McKinsey experts estimate that 70% of Transformation Programs Fail - Make Your Program Succeed With Proven Strategies to Generate Momentum and Sustain Long Term Change. Transformation change programs often fail for avoidable reasons related to ownership, structure, or communication. With ever increasing complexity and competing priorities in the workplace, securing the attention and commitment of the workforce is becoming harder by the day. Why are the vital characteristics of successful change neglected? What can you do to secure commitment and gain traction in your change efforts? In this presentation, McKinsey experts investigate the primary reasons for program failure. We will also review case studies to highlight key strategies and technologies employed to overcome these pitfalls that resulted in an engaged and energized workforce. This discussion was sponsored by McKinsey Solutions. About AIPMM The AIPMM is the hub of all things product management. It is where product professionals go for answers. With members in over 65 countries, it is the worldwide certifying body of product team professionals. It is the world's largest professional organization of product managers, brand managers, product marketing managers and other product team professionals who are responsible for guiding their organizations, or clients, through a constantly changing business landscape. AIPMM's certification programs are internationally recognized because they allow product professionals to demonstrate their expertise and provide corporate members an assurance that their product management and marketing teams are operating at a high competency level. Contact Hector Del Castillo at http://linkd.in/hdelcastillo for information about certification courses near you. Visit http://www.aipmm.com. Upcoming Webinars: http://aipmm.com/aipmm_webinars/ Subscribe: http://www.aipmm.com/subscribe LinkedIn: http://www.linkedin.com/company/aipmm Membership: http://www.aipmm.com/join.php Certification: http://aipmm.com/html/certification Articles: http://www.aipmm.com/html/newsletter/article.ph

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Presenters:
Edward Kitching
McKinsey New York
Shaibal Roy
McKinsey London

6. 70% of transformation programs fail –
Make your program succeed with proven
strategies to generate momentum and sustain
long term change
Edward Kitching
McKinsey New York
Shaibal Roy
McKinsey London
September 26th 2013
CONFIDENTIAL AND PROPRIETARY
Any use of this material without specific permission of McKinsey & Company is strictly prohibited

7. Contents
1
Section 1 Understanding the challenge
▪ Understanding the challenge
▪ Framing the solution
▪ Practical steps to success
▪ Case Studies – tools in action

8. McKinsey has invested in years of learning to uncover the key
to successful transformation
2SOURCE: McKinsey
4
Leading academics reviewed, challenged
and augmented our findings
3
Years dedicated to developing and
refining our understanding of healthy
organizations
20
CEOs and chairpersons shared their
personal experience with change in face-
to-face interviews
Respondents from more than 400
organizations completed our
organizational health survey providing the
inputs for McKinsey’s Organizational
Health Index (OHI) database
311,000
CEOs and senior executives completed
surveys regarding their experience with
transformational change
6,800
900
Academic journal articles and books
reviewed
Three worldwide surveys with
senior executives who had experi-
enced a significant performance
transformation in the last five years:
2,314
senior executives
responded in
January 2010
2,994
senior executives
responded in
July 2008
1,536
senior executives
responded in
June 2006

9. Participant Poll #1: Questions about transformational change…
3SOURCE: McKinsey Quarterly Transformation Executive Survey, 2008; Next Generation PMO KIP Team
Percentage of companies
transforming their organizations75%
Rate of success in transformations
where clients do not have holistic
programs
10%

10. Common failure modes in large-scale improvement programs
4
Business
results
Time
People involved 10s 100s 1,000s
1-3 years
Failure to launch
▪ Stuck in diagnostics –
leaders unable to align on
what to do, where to start
▪ Managers not held account-
able for performance
▪ Employees resistant
Failure to sustain
▪ No change in day-to-day behaviors
▪ Change agents – not the line – leading
the change
▪ No capability upgrade at the site level
▪ Improvements not baked into budgets
Failure to scale
▪ Multiple bottom-up efforts with
competing methodologies and
no overarching blueprint
▪ Limited leadership capacity
▪ Waning focus from senior teamExamples of change
programs
 Organization
design changes
 Mergers
 New product
launch
 Lean
transformation
 New IT-system
roll-out
SOURCE: McKinsey Quarterly Transformation Executive Survey, 2008; Next Generation PMO KIP Team

