Medidata Transformational Change REPORT

TransformaTional ChangeWhaT WorKs— anD WhaT Can Doom The iniTiaTiVe

in assoCiaTion WiTh:

ConTenTs

Transformational leadership: Inspiring change ...........................................................................................2

Catalysts for change .............................................................................................................................................3

What does it take to make transformation work? ................................................................................... 5

Metrics and incentives ......................................................................................................................................... 6

What can derail a transformation? ..................................................................................................................7

Types of transformational leadership: Is there a more effective approach? .................................. 8

Personal transformation: Need to want it ................................................................................................... 9

Conclusion ..............................................................................................................................................................10

Acknowledgments................................................................................................................................................ 11

Survey methodology .......................................................................................................................................... 12

2 | TrANSforMATIoNAl ChANge

The stakes couldn’t be higher. The cost of an unsuccessful business transformation can be catastrophic. Retailers from Borders to Circuit City to the corner hardware store have failed to find footing as the earth shifted beneath them. Steel and textiles—industries once consid-ered too big to fail—are now a graveyard for once mighty companies in the United States. Even former cutting-edge, high-tech companies such as Kodak that seemed on the cusp of reinventing themselves in the end succumbed to market shifts.

TransformaTional leaDership: inspiring Change

In contrast, successful transformation means more

than merely adapting to change; it means rewriting

business models or even reshaping your own industry.

Considering Apple’s role in the birth of the tablet

computer industry and the revolution in smartphones,

for example, it is hard to believe the company was once

an also-ran hardware maker.

While the outcome of transformation can mean life

or death for a company or industry, only half of

executives say that their organizations adapt well

to new technologies or processes, according to a

survey of 106 executives conducted by Forbes Insights

and Medidata.

What does it take to make transformation work? In

the case of Apple, it began with visionary leadership.

The push for transformation almost always comes

from the top, while it appears to be largely left to the

next layer of management to see it through to execu-

tion, according to our survey. In fact, most companies

get the vision part right; execution is the hard part.

The 106 executives from across the business and

industrial landscape who responded to our in-depth

transformation leadership survey cited leadership

limitations as the biggest barrier to success.

Specifically, these executives named conflicting visions

among executive leaders or decision makers together

with a lack of internal talent to spearhead or execute a

transformation as the main obstacles by respondents.

That’s the top-line finding of our survey, but the

detailed responses, alongside interviews with a

number of the executives, demonstrate that there

are important nuances in transformational leader-

ship. Among those differences are various catalysts

for change, strategies for making transformations

work, metrics and incentives for measuring and

encouraging success, and for understanding when

things are going wrong.Just half of executives believe their company

is well versed in transformational change.

CaTalysTs for Change

CoPyrIghT © 2014 Forbes InsIghts | 3

Sometimes catalysts come in the form of earth- shaking events. The financial crisis in 2008, for example, not only reshaped the entire banking industry but also spun through every company that counted financial firms among its customers. It was transform or die for many.

Evolutionary developments can be just as provocative. Big Data, the advent of the cloud and the decoding of the human genome are catalysts that very few businesses have fully embraced. These applied technologies clearly have the power to revolutionize many industries, yet many companies are still struggling with how to integrate them into their business plans. One case in point: just 60% of the companies we surveyed report that they are taking full advantage of data analytics to better understand customers and to act on that information. The deluge of information these new technologies bring is a double-edged sword— a source of tremendous opportunity but also an exponential increase in complexity.

Take the case of the pharmaceutical industry. With changes in the payer-provider system globally, drug developers are facing tremendous pressures to show greater efficacy and value in the treatments they bring to market. At the same time, advances in genetics and personalized medicine increase the variables that can determine efficacy almost exponentially. Medidata Solutions, a New York-based provider of cloud-based solutions to the life sciences industry, has built its business around collecting and managing data to increase predictability and efficacy and to bring greater productiv-ity to clinical development.

The issue is not in the amount of data, but in how it’s used, explains Tarek Sherif, chairman and CEO of Medidata. “Big Data is a very dangerous term,” he says. “Pharma has a data opportunity, but it’s more like quality data than Big Data because the amount of data is minus-cule relative to some industries like Google. Google has a Big Data challenge; pharma faces different challenges.

