Strategy+Business recently published an article by the same name that contained a 10-point checklist that leaders of large-scale transformation can use to put their wisdom into practice. Considering that managerial delusions are often rampant, that the Home Bias effect is often in full force, and that What Got You Here Won’t Get You There, any process that imparts a little common sense is a good thing.

As the article states, “successful transformation requires the common sense of experienced management. Unfortunately, the ability to apply that common sense, especially over the long time frame of a serious change in organizational culture, is all too rare”. To do so, a CEO needs to keep in mind at least 10 critical factors – and use a lot of uncommon concentration and awareness to put them all into practice.

1. The CEO makes a strong case for change by clearly and persuasively articulating the factors that are driving it.
   “If you’re the leader, you’ve got to define the problem, no matter how brutal, and you’ve got to use honest and unambiguous language. Your staff can’t do it. Only you can tell people about the reality you are facing. If you don’t, they’ll never accept it.”
2. Senior leaders set an aggressive, enterprise-wide target.
   Big goals are the key to driving big actions. An audacious, market-mandated target sends the message that transformation is not a matter of incremental changes.
3. Senior management is firmly aligned.
   Every individual on the leadership team needs to have a stake in the transformation effort as a whole, rather than focusing only on the piece related to his or her business or function.
4. An integrated enterprise-wide program for change is put in place.
   Cross-functional business solutions enable people to live out the new business model instead of remaining locked in the concerns of their day-to-day responsibilities.
5. Senior leaders focus on augmenting capabilities along with cutting costs.
   The prospect of working to create a better future is highly motivating for most employees … thus … efforts to massively change the cost structure of an organization must always be set within the positive context of building new skills. An organization that fails to develop a positive and forward-looking future vision is likely to shrink under the pressure of simply cutting costs.
6. “Moments of truth” are recognized and shared in order to demonstrate commitment.
   A “moment of truth” highlights precisely what needs to change in an organization.
7. A detailed plan provides the blueprint.
   Leaders must develop a comprehensive guide to the changes ahead. The blueprint must specify the steps that will enable the organization to meet its targets, set aggressive yet achievable timelines, address the change management issues that occur at every stage, and identify new roles for people throughout the organization.
8. Enabling triggers are built in from the start.
   The detailed map for the transformation should identify in advance triggering events that will clearly be important in moving the process of change forward.
9. Communication is proactive and ongoing.
   Internal communications should be blunt and realistic about the market imperative driving transformation. External communications to Wall Street analysts, governing structures, and the board must not only be consistent with the transformation’s goals, they must be proactive and aimed at aligning these key constituents with the goals of the transformation.
10. The results of change are sustained.
    New capabilities for achieving accountability, distributing benefits, allocating incentives, and tracking results must therefore remain in place even after financial targets are met.

The McKinsey Quarterly recently published an article by Dan P. Lovallo and Lenny T. Mendonca titled “Strategy’s Strategist: An Interview with Richard Rumelt” that had a number of great insights from the man himself.

Richard Rumfelt, a professor of strategy at UCLA’s Anderson School of Management, where he holds the Harry and Elsa Kunin Chair in Business and Society, is considered a heavyweight when it comes to strategy. He was the first person to uncover a statistical link between corporate strategy and profitability and his 1991 study demonstrated that neither industries nor corporate ownership can explain the lion’s share of the differences in profitability among business units. Being in the right industry does matter – but being good at what you do matters a lot more.

Rumelt notes that there has been a dramatic recentralization of strategy work in recent times, in contrast to the eighties where the wisdom was to decentralize into business units which would each generate a separate strategic plan, and that most corporate strategic plans have little to do with strategy. Rumelt has found that most corporate strategic plans are simply three-year or five-year rolling resource budgets with some sort of market share projection. Strategy needs to start with the identification of changes, not budgets.

The essence of strategic thinking is speculative judgments that allow one to take a position in a world that is confusing and uncertain. You can’t get rid of ambiguity and uncertainty, as they are the flip side of opportunity, and it’s not easy to clearly predict which positions will pay off, because if it was easy to calculate the financial implications of a choice – we could just use a spreadsheet, but that’s where the opportunity to profit comes into play. In essence, strategic thinking is a substitute for having a clear connection between the positions we take and their economic outcomes.

Most companies that become market leaders do so by being the first to jump through a window of opportunity when it opens – the first to get it right. The predatory approach of leaping through a window of opportunity and staying focused on big wins – not on maintenance activities – is what distinguishes a real entrepreneurial strategy. This should be backed up by the right knowledge and skill pools.

Rumelt also gives us some insight on how to identify which changes are important and which resources to combine. In business, change happens in years and there are earthqakes that cause massive changes which shift high and low ground all the time. When this happens, opportunities arise. Take advantage of them using “strategy dynamics”, which studies how those changes would shift each dimension of the industry. Does this increase or decrease industry consolidation? integration? product differentiation? The answers to these questions will trigger inductive insights that will help you identify which changes are important and how to address them. The answer will be like a solution to a puzzle.

Rumelt also notes that CEOs should be focusing on their job as managers – and the most important job of any manager is to break down a situation into challenges that subordinates can handle. In a focused company, the CEO will do this for the entire organization by examining the overall competitive situation and providing enough guidance to let the organization get to work – effectively defining the business problem for everyone else.

So what does this mean for you? It’s important to understand where your industry is moving, what the leaders are doing, and what opportunities they are creating or leaving on the table. Are the market leaders taking full advantage of the opportunities available to them? Are they locking up long term contracts, spot-buying, or balancing the two? Single sourcing or dual sourcing? Using leading sourcing or procurement technologies? Meeting consumer demand? Introducing products consumer wants? Expanding into new countries and markets? Whatever they are not doing, that they should be doing, that’s your opportunity. And this is true even if you only have responsibility for the sourcing / procurement / supply chain division – after all, in today’s global economy, that’s where the greatest opportunity for impact is at many companies.