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Why Most Business Innovation and Transformations Fail

A 2022 McKinsey study found 70 % of business transformations fail.  And since success from Disruptive Innovation (H3) is even more elusive, it’s easy to understand the challenges with effecting meaningful change in an enterprise !  Further, 40% of CEOs believe their companies won’t be economically viable in 10 years – if they don’t meaningfully transform or innovate, according to PwC’s 26th Annual Global CEO Survey.

Why is this ?  Because real change requires “ Process and Predictability “  +  “ Insight and Inspiration “ with the ability to learn how to look at things from a new perspective, be willing and able to challenge convention, an interest in seeing what’s possible, etc. And with this the mindset needed to create the future – like what the Silicon Valley crowd has, is and continue to do in established industries. Interestingly, while many enterprises view “We’re making good progress to move forward “, the reality is otherwise – as indicated by the high turnover in the Fortune 500 over time !

This isn’t new since John P. Kotter wrote an influential Harvard Business Review article about this phenomena in 1995 with the title, Leading Change: Why Transformation Efforts Fail.  From this it’s clear little has changed due to culture and underlying structure that won’t adapt and persistently fight to maintain a familiar and comfortable state – unless there is a crisis or a completely new approach or strategy.

According to McKinsey’s 2022 report, contributing factors to business failures include –

  1. Insufficiently high aspirations
  2. Lack of engagement within the organization – especially by Executives and Influencers
  3. Insufficient investment in building capabilities across the organization to effect and sustain change

Here are the critical elements to the success of any business transformation or initiative to innovate for impact in an enterprise –

  1. Vision  –  Establishing a clear, compelling and shareable vision for the future is key. What will happen, how will we benefit, What you be able to do if you make the change ?  Will you be more effective, will the business expand opportunities / increase relevance and revenue, improve UX, better serve more customers, have more career options and income, etc. All stakeholders need to buy in to achieve the goals and making the effort needed in the organization (including employees, suppliers, partners, investors, etc.). And get past the temptation to set goals that are achievable in the near to medium term (ie: announce a product or service upgrade a few months, add 5 cents to earnings per share or the dividend, etc.). This is to recognize that while setting and achieving short-term objectives is good,  they aren’t likely to lead to fundamental change in thinking or operations that lead to the creation of meaningful new capabilities and wealth.
  1. Time  –  Real change takes time. Not weeks or months – but years. In fact, as Kotter wrote in the HBR article, it took one company that successfully transformed 5 years to finally achieve the peak results from its transformation effort. Put another way, if you started today on a major business transformation or disruptive innovation initiative, you wouldn’t know the outcome until 5 years from now ! Again, while delivering short-term wins keeps things going, time and learning is needed to build new knowledge, skills, competencies, and value. To win at this requires an entrepreneurial mindset, the ability to set new goals and strategies, reward the right behaviors and outcomes, address potential roadblocks, etc.
  1. Nourishment This is what’s needed for growth, health and good conditioning – whether in our body or our business. For example, our body is nourished by foods that provide a mix of needed nutrients and vitamins. People also are nourished by education and opportunities that teach, challenge and stretch us, as well as periods of rest and renewal. Too often, in the quest to achieve goals, this is missed. Consider what happens with malnutrition and not being up to the challenge mentally – increased stress, lack of energy, tiredness, disease, limited capacity to work, poor attitude, etc. Does that sound like the right condition to innovate for impact or for transforming anything ?
  1. Consistency. While there will be setbacks along the way, it is essential to keep marching towards the vision established at the outset. Too often, when we don’t reach goals quickly enough, we change the goal or the way we’ll achieve it. That’s why so many companies are perennially announcing new transformations – because the last one didn’t happen !  In doing so, we lose all the benefits of consistency and must start over. If you do something consistently, it becomes a habit and gets easier to do, so you can do more of it. That creates momentum and spurs greater challenges. Plus, people (ie: employees) prefer consistency – so make curiosity, exploration and change a constant and their new comfort zone. 

For those serious about success, the above is well known. The differentiator is the ability to effect real change if the objective is for the organization to have a better future based on–

  1. having the mindset needed to create meaningful new opportunities and wealth
  2. delivering new value – in current and new markets
  3. developing an entrepreneurial culture with a focus on results
  4. the organization becoming digitally savvy 
  5. being accomplished at look ahead, learning, effective communications, etc.
  6. better recognizing and managing the changing nature of risk
  7. rewarding “ results achieved “ and “ lessons learned “ from unsuccessful projects

If these attributes describes your business, then great. However, as with most organizations, this is a work in progress.

To learn more, please refer to other articles at and elsewhere and/or contact CAIL to share insights on developing the mindset to innovate for impact.

Feb 14, 2023   By CAIL / Proof Point Communications   905-940-9000