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How Change Is Introduced

Many of the old rules governing how to institute change will have to be thrown out. Slow, incremental change in bureaucratic structures no longer works in meeting rapidly changing environmental crises. A quantum leap is needed to deal with changing external forces. Leaders will need to focus on opportunities along with productivity to achieve effective performance. Leaders who are concerned with significant change need to convince their organizations to accept new ideas. To accomplish this goal, language becomes an important aspect of portraying organizational vision. Using the right words is especially important when trying to convince employees to accept personal risk. This is more easily said than done. Gaining the confidence of employees is difficult. They will need to embrace a new culture, with new expectations. This requires sensitivity on the part of the leaders and must be backed up with credible behavior. Dealing with personal values and deeply held beliefs requires a leader who is sensitive to individual needs and is able to build confidence and gain commitment.

Bernard Denburg, an expert in turning troubled companies around, recognized the importance of empowering employees. He focused their efforts on innovation, not cost reduction, to turn sick companies around. Using this basic logic with over 45 troubled companies, he was able to make every one of them profitable. He recognized that the creative power of employees could work wonders. An example was the successful outcome at A&E PlastiPac, which used his strategy and their innovation to save the company. A&E produced plastic bags for food chains. When the large plastic manufacturers entered the field, they nearly drove A&E into bankruptcy. To counter this threat, Denburg challenged his staff to change the product so that it would be unique. With Denburg's help, they came up with the idea of adding the names of the food chains to the plastic bags and thereby A&E was able to recapture the market.

In his book Leading the Revolution, Gary Hamel maintains that in recent years, businesses have engaged in a technology race much like the international arms race. In most cases, investments in technology have improved profits across the board. However, radical innovation is critical for companies to stay ahead of the pack. Fresh thinking and a passion for work are the key elements needed. Hamel suggests that we recognize the need for innovative upheaval on the job rather than using incremental change. Two individuals at IBM, a programmer named David Grossman and a staff executive named John Patrick, kept pushing the unpopular idea of the Internet to their superiors. They found a variety of innovative ways to demonstrate the potential power of the Web. They were finally able to gather a group of believers, including CEO Louis V. Gerstner Jr., which eventually made IBM a major player in the Internet world.

Hamel claims that only radical change will lead to innovation, and that revolution is needed to achieve the goal of reinvention. Business has experienced rapid and often disruptive change in markets and technology over the past decade, and companies will have to make fundamental changes—reinvent themselves—to survive and prosper. On the other hand, there are those who contend that revolutionary change may not be best for all organizations because it causes monumental stress and not all organizations would survive intact. Those organizations believe that effective change can best be accomplished through well-planned, incremental means. The best advice is: If the shoe fits, wear it!

Part of the problem in introducing innovation is that companies flip back and forth between change practices. The first is economic change, such as restructuring and downsizing. Then it is organizational change, which includes the enhancement of employee attitudes and skills. Beer and Nohria contend that 70% of change projects fail because companies don't use both of these approaches together in a consistent and well-integrated manner. They do not feel that the revolutionary approach, so often advocated in recent years, is the correct way to proceed. Obviously, because of the differences regarding how best to introduce change, there is no one best answer. Some industries are better suited to change because that is how they remain ahead of the pack. Companies in biotechnology, the computer field, and advertising are examples of where change is both needed and accepted. In other companies, such as farm products and transportation, evolutionary change is preferred.

An example of balancing risk with a potentially high payoff was tried at Ballard Power Systems. Geoffrey Ballad wanted someone with a fresh and creative perspective—with few preconceived notions—to help design fuel cells. He hired a chemistry professor, Keith Prater, to work on fuel cell technology, even though the professor had no prior experience in the field. Obviously, Professor Prater's innovative style was transferable from chemistry to fuel cells. Consequently, Ballard's gamble paid off. Given the opportunity and the challenge, Prater made important breakthroughs in the development of fuel cells, which now power many of the buses and cars we use.

Microsoft recognized that there had to be a balance between innovation and discipline, so it hired Robert Herbold, a management consultant, to handle the crisis caused by an informal, creative atmosphere that was not meeting revenue targets. During his seven years at Microsoft, he was able to assist in quadrupling revenue and achieving a seven-fold increase in profits, while at the same time reducing operating expenses from 51% to 40%. How did he accomplish this? He started by identifying products that would excite customers, and then introduced a creative, new approach to sales. He had to overcome the isolated fiefdoms that existed within Microsoft, and to form an integrated information system that would be used by all managers throughout the company. A key success factor was his ability to “explain” why particular changes were needed. However, gaining acceptance of the changes required the leadership of a CEO who was sensitive to the creative needs of the organization as well as meeting customer needs.

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