Organizational Transformation

Transformations That Work

by Michael Mankins and Patrick Litre
From the Magazine (May–June 2024)

Rick Salafia

Summary. More than a third of large organizations have some type of

transformation program underway at any given time, and many launch one major
change initiative after another. Though they kick off with a lot of fanfare, most of
these efforts fail to deliver. Only 12% produce lasting results, and that figure hasn’t
budged in the past two decades, despite everything we’ve learned over the years
about how to lead change.
Clearly, businesses need a new model for transformation. In this article the authors
present one based on research with dozens of leading companies that have defied
the odds, such as Ford, Dell, Amgen, T-Mobile, Adobe, and Virgin Australia. The
successful programs, the authors found, employed six critical practices: treating
transformation as a continuous process; building it into the company’s operating
rhythm; explicitly managing organizational energy; using aspirations, not
benchmarks, to set goals; driving change from the middle of the organization out;
and tapping significant external capital to fund the effort from the start. close
 Nearly every major corporation has
embarked on some sort of transformation in
recent years. By our estimates, at any given
time more than a third of large
organizations have a transformation
program underway. When asked, roughly
50% of CEOs we’ve interviewed report that their company has
undertaken two or more major change efforts within the past five
years, with nearly 20% reporting three or more.

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Unfortunately, most transformation programs aren’t all that

transformative. Though they typically start with great fanfare—
complete with big announcements and proclamations of
wholesale change—most fail to deliver. Our research indicates
that only 12% of major change programs produce lasting results.
Too often, leadership accepts disappointing outcomes and moves
on, only to launch another program in a few years’ time. One
prominent U.S. bank, for example, has initiated three substantial
restructuring programs in the span of just four years, yet all of
them have fallen flat.

It doesn’t have to be this way. Over the past two decades we’ve
worked with dozens of companies that have effectively
transformed their businesses and studied hundreds of others that
have attempted to. Our analysis has revealed six important
differences between the programs that worked and those that
didn’t. In this article we’ll explain why so many ambitious change
initiatives come up short and outline the steps that leading
companies are taking to defy the odds and realize the full promise
of transformation.
Underwhelming Results
In late 2023, Bain & Company completed the second of two
comprehensive surveys of 300 large companies worldwide that
had attempted transformations. The first survey had taken place a
decade earlier. The participating companies included both Bain
clients and nonclients. The findings highlighted two concerning
trends.

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Less failure, but not more success. In the 1990s John Kotter and
other scholars identified the most common reasons for ineffective
transformation attempts—notably, a lack of urgency, insufficient
leadership, limited vision, poor communication, and a shortage of
“quick wins.” Many companies have taken steps to avoid those
pitfalls, often seeking outside advisory support. As a result,
companies are experiencing fewer outright failures in their
transformation endeavors. If we define “failure” as achieving less
than half of what leadership aimed for, then only 13% of recent
transformation programs can be labeled as such. That’s a
significant improvement from the 38% rate observed in 2013 and
can be attributed to lessons learned over the years.
But there’s a catch. Despite the decline in outright failures,
success rates have not risen. If “success” is defined as meeting or
exceeding leadership’s expectations, then only one in eight
transformations can be considered successful—and that rate has
remained constant since 2013.

An acceptance of mediocrity. The percentage of transformation

programs with so-so outcomes—that is, those that achieved more
than 50% but less than 100% of their targets—increased from 50%
in 2013 to 75% in 2023. Instead of pushing their organizations to
deliver more, many senior leaders seem to settle for improved but
still unexceptional performance. While that reaction is
understandable, it often signals to employees that if they wait
long enough, the status quo will be restored. Worse, it breeds
cynicism that undermines the success of future change efforts.

Six Critical Practices

Clearly, the prevailing approach to transformation in most
companies is not yielding the desired results. It’s time for a new
model—one incorporating six practices that our research has
shown are key to successful programs.

