323. How to drive transformations with rigor

0:01Michel Morenville: For McKinsey & Company, I'm Sean Brown and welcome to Inside the Strategy Room. Our research shows that companies that most successfully execute transformations do so differently by building a regular drumbeat of rigor into the core of their efforts. In today's episode, we explore what rigor actually looks like across the phases of a transformation and discuss how it can be applied in practice. This means turning bold ideas into measurable results by engaging the whole organization and running a central transformation engine that delivers from aspiration through to realization with every action showing up on the P &L.

0:41Michel Morenville: Joining us on our transformation journey today is Chris Hagedorn, a senior partner in our London office who leads our transformation assets globally. He also leads our work on transformational M &A. Michelle Morinville is a partner based in our Brussels office and the co-leader of our Transformation Digital Solutions portfolio, including Wave, our transformations platform, and Priya Modi, an associate partner in our Southern California office and a leader in our transformation practice. Welcome to you all. So Priya, the last time we had you on the podcast, I believe it was episode number 296, and we'll share that in the show notes.

1:17Michel Morenville: You talked about the critical importance of rigor to successful transformations, And today we're talking about how to actually make that happen in practice. So to start, I was hoping that maybe you could spend a minute on the one thing that you want to make sure our listeners take away from today's conversation. Yeah.

1:36Chris Hagedorn: What we want you to take away is that rigor is not just one magic silver bullet. It is a combination of systems, of culture, of behaviors and mindsets that are fully embedded in the organization and stem from the start to end of a transformation. And how to turn ambition into measurable results fast, right? Rigor is a defining factor in successful transformations. There are practical systems that make rigor real and not theoretical. And technology can really help aid and dramatically accelerate rigor. If there's one thing to leave with today, it's winning transformations aren't about better ideas.

2:16Chris Hagedorn: It's about better execution with rigor.

2:19Michel Morenville: And maybe you could say a little more about how rigor fits into your overall approach to driving successful transformations.

2:26Chris Hagedorn: Rigor is part of a kind of a three-step stool. And the quotient of these things is really what drives transformations to be their most successful. So we're talking about rigor today, but we also complement that with will, the organization's energy and behaviors and skill sets to implement the change. and skill, really up-leveling capabilities to ensure that transformational change is lasting and sustained for the outcomes to come.

2:54Michel Morenville: So to borrow your metaphor, a three-legged stool needs all three legs for someone to be able to sit on it. So in your experience, is rigor the most difficult aspect of the transformation to get right versus the other two legs, will and skill?

3:07Chris Hagedorn: Yes. Rigor requires, as I mentioned before, a real kind of mindset and culture change as well. And so I think that's some of the toughest change to embed in organizations. It's different conversations. It's different expectations of each other. It's different accountability. And so we've seen with clients that there's a real muscle change that needs to happen in that.

3:30Michel Morenville: And in terms of these three pieces, rigor, will, and skill, when implementing this as part of a transformation, are you pursuing all three at the same time? And how does this come to life across the overall life cycle of a broader transformation?

3:44Chris Hagedorn: Yeah, that's a great question. I think that rigor is definitely a foundational element that needs to be implemented in every stage of the transformation. Will is also really important to get kickstarted and jumpstart. Getting that energy of the organization around meaningful change and that step level of change really important to kind of set the momentum. And skill is something that we look to embed as we start getting mobilizing and then to realize the impact of a transformation to make sure that that impact is sustained and something that the organization is now implementing repeatedly.

4:20Michel Morenville: So what exactly do we mean by rigor in the context of a transformation?

4:25Chris Hagedorn: Yeah. So when we think about rigor, we think about it being something that is precise, thorough and strict in the methods and standards that are being applied. And in a transformation, this really translates into disciplined execution that turns these bold ideas and step change into measurable lasting results. And I want to be clear that rigor is not rigidity. It is not about setting things in stone and being inflexible. But it's about building the systems and the culture and the mechanisms that are embedded and consistent. and allow you as an organization to move fast, recover quickly, and show up reliably, even when those roadblocks arise and motivation dips.

5:08Chris Hagedorn: And so what we have seen is that rigor is really that differentiated marker that makes exceptional performance repeatable.

5:17Michel Morenville: And when you say rigor makes exceptional performance repeatable, how are you seeing that play out in practice? What's the benchmark for rigor and what results are the most rigorous organizations that are transforming, delivering?

