Chapter 1 Strategic Organizational Transformation – Projects, Programs, and Portfolios in Strategic Organizational Transformation


Strategic Organizational Transformation

  • Strategic organizational transformations respond to shifts in the environment to establish sustainable competitive capabilities.
  • 70+ percent of corporations are expected to implement organizational transformations in the foreseeable future.
  • Typically, only one-third of organizational transformations are successful, with diminished capacity or elimination as a result of failure.
  • Strategic organizational transformations are a specific type of project suggesting the utilization of project management practices and techniques.
  • Unlike traditional project management, transformation must continually focus on the management of multiple projects, environmental uncertainty, and organizational politics.

Chapter Structure

Strategic Organizational Transformation

Organizations make continual adjustments in response to changes in external factors and influences. Adjustments vary in degree according to requirements dictated not by the organization, but by the environment in which they operate. Product portfolios must adjust according to the changing demands of consumer markets. Adjustments might be a minor response to broaden options or make feature changes that satisfy an evolving preference of customers, such as a larger number of flavor choices for soft drink offerings or switching to recyclable packaging for storage and shipping. Changes due to transformation may be far more complex, such as entering new markets to counter the erosion in sales of outdated goods or moving into the market for entertainment content instead of relying on entertainment hardware. An organization must adjust to changes in the labor force as demands on talent shift to newer disciplines, leaving a shortage of skilled workers, especially in the fields of technology and analytics. Attracting and retaining desirable talent requires that organizations adjust to attitudinal changes regarding loyalty to both company and career. The examples could continue almost indefinitely, but suffice it to say that the different sources of impetus to change include a litany of market factors, regulations, investor requirements, societal pressures, and competitors.

When organizational change involves directional factors in response to or anticipation of environmental changes, such as vision, product positioning, or operational structure, then organizations are implementing a strategic transformation (Mintzberg and Westley 1992). Formally, strategic organizational transformation refers to advanced adjustments or core makeovers conducted by organizations to establish a sustainable competitive advantage based on actual or predicted changes in the external environment. Strategic transformation alters organizational capabilities, products, systemic processes, and possibly higher features as culture and leadership. In practice, environmental changes tend to occur more rapidly than essential transformations, resulting in a misalignment between the market and the organizational direction or a lag between strategic transformations and environmental changes. When a lag occurs, an organization is forced into more rapid, revolutionary strategic transformations (Johnson, Scholes, and Whittington 2005).

Organizations strive to maintain currency and relevance through continual improvements, each representing a small adjustment, but collectively transforming the organization and meeting both past and anticipated changes to the external environment and internal conditions. However, even an organization effective at continual improvement will someday be outstripped by the speed and magnitude of changes to their environment. Figure 1.1 illustrates how incremental change can be effective up to a point, but not beyond due to the emergence of large gaps.

At the start, an organization may effectively address the needs of their customers, investors, and employees through incremental changes instead of substantial transformation. As the environment changes, indicated by the line of change level, the organization proceeds with incremental steps to address change as indicated by the bars in Figure 1.1. For a time, the responses adequately address the changes to the environment as in Point A. At Point B, the speed of environmental change accelerates, leaving the ability of an organization to rise to the level of required changes through incremental transformations. At Point C, change continues in the environment, but the organization reached its capacity to change existing systems, practices, processes, or policies; perhaps the expense of marginal change exceeds the value, or technical limitations are reached. At Point D, a major shift in the environment occurs, perhaps due to technology, regulation, or social awareness. In Cases B, C, and D, the ability of an organization to make incremental change fails to maintain the required pace. Thus, there are times when an incremental approach is effective, and other times when a more revolutionary transformation is required.

Figure 1.1 Incremental response to levels of change over time

Of course, the binary representation from incremental steps of transformation to larger revolutionary transformation is overly simplistic. The nature of incremental steps addresses long-term transformation typically associated with efficiency and profitability, while a revolutionary transformation results from challenging the beliefs of an organization. Incremental steps target adapting to smaller changes in the environment while continuing to rely on existing strengths and capabilities. Here, an organization accomplishes strategic transformation through a gradual process by making small-scale adjustments, slowly leading an organization from its current state to a future state while retaining strengths associated with operational capabilities and market advantages. Clearly, such an approach may maintain the stability of organizational operations while moving the organization to match the organizational transformation to environmental changes.

