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Failed Change: The Greatest Preventable Cost to Business?

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Visible megaproject failures such as Boeing’s 787 "Dreamliner" get plenty of media and political attention, but they are just the tip of the iceberg. Most change failures are below the waterline, either failures of standard change programs, or difficulties with everyday, nonprogrammatic change. In this chapter from The Science of Successful Organizational Change: How Leaders Set Strategy, Change Behavior, and Create an Agile Culture, Paul Gibbons explores why business has the lowest standards for "knowledge" and the lowest standards for entry among the professions, and how these deficiencies can be improved.
This chapter is from the book

The Change Problem—How Bad Is It?

At a time when governments worldwide were desperate to cut deficits, and asking citizens—one way or another, whether by increased taxes or reduced benefits—to foot the bill, the 2011 headline in the British tabloid rag, the Daily Mail must have been unwelcome:

“£12bn [$18bn] NHS Computer System Is Scrapped...”

The UK government had, after a decade, canceled the largest civilian IT project in the world at the National Health Service (NHS). Initial cost estimates had come in at a mere £2.3 billion ($4 billion), which presumably seemed a steal at the time. On the other side of the pond, the U.S. Census Bureau canceled the planned automation of the decennial census project after approximately $3 billion in cost overruns. A few years later, the U.S. Air Force canceled a logistics management program that had accrued costs of $1.2 billion. The development cost overruns for Boeing’s 787 “Dreamliner” approximated $12 billion, Avon wrote off the entire $100 million of the “Promise Project,” Denver airport’s baggage system snafus cost $1.1 million per day until abandoned with an estimated cost of $3 billion. Merger failures are even more astonishing—if that is possible. The AOL-Time Warner merger is reputed to have destroyed $100 billion dollars in shareholder value—more than the GDP of a few countries! Part of that was market timing, but most of the destroyed value arose from cultural and interpersonal conflict that made structural and strategic integration of the businesses impossible.

Visible megaproject failures such as those get plenty of media and political attention, but they are just the tip of the iceberg. Most change failures are below the waterline, either failures of standard change programs, or difficulties with everyday, nonprogrammatic change. Seventy percent of change programs fail is the “statistic” that many gurus and even some experts cite. This seems an extraordinary figure; it should raise eyebrows, yet few people challenge it. Is it true?

Because this is a book on science and change, this is the place to first blow the whistle on a statistic that is neither true nor useful. The statistic “70% fails” was based on survey data published in a non-peer-reviewed magazine and on out-of-context remarks by two well respected Harvard professors (Kotter and Nohria).1 When I say here that the survey findings are “non-peer-reviewed,” why does that limit their trustworthiness? The peer review process means that the methods, data, and conclusions have been scrutinized by a jury of one’s peers, and it is the gold standard for quality because of this scrutiny. Despite this, even quality popular business magazines (for example, Harvard Business Review and McKinsey Quarterly) are not peer reviewed. This is astonishing, unique to business compared to other professions, and very worrying. In medicine or science, the most popular journals also have thehighest peer-review standards (such as The New England Journal of Medicine and Nature).

This raises a theme that will recur in every chapter: business has the lowest standards for “knowledge” and the lowest standards for entry among the professions (such as medicine, architecture, science, or law).

Seventy percent is a horrific number. The critical questions are:

  • Is it really that bad? What is the quality of the evidence?
  • What do we mean by change? Do some kinds fail more?
  • What do we mean by failure, complete write-offs, and slight delays?
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