The transformation challenge
Transformation is about sustained, purposeful change, often on a large scale, undertaken with the strategic objective of creating or maintaining competitive advantage, or of countering an advantage put in place by an existing or a new competitor. The concept is relevant to organisations that are faced with challenges and opportunities that cannot be effectively dealt with by employing proven methodologies for making incremental improvements to existing organisations, processes, technologies, human resources management and business models. The need for transformation can exist in both private and public sectors.
Climbing aboard: To be effective, the NATO Response
Force will require technology innovation to deploy
modern and interoperable command and control
The impetus to transform may vary. In some cases, transformation is stimulated by rapid deterioration in an organisation's competitive position resulting from unforeseen and unanticipated changes to the competitive environment, or by hitherto unknown rates of change. In other cases, transformation is opportunity driven, resulting from the desire to create or enhance competitive advantage by exploiting a new or emerging technology. This often requires organisational, process or people changes. In the case often referred to as a business turnaround, consistently ineffective leadership or management may cause a firm's competitive position to deteriorate to such a degree that a transformational perspective may be required to restore its competitive advantage.
Assessing competitive advantage
An organisation is said to possess a competitive advantage when it achieves a superior competitive position vis-à-vis one or more competitors. Competitive position is a relative measure of performance. In a practical sense, it can be measured by comparing the integrated capabilities of competitors in a competitive environment. Examples of capabilities in business include product design, production, marketing, sales and distribution. In warfare, examples include manoeuvre, strike, logistics and command and control. Whether in business or warfare, an organisation can assess its current and future competitive position by answering the following questions:
Current competitive position:
Who are the current competitors and what are their capabilities?
How well do current organisational capabilities compare with competitors' capabilities?
How does the rate at which the current organisation is learning, adapting and improving current capabilities compare to the competitors?
is the likelihood that new competitors will emerge in the near term?
Future competitive position:
Who are the likely future competitors and what are their likely capabilities?
are new competitors likely to appear?
What are the anticipated future capabilities of the organisation?
actions can be taken now to dissuade potential future competitors?
What actions should be taken now to create future competitive advantage should dissuasion fail?
The answers to these questions will characterise an organisation's current competitive position and provide an estimate of its future competitive position. In some cases, the answers are not clear-cut, since they involve uncertainty, ambiguity and the assessment of risk. This often leads to honest disagreement and stimulates debate within an organisation. If consensus can be reached regarding the existence of a competitive shortfall - current or future - then dialogue can begin on potential courses of action to enhance the competitive position. It is at this point, after consensus has been reached regarding the need for change, that transformation should be considered as a means to accomplish it.
Capabilities as focus of transformation
If one accepts the premise that capabilities are the primary basis by which organisations compete, then efforts to develop or enhance competitive advantage should be capabilities-based. In this way, a primary focus of transformation should be developing and enhancing capabilities.
Conceptually, capabilities can be viewed as having the components of people, process, organisation and technology. This implies that capabilities can be enhanced through innovation and change at the component level. When incremental change at the component level involves sustaining innovation, traditional innovation methodologies are typically adequate. However, when capability enhancement or development requires synchronisation of innovations in two or more components, or when innovation at the component level is disruptive, transformation methodologies are usually required.
A capabilities-based focus for transformation implies the following elements and relationships:
Transformation is a continuous process that creates and maintains competitive advantage;
Transformation encompasses the co-evolution of processes, organisations, technologies and human capital, which, when viewed together, enhance existing capabilities and enable new capabilities;
Transformation broadens the existing capabilities base through the creation of new competitive areas and competencies, thereby re-valuing existing competitive attributes;
Transformation seeks to affect current or future competitive advantage by identifying shifts in underlying principles or emerging rule sets;
Transformation involves identifying new sources of power that, if exploited, could enhance competitive advantage; and
Transformation focuses on the human component of change, developing leaders who can lead change and creating an organisational culture that is open to change and supportive of innovation, learning and risk-taking.
These elements provide a framework for thinking about transformation and structuring transformation initiatives. Clearly, the specifics of an organisation's competitive situation will determine the scope, pace and intensity of initiatives required to achieve desired strategic objectives. Consequently, the correct answer to the question "What do you mean by transformation and what does it look like?" is often "It depends on the specifics of the competitive situation that an organisation finds itself in."
Transformation and commercial organisations
In the commercial sector, an executive's decision to launch his or her company on a major transformation is typically driven by an eroded competitive position resulting from changes in the industry or the competitive environment. This may be the result of changes in the regulatory structure, the behaviour of competitors or the emergence of a new product or production technology.