5:31Chris Hagedorn: When we did some analysis on what does it look like to execute with rigor and what does that impact, we looked at over 70 organizations and we analyzed the makeup of their transformations. And what we defined as most rigorous was organizations that were consistently meeting their transformation target value at any point in the transformation, at either at 100 % or even higher. So they set a plan and a target, and they were consistently meeting that ambitious goal. And when we saw that the top quartile of those organizations that were able to do that, they delivered materially better results externally, with an average of two times excess TSR compared to the bottom quartile of rigorous execution.

6:15Chris Hagedorn: So the headline here is really that rigor isn't a nice to have. It's not something that's optional or opt-in, but it's a very unique capability, but it's also something that can be, and that needs to be built, and that will give you a measurable competitive advantage.

6:30Michel Morenville: So clearly there are a fair number of companies that haven't done well in terms of applying rigor to their transformation and execution, and they saw a pretty significant difference in terms of their excess TSR. So why don't all companies execute with rigor?

6:46Chris Hagedorn: Yeah, I think two things. One, it's hard. Rigor is not easy. If it was, you know, the results would be different, but it's really hard and it's hard because it needs to show up every day. It needs to show up in the conversations that you're having, how you're pushing your colleagues to be better, to move faster, to really untap their full potential. and it's about holding each other accountable as well. And as an organization, holding everyone to that higher bar. And that's hard. It's hard to do.

7:18Michel Morenville: So Michelle, you work with a lot of clients on implementing technology platforms to help them build in rigor as part of their transformation journey. So what's your perspective in terms of what makes rigor hard to achieve and where do you see companies struggling?

7:35Preeya Mody: Yeah, I think what's hard about it as well, It's to do it at scale. But large-scale transformations involves embedding it into the organization at scale and pushing a lot of initiatives. And we're not talking about four or five large initiatives. We're talking about hundreds or thousands of initiatives altogether, right? So you may be rigorous in addressing 10 or 20 of them. But how do you embed rigor into the organizations, into the layers? That's where it's hard, actually, is to do it at scale. And I think this is where I've seen most companies struggle, since this is where I think technology can help to embed it and have it structurally into, let's say, the ways of working of the company.

8:23Michel Morenville: And Chris, would love it if you could share your perspective here. There's clearly, this is clearly a tough process. How would you encourage leaders embarking on the transformation journey to keep that North Star of pursuing rigor? Well, I think, Sean, one of the most important overarching frames to consider is you manage what you measure. Ultimately, if you're going to measure very little, you're only going to be able to manage very little. So my encouragement to everyone who's embarking upon a transformation, considering it is making sure that you are measuring down and in and applying rigor so that you can actually manage the transformation and the detail that is required.

9:05Michel Morenville: And so then is rigor essentially about keeping an eye on the detail? Is it the same as a company's business processes or systems? And if not, how does it differ?

9:15Chris Hagedorn: So what I've seen in organizations, I love the question because, again, I think a lot of organizations think that's a bit of the answer, the silver bullet. If I document every process, if I have the most robust, racy, and we all align to it and we stack hands, rigor is just going to be systematized. And the reality is, it's not true. It doesn't happen that way. And it's because you're actually introducing a lot of complexity. You're not really thinking about how do you execute then with rigor. And so rigor means not just the most detailed processes and clarity in that. But it's about, are you clear on the decision rights?

9:55Chris Hagedorn: Are you clear on the handoffs? Are you clear on what you can expect from each other? And then are you actually holding each other accountable and holding the process accountable to do what it's supposed to do. And then also injecting when it's not working, rapidly changing that and modifying it to make sure that you're getting to the outcomes that you've expected. Chris? Yes.

10:18Michel Morenville: And maybe I'll just add that rigor has its place in core business processes, policies, you name it, that is for sure. But I think what is also absolutely necessary in a transformation is that you are applying rigor to the overall governance and management and metric tracking of the transformation itself. So I would think about those as two different axes. Rigor is important on both. Then how do you develop it so that you're being rigorous from the onset of the transformation and aligning the executive suite and the organization on the importance of rigor, both at the beginning and throughout the transformation?

10:57Michel Morenville: Yes, Sean, maybe I'll take this one. I think the mistake that many companies make is launching into a transformation without defining a target, specific set of outcomes you want to achieve, and not investing in the infrastructure to actually ensure that you're going to be successful in measuring the right things so you can manage the right things to deliver the outcome. And it's the equivalent of saying, I'm going to set up a company and it's going to be a sizable, scalable company and not actually putting in place an ERP or a financial system of record and just saying, I'll keep track of my financials on the back of an envelope.