“You have to have a very good idea of what you’re looking for before you start digging around in it, or you’re going to waste a lot of money and time,” he adds. “If we’re successful at what we’re trying to do, then we will help the industry become much more insightful about how to use the data they have.”

In the case of Lockheed Martin, it was federal budget sequestration and defense cuts that catalyzed transforma-tion—a change that has proved more profound than the end of the Cold War. The 100-year-old firm now has to look beyond government spending, the source of 90% of Lockheed’s traditional business, to international clients and non-defense industries, while continuing to provide innovative and affordable defense technology to its core government customers.

“The new reality is that we live in a very complex global security environment,” says Dr. Ray O. Johnson, senoir vice president and chief technology officer at Lockheed. “The challenges for us as a nation and our allies, and even our peers, are very complicated, and not getting simpler. At the same time the resources to take on these challenges are under pressure, and we see that through the pressure on the budget.”

Beyond financial crises, sequestration and disruptive technology, most companies are pushed to transform by the pressures that organizations face every day. Regulatory change, increasing competition and chang-ing customer expectations as well as technological change were named as the most pressing issues by respondents to our survey. These may sound like everyday problems for any business, but ignoring them can lead to the kind of slow attrition and deterioration in performance that saps customers and employees. And any of these catalysts—together or alone—can spell the beginning of the end for a struggling startup or a century-old industrial company.


In fact, any company that has been around for more than a few decades has likely undergone some sort of transformation. Would anyone who worked at IBM when it was founded in 1911 recognize the company today? Over the past several decades, many manufactur-ers saw the opportunity to move beyond production and distribution and recast their business as a service provider. Pulling off such a strategic shift without the catalyst of imminent peril is, in fact, far more difficult.

“There is a debate out there: can you really drive transformation without a burning platform?” asks John Conover, retired president of Ingersoll Rand Security Technologies. “Xerox went through one of the biggest and most successful transformations in recent history.

Here was a company days away from not being able to make payroll, completely changing the way they went to market. Everybody had to get on board.”

Conover faced a very different problem in the transformation he oversaw at Ingersoll Rand. “You take a company that is pretty successful, like Ingersoll’s security business. We were big, we were profitable, we were doing well,” he explains. “Trying to get everyone to engage in a major change, people look at you like you have a third eye.

“But you can’t stand still while everything around you is changing.”

FigURE 1. Top FivE CaTalySTS DRiving TRanSFoRmaTion

31%

32%

33%

28%

37%

Regulatory changes

Increasing competition

New or changing technology

Changing customer needs and/or expectations

Consolidation within industry or sector


WhaT Does iT TaKe To maKe TransformaTion WorK?

In most cases, it begins with visionary leadership. The push for transformation almost always comes from the top. Executing transformation, however, usually falls to the next layer of management, according to our survey. Most companies get the vision part right; execution is the hard part. Success or failure depends on getting the people right (Fig. 2).

“As a leader, it’s about having a vision and being able to communicate that vision and then tying it to everyone personally,” explains Conover. “To that end, your leader-ship team has to be on board, and everything else has to tier down from there.”

Transformation is tied to the culture of an organiza-tion. In that regard, leaders have to make communication a top priority, says Conover. “People have to understand why change is occurring, what we’re going to do about it, and the process we’re going to use,” he explains.

“People will look at the leadership, where are we spending our time, our money and where are we putting our talent,” says Conover. At HVAC equipment maker Trane, where Conover worked 32 years, coming

up through the ranks until he was appointed president Americas, transformation came with a new organiza-tional structure. “We hired talent, one-third outsiders, two-thirds insiders. We wanted people who understood the organization, and we wanted people who had already been through a transformation.”

In fact, employee adherence after transformation is described as the real challenge by 48% of respondents to our survey. “When you’re trying to do a transformational change, you have to be careful you don’t ask people to do too much,” Conover explains. “People get confused, they don’t know what their priorities are, and they get frustrated. Then you start to have an unengaged or, even worse, a negatively engaged organization.” This can not only affect day-to-day business but can also do permanent damage to customer relations.

“If you just add it to everybody’s to-do list, you’re not going to drive major change,” says Conover. “At the end of the day, the average employee needs to know, ‘What’s in it for me?’”

