Corporate transformation efforts frequently disappoint investors, even when management teams present ambitious plans. In a recent podcast episode, behavioral scientist Julia Dhar, author of How Change Really Works, discussed why large-scale change fails most of the time, what “false alignment” looks like in leadership teams, and how investors can evaluate whether a company’s innovation narrative has operational substance.
Dhar said research-backed change initiatives fail roughly 60% to 75% of the time and that the underlying reason is often not strategy quality on paper, but the human and organizational behavior required to execute transformation.
Key takeaways
- Transformation track record: Dhar cited evidence that major corporate change efforts fail 60% to 75% of the time.
- Catalyst to watch: Investors should scrutinize leadership coherence and the behavioral “how” behind announcements, not just the headline story.
- Spot false alignment: Look for inconsistencies in how executives describe strategy and whether internal stakeholders appear to genuinely understand the change.
- Innovation needs a grounded rationale: Dhar emphasized evaluating whether the stated innovation maps to a clear threat, fitness, or destiny narrative.
- Long-term implication: Signals from earnings calls and meetings—especially how leaders describe employee-focused change and their own behavioral adjustments—can help gauge change readiness.
Why corporate transformations often miss
Dhar said the return on transformation efforts has remained disappointing over decades of data. While companies often describe a transformation in terms such as mergers, integrations, or broad operating changes, Dhar argued execution is harder than planning because these efforts require large groups of people to alter established behaviors together.
According to Dhar, transformations are more likely to work when management actively addresses how behavior must change inside the organization and makes it easier for employees and partners to adopt the new ways of working that the company promised. She stressed that investors should monitor follow-through quarter over quarter, not only whether an initiative is announced successfully.
How to detect false alignment in leadership
A central concept in Dhar’s framework is “false alignment,” which she described as the appearance of consensus in meetings despite unresolved questions about direction or implementation. Dhar said this can occur when senior leaders ask whether “we’re aligned” and participants effectively agree without clearly sharing a detailed understanding of the change required and why it is necessary.
From the outside, Dhar suggested investors can still assess alignment by examining whether different executives communicate the company’s strategy in consistent ways—such as using similar language and providing comparable reasoning for decisions. She also argued that analysts should press management on implementation details: how the company expects to change, how success will be measured, and whether execution produces specific results over time rather than early enthusiasm alone.
Reading innovation stories: threat, fitness, or destiny
Investors often hear that companies are “innovating,” but Dhar said it matters what story the leadership team is telling to justify that innovation. She outlined three categories of change narratives:
- Threat story: change is driven by competitive pressure, existential risk, or disruptive technologies.
- Fitness story: change reflects continuous improvement to regain discipline in processes and capital allocation.
- Destiny story: change aims to reshape the company into what leaders believe it was meant to become, pursuing a broader horizon.
Dhar said leadership teams sometimes blend these narratives in ways that become muddled. If management can’t clearly classify the rationale for innovation—whether it is responding to a specific threat, focusing on disciplined improvement, or pursuing a destiny-type shift—she suggested investors should dig deeper because ambiguity can signal weak strategic clarity.
Founder-led companies and the “change distance” risk
Dhar also addressed whether founder-led businesses have an advantage. She said founders and very senior executives typically show strong enthusiasm for change, and she referenced survey findings indicating that the appetite for change among leaders is higher than among employees.
In Dhar’s view, the key risk is “change distance”—the gap between senior leadership’s energy for change and the organization’s capacity to adopt it. She said this gap can emerge whether the company is led by founders or by later CEOs and can cause a disconnect between the vision leaders articulate and the company’s ability to execute it. Dhar argued investors should look for evidence that leadership is managing that distance rather than assuming momentum will carry the transformation.
What long-term investors should look for next
For investors evaluating companies over multi-year horizons, Dhar suggested focusing on behavioral signals that are visible in earnings calls, shareholder meetings, and leadership Q&A. She highlighted two areas to watch: whether executives discuss employees with the same specificity and care they often reserve for customers, and whether management is open and concrete about changing its own behavior in response to new circumstances.
Going forward, investors may want to track whether companies provide implementation-level detail alongside strategy, demonstrate measurable improvements over successive reporting periods, and avoid explanations that rely on vague alignment or glossy innovation narratives without a clear operating plan.
