Change Management and Wake-up Calls

• change and E-business
• the importance of vision
• the case of Mannesmann and Vodaphone
• wake-up calls and sleep-tests: ADVANCE
• tuning or overhauling
• the journey becomes the destination
• key elements of creative thinking andinnovation
• the power of now
• references

Change and E-business

Bureaucratic companies are forced to change these days. A recentexample: The Board of a big conglomerate was aware they needed toadopt E-Business practices but they struggled with how to implementthem. All over the world their companies were taking initiatives,but there was no coordination. Each local management team made itsown judgments about E-Commerce, IT solutions and applications.Chaos followed, because the wheel was re-invented everywhere,inter-company connections were obstructed, and outsiders lostinterest in partnerships because the company was not utilizing itscritical mass. Not surprisingly, the results of these isolatedjudgments and practices are very disappointing for theconglomerate.

Attempts to avoid this strategic misfit led to things gettingeven worse for the conglomerate. The internal discussion quicklymoved to "who should be in charge, who should be involved, and whatshould be the connection with the users of the new technology". Andthe Board finally presented the new approach, which contained notone element of its own vision. The focus was on responsibilities ofthe steering committee, the user-group, the strategic task force,etc. The daily operational management was placed in the hands of atop executive who never exhibited an ability to achievetechnological innovation. And the outcome? The implementation isunlikely to lead anywhere and this type of coordination can beexpected to make matters worse.

The importance of vision

What was missing was the vision of the Board itself. The onlyconsensus among the Board members was that something should bedone, but there were no clear ideas about a plan or itsimplementation.

Events as described in this case are becoming common practice inmany classic companies because Boards in Europe rarely take theopportunity to get involved in innovation. They are too busy withroutine meetings, for example about budgets, and dailydecision-making. They are not eager to take a stand on newinnovative projects, because existing procedures only work for theold business cases. Soon these Boards may need to signal investorswith a profit warning.

Gary Hamel poses a crucial question in his bookStrategy as aRevolution: "What if your company is more ruling class thanrevolutionary?" His answer is: "You can either surrender the futureto revolutionary challengers or revolutionize the way your companycreates strategy. What is required is not a little tweak to thetraditional planning process but a new philosophical foundation;strategy is revolution; everything else is tactics". In their book,<ahref="http://management.hbp.net/scripts/artikelen/37/bijdrage.asp?aid=37">Competing in the Third Wave, Hope & Hope outlinethat leaders can be either visionary or democratic. The visionarytypes see the future in a way that others cannot. They anticipatehow markets will evolve and gear their organizations capabilitiesaccordingly. Their decisions are not democratic. Vision is a mustthese days, certainly for top management.

The case of Mannesmann and Vodaphone

"Barbarians are at the gate" was the message a few months agofor Mannesmann. They thought for a moment that they could resistthe hostile acquisition attempt from Vodaphone, but after a threemonth struggle, just as Hamel predicted, they had to surrender.Mannesmann, one of the historical representatives of Germany INC,lost its independence. Did this happen because they did a poor jobin the past? No, in ten years they completely restructured theircompany from a steel-oriented machine construction company into atelecommunications company. But they did not have the time to alsodevelop a competitive position against a newcomer whose brand-new"WAP" technologies emerged like a tornado. Who will be next?Clearly, if a company as good as Mannesmann is prey, others areeven more vulnerable.

Many traditional companies could go through the same ordeal asMannesmann, especially players in the so-called high-changeindustries like telecommunications, financial services, retail, andhealthcare. Speed, as stated many times before, is crucial forchange and it is "eat or to be eaten" in global business. Lastyear, in discussions with European companies, I had manyexperiences with E-Business awareness programs, strategic and ITissues, and acquisition targets. Two elements that were generallymissing: a sense of urgency and "out of the box thinking". InEurope, we often lose time with too many overly-lengthy discussionsin overly decentralized organizations and with people who are toooften on vacation or simply not available.

Wake-up calls and sleep tests: ADVANCE

In his great book, Defining Moments, Joseph Badaraccourges that "wake up calls" have to do with the awareness thatthings are going wrong. "Sleep tests" mean that we have to rely onour own sense, insight and intuition to find the right solution, oras Badaracco says, we have to choose between "right and right".This last notion stresses the paradox that often all decisions seemright, but it is no longer interesting to hear the argumentsproving this. More important is to hear why something will work.For traditional companies the book contains many lessons toADVANCE, such as:

• A ppoint a CEO with vision and decision power.
• D efine freedom for entrepreneurs.
• V erify cooperation when it stimulates synergies.
• A ccept that only knowledge is the key asset.
• N eglect long-term strategic plans but stimulate vision.
• C onsolidate a shared IT policy.
• E nforce integration HR and strategy.

Tuning or overhauling?

