Thriving in disruptive times

When Professor Peter Richardson and Associate Professor Elspeth J Murray first published Fast Forward: Organizational Change in 100 Days in 2002, they had a sense that the pace of change in business was picking up. Until that point academics had not paid it much attention. 

‘It seems prescient now,’ comments Elspeth. ‘Fast-forward to 2016, and there’s a deluge of factors triggering the need for change in organisations. We see industries and companies being disrupted, but it’s really just change on a different scale and at a different pace.’

Both Peter and Elspeth are organisational change experts with the Smith School of Business at Queen’s University in Canada. As distinguished guests of the AGSM in November 2016, they shared their insights with students and alumni on disruption and change management. 

‘This is not about surviving disruption. Companies are using our framework to exploit disruption,’ explains Peter. ‘It’s a mindset shift, but it’s also quite generational. Everybody over 40 thinks of disruption as a big challenge – everyone under 40 sees it as a great opportunity.’

Peter and Elspeth emphasise that, given change is now business as usual, ‘winning’ in today’s markets means being able to successfully transition two, three or more times.

‘The surest way to drain energy out of an organisation is to treat change as an exceptional event – an exceptionally negative one. It’s now simply a part of business life,’ he says. 

The first 100 days: a framework for change
Fast Forward focused on how to make change happen quickly. Peter and Elspeth are now working on a guide to making decisions more quickly, an essential precursor to change.

Their research shows that when organisations treat change as a part-time or side activity, progress will be slow. The first 100 days of change are critical in creating speed, the next 100 days provide the momentum.

‘Best practice includes having a great communications and launch plan for any big change,’ says Peter. ‘If you announce cultural change and 100 days later you haven’t got any runs on the board, you’ve probably lost the internal will to succeed.’

He believes that in a post-GFC world, larger companies are actually much slower than they were. 

‘If you look at what CEOs talk about today, they’re saying, “We’ve got to be flexible, responsive, nimble.” But they’ve also re-engineered their systems so there’s no slack. Big ERP systems, balanced scorecards – they’re bureaucratic and controlling. They’re not just managing risk, they’re avoiding it and that stifles change.’
Instead, he advocates for a proactive cultural mindset that picks up ideas and embeds them quickly.

‘When I start a change session with executives, I ask them three questions.’ 

‘Is your organisation changing?’ Almost all hands go up. ‘Is it changing fast enough?’ Very few hands are still up. ‘Is there a lot of change in your organisation?’ and all hands go up again. So we’re changing, but we’re not changing fast enough, and we’ve got too much change going on. The problem with this situation is you never get a critical mass of resources and momentum around the big initiatives.’

Instead, he suggests keeping it simple and focused. ‘We saw this work with Xerox, and more recently with Ford under Alan Mulally. Align people around a small set of big objectives.’ 

Winning conditions for change
Elspeth defines the most important requirements for change as the four Fs – Fire in the belly, Forward thinking, Faster, and Fearless.

The first F encompasses the founder’s mentality – that fire in the belly that creates a sense of personal responsibility. ‘Bain & Company released some interesting research this year that showed the companies with sustained profitable growth all share a common set of attitudes and behaviours, and these can usually be traced back to a bold, ambitious founder, ’ she explains. 

Public companies which still have the founder involved have provided shareholder returns three times higher than other companies since 1990.

However, the traits of a founder – a clear, shared sense of purpose and an owner’s mindset – do not need to be limited to the founders themselves. 

‘Ford is a great example of this,’ Elspeth says. When Bill Ford Jr, great-grandson of Henry Ford, realised the company needed help he called in Alan Mulally. 

‘Mulally is not the founder, but as CEO he had a personal commitment to ensuring Ford remained an iconic brand well into the future.’ 

Ford was also forward thinking. ‘They understood that with urbanisation and the sharing economy, millennials are less likely to buy cars. Ford is no longer in the business of making cars, it’s in the business of transportation.’
Investments in Lyft and mobile commerce followed. ‘What’s really interesting is they’ve gone back to their roots, creating transportation that’s affordable for all mankind,’ comments Elspeth.

Being faster – responding to change quickly, and adopting an agile approach, is a fundamental aspect of the Fast Forward framework. 

‘Bain’s research also found that 85% of executives surveyed believe the majority of barriers to growth are internal,’ says Elspeth. ‘Most of these are created by the bureaucracies that accumulate as a business scales.’ 

