Very few business transformation initiatives succeed. According to academic research, a staggering 70% of business transformations fail. That same number also applies to digital transformation failures, as found by McKinsey ─ punching a hole of $900 billion per year in the enterprise strategy. To raise the number of successes, we believe firms need a System of Change: Change Circles and a Change Map.
Let’s start by looking at some of the identified reasons for transformation failure:
- A lack of urgency ─ people do not perceive an urge to change.
- A lack of aspirations ─ expectations are set too low.
- No shared vision ─ the vision was not communicated or was not supported.
- No conviction ─ the team has no notion of the importance of change and prefers the status quo.
- No change narrative ─ people are not convinced that they need to transform.
- No buy-in ─ people don’t want to invest extra energy to make change happen.
- Lack of skills ─ available skills remain locked-in in day-to-day jobs, prioritizing ongoing business.
- No clear procedures ─ there was no record system for directing and measuring progress.
- No change-management infrastructure ─ management doesn’t know how to manage the process.
- No cadence of leadership-oversight meetings ─ leadership can’t ensure progress.
- No transformation office ─ or a grandmaster of change to lead the process.
- No performance management ─ no discussions to track progress.
- No alignment ─ with the vision or corporate strategy.
- No cross-team work ─ the heavy burden of navigating the seams within and across silos.
While there are many more reasons why business transformations continue to fail, it’s evident that the silo dynamics play a huge part. Although driving productivity, it’s hard to change existing hierarchical and functional structures, especially when people are afraid to speak out because of peer pressure or potential negative consequences. Or because of their loyalty toward their team and its leadership.
Some believe it is ultimately a failure of leadership that allows organizational silos to form and exist. It starts, and ultimately ends, at the top. If we can peek into the conference room of a leadership team, we will begin to see the symptoms of silos and the related causes. Watching the interactions between the members of the leadership team will usually reveal behaviors that create and enforce silos.
Minimal Requirements for Change
Certain elements must be in place in an organization for change to take hold:
- An agreed-on direction for the change,
- A functional and practical leadership structure,
- A culture that promotes and rewards change,
- The overall readiness to change.
Resistance to change is common and should be expected, according to Ana-Elena Jensen, Ph.D.: “Resistance to change usually comes from fear, on one of three levels—what will happen to me in my world, how will my relations to my colleagues change, or how will our practice and our clients be affected.” Although full schedules, distracting events, fear of change, and apathy are obstacles to change, the real enemy of change is complacency. “Having the will to change is critical,” says consultant Fabrizio. If leaders don’t have the willpower to follow up on change then, “Stop right there.”
Let’s pick an example of transformative change. Today, many companies prefer a customer-centric over a product-centric business model. But is that really what they want? Customer Centricity is about fulfilling more of a customer’s needs to obtain a more significant stake in the customers’ wallets. In contrast, a typical product-centric business model focuses on growing market share. Furthermore, a customer-centric business model by itself isn’t sustainable (business case: IBM).
What most firms want to achieve is:
- To retain more of their customers;
- To have them engage more often;
- To get them to share their feedback;
- To make them return more often;
- To get them to spend more over their lifetime;
- To get them to refer more often;
- To inspire them to be more loyal.
In contrast, most firms develop products for a particular customer need and then try to find as many customers as possible who want to meet that need. While a customer acquisition strategy is often perceived as critical to their survival, very few product-driven companies have a customer retention strategy. While customer service offers an excellent opportunity to help customers achieve their job-to-be-done better and faster, most perceive delivery, service, and support as an unfortunate drawback.
If the firm decides that it wants more loyal customers that return more often and spend more, what does it needs to do to make that happen?
A common problem is that customers, once created, are generally left at their own devices. If firms want more loyal customers, companies could proactively assist customers in achieving their goals sooner rather than later. Software-as-a-service (Saas) vendors are committed to Customer Success to onboard, satisfy, and retain more customers. The change could mean setting up a Customer Success department.