FigURE 2. Top FivE gREaTEST FaCToRS in SUCCESS

80%

82%

85%

78%

9.5

Assigning the right employees to implement the project

The need to appropriate adequate resources from the start

Gathering data for metrics during the process

Accurate timely feedback from employees executing the program

Forming the right executive team to oversee the project

88%


“What gets measured, gets done” still holds true. But more than that, what gets measured can be rewarded—and that is a major factor behind successful transformation.

Larry Wash, executive vice president and area director of KONE Americas, has been through a few transformations at old-line industries such as Xerox and American Standard. He sees transformation as a process of building competencies, improving work practices and refocusing corporate culture—all of which can be measured and rewarded. So, while setting the direction of a transformation is strategic, making it happen is generally tactical.

“You can’t just say, ‘Okay, now we’re going to do X,’ when the company makes its money doing Y. You have to have a path to get there,” he says. “You have to put a lot of things in place, and then you can start changing the way operational reviews are done and the way the man-agement team conducts itself in its operating cadence.”

The front-line managers, production staff and sales people, who make or break a transformation, will be asking themselves: How do I internalize this? How do I mobilize my people? How do I take this and then put it into action? “Unless they have that foundation around direction, situation, rationale and the expected outcome, they cannot drive their organization,” says Wash.

“You reinforce all the things that you’ve been talking about, and you change the agendas of the company,” he explains. “The management team will realize that not only is this serious, but we’re managing the company differently, and we’re measuring our progress differently.”

Performance measures, for example, might include how many technicians have been trained on new safety procedures. Results can also be measured: how many salespeople have written a new service contract, for example. Even behavior can be measured, says Wash. “A behavioral measure would be the number of proposals

generated using a new pricing tool, for example. So now you’re changing the behavior of the sales force,” he explains. “Or it may be a question of how many audits are conducted by a supervisor. Now you are changing the role of the supervisor from being in the office all day to being on the job site.”

For Medidata, the changes go beyond motivating employees and measuring performance. “How do you price and articulate value?” asks Sherif. “If you don’t do that well, you can do all the right things internally, but you’re going to fail with your customers.” It’s not enough to tell your customers, “‘We’re changing our pricing structure,’” he says. “If you can demonstrate where you are creating value using hard numbers and say, ‘Here’s how I can save you money, here’s how I can bring your drug to market faster, here’s how I can do it with higher quality and a better safety profile,’ then having a conver-sation about pricing becomes a lot easier,” he explains. “It’s not qualitative, it’s quantitative.”

To help with the transformation, Medidata has brought in a new C-suite executive: the chief value officer. “Having a CVO helps,” says Sherif, “but you need the whole organization to make it happen. There isn’t an employee here that doesn’t know the mission is to articulate, define and deliver value to our customers at this point.”

How do you know if you’re succeeding? It’s important to set realistic goals, says Conover. “You can’t change overnight, but you want to see deltas and then reward the behavior you are trying to encourage,” he says. “I had a boss who once told me that in a year, there is never as much change as you think there is going to be, but there is vastly more change than you can imagine over 10 years,” he says. “You drive these things, and it takes time.”

meTriCs anD inCenTiVes


Even with time, not every transformation will proceed without hitting a few bumps. In our survey, the biggest problems by far came from executive conflicts and lack of leadership to successfully execute a transformation (Fig. 3).

Larry Wash has witnessed these conflicts firsthand “and some of them still sting.” One thing he has learned is the importance of understanding the current state of an organization before pushing through transformational change. “How violently reactive are people going to be against it? Does it undermine their beliefs? Does it under-mine their culture?” he asks. Another question that must be asked: How capable is the management team? Are the employees capable of change? Does the organization have the bandwidth to do what you’re asking?

With any transformation, “you’re going to get a lot of blockers,” he says. “They may want to help, but they don’t know how, or, worse, they are really hostile to the whole idea. Then you have to ask if you want that leadership team in place because the whole organization will see what’s going on.”

In a worst-case scenario, pushing though a transformation can set different regions, offices and teammates against one another. For Wash, problems began with a global transformation that extended to Europe, where the plan was to move from selling equipment to installing it as well, thus competing with some channel partners. The

team in one country was experiencing problems and asked for help, says Wash. The message was: “We’re ready to do this. We know it’s a challenge. We’ve failed three times. Bring over your best guy.”

