In a workshop for Change Program Managers at a major bank, one of the teams started their project presentation with the phrase “There’s nothing like a major operational failure to get everyone’s attention …” Think BP in the Gulf, Volkswagen the diesel cheat, RBS and their countless systems meltdowns, Standard Chartered and Iran, Barclays and Libor … Sony or Target with their security woes. All of these represent highly visible operational or regulatory failures. They got everyone’s attention and very often there were high profile casualties in the boardroom as a result. We trust large brands to do the right thing, but operationally, they are often found lacking.
If we were on a boat, we’d blame the captain for not steering the ship away from danger … but isn’t it really everyone’s responsibility. We all need to act in the lookout role; to identify, package and prioritize the signals—to help the captain turn the super tanker, without putting the ship on the rocks or running it aground. And let’s face it; most large organisations have a lot of similarities with big boats. The point is that any large, established business can suffer a similar fate. One moment, everything appears normal, the next thing you know, and you’re out of a job.
The captain (CEO) may know and appreciate the need for a change in direction, but the body politic of the organisation, like the inertia of the super tanker, always wants to keep going in the same direction. While this sounds like a useful analogy, there is a spectrum of change:
- Some CEOs want a fundamental “wellness programme” for the organisation—a radical change that involves cultural change and true value innovation, such as pivoting the brand to focus on the long term needs of customers and their experience rather than quarterly shareholder returns. In these sorts of change programmes everything is up for grabs including the role played by the organisation within its ecosystem, the organisation structure, the processes, the products and services. There’s normally a mountain to climb in terms of the cultural change element.
- Somewhere in the middle, the ambition is more modest—simplifying business operations in preparation for the ravages of the digital economy, or reaffirming organisational purpose and ensuring it reflects in policies and practices. Typically, this sort of initiative follows on from an organisational merger, where multiple functions do similar things in many different countries. These sorts of changes often involve challenging the organisation structure and its fiefdoms, right down to the compensation mechanisms, decision making practices and processes.
- Others are content with applying a “Band Aid”—fixing a major problem within a function or dealing with some “burning platform,” as if, once applied, we can all then return to normal. Whatever that is. This sort of change is often more about putting “go faster stripes” on what is already happening—reducing the cost or speed of doing something (resource reduction). The organisation structure is taken as a given. Processes and management practices might need tweaking, but nobody is seriously challenging the need for them. Everyone wants clarity around what’s going to happen and how it affects them, but the underlying value proposition remains the same.
In our experience, about 80% of change programmes fall into the Band-Aid category, with no ambition of radical change the fundamentals of the organisation. Very few, perhaps 3-5%, set out with a wellness programme in mind. Either way, the CEO wants to achieve the goal without betting the company. Or putting it another way, they may want to revolutionize the business but do it with evolutionary techniques.
At best, our courageous CEO can describe the trajectory—the direction—and paint a picture of what that future might look like along with the perils of the status quo. They’ll use this as a first step to persuade other C level executives to explore the possibilities and even appoint a seasoned exec to oversee things. But it’s getting everyone else in the firm involved that will really make the change happen and ensure its sustainability.
It’s at that point that most change programmes run into the blockers and tacklers—the ones who have most to lose. If the change involves a challenge to the hegemony of the current functions religious (political) warfare often breaks out. They want everything kept nicely segregated—it’s their fiefdoms, their budget. They’ve helped create these functions and have built their careers around moving up and around them. They want everything communicated in their language. Typically, managers at the C-1 and C-2 levels want to see themselves in the new structure before they invest their time, energy and resources into helping create that new future. They’ll nod at the right times and send along their representatives to the key meetings to report back. But in most organisations, it’s those managers and their representatives that are the ones most threatened by the emerging new world order. You’ll hear phrases like “we like working stepwise,” and “building on our heritage;” or best of all, “that’s not how we do things here.”
With revolutionary change the need for many firms, the hard part is getting there with evolutionary methods. The challenge for the change leader is to overcome the catch 22—how do you bring the critical people along? How do you engage the key protagonists into the change programme and get their commitment and support, while avoiding alienating them? That usually means couching the language in ways that the existing functions can find palatable—outlining the challenge and the implications of maintaining the status quo, highlighting the opportunity and helping them work out the best way to get there.
