Behind the scenes of bold change: Three areas where relationships matter more than you may think
Some organizations seem to be made for bold change. Others might be thwarted at every turn. How can leaders successfully imagine and help drive bold possibilities?
Francisco Salazar
Brenna Sniderman
Timothy Murphy
Natasha Buckley
Aditya Narayan
Why is it that some enterprises seem to be able to successfully bypass conventional norms when it comes to making bold business moves, while others encounter significant resistance from their stakeholders and find it more difficult to gain a foothold in a new area? How are these organizations able to branch out into other sectors, industries, or entirely new business models, winning the support—and even encouragement—of their stakeholders? And what can executives, who may find themselves on the wrong side of this equation, do about it?
Our research (see “Methodology”) indicates many executives see bold change as a one-time “big bang” move that launches a business in completely new directions and can only be successfully accomplished by a few well-known brands. On the contrary, our research also suggests that bold change is typically not one herculean initiative, but rather an outcome driven by decisions, actions, and initiatives taken methodically over time. What seems like a sudden, significant shift from the outside is generally a series of moves—some bold in their own right, as in the case of CVS dropping tobacco from its shelves (a case study we’ll examine later in this article), and some smaller—that enable a tipping point often years in the making. Along the way, these moves can help prime stakeholders to accept change by incrementally shifting perceptions of the enterprise.
But what builds this change momentum? At its core, many organizations that successfully enact ambitious change over time often put relationships and connection at the heart of their change process. That is, they elevate the importance of consistent leadership, both in terms of people and vision; they invest in the underlying capabilities that foster a culture that can successfully scale ideas; and they know funding change is as much about sharing a compelling story with engaged stakeholders as it is about financing an investment decision.
This article, the first of a series, examines factors that could help leaders to cultivate relationships that can enable and drive bold change. Given the complex market conditions executives are navigating, a refocus on stakeholder relationships across stakeholders, from the C-suite to the workforce to shareholders and customers, can enable enterprises to shape and own the narrative on their transformations, build change momentum, and prepare stakeholders’ expectations for evolving over a longer-term horizon. Through analysis of executive interviews at large global organizations, quantitative data across multiple surveys, and case studies, we will explore the intricacies of bold change and the considerations that could help enable organizations and their leadership teams to gain permission to rewrite the rules.
What is bold change, anyway? Hint: Don’t automatically equate it with transformation
A working definition of “bold change” is any move that represents a significant departure from an organization’s typical way of operating or competing.1 Bold change may or may not be a brand new (or novel) idea that’s never been seen before, but it should be a major strategic change for the organization, requiring a variety of internal and external mindset and operational shifts. Attempting to enter a new market, for example, or appealing to a new customer segment; moving from B2C to B2B; or attempting to compete with a new business model could all be considered bold change. This kind of change may not necessarily make headlines, and it can impact stakeholders differently depending on its scope.
Regardless of the type of change, however, one thing all bold changes have in common is that they permeate the organization’s structure and operations, impacting nearly every facet of the enterprise across multiple decision points. Organizations that make bold change may experience transformation, implementing processes to adapt to changes in the business environment as a result of disruption.2 Many different organizational dimensions for change can be affected, including areas like corporate strategy, organizational design, and customer experiences, among others.3
Interestingly, while many executives perceive external bold changes in the market as “big bang” events, they take a more long-term view of bold change when discussing their own initiatives. In fact, the majority of executives we interviewed across different sectors cite a minimum of three to five years to execute a bold change. In essence, while it may seem like others uncovered a quick path to change from the outside, these leaders recognize—at least in their own organizations—that much work happens beneath the surface (and over a long-term horizon) to bring changes to life.
Bold change also is not limited to certain sectors. Yet we noticed during our executive interviews the tendency for leaders to cite the same set of companies, mostly falling into the tech and consumer business sectors. This highlights that organizations may be limiting their imaginations regarding what is possible, and who has permission to change. To challenge these presumptions, we looked for instances where different industries are driving change at levels comparable to the usual suspects. See the sidebar “The full spectrum of bold change” to learn how we distinguish—and highlight—cases of bold change.
The full spectrum of bold change: Highlighting a multi-year journey
To help illustrate the varying ways bold change can manifest, we highlight three cases where organizations took years—or even decades—to fully realize the benefits of their change initiatives.
