Read the business magazines or the Wall Street Journal and change is, as always, a hot topic:

1. “The world is changing faster than ever, so you have to change faster or you will become a dinosaur.”
   
2. “People hate change. Yet, knowing how to change is the single most important skill in business today.”
   

 WOW!! Scary stuff.
 

As we all know, these quotes have a kernel of truth in them. Change is omnipresent. But, if we keep it simple, we can learn how to change and improve our businesses. The purpose of this blog is to give a broad overview of change. Hopefully, you will pick up some basic thoughts and ideas on change that you find useful.

So, let’s get started.

Why Do We Need to Change?

The purpose of change in a business is to either maintain or improve your business’s competitive position. In short, if change does not lead to improvement, then it is just wasted effort.

Looking at the history of science, Steven Goldman said: “in history, it is self-evident that progress results from a change. But, change does not necessarily equate with progress.” I repeat. “Change does not necessarily equate with progress.” You want to change only if it will help maintain or improve your competitive position.

What Causes Change?

Change results from two forces:

1. External events
   
   1. Changes in the marketplace
      
   2. Changes with competitors
      
   3. Changes in technology
      
2. Internal events
   
   1. Personnel changes
      
   2. Identified inefficiencies or weaknesses
      

What are the Types of Change?

There are three types of change:

1. Incremental change
   
   1. Commonly known as continuous improvement, these are the daily improvements and efficiencies in doing tasks and doing business that (hopefully) each of your employees is working on daily.
      
   2. Probably the most important type of change for making your business successful
      
      1. As an example, just think if every day people on your team could do their jobs just 1% better. After 70 days, that 1% would have accumulated to a doubling in efficiency with a further doubling every 70 days.
         
   3. Primarily done in the context of production
      
      1. Toyota and its lauded kaizen method
         
   4. In other areas of the business, incremental change is often not sexy enough
      
      1. It is hard to measure
         
      2. Requires real managing and valuing the contributions of everyone on the team
         
2. Step change
   
   1. Commonly known as change initiatives or change programs, these are the “big” initiatives and programs rolled-out to make the business significantly better
      
   2. Very sexy
      
      1. Usually high profile and led from the top, these initiatives are classified as the “solution” to the business problem
         
      2. Since sexy, these initiatives seem to breed like rabbits with some companies having as many as 25 active change initiatives on-going at the same time. See the article “The Acceleration Trap” for a more complete discussion (http://hbr.org/2010/04/the-acceleration-trap/ar/1) of the over-breeding of change initiatives and its effect on businesses.
         
   3. Usually, unsuccessful and exhausting
      
      1. Nearly all studies report that 70% – 80% of all major change initiatives do not reach their originally stated goal or are abandoned before completion.
         
      2. Require a large amount of individual and corporate energy to get the initiatives moving forward.
         
      3. As with new government programs, change initiatives take on a long life of their own as they have the backing of top management who have a vested interest in seeing an initiative that they have developed and promoted be perceived as a success.
         
3. Complete transformation
   
   1. This is a business turn-around or complete transformation of the company from one business model to another
      
   2. Requires a tremendous amount of energy and can become all-consuming; but, generally has a beginning and an end
      
   3. Difficult to do well
      
      1. Usually has two phases: stop bleeding and re-building. The challenge is that the skills to stop bleeding (cutting costs, improved efficiencies, etc.) are often different than the skills to re-build the business (sales and marketing, etc.)
         
      2. In order to succeed, requires a concerted effort to stop doing things that are no longer relevant. “Stop Doing” is one of the hardest things for any business to achieve.
         
      3. As a positive, business turn-arounds generally create a tremendous focus in the business
         

What Are the Biggest Mistakes Businesses Make When Undertaking Change?

1. Change too much
   
2. Change the wrong thing
   
3. Skip bases
   

Change Too Much

Businesses usually undertake too many changes for several reasons.

