Page 36 - Council Journal Autumn 2019

FEATURE Preemptive Transformation
Preemptive Transformation-Fix
It Before It Breaks
In organisational transformations, there are many reasons to believe that time is an essential factor. Entities that change early may get a first-mover advantage, acting ahead of their competitors and potential disruptors. Besides, organisations are complex systems, which often decline much faster than they grow. Considering that transformations take time, moving preemptively may be the best way to prevent diffculties and any possible collapse.
Nevertheless, leaders may be reluctant to change their organisations when they are in a comfortable, seemingly
studied relative financial performance to identify preemption, rather than making qualitative timing judgments. If a public service organisation embarks on a transformation when it is performing well, the transformation can be described as preemptive. On the other hand, a transformation is categorized as reactive if it is launched while the firm is underperforming or judged by the public or political establishment to be under pressure or scrutiny.
Furthermore, the preemption premium is continuous: the higher the relative performance of a public sector body when it initiates change, the higher its long-term relative performance. In other words, the earlier a transformation is initiated, the better. (See Exhibit 2.)
unthreatened, position. Understandably feel little urgency to change when current performance indicators are still healthy. Transformations are costly, monopolise management and stakeholder attention, and may create distraction or instability, leading many to follow the old adage of, “If it ain’t broke, don’t fix it.”
Analysis from BCG Henderson Institute shows that in the three years following the start of a transformation, preemptive transformers have an output that is 3 percentage points higher than that of reactive transformers. Outperformance following a preemptive transformation is true not only in aggregate but across most industries, except financial services. (See Exhibit 1.)
In spite of this pattern, preemptive transformations are less common: in a given year, only 15% of outperforming companies embark on transformation, while 20% of underperforming and 25% of severely underperforming companies do.
So, should public service leaders engage in transformation preemptively or wait for a degradation of performance to trigger change? To answer this, it’s best to leverage an evidence-based approach to transformation, which shows that preemptive change does indeed generate significantly higher long- term value than reactive change, and it does so faster and more reliably.
As Giuseppe Tomasi di Lampedusa famously wrote in The Leopard, “If we want things to stay as they are, things will have to change.” Research suggests that in order to maintain outperformance, organisations should pursue preemptive transformation rather than relying on performance momentum to sustain itself.
There are exceptions. When Jack Ma founded online marketplace giant Alibaba, in 1999, internet penetration in China was less than 1%. Growth in that area was expected, but no one could predict its precise course. So, early on, Alibaba took an experimental approach, in which leaders constantly reevaluated their vision and, when necessary, restructured the company accordingly.
If we want things to stay as they are, things will have to change.”
The Value of Preemptive Transformation
Because each organisation’s circumstances are unique, experts
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