However, before we dive into each of these cases, it’s worth asking: what qualifies as bold change?
A transformation: Sometimes. An organizational transformation almost always necessitates bold change. However, the same is not always true in reverse. Some types of bold change may not be transformative. For example, consider a shoe company that makes a bold change entering a new geographic market in Asia. The shift is a major move for the company, but it may not be transformational in the sense that the company still maintains its identity with stakeholders as a shoe company.
A conglomerate: No. For conglomerates, acquisitions into new business lines does not necessarily equate to bold change. Rather, such moves are often core to their business and may not be considered bold in this context.
A spinoff: Maybe. Spinning off a business such that the identity of the core company is now significantly different could be considered a bold change. But the key here is context.
Given these parameters, we illustrate throughout this article the journeys of three organizations, including: Ørsted, a B2B energy company that moved from fossil fuels to green energy; CVS, the retail chain that pivoted to providing more holistic health services, and Amazon’s journey of redeploying its web services experience and infrastructure into an entirely new B2B business unit, Amazon Web Services (AWS).
The path to change is changing
Bold change is a multistep process that can take years to fully realize. But while the potential benefits of successful change remain significant, the window of time organizations have to capitalize on big shifts or implement long-term strategies may be shrinking and growing more challenging due to multiple external factors.
- Technology. Technological advances are increasing competitive pressures while shortening horizons. The transition from the First Industrial Revolution, marked by steam power, to the Second, which introduced electrical power and mass production, took 100 years. In contrast, the transition from the Third Industrial Revolution (electronic automation in the 1960s) to the Fourth (internet and connected technologies) only took 30 to 40 years.4 Also, the dynamic nature of generative artificial intelligence that creates original content, imagery, and audio through machine learning is rapidly creating new possibilities in terms of innovation, exploration, and content creation.
- Climate. Climate-related drivers are also accelerating the need for companies of different performance levels to plan for significant changes (see how our first case illustrates the power of climate as a change driver with Ørsted’s multi-year change from fossil fuels to green energy). For example, scenario models for transitions to a low-carbon future project a need for major changes in the next decade alone. In the auto sector, for example, scenario forecasts include a halt to sales of new internal-combustion engine passenger cars from 2035 onward.5 By 2030, all new buildings in advanced economies are forecast to be zero-carbon ready.6
- Macro environment. Other difficult-to-predict global challenges like geopolitical pressures, international conflicts, and global pandemics like COVID-19 can add further complexity to already challenging market conditions.
- Financial stakes. The financial stakes are also intensifying. Companies typically implement large-scale change to optimize their business, expand the business or reimagine it completely.7 Regardless of the reason or path chosen, the financial benefits to companies that successfully execute these moves can be enormous. For example, in a 2022 study of Fortune 500 organizations, those that implemented a holistic, enterprise-wide digital transformation strategy yielded as much as a 5% higher market valuation.8
Ørsted: From fossil fuels to green energy
In 2009, DONG Energy, a Denmark-based energy company, was like many conventional energy companies, generating more than 80% of its power via fossil fuels. However, when the company failed to gain approval for a new coal power plant in Germany due to stakeholder concerns, leaders reevaluated DONG’s strategy.9 Later that year, the company announced a new strategy to generate 85% of its energy from renewable sources by 2040.
To facilitate its new strategy and achieve the speed and scale needed to operate as a green energy provider, the company executed multiple acquisitions and partnerships to supply 500 wind turbines. To meet the high capital requirements to now supply wind farms, it deployed a new financing model called “farm-down.” Under this model, the company sold an equity stake in its wind farm prior to construction to reduce its own capital requirements. This financing approach helped the company expand operations efficiently over time.10
Just as importantly, the company simultaneously divested conventional fossil-based power generation assets. In 2017, DONG Energy changed its name to Ørsted, reflecting the values of Danish scientist, Hans Christian Ørsted, who was known for “a curiosity, dedication and interest in nature.”11 As of 2022, Ørsted has exceeded its original goal with 91% of the energy produced through renewable sources.
What you already know about bold change…and what you may not
Our executive interviews surfaced three areas where leaders can consider investing in relationships and organizational connections that can help drive change, as well as some less obvious but, in some ways, more important demands that leaders should consider when implementing a large-scale plan.
