Is Your Company Ready to Change?
Article by Herb Rubenstein
Introduction
When thinking about the future of your organization and deciding on sustainability and growth strategies, you will need to answer a very important question: which aspects of our organization are we willing to change and to what extent?
This can become a very complicated question if you don’t have some sort of road map to guide you through the process. We will discuss the use of a new strategic planning tool developed by our authors called the Flexibility/Innovation Analysis.
Flexibility/Innovation Analysis
This strategic planning tool will help you quickly analyze the ability and willingness of a company, non-profit organization, or educational institution to be flexible in its operations and to “innovate.” Innovation is the ability to do new things. Flexibility is the ability to do existing things differently.
This analytical tool builds on the work of Daryl Conner who promotes the idea that, as the speed of change increases in the marketplace, organizations must become more “nimble.” Our approach is a qualitative one that safely allows organizations to question the outer limits of change, innovation, and flexibility that they are willing to attempt.
We will discuss the flexibility/innovation analysis. There are two different aspects of this type of analysis that require special mention. The analysis process is designed to:
• Identify what an organization is willing to change, and
• Provide insight into what an organization can change in the short run.
While strategic business consultants may often assume that every behavior within an organization is changeable overnight, our research and the research of others shows that many organizations are simply not capable of changing their activities, systems, outlook, culture, or behaviors very quickly at all.
All persons who seek to advise and to lead organizations must keep close tabs on how adaptable the organization really is. For some, when change comes too fast, the resistance that employees and others create soundly defeats the goals of strategic plans.
The ability to measure an organization’s flexibility and innovation capacity or its adaptive capacity is still in its infancy. The process that we offer (as described below) is a first step to opening the door to a greater understanding of this most important business metric.
Underlying our development of the flexibility/innovation analytical device provided below is the understanding that flexibility and innovation are two of the most important sources of competitive advantage in the marketplace today.
Measuring Ability to Change
List the organization’s major activities and break down each activity into its component parts. For example, one author has experience with a non-profit educational institution that sells after-school, hands-on science programs for elementary school children. The organization, often through PTAs, hires the teachers and sends the prepared science kits to each teacher that covers eight 1-hour sessions after school.
When asked about the sizes of the classes, the organization said that the largest class was eleven students and the smallest was seven. Realizing there must be a huge market for class sizes larger than eleven and fewer than seven, we sought to understand why the class sizes were so restricted.
The answer was in the organization’s business model. They sold the science kits in packages of twelve completed sets. One of the kits was for the teacher, so the maximum class size was eleven. The teacher had to pay for all twelve kits, and so lost money if fewer than seven children enrolled in the class.
Although the organization was turning away many students (because if only six children signed up, the class was cancelled and if more than eleven signed up, some were turned away) the organization refused to change the way it boxed its science kits. The two areas where the kits could be sold were to the parents of the 1.3 million US home schooled children, and in schools where 20–30 students could have used these lessons to supplement their standard science curriculum.
Since we anticipate that the number of home schooled children will grow rapidly in the US, selling the kits to home schooled children appeared to be a natural sustainability strategy. Similarly, since the organization had not sold any kits for use in elementary schools, this market also presented a huge opportunity for growth.
The organization, however, decided during the short time one of the authors worked with it, three things:
• that they were either unable or unwilling to change its system of selling twelve kits per box,
• they were unwilling to sell to home schooled children (because the teacher wouldn’t have received the organization’s required training) and
• they were unwilling to allow its kits to be used in regular elementary school classrooms.
This organization’s experience in standing rigidly by its business model provides a key insight into how to identify elements of your organization’s business design or business model and to break down your economic activity into component parts.
Measuring Willingness to Change
Gather a substantial list of business activities, systems and procedures that make up your organization’s stated or implied business model. Then, discuss each activity deciding how willing and capable your organization is to be flexible and innovative on this activity.
If you want to quantify this practice, you can rate each activity for “willingness to innovate” on a scale of 1–10 (with 10 being the most flexible). Regarding many areas of your operations, a score of less than five could spell doom to your organization and be a source of competitive disadvantage if your competitor is willing to be more flexible in this area.