1. Treating transformation as a continuous process. Most

transformation efforts are structured as discrete programs—with
a clear beginning and end. Top management sets an ambitious
goal, defines a series of initiatives designed to meet it, assigns
leaders to manage the change, and then monitors performance
until the program is complete. It’s an approach inspired by the
work of the psychologist Kurt Lewin, who believed that the
process of change entails (1) creating the perception that a change
is needed, (2) moving toward the new desired behavior, and (3)
solidifying that new behavior as the norm. This became widely
known as the “unfreeze-change-refreeze” model.

Although that model may have made sense when most business
transformations were transitory—that is, a temporary deviation
from “normal”—or if the change involved managing the
implementation of, say, a new enterprise resource planning
system, it’s not well suited to deliver major change in today’s
highly dynamic environment. Most companies are (or should be)
in a state of constant transformation. It’s simply no longer
possible to refreeze and step aside. The most successful efforts
recognize that transformation must be continuous and
orchestrate their programs accordingly.

Dell Technologies is a case in point. When Michael Dell took the

company private, in 2013, he knew he wanted to transform the PC
maker into a broad-based leader in infrastructure technology. He
also recognized that to do so he needed his team to keep
stretching to drive the next level of performance.

Starting in 2014, Dell’s executive leadership meetings centered on

what was referred to as the Dell Agenda. This agenda amounted to
a backlog of the most critical issues the company was confronting
at the time and, by implication, the most important changes Dell
had to make to transform successfully. Some issues, such as the
need to simplify Dell’s product portfolio and transition from a
made-to-order to a made-to-stock approach, pertained to day-to-
day operations. Others, like defining a new go-to-market structure
for the company’s direct sales force, were organizational in
nature. Finally, many, such as determining how to strengthen the
company’s position in the rapidly growing, high-margin storage
segment, involved strategic opportunities.

What made the Dell Agenda particularly noteworthy was its

evergreen nature. When an issue was successfully resolved, it was
removed, and a new issue took its place. This ongoing process of
addressing operational, organizational, and strategic issues
produced extraordinary results. From 2014 to 2023, Dell
Technologies experienced a dramatic increase in market value,
achieving more than 10-fold growth. The surge in value was a
testament to the company’s newly established leadership
positions in areas such as commercial PCs, servers, storage
solutions, and other critical infrastructure technologies.
2. Building transformation into the company’s operating rhythm.
Too often transformations are viewed as separate from company
operations and handled by a distinct program-management
office. In most instances, however, working on both should be
considered part of every manager’s day job.

Consider the approach Alan Mulally took to successfully lead the

transformation of Ford Motor Company from 2006 to 2014.
Shortly after taking the helm, he introduced a rigorous business
plan review (BPR) process, which involved weekly meetings with
the entire senior leadership team. The BPR played a pivotal role in
aligning the team around a compelling vision and a
comprehensive strategy known as One Ford.

The BPR ingrained the implementation of One Ford into the

company’s operating rhythm. As Mulally noted, “Everyone knew
the plan, the status against that plan, and all the areas that
needed special attention. Everyone was working together to
change the reds to yellows and greens.”

Rick Salafia creates fantastical and nonsensical measuring instruments out of aluminum alloy to explore how we
quantify and conceive of the unmeasurable.

Under One Ford the company divested itself of Aston Martin,

Jaguar, Land Rover, and Volvo. It terminated its passenger-
vehicle joint venture with Mazda and discontinued the Mercury
brand. Ford also streamlined its vehicle platforms and
standardized components across its models, which resulted in
significant cost savings and improved product quality. The
proceeds from asset sales and the savings from restructuring,
along with external financing, were channeled into creating a
“balanced business” of cars, trucks, and SUVs. The company
revitalized its iconic brands, including the Ford F-150 pickup and
the Mustang, transforming itself from a near-bankrupt relic into
an industry leader.

