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Opportunities for Action in Consumer Markets Transformation: How Consumer Companies Can Load the Dice in Their Favor
Opportunities for Action in Consumer Markets
Transformation: How ConsumerCompanies Can Load the Dice in Their Favor
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Transformation: How ConsumerCompanies Can Load the Dice in Their Favor
Whether for strategic, financial, or technological rea-sons, consumer companies are increasingly findingthat they must completely transform critical elementsof their businesses. As a result, the ability to managesuch efforts quickly, effectively, and confidently hasbecome an important source of competitive advan-tage and shareholder value. The problem, however, is that transformation, by its very nature, severelystretches organizations—often pushing skills,resources, and comfort levels to their limits.
Compounding the challenge is the fact that there isno commonly accepted way to know at the outset if atransformation program and its components are setup for success, failure, or mediocrity. Indeed, differ-ent managers and employees are bound to view thesame program differently, focusing on differentstrengths or weaknesses on the basis of widely vary-ing past experiences. At the same time, dozens ofchange management books and experts have founddifferent actions to be the absolute key to success.
The varying perspectives on change are not neces-sarily incorrect; to the contrary, many have much tooffer. But given the uncertainties and resource con-straints present within companies, the big issue is amatter of focus. Which conditions actually governthe change process? Which factors matter most?How do these conditions and factors vary amongdifferent initiatives?
Based on The Boston Consulting Group’s experienceand research, including studies of more than 200
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transformation efforts undertaken around the worldand in a broad range of industries, we have found thata few common elements determine the outcome ofalmost all change projects. Success or failure ultimate-ly comes down to a combination of the following:
• The duration of each project or the time betweenmajor review milestones
• The performance integrity of the project teams
• The organizational commitment to change, specifi-cally that of senior managers and local-area staff
• The additional organizational effort required forimplementation above and beyond usual workrequirements
Of course, these four elements are not surprising inand of themselves. What is significant, however, is thatwhen taken together—and considered properly—theyoffer a litmus test to assess the probability of successfor a given project or set of projects. What’s more,they help shine a spotlight on some very specificactions that can improve the probability of successbefore implementation even begins. With these ele-ments, business managers embarking on majorchange programs can, in effect, load the dice, stack-ing the odds in favor of successful implementation.
DICE: The Four Key Elements of Change
The four elements we identified, which we refer toas DICE1, together constitute a simple continuum—
1. DICE is a registered trademark of The Boston Consulting Group, Inc.
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from projects that are set up to succeed to those thatare set up to fail. Projects at either end of the spec-trum are easy to identify. Short projects—each led bya cohesive, highly skilled, and motivated team; cham-pioned by senior management; and implemented inan area that is receptive to the change and is re-quired to invest little additional effort—are clearlyset up to succeed. Conversely, a major transforma-tion consisting of multiple lengthy projects—with ill-defined milestones; led by poorly skilled, unmotivat-ed teams; and implemented in areas that are resis-tant to change and are required to perform signifi-cant additional work during implementation—willalmost certainly fail.
In reality, however, many change efforts occupy themiddle ground, where the likelihood of success orfailure is much more difficult to assess—certainly inthe early stages of the effort. Consider, for example,the following scenario: If a project is short and has agreat team in place but senior management commit-ment is unclear and implementation requires a gooddeal of additional effort from reluctant staff, what isthe likelihood of success?
We have found that the answer lies in a thorough con-sideration of each of the four elements. For instance,in regard to duration, the key is not necessarily howlong or short a project is but how well learning mile-stones are structured. Do these milestones occur reg-ularly? Do they enable a meaningful review of tangi-ble progress? Similarly, when it comes to establishingproject teams, it is essential that they not only possesssufficient technical skills and capable team leadersbut also show strong commitment and cohesiveness.Do the teams exhibit a sense of purpose? Are theobjectives clear to all members? (For more detail onpoints of consideration for each of the elements, seeExhibit 1.)
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In fully evaluating the four elements, it is especiallyhelpful to use a standard scoring mechanism—inessence, an objective framework for making what areinevitably subjective assessments. The worth of provid-ing an objective framework for subjective judgments iswell known. What’s more, a common scoring mecha-nism broadly applied forces a systematic view—inother words, it ensures that projects will be evaluatedin a consistent manner across the entire organizationrather than handled differently depending on thestandpoint of specific individuals or departments.
