Organisational Change Management Volume 1

Framework 50 Transitions in Uncertain Times

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(Discovery driven approach)


Many organisations need to review their mindsets and practices to help them survive in uncertain times. With an increasingly unpredictable, complicated and volatile environment many of the accepted practices and core businesses (products and/or services) need reviewing. Beware of making decisions based on old assumptions, ie high barriers to entry, high transaction costs, few capable competitors, growing and increasingly affluent markets, restricted information flows, etc.

Generally human beings have a tendency to embrace information that reinforces their pre-existing views, while challenging or rejecting information that questions these views.

Many established management tools, such as net present value, are built on a foundation that assumes certainty, ie forecasting likely cash flows and discounting them. In a volatile business environment, this thinking is not acceptable.

A way around this is a "discovery-driven" approach that focuses on searching for the right answers and reducing the assumption-to-knowledge ratio by using 3 processes, ie

i. initiating the renewal process

ii. evaluating change options using financial models

iii. mapping the future growth portfolio

1. Initiating the renewal process


Generally an organisation that is performing well has less desire to invest in new opportunities despite having the resources to handle them. Furthermore, when an organisation is performing well, it is too easy to overlook the weak signals of performance decline. Thus an organisation needs to reinvigorate itself before it is forced to.

Defined an attractive feature

- when a business is successful, there is less incentive to challenge fundamental assumptions. One way to handle this denial syndrome is to look into the future and think about what your business looks like 3 to 5 years time, ie

"... you need an idea of the concrete results that might constitute a success before you can begin to assess whether the core business is likely to help you get there..."

Rita Gunther McGrath et al, 2009

Determine which programs and projects are likely to get you there

- once the realisation occurs that your core businesses are not your future, then focus on developing strategies for new, rapid growth segments, eg move away from commoditized product-based activities into growing, largely knowledge-intense businesses. Furthermore, this can be the time to sell the 'old' core businesses.

Determine and test your fundamental assumptions

- Do your assumptions still reflect current and future reality? If not, then you need to reinvent the organisation to reflect realities

Create enabling structures

- as most organisations are designed to protect and preserve the status quo, any new activities requires major organisational changes, eg new businesses are separated from established operations and given their own focus in a direct line to the senior executive team. This is needed to eliminate the power of the resistors and naysayers.

2. Evaluate change options using financial models


- having identified the need to move on from reliance on existing core business, you need to construct a financial model that shows what the new strategies could deliver. There is a need to build flexibility into these strategies as they can change over time

- understand the financial assumptions to the 4 phases of your business's lifespan, ie launch, ramp up, exploitation, erosion. This will identify the areas of competitive advantages and how long these advantages will survive

- remember: slow launches and long ramp-up periods are expensive as they commit resources before benefits (revenues, profits, etc) are realized. How long you will have competitive advantages will depend upon how quickly competitors respond and market changes. No product and/or service will continue to thrive forever.

- you need to estimate what the total investment will be and the likely returns. If using a discounted financial analysis, such as net present value, the riskier the venture, the higher the discount rate. Only other hand, this financial analysis is of limited use in fast-paced, uncertain times. The analysis needs to be able to assess core business variables in the new initiatives as against the current core businesses. This includes making an allowance for the cannibalization of current core businesses.

3. Mapping of future growth portfolios


Use mapping a growth opportunity portfolio as a way to allocate strategies/resources across different levels of uncertainties (market and organisational, eg internal and external, and capabilities, eg technical, executional, etc)

Need to understand assumption-to-knowledge ratios, ie higher the uncertainty, the lower is the assumption-to-knowledge ratio

Needed to differentiate the current core activities with the new platforms/options that have a degree of uncertainty about their success

When the portfolio of activities is close to the core, most of the projects will be located in the low uncertainty area. This may cause concern: that you are not making enough investments in future opportunities.

An example is the telephony industry with many traditional players staying with the landline concepts. Then they were threatened with the technology of wireless alternatives and broadband, eg mobile, voice over internet, fiber optic services, cable offering television and internet services, etc


Remember: after every downturn, the world emerges differently from the old one

The aim is to

"...make aggressive investments in the company's future while core business was still generating substantial cash..."

Rita Gunther McGrath et al, 2009

(source: Gunther McGrath et al, 2009)


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