Transformation efforts in the commercial sector to enhance or develop new capabilities can be proactive, as in the case of Dell's pre-emptive move into direct distribution and just-in-time manufacturing in the PC market. Transformation can also be reactive in response to a competitor's move, as in the case of competitor responses to Dell's relentless cost-reduction and share-gain drives. Compaq and HP merged in an attempt to gain scale advantage; IBM effectively surrendered, announcing the sale of its PC business to China's Lenovo and a new focus on services to corporate customers.
The opportunity for transformation to create or enhance competitive advantage by enhancing a capability through exploitation of a new technology is illustrated by Dell's shift to direct distribution. This shift was enabled and accelerated by the internet, which allowed for lower-cost direct distribution and supplemented a direct-sales force and telesales. The Dell experience also demonstrates that exploiting technology can require organisational, process and people changes. At Dell, the entire delivery system was reworked and the leadership team almost completely rebuilt with external talent as the business grew.
Transformation and military organisations
The US Department of Defense defines transformation as "a process that shapes the changing nature of military competition and cooperation through new combinations of concepts, capabilities, people and organisations that exploit our nation's advantages and protect against our asymmetric vulnerabilities to sustain our strategic position, which helps underpin peace and stability in the world."
This definition of transformation reinforces the centrality of capability development and enhancement to military transformation and highlights the proactive nature of the transformation process. In a defence context, the four principal components of capability - people, process, organisation and technology - can be expanded to include additional capability building blocks. In the US Department of Defense, this corresponds to the construct of Doctrine, Organisation, Training, Material, Leadership and Education, Personnel, and Facilities. The corresponding relationships between the four principal elements and the expanded US elements are as follows:
People - Personnel, Leadership and Education, and Training
Process - Doctrine
Organisation - Organisation
Technology - Material and Facilities
This simple framework highlights the principal dimensions of change for military forces and provides a mechanism to communicate clearly and succinctly the changes that can be pursued in "transforming" military forces. It also provides a useful perspective from which to re-examine the past and to develop strategies to meet the challenges of implementing military transformation.
Historic military transformation
Successful military transformations have all resulted in the development of new war-fighting capabilities. The development of new war-fighting capabilities almost always involved evolutionary changes in some or all of the principal components of technology, process, organisation and people. The net result of these evolutionary changes had a revolutionary impact on competitive advantage in combat when competitors' capability development lagged.
In many cases, the source of this competitive advantage resulted from exploitation of an innovation in a key component of capability. Examples include the Roman Phalanx (organisational innovation), gunpowder (technology innovation), cryptography (process innovation) and professional armies (people innovation). In some cases, however, innovation solely at the component level is inadequate to significantly enhance war-fighting capability. This is often the case when technology innovation enables an order-of-magnitude improvement (which corresponds to a factor of ten change) in a vital dimension of warfare. This ten-fold improvement occurred with carrier aviation (range of engagement), mechanised warfare (speed of manoeuvre), and air defence (detection range). In each of these cases, various combinations of technology, process, organisational and people innovation were required to realise new war-fighting capability. These cases highlight the challenges associated with identifying and exploiting new sources of power to develop new capabilities. They also shed light on the critical success factors for military transformation.
Technology, process and organisational innovation
With mechanised warfare, the primary enabling innovation was a technology innovation in the form of the tank, which, when mature, enabled the mechanised elements of armies to cover hundreds of miles in a day. This compared to distances of tens of miles for armies travelling on foot or horseback. The British, French, and German armies developed tanks and explored various means for employing them. However, only the German Army was able to successfully combine technology innovation with process and organisational innovation to create a new war-fighting capability. What, in retrospect, appear relatively simple process and organisational-change issues were a major point of contention and disagreement within the major armies that held the British and French armies back.
The process change argument revolved around whether tanks
should support infantry or vice versa. The human element was core to this argument,
since its outcome would determine whether the status of the existing war-fighting
elites - the infantry and the cavalry - would be maintained and reinforced, or
diminished. Once initial technology and process innovations had gained a foothold
within the German Army, the issue to address was the organisational forms to
best exploit the technology and process innovations. Specifically, the organisational-change
issues evolved around the sizes of mechanised units that should be created, whether
Panzer Brigades or Panzer Divisions.
| The human component of change is the most complicated factor in
The net impact of evolutionary changes in each of these areas - combined with effective use of radio and close air support - was
the transformation of land warfare. This enabled Germany to rapidly defeat Poland
in 1939 and France and her allies in 1940.
The importance of people innovations
The potential of some types of war-fighting innovation to disrupt the existing
elite's way of life poses one of the core challenges to military transformation.