11. Most change programs fail … and for predictable reasons
5
30 70
Employee resistance
to change
Management behavior
does not support change
Inadequate resources
or budget
Other obstacles
39
33
14
14
% of
efforts
failing to
achieve
target
impact
Change program failure rate Reasons for failure
SOURCE: McKinsey Quarterly Transformation Executive Survey, 2008; Next Generation PMO KIP Team

12. The four levers of the Influence Model need to be pulled simultaneously to
sustain a real shift in behavior
6SOURCE: McKinsey
I will change
the way I work
if…
Developing
talent and
skills
Aligned
systems and
structures
Role
modelling
Understanding
and conviction
…I have the
knowledge and the
skills to behave
differently…
…I see new
conduct in
leaders,
colleagues and
direct reports…
…I understand the
shift we’re trying to
make and it makes
sense to me
personally…
…The structure,
processes and
systems encourage
the change in
behavior expected of
me…

13. Contents
7
Section 2 Framing the solution
▪ Understanding the challenge
▪ Framing the solution
▪ Practical steps to success
▪ Case Studies – tools in action

14. The ways in which we manage change efforts can vary based on their
desired goals
8SOURCE: Next Generation PMO KIP team
Based on these goals, formal
systems and structures must
be able to:
1. Support overall program
structure and accountability
2. Provide transparency and
rigorous progress tracking to lock
in change
How much new capability is needed?
How much
change is
desired?
A lot
A little
A little A lot
Nerve center
Coordination
Change engine
Coordination
Change Management
Center of
excellence
Coordination
Capability building
Revolutionizer
Coordination
Change Management
Capability building

15. Golden Rule #1 Formal Systems and structures must support overall
program processes and accountability
9SOURCE: Next-generation PMO KIP team; McKinsey Quarterly transformational change survey, 2010
-7
-69
-68
-1 -46
-1
-26
-19
The transformation was organized into a clear
structure with readily understandable sections
%, N = 2,041
Not at
all true
Somewhat
true
Quite true
Entirely true
Degree of transformation success
Extremely successful Successful
Somewhat successful Not successful at all
2
2
6
10
23
46
60 13
Properly structured and well managed
work plans with clear roles and
responsibilities
Helping to develop a bold
and memorable aspiration
Aligning initiatives within the themes
and redefining/ eliminating those
which don’t align
Identifying complementarities
and dependencies between
initiatives
Articulating both performance
and health themes that are
consistent with the aspiration
x 6.1

16. #1 However, often organisations lack robust tools for program
management
10SOURCE: McKinsey
Transformations and improvement programs typically consist of a portfolio
of initiatives which in turn can consist of several detailed actions plans
etc
Initiative 4
Improvement
program
Initiative
2
Initiative
3
Program management tools should provide :
▪ Defining balanced portfolio of initiatives and
associated actions
▪ Tracking progress of initiatives and overall
program for all incl. top management reporting
▪ Monitoring achievement of impact targets
▪ Facilitating collaboration and communication
▪ Enabling responses and adjustments by
senior management
Managers of individual initiatives may also need
more detailed project management capabilities at
the action level:
▪ Resource management (FTEs)
▪ Tracking sub levels of activities
▪ Dependency and critical path management
Tools must provide integration or complementary
to other specialised tools to offer managers the
ability to combine program management and
Action 1
Action 2
Action 3…
Initiative
1

