Change is generally managed through either a functional project team where a specific business unit will go after incremental improvements in their functional area, or at a larger enterprise level via a PMO which manages incremental change through coordinating cross-functional projects that effect multiple business units, and lastly through a Transformation Management Office which manages enterprise-wide transformative change. Although seemingly similar, each level has its place and purpose in an organization, so it’s important to distinguish the roles of all 3 change management vehicles in order to delineate effective change across the board. By establishing roles, goals, governance protocols, and definitions of various degrees of change, your organization can become much more effective at managing change.

Both change strategies of transformation and continuous improvement improve people, processes, products, and tools, but they differ in scope, approach, and duration. Let’s explore their differences.

1. Transformation:
   • Transformation goes after significant and fundamental changes across an organization that are critical to its future existence. They are survival plays. Shifts this big are about keeping up or getting ahead with changing markets, competitive playing fields, and technology. These types of changes are large-scale initiatives that impact the organization as a whole, affecting all business units. They are changes that often break a whole existing system or way of thinking or working. They must feel uncomfortable and even unfamiliar, if not, then they are not transformative.
   • Transformations often have ambitious targets that are typically just out of reach, meaning the company has to make a fundamental shift and build up new capabilities in order to achieve the transformation. Ambitious can be considered as making a leap, rather than a step, on the “S” curve of innovation. Transformation projects are often characterized as having high stakes, require substantial investments, and have a long-term goal.
   • Initiatives this big require organizations to fund and resource it differently. This may mean feeding more into the capital expenditure budget and dedicating full-time resources.
   • Lastly, a good way of thinking about transformation is the “side gig” to the day job. Meaning the side gig is generally the larger vision trying to come into play and replace the day job, but is still worked on on the side because you need the day job to fund the side gig.
2. Continuous Improvement:
   • Continuous improvement, on the other hand, focuses on making incremental and ongoing enhancements to existing people, processes, tools, or products rather than radical changes.
   • They are optimization plays that aren’t crucial to future existence, but help. They can be a step on the “S” curve of innovation, but certainly not a leap.
   • They are smaller scale changes that modify existing ways of working without totally breaking current systems. As a result they are faster and easier to achieve with shorter timelines and smaller investment coming from operational budgets. They could be either enterprise wide or business unit focused.
   • Resourcing these smaller initiatives generally tap into existing resources and have them split their time in an 80-20 fashion, with the latter being focused on the new change.

Now that you understand the various degrees of change, your next step as an organization is to establish your own definitions that are relevant to your industry and company size. Here are some key criteria to define the threshold between continuous improvement versus transformational change.

• Budget spend – How much investment is considered significant, or beyond average improvement spend?
• Number and resources and time commitment away from day job required
• Define the “S” curve for your operation. What is the next step? What is the next next step? How many degrees from where you currently are would you say defines a transformative change?
• How many steps in a process or system need to be broken before it needs to be swapped and replaced with something else?
• Look at your competition pressures and growth plan. At what level of annual growth would you define as just out of reach? 3x growth? 10x growth? What is a reasonable loss of market share that is reversible with current capabilities and tweaks versus a significant loss of market share that will continue bleeding unless something significant changes internally?
• What is the timeline to achieve the main goal? Do you consider a change transformative if it takes longer than 6 months, 12 months, 1.5 years?
• What degree of uncomfortable must you feel as an organization to be considered transformative? Although subjective, it is still a valid measure to poll for. This can be very different depending on your organization. For example if you are a tech company, used to taking lots of risks and pursuing innovation which is your norm, then your degree of uncomfortableness might reside at anything above an 8/10. If you are a regulated industry such as a financial services firm, you degree of uncomfortableness may be a 5/10. This can also vary by function, so it’s important to understand the stakeholders being impacted when creating the pool for the poll.

Now you might be wondering, if small incremental continuous improvements when consistently applied over time, lead to significant improvements in efficiency, quality, and overall performance, then why do we need to set up a Transformation Office to manage transformational change. Ideally and theoretically organizations would hope to be able to operate at a fast enough pace to achieve transformation with a pipeline of continuous improvement changes, but the fact is that it’s hard to see the eagle eye view when you operate in the weeds everyday. Same as it’s always better to use a 2-pronged approach of bottoms-up and top-down to meet somewhere in the middle with some degree of accuracy, rather than just always working from a bottom’s up approach. As a result it’s important to keep TMOs and PMO’s structurally separate. Although it’s important that they interact, you want the top-down people to bring that pure perspective while your bottom’s up people to bring theirs. Where they land depends on the dynamics of their interaction and if you can embed best in class collaboration, negotiation, compromise, and business casing principles into the teams to optimize the result.

In summary, while both transformations and continuous improvement aim to drive positive change within organizations, transformations involve large-scale, fundamental shifts that require a top-down approach whereas continuous improvement focuses on making ongoing incremental enhancements to existing processes or systems that bring a bottoms-up approach. All degrees of change must be managed in their appropriate setting and governance vehicle while also functionally working together.