On the other hand, revolutionary transformation involves a substantial overhaul, perhaps requiring new capabilities, a new culture, and a new business model. In between incremental and revolutionary transformation lie many possibilities. Environmental change may require substantial operational improvements or product modifications, but no essential change to the business model or culture of the organization. Likewise, the reverse might also be true. Table 1.1 affords a comparative look at extreme and combined features.

Table 1.1 Incremental versus revolutionary transformation




Gradual strategic transformation implemented over a long period

Gradual transformations punctuated with occasional radical transformations

Large-scale strategic transformation implemented over a short period

Time horizon




Scope and scale




Planning basis










Opportunities and threats


Typical Impact


Business model

Almost everything





A strategic organizational transformation is a tool for environmental response, and the type of transformation chosen depends uniquely on each situation, on organizational change capacity, and pressures from the external environments. Management must focus on how to implement transformations best to facilitate surviving and thriving. Implementing strategic transformation that is not well considered is not a way to embrace change but more of a way to arrive at organizational extinction. Regardless of the location on the incremental to revolutionary scale, organizations must manage the transformation to achieve objectives of closing the gap with the environment. The transformation must be accomplished effectively and efficiently to leave the organization in the best competitive position possible.

The Prevalence of Strategic Organizational Transformation

Detailed data to characterize organizational effort are scarce due to differing perspectives on the threshold to be recognized as transformational change. Most researchers and authors use the term interchangeably, as transformation is a higher level of change involving more depth of impact for an organization. A 2016 study by the Corporate Executive Board (CEB, now a subsidiary of Gartner) asserts that organizations execute an average of five transformations over every three years. Of the firms considered, 78 percent indicated attempting deep transformations of culture or mission. Furthermore, 73 percent of corporations in the report estimate they will execute a major organizational transformation within the next three years. Only a small fraction expects to slow the pace of transformation.


Transformations arise from multiple reasons and in multiple contexts. Taking an organization from current status to a position aligned with the environment will involve any number of interest groups, require specialized knowledge from multiple disciplines, and necessitate management of change across a broad scope. The transformation will cross structural levels and structural divisions in an organization leading to a variety of perspectives. The CEO may view a specific initiative as a change to strategy, whereas a field sales representative may see only a change to the product portfolio. The manager of information technology may view a specific initiative through a narrow technology lens, whereas operations managers may view the same transformation as a change to the process.

Though organizations focus on moving the organization to meet strategic needs, determination of mission and strategy must supplant other initiatives in priority. Organizations must adjust to this primary aspect or face dire consequences. Corporations with decades of past success are not assured of survival in the current marketplace without adjusting to new realities. The number of longstanding corporate giants struggling in the market and with investor valuations continues to grow. Companies with novel vision and missions displaced many industrial giants not able to transform. Yet the tenure of new organizations is by no means assured if they cannot identify essential transformations and effectively manage required change. All remaining challenges of transformation pale in need to keep the mission and strategy of the organization in line with the environment. New strategies ignite the need for further transformation, either as a part of the same major transformation or as a series of anticipated minor changes.

The organizational structure must transform to place the talent in the best position possible to achieve strategic organizational goals. The effective organization of departments can provide channels to press the desired chain of command or autonomy. Altering responsibilities or roles of departments, teams, and people can improve responsiveness to clients in a transformation from a product push orientation to one of service pull. Mergers and acquisitions spark consideration of the best structure for the combined organization. Hiring, training, and retaining personnel for new roles and responsibilities becomes an essential element of transformation. Organizational structure may represent significant, rapid change with many stages in progress simultaneously, or with a more incremental approach to alignment.

Technology is often cited as a reason to transform an organization. This view is limiting, however. Organizations must align with the environment, not to technological advancement. No doubt, technology is powerful. The Internet of Things, advances in artificial intelligence, blockchain and secure contracts, and cloud computing enable further business opportunities in products and market or support more efficient means of operations, but these and other technologies are enablers of opportunity, not saviors of poorly designed strategy. Still, technology-driven transformation presents some of the most invasive change to the entire organization. Managing changes incorporating technology require extensive control and management to gain acceptance throughout the organization and achieve the expected benefits (Jiang, Klein, and Fernandez 2018).

