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How business change & transformation has matured over the last decade

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Here’s a closer look at exactly how business change and transformation has evolved over the past 10 years to become the important business function we know today.

Early 2000s: Pre-GFC

During the mid noughties, UK plc was enjoying a post 9/11 rebound driven by high government spending and a booming, de-regulated financial services sector. Access to finance was abundant and CFO time was more focussed (comparatively) on growth and strategy than cost management.

As business change and transformation activities drove an increase in demand on the workforce, the natural port of call was to bring in consultancy (Big 4 et al) resources, often in droves, or independent contractors directly through recruitment agencies. Rates were relatively unchallenged and consultancy firms were often engaged to provide full end-to-end delivery. The majority of organisations had little governance around spend versus quality of delivery with more autonomy being given to Directors and Department Heads.

The post-Enron era of improved governance and financial rigour was starting to take shape with the introduction of the Sarbanes Oxley act – the first regulatory driven headache to really prompt corporate firms to splurge on non-strategic change. That said, investment spend was typically going into new IT systems and growth / innovation driven initiatives. Central business transformation functions were very much the rarity, with projects typically being run from within IT or the functional areas themselves.

2007-2012: Post-GFC

Fast forward to the 2007/08 credit crunch and the ensuing stock market crash and the change in economic landscape drove a major shift in corporate management agendas. As stock prices plummeted and revenues shrank, boards’ focus turned to cost management and streamlining of operations. In many industries, business models were completely overhauled with those firms on the front foot ensuring continued growth and success. Many household name blue chips that were slow to adapt to the new world were often left behind and consigned to a future of stagnation and obscurity.

The financial services industry in particular saw more changes than any other. Aside from the high profile casualties (Lehman Brothers, Merrill Lynch, HBOS etc) being forced into emergency integrations, the wave of regulation that hit the industry created unprecedented demand for business change / project delivery specialists and the professional services industry as a whole. Accountants, lawyers and advisors of all shapes and sizes were being called upon to provide answers to appease regulators, authorities and the baying public in a trend that has continued to gather momentum to this day.

Sensing the longer term demand for change professionals we saw a significant increase in organisations’ appetite to bring in change specialists as permanent members of staff in many industries, despite a wider climate of cost cutting and headcount reduction. The rise of the ‘internal consulting group’ aimed to both reduce management consultancy spend and gain a competitive edge through the creation of a high impact strategy and change delivery function - offering high performing management consultants a great entry point into organisations from which they could build their career. In reality, the sheer volume of work coupled with demands of shareholders and regulators saw continued growth in both contractor and management consultancy spend, with many project management specialists choosing to ride the wave of demand (and in turn the day rates) in their chosen sector.

As the market grew and matured, this era also saw the rise of the Subject Matter Expert, with many (contractors in particular) pursuing a more specialist path in the ‘hot topic’ areas such as risk management and regulatory change, governance and control, eCommerce / digital transformation and operational excellence.

Present Day – The recovery takes hold

As we reflect on 10 years of evolution in the change management market – through pre-crisis, post-crisis and now finally back into growth phase – the natural evolution of change delivery models and with them, the wider corporate landscape has been remarkable. Interestingly, in the Q3 2014 Deloitte CFO survey, risk appetite hit a seven year high, despite financial and economic uncertainties, as two thirds of CFOs think that now is a good time to take greater risk onto the balance sheet.

Business Transformation groups have grown, matured and become a staple support function among big corporates as the focus has crept back towards innovation and strategic change. Big Data, eCommerce, digital / Cloud solutions and business intelligence are all driving growth initiatives as firms look to capitalise on an improved and increasingly globalised economic landscape.

Financial services remains heavily regulated and the never-ending tail of governance and risk management driven change looks like it will keep relevant skills in this sector in demand for some time to come.

Most large firms have spent the last 2–3 years addressing the often skewed, Permanent / Contractor / Consultancy balance – in order to reduce burn rates and keep intellectual property in-house. The quest for better financial management has fed through to all functions, with Procurement / Sourcing teams enjoying more empowerment and control of how and where money is being spent. As a result, company executives have more internal red-tape to navigate and all suppliers, from professional services firms and technology vendors to water and stationary providers, have had margins squeezed and more robust contracts negotiated.

Recruitment models have matured with most blue chips opting for the Recruitment Process Outsourcing (RPO) model, driving down spend in supplier numbers in return for higher volumes, although in turn creating extra layers of process for all to navigate. Consultancy & Strategy houses are diversifying and have in many instances moved into each others’ territories with the offering of broader end-to-end services in order to maintain previous levels of revenue.

As we look to the future, much will depend on the continuing strength of the recovery, but if we look at the lessons learned over the past decade, one quote from Charles Darwin rings very true, albeit his intentions were for it to be taken in a different context… “It is not the strongest of the species that survives, nor the most intelligent that survives. It is the one that is the most adaptable to change”.

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