Bureaucratic companies are forced to change these days. A recent example: The Board of a big conglomerate was aware they needed to adopt E-Business practices but they struggled with how to implement them. All over the world their companies were taking initiatives, but there was no coordination. Each local management team made its own judgments about E-Commerce, IT solutions and applications. Chaos followed, because the wheel was re-invented everywhere, inter-company connections were obstructed, and outsiders lost interest in partnerships because the company was not utilizing its critical mass. Not surprisingly, the results of these isolated judgments and practices are very disappointing for the conglomerate.
Attempts to avoid this strategic misfit led to things getting even worse for the conglomerate. The internal discussion quickly moved to "who should be in charge, who should be involved, and what should be the connection with the users of the new technology". And the Board finally presented the new approach, which contained not one element of its own vision. The focus was on responsibilities of the steering committee, the user-group, the strategic task force, etc. The daily operational management was placed in the hands of a top executive who never exhibited an ability to achieve technological innovation. And the outcome? The implementation is unlikely to lead anywhere and this type of coordination can be expected to make matters worse.
The importance of vision
What was missing was the vision of the Board itself. The only consensus among the Board members was that something should be done, but there were no clear ideas about a plan or its implementation.
Events as described in this case are becoming common practice in many classic companies because Boards in Europe rarely take the opportunity to get involved in innovation. They are too busy with routine meetings, for example about budgets, and daily decision-making. They are not eager to take a stand on new innovative projects, because existing procedures only work for the old business cases. Soon these Boards may need to signal investors with a profit warning.
Gary Hamel poses a crucial question in his bookStrategy as a Revolution: "What if your company is more ruling class than revolutionary?" His answer is: "You can either surrender the future to revolutionary challengers or revolutionize the way your company creates strategy. What is required is not a little tweak to the traditional planning process but a new philosophical foundation; strategy is revolution; everything else is tactics". In their book, Competing in the Third Wave, Hope & Hope outline that leaders can be either visionary or democratic. The visionary types see the future in a way that others cannot. They anticipate how markets will evolve and gear their organizations capabilities accordingly. Their decisions are not democratic. Vision is a must these days, certainly for top management.
The case of Mannesmann and Vodaphone
"Barbarians are at the gate" was the message a few months ago for Mannesmann. They thought for a moment that they could resist the hostile acquisition attempt from Vodaphone, but after a three month 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 job in the past? No, in ten years they completely restructured their company from a steel-oriented machine construction company into a telecommunications company. But they did not have the time to also develop 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 are even more vulnerable.
Many traditional companies could go through the same ordeal as Mannesmann, especially players in the so-called high-change industries like telecommunications, financial services, retail, and healthcare. Speed, as stated many times before, is crucial for change and it is "eat or to be eaten" in global business. Last year, in discussions with European companies, I had many experiences with E-Business awareness programs, strategic and IT issues, and acquisition targets. Two elements that were generally missing: a sense of urgency and "out of the box thinking". In Europe, we often lose time with too many overly-lengthy discussions in overly decentralized organizations and with people who are too often on vacation or simply not available.
Wake-up calls and sleep tests: ADVANCE
In his great book, Defining Moments, Joseph Badaracco urges that "wake up calls" have to do with the awareness that things are going wrong. "Sleep tests" mean that we have to rely on our own sense, insight and intuition to find the right solution, or as Badaracco says, we have to choose between "right and right". This last notion stresses the paradox that often all decisions seem right, but it is no longer interesting to hear the arguments proving this. More important is to hear why something will work. For traditional companies the book contains many lessons to ADVANCE, 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.
In my previous articles, The Strategic Constraint of HR and Global Business 2000, I stressed the points that HR and Strategy have to merge, that all companies (not only the new ones) face risky times, and that we do need more leadership. In Vision on Digital, I elaborated (along with other insights) on the necessity of a coordinated IT policy and I pointed out in No Web Strategy without Partner Strategy, the importance of partners to connect a company to communities with co-branded concepts. What really matters is: vision, entrepreneurship, value creation, and further speed, speed and speed&!
Tuning or overhauling?
David Nadler, in his book Champions of Change,distinguishes four key variables for management of change. Four environmental factors create their influence, namely: (1) anticipatory or (2) reactive and (3) incremental/ continuous or (4) discontinuous/ radical. So we get the following picture:
Tuningis something like Utopia: nobody is able to change constantly, but some organizations like General Electric or Microsoft are coming close. Overhauling is usual in times of crisis: there is a strong reactive change that demands radical measures. But such a turnaround can be very productive and recent examples of this are: AT&T, and Apple, and in the past IBM. Of course such a situation is the last resort and should be avoided. Redirectingshould be the most desirable model because the company 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 but constant; perhaps Philips is a master of this strategy.