During Mulally’s tenure, Ford rebounded from a $12.7 billion loss

to a $6.3 billion pretax profit. Though its stock price fell during
the global financial crisis, it shot up 800% from its low point, and
when Mulally left it was nearly double what it had been when he
started.
3. Explicitly managing organizational energy. Transformations
fizzle when they consume more energy than they generate. That’s
why their tendency to continually disrupt the work routines of the
same group of individuals is problematic. Over time that group
may start to ignore further requests for change or even actively
resist them. Our research shows that if an organization tries to
change more than two primary routines simultaneously, the odds
of failure increase dramatically. For example, consider a scenario
in which a company’s sales force is asked to sell in newly defined
territories while also promoting an expanded portfolio of
products and services. In such a situation it’s highly likely that
sales productivity will drop. Still, despite its importance,
organizational energy is rarely managed effectively during
transformations.

In successful programs leaders explicitly identify the employees

and functions that will be most impacted by each aspect of the
initiative and ensure that no group is expected to alter multiple
routines at once. Changes are carefully sequenced to limit
disruption and prevent widespread organizational fatigue.
Success is recognized and rewarded along the way to build energy
and enthusiasm for the effort.
Take the transformation of Virgin Australia. In April 2020, just a
few months into the Covid-19 pandemic, the company entered
voluntary administration as a bankrupt carrier. That September,
Virgin was acquired by the U.S. private equity firm Bain Capital
(an entity entirely separate from our firm), and by the end of
November, Jayne Hrdlicka had been appointed CEO. Under her
leadership the company reorganized itself as a much leaner,
midmarket carrier. Once it had turned the corner it expanded its
fleet by 60%, hired thousands of new employees, opened many
new routes, and completely reimagined its customers’ experience.
Such massive changes could have caused debilitating disruptions
had leadership not been meticulous about managing
organizational energy.

At the start of the process, every aspect of Virgin Australia’s

overhaul was carefully sequenced. The airline made significant
investments in new planes and technology, restructured its head
office, revamped its marketing and sales function, bolstered its
procurement team’s capabilities, and introduced new customer-
service innovations. Virgin’s leadership assessed how each
change would affect employees and consciously scheduled the
hundreds of initiatives involved to avoid overburdening any one
part of the organization at any one time. Unnecessary or lower-
priority efforts were put on hold, either temporarily or
permanently, freeing up organizational bandwidth. Leadership
applied a simple rule of thumb: Prioritize the changes that were
most crucial to passengers and deemphasize or eliminate those
that weren’t. The strategic staging and focus allowed Virgin
Australia to move quickly without exhausting its people.

In our study nearly all failed

transformations were underfunded.
Many leaders tried to finance them
through cost-cutting measures. That
strategy typically fell short.
Hrdlicka and her team also actively engaged the organization
throughout the transformation, tapping into Virgin Australia’s
unique “Virgin Flair” culture. They encouraged employees to
contribute new ideas for making Virgin “the most-loved airline in
Australia.” Great ideas were celebrated, and the inclusive
approach injected passion and energy into the team’s work,
significantly accelerating the pace of change. Frontline staff and
executives shared in the success of the transformation, receiving
bonuses and other financial rewards in recognition of their
contributions to the turnaround.
4. Using aspirations, not just targets, to stretch management’s
thinking. In typical transformation efforts, especially
turnarounds and restructurings, the initial step involves
examining external benchmarks. These are then used to set top-
down targets for cost and head count reductions, and the
organization is tasked with figuring out how to meet them. While
that approach may appear rigorous and data-driven, it seldom
sparks transformative thinking. Relying on benchmarks tends to
confine “the art of the possible” to what others have already
achieved, effectively setting the bar too low.

True transformation calls for breakthrough thinking and pushing

beyond current practices, often with the help of new technology.
Consider Adobe, the $18 billion developer of software for creative
services professionals. In 2011, when it declared its intent to shift
its entire product line to the cloud, the strategy was deemed
unusually ambitious, if not revolutionary. There were few
benchmarks that Adobe could refer to—only the aspiration of
fundamentally reshaping the company’s business model.

Shantanu Narayen, Adobe’s CEO, challenged his management

team to reinvent the company. Historically, Adobe’s formula of
selling software like Photoshop to creative professionals at
attractive prices had been highly successful. However, Narayen
recognized that clinging to the past would not be a winning
business strategy. Drawing on his extensive knowledge of the
industry and the company, he set the goal of transitioning 100%
of Adobe’s products to a web-based subscription model. The
company would be among the first to adopt the software-as-a-
service (SaaS) approach.

