There are several reasons why transformations raise the bar for CEOs—especially those new to the executive position.
As the digital transformation is underway, the new wave of CEOs must be prepared to face all-new challenges, especially if it’s their first time on the job.
In the tradition of “if the company ain’t broke, fix it preemptively anyway”, BCG studied the necessary mandates a CEO needs to transform any company—including its strategy, business model, organization, operations, and culture.
These are some:
- CEOs must continually balance short- and long-term objectives. An incoming CEO faces immediate pressure to deliver top-quartile performance in the company’s core business, in many cases, through short-term improvements. At the same time, the new CEO must reinvent the business model, enhance product and service offerings, and invest in other long-term initiatives. The best CEOs can do both.
- CEOs must quickly reset investor expectations. Within six months of taking over, new CEOs need to evaluate which parts of the business are still viable, identify the most urgently required improvements, and determine where the company’s future growth lies. They must not only develop a strong plan—including potentially painful measures to restructure, sell, or close legacy businesses—but must also communicate this plan to their investors.
- CEOs must develop a clear purpose for the change effort. At any given time, in this era of always-on transformation, companies have multiple initiatives underway, which can be exhausting for people in the organization as they cope with constant change. CEOs need to reenergize people with an explicit purpose—the “why” around which management and the rest of the organization can rally.
- CEOs must adopt agile and digital methods to drive change.To get breakthrough results fast, while inspiring and engaging employees, leaders should adopt agile approaches—for example, mapping customer pain points, establishing cross-functional teams, and establishing new ways of working, such as two-week “sprints,” obstacle boards, and minimum viable products. At the same time, they must leverage digital technologies to improve the customer experience and simplify workflows.
- CEOs must assemble diverse leadership teams. Assembling the right senior executive team, a critical component of transformation success, is a challenge for some CEOs. The ideal team includes people from inside and outside the organization who understand the current core business, as well as the actions needed in order to respond to—or lead—disruptive change. It is important to strike the right balance between external hires (who can bring fresh ideas and new capabilities, particularly digital) and internal talent (who know the business and organization).
- CEOs need to apply directive and inclusive leadership.Leaders cannot simply set the broad vision for a transformation and then delegate its execution. Instead, they must show directive leadership, setting the ambition, articulating strategic priorities, and holding management accountable for results. At the same time, they need to be inclusive, involving their teams early on, fostering collaboration, soliciting honest feedback, and empowering teams to define and implement specific initiatives. Striking this balance can be difficult, especially during the intense pressure of a major transformation effort.
Read here about the evidence-based guidance for new CEOs that is offered within the BCG study.
Click here to see what worries CEOs during 2018.