11:37Michel Morenville: You need to actually invest in the proper infrastructure to actually measure what you want to manage ultimately. That's a great analogy, Chris. Thank you. And Priya, can you share a little more detail about the link between executing with rigor and transformation success? And when and where does rigor need to be applied across the transformation phases? Great.

11:59Chris Hagedorn: And the last question was also a great jumping off point for this idea that rigor occurs in every phase of the transformation. Shows up differently. And like Chris was saying, first, you start off with setting a bold, full potential target that forces a new way of thinking. We're not talking about incremental change here. We're talking about real step change. Then as you mobilize to execute, engaging the organization at scale and driving hundreds of initiatives, as Michelle was saying earlier, too, with discipline and speed. And then as you execute, making sure that you're realizing impact. So every action is translating into measurable bottom line impact.

12:35Chris Hagedorn: And so the difference that we saw across these stages of the transformation is that, you know, the winning transformations weren't just applying rigor in one phase. They embedded it end to end and they were holding themselves accountable and they were leveraging technology to help them do this as well, to gain the visibility and to gain the, the, the consistency across the organization to transform with rigor at a whole new clip.

13:01Michel Morenville: And Priya, let's talk a little bit more about the how, how does rigor show up in each phase of a transformation? And, and maybe you could start with how you think about this as you're working with clients to set the aspiration and the targets. It's obviously always important to set bold targets, but what does boldness really mean in this context?

13:21Chris Hagedorn: In our experience, we've seen that setting bold targets typically means at least 75 % of your full potential earnings. You need that to really reset the trajectory of the company and where you want to go. But just setting a number and having this grand ambition isn't enough. You have to have, rigor is what makes that meaningful. And what that means is grounding these targets in external benchmarking, tying them to the priorities of the organization, and setting a horizon that is near term, pushing the organization to realize meaningful impact in a short period of time, and in a bottom line real way.

14:07Chris Hagedorn: And so what we found is when companies apply this level of rigor to target setting, they're not just aiming higher, but they actually deliver more. In fact, we've seen that almost three times more value was captured than executives initially expected. So this idea of you aim for the moon and rigor actually helps you land on it.

14:29Michel Morenville: Love that. So setting a number and having a grand ambition is necessary, but it's not sufficient. So one needs to also ground their targets in strategic priorities and external benchmarks. So to what extent does that involve cutting costs?

14:44Chris Hagedorn: Setting the target shouldn't just be a cost-cutting exercise. It really needs to be a holistic approach. And so we really want to push organizations to think about the full potential view. And the ones that do this well take a step back and they say, what's the full potential of this business? How do I think about myself in terms of where I am in the industry and my peers? How do I think about disrupting the industry? And what inspiration can I look to towards adjacent industries? And what can I pull in there? And so holistic impact is about strengthening the core, expanding into new adjacencies, and it's even building new businesses as well.

15:21Chris Hagedorn: And rigor comes in because you need to have the discipline to systematically uncover this value across all areas. So you're not just looking at the obvious ones. And when you do that, two things happen. Not only does the opportunity get bigger, and you're setting that ambition, but you're also becoming more resilient, because you're not depending your transformation on just a few big bets. And so that's what we mean by a full potential view. It's comprehensive, and it's rigorous and defining where the value will come from. And winning transformations do this in a very centralized way. So ambition isn't just held at the top with executives, but it's democratized and it's brought down to the entire organization.

16:03Chris Hagedorn: So they understand where the value is coming from and how they're mobilizing to drive that impact. And that's part of that step change.

16:12Michel Morenville: And as we look at the full potential view across all the levers, where is it most straightforward to apply rigor and where can it be most challenging? You know, Sean, I think maybe this isn't true 100 % of the time, but it's probably true 90 % of the time, which is that big strategic moves, new businesses, by definition, are just harder to set a target and harder to take the cascade down of the second, third level KPIs, metrics, what will drive success. it's much easier to apply rigor to a cost a current cost structure and say how how do i improve that how do i how do i make it better how do i reduce my cost so growth in general is harder it can still be done and it still still should be done with rigor because without the rigor then you're just kind of hoping that you're going to achieve those goals but it is harder in those situations and prea anything you'd like to add yeah i totally agree with chris and i think

17:08Chris Hagedorn: As Chris mentioned, the harder the areas, the strategic growth areas, I think that's why rigor is even more important because they can be more ambiguous. It can be harder at first clip to understand what we should be measuring. But rigor helps bring that mindset of, like Chris was saying, what you measure is what you manage.

