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4/3/2021 5 Critical Success Factors for an Effective Business Transformation | by Mark Bridges | Mar, 2021 | Medium
https://mark-bridges.medium.com/5-critical-success-factors-for-an-effective-business-transformation-371c0d9c935a 1/7
Mark Bridges
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5 Critical Success Factors for an Effective
Business Transformation
Mark Bridges 4 days ago · 5 min read
Business Transformations have become a necessity in the fast-changing technological
and competitive business environment. Transformation is characterized by significant
and risk-laden Restructuring of a company, with the objective of accomplishing
Operational Excellence and changing its future course.
Business Transformation is a priority for many top executives but it is usually a reaction
to challenging circumstances rather than being a preemptive measure.
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4/3/2021 5 Critical Success Factors for an Effective Business Transformation | by Mark Bridges | Mar, 2021 | Medium
https://mark-bridges.medium.com/5-critical-success-factors-for-an-effective-business-transformation-371c0d9c935a 2/7
Business Transformation is prompted by a combination of 2 situations:
Need to address inherent problems causing organizational drag — these problems
may be internal and/or external.
Aspiration by the top management and other senior stakeholders to seize the
occasion of addressing these problems, in ways that deeply alter the Business Model
of the organization including Value Creation.
Business Transformation entails not just making incremental changes but fundamentally
changing all or some of the following:
Organizational Structure
Core Product or Service Portfolio
Systems
Processes
People — the way employees work
Technology
Undertaking such arduous effort requires approaching the task in a structured way.
Research shows that quite a few of such undertakings are based on anecdotal beliefs
instead of being based on empirical data.
Countering this trend, the Boston Consulting Group conducted an empirical study of
financial and non-financial data-set comprising 300 U.S. public companies. The data
spanned a period of 12 years from 2004 to 2016. Selection was based on the following
criteria:
Companies that had a $10 billion or more market capitalization between 2004 and
2016.
Of these, companies with an annualized deterioration in Total Share-holder Return
(TSR) of 10% or more relative to their industry average (2 years running or more)
were identified.

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4/3/2021 5 Critical Success Factors for an Effective Business Transformation | by Mark Bridges | Mar, 2021 | Medium
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Based on extensive analysis — that included use of methodologies like trained
proprietary algorithms, prediction models, and Multivariate Regression Analysis — a
pattern pertaining to Business Transformation emerged. The pattern depicted the
following themes:
1. Frequency of Failure
2. Impact of Digital Disruption
3. Impact of Downturn
4. Competitive Volatility
The study also suggested the following 5 evidence-based Critical Success Factors (CSFs)
for achieving Transformation Success.
1. Cost Management (drives short-term success)
2. Revenue Growth (drives long-term success)
3. Long-term Strategy and R&D Investment
4. New, External Leadership
5. Holistic Transformation Programs

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4/3/2021 5 Critical Success Factors for an Effective Business Transformation | by Mark Bridges | Mar, 2021 | Medium
https://mark-bridges.medium.com/5-critical-success-factors-for-an-effective-business-transformation-371c0d9c935a 4/7
Let us examine in a bit more detail some of the CSFs.
Cost Management
In order to launch the Transformation effort on the correct footing, Cost Management is
key, in the short term especially. Predictably, empirical analysis suggests that the leading
driver for organizations recovering from severe TSR deterioration is a determined Cost-
cutting effort during the 1st year of Turnaround. By year 3, Cost Reduction is
accountable for the major share of TSR growth as companies divert their portfolios and
make available funding for growth investments.
Revenue Growth
Merely short-term operational improvements do not augur well for a sustainable
Transformation. There has to be a long-term Growth Strategy put in place. For this to
happen, leaders have to challenge the foundations of the company’s Business Model.
Research divulges that Revenue Growth progressively becomes the driver for TSR
recovery after year 1 in all the successful Transformation efforts. Revenue Growth
overshadows, by far, all the initial drivers for TSR recovery by year 5 of all successful
Turnaround efforts.
Long-term Strategy and R&D Investment
Turbulent competitive environments, particularly, require long-term Strategic Planning
and investment in Research and Development for fruitful Business Transformations.
Empirical research and analysis demonstrates:
A 4.8% difference between Transforming companies showing above-average long-
term strategic direction compared to companies with a below-average orientation.
More pronounced findings in transforming companies operating in turbulent
competitive environments — long-term orientation linked with a TSR increase of

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4/3/2021 5 Critical Success Factors for an Effective Business Transformation | by Mark Bridges | Mar, 2021 | Medium
https://mark-bridges.medium.com/5-critical-success-factors-for-an-effective-business-transformation-371c0d9c935a 5/7
7%.
Companies with above-average R&D investments had upwards of 5.1% TSR impact
in contrast to those with below-average spending.
These CSFs strengthen the odds of success in Business Transformation individually.
When used together, most of them produce an impact that is larger than the totality of
their individual parts.
Interested in learning more about the 5 Critical Success Factors for Successful Business
Transformation? You can download an editable PowerPoint on 5 Critical Success Factors
for Successful Business Transformation here on the Flevy documents marketplace.
Want to Achieve Excellence in Business Transformation?
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Transformation. Our frameworks are based on the thought leadership of leading
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“If you don’t transform your company, you’re stuck.” — Ursula Burns, Chairperson and
CEO of VEON; former Chairperson and CEO of Xerox
Business Transformation is the process of fundamentally changing the systems,
processes, people, and technology across an entire organization, business unit, or
corporate function with the intention of achieving significant improvements in Revenue
Growth, Cost Reduction, and/or Customer Satisfaction.
Transformation is pervasive across industries, particularly during times of disruption, as
we are witnessing now as a result of COVID-19. However, despite how common these
large scale efforts are, research shows that about 75% of these initiatives fail.
Leverage our frameworks to increase your chances of a successful Transformation by
following best practices and avoiding failure-causing “Transformation Traps.”
Learn about our Business Transformation Best Practice Frameworks here.
Do You Find Value in This Framework?

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4/3/2021 5 Critical Success Factors for an Effective Business Transformation | by Mark Bridges | Mar, 2021 | Medium
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Business Transformation Total Shareholder Return Value Creation Strategic Planning
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7.
4/3/2021 5 Critical Success Factors for an Effective Business Transformation | by Mark Bridges | Mar, 2021 | Medium
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