Beware of These 5 Leadership Pitfalls of Growth Transformations

Change is inevitable, but what defines you and your organization is how you respond and adapt. This can be the difference between thriving and simply surviving.

Change also happens more rapidly and cuts more deeply than ever. Bubble markets, tech disruption, M&A activity, and volatility necessitate more than tweaking operations – you might need a complete overhaul of your organization from top to bottom.

These crunch moments are known as “growth transformations.” These are major pivots that aim to keep you ahead of competitors, improve capabilities, and increase market share.

They can lead to lasting success. But many businesses struggle to assess and manage risks, making strategic missteps, executing plans badly, or leaving things way too late.

McKinsey research highlights that 70 percent of change programs fail to reach their goals. [1] Digital transformations fare even worse, with only 16 percent succeeding at improving performance and sustaining changes long-term. [2]

5 Common Pitfalls in Growth Transformations

So, what are some of the main pitfalls of growth transformations to avoid? And what can you take on board from companies who have learned the hard way? Here, we explore five pitfalls – and how five major organizations fell headlong into them.

Pitfall 1: Leadership Misalignment and Centralized Decision Making

During the early pandemic, fitness company Peloton thrived as gyms closed and demand for at-home fitness equipment skyrocketed. By 2020, the company was valued at more than $50 billion, and CEO John Foley seemed unstoppable.

However, Foley's overconfidence in what many saw as temporary pandemic demand led to a series of strategic missteps. [3]

Despite market analysts and internal advisors cautioning that demand would drop post-pandemic, he aggressively scaled the business, investing heavily in manufacturing and acquiring fitness equipment firm Precor for US$420 million.

Senior leaders and board members warned Foley to scale back, but he remained convinced that Peloton was on course to become a long-term lifestyle brand.

A serious product recall exacerbated the situation when a treadmill was linked to a child's death. Rather than immediately addressing safety concerns, the company initially resisted calls for a recall. This damaged public trust, highlighting the leadership's disconnect from customer safety priorities.

Foley stepped down as CEO in February 2022, and Peleton brought in an outsider, Barry McCarthy, former CFO of Spotify and Netflix, to restructure and salvage operations.

Lessons Learned:

• Separate temporary trends from permanent shifts: the pandemic demand created unusual conditions that wouldn't last.
• Prioritize customer safety over company image: quick, transparent responses to safety issues build rather than damage trust.
• Listen to diverse perspectives: internal advisors and market analysts often see warning signs leadership might miss.

Pitfall 2: Resistance to Change and Employee Engagement

In 2011, struggling retail chain J. C. Penney appointed Ron Johnson, formerly of Apple, as CEO to revitalize the business. Johnson introduced sweeping changes, including eliminating sales and coupons in favor of everyday low pricing and overhauling store layouts.

At first, the transformation seemed promising from a strategic perspective. However, when the changes were implemented, cracks began to emerge.

Johnson had failed to adequately consult or prepare employees, leading to confusion and resistance within the organization. [4] He underestimated the existing corporate culture and the attachment both customers and staff had to traditional practices.

Threatened by unfamiliar processes, feeling excluded from decision making, and watching customer complaints mount, employees resisted change. The pace of which also alienated core customers and contributed to a demoralized workforce.

Instead of adjusting course and involving employees in refining the approach, Johnson doubled down on his vision, further widening the disconnect between leadership and staff.

Lessons Learned:

• Engage your employees early: build trust and feelings of inclusion by involving the wider team.
• Be transparent: clearly communicate how changes will impact your employees.
• Recognize the human side: remember that transformations affect people as well as the company. So pay attention to its cultural and emotional, as well as technical impacts.

Pitfall 3: Overambitious Goals Without Adequate Resources

In the mid-1990s, pharmaceutical distributor FoxMeyer Drugs embarked on an ambitious project to implement a new $100 million enterprise resource planning (ERP) system to handle increased demand and streamline operations.

However, the company aimed for a rapid, company-wide implementation without phased rollouts or sufficient testing. But there simply weren't the resources or expertise to get there safely.

FoxMeyer underestimated the complexity and resources required, leading to inadequate training and support for employees.

As a result, the flawed implementation disrupted operations, causing significant financial losses and ultimately leading to FoxMeyer's bankruptcy in 1996. [5]

Lessons Learned:

• Set realistic goals: aim high, but make sure you can actually get there. Targets must be grounded in market realities and internal capabilities.
• Assess your readiness: make sure your company has the required skills and resources before throwing out numbers.
• Be flexible: regularly assess performance and adjust your strategy to reach your goals.

Pitfall 4: Ignoring Market Trends and Innovation

In 1975, Kodak developed the first world’s first digital camera. The team involved knew it had created something that could revolutionize photography.

Millions of dollars were poured into the project – only for the firm to get cold feet and scrap the planned release. Kodak's leadership remained focused on film-based photography, underestimating the potential of digital technology and fearing how it would cannibalize their business model. [6]

While other companies moved forward, investing in digital innovation and introducing advanced camera technology to consumers, Kodak stuck doggedly to their traditional film-based processes and products.

By the time it caught up, Kodak's products were outdated, and their competitive edge was lost. The company filed for bankruptcy in 2012, but has since rebuilt and is now focused on commercial printing and chemical coating materials.

Lessons Learned:

• Keep innovating: prioritize R&D to maintain your edge in the market.
• Monitor market trends: keep an eye on any industry changes and adjust your strategies as needed.
• Build capabilities early: always seek to develop new skills and technologies, even if they do not seem essential yet.

Pitfall 5: Operational Scalability and Financial Risks

WeWork promised to revolutionize office space with flexible, community-driven work environments. Founded in 2010, the company grew explosively, reaching a peak valuation of $47 billion by 2019.

However, WeWork's rapid expansion strategy exemplified the dangers of scaling without solid operational foundations. The company opened new locations at breakneck speed, spending US$2 billion on property and equipment in 2018 alone while losing money on most of their leases. [7]

Founder Adam Neumann's leadership prioritized growth metrics over profitability, with the company burning through billions in investment without achieving positive unit economics (i.e: individual elements of the business were costing more to operate than they generated in revenue).

Their business model relied on continuous expansion to mask underlying losses — and once growth stalled, the financial reality became impossible to ignore.

The company's operational challenges were compounded by Neumann's leadership style, which was described as “eccentric” and “disengaged.” [8]

When WeWork filed for its IPO in 2019, investors finally scrutinized the fundamentals and discovered the company was essentially a traditional real estate business dressed up with tech valuations.

Lessons Learned:

• Build sustainable unit economics before scaling: growth without profitability is just expensive failure.
• Don't confuse activity with profitable progress: opening new locations isn't the same as building a successful business.
• Focus on operational excellence: flashy marketing and high valuations can't substitute for solid business fundamentals.

Frequently Asked Questions

What's the best way to identify whether a transformation initiative is based on temporary trends or long-term shifts?

Conduct structured horizon scanning and market analysis. Use data to separate short-term spikes (like pandemic-driven demand) from enduring behavioral or technological changes.

How can I better involve employees in transformation efforts from the start?

Engage teams early through workshops, surveys, and feedback sessions. Share the vision, listen to concerns, and make space for employee input in shaping change.

What’s the risk of launching a transformation without enough internal capability?

Insufficient resources can lead to delays, poor execution, and team burnout. Assess readiness carefully, invest in training, and bring in expert support when needed.

How do I avoid over-scaling too quickly during a transformation?

Focus on sustainable growth. Validate your business model and financial performance at smaller scales before expanding. Monitor margins and adjust pacing accordingly.