Change management: Implementing strategic change
Section two of the Personnel Today Management Resources one stop guide on change management, looking at the five sets of concepts and tools essential to implement strategic change. Includes a case study on the BBC's Producer Choice change initiative. Other sections.
|
|
To be successful in implementing strategic change, managers need to work with five sets of concepts and tools. These are described under the following headings:
The value-based company
Change frameworks
Ambition and strategic change
Change solutions
Transforming the organisation.
The value-based company
New ways of organising work have emerged, which are built upon concepts of customer service and adding value. These new ways of working need arrangements that are adaptable, as customer needs and market circumstances keep changing.
The new 'rules of competition' emphasise speed, flexibility and customer intimacy. Therefore, when we change our organisations, we are no longer concerned with control and predictability as over-riding considerations. Increasingly, we are concerned with speed, flexibility and customers.
In a world of change, where new forms of competition can and do arise quickly, internally-focused organisations are doomed to fail. For example, given the emergence of internet-based booksellers such as Amazon and Abebooks, can traditional booksellers survive? Only by adapting to the new context created by those sellers.
Change frameworks
We need to understand best practice in change diagnosis. What kinds of tools and frameworks will enable us to develop valid data and, thereby, solutions credible to key stakeholders? How can we create authentic diagnosis? And what processes should we follow?
Diagnosis
Diagnosis follows a particular set of rules governed by a tough dilemma: do you wish to be right or to be influential? Some will say there is no conflict here. But that is to over-simplify.
You may have firm ideas, based on honest conviction, that you understand what is happening in your business context. But others may hold a different view with a similar conviction.
The question then becomes: how far will you push your view? Beyond a certain point, you may lose credibility by doing so. Therefore, we are not simply looking at right versus wrong here. In an uncertain world, this is just too easy.
What do we mean by change architecture? Simply stated, we mean that set of arrangements, systems, resources and processes through which we engage people in 'productive reasoning', focused on creating a new future.
The principles through which the various techniques (strategy forum, communication cascades, town meetings, open-space events, balanced scorecards and much more) are tied together are as follows:
We seek to clarify governance and accountability for strategic change
We seem to engage key stakeholders in appropriate ways
We seek to secure alignment for all, or at least a critical mass, of key stakeholders in ways supportive of success, however defined
We seek effective, credible and accessible performance measures provided on a relatively transparent basis
We need a balanced set of performance measures (such as covering finance, activity, quality, adaptability, markets, customer and employee satisfaction etc) presented on a common platform
We seek to acquire or develop the new skills and capabilities and to mobilise commitment and resources.
Change risk
And what of change risk? What is likely to be the risk-return equation associated with a particular set of proposals? Clearly, this requires analysis of two ideas. First, how ambitious are the proposals? Second, how ready is the organisation to accept and implement major changes? And is it possible to assess this via an 'implementation index'?
It is self-evident that the more ambitious the proposals, the higher the risk, other things being equal. However, in a turnaround situation or where the organisation possesses a high degree of change readiness and capability, it will be more complex. Here, proposals of low ambition may be deemed irrelevant. Clearly, these considerations are interconnected.
Ambition and strategic change
So how can business leaders conceive ambitious, strategic change? What does ambition mean in this context? Clearly, competitiveness is key. Understanding the assets upon which competitiveness can be based is also important. But we must also beware naïve assumptions.
Distinctive capability
As Hampden-Turner demonstrates, a focus on a single factor can bring immediate success and longer-term failure.1 But Kay probably lays the most appropriate foundation.2 For him, the differentiator upon which market power is based is known as 'distinctive capability'. In turn, this is based on the following:
Reputation: Essentially the market perception of product/service offerings in terms of tangible attributes - linked to brands
Architecture: The relationship of resources, including knowledge and flexibility, both internal, external and networks which the firm can bring to bear
Innovation: The capacity to change.
For distinctive capability to be a source of competitive advantage, however, it must be sustainable. The truth is that nothing is ultimately sustainable - the fortunes of many a major corporate over time demonstrates this all too clearly.
Scale and market share help, but Kay infers that the management of public policy might be just as important. All of this points to the need to understand how to create and maintain 'added value' as the foundation of corporate success.