A Different View Of Strategy
One could argue that we are talking here about tactics rather than strategy. Indeed, by the time the change programme is beginning there have already been many discussions around strategy. However, any discussion around change programmes as an implementation or execution of strategy must take into account how those strategic choices were made. While there are lots of different strategy methods, we see two big buckets:
- Deterministic Strategy. This view of strategy involves three (OK, perhaps six) people sitting in a room to agree what the future should look like—perhaps using some variation of Porters Five Forces, PEST or SWOT analysis. Having proclaimed the future and supported by consultants, they now decide on the tactics to get there. Then it’s a case of telling everyone else how they’ve got to change, when to jump and how high. There are always alternative methods and techniques to substitute into the mix, but the underlying assumption is that the machine itself is fine; all they have to do is to fix or replace some broken part. At the heart of this approach is a mechanistic mental model with appropriate levers and controls for the business machine. All that’s needed is a reduction in resources and increase in speed, and hey bingo, the transformation is complete!
Well, not quite. That linear dogma—a way of thinking that was born in the 17th century—has very little to do with the creative economy and the rapidly evolving disruptive forces of the 21st century. Moreover, when you need a wellness programme, or the more common post-merger integration, your real challenges revolve around overcoming inward-looking, hierarchical and bureaucratic cultures. Most large organisations are crippled by their existing management practices, which, in turn, stifle any attempts at meaningful change or innovation.
- Emergent Strategy. In this bucket, the future strategy emerges over time. These approaches take into account that the overall direction is usually known—the mountain in the distance that we have to climb, yet what is just around the next bend is unknown. The path to get up that mountain is unique to each traveller (organisation); plans are developed to follow a particular path, and then readjusted based on experimentation and feedback. Rather than just a few people making all the decisions and imposing them on others, to scale the heights the organisation engages people from the core and the frontlines, challenging them to co-create the future. While teams may have efficiency targets, their ultimate focus is on value. The goal is to evolve a set of robust “service propositions” or product/service combinations that deliver more, and better, value to customers.
Rather than the inside-out approach, where the business views itself as machine to make ever larger returns for shareholders, the principle underlying this approach is that by setting out to delight customers, the enterprise delivers more value than its competitors. The organisation sets out to make an emotional connection with customers; delivering an experience that a competitor cannot easily replicate. As a result, the organisation turns its customers into brand advocates—think Apple and its iPhone. Customers are more likely to buy more, to recommend the organisation to their friends, and have a far lower likelihood to decamp to a competitor. There is no single well-articulated grand-master plan. The firm continuously adjusts its service propositions and products to the environment within which it finds itself.
“Business transformation means being prepared to change everything you do—but most importantly—how you think” COO, Major Wealth Management Organization
Rethinking change outside-in ensures a focus on the “why”—why the firm exists and how it delivers value. It means you focus on creating a wellness programme rather than applying yet another Band-Aid that drives up complexity. It means engaging your people to do the right things (rather than just doing things right). This way of engaging and co-creating helps overcome the silos (politics), drives innovation, and in the end, delivers differentiated value to your customers. This style of thinking gets to the marrow of the organisational culture rather than just going skin deep. If you do it right, it becomes their change, not yours. But that means that most of you—the change agents, need to change the way you think about change.
This is an uncomfortable place for many traditional managers and executives. Many large businesses are still dominated by that inward-looking, hierarchical and bureaucratic culture. They’ve only got where they are today by exercising their knowledge and power; change is for everyone else, not them. They still think that better and more controlled in execution of the plan is the route to success.
The central thesis of this book is that the deterministic approach to change just doesn’t work. Galileo Galilei once said “You cannot teach a man anything, you can only help him find it within himself.” Too many change efforts in big businesses start with exactly the opposite; they begin with decree and diktat. The initiative risks getting derailed before it gets started. Galileo also said “I have never met a man so ignorant that I couldn’t learn something from him.” The point is that, when you reimagine change—when you refocus the trajectory—to become more of a conversation on the why rather than just the how; outside-in, building an engaged and involved workforce; that’s when you’ll get real and sustainable change.