CORPORATE CHANGE

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CORPORATE CHANGE
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IMPLEMENTING STRATEGIC CHANGE

• EVOLUTIONARY
• REVOLUTIONARY CHANGE

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CHALLENGE OF DISCONTINUOUS CHANGE
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THREE VARIANTS OF ERROR IN THIS INDUSTRY

• THE DECISION NOT TO0 INVEST IN THE NEW TECHNOLOGY
• TO INVEST BUT PICKING THE WRONG TECHNOLOGY
• CULTURAL (INABILITY TO PLAY 2 GAMES AT ONCE)

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A CONTRAST HATTORI-SEIKO

• 1960S -- DOMINANT JAPANESE WATCH PRODUCER --
  SMALL PLAYER IN GLOBAL MARKETS
• ASPIRATION A GLOBAL LEADER
• CONDUCTED INTERNAL EXPERIMENTATION -- BOLD BET
  BECAME BOTH A MECHANICAL QUARTZ WATCH COMPANY

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EMPLOYMENT IN SWISS WATCH INDUSTRY
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REAL TEST OF LEADERSHIP

• TO BE ABLE TO COMPETE SUCCESSFULLY BY BOTH
  INCREASING THE ALIGNMENT OR FIT AMONG STRATEGY,
  STRUCTURE, CULTURE, AND PROCESSES, WHILE
  SIMULTANEOUSLY PREPARING FOR THE INEVITABLE
  REVOLUTIONS REQUIRED BY DISCONTINUOUS
  ENVIRONMENTAL CHANGE

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REAL TEST OF LEADERSHIP MANAGE BOTH
REVOLUTION
EVOLUTION
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COMMON PATTERN OF EVOLUTION

• Periods of incremental change punctuated by
  discontinuous or revolutionary change
• Long-term success marked by increasing alignment
  among strategy, structure, people culture
  through incremental or evolutionary change
  punctuated by discontinuous or revolutionary
  change.

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ORGANIZATIONAL ECOLOGY

• MANY SIMILARITIES BETWEEN POPULATIONS OF INSECTS
  ANIMALS POPULATIONS OF ORGANIZATIONS
• MODELS OF POPULATION ECOLOGY USED TO STUDY SETS
  OF ORGANIZATIONS (WINERIES, NEWSPAPERS,
  AUTOMOBILES, BIOTECH COMPANIES, RESTAURANTS)

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RESULTS OF STUDIES

• POPULATIONS OF ORGANIZATIONS ARE SUBJECT TO
  ECOLOGICAL PRESSURES
• EVOLUTION OCCURS THROUGH PERIODS OF INCREMENTAL
  ADAPTATION PUNCTUATED BY DISCONTINUITIES
• THOSE ORGANIZATIONS INDIVIDUALS BEST ADAPTING
  TO A GIVEN MARKET OR COMPETITIVE ENVIRONMENT WILL
  PROSPER
• CANNOT USE INCREMENTAL EVOLUTION FOR
  DISCONTINUITIES

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PUNCTUATED EQUILIBRIUM ORGANIZATIONAL EVOLUTION
Strategy
Critical Tasks
People
Culture
Formal Organization
Differentiation Cost (Selection)
Retention
Innovation (Variation)
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SLOW EVOLUTIONARY CHANGE IN FAST CHANGING WORLD
IS THE ROAD TO
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EXTINCTION
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TECHNOLOGY CYCLES EVOLUTION
Process Innovation
Product Innovation
Process Innovation
Product Innovation
Rate of Innovation
Dominant Substitution Dominant Design 1
Event Design 2 Time
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THE SUCCESS SYNDROME

• SUCCESSFUL COMPANIES LEARN WHAT WORKS WELL
  INCORPORATE THIS INTO THEIR OPERATIONS
  (ORGANIZATIONAL LEARNING)
• STRESS THEREFORE IS ON ACHIEVING CONGRUENCE
• BUT CONGRUENCE IS A TRAP

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The success syndrome
Inertia Structural Cultural
Fit
Success
Size Age
Failure when markets shift
Success in stable markets
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PARADOX OF CULTURE

• IBM -- lost 14 billion between 1990-1993. Why?
• Culture major reason -- inward focus, stress upon
  consensus, arrogance, sense of entitlement for
  jobs
• Culture product of success but also key to
  long-term failure

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AMBIDEXTROUS ORGANIZATIONS

• DILEMMA FACING MANAGERS
• short run -- increase fit of strategy, structure
  culture
• long run -- may have to destroy the alignment
  that made their organizations successful
• NEED AMBIDEXTROUS ORGANIZATIONS TO OVERCOME
  SUCCESS PARADOX

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SUCCESSFUL ORGANIZATIONS

• Hewlett-Packard, Johnson Johnson, ABB
• Each has been able to periodically renew itself
  to produce streams of innovation
• Commonalities?

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COMMONALITIES

• Organizational architecture -- reliance on small,
  autonomous units
• Reliance on strong social controls (both tight
  loose)
• Ambidextrous managers

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ORGANIZATIONAL ARCHITECTURE

• Emphasis on autonomous groups
• Retain benefits of size (especially marketing
  manufacturing)
• Decisions kept as close to the customer or
  technology as possible
• Headquarters facilitates operations

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MULTIPLE CULTURES

• Reliance on strong social controls
• Simultaneously tight loose
• Common overall culture promotes integration
  encourages identification sharing of
  information resources.

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AMBIDEXTROUS MANAGERS

• Managing units pursuing widely different
  strategies that have varied structure
  cultures is a juggling act - 3 companies
  successful
• Relatively long tenure
• Continual reinforcement of social control system

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ANDY GROVE OF INTEL
There is at least one point in the history of
any company when you have to change dramatically
to rise to the next performance level. Miss the
moment and you start to decline.
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CLASS ON 27/11/2000 BAMA PIE LTD.