Finally, using a scoring system makes it possible to com-bine the ratings of the four key elements mathematical-ly, thereby establishing a unified project assessment. Bycomparing project scores with a sufficiently large set ofpast experiences, simple statistical analysis can be reli-ably and quickly used to predict the likely outcome forany project. For instance, BCG developed a formula
The time (DURATION) until the project or the next learning milestone is completed• A learning milestone is a predetermined stage in implementation when project strengths, weaknesses, and progress against key indicators are formally assessed
The performance INTEGRITY of the project team, including• Capable and respected leadership• Clear objectives• Appropriate resources and organizational skills
The COMMITMENT to the change, including• The attitudes of the local area undergoing the change• The visible commitment of senior management
The additional amount of local EFFORT required during implementation
• The ongoing effort required to maintain existing operations, while simultaneously implementing change, is a critical and often over- looked consideration
D
I
C
E
SOURCE: BCG analysis.
Exhibit 1. The Four Elements of DICE
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that generates an overall DICE score ranging from 7 to28. When we calibrated the results of our database ofchange projects, representing more than 20 millionperson-hours of companies’ experiences, the analysisgenerated a clear and compelling distribution of out-comes. Indeed, the analysis allows us to assess objective-ly whether any given project falls into one of threebroad categories: win, meaning the project is statistical-ly likely to succeed; worry, meaning the project’s out-come is unpredictable; or woe, meaning the projectseems preordained for mediocrity or outright failure.2
(See Exhibit 2.)
To be sure, in calculating DICE scores, not everyoneevaluating the same project is likely to produce identi-
2. The DICE formula and supporting database are BCG intellectualproperty, with a U.S. patent pending. For more information aboutthe DICE methodology, please contact the authors.
Highlysuccessful
Actual outcome 1 2 5 3 7 1 4 7
1 1
1 12 4
1
Mediocre
Highlyunsuccessful
WIN6
9
1 5 6 3 1 1
1 1
15 9 2 9
1 1 2
4 1 9
1
WORRY
1 8 5 1 1
1 1
3 1 6 2 2 2 1
1 2 2 2 1 2
1 1 15 5 6 1 13 4 1
1 1 1 1
1 1 1 1 2 5 1 3 1 2 1
DICE score7 8 9 10 11 12 13 14 15 16 17 18 19 2021 22 23 24 25 26 2728
WOE
SOURCE: Analysis of DICE database.NOTE: Superscribed numbers represent the number of projects withthat particular DICE score and actual outcome.
Exhibit 2. DICE Scores Range from Win to Woe
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cal assessments. But far from diluting the value of theexercise, these differences in scoring are an impor-tant aspect of using DICE. Whether a project has avalue of, say, 18 or 20 on our scale is not the primaryissue. What is important is the ongoing dialogue thatresults from such different assessments, provoking theparticipants and engaging them in debate regardingsuch questions as, Why do we see the project in thesedifferent ways, and what can we agree to do to ensurethat it will succeed?
Using DICE to Win
Discussions among senior managers and projectteams based on the elements of DICE—and whatthe assessments say about the likelihood of a proj-ect’s success—are extremely powerful. Issues thatmay not have been apparent until well into the pro-gram are immediately brought to the surface andaddressed. Collectively, various project-level discus-sions about the common framework will inform anoverall program-level judgment on how implemen-tation is proceeding and what actions, interven-tions, and tradeoffs are required to maximize thelikelihood of success.
Consider the example of a large retail bank, whichundertook a total restructuring of its back-office oper-ations. At the project’s outset, the bank’s managersagreed on the rationale for the change and the specif-ic objectives. At the same time, however, each had adifferent view of whether they were likely to achievethe objectives, which would require major changes inprocesses, behavior, and organizational structures. Infact, several managers had real doubts about whetherthe effort would succeed. Yet the concerns eitherweren’t consistent or weren’t made explicit. Bringing
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everyone together long enough to air their opinionsand then sort out their differences, prior to com-mencing broad implementation, proved to be nearlyimpossible.