As a product line ages, a transformation is essential. Product strategy is a clear example of how transformation in one area influences changes to others. An organization must determine whether to upgrade products, create new products, or attempt to reimage the existing product through marketing efforts. Any decision requires a certain level of change, impacts different responsibilities across departments, and could also be implemented as a major transformation or incremental changes often depending on the perceived urgency in meeting market demands. A focus on new product development may require installation of structural changes to bring development projects into an organization established on repetitive operations. Processes to produce new products affect operations. Departments may need to expand or retrench. Updating channels of distribution requires change. Structuring such a change process requires strong consideration of speed and scope.

As recent as a few decades ago, organizations began to recognize the critical need to manage organizational knowledge universally. Knowledge management practices and more effective management of intellectual capital drove the inclusion of new executives, systems, and processes. The same trend continues today with an emphasis on analytics, the art of turning extensive data into competitive advantages. Knowledge and analytics help an organization respond faster, make better decisions, and reveal new opportunities. An organization must be prepared to capitalize on knowledge advantages, sometimes requiring rapid changes of significant magnitude or simple adjustments to processes. Both the incorporation into the organization of knowledge practices and changes required to respond to revelations imply the need to properly manage change both incrementally and in rapid, large chunks.

At this point, we still have not described other contexts of transformation, such as changes to organizational culture, business tasks, and processes, or legal agreements and policy. However, a pattern is already established in the limited number of transformations described. The transformation may be rapid or paced, incremental or comprehensive, invasive or confined, and of broad or narrow scope. Transformations impact multiple layers of management, consider different time frames, and involve multiple skill categories. Regardless, one item of commonality is that transformations must be effectively managed to integrate all aspects of change seamlessly. Yet organizations are not typically structured or have the managerial capacity to transform continually.


Currently, most strategic transformations fail to achieve the expected goals. The CEB report on more than 400 organizational transformations in various corporations worldwide found that only one-third of attempted transformations achieved desired levels of success, as shown in Figure 1.2. Failure of organizational transformations often results in major economic losses and corporate dilemmas: while it may be difficult to continue the transformation, abandoning transformation may cause dissatisfaction among stockholders or other stakeholders. Major failures in organizational transformation even result in corporate closure. Numerous challenges persist in successfully conducting a strategic transformation (Franken, Edwards, and Lambert 2009; Balogun, Hailey, and Gustafsson 2015). Challenges range across traits of the transformation, organization, stakeholders, and environment.

Figure 1.2 Success rates of strategic organizational transformations

One primary challenge is the locus of power and resulting conflict. Power can be dispersed or centered in a particular body. Often, power is granted fully to ownership, resulting in short-term pressures to realize profitability and rapid growth. Major strategic shifts require excessive resources and place high risks on immediate and even continued financial rewards. In certain industries, unions may have undue influence, restricting how jobs may change or workforces may be reshaped. Change typically requires managerial autonomy and decentralization of authority to provide the flexibility and responsive essential for success. Organizations must often navigate the various streams of power while acting in ways contrary to powerful interests. The balance is often between risks due to change and risks due to a failure to change. This delicate balancing act often results in a combined approach to transformation.

Time poses a major challenge. Many strategic transformations push an urgent deadline. Transformation initiatives may require a long period to complete, fostering ownership worries about gaps in productivity. Initiatives forced by a crisis or extensive delay do not often permit sufficient time for analysis and planning. Success is more likely than failure when the need to change is determined well in advance to allow smoother transitions and windows for responding to dynamic environments. Pressures to meet predicted conditions or events, to be next to market, to counter competition, to return to profitability, to complete integration in mergers and acquisitions, to meet many other time-oriented constraints, can confound the ability to control the transformation.

Resource requirements can be overwhelming. An organization must commit funds, personnel, and time. If conducted during times of full operations, the additional requirements may be beyond the capacity of the organization. On the other hand, reducing operations will reduce the inflow of essential capital. Neither choice is pleasing, making it difficult to arrive at a satisfactory plan. Larger organizations may have the capacity to make incremental improvements on the way to a major transformation, but many organizations are forced into several simultaneously. Resources become scattered or scarce. Talent shortages appear as many changes require dedicated talent and new talent, indicating a lack of capability to complete a transformation. Managers cherish talent and are reluctant to relinquish control over limited resources once attained.

