Introduction

Organizational leaders are perplexed and worn out by the persistent and dynamic jolts in today’s business environment. “Rarely does a day go by,” bemoans a company vice president, “that I don’t feel the impact of yet another attack on my strategic direction.” Any business leader can cite example after example of dramatic changes occurring in the world:

• Deregulation and privatization open markets
• Breakthrough technology creates new industry leaders overnight
• Court challenges drain companies of time and money
• Mergers and acquisitions require immediate operating model changes
• Large-scale restructuring efforts and layoffs lead to disgruntled employees and strikes.

Leaders know they can neither ignore these challenges nor let them dictate their organizational strategy. It is a classic Catch-22. Ignoring these challenges will ultimately result in erosion of market share, margin, stock price, and possibly, the death of the company. Alternatively, allowing the changes to control a company’s strategic direction would lead to a constant game of catch-up, frustration, cynicism, and eventually, apathy.

As a result of this constant flux in the corporate operating environment, many previously fundamental aspects of organizational life have become impediments to change:

• Rigid organizational structures, which once provided stability and control, are now political encumbrances that slow reaction time.
• Long-range plans gather dust as technology continues to rapidly reconfigure the competitive environment.
• Command-and-control leadership styles that once provided certainty have created internal competition between leaders, and a workforce that has no confidence anyone will listen to their ideas.
• Functional organizations that have deep, specialized knowledge are being subjugated by integrated organizations that offer a wide range of comprehensive services.
• Traditional operating models and long-standing vendor relationships are being threatened by the movement towards outsourcing both peripheral and core businesses.

As the ability to predict what will happen in the business environment has become virtually impossible, a company’s ability to change, reinvent and quickly reconfigure itself has become a competitive advantage. Prospering in this time of permanent unpredictability requires new ways of thinking and behaving. The scale and scope of these changes demands a transformational process in which the company designs not only new organizational operating models, strategies and business processes, but also more importantly, new competencies and practices. On a practical level, real agility in these times requires that an organization’s members learn new tools that will allow them to react and respond to these challenges with possibility and creativity.

As the ability to predict what will happen in the business environment has become virtually impossible, a company’s ability to change, reinvent and quickly reconfigure itself has become a competitive advantage.

This paper offers a transformational approach to managing change, an approach that enables all employees to become new observers and actors in their organization. In Part I of this paper, we will look at three major trends that have been permeating the contemporary business world and discuss their impact on the state of organizations today. Next, we will discuss two distinct strategic approaches that have emerged in response to “managing change.” Finally, in Parts II and III we will put forth an alternative approach to transforming organizations that includes the two approaches but is not limited by either one. Specifically, Part II will describe the theoretical components which support the transformational approach and offer some enabling competencies for being effective in the domain of context. Part III, the practice section, offers a detailed process, consisting of seven components, for bringing this approach into organizations. The practice section also provides some examples of both behavioral and practical business results we have seen in companies who have used this approach.

PART 1: Background

Trends in Today’s Business Environment

The importance of developing both theory and practice for creating a new strategic approach to managing change increases when the trends of today’s business environment are observed. These trends have formed something of a ritual mantra for business executives when talking about change and we have captured them in three general categories:

1. Organizations are dynamic networks of relationships.

Over the past decade, there has been a growing awareness inside of organizations that they are fluid networks of relationships and self-organizing systems, rather than static, self-contained entities. The plethora of books and articles on the “ecology” of organizations demonstrates this view, as does the recent eruption of mergers and acquisitions, hostile takeovers, strategic alliances and the emergence of leading-edge technology partnerships. In one alliance, competitors are working side-by-side to develop new organizational operating models for a client. In another, we see CEOs of Fortune 500 companies working with directors of local community agencies and headhunters to create centers for employee recruiting and training.

As is most often the case, the shift in business has been closely paralleled with a shift in scientific discourse. Neurologists, physicists, biologists and psychologists are all struggling with questions like how do billions of interconnected cells in the brain give rise to awareness, cognition and feeling;² and how do simple particles organize themselves into complex structures such as stars, snowflakes and hurricanes?³

Instead of directing the focus on the quest for the ultimate particle, both science and business have been moving toward studies and practices concerned with flux, change and the forming and dissolving of patterns.