A decision to analyze the project using DICE and thejudgments of key stakeholders and senior managerscondensed a debate that would have required at leasttwo full days (and therefore probably would neverhave happened) into a highly productive two-hourmeeting. The focus on the four key elements gener-ated a clear picture of the project’s fundamentalstrengths and weaknesses. For instance, the restruc-turing would take more than eight months to imple-ment. Also, although the project team’s performanceintegrity was “good” and senior management showedreasonable commitment to the effort, the back-officework force was very resistant to change. Further-more, managers and back-office employees agreedthat the people involved would need to muster anadditional 10 to 20 percent of effort, on top of cur-rent commitments, throughout the course of imple-mentation. On our scale, the project scored a 21—well into the woe zone.
The good news was that the assessment and scoringexercise led the managers to a clear view of whatsteps they could take to increase the odds of suc-cess—before they started the project rather thanweeks or months into implementation. For instance,the bank decided to split the project timeline intotwo parts. Doing so allowed meaningful reviewpoints to occur more frequently and up-front learn-ing to be maximized prior to taking on the mostcomplex aspects of the transformation. In addition,to improve commitment, the bank decided to devotemore time than initially planned to explaining tostaff and unions why the changes were necessary. It
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also took a closer look at the people who would beinvolved, reconfiguring some of the project teams—and particularly the leadership. Finally, senior man-agers made a more concerted effort to show theirown commitment to the effort. Taken together, thebank’s overall set of planned actions moved the proj-ect’s rating on our scale to an 11—shifting it to wellwithin the win zone.
The bank’s change project proved to be a major suc-cess. Looking back, many of those involved noted thatthe success was the result of “getting to the heart ofthe matter.” The bank’s managers and employeeswere able to focus on the basic facts concerning theirsituation; and by doing so, they avoided the disagree-ments and wheel spinning that plague so many otherefforts. As a result, they were able to act quickly anddecisively, despite the inevitable uncertainty, resourceconstraints, and unexpected twists and turns thatcome into play every time organizations attempt tosignificantly change the way things are done.
The Versatility of DICE
As noted, using the DICE framework to score andmeasure projects allows management to rank andcompare the initiatives across the company. But evenwithout explicit scoring, management can still createa common language, force the right discussions, anddesign change efforts for success simply by introduc-ing the DICE framework and focusing on its four keyvariables. This is especially true for large-scale trans-formations that cut across business units, functions,and geographies. In such change efforts, it is criticalto find the right balance between centralized over-sight (to ensure that everyone in the organizationtakes the effort seriously, understands the goals, and
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remains committed) and the autonomy needed bythe various initiatives. After all, teams must have theflexibility and motivation to produce customized solu-tions for their markets, functions, and competitiveenvironments. The right balance is very difficult toachieve without an explicit consideration of the DICEvariables and how they should be cascaded through-out the organization.
Take the case of a leading global beverage player,which needed to raise the level of play in all of itsoperating units. Growth in the industry had slowed,and management realized that future value creationwould have to come from increased efficiency inoperations and greater focus on the most promisingbrands and markets. The company also sought im-proved innovation across all of the key consumer andcustomer-facing processes, such as consumer demanddevelopment and customer fulfillment.
The CEO’s goals were ambitious and required mobi-lizing significant resources across the company in ashort period. Management faced enormous chal-lenges in structuring the overall effort and, at thesame time, spawning individual projects that focusedon the right issues and were designed to succeed.Without the company explicitly thinking through theDICE variables, a change effort of this magnitudewould have been doomed from the start.
Management knew that this was a multiyear effort.Yet, without tight schedules and oversight of individ-ual projects, there was a risk that the timeframe coulddrift indefinitely and the quality of the results couldbe compromised. To mitigate these risks, senior man-agement decided to review each project regularly andat multiple levels in the organization. A common proj-ect methodology with explicit milestones was intro-
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duced throughout the company. Managers at thesenior level reviewed each effort monthly until itgained momentum and they felt confident that it was on track. After that, reviews occurred when major milestones established in the project meth-odology had been met. Even in the latter stages of the effort, however, no more than two months wereallowed to elapse between reviews. The time betweenreviews at the working team level was even shorter.The project team leaders reviewed progress on a bi-weekly basis. That level of intensity was maintainedthroughout the transformation.