Further challenges stem from increased complexities of organizations. Transformations may cross multiple in-house functions, extend to regional facilities around the world, and even impact other organizations in a supply chain involved in the production of products and services. The spread of an organization involves a diversity of cultures, disciplines, and management levels. Therefore, when transformation occurs for any one strategy, the impacts are far-reaching and may involve multiple personnel, processes, structures, technologies, suppliers, and collaborators. This broad complexity makes strategic transformation plans far more complex and increases the risk of failure.

Scope of change addresses the breadth of reach for the change to implement. The scope also considers if big changes are required to culture, mission, or structure, or if shallow changes to processes and product offerings fit the bill. The broader the reach, the greater the control required, and the greater the risk of failure. The reverse side of scope also matters—retention. Core functions and competitive postures may go unchanged; these aspects may lie in unique departments and leave a number of people unaffected. Care must be taken to ensure that conflicts do not arise between those subjected to change and those protected from change.

An organization must be ready for the changes to be implemented. Strategic transformations begin with discussions and decisions among a few select individuals before the launch of any program of change. Yet the involvement of a large subset of the employees will prove essential before completion. Many will view change as unnecessary, merely a function of a bureaucratic whim. Participants must be properly motivated, which requires an understanding of the transformation purpose and process. Consideration of this factor, those aforementioned, and others that arise to each unique context, all require unique management skills and organizational structures to plan the strategic transformation and govern the process of change.

Guidelines for Strategic Organizational Transformation

There are numerous models that advise how organizations should initiate and implement strategic transformation. Searching the Internet and scouring academic journals, we located over 70 frameworks on how to complete a strategic transformation. Only a handful of sources mention project management techniques and those limit to a single perspective. They almost all have one commonality, a presentation of strategic transformation as having a sequential life cycle of inception to completion. Most focus on process, some consider behavior issues as the primary basis of transformation, and a few consider both aspects when striving to realize the changes necessary for transformation. Perhaps the most frequently described framework is credited to the famous psychologist Kurt Lewin, who considers the personal aspects of transformation and alludes to actives that may complete the process (1997). The model is only the three phases shown in Figure 1.3. With a goal of improving performance, action must be taken to free current behavior and processes so that change may be conducted. Action taken during a change may temporarily lessen performance. Once personnel adjust to the new way of doing things, the new state should be made permanent (until the next major change).

Figure 1.3 Lewin’s model of transformational change

The model is unique in that it clearly indicates an end has come to the old way of doing things. People must realize that they need to change, which often involves loss of ingrained processes, loss of relationships within the organization, and perhaps even loss of familiar surroundings. It is essential that people be motivated to make the required changes and surrender old habits. Negative feelings may be aroused during significant change, so a motivational jolt is critical. Moving into the phase of transformation requires inordinate effort about past expectations. The organization may suffer at the time, leading to uncertainty about the future for everyone involved in the transformation. Effort must be elevated to acquire new processes and skills. Burnout is a substantial risk along with discomfort due to visible degradation of organizational performance. Lastly, the organization enters a new state where norms, culture, and procedures represent a higher level of performance for the organization. Management must provide support to encourage the new state and reward those who adjust.

Models frequently mentioned by researchers include those of Kast and Rosenzweig (1973) and Schein (1965) described in Table 1.2. These models, and many others, focus on the steps of a transformative change. The model by Kotter (2009), also in Table 1.2, is similar to the process models, but adds a beginning step similar to unfreezing and a final step similar to refreezing. Based on these models and others presented in the many research papers, we find four key steps of strategic organizational transformation to be (1) assessment of current situations, (2) selection of new strategies, (3) implementation of strategic transformation, and (4) monitoring and review of strategic transformation.

