Organisations have to anticipate and own disruption with agility and discipline. This will help them differentiate and stay ahead. This is why change management is essential
Change is the only constant — be it life or business. In this dynamic landscape, businesses, whether small start-ups or large firms, need to change their strategies and vision and go through the transformation process to stay alive. The importance of change management lies with the fact that it helps align existing resources within the organisation. It can also respond faster to customer demands. It provides a way to anticipate challenges and respond to them effectively and, hence, increase return on investment.
The current business world is quite demanding. Faced with a “two-speed world” — rapid growth in emerging economies and slower growth in developed countries — firms have to develop unique strategies. In addition, digitisation and globalisation are blurring the lines between sectors as well as between traditional competitor groups. Technology is constantly changing consumer behaviour, empowering start-ups, making pricing more transparent and reducing product life cycles. Additionally, owing to changing costs, evolving demand and unfolding trade restrictions, firms must rethink and continually reassess their operational footprint. In the background of this shifting environment as also to keep up with the pace, most businesses must transform, either in strategy, operating model, organisation, people or processes. This generally results in the alteration of their growth trajectory. For most companies, it is an ongoing, adaptive process as market conditions continue to change.
Although change has been a part of businesses for long, it is its speed that has rendered transformation as an important and integrated business function. What took radio 38 years to reach a user base of 50 million people was achieved by television in 13 years and by internet in just five years. Today, the challenge is the speed of transformation. All organisations have to gear up to face it. However, according a study by McKinsey, despite huge investments made by companies in tools, trainings and several publications of about 83,000 books on change management, as much as 70 per cent of change programmes fail to achieve their goals. So, is something wrong with the concept of change management? Or is it rather its implementation?
Traditionally, there are several frameworks on change management, like Lewin’s change management model, McKinsey’s 7-S model, Kotter’s Eight Success Factors, Nudge theory, ADKAR, Bridges Transition Model and Kubler-Ross change curve, to name a few. Lewin’s change management model is one of the most popular approaches as it splits the change management process into three stages which account for both the processes and people in any firm. Lewin describes three stages of change management as unfreeze, make change and refreeze. However, it could be difficult and time-consuming to enact due to the scale of unfreezing process. It is only worthwhile to pursue if the business requires a complete overhaul.
On the contrary, instead of supporting deep analysis and large shifts, the McKinsey 7-S model is great for analysing how coherent a company is. By analysing the following seven aspects of a firm and how they affect each other, the model highlights the changes needed to create a united approach to business: Strategy, structure, systems, shared values, style, staff and skills. The McKinsey 7-S model is best suited for those firms which want to know how they can change for the better.
Kotter’s theory is one of the first approaches that focussed less on change itself and more on the people behind it, although in a top-down point of view.
On the other hand, Nudge theory is odd in the sense that it really is just a theory — there’s no set change management model, instead, a mindset and tactic which can be used to frame the changes in a more attractive and effective manner.
The ADKAR change management model (acronym for Awareness, Desire, Knowledge, Ability and Reinforcement) is a bottom-up method which focusses on the individuals behind the change. However, it severely lacks in terms of a high-level plan. If a manager does not have a set change in mind, then it’s best to analyse the company with something like the McKinsey model first.
Even though there are a number of change management models, there is only a 30 per cent chance for it to be successful. Due to ever-changing consumer expectations and competition in the global economy, the science of organisational change is itself constantly evolving. In addition, employee resistance is one of the major challenges in change management. The human element of change management may be one of the most difficult to navigate because people do not inherently like change or adjust to it well.
Most change methods agree that change is difficult and cumbersome. Therefore, involving people early during the implementing process and continuously adjusting for improvement are critical to its success. This includes thorough planning, buy-in, process, resources, communication and constant evaluation. So, how can an organisation embark on this journey? The first critical step is to get the right strategic vision and being able to anticipate the requirements of customers and strategies to achieve them. A sound strategy is necessary for a broad range of enterprise — wide investment decisions, resource allocations and performance expectations — and helps derive value from the transformation. It also includes defining the depth and scope of the changes and redesign of the internal processes and structures.
Several studies have shown that a majority of companies take a strategic approach to transformation by continually aligning their business models with strategy. However, some firms view transformation as an overall turnaround that leads to a complete revamping of the business model and the remaining ones adopt a narrower view, limiting themselves to transforming specific processes, functions or areas. Therefore, depending on the requirements, firms have to identify if a major transformation is necessary or will a more surgical, limited repositioning be enough.
The second step is execution, which is the hardest and the most crucial part of transformation. According to industry experts, in the current complex and fast-changing business climate, more than half of the firms undertaking transformation fail to achieve desired business result due to underestimation of the significance of operating model refinements necessary to effect transformation across people, process, technology, data management and risk management components.
Third, companies should define specific enterprise capabilities that will help achieve competitive advantage. Focussing on those critical capabilities, which are relevant to differentiate and compete, can help deliver greater value, drive leaders to achieve competitive advantage and help the organisation realise its business transformation ambition.
Knowing where to start is critical to unlock value through a business transformation. Prioritisation allows firms to quickly evolve to address immediate market opportunities.
The fourth step is to have relentless focus on value throughout the transformation journey by articulating expected value to be achieved and monitoring, measuring and tracking value throughout the process. Failure to define the value expected can create problems downstream. In addition, building of sustainability is essential as it extends value beyond business transformation.
The fifth step is to have a disruptive mindset. Since change is the core element of business transformation, continuous evolution, agility, flexibility, innovation and disruptive mindset should be part of every transformation initiative. Also, customers should be the key focus and anticipation of customer needs should be aligned with any business transformation. Engaging all stakeholders in this process is also essential. And finally, a respected and capable business leader is critical to establishing credibility and importance of the transformation to the organisation’s strategic goals so as to make major shifts and shape how work gets done.
In this fast changing world, it is not enough to respond to disruption anymore. Organisations have to anticipate and own disruption with agility and discipline. This will help them differentiate and stay ahead. This is why change management is essential. Making it happen effectively, however, needs to be a core competence of managers and their role has changed from the ability to complete change projects to designing the organisations in a way that enables continuous adaptation to an ever-evolving environment.
(The writer is Assistant Professor at Amity University)