Underlying each of these lessons is a critical assumption: driving bold change is a team sport. A superhero CEO may not be the solution here. Often, it can only happen through strong leadership teams and the relationships they cultivate throughout the organization. The need for collaboration at all levels of the organization and across the business ecosystem has likely never been greater, and each of the following three themes is driven by this spirit of executive teaming and relationship.
Where you may be focused: The right leadership is critical.
Where to consider expanding your lens: Leadership stability is important too.
The average tenure of a CEO in a Fortune 500 company is roughly seven years and shrinking.12 But many changes take even longer. Ørsted’s transformation from an oil and gas company to a sustainable energy company took 10 years. CVS’s big shift from a drugstore into a comprehensive health care company, described below, took even longer.
That doesn’t leave much time for the average executive to deliver change within their tenure, unless they also prioritize finding and preparing the next group of leaders who understand the vision and are willing to continue seeing it through. This is where persistence is important. Longer-term trends tend to demand longer-term plans and processes. It’s important for leadership to come together and agree on a vision that transcends their tenure. This means thinking about leadership succession plans across the C-suite, not just for the CEO or select roles.
In fact, while the vision of the CEO plays a key role in strategy formulation, and the leadership team can be equally critical in developing and driving it, it’s also important that existing leaders think of developing new leaders, who may not yet reside in the C-suite, to carry the vision forward and implement it. Additionally, by developing these future leaders, the CEO could increase the likelihood of a longer tenure as the entire leadership team shares a congruent vision for the future of the organization.
At the same time, CEOs can think not just about a vision that extends beyond them, but about the longevity of their own tenure in the role to see changes through. For instance, CVS has had just three CEOs over the last 30 years. Each leader played a key role in the ongoing narrative of the company’s growth, emphasizing the point that bold change cannot be led by one person alone—but each had time to see longer-term changes through.
This can feel at odds with current market pressures. Given market expectations to deliver immediate quarterly results, leaders can become conservative and shy away from embarking on changes that could require a long-term investment. However, each step along the way to a bold evolution can still fuel growth over a near-term horizon. For instance, in 2005, after CVS announced a partnership with MinuteClinic to integrate health clinics within their stores, revenue increased 18% over the following year;13 similarly, after ceasing the sale of tobacco products in 2014, the company still exceeded revenue and market expectations despite forgoing $2 billion in tobacco revenue.14
Executives can consider the following to help ensure a congruent vision is shared by both the current and future leadership teams of the organization:
- Deploy shadow boards to align succession to strategy. Some companies align their succession plans and strategy, linking high-performing talent with the long-term strategic vision so they can grow together. Shadow boards represent one approach to accomplishing this goal. A shadow board is a group of young, non-executive employees who work with an organization’s board on important initiatives such as strategy planning and implementation. Simultaneously, these shadow boards can give young professionals critical exposure to leadership while preparing them to seamlessly roll into the top leadership team in the future. Fashion brand Gucci established a shadow board in 2015. The group meets with the board of directors regularly and helps implement transformational initiatives, which Gucci believes helped drive a 200% increase in sales from 2014 to 2022.15
- Establish an independent chairperson of the board. Research suggests that when the CEO and chairperson are the same person, a number of issues and blind spots can result.16 Without a chairperson to lead the board in overseeing a company’s strategic execution, CEOs may unwittingly steer the company in directions that can lead to mishaps and reputational damage to the brand. Appointing an independent chairperson also helps ensure longer-term leadership continuity—an important element that goes beyond the tenure of most CEOs.
CVS: From local pharmacy to global health care company
Founded in 1963 as a local pharmacy in New England, CVS is now a multibillion-dollar health solutions company with nearly 10,000 retail stores.17 With a focus on mergers and acquisitions to drive change, including large-scale acquisitions of pharmacy benefit manager Caremark Rx and health plan Aetna, the company has transitioned from a local retail pharmacy to national retailer to health services provider.
CVS acquired and divested businesses that didn’t align with its strategic vision and purpose as a health care company. For example, the company made more than 40 acquisitions, across five different industries, since 1997.18 In addition, CVS became the first pharmacy chain to stop selling tobacco products in 2014 recognizing that its product line needed to align with the company’s health care vision and purpose.19 Rebranded as CVS Health in 2014, the company completed a strategic partnership focused on digital health and personalized care with Microsoft in 2021.20
Where you may be focused: Culture is critical.