Table 1.2 Strategic organizational transformation process models



Kast and Rosenzweig’s transformation process model

Review current status: review, reflect on, assess, and study internal and external organization environments

Identify problems: identify existing problems and determine the need for organizational transformation

Identify gaps: identify gaps between current and future states and analyze existing problems

Design methods: propose and assess different methods for discussion and performance measurement and select appropriate methods

Implement transformation: implement transformation according to chosen methods and action plans

Review performance: assess and review results; if new issues arise, begin this process again from the start

Schein adaption cycle model

Assess internal and external environment changes

Provide specific transformation information to relevant organizational units

Change internal processes according to information provided

Reduce or control the negative impacts of transformation

Output new products and results generated after transformation

Review and observe consistencies between internal and external environments to assess transformation results

Kotter transformation model

Generate a sense of urgency

Establish a strong and stable transformation team

Establish a vision and form strategy

Communicate and promote transformation visions

Authorize employees to implement actions to achieve visions

Systemic planning and short-term benefits

Implement organizational transformation

Establish systems

Culture formation

Of these four key steps, assessment of current situations is the heart of strategic transformations, where organizational status and internal and external environments are analyzed to clarify the needs and motives of organizational transformation. This foundation is then used to design and plan a transformation strategy to guide strategic decisions. After confirming the direction and goals of the new strategy, the next step involves the implementation of strategy, which is key to the success of achieving strategic transformations. Therefore, it is necessary to continually monitor and review the implementation process to ensure timely and effective adjustments to strategy implementation.

However, the reliance on steps in a model is misleading. Organizations may have multiple transformations in progress that interact with each other and influence the internal environment evaluated. Monitoring must be continual. Environmental changes are not considerate enough to wait until transformation is complete, indicating that continual evaluation of the environment might interrupt a transformation initiative completely by making it moot, incorrect, or even escalate its importance. Organizations must develop managerial structures to be fluid and responsive, not related to a defined process.

Strategic Organizational Transformation as Projects

Concepts of project management are becoming more prevalent, and more managers are using project management techniques to implement strategic transformation (Partington 1996). Researchers view strategic transformation as a specific project or program in which well-established project management techniques apply (Caldwell 2003). Utilization of project management techniques can enhance success rates of strategic organizational transformations (McElroy 1996). Projects seem a natural structure for implementing strategic transformation. Projects address many of the difficulties described earlier, including the management of time, scope, budget, stakeholders, communication, and resources.

However, note that even though more scholars recommend and more managers apply project management techniques to implement strategic transformation, in actuality, managers often fail to understand or focus on the differences in strategic transformation projects to projects of less severity and complexity, and simply use traditional project management processes and techniques. Given the rates of success, such an approach is not as successful as desired. When viewing strategic transformations as projects, it is necessary to allow for the issues of complexity noted earlier. For our purpose, we deem differing complexities related to the following three factors:

  1. Complexities of strategic transformation projects stem from the fact that it is necessary to manage multiple projects (project combinations). Implementation of new strategies at all levels within an organization is a task that must be accomplished through multiple projects rather than a single project. However, limited resources within an organization pose a basic difficulty in that multiple projects must be designed, timed, and completed in a network of interrelated projects. Additional complexities also arise during the conduct of the projects because limited resources must be effectively allocated and coordinated.
  2. Management complexities of strategic transformation projects stem from uncertainties in goals and solutions. Traditional projects produce tangible products or relatively specific services. Project goals and procedures for most contexts are assumed to be well specified and clear for the duration of the project. However, strategic transformation projects are a type of “soft project,” where outcomes may be intangible, and project goals are difficult to define at the initiation. Only as the transformation progresses do the goals crystallize and the means of achievement become evident. Even then, adjustments must be made to the goals and means as continued interaction with external environments reveals new directions. Therefore, there is uncertainty within strategic transformation projects at the start and throughout the life of the project. Traditional project management techniques cannot be used to manage dynamic projects where solutions and goals are both unclear to start, and evolving as the project progresses. Therefore, an inherent problem of strategic transformation projects is the management of uncertainty in project goals and solutions.
  3. Management complexities of strategic transformation projects arise from power and politics. The very nature of strategic transformations is that of a power struggle between potential and existing beneficiaries. In terms of strategic transformation projects, finding an effective compromise among organizational stakeholders is key to project success and often a game of politics. This factor may be addressed in the planning of traditional projects, but the dynamic nature of a transformation presents an ever-shifting landscape.

This book relies on research in project management and builds a framework for a strategic transformation from a project management perspective. Strategy development requires an understanding of the internal and external environments of the organization. An overview of the framework is in Figure 1.4, which shows the two halves of strategic transformation, strategy development, and strategy implementation. Typically, executives are the decision makers in the formulation of strategy. However, a statement of strategy is insufficient to move the organization forward. Thus, executives oversee the creation of strategic plans that then guide any organizational transformation. Lower management implements the plans to unfreeze, transform, and refreeze as required by the plans, normally with project management techniques organized as discussed in the remainder of this book.