17:29Michel Morenville: And so as organizations begin to mobilize and work toward that growth aspiration, how can leaders measure and keep track of all these initiatives? Michelle, you're the leader of Wave, which is McKinsey's proprietary transformation platform. Maybe you can talk us through the role that such a platform plays in helping ensure rigor throughout the transformation.

17:50Preeya Mody: Sure, happy to. And yes, Wave is our transformation infrastructure platform that we use technology to embed the rigor into transformations. As we prepare to move from setting up the aspirations into mobilization, it's important that we establish a central place, a home, a central language for the transformations where the whole company can speak of the same language or the language of the transformations. So that's the home of the transformation, where it's about what do I need to know as I prepare? What do I need to do? What do I need to learn as well? This is important because we're setting up the place which will become the single version of the truth for managing the whole transformations, right?

18:43Preeya Mody: We're going to have to deal with hundreds, if not thousands of initiative. And it's important we have the rigor and the structure. And based on my role, whether I'm owning an initiative, whether I'm reviewing an initiative, whether I'm looking over at the portfolio, I will need to have a structured way that is similar across the organization. So as an organization, we can all speak the same language. That's quite important. And also, there's quite some knowledge and experience that we want to bring to the front line there. And today's technology, such as AI, or probably all I have used by now, some form of AI assistance, It is something that can also bring to the organization a point of contact, a knowledge assistant that can help me understand and ask any questions and get the resources I need.

19:35Preeya Mody: Why does it matter to have this one place? Because as I mentioned earlier, we'll have to align large organizations made of hundreds, if not thousands of initiative owners. They will have to move at the same pace using the same voice overall. And that's what's hard about this, where it's important we set it right from the beginning.

19:57Michel Morenville: And so if we've set the aspiration and embedded it into a central source of truth to ensure rigor in that initial phase, what comes next? Chris? Building on Priya's comment around the aspiration setting, we move to the second stage of rigor around mobilization and engaging the organization at scale. I think there are a couple of really, really important aspects to note. I think everyone realizes that typically a company-wide transformation starts typically from the top of the organization with an aspiration. However, that's not sufficient. And what our research has shown is actually the more employees are engaged, the larger percentage of employees that are engaged in the transformation, the absolute better the performance and the shareholder returns are from that enterprise and undergoing the transformation.

20:52Michel Morenville: And I think this is important for a couple of reasons. I think oftentimes there's a notion that, well, we'll just do it in a small group. And that is true for some of the largest initiatives that are truly strategic and some of the breakout moves that, Priya, you talked about earlier, growth, et cetera, new strategies. But the simple fact is that you really need, if you're a CEO or a C-suite executive, you need your organization engaged in order to achieve success and in order to transform. And I think that takes us to actually the next thought on mobilization, that our research shows that very surprising 68%, so two-thirds of the value of the transformations, comes actually from initiatives less than$250 ,000 per initiative.

21:41Michel Morenville: And so oftentimes, we will get questions saying, why do I want to worry about the small initiatives? I just want to focus on the big ones. And as a CEO or C-suite executive, that's probably true of where you will spend your time. But it's truly important and critical that actually you find a way to set up the rigor to engage the entire organization. because if you don't, first of all, the TRS shows that you will actually lag your peers, not actually perform better than your peers. And actually, you'll leave two-thirds of the value on the table if you don't actually engage and allow for the smaller organic initiatives to actually move through the system.

22:23Michel Morenville: And I'll also say it has the side benefit here, that it gives employees more stake in the transformation and allows for cultural change to happen, even though it may not be purposeful. It actually allows for democratization and full participation that every employee can say, I know how to participate in this transformation. And it, by the way, adds a lot of value as well. And Chris, given the importance of the smaller initiatives that you just described and of that broad engagement across the organization, how do you keep motivation and stamina up to ensure that that rigor persists over the course of what is often a multi-year transformation journey?

23:07Michel Morenville: Are there any specific actions, especially as a CEO or chief transformation officer, that one should take? I will mention a few and then I'll open it up to Priya and Michelle to respond with their experience as well. But I will say a few things. One, positive recognitions for success, having the CEO call individuals in the organization and say, thank you for delivering the impact. And it may not be the$5 million initiative. It might be the$100 ,000 initiative. I think second is you have to change it up. You have to find ways to create engagement in different ways. And there is no replacement for leaders in the organization engaging with the employees across their parts of the organization and elsewhere.