This bold ambition unified and motivated everyone at Adobe.

Every facet of the business had to grapple with the question, How
do we need to do this differently? Transitioning to the cloud
significantly affected the company’s product development,
operations, and go-to-market strategies. For instance, Adobe had
traditionally introduced new features whenever a new software
version was released, typically every 18 to 24 months. But in the
cloud, products could be continuously updated, tested, and
released, necessitating a more agile and scrum-based approach to
product development.

In addition, Adobe had to invest in cloud-based components that

would facilitate seamless downloads of products because
customers still needed to have many applications on their
desktops. And the way that Adobe engaged with its customers had
to change. Its value proposition was reorganized around
delivering high-quality service, not merely introducing new
features. Aspects of it like uptime, availability, disaster recovery,
and security all became pivotal. Much closer collaboration among
the functional groups contributing to the overall customer
experience, including product management, engineering,
marketing, and IT—which all had previously operated separately
—was also required.

Adobe continues to transform itself, lately by harnessing

breakthroughs in generative AI. In 2023 alone the company
introduced 100 new features and updates for its software,
including many advanced AI-powered tools. It has expanded
Firefly, its AI product line, with three new image generators.
Beyond the “wow factor,” the wide range and high quality of these
innovations have firmly established Adobe as the leading maker
of creative tools for professionals.
The results have been truly impressive. Since Narayen became the
CEO, Adobe’s market value has shot to more than $250 billion
from just $24 billion—and the company’s average annual total
shareholder return has been more than 15%. This compares very
favorably with the tech-heavy Nasdaq’s TSR of just under 9% in
the same period. What’s more, Adobe’s transformation has
reshaped the entire software landscape. Nowadays nearly every
software company, ranging from Autodesk to Microsoft, has
followed Adobe’s pioneering lead.
5. Driving change from the middle out. Most transformation
programs are top-down: Upper management sets targets and
relies on lower organizational levels to figure out how to meet
them. Initiatives are then typically executed from the bottom up.
While this approach can yield effective ways to cut waste, it rarely
produces lasting results. Why? Because enduring improvement
requires changes in both the work being done and how it is
accomplished. Cross-company intelligence and deep experience
are needed to identify those changes, and that calls for a “middle-
out” approach.

Senior executives frequently are too far removed from day-to-day

operations to understand what truly needs to change.
Consequently, top-down solutions tend to be superficial or at
least short-lived. Frontline managers, meanwhile, often lack the
contextual understanding to challenge existing processes, and so
trim around the edges rather than propose major changes. But
midlevel executives tend to have enough experience to see the
shortcomings in current operations—and aren’t so close to the
ground that they get lost in the weeds.
 See more HBR charts in Data & Visuals 

Amgen, the $27 billion global biopharma company, is a case in

point. In 2013 its CEO, Bob Bradway, and his team set out to
reshape the company, which was more than 30 years old and
grappling with the expiration of the patents on several of its most
successful drugs. The goal was to reposition Amgen as an agile,
patient-centered powerhouse capable of developing
groundbreaking drugs quickly.

For each transformation initiative, Bradway and his team selected

two midlevel leaders—a VP-level “initiative lead” and a director-
level “initiative liaison.” These leaders were to make the
transformation effort their primary focus. Their selection was
rigorous: A “draft,” coordinated by the chief transformation
officer and the chief human resources officer, was conducted by
the CEO and all his direct reports. Eligible executives had to be
among the highest rated at Amgen, with proven ability to tackle
the most-pressing challenges.

Once the initiative leads and liaisons were in place, teams with
the necessary capabilities and expertise were assembled.
Leadership emphasized the importance of assigning the best
talent to each transformation initiative. This ensured that the
teams had the skills to drive meaningful change quickly. Soon the
transformation process became a vehicle for testing and
developing the next generation of leadership within the company.
Many of the initiative leads and liaisons have since moved into
senior roles at Amgen.

