fundamental change.  I have been in many situations where the technical side of the problem was quite clear, but management was not inclined to make the decisions necessary to proceed.  I have also experienced many situations where the social network rejected the need for change, effectively providing the function of an organizational immune system.

Successful enterprise transformation requires leadership that assures all four elements of the theory are addressed, with appropriately balance across the technical, behavioral, and social dimensions of the problem.  That’s how one stays in the Fortune 500 when your value proposition is challenged.  If this does not work for you, then I suggest you heed Ogden Nash’s advice, “When called by a panther, don’t anther.”

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