23:54Michel Morenville: And that builds a lot of momentum. It builds change. And actually, it allows for the mix to change as well of people kind of just sitting in their area and executing. It's really important to actually have different forms of engagement and leadership engagement as well. Priya, anything else you would add?

24:12Chris Hagedorn: Yeah, I added two things. Maybe it's Chris's last point. And what we talked about in our last conversation was, in order to get rigorous and be speedy, you need to have a purpose beyond the bottom line. And so I think to Chris's last point, being really clear on what is the change and what's the vision and what's the from to and getting a lot of excitement and then continuing to deliver on that message and update that message along the journey. And then I think also to Chris's mantra on what gets measured gets managed, I think incentives are something to be considered as well. Right. If people are doing things beyond their day job and really moving the needle for the company and it's showing up in bottom line impact, there should be some recognition for that, too.

24:58Michel Morenville: And is there a tradeoff between rigor and speed or between rigor, speed and being entrepreneurial or put another way? How do you be rigorous but also remain agile? Quick answer to that is speed in a transformation is much more important than the second decimal place of precision. So, Sean, at the same time, when we define rigor, it's actually having enough detail that you make sure you're making the right decisions, that your business cases are positive, that you know who's involved, that you have that. You have milestones that you're tracking, that you're measuring progress against. But it doesn't mean last place accounting level granularity because an organization can fall over from too much detail.

25:46Michel Morenville: But the rigor is necessary while also moving at speed. And those two can absolutely be done in parallel.

25:52Chris Hagedorn: I would just add to that also, if you have rigor in your governance, then you're setting the guide rails as well. And you're allowing people then to move within the guide rails at speed. but you still got rigor and how you're managing it and how people should expect to go through the progress and the change.

26:11Michel Morenville: So where does responsibility sit within the organization for ensuring a rigorous transformation? Should it be embedded within the operating business or is it somewhat separate in, say, a transformation office, for example? This is super important when it comes to thinking about the transformation engine and the governance that Priya was talking about earlier. That one thing, it's important that the transformation is set up as a distinct objective entity from the operating business so that you have an objective organization and construct, not large, but that's there to actually set this rigor up and ensure that it's executed well.

26:53Michel Morenville: It brings a different level of execution cadence when you do this. And you think about this transformation engine as being the conductor of the orchestra, all of the businesses and the functions are actually playing the instruments. If you don't have the rigor of having the conductor, right, tell people when to come in, when to bow out, when they should play, you end up with something that doesn't actually execute as well. And part of that, I'll also say is having a chief transformation officer and a transformation office that's in place. And another element of this is ensuring one source of the truth.

27:32Michel Morenville: So often the case of people say, oh, I've got my own scorecard over here. Well, that's like saying you're playing a football match and you're operating from two different scoreboards. That actually doesn't work, right? You need one version of the truth. And also say what's really important is that when you're launching a transformation and you're serious about it and you're bringing the rigor. When you have new initiatives, new externalities, other things that cause you to launch new things, bring it into and under the single engine umbrella. Because if you don't, and you have three or four different flavors going on, they all lose an intensity and people lose focus.

28:14Michel Morenville: And so make sure you're using this single transformation engine to drive the impact and use that rigor to your advantage for new things that come up along the way. It always happens. Thank you, Chris. So what does this actually look like in practice? Maybe you can share an example, perhaps starting with the concept of L gates and where each gate gets one closer to measurable impact. It's just really important. This is a very simple concept, but really important that you have a standard way of measuring every single initiative in the transformation on a similar basis. And so you'll see L gates, L zero, L one, L two, L three onwards.

28:51Michel Morenville: I won't go through the details and everyone, but let's just say that you have an idea. You need to advance it with a validated value business case, you know, investments that are needed, what have you, and also action planning to take it to what we typically call an L three level where you've planned for how you will mobilize. And it's really important to have those, those, those plans in place business cases, implementation plans with detailed implementation steps so that you can actually keep track of where are we. You can flow resources to areas that are behind, celebrate areas that are ahead, but use that level of rigor to your advantage.

29:32Michel Morenville: And the realization you see, the L4, the L5, that's actually the fun part when you actually plan this well, that you then measure the impact at L4 of completing the money step that's necessary to unlock the value and L5 of actually seeing the impact hit the bottom line and ensuring that it's in place. Thanks, Chris. And Michel, how does this play out through a transformation platform? And how do you build rigor at the initiative level?