Value-based management
Value-based management is a watchword of current management. It means different things to different observers. For some, it is about economic added value, shareholder value and the like. For others, the key is social capital.3
Taking the latter view, others see value-based
management as more than simply added value.
A recent advocate of this view is Markides.4 For him, sustaining advantage is achieved by the following:
Organising its various activities into 'tight' systems, which support and reinforce each other. In essence, the advantage is sustained because while imitators can adopt various ideas and techniques, the ability to manage interfaces really well is difficult to copy
Creating an underlying organisation environment of culture, structure, incentives and people which is also difficult to copy.
Both of these points describe alignment. Markides also argues that success is often achieved by avoiding the tendency to copy. Instead of competing head to head with an existing set of competitors, each with well-protected positions, the key is to create a new strategic position by changing the rules of the game.
Examples include Body Shop, CNN, Dell, Direct Line Insurance, Easyjet, Federal Express, IKEA and Swatch, among others.
Assessing market and competitive strength
The Kay view takes the idea of 'core competence' as a part of strategic architecture. Grünig and Kühn develop these ideas into a clearer analytical framework.5 For them, evaluating whether a strategy will be successful (building upon Ohmae6) requires the assessment of market and competitive strength at three levels:
|
Market position |
Market attractiveness |
|
Competitive intensity |
|
|
Market share |
|
|
Growth/decline of share |
|
|
Market offers |
Scope and range |
|
Quality and service |
|
|
Add-ons |
|
|
Price |
|
|
Speed |
|
|
Including measures relative to competitors |
|
|
Resources |
Sustainability of competitive advantage (rarity, unitability, substitution). |
These authors note that it is possible to adopt either an outside-in approach to assessing success potential (the market-based view) or an inside-out approach (the resource-based view). However, they do note the latter as being the exception, not the rule.
Balanced scorecard
Nevertheless, what is interesting about their formula is the way they track through from assessing success potential, to the concept of the balanced scorecard. From this, they define implementation measures - for which they propose a two-by-two matrix looking at motivation and knowledge and competencies on one dimension, and change drivers and obstacles on the other dimension. Each of these interconnect. So the level of ambition is connected to the degree of alignment provided for by the proposals.
Change solutions
Implementation could be defined as those processes needed for designing and organising the process of change to be effective. So how can we judge the effectiveness of change?
Questions that need answering
Why do some change programmes succeed and some fail? Why can some companies achieve change quickly and some not at all? Why do more and more companies see leadership and culture as defining issues in success or failure? Why are we most concerned with establishing the process of change properly? Why do changing organisations concern themselves about values and benchmarking? Is not the central issue for successful change that of 'reading' the environment right and putting in place a competitive business model?
Is there not a case for saying that in many strategic changes the most important thing is to define the right business model and replicate it accurately? Are we really convinced with the 'no one best way' argument?
Human-centred view
Organisations are often seen as unable or unwilling to take the human-centred view seriously. Could it be that in reality some of this is about people arguing for the adoption of the human-centred view, while not considering the 'task-centred' view seriously enough? If so, focusing only on the so-called human issues is unlikely to be meaningful.
Why do academic observers and consultants so often perceive attempts at change to be failures? Boonstra makes this very point.7 In the US, most of the attempts to redesign business processes were judged to fail. The development of new strategies 'runs aground' in 75% of cases. Research (also cited by Boonstra) in The Netherlands indicates that 70% or more of change programmes lead to 'insufficient results'.
And yet this perception flies in the face of other evidence. Industries and sectors have been transformed in recent years. We have re-engineered hospitals, government and the great companies of the world. Ford is very different in the year 2000 compared with say 1960. Is anyone seriously arguing that the privatised BT of today has not gone through dramatic change since privatisation? Or British Airways?
Pfeffer argues the case that you can 'build profits by putting people first',8 as does Gratton.9 In each case, these authors cite evidence, which appears to show that strategic change is regularly achieved.
The literature on 'lean' or 'world class' manufacturing does much the same. However, from my own experience working with organisations engaged in making major change, it is clear that many executives see the process of change as problematic. It is difficult to engage stakeholders. The human-centred approach is of value, but not often used. Very little attempt is made to learn from experience.