17. Golden Rule #2 Transparent information and stringent progress tracking
are major characteristics of successful transformations
11SOURCE: Next-generation PMO KIP team; McKinsey Quarterly transformational change survey, 2010
67 24 3
Very true 3 44 49 5
Entirely true 0 28 56 16
x 7.3
Not at all true 17 74
8
1
Somewhat true 6
Stringent progress tracking increases
likelihood of success by factor 7
Clear, unambiguous metrics and milestones were
in place to ensure that progress and impact were
rigorously tracked
Percent, N = 2,0441
1 Unweighted data
Note 1: Due to rounding, totals might not add exactly to 100%
Note 2: Data weighted by proportion of world GDP, following McKinsey Quarterly weighting standards
The right information was available at the right
time for managers to monitor the transforma-
tion’s progress and trouble-shoot where required
Percent, N = 2,0381
Availability of information increases
likelihood of success by factor 4
Extremely successful Somewhat successfulVery successful Not successful at all
x 4.6
Not at all true 19 66
12
3
Somewhat true 5 67 26 2
Very true 2 41 50 8
Entirely true 1 31 52 16

18. #2 Change management frameworks should support a process of
cascading progress reviews to enable continuous improvement
12SOURCE: McKinsey
A strong performance
management
framework can help …
Create a direct link
between the front line
and the CEO/top team
to ensure that everyone
is heading toward same
set of objectives
Quickly identify issues
to ensure program is
delivered at the right
pace
Maintain a ‘single
version of the truth’
Build appropriate skills
to ensure continued
success and ensure
step-change
improvement
Translation into corrective actions and
performance management measures
Program
sponsor
MonthlyWeekly
Frontline
managers
Staff
Bi-weekly
Senior
Management
Bottom - Up
Top - Down
Long term
perspective
 Track progress
and impact
 Guidance
 Identify
complementari
ties/dependen-
cies across
departments
Day-to-day
management
 Review
progress and
impact
 Identify issues
 Consolidate up
new initiatives
Medium term
coordination
 Track progress
and impact
 Support
 Identify issues
 Prioritize
initiatives
 Identify
complemen-
tarities or
dependencies
Update on progress
and escalation of
issues

19. Best in class program management tools can help successfully
plan, execute and sustain improvement programs
13SOURCE: Wave Team
Plan
Create a balanced
portfolio of initiatives
including
▪ Capture ideas for
improvement initiatives
and define them in a
centralized location
▪ Prioritize them, assign
single-point
ownership, define
associated actions,
and timing
▪ Evaluate and assign
potential impact to
initiatives
Execute
Track and maintain all
of these initiatives over
time including
▪ Visualize progress,
delays, and
accountability
▪ Reprioritize and
respond to changes
▪ Communicate clearly
about status and
adjustments needed
across the
organization
Sustain
Measure impact of
actions over time
including
▪ Show to what extent
financial and opera-
tional targets are being
met
▪ Understand what is
driving gaps (which
initiatives were not
completed and who is
responsible)

20. Contents
14
Section 3 Practical steps to success
▪ Understanding the challenge
▪ Framing the solution
▪ Practical steps to success
▪ Case Studies – tools in action

21. Setup & Launch User adoption
▪ Kick-off
Define use cases, gather requirements and
set parameters
▪ Configuration
Agile design and deployment of a relevant
and sustainable tool
▪ Expertise
– PMO
– Sector specific
– Technical
 Upload
Existing or new data, in a
consistent/appropriate way
 Launch
Phased spread through the program and
stakeholder groups
▪ Communication
Strategies to raise awareness, understanding
and acceptance
▪ Tailored in person training
– CST / Super User
– End user
– C-level
Repeated on a regular basis through the
adoption cycle
▪ Integration
Alignment with existing business process,
business rules, structures and systems
▪ Sponsorship
Building senor awareness, understanding
and buy-in
There is a two stage process to a successful deployment and adoption of
a technology platform to improve program management
15SOURCE: Wave Team

22. Successful adoption of your program tool – what is required when
applying the influence model
SOURCE: Wave Team
▪ Adequate, tailored and
appropriate training
▪ Repeated regularly as
required
▪ Reinforce and integrate
▪ Use carrot and stick
▪ Recognize and reward
▪ Part of current workload
▪ Senior leaders and PMO
should be regularly use
▪ Identify ‘influencers’
across the program
▪ Build a story
▪ Tailor the benefits across
the program
▪ Use stories to convince
16
I will change
the way I work
if…
Developing
talent and
skills
Aligned
systems and
structures
Role
modelling
Understanding
and conviction
…I have the
knowledge and the
skills to behave
differently…
…I see new
conduct in
leaders,
colleagues and
direct reports…
…I understand the
shift we’re trying to
make and it makes
sense to me
personally…
…The structure,
processes and
systems encourage
the change in
behavior expected of
me…