29:59Preeya Mody: Yes, because as we mobilize the organization, the goal is to turn an aspirations into granular initiatives, right? So initiative will be at the center of, you know, this is the currency of exchange of transformation, right? And so at the very beginning, you know, an idea, it starts very simple, right? It's just a description, right? But as you move forward, rigor means that it's not that, as you said, you don't want to have two decimal places. What you want is actually to make sure that the right questions are being asked on the assumptions behind an initiative. For instance, creating a robust business case is all about helping understand what are the underlying assumptions that make the business case.

30:46Preeya Mody: What are the specific money step? What are the elements that will unlock the value? That's quite important. And we can use AI and tools today to help folks advance that. It's also having a structure of measuring the value that's aligned with the P &L structure so we can do reconciliation later on. And important also understanding which are the indicators that are actually used to inform how well we're progressing towards realizing the impact. And having milestone plan, a structured way to look at the key elements in the implementation forward. So rigor comes in asking the right question, structuring the information in a way that folks are responsible to review and approve the plans.

31:36Preeya Mody: have a way to actually assess it in a common language, right? It's about advancing ideas and making them ready for implementations with a level of rigor that is about assessing the robustness of that.

31:51Michel Morenville: So if we go back to the point of engaging the entire organization or as much of it as possible, and certainly within the transformation itself, how do you support those folks in execution?

32:03Preeya Mody: This is where I think at the core of the rigor as well, it's bringing institutional capability building, upskilling the folks that would be involved in the transformation to make sure they're equipped to succeed with AI and such capabilities. we can actually build customized, personalized training and especially bring them at the moment of need where folks, when they're, for instance, build their business case, they can have a coach. They can help them answer the questions and help them create a compelling business case. The goal is not to give the answers. The goal is actually to help them ask the right questions, right?

32:44Preeya Mody: Asking the right questions. In addition to this, I mean, we're talking about very much hardcore functional skills, what we've seen also being a great unlock, it's also thinking about essential skills for leadership, right? Above functionals, how to run effective meetings, how to communicate with efficiency, right? How can you give feedback to others? All of the things that can really enable the organization, you know, be more effective and more rigorous in managing the transformations.

33:17Michel Morenville: So this sounds great. What kind of results have you seen by employing this approach?

33:22Preeya Mody: So what we've seen when we bring those QPPT building at scale is that on a typical mobilization phase that takes about 8 to 12 weeks, we see two weeks acceleration being faster actually in getting the planning phase done. And on the execution, we've seen 10 % acceleration in the delivery of impact.

33:46Michel Morenville: Those sound like really impressive stats. And I'd imagine that kind of acceleration can have a really material impact and the value that's also created by such transformations. Yes, the speed, being able to deliver the impact faster. If you imagine a transformation that's, say,$1 billion for a large enterprise,$1 billion of improvement, for every month you save, every month, right, you're basically saving$80 million that you otherwise would have just lost because you didn't execute as fast. And so it is super critical that you deploy the capability building. As Michelle mentioned, AI makes this possible to deploy it real time so that the organization can not only plan and mobilize faster, but can realize the impact faster as well.

34:40Michel Morenville: So now we've talked about the importance of engaging as much of the organization as possible in the transformation and having people be involved with real initiatives. So how do you manage the organizational capacity when everyone also has a business to run at the same time? What role does rigor play in helping make sure that the business continues to run well while this transformation is also being executed? Yeah. Sean, maybe I'll start with this one. And I know Priya and Michelle both have unique experiences to share here. I would say that, first of all, a transformation, let's just be honest, it takes some extra effort in order to do this versus business as usual.

35:21Michel Morenville: But the prize is almost always worth it. And so you need to find a way to have the proper resourcing. Now, for selected roles, you need to put people in roles to help drive this, to put the rigor in place that we talked about earlier. But for the vast majority of the organization, back to the how do you engage 20, 30 % of your organization? Honestly, what you do in this mobilization phase when you're planning these initiatives is you have initiative owners, you have estimates of what their, the intensity of their time of what this will take. And then we go through a process called sequencing where we say, you know, do we have too many initiatives on a single person?

36:00Michel Morenville: Or do we need an external resource to build an IT, you know, an advanced analytics tool or what have you, whatever it may be, is there's a resourcing step in sequencing before you actually finish the mobilization phase here, that actually allows you to properly ensure either that you bring the right resources to match the plan of executing everything at once, or you actually sequence your initiatives such that you match the resources and the time and the capacity that you do have in the organization. Thanks, Chris. That's super helpful. And Priya, Michelle, anything you'd add?

