IMPLEMENTATION: RADICAL OR TRANSFORMATIVE CHANGE:Recognize the challenge

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Change Management MGMT625

Lesson #. 40

IMPLEMENTATION: RADICAL OR TRANSFORMATIVE CHANGE

Dunphy used the following typology for the causation for revolutionary change

Environmental Creep:

The environment itself may be changing incrementally and in ways become imperceptible to managers.

Therefore the degree of change over time may be large and require major re-adjustment

Organizational Creep:

The organization itself may move out of strategic alignment with an environment which remain

relatively stable

Diversification, Acquisition, Merger, Shut downs:

Diversification, for example, often involves a major structural shift from a functional to a divisional

structure. Because the structures are radically different, incremental change over is often not a realistic

possibility. Same is the case with acquisition, merger and shut down as large scale additions or

subtractions also preclude incrementalist approach.

Industry Re-organization

An organization may be adjusting appropriately with an industrial structure but what if that structure

itself may be altered dramatically. For example deregulation or nationalization, opening of borders and

signing trade liberalization treaties like WTO are few examples of introducing discontinuity in industry

environment

Major Technological Breakthroughs

Organizations might have invested too much in current technology while major new technology break

through occurs; which may dramatically change production costs. This creates problems for old org

with older technology while creating potential for new investors e.g. mini-mills in the steel industry

Managerial implications (Managing Radical Organization Transformation by Francis & Bessant)

Transformation means profound fundamental changes in thought and an action, which creates an

irreversible discontinuity in the experience of a system in multiple dimensions of organization's

strategy, structure, culture and work processes.

Here three key variables are:

1. Thought and actions

2. Irreversible discontinuity

3. Multiple dimensions

Several factors create a transformational imperative. Of these the most ubiquitous is technical change.

Many but not all, organizations create value in ways that are defined through the exploitation of

technologies. Firms founded to exploit specific technologies are especially vulnerable when there are

discontinuous changes in the prevailing scientific paradigm, dominant technologies or other factors that

radically change the economics of the business. The principal reason for this vulnerability is that the

prevailing core values, routines, strategies, cultural imperatives and asset endowment were built on a

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business model that has become competitively inferior, reactionary or obsolete. When this happens, a

firm's traditional competitive advantage ebbs away, but is, generally not lost overnight. In this

condition firms face a multi faceted strategic dilemma. A radical transition is required but firms can fail

to recognize the urgency of the challenge, lack understanding the scale of the destruction and

reconstruction required, or not possess the skills to handle the "jump". Hence a transformational

imperative presents particular problems for strategic managers.

Radical organizational transformation requires multiple changes. Strategies must be rewritten,

organizational culture realigned around different values, processes re-worked and value chains re-

designed. Managing transformation is confronting in the extreme for those who lead and manage

organizations. Some studies of corporate transformation hold that cumulative, incremental additional

capabilities need to be built progressively by firms in order to transform or rejuvenate themselves. The

study of Francis and Bessant shows that firms needs to have a set of different, distinctive (and possibly

temporary) new capabilities need to be acquired, generally from outside the firm and unleashed to make

a radical transformation. They proposed an analytical framework that identified five key organizational

and managerial competencies which are given as under:

The five organizational and managerial competencies are:

1. Recognize the challenge

2. Determine a transformational strategy

3. Require Extensive innovation

4. Manage Systemic change

5. Upgrade leadership process

Stage I: Recognize the challenge

Most organization faces strategic dilemmas in the sense that they are not in a state of readiness (or not

in a mood) to go for change. These dilemmas are identified by the manager as "we are in a wrong

place". This author has defined as that organization face "pre-action barriers" which are:

Avoidance

People in the organizations especially top managers cannot move away from their tested ways of doing

business as they do not believe that the world has changed. In other words this is a kind of success trap

for individuals who are unable to differentiate environment and situations and believe that with same

set of knowledge and skills they can counter each and every situation.

Indecision

Even when the need for change is understood no one may know what the best strategic direction to

follow is. This is the problem of too many options and alternative on one hand and the problem of

leadership and decision making amongst competing and splintered leadership.

Poverty

Firms may find themselves needing to undertake radical change at the same time as their financial

results are poor. At the same time the cost of investment is very high especially in going for technology

driven solutions. The other examples are licensing, maintenance, up gradation and training etc.

