ment team typically loses the ability to make changes
on its own, and different stakeholders such as banks
and other debt holders may have a say in trying to
restructure the company.
Based on BCG’s experience working with clients,
we have developed a three-part transformation framework. 1 Turnaround and restructuring programs involve
applying all three components:
• Funding the Journey. Launch short-term,
no-regret moves to establish and demonstrate
momentum and to free up capital to pay back
debt and help the company reposition.
• Winning in the Medium-Term. Develop a
business model and an operating model to
increase competitive advantage.
• Organizing for Sustained Performance. Set
up the right team, organization, technology and
culture to deliver long-term gains.
A turnaround or restructuring program should
include all three elements, but the relative importance of
each element changes at various points in the process.
In addition, it requires an initial triage and assessment stage to determine the severity of the company’s
challenges and determine the right path forward. (See
Exhibit 2, next page)
Triage and Assessment
The initial stage, triage and assessment, is aimed at
generating a clear picture of the company’s financial
situation and identifying the most immediate priorities. At this point, management needs to launch rapid
measures to stop the bleeding and free up capital as
soon as possible — ideally in weeks, certainly no longer
than a few months. > >
1 See “Transformation: The Imperative to Change,” BCG, November 2014.
This is an excerpt from Transformation: Delivering and
Sustaining Breakthrough Performance.
Many transformation initiatives focus on improving a company’s financial and operational performance from “good” (or
moderate) to “great”— that is, the company is already
doing well in some or most areas, yet management still
sees a need to make improvements. Other companies
occupy a separate category of transformation because
they are in the midst of immediate, urgent crises. We
refer to these as turnaround and restructuring efforts.
With the business environment becoming so volatile
and unpredictable, an increasing number of companies
need to take dramatic actions to generate rapid impact
or risk going out of business.
Typically, business problems unfold in three phases.
(See Exhibit 1, next page.)
During the first phase — a strategic crisis — the
company is no longer able to compete effectively. Sales
numbers may be stable, or even growing, yet profitability has begun to decline. Very often, management
has tried a new strategy, or several, without success. (In
some cases, management may not recognize the scope
of the problem.) At this phase, traditional transformation programs are relevant.
If the company does not change its course, the
BY LARS FAESTE, JOCHEN SCHOENFELDER, CHRISTIAN BRUB AND CHRISTOPH LAY
second stage is a profit crisis. Sales are now stagnating
or declining, while profit margins turn markedly nega-
tive. At this point, the company starts burning through
cash reserves and needs to launch a turnaround.
Failure to do so — and continuing to burn cash
— leads to the third and final phase: a liquidity crisis,
in which the company may soon lack the financial
resources to keep operating. At this point, the manage-
Desperate Times Call for
In an excerpt from their book, Transformation: Delivering and Sustaining Breakthrough Performance,
Boston Consulting Group’s Lars Faeste, Jochen Schoenfelder, Christian Brub and Christoph Lay discuss the
essential steps needed to create a transformational turnaround and restructuring effort.
Senior Partner &
Managing Director —
Copenhagen Office, The
Boston Consulting Group