Rick Salafia
The middle-out approach surfaced better solutions at Amgen. The
team overhauling the company’s critical process-development
capability offers a great example. Its breakthroughs included such
fundamental changes as the consolidation of 17 functions into
seven, the closure of five sites, the integration of 25 disparate
systems into one new platform, and the implementation of three
new cycle-time-reduction processes across the company. Its
efforts were a significant departure from previous transformation
initiatives at Amgen, which had typically led to modest changes
to established practices and processes.
The results have been impressive. From 2013 to 2022 the company
doubled the number of approved medicines in its portfolio—from
13 to 27. Many more of its drugs are blockbusters. In 2013, Amgen
had only three drugs that generated $1 billion or more in sales. By
2022 it had nine. Significantly, the transformation is still ongoing,
with Bradway and his team constantly pushing Amgen to greater
heights, as evidenced by its $28 billion acquisition of Horizon
Therapeutics.
6. Accessing substantial external capital from the start.
Transforming a business is often expensive. Mulally borrowed
$24 billion to fund Ford’s transformation in 2006, and Michael
Dell invested more than $60 billion to turn Dell into a leader in
infrastructure technology in 2017.

In our study nearly all failed transformations were underfunded.

Many leaders tried to finance them through cost-cutting
measures. While that strategy may sound appealing, it typically
falls short. Efficiency gains and waste reduction alone usually
can’t provide enough financial resources.

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In contrast, nearly all successful transformations tapped the

capital markets. External capital played a crucial role in fueling T-
Mobile’s growth from 2013 to 2020, for instance. Shortly after
John Legere took the reins as CEO in 2012, he and his team
acknowledged that a substantial investment was required to pull
off the turnaround the company needed. At the time, T-Mobile
lagged far behind Verizon and AT&T, with only a third of the
wireless subscribers of either carrier. One major problem was that
T-Mobile had not supported the iPhone when it became
ubiquitous. “Before I joined T-Mobile it was the fastest-shrinking
wireless company in America,” Legere told Investor’s Business
Daily.

Avoiding the common mistake of relying solely on internal cost-

cutting measures, Legere and his team decided to borrow $7
billion to initiate a comprehensive transformation. They set out to
redefine T-Mobile as the “uncarrier” by eliminating hated
industry practices that benefited carriers but harmed consumers.
The company started including taxes and fees in its price quotes
to eliminate surprises for customers. Unlimited service became
standard, and contracts and global roaming charges were
abolished. The iPhone was integrated into the T-Mobile network,
and the company invested heavily in acquiring spectrum to
enhance coverage. Finally, T-Mobile secured an additional $19
billion to fund its $66 billion acquisition of its U.S. telecom rival
Sprint in 2020.

Though the transformation required significant investment, the

returns were extraordinary. From 2013 to 2019 (Legere’s last full
year as CEO), the company’s earnings soared 1,000%. Subscriber
numbers more than doubled, from 33 million to 86 million. That
growth far outpaced that of AT&T and Verizon over the same
period. The share price of T-Mobile also rose by more than 400%
during Legere’s tenure, significantly outperforming the S&P 500’s
150% gain. During that time T-Mobile’s performance even
surpassed Apple’s.

...
Transformation programs often promise breakthrough results,
but most never realize them. The successful ones adopt an
approach that fundamentally differs from the approach at other
companies. Their leaders view change as a continuous process,
integrating it into the company’s operating rhythm. They
understand that organizational energy is a scarce resource and
manage it diligently, and they keep the focus on driving the
transformation from the middle out. Never forgetting that major
 change requires major investments, they secure external capital
early (and often). In short, successful transformations employ a
transformative strategy—a must for companies aiming for
enduring success in today’s ever-changing world.
ABusiness
version Review.
of this article appeared in the May–June 2024 issue of Harvard

Michael Mankins is a leader in Bain’s

Organization and Strategy practices and is a
partner based in Austin, Texas. He is a coauthor
of Time, Talent, Energy: Overcome
Organizational Drag and Unleash Your Team’s
Productive Power (Harvard Business Review
Press, 2017).

PL
Patrick Litre leads Bain’s Global
Transformation and Change practice
and is a partner based in Atlanta.

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