Section 2: The Why and What of Change
2.1 Today's Context
Every one faces complexity driven by uncertainty and accelerating change. It is the "New Normal" making leadership more demanding and in demand.
Accelerating complexity places extreme demands on leaders. The leader's ability to relate, energize, and develop their followers is critical to empower them to act without direction. It's a competitive imperative and requires a new balance of more effective and affective leadership. It's the ability to produce results by being affective. That ability to influence people, in the way they think, feel and act is now paramount Surveys from IBM and KPMG give us some clues. Not surprisingly, CEOs are confronted with massive shifts caused by:
"Leaders cannot afford to choose between reason and intuition, or head and heart, any more than they would choose to walk on one leg."
(Peter Senge)
- New Government Regulations
- Increased information management.
- Changes in global economic power centers
- Accelerated industry transformation
- Rapidly evolving customer preferences
In the KPMG survey 1400 Corporate Decision Makers across 22 countries) showed:4
- 94 percent agreed that managing complexity is important to company success
- 70 percent agreed that increasing complexity is one of the biggest challenges their company faces
- Trying to manage complexity has had mixed success with only 40 percent of senior executives rating themselves as "very effective"
In IBM's annual survey, they interviewed 1,500 CEOs from 60 countries across 33 industries.5
Most say that successfully navigating increasing complexity requires creativity. Yet, less than half believed their enterprises are prepared to handle a highly volatile, increasingly complex business environment.
It doesn't sound as if things are getting any better. Since 1996, surveys have consistently shown that 60-70 percent change initiatives fail in North America fail and now more than 60 percent of CEOs said that industry transformation is the top factor contributing to uncertainty, indicating greater challenges to find more creative ways of managing organizations, finances, people and strategy.
In IBM's survey:
- 80 percent CEOs expect things to get much more complex but only 49 percent believe their organizations are equipped to deal with it successfully - the largest leadership challenge identified in eight years of research.
- Most say such constant change demands creativity
They say they need creative leaders that will:
- Focus much more on innovation
- Be more comfortable with ambiguity and experiment with new business models to realize their strategies
- Invite disruptive innovation and take balanced risk
- Consider changing their enterprise drastically to enable innovation
- Engage their teams to be courageous enough to alter their status quo
- What have the "stand out" organizations been doing as this trend has emerged?
Standout Organizations
Over last 5 years, IBM showed that "stand-out" organizations buck this trend
- 54 percent are more likely than others to make rapid decisions.
- 95 percent identified getting closer to customers as a strategic imperative
- 20 percent more of their future revenue will be from new sources than their more traditional peers due to their superior operating dexterity
- 61 percent see "global thinking" is a top leadership quality.
- Most see the need for new industry models and skills as they can't rely on models they use in their domestic markets
In parallel, 74 percent KMPG respondents see opportunity in complexity, like:
- Gaining competitive advantage,
- Creating better strategies,
- Developing new markets,
- Driving efficiency,
- Bringing in new products.
They also see complexity driving new approaches to HR, geographic expansion, mergers/acquisitions and outsourcing. Typical reactions to increasing these complexities are curious.
As these surveys show, many leaders see their world as complex but the questions is: Do their organizations need to be complex as result? The increased pressure we find has an insidious effect of CEOs feeling that they need more control, more systems, more technology, more..complexity and often fall prey to:
"The perfect becoming the enemy of the good"
(Voltaire)
Let's unpack this. As technology gets faster and cheaper, pressured decision makers seek more data and information which locks them away from the future. The real danger is developing corporate myopia that focuses on refining existing products while competitors are developing "Game Changers"
Added to this is a common view that more data and information gathering capabilities reduces uncertainty. But, time-compressed decision-making rests on identifying your competitors' intentions with the least amount of information to take action first. The need is for enough situational awareness to find competitive vulnerabilities and predict their actions.
The problem is that the time to create the future is compressed. Only wisdom deals with the future. But achieving wisdom isn't easy. For people to acquire wisdom they must transition through data, then information, then knowledge to get to wisdom - "evaluated understanding" Let me explain
Wisdom is understanding where none has existed before. Unlike data, information and knowledge, it asks questions which have no known answer. Wisdom is a human state informed by technology, not replaced by it, and enabled by future perfect and future worse-case thinking. The challenge is leading people through transitions of understanding data, to information, to knowledge, and finally to wisdom - fast enough to be useful.
"The only sustainable competitive advantage is an organization's ability to learn faster than the competition."
Peter Senge
This means that leaders need to create learning organizations that acquire wisdom fast enough to thrive in rapid change by:
- Creating cultures that support ongoing employee learning, critical thinking, and risk taking with new ideas
- Allowing mistakes and valuing employee contributions
- Learning by experience and experiment
- Dispersing newly gained wisdom through the organization and embedding it into the day-to-day
In later sections, you will see that these survey's clarion call for changing how organizations should be led falls on many leaders' deaf ears. With this context in mind, we now look at our survey's findings of how often both initiated and reactive change occurs. These findings are an important confirmation of both the KMPG and IBM findings on the increasing rapidity and complexity of change. It is important because it increases the risks of each failed change impacting each subsequent change in a compressed timeframe.
This section summarizes 781 contributors' two thousand replies to three questions:
- How often does your organization initiate change?
- Why do we need to change?
- What does change mean to you?
2.2 How often does your organization initiate change?
CHART 1: HOW OFTEN DOES YOUR ORGANIZATION INITIATE CHANGE?
It's interesting to note that contributors also made 248 additional comments. The reader will notice that we asked how often does your organization "initiate change"
For many contributors, they clearly live in a more reactive world. Here's a summary of their comments.
- As needed, by customers, projects, markets, governments, poor performance, environmental factors (83)
- Constant, Ongoing, Process (63)
- Hard to Say, Infrequently, Not predictable (20)
- Reactive (5)
Add to these figures those who say their organizations change at least monthly (36.6 percent)
Here are some contributor comments of change's continuous nature:
- Reviews of strategy expectations with actual market achievement
- Sporadic, but too often.
- There is no specific agenda. It happens as and when a need is felt. Firefight like situation.
- Too much. It is not effective because it is the company driven, not employee driven.
- We are constantly innovating and continually improving programs, processes, resources and our approach
- We are growing rapidly and are always evolving our services so that they better serve the needs of our clients.
- We are in a continuous mode. We strive for the most current best practices and encourage innovation in the 11 different regions we work across.
- We are in constant motion; it's is part of our culture
- We are looking all the time to see how we can grow
- We sometimes daily to adapt to new situations - a benefit of being a small company
2.3 Why do we need to change?
CHART 2: COMMON TRIGGERS FOR CHANGE
Despite some contributors finding these questions obvious, many others didn't find them obvious at all. Results...
