Operational efficiency is not transformation

Michael Porter, in his landmark 1996 Harvard Business Review article, “What Is Strategy?”, made a clear distinction: operational effectiveness is not strategy. While practices such as total quality management, benchmarking, and outsourcing can lead to significant improvements, they are easily replicated and do not constitute a sustainable competitive advantage.

For digital and technology leaders, a similar debate persists: operational effectiveness is not transformation. Many executives recognize this distinction and seek a dedicated transformation office to drive outcomes beyond efficiency gains and into the realm of true business model reinvention.

What is transformation?

Porter distinguishes operational effectiveness—performing similar activities better than rivals—from strategic positioning, which entails performing different activities or performing similar activities in unique ways.

The same logic applies to transformation. Consider Amazon’s use of AI-driven demand forecasting and route optimization to reduce delivery times and inventory costs. While these improvements enhance efficiency, they are also easily adopted by competitors such as FedEx and UPS.

Now, compare that to Tesla’s over-the-air (OTA) software updates. Traditional automakers rely on dealerships and service centers for vehicle maintenance, recalls, and feature updates. Tesla fundamentally changed this model by enabling OTA updates, allowing it to fix issues, improve performance, and introduce new features remotely. This wasn’t just an efficiency play—it transformed the very nature of vehicle ownership, turning cars into continually evolving digital platforms. Rather than simply optimizing the existing automotive service model, Tesla redefined how customers interact with and experience their vehicles.

Achieving transformation through the missing middle

When organizations pursue transformation, they often jump straight from ideation to execution—focusing on refining existing systems and processes rather than redefining the activity itself. This approach can yield value but frequently results in a multi-million-dollar effort to do the same things faster rather than reimagining what is possible.

The “missing middle” is the set of strategic activities that occur between ideation and execution—steps that increase the likelihood of delivering truly transformative outcomes rather than just operational efficiencies. These activities include establishing a vision, reimagining experiences and processes, defining the holistic technical architecture, and devising a plan for managing delivery and change.

The magic of the “missing middle” is not derived from the activities themselves. None of them in isolation are novel; you are probably doing all of them in some form or fashion. Rather, the magic is derived from the order, rigor, and purview at which they are executed.

Order: how you do it matters

Take order, for example. A company that starts its transformation by designing systems and then tries to retrofit a vision based on the system changes they have proposed will likely overlook key aspects of the experience or opportunities to truly change how they go to market to serve a growing persona or channel in a differentiated fashion.

Similarly, a transformation that skips visioning to determine how success will be measured and how it ties to firm economics may suffer from an existential crisis, unable to articulate how its investment has moved the needle. Order matters, and it all needs to start with a measurable vision.

Rigor: transformation is not a part-time job

The rigor with which these activities are executed is another moment of truth. As the Chief Digital Officer of a Fortune 500 manufacturing client said, “Transformation is not a part-time job.”

Performing the missing middle correctly often requires a team of dedicated resources. Sometimes, this is simply a matter of capacity, and other times, it’s a matter of not having the proper skill set. Organizations that do this well dedicate full-time resources to establishing repeatable playbooks and executing the activities in the missing middle.

For example, a Fortune 500 manufacturing client recently enlisted 15 new full-time resources to stand up a transformation function and lead key transformation activities: strategy, experience, process and technical architecture, and change.

Despite their best efforts and intentions, a technical lead asked to design the future-state vision and experience off the side of their desk, while also leading architecture, will inevitably fall short. Cross-functional, cross-business-unit transformation initiatives that are intended to fundamentally change how a business operates or interacts with constituents deserve fully dedicated resources to execute the missing middle.

Purview: operate with a wide-angle lens

Last but surely not least is purview. For large, at-scale organizations, transformation efforts cannot succeed in a vacuum. It’s rare that something truly transformative won’t have its tentacles in various business units, functions, and other parallel transformative initiatives.

To effectively play the orchestra, there needs to be a centralized transformation function that defines “the music” that the various initiatives follow in conducting the activities in the missing middle. It should define the overarching guardrails for experience, business, and technical architecture for all of the initiatives in the portfolio. It should also have methods for maintaining ongoing dialogue with initiative teams so they can verify alignment with the guardrails and have visibility into execution to navigate portfolio-level issues, ensuring that the outcomes of one initiative complement, rather than conflict with, those of another.

The degree to which these capabilities are decentralized at the initiative or centralized at the portfolio level will vary based on the goals of the organization regarding consistency, governance, speed, and agility. Over time, most organizations settle in with a hybrid model.

If you’re only getting faster, you may be doing it wrong

If your transformation efforts feel more like an exercise in operational efficiency rather than a fundamental shift in how your business operates, it may be time to reconsider your approach. True transformation is not about doing the same things better—it is about redefining what is possible. A dedicated transformation office, equipped with the right order, rigor, and purview, can be the difference between incremental improvement and a true reinvention of your business model. By focusing on the missing middle and aligning strategic activities before execution, organizations can drive meaningful, sustainable change that extends beyond efficiency and into the realm of true competitive advantage.