23. Following a successful launch, the challenge is to maintain the momentum
through the course of the program
SOURCE: Wave Team 17
 Push notifications
 Competitions
 Idea capture
 Excellent content
 The ‘new way’ of managing things

24. Contents
18
Section 4 Case studies
▪ Understanding the challenge
▪ Framing the solution
▪ Practical steps to success
▪ Case Studies – tools in action

25. UK Healthcare provider improvement
19
▪ A large UK healthcare provider launched a multi-year cost improvement and
operational effectiveness program across all units within the organisation
▪ Because of the highly decentralized structure, communication flow between
units and central PMO was poor and data currency almost impossible to
achieve
▪ Platform was the key communication channel for 40+ users within the
organisation, enabling tight monitoring of 450 initiatives and 900 sub-tasks,
and aggregation of budget information from numerous units
“This tool gives us the
single version of the truth
needed to interpret the
numbers”
“Tool made it easy to track
progress without a monster
xls file that would have
taken days and days to
keep updated”
Program tool to track multi-year healthcare transformation
SOURCE: Wave team
450
INITIATIVES
900
SUB-TASKS
43
USERS

26. ▪ McKinsey assisted with the Repositioning of an Australian
Platform transformation process
▪ Covering all Australian mines and central business units
▪ CI team and site team came up with initiatives to realize AUD
>300 million in cost reductions over the next year
Situation and study context
▪ Detailed initiatives, action plans and financial targets tracking
▪ One Source of Truth for all management to utilize (Mine GM and
employees to Charles) in cascaded performance conversations
▪ Follow up of the initiatives and action plans by the PMO
▪ Comparison between targets and achieved results
What the platform was used for
▪ 1100+ initiatives identified, for implementation, delivering the
Australian target of $273m cost reduction by 2014 run-rate
▪ Tool created great momentum throughout the organization and
real “transformation” aspiration
▪ Empowered the client team members to take over the PMO and
transformation process within just 5 months!
Results achieved and the role the platform played
Mining transformation in Australia
20SOURCE: Wave team
87
USERS
1192
INITIATIVES
894
MILESTONES

27. The quick and easy way to develop a community
21
Private Members Club:
Make it strictly private for a closed
community with no impression of
what is inside
Content free-for-all
Make it as easy as possible to
gather as much user generated
content as possible

28. The harder, more sustainable way to develop an online community
Dotted = open, single line = private, double line = secret
22
TOPIC A
SECRET CONTENT
PRIVATE
CONTENT
TOPIC B
TOPIC C
OPEN CONTENT
Open it up:
Invite an open community with
content previews, but enable
privacy and secrecy
Content containers:
Make it much easier to organise
and navigate content

29. 23
TOPIC A
SECRET CONTENT
PRIVATE
CONTENT
TOPIC B
TOPIC C
OPEN CONTENT
The harder, more sustainable way to develop an online community
Dotted = open, single line = private, double line = secret

30. In summary: There is a holistic desired endpoint
& key success factors to get there
24
Mindsets,
behaviors &
capabilities
Implementation
readiness
Infrastructure
“The way individuals and
organization think, feel, and act at
workplace to ceaselessly pursue
customer satisfaction”
Systematic management structure
and process to maintain and
mange operating system and
achieve continuous improvement”
Organize and use assets
in a way to minimize
waste and variance and
maximize flexibility on
value chain”

31. Q&A
Presenters:
Edward Kitching (edward_kitching@mckinsey.com)
McKinsey New York
Shaibal Roy (shaibal_roy@mckinsey.com)
McKinsey London
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Any use of this material without specific permission of McKinsey & Company is strictly prohibited

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