“And so we brought over an expert,” says Wash. “And when he got there, he wasn’t greeted with, ‘Okay. How do we do this?’” Instead, they wanted him to spend the next few quarters explaining: Why do we need to do this again? “We wasted a whole year,” says Wash. “The whole thing was frustrating because we thought we were going in to execute but we were right back to explaining strategy.”

Instead of wasting more time, Wash and his team concentrated resources on the three countries in Europe that were already on board and ignored the other nine. It wasn’t long before those other nine offices started yelling for help. “And they got really upset with me, but that’s how you create pull,” explains Wash.

“In the early stages of change, I don’t like to do push,” he explains. “There will always be some high potentials, parts of the organization that are saying, ‘I’m ready, Larry. This makes sense to me. My customers are asking for it. I’m getting killed here.’ There will be a group within an organization that will get it. If they don’t, then you’ve got a bigger issue. Maybe you should think about an acquisition instead.”

WhaT Can Derail a TransformaTion?

FigURE 3. Top FivE BiggEST BaRRiERS To ovERComE

22%

25%

28%

21%

33%

Conflicting visions among executive leadership or decision makers

Lack of internal talent to spearhead or execute business change

Resource/budget constraints

Inefficient execution or lack of formal process

Lack of adequate technology


FigURE 4. plEaSE ChooSE whiCh moDEl BEST REpRESEnTS yoUR oRganizaTion’S philoSophy

At a more philosophical level, our survey revealed a remarkable dichotomy among executives on the best way to approach a transformation with employees and clients. Half of executives think of their companies as enabling employees to find their own way, while the other half believe in setting the rules to navigate new processes. This dichotomy between “empowerers” and

“close managers” carried over into almost every question of executing a transformational change. Nearly half of respondents whose organizations empower the individ-ual say they reward employees with internal recognition for adhering to a transformation versus 16% of close managers, who were also notably less likely to have any incentive system in place.

The empowerment group is also more likely to offer incentives, such as loyalty programs and discounts, to clients or customers to ease adoption of new processes. They were far more likely to use pilot programs or roll out a product while still in beta than the close managers. This suggests that the empowerment group may put into practice the notion that allowing customers an early sneak peek causes them to feel more invested in a new product or service (“My input helped make this!”) and perhaps more likely to want to use it.

“We’re taking in input from people across the organization,” says Sherif of Medidata. “And we are empowering people to go forward.” For Sherif, managing transformation means being part cheerleader and part overseer. “Once you set the direction,” he says, “there is too much going on to try to micromanage.”

John Conover agrees. “It’s better to establish a clearly defined set of outcomes and then measure against those outcomes but not be overly prescriptive about the process,” he says, especially when you are doing things in front of customers.

For Lockheed Martin, everyone in the company recognizes the imperative to change, says Johnson, and this is enough of a burning platform to motivate his employees. “They’re a very savvy, smart group of people, and they know what’s going on in the world, and they certainly know what’s going on in the Department of Defense.”

To move the transformation along, Johnson is playing to the strengths of Lockheed’s professionals and workers. “We have 60,000 scientists, engineers and technologists,” he notes. “If I can rely on them to solve these problems and turn them into technical problems, then I feel very comfortable that we’ll get to the answer. There was a defensive feeling at first,” he says, “but we took on an offensive role. Now, I think most employees are excited, because they see us being the corporation that can provide global security solutions for the next hundred years, because we are able to change, we are able to adapt.”

enabling individuals to choose their own approach within a set of parameters meets with more success than management and a prescribed set of rules.

Individuals need close management and clearly defined rules to help them navigate a new process, technology or set of behaviors.

47%

53%

Types of TransformaTional leaDership: is There a more effeCTiVe approaCh?

47%

53%


On a more personal level, executives were very clear that they preferred the empowerment approach for changes in their own lives, such as habits or life-style, though differences in age among these leaders delivered up different results.

When it comes to personal health, for example, just under a quarter of the executives we surveyed are already digitally tracking their health habits, and another 20% plan to start. But there was a differ-ence among age groups, with younger respondents (under 45) more likely to embrace digital tracking.

