When embarking on a significant digital or business transformation, return on investment is the name of the game. After all, these initiatives are multi-year, multi-million, and likely to significantly change how people work. It makes sense that this thing better be worth everyone’s time when you put it that way! But, a critical and often-overlooked factor in transformation ROI is speed, effectiveness, and sustainability of your business community’s adoption of the new ways of working. The best technology and the most efficient processes are only as good as the willingness and ability of people to use them.
So, how do you model and cost this people-dependent factor upfront, long before the project even kicks off?
By using a simple yet powerful concept called the “change curve.” This curve enables you to effectively model how people are likely to react to change, which drives the effort for managing their transition through the change. Ultimately, this type of modeling enables you to factor in the cost and benefit of the change as part of your overall transformation ROI.
Grounding Among Alternate Realities
To illustrate what modeling could look like in action, let’s look at two different versions of the future.
In the first version, the future state after the transformation is unclear, and the day-to-day effects of the change on the business are not well-understood. The ‘what this means for me’ narrative is full of holes, like Swiss cheese, with as many unknowns as knowns. Some people move through this type of transition easily, while most struggle. There are many reasons for struggle — some may resist the change brought on by significant transformation, others don’t know what the change means, and still, more don’t know how to be effective in the new reality.
Regardless of the specifics, the consequence is the same — your vision of the future and the desired transformational value aren’t fully realized.
Now let’s consider a second version where the future state after the transformation is well understood. In this version, everyone made it through all of the adoption stages required by the change and is actively working towards sustaining the future state. You have successfully employed tactics to overcome resistance, help understand what is changing, and own doing things in a new way.
In this second version of the future, your ROI is inherently higher than the first because better business adoption increases not just the speed to value but also the magnitude and duration of the value horizon of the transformation.
Comparing these two future states side by side, the path forward becomes clearer. If people’s ability to more quickly embrace, adopt, and sustain new processes running on new tech and better data contributes to higher transformation value, then leveraging the Change Curve approach to optimize ROI models is a must.
Understanding the Change Curve
Before incorporating the Change Curve into the business case and ROI model, a few grounding concepts are in order.
The Science Of Change: Physical Constants and Variables
There are many models of change, but they all have at least three elements in common:
- The current state
- The transition state
- The future state
The change process is sequential. You can’t tell people how to change before you convince them to want to change.
We have to allow that this is not a one-directional path as sometimes people can, and do, fall back along the change curve. e.g. “I thought I liked the new process but now that I fully understand it I’m worried about the additional steps and no longer like it.” We also have to allow for the fact that different people and groups of people are at different velocities along the Change Curve. Taken together, we have Time and some quality of Change as our X and Y dimensions on the change plane, and people’s attitudes as the function moving along a curve-like path on this plane at different speeds and trajectories.
The Art Of Change: Different Models For Measuring Different Dynamics of Change
Multiple approaches have been developed in the field of Organizational Change Management (OCM) for navigating the various aspects of the change curve, but, for our purposes, we will consider just two models to illustrate why choosing the right one or several for your transformation confers specific advantages.
Prosci ADKAR Model
The ADKAR Assessment evaluates an individual’s readiness for change based on five stages:
This model is built around the idea that the organization cannot change until individuals do, and it can guide team members through transformation and identify roadblocks they may face.
Kubler-Ross Change Curve
While the Kubler-Ross Change Curve initially was designed to help people going through trauma or grief, it is now also used for organizations going through highly-disruptive change (and believe me: many individuals will feel that a major transformation project is traumatic!).
It looks at where an individual is on their journey to identify the best strategies for managing transitioning individuals from one specific stage to another:
Depending on the nature of the transformation (e.g., new capabilities or headcount optimization) and the culture of the organization (e.g., accustomed to change vs. traditional), one model may be more relevant than the other for capturing the type and magnitude of effort required to navigate people along the respective change curves.
These two models are not necessarily mutually exclusive and can be combined as needed. For example, if it is expected that a particular transformation is likely to generate significant resistance, supplementing ADKAR with Kubler-Ross would enable a more precise measure of the effort required to manage such resistance. In this instance where the ADKAR is limited by having only one stage — Desire — the Kubler-Ross model can be added to further break down the movement through Desire to the next stage or stages for an individual or a similarly situated group of individuals.
Applying The Change Curve To Business Transformation ROI Models
The two basic elements that drive the financial modeling of business adoption in a transformation business case are (i) Organization Culture and (ii) Organizational Change Management efficacy.
Culture Maps To The Type And Shape Of The Change Curve
Culture dictates not only how an organization performs when going through change but also where and how change is received. For example, some organizational cultures resist change initially, but once bought in, rapidly and sustainably adopt and own new ways of working. Other cultures may embrace change, but because of being accustomed to constant change as the norm, they never sustain any new ways beyond a specific time horizon.
Understanding your organization’s culture is key to understanding where OCM attention is needed most, both to understand what is required to ensure lasting adoption and where there are likely to have quick wins and highest impact with minimum effort vs. diminishing returns despite maximum effort. Conducting this analysis enables the mapping of Culture to the relevant Change Curve (or combinations thereof).
OCM Efficacy Maps to Velocity Moving Along The Change Curve
Every Change Curve stage is time-dependent on other relevant activities in the transformation. E.g., Users better understand the new processes and any new system or tool before they are expected to test those. Movement from one stage to the next can have longer or shorter durations for different departments, business units, or levels within the organization. Depending on where you expect the steepest slopes on your Change Curve and how quickly you need to move various stakeholder groups along various points on the Change Curve to enable your various transformation activities, you can allocate the appropriate level of effort across various OCM roles and techniques. A few examples:
If your organization is new or recently changed from M&A or reorganization, you may need additional up-front effort for the discovery of the different stakeholders to ensure you have enough lead time to develop Awareness (ADKAR) or get them from Shock to Decision (Kubler-Ross).
If your organization is resistant to change or sufficiently diverse in geographies or ways of working, you may determine that getting people from Awareness to Ability (ADKAR) is the biggest hurdle.
If your organization has already started on the transformation and change management needs to be incorporated mid-flight, you may conclude that Reinforcement (ADKAR) or Integration (Kubler-Ross) is where the highest value will be realized.
In summary, analysis of the organization’s culture and selection of the right Change Curve models enables the mapping of organizational dynamics to the expected level of effort to ensure effective business adoption. With the change effort understood, OCM investment can then be plotted against the Change Curve (and time horizon) of the transformation.
Don’t Just Plan For Change But Use Change To Drive Value
Developing a bullet-proof business case for a major business transformation is no easy feat. In these complex cost models, the greatest attention is spent on capital expenditures, vendor outlays, and other “hard numbers.” On the benefits side, maintenance and overhead reductions, headcount efficiencies, and operational capabilities are frequently touted, oftentimes with benefits trailing costs by many years. Accelerating the start of benefits and their yield curve is a key driver for any strategic transformation value case.
Incorporating the Change Curve approach into the transformation ROI model enables a more accurate method to quantify, not just the associated costs of OCM work involved in a transformation, but also a more precise mapping of that work against the expected benefits associated with improved business adoption of the transformation.