Team leaders and members were selected for theircapabilities and specific areas of expertise. Some ofthe best people were asked to commit full time to theeffort in order to ensure that there was no questionabout the integrity of the teams. The human re-sources department took an active role in recruitingthe teams, thereby creating a virtuous cycle in whichthe best people began to seek involvement in the vari-ous initiatives. A value system was introduced thatrewarded fact-based and practical diagnostics and rec-ommendations—but also encouraged innovativethinking. During the course of the transformation,several team leaders and members were promoted tosenior line- and functional-leadership positions on thebasis of their performance. That sent a strong mes-sage throughout the organization. A new culture be-gan to take shape as team members became advocatesand change agents in key positions in the business.
The effort was highly successful and resulted in hun-dreds of millions of dollars of value creation for thecompany. Stagnant brands revived and began to grow,new markets (such as China) were set up for success,sales and promotion activities were aligned with grow-ing channels, and old, untenable joint-venture struc-
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tures were undone. Nevertheless, there were manymoments during the change process when the inertiain the organization threatened to derail the efforts.But senior management’s unwavering commitment tothe change—and its belief in focusing on the vari-ables that separate successful from unsuccessful trans-formations—was a major factor in moving the busi-ness to a higher level of operating performance.Analytics and insights were clearly invaluable in iden-tifying the right areas to focus on, but they wouldhave been woefully inadequate had it not been forthe DICE that were loaded in favor of the company’sefforts to change.
Taking Luck Out of the Equation
Many commentaries (and assumptions) about organi-zational change treat it as a linear progression—a pre-determined series of tasks and events that can becompleted and ticked off. In this approach, elementsof the change process are dealt with as though theywere the components of a large machine in need ofservice. In reality, however, the ways in which organi-zations behave and respond to change are muchmore analogous to what happens in living systems:progress is nonlinear, dynamic, and subject to multi-ple feedback loops. That being the case, the discus-sion should not be about precise cause and effect butrather about feedback, interdependence, selectionmechanisms, probability, and behavior.
Of course, the reason that organizations and the waythey evolve resemble living systems is that they aredependent on people. Across companies and indus-tries, people tend to behave in certain similar ways,respond in similar ways, and ultimately share similaraspirations.
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Unfortunately, despite their many commonalities,people acting within organizations often lack a com-mon, pragmatic language for understanding and ana-lyzing joint projects. Instead, prejudices, different per-spectives, and a reluctance or inability to speak upcan block effective discussion, decision making, andexecution. The result, in our experience with thechange process, is that people and organizations alikeare too often influenced by chance. Some get badlyburned when change fails—not because of their lackof competence but because of the structuring of theparticular project. Others may succeed—owing, inpeople’s minds, to great skill—but in reality becauseluck happened to smile on the project.
An approach based on DICE is not a silver bullet. Itaugments rather than replaces other frameworks andtools that may already be applied in understandingand mastering large-scale organizational change. Italso does not make it any easier to resolve vital pro-gram-management issues—such as setting the projectvision and targets, structuring and developing projectteams, delivering quick wins, and engaging majorstakeholders. Such matters all require considerableexperience and skill.
We have found, however, that an approach that lever-ages the elements of DICE, and the candid dialogue ithelps create, does ensure that an organization’s ef-forts are focused on the most critical factors of suc-cess. And in doing so, the approach allows organiza-tions—in planning as well as in deed—to reduce theinfluence of luck on successful change management.Because, in the end, if an organization has the rightteams involved and influential leaders clearly backingthem, if employees are not overwhelmed with toomuch work, if objectives are clear, and if transforma-tion is moving at the right pace and meeting explicitmilestones, then the chances of success are much
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improved. Remember that business competition is nodifferent than any other type of competition: skill andstrategy are essential; but to really improve your oddsof winning, it helps to load the dice.
Wahid HamidAlan Jackson
Perry KeenanHarold L. Sirkin
Wahid Hamid is a vice president and director in the NewYork office of The Boston Consulting Group. Alan Jackson is a senior vice president and director in the firm’s Sydneyoffice. Perry Keenan is a vice president and director inBCG’s Auckland office and the firm’s global topic leader for rigorous program management and implementation.Harold L. Sirkin is a senior vice president and director in BCG’s Chicago office and head of the firm’s globalOperations practice.
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© The Boston Consulting Group, Inc. 2004. All rights reserved.
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