This was the case with the development of mechanised warfare as well as with
the development of carrier aviation. The human component of change is the most
complicated factor in transformation, regardless of whether the setting is private,
public or military. Consequently, leaders charged with guiding change must focus
on the human element.
Accelerating innovation with continuous learning
One factor complicating military transformation is the need to demonstrate the potential operational effectiveness of a new concept. In the case of inter-war carrier aviation and mechanised warfare, the initial operational concepts and associated technologies failed to perform as well as existing capabilities. Few appreciated the potential impact that the operational concepts and technologies would have as they matured. In both cases, the ability to conduct a mutually reinforcing series of experiments, exercises and war-games was critical to enabling visionary leaders to accelerate learning rates and obtain evidence to support investing in emerging capabilities. In the case of mechanised warfare, a critical mass of individuals in the German Army was able to learn about how mechanised forces could be employed much faster than their peers in the British, French or Polish armies.
Transformation and NATO
In looking at NATO through the lens of transformation, it is important to ask the questions posed above regarding current and future competitive advantage. Answering these questions can provide useful insight into the degree to which transformation is required and the pace with which initiatives should be pursued.
There is broad consensus that NATO's current "competitive environment" has changed.
The comparatively static competitive environment of the Cold War has been replaced
by an extremely fluid and complex security landscape. The combination of new
competitors and their existing and emerging capabilities creates a new security
challenge. New competitors include transnational and non-state actors lacking
many of the familiar identifying attributes of territory, borders and fixed bases,
possessing a diverse set of aspirations and motives, and operating by different
NATO has responded to the new competitive environment by seeking to manage risk by creating a force with new capabilities and new competitive attributes to counter current and emerging threats. At the 2002 Prague Summit, Allies agreed that NATO forces needed to be more agile, deployable and sustainable. The degree of change required to create a force with an integrated set of appropriate capabilities clearly meets the criterion of transformation. Moreover, the primary engine for this is the NATO Response Force (NRF).
The NRF is envisioned as a 20,000-strong rapid-reaction force, prepared for combat, able to deploy in between 5 and 30 days and sustainable for 30 days. Each NRF is intended to be a combined arms team with assets that include a brigade-sized ground force, air assets and command and control capabilities to support up to 200 sorties per day, as well as maritime forces. To be deployable, these forces must be expeditionary. This requires technology change in the form of strategic airlift and people innovation in the form of soldiers and airmen who can deploy outside their national borders.
To be effective as an integrated combined arms team, the NRF will require technology innovation to deploy modern and interoperable command and control systems. And to be sustainable, the NRF will require the development of effective, robust and adaptable logistics capabilities. Achieving improvements in sustainability will require innovations in the areas of process, organisation and technology.
The need for enhanced interoperability poses one of the most significant challenges
for any single nation's armed forces and is particularly challenging for NATO. However, what makes the NRF an even more powerful engine for NATO transformation is the linkage of the NRF to NATO's
concept for Network-Enabled Capability (NEC). This link has the potential to
enable NATO forces to improve interoperability and better exploit the new source
of power associated with information sharing. But realising this potential in
the current fiscal environment and translating the NATO NEC concept into reality
will inevitably involve hard spending choices.
The necessity of investing in network-enabled capabilities creates an opportunity
for collaborative concept development and experimentation focused on establishing
the performance of networked coalition forces across the likely range of operations.
If properly executed, this approach would also help develop the empirical evidence
needed to support NATO when it comes to member states' investment in the core enablers of network-enabled capabilities. A key challenge for accelerating implementation of NATO NEC is improving Allies' capacity to learn from each other's
experiences with networked forces in operations, exercises and experimentation.
The deployment of the German/Netherlands Corps in Afghanistan, for example, provided
an opportunity for in-depth learning regarding the feasibility of employing network-enabled
and satellite-based communications in a coalition environment.
An emerging mechanism for accelerating organisational learning in this area is
the Network-Centric Operations Short Course. This executive-level course will
be offered by Allied Command Transformation, in collaboration with NATO's Centre of Excellence for Command and Control and the US Department of Defense's
Office of Force Transformation, from June 2005.
In looking at the full range of NATO transformation initiatives, the creation
of Allied Command Transformation stands out as an important organisational innovation
that promises to continue to contribute greatly to NATO's ongoing transformation. This Command's work and that of NATO's
emerging centres of excellence provide a strong foundation to facilitate sustained
Alliance transformation. In determining the success of military transformation,
history highlights the importance of leaders who can lead change and the value
of a culture that is open to change, tolerant of debate and supportive of innovation.
Only time will tell whether NATO has put together the factors critical to success.
However, based on progress to date, the outlook is hopeful.