TIP: If you have multiple product groups, each with a dedicated sales team, and you’re selling to the same group of customers, you may want to consider introducing Corporate Success Management (compare: corporate account management). Once the new business cycle commences, shift to corporate account management to refocus on growth.
We’ve looked at change from an ambitious viewpoint. Let’s look at change from a trend view: we’re faced with a problem and want to make sure the problem is adequately solved.
Russell Ackoff was a pioneer in problem-solving, operations research, systems thinking, and management science.
According to Ackoff:
- A system is not a sum of the behavior of its parts; it’s the product of their interactions.
- You can not solve a problem without affecting others in the system.
- A separate problem can create a much more severe problem than the problem solved.
- You can be sure that a solution directed at improving the parts taken separately won’t improve the performance of the whole.
- To dissolve a problem is to redesign the organization with the problem or its environment so the problem is eliminated and cannot reappear.
Ackoff argued that there are four ways of problem handling:
- The way we treat most problems is what Ackoff called problem absolution: we ignore the problem and hope it will eventually go away.
- We may want to find a problem resolution, which means we look into the past to find a “good enough” solution. This approach doesn’t solve the problem, but it allows us to move on. The solution seldom satisfies anyone.
- Our learned way of problem-solving is looking for the optimal solution, the best thing to do in the current situation. But, no problem ever stays solved in a dynamic environment, and every solution to improve the part that caused the problem creates new problems. So it’s a temporary and ineffective way to treat a problem.
- The best way to create lasting change is by problem dissolving. We can only deal with a problem effectively and enduringly through (re)designing the system that has it so that the problem no longer exists.
This perception of problem handling made us create a Productivity Matrix that we dedicated to Ackoff:
Cause and Effect Analysis
Assessing the scope of a problem is part of the exercise. A good way of assessing problems is by using a Cause and Effect Analysis, devised by professor Kaoru Ishikawa, a pioneer of quality management, in the 1960s, often represented by a fishbone diagram. Although it was initially developed as a quality control tool, you can use the technique just as well in other ways. For instance, you can use it to discover the root cause of a problem, uncover bottlenecks in your processes, or identify where and why a process isn’t working.
Participants to Change Circles also need to be able to practice critical thinking. We don’t want to waste time on trivia. In essence, critical thinking requires you to use your ability to reason. It is about being an active learner rather than a passive recipient of information. Critical thinkers rigorously question ideas and assumptions rather than accepting them at face value. They will always seek to determine whether the opinions, arguments, and findings represent the entire picture and are open to finding that they do not.
Decide on What to Change
Solving a problem to improve (or better) a particular business situation may require change. But not all change is an improvement.
W. Edward Deming developed and taught a theory of management and improvement named the System of Profound Knowledge, which included the Deming Cycle or the PDSA Cycle of Continuous Improvement (PDSA = Plan, Do, Check, and Act).
Deming argued that we need to ask ourselves three questions before trying to improve a system:
- What are we trying to achieve? (= Aim)
- What changes can we make that will result in an improvement? (= Change)
- How will we know that a change is an improvement? (= Measure)
By answering these questions, we can devise the right improvement plan (CAP). More about Deming’s PDSA Cycle can be found here.
Systemic and Integral Change
Systemic Change results from challenging ourselves to deal with problems most effectively and efficiently ─ by dissolving problems in Ackoff’s terms. In other words, by redesigning the system so that the issues identified won’t reappear (bettering the system = change) ─ or by choosing another system (better system = transformative change).
However, the system isn’t merely about the existing processes, procedures, protocols, structure, business model, value proposition, portfolio, and so on. It will also need to include the individual, the team, and leadership. For change to succeed, we may need a change of people’s behavior, reskill employees, raise an individual’s emotional and social awareness and intelligence to improve teamwork and collaboration and help the leadership team guide people.
Looking at change from the whole person, the entire team and the entire system refers to Integral Change.
In her research, Harvard’s Heidi K. Gardner Ph.D. found that: ‘For professional services firms, the only way to address the client’s most complex issues is for specialists to work together across the boundaries of their expertise.’