David Nadler, in his book <ahref="http://management.hbp.net/scripts/artikelen/51/bijdrage.asp?aid=51">Champions of Change,distinguishes four key variables formanagement of change. Four environmental factors create theirinfluence, namely: (1) anticipatory or (2) reactive and (3)incremental/ continuous or (4) discontinuous/ radical. So we getthe following picture:

Tuningis something like Utopia: nobody is able tochange constantly, but some organizations like General Electric orMicrosoft are coming close. Overhauling is usual in timesof crisis: there is a strong reactive change that demands radicalmeasures. But such a turnaround can be very productive and recentexamples of this are: AT&T, and Apple, and in the past IBM. Ofcourse such a situation is the last resort and should be avoided.Redirectingshould be the most desirable model because thecompany tries to anticipate from time to time with radical change.Good examples are: Intel, Cisco and perhaps AOL.Adapting,finally, is a model that is mainly reactive butconstant; perhaps Philips is a master of this strategy.

The journey becomes the destination

In the last decade we have gained extensive experience with onlytwo change programs: re-engineering and TQM (Total QualityManagement). But these methods analyze processes in the past or inthe present and, frankly, that is no longer interesting. Companiesshould, as much as they can, innovate constantly, be keenly readyfor the future, and so "the journey becomes the destination".Silicon Valley companies know what this means and perhaps Cisco isthe best example of such a company. It is unbelievable what thiscompany has accomplished with smart management-solutions toinnovate themselves. It will not be a great surprise if historiansa few decades from now prove that in the year 2000 Cisco was thebest-managed company in the world.

A big danger is that in achieving innovation we are too eager touse our Newtonian-thinking pattern in going for each detail, asDona Zohar in Rewiring the Brain observes. This philosopherand physicist urges us to optimize the mix of:

• Japanese or Eastern thinking, which is mainlyrelation-oriented; and
• Newtonian or Western thinking, which is mainlyanalysis-oriented on an atomic level.

Innovation is not a primarily rational process but more anintuitive process driven by visionary non-democratic leaders. Theresult is that the "visionary company" to which Colin and Porrasintroduced us, essentially means that translation of its coreideology leads to change in everything that the company does.

Key elements of creative thinking and innovation

That great companies can fail precisely because they doeverything right is the opinion of Clayton Christensen in <ahref="http://management.hbp.net/scripts/artikelen/114/bijdrage.asp?aid=114">The Innovators Dilemma, the 1997 Financial TimesBook of the Year. It is clearly comparable to Badaraccos decisiondillemma: when managers must choose between right and right.Innovation requires creativity and this means we ask people to beunconventional "by nature". By asking this, we introduce aproblem because many collegues are not eager to be confronted withthe results of lateral behavioral of members of their team . Itcould disturb their careers or they might simply be jealous thatthey did not think of it. In any event, it takes a lot of work tomake the whole process happen and there are significant risks offailure and damage to careers.

Resistance against change can be big; we usually call this "thenot invented here syndrome". Innovation and creativity belongtogether, thats clear, but conflict is also part of the equation.Change or innovation management requires first of all the handlingof conflicts otherwise the company will not achieve much. Robinsonand Stern argue in Corporate Creativity that a creativecompany needs employees who will do something new and potentiallyuseful without being asked and without having to be shown.Management of creativity means, according to them, stimulating theprobability that creativity will be executed. Nevertheless, we knowthat in the majority of companies creativity, and thereforeinnovation, is at a dismally low level.

The power of now

This is the title of a new and already famous book from the CEOof one of the most exciting companies in Silicon Valley. Its aboutTibco and its leader and founder, Vivek Ranadive, the pioneer ofreal-time technologies.The key question he poses is: How can youraise your company above the ravages of creeping commodization andgain that crucial, elusive competitive advantage? And his answeris: Become event-driven! We could add: Dislocate your business andbecome truly virtual. Event-driven companies achieve competitiveadvantage by creating virtual, integrated, real-time supplynetworks (no chain anymore!) for and with their customers.

Tibco became most famous perhaps through their slogan that theyprovide "The power behind your portal". They areintegrating and converting databases for their clients to usergroups so quickly that they are running out of competition.

What can we learn from this to achieve effective changemanagement? Here are my comclusions:

1. Competion is concentrating more and more on the potentialmarket position of a company in the near future in stead of priceearning or price revenue ratios.
2. Time to market is going "digital" and that means very fast.To be event-driven and dislocated becomes an asset.
3. The old management techniques for innovation are not effectiveanymore. Innovation activities should not only be launchedwithin the (big) company or dot.corp but also outside the companyor dot.com.
4. Newtonian thinking on an "atomic level" creates a graveyard; weshould act more intuitively. Tune or redirect yourbusiness.
5. Learn from the Vodaphone Mannesmann case; avoid being part ofthe ruling class and select top executives with vision. Adoptthe ADVANCE Concept.

References

Badaracco jr., J.L., Defining Moments,Harvard BusinessSchool Press, Boston 1997

Christensen, C.M., The innovators dilemma, Harvard Business Press, Boston1997

Hope, J. and T. Hope, Competing in the third wave, Harvard Business School Press,Boston 1997

Nadler, D.A. and M.B. Nadler, Champions of change, Jossey-Bass Publishers, SanFrancisco 1998

Robinson, A.G. and S. Stern, Corporate creativity,Berrett-Koehler Publishers Inc., San Francisco 1997

Vivek Ranadive, The Power of Now, McGraw Hill, New York1999

Zohar, D., Rewiring the Corporate Brain, Berrett-KoehlerPublishers Inc., San Francisco 1997