As with corporate transformation, taking more personal responsibility for one’s health may be enhanced with the right incentives. Some compa-nies offer insurance discounts to employees who quit smoking or lower their BMI. At KONE Americas, for example, there is a pedometer competition to see which employee can walk the most over a set period of time. “We want employees who are healthy and focused,” says Area Director Larry Wash. “So we offer very comprehensive programs that help peo-ple get there, with diagnostics and a plan to close any gaps,” he says. “And then we give behavioral and monetary incentives to anyone who participates in challenges and activities, including raffles for prizes and discounts on healthcare premiums.”

Being given more information makes most respondents (87%) feel empowered to want to fol-low through on a change. But it remains to be seen whether their actions match their words: when asked whether they would consult an expert or use a help line if they needed more information, just half—51%—agreed or strongly agreed. And just 29% said it was easier to make a change stick if they had an expert with them to provide guidance when needed, while 32% were ambivalent, and the rest actively opposed it.

Those whose corporate culture more closely manages individual approaches to transformational change also demonstrated a preference for this approach in their personal life; 21% “strongly” agreed that they pro-actively use help lines or call experts when they need help, compared with 8% of those whose companies enable them to act on their own.

The question remains: is personal transformation truly possible? About half of the executives surveyed agreed that making major transformational changes to their own lifestyle sounds great in theory, but the reality is these changes simply don’t work most of the time.

The survey did support the popular adage that, in order for a transformation to be successful, the per-son has to want to change. Whan asked to respond to the statement “It doesn’t matter how much sup-port or engagement I get, I won’t make a big change until I decide I’m ready,” six out of 10 agree.

pERSonal TRanSFoRmaTion: nEED To wanT iT

FigURE 5. i’D RaThER ChooSE my own appRoaCh Than BE managED By an ExpERT

Agree 86%

Neither agree nor disagree 10%

Disagree 3%

49%

10%

86%

10%3


Transformational change is clearly achievable—and frequently a matter of life and death for some companies. yet the road is littered with companies that have failed to successfully execute and suffered in the market. from those that have met the challenge, some key lessons:

• Make sure the vision at the top is aligned and coherent. Deal with conflicts among the highest levels because they can undermine all efforts.

• Articulate why a transformation is necessary, explain the rationale and the desired outcome. Then, explain it all again and reinforce the message. Communication is key.

• Assign the right people and allocate enough resources to see the change through.

• Incentivizing employees and customers can make or break a transformation. Stakeholders need to understand why a transformational change is the best way forward and, in an ideal world, have some role in shaping the outcome.

• You can’t change what you can’t measure. Establish metrics, take advantage of analytics and keep the dialogue moving.

• Set realistic goals. Transformation takes time.

ConClusion


aCKnoWleDgmenTs

Medidata and forbes Insights would like to thank the following executivesfor sharing their time and expertise:

John Conover, President, Ingersoll rand Security Technologies, retired

Dr. ray o. Johnson, Senior Vice President and Chief Technology officer, lockheed Martin

tarek sherif, Chairman and Chief executive officer, Medidata Solutions

Larry Wash, executive Vice President and Area Director, KoNe Americas


67%

Based on a survey of 106 executives conducted by Forbes Insights in January 2014. Respondents were from financial services (41%), manufacturing (20%), healthcare (13%), life sciences and pharmaceuticals (8%), media (5%), technology (8%), construction (1%) and non-financial services (1%). All respondents work for companies with revenues of more than $100 million.

Thirty percent of respondents were from compa-nies with revenues above $5 billion. Fifty-five percent of respondents were C-level executives; the rest were managing director or above. Functional roles were dominated by general management (36%) and IT (26%). Executives in finance (14%), R&D (3%) and operations (11%) also participated. Two-thirds (66%) of respondents have been with their current employers for more than five years, including nearly a quarter (23%) with more than 15 years at the same company.

surVey meThoDology

aBouT forBes insighTsforbes Insights is the strategic research and thought leadership practice of forbes Media, publisher of forbes magazine and Forbes.com, whose combined media properties reach nearly 50 million business decision makers worldwide on a monthly basis. Taking advantage of a proprietary database of senior-level executives in the forbes community, forbes Insights conducts research on a host of topics of interest to C-level executives, senior marketing professionals, small business owners and those who aspire to positions of leadership, as well as providing deep insights into issues and trends surrounding wealth creation and wealth management.

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Medidata Transformational Change REPORT

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