Where to consider expanding your lens: Culture is only as strong as the components that underpin it.
Culture is a term that has grown to encompass everything, and thus may often not mean anything. “Culture” is often used as a catch-all for a wide array of things a CEO should consider whenever making any big transformation. It’s a vague action point at the end of countless articles. But what does it actually mean to work to have the right culture?
Typically, culture speaks to employees and how work is done. Good can fall flat if employees aren’t incentivized to try new approaches and promote change with customers and other stakeholders. Consider employees at a retail store who don’t buy into the company’s new line of products. What will happen when customers seek employee assistance or advice? Do employees at all levels of the organization have an entrepreneurial mindset? Are incentives aligned to support new initiatives?
It might be more accurate—and useful—to think about culture as the machinery within the enterprise that allows leaders to scale ideas from small thoughts to broader accomplishments. This engine has many components: sophisticated business analytics to forecast market trends, a wealth of data and information to mine for insight, an ecosystem of external partners, a slate of experienced leaders, and other tools. That is, underpinning culture is a set of capabilities and systems that make it easier to share, execute, and scale ideas. For instance, leaders may be more likely to gain buy-in from employees if they can demonstrate which insights informed the idea for change, what investments (for example, partners or technology) ensure the organization possesses the ability to undertake the change and develop the right leaders to better manage their teams through change.
But each of those components should be focused in the right direction for bold change to hit its mark. For example, if leaders aren’t getting relevant market information, are focused on the wrong competitors or regions, or don’t have the appropriate mechanisms to open their perspective, they may miss out on seemingly unrelated opportunities. To help ensure the right mechanisms are in place to foster a culture that is able to create and scale ideas, organizations can consider the following:
- Turn adjacencies into a change catalyst. Adjacency and diversification are different: diversification is entering totally new markets while adjacency focuses on finding opportunities that are much closer to the core of the business. For instance, in the case study below, as Amazon’s data centers grew in scale, so too did its skills and experience. As such, Amazon realized that this infrastructure could be a valuable asset to other companies as well, leading to the birth of AWS in 2006.21 While the customer bases between Amazon and AWS may be different, the skills to execute the shift remained constant. Similarly, CVS’s already broad retail real estate footprint enabled it to move into the healthcare provider space, as it already possessed physical space for in-person clinics. In these instances, leaning on adjacent skills or competencies can foster a culture more willing (and capable of) turning ideas into actions.
- Expand the purview of stakeholder relationships to strengthen. Culture may go beyond the relationships within the four walls of the organization. Does the organization have the supplier network necessary to build out a new business across different geographic regions? Does it have the backing of investors who supported the organization in the past, or who are eager for change instead of staying the course? Is it well-connected to innovative minds and new thinkers? In one Deloitte Global research study on high-performing suppliers, the fastest-growing suppliers (those with more than 15% annual revenue growth) cultivated a more trusted supply-chain ecosystem across its many stakeholders by regularly focusing on strengthening relationships with multiple stakeholders, including investing in their own talent growth and development, regularly refining their supply chain to reflect customer values, and prioritizing innovation at a rate higher than their industry peers.22
- Identify—and remove—change friction. Organizations have different cultures, driven by the unique and special qualities of the people who lead and operate in it. But some organizational cultures may be better positioned to enact substantial change, and some may not be. Leaders should identify areas of friction that could inhibit change efforts and be intentional about eliminating them. For example, consider a retailer that has historically succeeded through a low cost, efficiency-led business model. What changes in culture via incentives, training and other solutions might be needed to remove points of friction and shift employees’ attitudes and capabilities towards a high-quality, low inventory model?23
AWS: Turning adjacent skills into new offerings
Amazon’s growth story is reflective of the company’s ongoing effort to capitalize on its core capabilities over time. In the early 2000s, Amazon.com was a growing e-commerce platform. Around that time, the company launched Merchant.com, realizing that its e-commerce platform could support retail merchants who needed to move their business online.24 In 2003, company leaders also recognized an opportunity to build a centralized development platform to support common infrastructure services across Amazon and avoid information technology development redundancies.