Insularity

The individuals in power in the organization are those whose life experience has been in creating that

which now has to be destroyed. High powered leadership (isolated from people) are least equipped to

be the leaders of transformation

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Inability

The management of major change programme or organizational transformation is a demanding task and

relatively few leaders have the necessary prowess. It is unlikely that managers who have spent years

managing steady-state organizations will have the appropriate skills and values to lead transformational

change.

Stage II: Determine a transformational strategy (TS)

For instance there are couples of generic TS, of which four have been identified here in the following

subsections:

TS 1. Reconfigure the value stream

Reconfiguring the value stream involves making major changes in the positioning of the firm with in a

web of suppliers, partners and/or down stream agents. For example, firms contemplating a value stream

transformational strategy may be able to change, upgrade or develop their suppliers and do the same

with downstream agents. They may be able to find new ways to meet supply needs or reposition

themselves within the value stream with advantage. This may facilitate the organization to train, impart

technology and even indoctrinate suppliers as per it needs. For example, Sun Micro systems developed

an extensive partnering network for service support that extended their reach and enabled them to

provide locally adapted services. Three key advantages are associated with re-configuration of the value

stream. First, it enables activities to be undertaken at rock-bottom costs since lowest cost providers are

selected (for so long as they remain the lowest cost provider). Second, a value stream can be

constructed so that it is inherently agile resources can be "switched-on", reconfigured or "switched-

off" relatively easily thereby providing customers with what they value while not being locked-in

maintaining costly assets. Finally, visibility of the value stream as a whole provides an opportunity to

detect inefficient linkages and improve them optimization take place at the level of the value stream

TS 2. Redefine the driving force of the business

Over a period of time organizations need to change their strategic orientation must revise their

strategic driving force, and innovate their mission. This can be changed, although the risks of adopting

a new strategic driving force are high as the organization must abandon at least in part, what it knows

and enter a domain of ignorance, uncertainty and discovery. In stable times organization an

organization's routines are an asset as they encapsulate accumulated knowledge and eliminate the need

for learning afresh in repeating situations. For example a company in one of the Scandinavian countries,

back in 1865 was concerned with pulp and paper industry after 100 years or so it entered

telecommunications and since late1990s is the industry leader outmaneuvering other leading telecom

players

TS 3. Reconstruct the competencies of the business

Competencies are underlying attributes that enables difficult things done in a reliably and economically.

In other words now body else can do the way you do is known as strategic competence. Critical Success

Factors (CSF) is an equivalent concept and is there in every industry. For instance, oil companies have

a competence in finding oil by interpreting complex geological data to reduce the risk of drilling at

wrong place. In Pharmaceutical industrial sector spending on research and development (R&D) is a

norm to discover new compound. One computer firm transformed itself from Memory Company to a

Processor Company. Hence the development of new competence is essential given the perceived

change in environment.

TS 4. Redefine the value proposition to the existing and /or new customers

Competitive strategies are about meeting sufficient numbers of customers' need better than others,

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managing costs and innovating, and thereby providing a profit margin. Firms that understand their

existing customers well, and importantly, their potential customers, have an advantage. Intimacy with

the customer provides a form of learning that can be applied to design of the product/ service offer. As

such it is a factor of production as important as any tangible asset.

Many firms have a predisposition to know their customers well, at least at some point in their history.

They spend time with them and are influenced by their needs and wants. However , a focus on existing

customers can blinkers firm's decision makers since existing customers may not be lead users. Rather a

commitment to study potential and/or lead user customers is needed. This establishes flows of insight

that enable product and service development to take place with the whole potential market in mind, not

the firm's current market.

This theme is central to Christensen's (1997) analysis of the "innovators dilemma" where the weak

signals that indicate the emergence of new market opportunities, generally based on new technological

capabilities, are unlikely to be picked up by concentrating on existing core customers. Exploring

emerging opportunities spaces becomes a key strategy and requires the ability to maintain existing

customer links and, simultaneously, develop new and, sometimes, radically different ones.

The challenges of an uncertain environment or turbulent environment are such that unless organizations

change what they offer (product/service innovation) and the ways in which they create and deliver that

offering (process innovation) there is a probability that their survival will be in doubt.

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