Cross-functional or horizontal collaboration has become critical in today’s complex world, and it is paying off (see image to the right). According to Heidi Gardner, ‘Organizations earn higher margins, inspire greater customer loyalty, produce more innovative work, and attract and retain the best talent when specialists engage in smart collaboration across boundaries.’ We couldn’t agree more: next to having a growth mindset, a collaborative mindset is essential for coping with today’s challenges.
As we’ve stated numerous times on our corporate website and on this website, employees have narrowed down their expertise while the conditions business leaders face today are volatile, uncertain, complex, and ambiguous (VUCA). To cope with today’s complex problems (like the issues related to the pandemic, global competition, digitalization, and virtualization), ‘experts need to integrate their specialized knowledge to tackle more complex problems than any of them could do alone.’ as Heidi so eloquently described in a webinar.
A recent study by McKinsey revealed that positive employee experiences (EX) lead to 16 times more employee engagement and that they are 8 times more likely to want to stay at the company: “How do leaders satisfy all parties in trying to remake the mission? In our view, they have a unique opportunity to listen to their employees and engage them on what matters—now and into the future”, as found by McKinsey, “Workers are hungry for trust, social cohesion, and purpose. They want to feel that their contributions are recognized and that their team is truly collaborative. They desire clear responsibilities and opportunities to learn and grow. They expect their personal sense of purpose to align with that of their organization. And they want an appropriate physical and digital environment that gives them the flexibility to achieve that elusive work–life balance. “
While both the business and the professionals benefit significantly from cross-silo collaboration, getting people to work together can be difficult. For instance, the ‘stars’ in the organization may believe that they thank their success for acting individualistically. Why would they want to change their behavior? Furthermore, functional silos gave subcultures, with their jargon, heroes, reward system, and allegiances. Why bother working with people that think differently? Besides, why would you share information freely if hoarding information offers a kind of leverage or bargaining power?
Because, as stated by Gardner, a collaborative mindset is critical for coping with the enormous challenges that companies need to deal with in today’s extremely fast-paced world.
Many books deal with tearing down the silo walls. However, we believe change should start by focusing on those who want to change, not fighting those who wish to oppose it. If we can prove that collaboration leads to positive change, taking away their concerns, those who oppose it will follow, causing the silo walls to come down naturally.
ROUNDMAP Change Circles™
We all know that we live in disturbing times. Opportunities and threats are omnipresent. As stated, firms need to create cross-functional platforms where staff and management can share ideas, discuss customer cases, and address problems that need to be dissolved—a place where people can discuss new opportunities and identify threats more quickly.
To do so ─ without having to overhaul the existing structure needed to commit to and defend the ongoing business ─ we are proposing a quick, out-of-the-box solution: so-called roundtables or Change Circles™. Change Circles offer the psychological safety needed for people to speak out and debate issues that cross the mental and functional silos. This setting allows opportunities and threats to be considered from a transdisciplinary perspective (as they should) to drive impactful change initiatives.
Why use roundtables? As found by astute authors like Heidi Gardner, Patrick Lencioni, and Gillian Tett, crossing the silos is critical but also extremely difficult. While at the same time, the urge to collaborate from a diverse background is extremely high. Companies need a resolution NOW and can’t always afford to go through a tedious process of cultural transformation to get people to work across the silos.
If anything, Change Circles™ need to provide the why, how, and what of change. If people understand why they need to change, they are far more likely to accept the what and how. And if 15% of people commit to the change, the rest will likely follow.
For instance, by discussing the problem of a growing customer turnover rate, participants of a Commercial Roundtable came up with the solution to implement customer success management to improve the customer onboarding process. The members of the Business Roundtable discussed their Change Proposal (CP) and agreed to the solution. They passed on a change Recommendation to the Change Management Office to initiate a Change Action Plan (CAP), supported by a senior management member (CAPtain).