The “quality” movement of the 1970s and 1980s—based largely on the design and control of distinct components in a process—grew into the more dynamic reengineering movement of the early 1990s. This quantum shift began to, and continues to, move the focus toward understanding and redesigning networks and systems. What has often been overlooked in this process, however, is an intentional focus on the individual’s role in taking accountability for the success of these networks of relationships and processes. The concept of self-organizing systems contains the assumption that people will naturally self-organize. Managers have unfortunately relied on this premise and have developed a sense of complacency because they think they don’t have to do anything except massage the process. What is missing is an intentional focus on whether the system is organizing in a way that aligns with the company’s and the individual’s goals. Structures and processes need to be designed intentionally to allow people to be accountable for making these networks of relationships work.⁴

2. The “globalization” of businesses and markets continues to grow.

Industry lines have been blurred, local markets have expanded, and the “democratization” of countries—particularly in Asia, Latin America and Europe—have dramatically changed the nature ‘of our global marketplace. The massive investment in infrastructure and business-process redesign resulting from globalization demands some universal interpretation of human action and coordination that transcends cultural differences. In this environment, organizations must acknowledge not only linguistic and cultural disparities, but also must take into account local technological capability, variable economic conditions, and educational inequalities. An organization’s members see the world from different points of views and value systems, and in response, companies have attempted to establish a “common ground” on which to conduct business.

The creation of a common ground—although built on good intentions—has often led to the homogenization of corporate operating environments. In other words, many organizations have not embraced these differences, they have tried to conquer them. The “melting pot” mentality is pervasive in organizations when dealing with issues of diversity: it minimizes and blends differences rather than enhances them, like a mosaic would. Instead of seeing how each individual can make a distinct contribution, some organizations have put people in cross-functional teams and blended their expertise, making the team accountable for the results. In some situations this has proven effective, but in the majority of cases when a person can blame the team for his/her mistakes, personal ownership is lost, and the success of the team is diminished.

Furthermore, the shift to free market structures around the globe has dramatically changed the nature of security for employees. Put simply, the locus of security has changed. As markets and industries have evolved and grown, competition has increased and companies have had to “streamline” to keep costs down and margins high. Employees’ sense of responsibility for the enterprise has been replaced by the question, “Will I be out of a job tomorrow?” No longer can employees rely on their companies to provide security; instead they must generate a sense of security from within. People need to develop the capabilities and resourcefulness that will provide them with internal satisfaction and accomplishment, regardless of the circumstance. It is this dramatic shift from an institutional form of security to developing employees’ internal sense of security that leads us to stress the importance of personal transformation as an access to changing an organization’s culture.

3. Technological advances are changing the way organizations change.

Technology is driving the rate of change. The intensifying spiral of upgrades and breakthroughs in technology are forcing competitors to rapidly match each others improvements. Federal Express for example, develops an electronic package-tracking system to expedite customer queries, and within a month the United Postal Services (UPS) has developed a package-tracking system that surpasses that of FedEx, both in terms of technological competence and price. Technology requires that not only organizations, but also individuals, constantly assess and upgrade their skills and capabilities as their organizations change.

Moreover, technology has become inexorably linked with every other aspect of the business model. One can’t even think about strategy or any other organizational process without considering both the implications and opportunities that technology provides. The convergence of strategy, technology, and process has created the need for an organization to look towards changing and reinventing itself on a regular basis. Technology has truly made change the status quo for organizations today. Technology, and our relationship to it, is a key lever for an organization’s ability to prosper in these times of constant change.

“Change is the business environment. And it’s not that every company is undergoing change. Change has taken over every company. Creating change, managing it, mastering it, and surviving it is the agenda for anyone in business who wants to make a difference.”⁵

C. Fishman, The Ten Laws of Change That Never Change

Technology is further disrupting what used to be relatively stable businesses and industries. Technological breakthroughs have become normal in almost every field. Like globalization, this has perpetuated the race to operate as lean and mean as possible in order to stay on the leading edge of technological advances. Because companies are unfamiliar with this continual demand for shedding expenses and layers, instead of becoming more vibrant, these efforts have often left organizations in an anorexic condition. People are tired, disoriented, anxious and cynical about their future. They are looking for certainty in an uncertain world.⁶ Without a deliberate effort to incorporate people and provide them with new skills and some direct accountability for the company’s success (as well as their own) the logical end of this game turns into washed out margins and a burned-out work force.

Implications for the Future of Organizations

How can an organization prosper and grow in this state of permanent unpredictability? The answer lies in the ability of both the organization and its work force to fundamentally alter their relationships with themselves, each other, emerging technologies, and the business environment in which they operate. This change will require flexible and efficient coordination of capabilities and an ability to build, modify, and sustain relationships with both partners and competitors.⁷ Financial services, health care, insurance and management consulting are just a few examples of industries that are facing demands from their clients to offer “integrated” capabilities and services at an accelerated pace.

The ability to respond, expand and innovate no longer depends simply on how smart or savvy one is but, in addition, depends on how quickly one can adapt to the changing marketplace. The transformational approach claims that organizations can build specific organizational competencies and practices that will produce freedom, power, possibility and choice regardless of the situation or circumstance. These competencies will rely on two pertinent capabilities: the ability to consistently and accurately sense conditions and know when it is time to reinvent the organization; and a willingness to embrace being in a state of constant personal and organizational transformation.