Strategic benchmarking
Strategic benchmarking has taken up a vital role in organisational diagnosis for change. This adds an important idea to the concept of diagnosis. The vital point is to compare your own organisation to the world's best. Therefore, we identify where we are, the causes of our present situation and (through benchmarking) we identify the potential for improvement and ideas for change.
Benchmarking as a technique has evolved - at least in principle and concept - from first generation benchmarking, in which the focus was on benchmarking a particular product or system, through competitive benchmarking, process benchmarking, strategic benchmarking to 'global benchmarking'. Most importantly, benchmarking represents a learning technique. It applies rational analysis based on comparisons.
Business process re-engineering
Similarly, business process re-engineering has attracted wide attention, with many supporters and cynics. Admittedly, more than a technique for diagnosing what needs to be changed, it nevertheless incorporates techniques for diagnosis.
Most importantly, supporters of this approach conceive it as a technology for break-through or 'discontinuous leaps in performance'.
The focus is on the 'business architecture' - locations, structure, technology and skills. Alongside the analysis of the business architecture, in terms of value added, is risk assessment looking at change and organisational issues.
In techniques such as benchmarking and business process re-engineering, diagnosis has become more thorough and broader in scope. However, in practice, the potential of these approaches is often under-utilised.
Transforming the organisation
Managing major changes successfully requires us to take an organisation-wide approach. Change creates stress and strain both for those who support change (through over-work, the challenge of leading change in an uncertain world, the pressure of dealing with other, often anxious people, and the inherent uncertainties) and for those who are either indifferent, opposed or fearful of change.
Organisational learning is a vital component of effective change. Following the work of Quinn,10 it is believed that organisational restructuring and strategic change should be based on effective diagnosis and benchmarking, information and incentive systems.
All of this assumes that change implementation requires:
that the case for changes is made convincingly and credibly
that the process of change is a learning process - you don't get everything right initially
that dramatic changes can feel chaotic and uncertain as people seek to come to terms with new skills, etc
that attention must be given to broadening and mobilising support for change,whether through taskforces and project teams, through the use of incentive systems and training, pilot schemes and so on
crystallising the vision and focus for the organisation, but not necessarily at the outset. Initially, the vision may be very broad
a focus on people and on the process of change.
Different learning modes
There are three learning modes that are relevant to managers concerned by change. They are as follows:
Learning by doing - this is an internal process. We learn by experimentation, by trial and error, by pilot trials and so on
Learning by use - this is essentially learning from the external world. We learn about how to improve our own product/services by gaining feedback from customers and by competitive benchmarking. Therefore, we gain from customers' experience of using our products/services and through comparing ourselves with competitor organisations
Learning from failure - speaks for itself but which, to be available to us, demands that we accept that failure will happen from time to time.
Ideas such as transformational leadership, entrepreneurship and the learning organisation each embrace these ideas. Beyond this, major changes are typically implemented as major programmes organised around simple themes.
A good current example is that of 'time-based competition'. The key idea is that the way we manage time - whether in production, in new product development or in sales and distribution - represents a powerful source of competitive advantage.
This idea has spawned another, that of 'business process re-engineering'. At the core of both is a strategy for change, using techniques to analyse the organisation and seek continuous improvements to work and information flows and to the use of time.
The emphasis is on the organisation doing the work itself, using its own people, and empowering people at all levels to achieve change.
Benchmarking is a key analytical technique used in such programmes, as are techniques such as 'pilots' and 'breakthrough teams'.
According to Stalk and Hout,11 break-through teams should be given radical goals, such as reducing time in half so that assumptions will be challenged. Bottlenecks, breakdowns, failures, unmet customer needs all become opportunities to learn. All of this implies radically new ways of thinking about the organisation.
Constraints to effective learning
However, there are some constraints to achieving effective learning in organisations. Argyris points to the distinction between what he calls single-loop and double-loop learning.12 At the core of his explanation are two key points about professionals (managers and a growing proportion of employees are professionals or quasi-professionals of one sort or another), as follows:
Essentially, the life experience of most professionals through schooling, university and early career is characterised by success, not failure. Because they have rarely failed, they have never learned how to learn from failure. Therefore, when things go wrong for them, they become defensive, screen out criticism and put the blame on others. Ironically, their ability to learn shuts down just when they need it most
Organisations assume that learning is a motivation problem. Many believe that creating the right structures of communication, rewards and authority and accountability will create motivated and committed employees - and learning and development will follow. But this is fatally flawed. People learn through how they think - through the cognitive rules or reasoning they use to design and implement their action.