The journey becomes the destination
In the last decade we have gained extensive experience with only two change programs: re-engineering and TQM (Total Quality Management). But these methods analyze processes in the past or in the present and, frankly, that is no longer interesting. Companies should, as much as they can, innovate constantly, be keenly ready for the future, and so "the journey becomes the destination". Silicon Valley companies know what this means and perhaps Cisco is the best example of such a company. It is unbelievable what this company has accomplished with smart management-solutions to innovate themselves. It will not be a great surprise if historians a few decades from now prove that in the year 2000 Cisco was the best-managed company in the world.
A big danger is that in achieving innovation we are too eager to use our Newtonian-thinking pattern in going for each detail, as Dona Zohar in Rewiring the Brain observes. This philosopher and physicist urges us to optimize the mix of:
Japanese or Eastern thinking, which is mainly relation-oriented; and
Newtonian or Western thinking, which is mainly analysis-oriented on an atomic level.
Innovation is not a primarily rational process but more an intuitive process driven by visionary non-democratic leaders. The result is that the "visionary company" to which Colin and Porras introduced us, essentially means that translation of its core ideology leads to change in everything that the company does.
Key elements of creative thinking and innovation
That great companies can fail precisely because they do everything right is the opinion of Clayton Christensen in The Innovators Dilemma, the 1997 Financial Times Book of the Year. It is clearly comparable to Badaraccos decision dillemma: when managers must choose between right and right. Innovation requires creativity and this means we ask people to be unconventional "by nature". By asking this, we introduce a problem because many collegues are not eager to be confronted with the results of lateral behavioral of members of their team . It could disturb their careers or they might simply be jealous that they did not think of it. In any event, it takes a lot of work to make the whole process happen and there are significant risks of failure and damage to careers.
Resistance against change can be big; we usually call this "the not invented here syndrome". Innovation and creativity belong together, thats clear, but conflict is also part of the equation. Change or innovation management requires first of all the handling of conflicts otherwise the company will not achieve much. Robinson and Stern argue in Corporate Creativity that a creative company needs employees who will do something new and potentially useful without being asked and without having to be shown. Management of creativity means, according to them, stimulating the probability that creativity will be executed. Nevertheless, we know that in the majority of companies creativity, and therefore innovation, is at a dismally low level.
The power of now
This is the title of a new and already famous book from the CEO of one of the most exciting companies in Silicon Valley. Its about Tibco and its leader and founder, Vivek Ranadive, the pioneer of real-time technologies.The key question he poses is: How can you raise your company above the ravages of creeping commodization and gain that crucial, elusive competitive advantage? And his answer is: Become event-driven! We could add: Dislocate your business and become truly virtual. Event-driven companies achieve competitive advantage by creating virtual, integrated, real-time supply networks (no chain anymore!) for and with their customers.
Tibco became most famous perhaps through their slogan that they provide "The power behind your portal". They are integrating and converting databases for their clients to user groups so quickly that they are running out of competition.
What can we learn from this to achieve effective change management? Here are my comclusions:
Competion is concentrating more and more on the potential market position of a company in the near future in stead of price earning or price revenue ratios.
Time to market is going "digital" and that means very fast. To be event-driven and dislocated becomes an asset.
The old management techniques for innovation are not effective anymore. Innovation activities should not only be launched within the (big) company or dot.corp but also outside the company or dot.com.
Newtonian thinking on an "atomic level" creates a graveyard; we should act more intuitively. Tune or redirect your business.
Learn from the Vodaphone Mannesmann case; avoid being part of the ruling class and select top executives with vision. Adopt the ADVANCE Concept.
Badaracco jr., J.L., Defining Moments,Harvard Business School Press, Boston 1997
Robinson, A.G. and S. Stern, Corporate creativity, Berrett-Koehler Publishers Inc., San Francisco 1997
Vivek Ranadive, The Power of Now, McGraw Hill, New York 1999
Zohar, D.,Rewiring the Corporate Brain, Berrett-Koehler Publishers Inc., San Francisco 1997
The contributionsin managementsite of our correspondence clerk in SiliconValley harvest much appreciation. Burt Rost van Tonningen has processed its contributions and has joined in an integrated vision on e commerce, e organization and e strategy with as title:
PREPARING FOR THE E-TORNADO: Observations from a European in Silicon Valley