In the last blog in this series we observed that many organisaitons suffer from change fatigue. We argue that often this is due to badly managed or poorly structured change programmes. Given that the pressure for ongoing transformation of business models, processes and technology is a strategic imperative, stopping is not an option. Consider an example of change from the retail sector.
Would anyone have believed in 1994 that a garage bookseller (Amazon) with $40,000 of investment capital would, over a period of 15 years, become the number 3 global retailer by brand value (BrandZ), despite having to change strategy midway through its growth cycle and move from direct sales alone to providing online platforms for other retailers? This success has impacted the industry as a whole and has forced other retailers to strive for better e-channel sales. Such pressure for change is one of the reasons that the retail sector is at the forefront of continuous renewal and improvement.
The most recent Times “State of Retail” survey, highlights how this industry sector is under constant pressure to change. While its prediction of a UK retail “wipe-out” has not occurred, the survey does accurately identify changes to the sector and its subsectors.
1. The report reveals that scale wins: the UK’s top 2 largest retailers by category are significantly ahead of the competition on EBIT margin.
2. Through the search for cost reduction, the trend of the last decade to exploit Far East sourcing is considered to have reached its zenith, especially in clothing, in which the growth of regional market demand and the power of suppliers have led to increased cost along the supply chain.
3. Retailers are also being challenged by changes in technology. Some think that retailing has undergone the most significant transformation of all industry sectors as a result of the internet (although many believe that maturity remains a long way off). One outcome has been the development of multichannel rather than conventional store-sales retailing. To remain competitive, a multichannel business has to provide the same coherent level of customer service and brand promise across all channels. Technology also raises business architecture issues, as retailers need to decide what is the right investment in CRM, data management and technology integration. It all becomes even more complex if a business is considering acquisition.
4. Ultimately, the sector is driven by the consumer. With recent requirements for thrift versus luxury, increased personalisation, more self-care products and consideration of green issues, retailers are facing significant external pressure to change and transform.
Change management and restructuring are vital
Corporate survival demands effective responses to change, but if management is weary of change, there is a problem. If previously successful, intelligent and innovative people within organisations continually fail to achieve high rates of efficient change, that is significant. If these people contribute to or suffer from low morale, overall business performance deterioration is just around the corner. Such individuals may not be isolated anarchists within the system, however. In fact, there is a growing dialogue on the subject of change fatigue—weariness and failure in academic, journalistic and professional forums—and statistics suggest that businesses are poor at change management most of the time. What’s going wrong?
Strategy Alignment principle
We cannot accept high levels of failure, change fatigue and low morale in our organisations. Some people believe the answer is to stabilise or slow the pace of change. I suggest the opposite; I also think that most organisations look at the wrong issues when trying to deliver change. I believe that a major reason for change fatigue is organisations’ failure to integrate strategy management with strategy execution—the inability to align strategy and change. Around 15 years ago, many large corporations failed to implement customer-focussed processes and instead managed inefficiently in functional silos. In the same way, a large number of sizeable or geographically dispersed organisations today fail to see that their raison d’être should determine the things they actually do. As Steve Tobak recently intoned, “It’s the strategy, stupid”.
Change management is nothing less than strategy execution (see ”Designing the code for change, Leppitt, 2007). Too many organisations operate strategy management decoupled from change management. It is common to see a functional mindset in which the business decides its strategy and then passes change “over the wall” to Operations and IT. Likewise, the planning process in many organisations creates barriers to effective change. Annual operational planning is typically bottom-up and based on an annual or fiscal cycle. Conversely, business transformation is rarely something that can be constrained to specific calendar planning cycles. The results are a constant misalignment of planning and delivery, significant wasted effort on reconciliation and reporting mechanisms, and lost time.