Please keep in mind that it is critical to keep the Change Circles™ aligned with the company’s existing (or aspired) vision, strategy, purpose, and mission: you don’t want people to start to wander around in all directions.
ROUNDMAP Change Map™
Next to the Change Circles, we’re using a Change Map as a guideline to bring about transformative change (based on the Change Canvas).
The Change Map is a visual mapping system that will help describe the current state as well as the desired future state, the change needed in terms of culture and behavior, processes, technology, talent and capabilities, organizational structure, and what is required for change to take place (communications, training, and so on).
Our approach to change is from a collective effort driven by stories. It balances the traditional top-down diagnostic approach (Lewin, Kotter, Mauser) and a bottom-up dialogic approach. During transformative change, Change Circles can be deployed as the rendezvous points of a Change Coalition. We’ll explain more about the Change Map in another post.
Commercial versus Operational
Change Circles (CCs) and Change Maps (CMs) intend to drive change, for instance, by improving customer value creation, transitioning from a product-driven to a customer-driven organization, or changing from a fixed to a growth mindset to become a more creative, collaborative, and innovative organization.
You might be familiar with a more traditional counterpart, Quality Circles. A Quality Circle (QC) is a participatory management technique to manage and improve the quality of the entire organization. Similar to the CC, the power of a QC comes from mutual trust between managers and employees, which leads to more mutual understanding which focuses on improving the attitude toward quality throughout the organization.
We’ve combined our concept of Change Circles™ with Ackoff’s four ways of problem handling (absolve, resolve, solve, and dissolve) and the Kubler-Ross Change Curve in the following image. We’ve also included the four ‘cornerstones’ (vision, strategy, purpose, and mission) as inspiration, should you want to divide the roundtables hierarchically over the four cornerstones.
In the following image, we’re using three table levels, but you may choose to set up cross-functional Change Circles per product group or division. Regardless, keep them interlinked so that stories, experiences, and progress can be exchanged!
In the image above, the roundtables are hierarchically structured:
- Business Roundtable (top; business line)
- Operational Roundtable (middle; operational line)
- Commercial Roundtable (bottom, frontline)
Regular Change Requests could originate from all three levels: they may trickle down from the top, for instance, when the company needs to realign the rest of the organization with a revised vision or strategy. Or it can rise to the top, for example, when customers report that they are frustrated by specific installation problems. However, Change Requests can also originate from the middle, for instance, when broken supply chains can’t immediately be fixed causing delays in the delivery of certain products.
Change Action Plan (CAP)
A Change Request can be turned into a systemic Change Action Plan (CAP). If you haven’t assembled a Change Coalition, to make transformative change happen, we recommend appointing a CAP Officer or setting up a CAP Office to ensure that CAPs can be executed successfully. If a CAP is transformational to the business, you could appoint a Transformation Officer or a Transformation Management Office (top-down approach). But again, if you want the entire organization to be involved in change, we strongly advise assembling a Change Coalition.
A recent post by Greg Satell can be seen as a warning but don’t get discouraged by it: “Change fails because people want it to fail. Any change that is important, that has the potential for real impact, will inspire fierce resistance. Some people will simply hate the idea and will try to undermine your efforts in ways that are dishonest, deceptive, and underhanded.”, continuing, “People who hate your idea are, in large part, trying to persuade many of the same people you are. Listening to which arguments they find effective can help unlock shared values and that’s what holds the key to truly transformational change.”
Kubler-Ross Change Curve®
Change can have an impact. In the image above, we’ve incorporated the Change Curve (on the outer rim; anti-clockwise, implying an evolutionary process) to explain the relationship between problems, lasting change, and the emotional response to change interventions.
Since its formation, the Kübler-Ross model or the Kübler-Ross Change Curve model has been extensively used by individuals and organizations to help people understand their reactions to significant change or loss. The Kubler-Ross Change Curve model is widely accepted to explain the response to change. As the basic human emotions experienced during personal loss, Change, death, or a dramatic experience remain the same, this model can be applied effectively in such situations.