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Transformation and Change Risk

Hot topics 2022

Modern change landscape

Investment in strategic change rebounded rapidly after the initial pandemic lock downs. Deloitte’s latest CFO Survey shows that capital investment intentions exceeded pre-pandemic levels by Q1 2022. Many organisations are now investing in long-term growth and attracting new business again rather than reacting to short term operational challenges. At the same time, organisations globally, but particularly the UK, are reassessing what the new geopolitical world looks like for critical business services, factoring supply chains, access to resources, and talent market. They are looking at how they attract new customers and improve engagement with existing ones.

The next logical step for decision-makers considering how to invest in change and transformation is to change how they deliver transformation and change. The blockers are not financial, businesses have financial resources available but often transformational change programmes fail to deliver their stated intentions. The prevailing industry response indicates that now is the right time to invest in technology, risk reduction, and digital solutions to enable future services, increase efficiency and attract the workforce of the future.

What is driving activity and client concerns with transformation and change?

Priorities for change in 2022 align closely to business themes

Digital transformation. The pandemic challenged assumptions organisations had about the nature of work and the boundaries of digital customer engagement. Some regulatory barriers (e.g. privacy concerns) have been overcome to enable greater online interactions. Supply chain and resource constraints create an operational imperative for change away from offshore outsourcing arrangements to reduce cost to digital solutions which eliminate cost and improve customer experience. These drivers have pushed businesses to offer more digital products in their portfolio and to digitise their internal operation.

Tentative return to growth. As UK businesses start to emerge post-pandemic and post-Brexit trade arrangements settle down, there is accelerated investment in new markets, products, and services. Factors consuming management attention include competition for talent, an excess of prioritisation options, and the constant “change in change”. It is important to know which skills are needed, solutions to choose, and how to prioritise.

Cyber security. The evolution, targeting, and increase of cyber threats has negatively impacted the performance of many organisations worldwide. Organisations continue to face challenges in improving their cyber security to prevent and combat cyber-attacks. The war in Ukraine and other geo-political developments continue to increase the risk profile for organisations, just as technology trends continue to make the challenge of securing technology infrastructures harder.

Regulation. Operational and business resilience has been at the forefront of business leaders' and regulators' minds due to extending supply chains, resource constraints, and uncertainty across global markets. Given the short timelines for resilience programmes and the complexity of transformation, organisations need to be acting now to plan for changes over the next year and beyond.

Mergers & acquisitions. 2021 was one of the hottest deal markets on record, with a boom in both distressed sales resulting from pandemic factors and aggressive growth-based deals. While deal volumes have slowed in the first part of 2022 from those heights, deals continue to be done and high levels of market uncertainty continue to drive M&A activity, while firms who have done deals often take years to consolidate their acquisitions.

What is the biggest challenge facing businesses?

Arguably, the biggest challenge facing all firms is competition for talent – specifically attracting and retaining the right skills and expertise to deliver business priorities and simultaneously drive change. The intensity of competition for talent has been amplified not only because of its increased value but also by the fact the companies do not own all the specialist human capital they need. The demand for new skills in digital technology and agile change across the industry places a high price on those with ‘ready-made’ skills and experience who can adopt senior roles without the need for further development and training.

What are the key takeaways?

  • Manage dependencies on key individuals for the delivery of big transformation programmes
    By leveraging flexible external service providers and restructuring internal resources, change teams implement cross-skilled teams and create specialist career pathways with less reliance on contractors and flexible working arrangements. Firms are investing in the use of ready off-the-shelf solutions, turnkey services from established partners, and cloud platforms to reduce resource utilisation and invest in digital journeys for customers. Leaders must also invest in their own technology and transformation skills to allow them to manage specialists and architect the changes they want to see without placing their future success entirely in the hands of newly recruited technical specialists.
  • Choose partners carefully, be prepared for bumps in the road
    To protect themselves from the fluctuations in the workforce market, change managers need to plan for the long term, aligning budgets and outcomes over multiple years. This includes exploring new recruitment tools and channels such as candidate onboarding management, automated hiring tools, and developing crowd capital, including the use of open-source products or services. Management should also invest in augmented learning to address future talent shortages within the organisation.
  • Change is changing with adoption of agile change framework, having the right governance, risk management, and routes to rapid decisions is critical.
    Adoption of change requires additional resources in organisations. Introducing a change management framework that is tailored to business is the key. Agile change methodology needs a flexible governance structure with clarity of decision routes and escalation helps to avoid unnecessary bureaucracy and bottlenecks but maintaining close oversight and control. Some businesses are also introducing a separate change quality function for overseeing and challenging progamme management practices.

The Future

  • Take a proactive approach
    Many organisations are taking a proactive approach. This includes intervening more quickly in managing the change and embedding some of the gained knowledge and work practices sooner, without making themselves dependent on a few individuals. Businesses are learning to adapt quickly using data as an asset.
  • Promote agile tools and agile ways of working
    Agile tools continue to gain popularity, with a focus to improve collaboration and cohesiveness across the project teams. Exploring value streams, demand management, and introducing the right levels of controls is another option to create value for customers and achieve better alignment in organisations without loosing sight of risk and governance. Agile programmes can go wrong, just as traditional waterfall programmes can, so the adoption of agile should not be seen as a panacea and management teams must invest in their own skills to allow them to effectively govern and oversee these programmes.