As the company began developing new skills, building and running reliable, scalable, cost-effective data centers, Amazon leaders realized that such infrastructure could be valuable to other organizations as well. This led to the genesis of AWS and in 2006, Amazon launched AWS as an on-demand cloud services provider.
Though Amazon.com and AWS may be serving different types of customers, the core of both these organizations remains the same according to founder Jeff Bezos.25
Where you may be focused: Funding is critical.
Where to consider expanding your lens: Stakeholder buy-in may be more critical than the investment dollars themselves.
Convincing stakeholders across the ecosystem to sign on to, fund, and support a long-term, significant change is not an easy prospect. Many people are loss-averse and resist change. But by investing in these stakeholder relationships—and bringing them along the change journey—this challenge can be overcome, instead of serving as a ready excuse to abandon bold change.
Just as the CEO should not be the sole arbiter of bold change, there is no one magic entity or constituent that should determine whether a change can happen. If large shifts emerge from a series of smaller moves over time, each one may necessitate buy-in from a different group or affect each constituency differently. Across the ecosystem, different stakeholders—the board, consumers, investors, regulators, employees, or others—can spell either success or failure.
Bold change is as much about developing a strong marketing strategy to get stakeholder buy-in as it is about the dollar amounts funding the change. And leadership can play a significant role in telling a strong story about why change needs to happen and tailoring that message to resonate with each stakeholder group. It takes a village for change to occur, so leaders should talk to each of these constituencies regularly and understand and address their concerns.
Leaders can bring stakeholders along in the process by considering the following when developing a more tailored communication plan for change:
- Use clear language to help articulate your vision. Leaders should be able to share a clear vision for the future, one that is detailed, accounts for potential missteps, and provides timelines for various shifts that enable stakeholders to set realistic expectations. Further, leaders should be able to clearly articulate the business case for proposed changes and speak to the diverse set of investment and time-to-ROI thresholds their stakeholders may expect.
- Center the message on the areas that matter most to the audience, and on cultivating trust. Stakeholders should feel like they can trust that executives are being transparent and sharing accurate information. Likewise, leaders should be transparent about the levels of risk inherent in the proposed vision for change. Having trusted ecosystem partners that can independently advocate for the vision can also help build trust and take stakeholders along in the process. For example, customers that buy into a company’s new product line likewise generate optimism and trust among investors. Further, each audience might prioritize different information. Make sure you’re tailoring your message to what will matter most to them.
- Make it a two-way conversation. It is important to note that communication can and should go both ways and new ideas can come from the outside-in. Stakeholders may communicate to leadership as well—and, as in the case of Ørsted, stakeholder feedback can serve as the catalyst for bold change.
Bold change is more realistic than you think
Some leaders express frustration at their company’s inability to execute change, presuming that industry dynamics are the root cause of their challenges. However, our research suggests there’s often more to the story, and this should offer optimism for leaders. Large-scale change is challenging but feasible for companies across industries. As your organization ramps up for its next move, consider these three questions to help jump-start your journey:
- Does your organization’s leadership have the patience and persistence to drive methodical change over time?
- What competencies has the organization developed to build a culture capable of turning ideas into bold action?
- Which internal and external stakeholders (like shareholders!) require more tailored marketing to not only address reservations but foster authentic buy-in?
The good news is that bold change can be built incrementally: small wins lead to bigger ones. As one executive we interviewed noted, “As you accumulate success in making smaller moves that get bigger and bigger and bigger, then you gain credibility in your ability to execute new things. And then you'll be able to have a little bit more license from stakeholders to take big moves.” Given the increasingly complex nature of business competition today, the urgency for leaders to adopt a journey-focused view of bold change has likely never been greater.
Methodology
To begin exploring the concept of bold change, Deloitte interviewed fifteen senior strategy executives from Fortune 500 companies and venture capital funds in June 2022. We sought to understand the factors that impact a company’s ability to drive significant change and what this change entails. In addition to conducting these interviews, we analyzed financial data and M&A activity across a variety of sectors to further assess who is driving bold change and what role industry economics play. We also examined academic literature to better understand established and emerging management theories that seek to explain decision making, planned behavior, and systems thinking. This research article marks the beginning of a deep exploration of these questions over time.