Rate of change increases


If the rate of change on the outside exceeds the rate of change on the inside; the end is in sight.
Jack Welch

In a recent comment column in the Economist, Schumpeter notes that in 1980 (just 30 years ago) a company in the top fifth of its industry had a 10% chance of falling down to a lower tier within 5 years (the rate of change is 10% of companies drop out of the top fifth every five years); in 1998 this had risen to 25%. It is almost certainly higher now.

Of course, some of the change is newer companies succeeding in the competitive battle and moving into the top fifth; some of the change is companies losing the competitive battle and dropping down. I am interested in the implications for a business that has been going for a while. What should it be doing to survive and succeed. Or crudely put: avoid the Kodak, HMV, Blockbuster effect!

To survive in today’s economic and competitive climate an organisation much change much more rapidly than it used to, say just 5 years ago. However, for most organisations their capacity and capability to change has barely altered. So doing more change is not a possibility. That only leaves smarter change. Smarter change requires two critical components:

  1. A clear strategy to drive the organisation towards a well thought out future (with some ambiguity to include possible changes). This strategy needs to be sufficiently clear and detailed to produce Strategic Objectives.
  2. A mechanism to use the Strategic Objectives to decide on what change is needed and to execute that change as effectively and efficiently as possible.

Strategy Requirements

An organisation strategy needs to be developed, managed, improved and further developed as the anticipated future arrives (or not). It is an imperative of the senior managers and should be their top priority — over and above running the different sections of the business they may be responsible for (finance, sales, HR, IT, marketing, purchasing, manufacturing, logistics, etc).

For an organisation to succeed and survive its strategy needs to ensure that all of its activities are aligned to the purpose of the business and (for a commercial organisation) deliver a profit. This requires the senior managers to consider the business holistically and as a system (see systems thinking). It is change (and innovation) in the joined up activities of an organisation that will enable it to survive. To continuously change the systemic activities in a organisation requires a careful approach to change; starting with clear Strategic Objectives (especially measurable and timely).

For instance, organisations that have not innovated their activities to be able to use the internet are failing at an amazing rate. Just having a web site is clearly not enough. Recently the Morrisons supermarket chain lost considerable market share because it does not have an internet delivery capability. It has little time to recover this situation; however it should be seizing this opportunity to get ready for the next paradigm shift in retailing — if necessary inventing it!

Effective and efficient change

The starting point for prioritising change has to be delivering the strategic objectives; if a change is not completely focussed on strategic objectives it is a waste of time. For all the possible changes that are aligned with strategic objectives then getting value in terms of objectives met for effort involved has to be the next level. This of course requires well researched and realistic business cases.

A technique for working with a business case is to make it both a mechanism for decision making (which changes to do) and a contract for delivering the change between the organisation and the change team. Once the change team realise they will be held to account (with consequences) for delivering the business case it tends to promote quality and realism in the preparation of the business case.

The delivery of change in many organisations is often driven by a project or programme method. These are traditionally heavyweight approaches which can become bogged down in their internal processes. A more agile approach is required (not unlike the Agile methodology used in IT) to provide more flexibility to be reactive to innovation occurring within the business as well as adaptive to changes outside. An Agile change method is yet to be agreed; though a lot of people I talk to are thinking about it.

Finally the poor development of change capability and capacity in most organisations in the past is not an excuse for not developing increased capability and capacity now. The ideal starting point is a maturity assessment of an organisations current change capability. We are developing our own model (based on those for Software Engineering and P3M3 from the PPM community) to help us understand how we can best help our customers. Whatever your maturity level you will need training to get to a higher level. Contact us to see how we can help.

Portfolio Management

The recently developed concept and method of Portfolio Management is exactly what the organisation needs to connect its change activities. Portfolio Management will provide a continuous process of assessment and decisions to ensure the change in an organisation is aligned to strategic objectives and is the best value use of critical change resources. We are developing an introductory course for this topic; contact us for more details.


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