She describes a more agile approach to strategic planning as one with ongoing discussions and rapid feedback loops. ‘Think of it as a series of sprints with a longer-term vision,’ she explains.

And finally, change requires courage – the ‘fearless’ condition for success.

‘You’ve got to have people who will dig deep these days, because it’s hard work,’ says Peter. 

Uncover the root cause 
Another aspect of digging deep involves diving in to diagnose the real problems holding your organisation back.
‘In medicine they say prescription without diagnosis is malpractice,’ comments Peter. ‘I believe a lot of executives are guilty of malpractice, because they diagnose change without understanding the underlying issues. It doesn’t have to take long, but before you do anything you need to understand the dimensions of what’s required.’

Sometimes an organisation can feel like it’s going through a lot of change, but the impact is only surface-deep because it’s reactive. ‘Instead of putting out fires, you need to get to the source of the fuel leak,’ he explains. 

The age of the frictionless start-up
Elspeth has established many new venture activities at Smith School of Business, including the school’s entrepreneurship centre. She believes it has never been easier to start a new venture.

‘All the elements of friction have gone. You raise money on Kickstarter, you create a website and host it on Amazon Web Services, you put your backend on Shopify, you buy everything you could possibly need on Alibaba, you find people on Upwork (a freelance website), and if you want to manufacture, you can buy a 3D printer.’ 
It’s never been easier to outsource, and everything is open source.

‘There’s also a complete mindset shift on what growth means,’ comments Peter. ‘Again, this is a dislocation between generations. People over 40 might think 20% annual growth is good, but the growth of start ups can be exponential.’

One of his MBA students invested in an online jewellery company called Alex and Ani.

‘They were bringing in $1 million four years ago and they’re at $300 million revenue today. It’s all manufactured in the US – they tapped into the latent skills of a local community.’

Elspeth points out that every industry is seeing disruption in this age of the frictionless start up – even mattresses. In the US, Casper has shifted the experience of buying a mattress from the showroom to online, with free delivery and 100 days to return if you don't like it. It reported $100 million in sales in its first full year of business and is set to double that this year .

‘We’re so boxed in by our traditional thinking,’ says Elspeth. ‘The real question is, how do you get those wild and crazy ideas? How do you nurture those discussions internally, rather than thinking people are wingnuts?’
Peter believes both Australia and Canada are relatively ‘un-innovative’ nations. 

‘Even though Canada benefits from being adjacent to the US, we’ve lost all our manufacturing. Why? Because we failed to keep up with innovation and R&D, failed to reinvest.’

He understands it’s not possible to compete on cost. ‘That’s the point. You’ve got to compete on innovation. Look at Finland and Sweden, at the size of their economies and high cost of their labour. They haven’t lost their manufacturing core, because it’s about design. They are able to charge premium prices for very well-designed industrial and consumer products.’

He sees the challenge for Canada and Australia as one of scale mindset.  

‘We’ve got a lot of good small innovators and designers, but somehow we lose the ability to do great industrial design manufacturing on a large scale. We just don't have that culture in either country.’
And this is important, because change and innovation go hand in hand.

‘They really require the same skills,’ says Peter. ‘If you’re good at innovation, you’re usually good at change.’

Incumbents can still win.
As the example of Ford shows, it’s still possible for leading brands to thrive in turbulent times.

‘We’ll only really know in hindsight which ones will succeed, because financials are lag indicators,’ comments Elspeth. She says she’d bet on Ford, IBM, 3M and even McDonalds. ‘They’re undertaking a massive shift towards healthier food and getting into the coffee business.

Peter says that in the resources sector – also important to Canada and Australia – the mid-tier companies are the ones coming through. ‘There’s a great company in Canada called Lundin – they’ve become a powerhouse. Again, they have a founder’s mentality. It's a family business.’

‘Winning doesn’t mean you have to do it all yourself,’ concludes Elspeth. ‘If you can't build the capabilities you need fast enough, then you have to buy them in. You just need to be prepared to change with the times.’

Ultimately, that could mean the difference between barely surviving and thriving in today’s markets. 

Professor Peter Richardson and Associate Professor Elspeth J Murray are organisational change experts from premier business school Smith School of Business at Queen's University Canada.


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