First, they over-estimate the capacity of an organization to change. In looking at the business and the competitive landscape, top management often realizes that there are many areas to improve. While it is true that each one of these areas needs to be improved, people do not have the attention and perception span and the time to improve all these areas at the same time (while focusing on their “real jobs”). By default, too many priorities become no priority.

Second, top management and their staff pride themselves on their bias for action. So, they introduce changes and initiatives to make it happen. For staff people, “high potentials” who are rotated through jobs every few years, or people in middle layers in a bureaucracy, these initiatives become justifications for the importance of their job. Further, top management may not realize that the time it spends on any one initiative is multiplied several times over as the initiatives extend down into the trenches.

Third, poor management and poor execution is not dealt with directly. Instead, it can become a reason for a change or training initiative or program. A poor performance in sales may not require a “sales training” initiative. It may just require having better sales managers and holding them accountable.

To sum up, Jim Collins in his book How the Mighty Fall, reminds us: “if you want to reverse decline, be rigorous about what not to do.”

Change the Wrong Thing

An operational consultant friend of mine (schooled in Theory of Constraints, Lean, Six Sigma, Quality, etc.) relates a story. He was invited into a plant in central Pennsylvania to see what he could do to improve the operations further. The plant manager already had a number of initiatives under way and was genuinely open to new ideas. My friend was impressed; the plant was clean, well-laid out, and efficiently produced a quality product. Afterwards, he met with the President who was excited to know what more could be done to improve the plant.

My friend’s answer was quite simple. “Don’t do anything more in the plant. The plant runs very well. But, the most important thing that can be done to improve the business is to bring in more sales. Any tweaks and slight improvements in the plant would be minor compared to the improvements in the business with more sales.”

In this case, the overall constraint (what is holding the business back) is not the plant, it is sales. By improving the plant further, you make the plant better. But, that does not necessarily make the business better. It is great to have an excellent plant. But, the goal is not to have the best plant. The goal is to have the best overall business with the best competitive position.

This concept of “change the wrong thing” often occurs when management trained and promoted under one set of business conditions needs to respond to different business conditions. In the above story, the production focused President wanted to solve the company’s problems by focusing on what he knew best (production) instead of what was needed (additional sales). To a leader comfortable and confident in swinging a hammer, every problem will look like a nail.

Skip Bases

Baseball is reasonably simple. You get a hit. You run to first base. If it makes sense, then you run to second base. Then to third base. Then to home. You do not skip bases.

In change and change initiatives, people often skip bases. They try to go from the batter’s box to third directly without going to first and second. Most often, you will see this in change initiatives undertaken with the help of consultants, who are peddling a “solution.” This solution has to be reasonable complex or the company will not perceive that the consultant is adding any value. Unfortunately, the company may not be prepared for the solution that the consultant has to offer.

Let’s give an example. A company is struggling and realizes that it has a poor sales and marketing presence and team. The solution is to implement a CRM (Customer Relationship Management) program like Salesforce.com. With it, the sales team will all be able to track customers and customer activities better and everything will be great!!!

WRONG!!

Do not skip bases. As described, the company is barely out of the batter’s box on sales and marketing. Full implementation of a productive sales and marketing effort with Salesforce.com is third base. To even begin working on a CRM solution you need to be at second base. But, to get to second base, you need to, first, ensure that top management has a commitment to customer service and sales. Then, get decent sales management in place that will over-see and evaluate the sales team. Then, ensure that you have the right people on your sales team. Then, ensure that the team is properly trained on how to sell the product or service. Then, develop the discipline in the sales team to record their contacts in Microsoft Outlook and write sales reports. By this point, you may finally be ready to implement Salesforce.com or another CRM program.

What are the Three Keys in Undertaking Change?

Undertaking change and business turn-around are topics of future blogs. In these upcoming blogs, I will discuss the three keys for change as the following:

1. Understand Reality, Face Reality
   
2. Focus, Prioritize, Plan (Less is More)
   
3. Right People Doing the Right Job
   

Until Next Time.