According to Argyris, organisations can learn how to encourage learning and how to resolve these learning dilemmas. The solution lies in finding ways of constructively questioning the rationale or reasoning behind someone's actions.
References
1. Hampden-Turner, C (1996) Charting the
Corporate Mind,
2. Kay, J (1993) Foundations of Corporate
Success,
3.
4. Markides, C
(2000) All the Right Moves: A Guide to Crafting Break-Through Strategy,
5. Grunig, R and
Kuhn, R (2001) Process Based Strategic Planning,
6. Ohmae, K (1982) The Mind of the Strategist,
7. Boonstra, J
(2002) The Psychological Management of
Organizational Change,
8. Pfeffer, J (1998)
The Human Equation,
9. Gratton, L (2000)
Living Strategy,
10. Quinn, JB (1992) The
Intelligent
11. Stalk, G and Hout,
JM, Competing Against Time,
12. Argyris, C
(1990) Overcoming Organizational Defences,
13. Felix, E (2000) 'Creating Radical Change;
Producer Choice at The BBC', Journal of Change Management, vol 1, pp5-21 This case study
outlines what was a radical change in the BBC - an initiative known as
Producer Choice, which was implemented in the 1990s. It is of interest
because:
Producer Choice
was adopted in spring 1993 and represented a radical shift in culture and
ways of working. Prior to Producer Choice, all budgets were held centrally
and delegated to departments. Programme makers did not have budgets;
rather they accessed resources with which to make programmes. The underlying
idea, therefore, was to assign budgets to programme makers and allow them
to use outside resources. This was intended to focus attention on the true
cost of programmes, on value for money, and on market comparisons of
efficiency, quality and so on. Announced late in
1991, it was proposed that the period to April 1993 be devoted to
preparatory work - of which much was needed. Training and development
programmes would be included. A steering group was established to oversee
the changes, and an implementation plan comprising 107 key activities was
agreed. A comprehensive
communication programme was established, including the formal launch
attended by 170 key BBC staff. This was followed up by staff meetings,
workshops, question and answer forums, and the distribution of a Producer
Choice brochure. A series of one
and two-day courses were implemented over the 18 months to spring 1993,
involving 1,800 staff from different levels. In parallel, workshops were
arranged for all levels of BBC staff to discuss and debate Producer
Choice, not least to continue the process of raising awareness. Also, in parallel
with these activities, an overhead review, a resource utilisation review
and a market-testing process were underway. Headcount was reduced by 19%
between 1990 and 1993. Producer Choice
commenced with a pilot period. This was opened by groups of BBC senior
managers attending workshops, in which a custom-designed simulation of the
BBC under Producer Choice was used as a vehicle for piloting the model. A
total of 72 senior managers were involved. There was a myriad
of implementation problems associated with this change, many of which were
predicted by the pilot exercise. Many junior staff noted that to create
481 new business units under the new regime was to create a large 'paper
chase'. Nevertheless, by
1994, the survey and other data suggested that value for money had
improved and, moreover, the BBC now had credible measures of its market
performance. The number of business units had been reduced to 200.
While
controversial, Producer Choice appears to have been part of a process of
culture change needed by the BBC as it moved into the era of global
competition for media and the digital age. But results from
staff surveys (based on the Burke-Litwin model)
undertaken in 1994 and 1995 suggested that while staff were not opposed to
the ideas of Producer Choice, they believed the pace of change was
out-running the ability of management to create the infrastructure needed
to deploy the new ways of working. Therefore, while
issues of resistance to change, commitment, stress and anxiety were all
too apparent, a crucial question was related to infrastructure - would it
be in place? If not, the new
approach would not work. And if so, staff would prefer the old,
comfortable ways. However, if it was in place, then given the tools, they
felt able to work in new ways. On this view,
success in change is about whether people involved see a 'change
architecture', which looks able to deliver that infrastructure. And
resistance to change is as much about resistance to half-hearted changes
that look likely to fail - than it is to resistance to change. Source: Felix13
|
Section two: Implementing strategic change Section three: Culture and change Section four: Coping with change
|