The implementation side contains many temporary endeavors organized as projects. The core mission of each project is to generate and produce outcomes under limited amounts of time, budget, and other resources while permanent structures (e.g., the executive team) work to ensure a strategic direction and pursuit of that strategic direction. A controlling entity, the transformation management office (or other permanent organizational control entity such as project management office, program management office, or change management office) obtains information on all projects within an organization and maintains consistency with strategy (Aubry, Hobbs, and Thuillier 2007). For example, project management offices organize information on project performance to provide a reference for the organization to adjust, remove, or add individual projects that reside in the collection of all projects.

The controlling office is a permanent structure that helps those in charge of the projects arrive at completion. The transformation management office further reports to the strategic decision makers. Those making the strategic decisions may then adjust organizational strategy according to organizational capabilities and any environmental shifts. These lines of direction appear in Figure 1.4. Strategic decisions direct planning, which in turn directs the management of installation actions organized as temporary projects, programs, and project portfolios. A responsible entity (the transformation management office) works with temporary entities (those in the dashed box in Figure 1.4) to gather feedback. The controlling office digests the feedback to suggest changes in implementation and inform executives for their future strategic formulations.

Figure 1.4 Strategy development and implementation in organizational transformation

Going Forth

We examine the increasingly urgent strategic transformation challenges faced by organizations from a strategic organizational transformation perspective, developing a project management framework for planning and governance (decision makers and implementers), highlighting how effective project management can be used to manage strategic organizational transformation and ultimately enhance organizational performance.

The remainder of this book describes effective project management concepts for the implementation of strategic organizational transformation in terms of traditional project management, complex project management, program (multiple projects) management, project portfolio management, and conclude with a discussion of the organizational drivers of project management. Unlike other sources that focus solely on one type of project management when discussing strategic organizational transformation, we use a sequential approach in this book, proceeding from simple projects through comprehensive portfolios.

So that we may build understanding in increasing complexity, we apply a sequential structure in chapters 2, 3, 4, and 5. Chapter 2 starts with an introduction to traditional project management for temporary and one-time events within organizations. This type of project management is principally applied to strategic transformation projects where goals and solutions are clear. When there is the uncertainty of the solution methods, we apply complex project management as described in Chapter 3. Complex project management excels when facing structural complexities, technical complexities, and temporal complexities during the implementation of strategic organizational transformations. When uncertainty exists in project goals, when project deliverables are ambiguous, we switch to program management as described in Chapter 4 to respond to directional complexities of strategic organizational transformation. In Chapter 5, we also discuss project combination management for building portfolios. Traditional project management, complex project management, and program management focus on “how to conduct projects,” but organizations are usually faced with the issue of “how to select projects” before project implementation. Determining the combinations of projects in a portfolio is a higher order function for an organization. The project combinations contain traditional projects, complex projects, and programs.

For each of chapters 2, 3, 4, and 5, we employ a standard configuration to best frame the appropriate project management techniques. Following a definition in each chapter, we consider, “Why do we need this type of project management?” (motive analysis). Following the motive is a definition of the type and relevant elements. Processes and specific techniques of each type of project management (processes) follow. Lastly, each chapter concludes with an exposition of project management boundaries and application limitations (limitations and challenges), which naturally leads to the subsequent chapters.

Beyond the project management considerations in chapters 2, 3, 4, and 5, we move on to organizational foundations in Chapter 6. Organizational foundations include organizational transformation cultures, transformation structures, and transformation capabilities. Management of foundations enhances the strategic transformation ability of an organization in search of the best approaches to implement strategic transformation.

Discussion Questions

  1. What complications arise from treating all environmental changes with incremental transformations?
  2. What emotional factors or fears inhibit the implementation of transformation? What suggestions would you have for overcoming these inhibitions?
  3. Can you think of a recent organizational transformation receiving wide coverage in the press? What impressions resulted in the market for that organization’s product or service?
  4. Governments often transform agencies or services due to societal changes. Identify a recent example. Can you identify any directive activity associated with unfreezing expectations or behaviors?
  5. As a manager, how would you approach your subordinates about the need to make a major transformation?


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