36:36Chris Hagedorn: Yeah, I'll add on the sequencing that Chris is talking about is then what helps you lock in that plan and the target of the plan. So you are incorporating resource allocation and kind of the bandwidth and the capacity of the organization in the plan that you built. And the second point I want to make is I think organizations should be pretty bold about who's owning these initiatives. So sometimes I see organizations say, oh, we need project managers and we need to create unique roles. It's kind of missing the point. The point is the people who are most affected and are living these pain points should be the ones that are, they're the most motivated to make things better and should be the ones owning the answer as well.

37:17Chris Hagedorn: So I think we've all had experiences where we've seen frontline employees take the charge on a change. And that's been super meaningful and also creates the energy and excitement in the transformation as well.

37:27Preeya Mody: I'd like to add maybe what I've seen as well is that, and it relates back to the mobilizations about engaging the organization at scale. Once you reach a certain scale, the transformation is very visible in organization. And you move from a pull to a push systems where I've seen frontline people there says, I want also to participate. I want to improve. I have this idea and I want to do it. And this point, I think for line managers and others, it's asking the questions, okay, if we do that initiative that's going to improve to the bottom line, what are we not doing? It's actually forcing questions about how we allocate our time and are we getting the bang for our buck?

38:10Preeya Mody: And that's a very healthy discussion to have Because for a lot of employees, part of their job descriptions is to improve the business, right? That's something that typically falls down at the bottom of the pile of things because we have day-to-day objectives. But it puts a different perspective about, should I do this or that? And that leads to very healthy discussions and situations.

38:32Michel Morenville: Right. And in your experience working with clients on rigorous transformations, how do you measure and ensure the engagement of all of those employees? please. This is always a, it's always a critically important one, Sean. And I think there are a few different ways. I think first of all, the softer side of this is, Michelle just gave a great example where when you have people across the organization, especially at the front line of the organization, asking to actually be involved and to lead initiatives, that is a fantastic sign of winning. And so that engagement is great. I also say when you do the proper planning and you have milestones roughly every two weeks for your key initiatives that you have in the transformation, it allows you to measure the level of engagement, right?

39:24Michel Morenville: Are folks actually advancing this? Are they logging into the system, right? Are they advancing their initiatives? And so there are many ways to interrogate progress and to call out where people may need help, where something may be languishing because someone may have taken another responsibility on whatever it is. So there are also ways to actually do that that are very analytical and that are brought in. And that's back to the foundation that rigor provides. Super. And so we've talked about setting this ambition and mobilization and how to think about rigor in those phases. But Chris, let's dig into that third phase now, realization.

40:02Michel Morenville: So when it comes to realization, look, that's what everyone launches into a transformation to achieve the outcome, right? Not to set up rigor. That's not the purpose. But I think when you actually, when done well, what we find is that, you know, when we look at our average transformation, 72 % of the value, and that's an average, can be achieved within 18 months for those that have a two and a half year plan, which is a fairly typical transformation for a large scale, complex cost, revenue, growth transformation. And what's really important in helping deliver that average or being ahead of the average, which is obviously where everyone wants to be, are things like really getting out of the starting blocks fast, right?

40:48Michel Morenville: So delivering early wins in this, making sure that you're linking the impact to the P &L and rigorously reporting out on it to make sure you're tying out the actual input actions, the business cases that you're measuring on the back end. Am I getting out of this initiative what I said I would get in when I actually set it up, when I planned for it? And then, you know, identifying the performance gaps. We just talked a little bit some of the ways to do that. But it's really important to have closed loop actions around where do we have leakage? Where do we have initiatives that aren't being advanced on time or on magnitude that allows you to actually go back and iterate and apply the right resources, the right decision making, whatever may be holding it back.

41:33Michel Morenville: So but realization is ultimately what's what's key for us in terms of the outcomes that we desire from a transformation. Thanks, Chris. And so one question that comes to mind is, as we think about the importance of acceleration and the importance of capability building, what are some of the ways that in your work in transformations, you see leadership accelerate that capability building pieces? Is AI, for example, taking more of a role in both gauging and identifying and then deploying capability building in an organization that's undergoing a transformation?

