Ten questions · 5 minutesTransformation Lens Check →

Why Zero-Based Transformation™?

Because a transformation can be fully active, on schedule and on budget, and still leave the operating model it was meant to change exactly as it was.

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Practitioners tracing one piece of work across a full lifecycle map

Funded on outcomes.

Transformations are approved for what they will change in the business.

Governed on activity.

They are then managed on milestones, status and spend.

The gap is the operating model.

Zero-Based Transformation™ derives every requirement from what it must make true.

Why it is no longer optional

The next tranche is released on evidence of change, not reports of progress.

CFOs and strategy officers now review transformation portfolios for what they changed in the operating model and what it is worth. A transformation that cannot show that change does not get its next round of funding, whatever its delivery status. Only 48% of digital initiatives meet or exceed their business outcome targets.Gartner, 2025 CIO and Technology Executive Survey, n = 3,186

The argument in six steps

Transformation is funded on outcomes and governed on activity.

Much of the value is lost before the work begins.

Requirements are inherited rather than derived.

Reported progress outruns the operating model.

Derive every requirement from what the operating model must make true.

A common basis for funding, direction and delivery.

01–04 describe the condition. 05–06 are the Zero-Based response.

Why zero-based

Zero-based budgeting asks every dollar to justify itself. Zero-Based Transformation™ asks every initiative to justify the operating change it produces.

Nothing carries forward because it was funded last year. Each initiative re-earns its place against what the operating model must make true.

Enablement debt

Most stalled transformations are carrying enablement debt.

The change was approved and delivered. What it depended on, the records, rules, handoffs and owners, was never built. The debt grows quietly until it shows up in the numbers.

01The pattern

Transformation is funded on outcomes and governed on activity.

Enterprises are committing more to transformation and capturing a small share of what they commit. In Deloitte’s 2026 Enterprise Cost Transformation Survey, 96 percent of organizations were carrying out cost transformations, and 14 percent achieved or exceeded their program savings targets in 2025.¹ In PwC’s 2025 Digital Trends in Operations Survey, 92 percent of respondents said their technology investments had not fully delivered the expected results.²

The business case is written in outcomes. Governance in most programs tracks activity: milestones, go-lives and spend against plan. The value case sits between the two and is rarely examined until it is overdue.

Exhibit 1 · Cost transformation, 2025

96%

of organizations carrying out cost transformations

14%

achieved or exceeded their savings targets

Source 1. Self-reported.

02Where value is lost

Much of the value is lost before the work begins.

Value loss is usually attributed to execution. In McKinsey’s survey of 1,034 transformation participants, 55 percent of value loss occurred during and after implementation; the remaining 45 percent was lost before implementation began, starting as early as day one.³ Deloitte found that 24 percent of organizations account for value leakage when setting their targets.¹

Value that is never specified cannot be governed later.

Exhibit 2 · Where transformation value is lost

45%Before implementation: targets, plans, scope

55%During and after implementation

Share of total value loss, by stage. Source 3.

03The cause

Requirements are inherited rather than derived.

Most transformations begin from what already exists: the prior year’s portfolio, budget lines, vendor proposals and the current organization chart. Requirements are then written to fit solutions already chosen.

Between strategy and delivery sits a layer that seldom has an owner: the statement of what the operating model must make true. Where it is missing, each team supplies its own. Six teams produce six interpretations, each coherent on its own terms and none reconciled with the others.

Exhibit 3 · The missing middle

Strategy

Direction and intent

Operating requirements

What must the operating model make true?

Delivery, in any method

Defined work, executed

The Operating Requirements Model ›

04The consequence

Reported progress outruns the operating model.

When requirements are inherited, progress is measured against them, and a program can meet every milestone without changing how the work runs. McKinsey’s research on operating-model redesigns finds 63 percent of companies meeting most of their objectives and 24 percent highly successful.⁴ The firm also reports that even top-performing companies achieve about 70 percent of their strategies’ full potential, in large part because of shortcomings in their operating models.⁵

For finance, the result is a claim that cannot be reproduced: benefits reported by the program that do not appear in the operating results. The argument is developed in Counted, Not Proven.

Exhibit 4 · Operating-model outcomes

24%

of operating-model redesigns highly successful

~70%

of strategy potential achieved, even by top performers

Sources 4 and 5.

05The alternative

Derive every requirement from what the operating model must make true.

Zero-based budgeting asks each line of a budget to justify itself from its purpose rather than carry forward from the prior period.⁶ Zero-Based Transformation™ applies the same test to the transformation. Its scope, requirements and work are derived from the operating model it must change.

Exhibit 5 · Two starting points

InheritedZero-based

Scope starts fromLast year’s portfolio, budgets and proposalsWhat the operating model must make true

RequirementsWritten to fit the chosen solutionDefined before solutions harden

ProgressMilestones, go-lives and spendOperating conditions that now hold

Value claimsReported by the programTraced to the work that produced them

After the programThe knowledge leaves with itThe method stays with your team

06What it enables

A common basis for funding, direction and delivery.

Finance increasingly shares ownership of transformation: 52 percent of CFOs in FTI Consulting’s 2026 survey reported leading or co-leading it.⁷ The methodology gives finance and strategy, and the executives whose mandates depend on them, one statement of what the operating model must make true and one standard of evidence for whether it has.

Exhibit 6 · What each role can do with it

Chief Financial Officer

Release capital against evidence that the work converts to operating change, and that change to value.

Chief Strategy Officer

State the strategy as the operating conditions it requires, before solutions are chosen.

COO · CTO · CMO

Trace each mandate to the operating conditions it depends on, and to the evidence that they hold.

Your transformation team

Read, define, connect and prove the change with one method, retained after the program ends.

Teams build the capability in the Foundation Course and apply it to a live transformation in the Practitioner Intensive.

Evidence boundary

The cited research establishes how much transformation value goes uncaptured, when it is lost, and the growing role of finance in transformation. Figures are self-reported survey results; the Deloitte figures concern cost transformation programs, and the McKinsey operating-model figures are respondent assessments of success. None independently validates Zero-Based Transformation™.

Zero-Based Transformation™ reflects more than two decades of applied transformation work across 60+ enterprise programs, strategies and mandates in organizations from roughly $400 million to $20 billion. The full research base is on the Methodology Overview.

Deloitte (2026). 2026 Enterprise Cost Transformation Survey. Press release, September 2026. Source ↗
PwC (2025). Digital Trends in Operations Survey, as reported in “Deliver value, not just projects: Three questions about sustained outcomes transformation risks.” Source ↗
McKinsey & Company (2021). Losing from day one: Why even successful transformations fall short. Global survey, n = 1,034 respondents who had taken part in a transformation in the preceding five years, fielded May–June 2021. Source ↗
McKinsey & Company. How to get your operating model transformation back on track. McKinsey Quarterly. Source ↗
McKinsey & Company (2025). What is an operating model? McKinsey Explainers. Source ↗
Pyhrr, P. A. (1970). Zero-base budgeting. Harvard Business Review, November 1970. Source ↗
FTI Consulting (2026). 2026 Global CFO Survey Report. n = 700 CFOs, February 2026. Source ↗

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