Photo: iStock
Photo: iStock

Firms are struggling to keep pace with change: KPMG

Companies across the world are having a hard time coping with shifting customer behaviours, disruptive technologies, regulatory policies and globalization

Organizations across the globe and in India are attuned to the rising need for business transformation in order to keep pace with shifting customer behaviours, disruptive technologies, regulatory policies and globalization.

Yet, senior executives across the globe do not consider their organizations capable of responding effectively and driving these transformational changes, reports a KPMG survey on global transformation titled Succeeding in Disruptive Times.

The research is based on survey responses and interviews with more than 1,600 senior executives across industries in 16 countries. The results of the study in India suggest that paucity of change management acumen (16% executives) and lower importance attributed to the need for evolution in operating models (16% executives) are the two biggest barriers for business and operating model transformation.

The global data shows that 96% of organizations are in some phase of transformation, and nearly half have completed at least one transformation initiative in the past 24 months. However, the study also reveals widespread doubts among many senior executives that their intensive efforts will bear the necessary results and ultimate value.

Global study findings show that less than half of executives (47%) believe they can extract and maintain the planned value from a future transformation initiative.

In addition, only half of executives (51%) believe they can create short-term transformation wins.

The India data, conversely, presents a distinct scenario, which suggests that 59% of the executives characterized the realized value from past business transformation projects to be equivalent to the anticipated value.

“Success of transformation depends on how quickly organizations adapt to the dynamic market where products and services are becoming obsolete at a rapid pace, customers have instant access to high-quality information and switch loyalties at the blink of an eye when they find an innovative alternative," says Romal Shetty, chief operating officer (advisory) at KPMG in India. “The ability to adopt and innovate needs to be embedded at the heart of your culture driven by ‘business values first’ approach. Unfortunately, very few executives are capable of implementing new business models."

So, what causes transformations to fail?

Failure to understand the complexity of the operating model: The most commonly identified barrier to success (37% of executives) is underestimating the significance of operating model changes necessary to affect transformation across the firm.

Inability to innovate: Nearly a third (31%) of executives say their organizations are incapable of implementing formal innovation processes, management and budgets. Missing the cultural connection: 28% of executives say their existing organizational culture is a barrier to execution.

Failure to take a ‘business value first’ approach to technology: 30% of executives say their organizations’ legacy technology/systems are a barrier to success.

Inability to execute: Only 17% of executives say their organizations are highly capable of executing on an implementation plan to build and operationalize a new target operating model.

Customer insights, innovation at the heart and ability to thrive on change are keys to business transformation success, according to KPMG’s global research.

The study revealed that organizations identify changing customer demographics, behaviours and expectations as the most influential source of insights and trends for their business transformation strategy.

This cognizance has defined the approach that 40% of Indian organizations take while establishing their transformation initiative through an “outside-in" perspective to understand signals of change in the marketplace—in context—and develop unique insights and hypotheses on our customers’ behaviours and expectations. To be able to meet customer value propositions profitably, it is imperative to strategically segment the customers.

This organizational intelligence must be rooted in a strong data and analytics capability, founded on four anchors of trust: quality, accuracy, integrity and accepted use.

The analysis in the report highlights that successful companies will proactively disrupt themselves before a competitor or regulatory change forces disruption upon them, so they can remain competitive and continue to satisfy current and future customer needs.

Innovation has to become a core capability and a top organizational priority.

The critical challenges faced by Indian companies in strengthening their ability to thrive on change are maintaining senior leadership commitment to the transformation and creating short-term transformation wins.

The research surveyed 102 Indian firms. Approximately 10% were from the banking sector followed by media & entertainment (9%) and technology & IT services (8%). It was found that firms having maximum probability of disruption in business model in the next five years belong to life sciences sector, followed by automotive and banking.