42:08Chris Hagedorn: Yeah, so the way we've leveraged technology and some of the experiences that I've had is real time coaching. And I've seen clients really engage in that, and then build their skills. So it's not just a sit down classroom, let me like build your capability. And then months later, see if it's really stuck. But this is like real time day to day, coaching and learning. And that I have seen just stick so much more with clients and accelerate. the capabilities in the organization.

42:39Preeya Mody: Yeah. And also maybe one point there for those that become initiative owners, it's a fantastic opportunity to learn new skills, to get exposure to leadership, to learn. Right. And it's not very uncommon to have actually a new generation of leaders that come through the transformation because they're being apprenticed in there. And actually transformation becomes a new normal for a lot of them. Right. We're really building a muscle there. And to your questions, Sean, about leadership, I think it's really leading by example. I think leadership is there to support the transformation and the initiative owners.

43:18Michel Morenville: How does leadership support the initiative owners with rigor across so many initiatives? It seems like a lot to try to keep an eye on. How can they know what needs attention when and then ensure ownership and action and follow up?

43:34Preeya Mody: Yeah, because I think when it comes to rigor in how we manage this hundreds or thousands of initiative, it's about establishing a weekly cadence. We talked about recognition, but also it's about looking from a bird's eye with a weekly frequency. We really have to change the momentum and the speed at which we realize. We have a target. We manage week by week, not monthly. These are weekly steering and initiative owners meeting, looking at different work streams of accountability. How are we performing and how are we not performing? Let's not kid ourselves. I mean, as much as we do robust plannings at the initial level, things will change.

44:22Preeya Mody: Some assumptions will become unproven. Some external factors will come in the way. So we'll need to be dynamically looking at what's happening. And under those large numbers lies a number of initiatives that deserve support and attention from the leadership. And the goal of the leadership is really there to de-bottleneck. That's why we say, for instance, something needs leadership attention, right? We need to help. And that's to the point about, you know, building the muscle. And if you run a weekly meeting on a Tuesday, the goal is to take an action not for next week. It's for what can you do by Thursday?

45:02Preeya Mody: What can you do by Friday? That's also something that takes time, but the rigor is there. The rigor is about adopting this weekly cadence and cycle there. And I mentioned that things will evolve and change. We know that from the plan, the ambition, that step, and as you build your plan in the mobilization phase, typically on average, 25 % of the value will not materialize. Things will be delayed, things will erode, and maybe some initiatives will be canceled, right? But as you've built through the mobilization the muscle of creating new initiative, actually, organization refill the pipeline when they are in execution.

45:47Preeya Mody: And it's one of the important elements about the execution is that being dynamic, refilling the pipeline, right? And actually, top quartile performers, not only do they compensate for those, you know, erosion, they actually overcompensate. They deliver 130 % of the plan after two years, right? Which shows that building the muscle is actually critical in the organization.

46:15Michel Morenville: Thank you, Michelle. 130 % of the plan is a very compelling outcome. And Chris, before we close out our episode today, we'd just love your final thoughts on rigor. Sounds good. I think going back to Priya, your introduction of the transformation equation of rigor times will times skill, right? It takes all three. And if anyone is zero, you're probably going to come up with a zero on the transformation. So I, but rigor, the focus of our discussion here today, absolutely. Speed, Sean, you asked the question, is key consistency, regular cadence, a drumbeat that you set up. And if you do that and you build the right infrastructure, the right rigor underneath the transformation, the organization can truly execute well.

47:01Michel Morenville: You've got to set a high aspiration. You need to mobilize it. The impact delivery will be there. Priya, Michelle, Chris, thank you so much for taking the time today. Really appreciate it. Thanks, Sean.

47:13Preeya Mody: Thank you. Thanks, Sean.

47:15Michel Morenville: And thank you to all of our listeners for joining us today. We hope you enjoyed the episode and we welcome your feedback and ideas for future episodes. Just email us at itsr at mckinsey.com, which stands for Inside the Strategy Room. You can also share your ratings and reviews on any podcast player with many thanks to all who've already done so. We really appreciate all of your comments and feedback and encourage you to keep them coming. And if you enjoyed this episode and you'd like to subscribe, you can easily follow our weekly series on any podcast player, where you can also access our entire library of more than 320 episodes.

47:48Michel Morenville: Finally, if you'd like to automatically receive our latest publications and insights, we encourage you to visit our transformation practice at mckenzie.com slash mt. You can also connect with us on LinkedIn, and we've included links for those in the show notes today. Thanks again for listening. We look forward to having you join us again next week inside the Strategy Room.