The world changes rapidly these days. Technologies move on and companies adapt – or not in some cases. The problem lies in being able to change as quickly as the environment in which your business operates. But change management need not be crisis management. Through a process of strategic renewal leaders can develop a set of practices that can guide their organizations to a new era of innovation.
We often find it easier to resist change rather than embrace it, but this process allows leaders to approach the future and all its uncertainties with confidence, while acknowledging the contribution of past success.
Strategic renewal is not an easy process to begin, fund, or lead, because it entails making changes before disruption occurs. The problem for many businesses, stretched as they are by myriad pressures and mounting costs, is they don’t want to go ‘looking for trouble’. Yet recent research suggests that is exactly what they need to do to survive in an uncertain world, recommending that leaders need to embed strategy, experimentation, and execution into the day-to-day fabric of their organizations.
Failure to act ahead of a crisis over recent years has resulted in disaster for the likes of Xerox, Kodak, HMV and Blockbuster, to name a few. They had all been successful companies, but with that success came complacency and a lack of response about the real threats to their pole positions. By the time they attempted to react, the technology had moved on and they were left behind more innovative competitors.
Strategic renewal is all about responding rapidly to change, adjusting your business model to fit the market, and reconstructing it in a way that adds value for your customers. Innovation of this kind requires leaders to look beyond the obvious threats, see new possibilities, and find imaginative ways of organizing their business.
IBM’s experience illustrates how strategic renewal can result in a positive outcome if initiated early enough. In 1993, when its core mainframe business was being threatened by the advent of the PC and the client server, IBM was rescued from disaster by outsider CEO Lou Gerstner. He took the step of listening not to insiders (who wanted to break it up into autonomous business units) but to clients, and he realized that one of the company’s greatest strengths was the fact that it could provide integrated solutions for its customers. Since that time, the company’s success is down to its focus on consulting, analytics and industry-specific solutions, and its move away from hardware and software.
Some threats to your business may be easier to spot and harder to challenge than others, whether it’s emerging markets, foreign competitors, or digital business models. Witness the damaging effect of online advertising on the print publishing industry, for example. But other threats require leaders to be braced for the unknown, to anticipate competition from outside their core markets. Dramatic change often comes from elsewhere, challenging the whole basis of an industry – Apple and Google entering the mobile phone sector, for example, and completely overshadowing Nokia and Blackberry.
How to renew your organization ahead of market disruption:
Start with your people – involve employees in the renewal process, and build energy around the desire to succeed rather than fear of failure. The research points to how Ciba Vision, a global contact lens manufacturer, used this strapline – ‘Healthy eyes for life’ – as the basis for its strategic renewal program, which allowed employees to identify easily with its goals. In contrast, it refers to a British manufacturer’s aspiration of ‘5/10/2010’, meaning 5% revenue growth and 10% profit growth by 2010. It inspired no one but the CEO and the company’s stock subsequently plunged.
Think of new ways to get people behind your strategic renewal plan and spark dialogue. Develop forums so your teams can start to look at the business now, and where they would like it to be, always with the customer in mind.
Be imaginative, think laterally, and act creatively. How quickly can your business model react to sudden change? Is it outmoded? Perhaps the way to grow is through experimentation. Taking Blockbuster versus Netflix as an example, while the former assumed that threats were a normal part of competition and stuck to the DVD rental process, the latter could see how market conditions were changing rapidly, so it shifted from rental to video streaming.
Don’t rest on your laurels. If your profits are dominated by well-established branches of your business, look beyond them and aim to develop new capabilities. Executing a plan to create new profit streams if current sources disappear will help you cope with sudden changes in the market.
Explore new ideas for new ventures across the organization – although strategic renewal must be rooted in the senior teams’ collective engagement to change, it must be broad enough to engage managers a level or two lower who can also help to win over any resistance.
Finally, strategic renewal needs full commitment and appropriate funding and resources. View it not as an add-on activity but core to the work of leaders, for it is just as vital to your business performance as other projects you expend time, energy and funding on.
The Art of Strategic Renewal. Andy Binns, J. Bruce Harreld, Charles A. O'Reilly & Michael L. Tushman. MIT Sloan Management Review (Winter 2014).
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