While ready-made solutions evade us all, says Dreu Harrison, there are some principles that underpin the successful design of organisational transformations.
There is nothing in the world that does not change. We know this to be true when we consider the sheer number and variety of changes we experience each day. In business, we can reinterpret this rule to mean there is no competitive advantage that is not transient.
Faced with intensifying competition, a team or organisation’s capacity to successfully transform becomes key to competing, that is, to achieving short-term performance and long-term sustainability. But how do we successfully transform teams or organisations?
While ready-made solutions evade us all, there are principles that underpin the successful design of transformations, principles which allow us to focus our attention and structure our efforts. In particular, we should consider the way that systems can support or impede transformations and how we might redesign them to improve the likelihood of success.
Why must we transform?
We are distracted. Every day, we encounter streams of new, and often contradictory information to be grasped and acted on promptly. We have even come to crave constant change and reversal, unable to ignore the next alert on our phone or headline on our feed.
Paul Valery could have been describing our collective (mis)behaviour when he declared: “Interruption, incoherence, surprise are the ordinary conditions of life. They have even become real needs for many people, whose minds are no longer fed…by anything but sudden changes and constantly renewed stimuli…. We can no longer bear anything that lasts.”
Valery’s insight that we cannot bear anything that lasts is unusual, yet his underlying message is profound. Many of us are actually seeking out change, even as we struggle to cope with it. We are mesmerised by it. We can’t concentrate, we want to be distracted. With a bit of licence then, Valery can be taken to mean that too much focus on the churn of change, diminishes our ability to respond appropriately to it.
By way of example, I often read analysts and bloggers who insist that disruption is everywhere, that the rules have broken down, that all bets are off. Yet these are clearly overstatements. Firms remain incumbent, systems remain intact, and outcomes remain predictable for the most part – everything in the world has not changed all at once.
So, we need to get some perspective on what has and has not changed before we launch into praising transformation and making a virtue of agility.
We want to prosper
Applying this insight to the sources of competitive advantage today, Roger Martin puts it like this: “Yes, some things have changed – competitive advantages have become more fragile, and there are new recipes in the strategy cookbook to bake low cost or differentiation advantages. But in acknowledging that, it’s important not to lose sight of the fact that there are still just two fundamental forms of competitive advantage. The leaders who understand this clearly, I think, will prosper most in the coming years.”
Martin’s point gets to the heart of why we want to transform our teams and our organisations. We do not want change for the sake of change. We want to prosper. In markets, we prosper when we deliver products and services at a lower cost or higher willingness to pay than our competitors. However, because the ‘use by date’ of our advantages are getting shorter and shorter, we now know that we must transform ourselves more often to stay ahead of the competition.
This is the perspective we need to maintain when discussing why we need to transform. To reiterate, the forms of competitive advantage – lower costs and differentiation – have not changed; the ways we need to relate as teams and organise as businesses to achieve them are changing constantly.
Unpacking the second point, Rita Gunther McGrath explains: “to win in volatile and uncertain environments, executives need to learn how to exploit short-lived opportunities with speed and decisiveness… the deeply ingrained structures and systems that executives rely on to extract maximum value from a competitive advantage are liabilities – outdated and even dangerous – in a fast-moving competitive environment.”
To repeat, the ingrained structures and systems leaders rely on to compete are becoming liabilities as they render firms sluggish and indecisive. Yet some leaders still refuse to acknowledge this change in competitive dynamics. They continue to rely on their old ways of thinking and acting, even though their personal and organisational habits were developed under less intense conditions. It is true that some organisations will be able to simply adapt their existing ways of working to compete in the short-term.
However, many others will need to go further and transform their habits entirely.
Principles for guiding transformation
Having established that we must transform ourselves to remain competitive, we can turn to consider how we might do so. Research by McKinsey points to four principles that underpin a sound and coherent approach to transformation. These four principles are:
- Create role models: leaders and influencers must model new values, beliefs, and behaviours,
- create a compelling story: transformation needs a story that is meaningful (‘why?’) and relevant (‘why me?’) to people,
- develop new talent and skills: people must be trained to think and act in new ways, and
- reinforce change through formal mechanisms: structures and systems must be aligned to support the adoption of the new values, beliefs, and behaviours.
I am interested in zeroing in on the final principle – reinforcing change through formal mechanisms – in the context of organisational transformation. This is because this principle gives me a way to interpret and positively reframe a frustration I often hear my clients expressing:
- ‘We’re all trapped in silos,’
- ‘we lack alignment,’
- ‘we can’t master cross-functional collaboration,’ and
- ‘you’d think we weren’t on the same team.’
These comments point to a dissonance between an organisation’s existing structure and its preferred ways of working, between what does happen and what should happen. Yet this dissonance can persist, despite our good intentions.
In part, because systems and structures will overwhelm transformation efforts if they are not coherently redesigned to support a new way of working.
Your systems are working too well
High-performance teams and businesses are constantly looking for an edge. I see them embracing a range of new behaviours from options reasoning and agile methodologies to a focus on human centred design and business model innovation.
Yet all this good work falters when it is not matched by parallel efforts to redesign existing structures and systems. How often do we see strategy or budgeting annual meetings run more often so they can be more responsive to emerging challenges and opportunities? How often do we see teams united by common methods and metrics rather than divided by separate P and Ls? How often do we see the voice of the
customer given priority over the voice of the most senior stakeholder in the room?
How often do we see business cases come at the end of a rigorous innovation process, rather than at the start? And how often do we see people place small bets to test new ideas rather than overcommitting to a costly pilot and then refusing to back down?
In my experience, not very often. Yet building a team or organisation that is competitive demands we challenge our standard ways of strategising, budgeting, investing, researching, and creating new products and services.
A financial services client I worked with recently could have been the poster child for some of the new ways of thinking and working I described above. They had leadership backing, change champions, a compelling story, and were training staff in agile and design methodologies. Yet they kept pointing to the persistence of silos and shadow functions in their organisation.
My moment of insight came when they prefaced their usual complaint by saying “My systems just aren’t working, we’re all still stuck in silos.” In a flash of insight, I replied “Actually, your systems are working
too well. You say you want innovation and learning but you hire for business-as-usual and compliance. You prioritise security and incentivise low-risk plays. Your organisation prizes the efficiency of a divisional structure but cannot eradicate duplication because divisional heads want to keep end-to- end control to avoid the ‘inefficiency’ of working with others. The issue is, your systems are doing their job but now you want to change that job. So you need to change the job and change your structures and systems at the same time.”
If there is nothing in the world that does not change – if every competitive advantage is transient – then our teams and organisations must adapt and, when necessary, transform with increasing frequency. New mindsets and methods are the key to staying competitive in our networked societies and economies.
But these new ways of thinking and acting can only flourish when we do the hard work of redesigning structures and systems to support and reward them. Instead of craving superficial changes, we might come to crave generating new advantages, stretching our teams and organisations as we reinvent what it means to work well together and to prosper.
Paul Valery cited Zygmunt Bauman. Liquid Modernity. Polity Press. 2000.
Rita Gunther McGrath. The End of Competitive Advantage. Harvard Business Review Press. 2013.
Roger Martin. ‘There are still only two ways to compete’. Harvard Business Review. Harvard Business Review Press. 2015.
Tessa Basford, Bill Schaninger, and Ellen Viruleg. ‘The science of organisational transformation’. McKinsey Quarterly. 2015.
This article was written by Dreu Harrison, who is director of strategic innovation at Pivot (Part of Frost Collective), and has been re-published with permission from MarketingMag.com.au.
Copyright: dedivan1923 / 123RF Stock Photo