This analytical tool makes strategic planning potentially very revolutionary. You can get into as much detail as you like in breaking down your operations (such as, “how exactly do we buy paper clips?”) or you can stick with the major activities of your organization (such as, “how do we make decisions around here?”).
This process questions everything. You may wish to consider if your organization is willing to:
• change office locations
• institute telecommuting policies
• allow employees at all levels to form strategic planning teams
• take risks
• enter into strategic business partnering/joint venture arrangements
• modify your business model to promote sustainability
• discontinue work habits/procedures that employees do not like
• invest in state-of-the-art technology
• do business in a foreign country
• change salary levels and benefit levels to reward certain types of behavior not previously rewarded
• introduce new products/services
• treat customers in a new way
• treat employees in a new way
• raise capital through new means and share ownership
• change the way the board of directors is selected, evaluated and turned ove
Involving Employees and Managers
While change is not always good, without innovation and flexibility there can rarely be a sustainable growth strategy. From Michael Maccoby’s book, Why Work: Motivating the New Workforce, we learn about the “expert type manager,” the one that learned the “right” way to do things, became very good at it (with credentials to prove it) and wants to keep running things the way the expert “knows” is right. He is no longer the ideal type of manager for many, if not most business situations.
Maccoby presents a compelling case that the “innovator type manager” is less interested in getting things correctly done the old way and more interested in getting the desired objective accomplished any way that works, that is cost-efficient, is legal, ethical and does not harm employees or consumers.
Another example: some years ago, one of the authors conducted an “entrepreneurial management program” for selected Marks & Spencer (M&S) managers. M&S has had great success over the past several decades but had poor financial results one year. M&S is currently seeking to become a world retailing giant.
However, not many years ago, M&S refused to accept any credit or debit cards other than its own. On the flexibility/innovation grid score, on this one M&S gets a “0.” M&S has now changed that policy. The major lesson of the last decade is that sustainability strategies must be customer centric. Every sustainability strategy must focus on making it easier for the customer/client/student to obtain, pay for and benefit from the services and products of the organization. Organizations must not only be entrepreneurial and customer-centric in their operations, they must be entrepreneurial in their culture and in the manner in which they treat their employees.
An example came up during the M&S entrepreneurial management program when the managers who were taking the program began to see how “anti-entrepreneurial” M&S was at that time. The senior manager who had arranged the entire program and secured funding for it (the advocate) was confronted by other managers who said that M&S was not entrepreneurial. In response, the senior manager turned to the consultant and said, “I told you we weren’t entrepreneurial. Look at me, because of my style, I have not been promoted!”
The failure years ago to reward an entrepreneurial manager at M&S sent a clear signal throughout the organization of the type of behavior that would not be rewarded. Trying to achieve strategic change in many organizations can be like turning a supertanker. The physics of the supertanker are an equal match, in lacking flexibility and innovation to an organizational culture that prefers plodding along at a steady pace, making no sharp turns and resisting severely efforts internally for it to change course or reverse directions suddenly.
Examples of flexibility and innovation are common. Today ASTD and many other organizations allow conference attendees to register through the Internet. While Merrill Lynch lays off 3,400 stockbrokers who use the old, expensive stockbroker model, Charles Schwab (eschwab), etrade and other companies that have embraced direct on-line brokerage services are experiencing tremendous growth.
On-line mortgage lending, online airplane ticket purchasing via auctions and similarly innovative, customer-friendly innovations represent the results of well-thought-out sustainability strategies. The expansion of Amazon.com into music, toys and other retail markets is an excellent example of “innovating” a solid business design and being flexible enough to take advantage of opportunities quickly as they appear.
Conclusion
Conducting a flexibility/innovation analysis is essential to understanding whether your organization is willing and can change to optimize its future. We hope this article helps your organization can take important, foundational steps so that you can address a central question of business at this time. Is your organization ready to change?