Very few transformation initiatives actually 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.
Some of the reasons for failure that were identified are:
- 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 system of record 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 having to navigate the seams within and across silos.
While there are many more reasons why business transformations continue to fail, it’s obvious that the silo dynamics play a huge part. Although propelling 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 own 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 practice (Shared Vision),
- A functional and practical leadership structure (Conditional Leadership™),
- A culture that promotes and rewards change (Change-as-usual versus Business-as-usual),
- The readiness to change (Growth mindset versus Fixed mindset; Art of War versus Art of Raw™).
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.”
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 we believe most firms actually 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,
- and to inspire them to be more loyal.
In contrast, most firms develop products for a certain customer need and then try to find as many customers as possible who want to have that need met. 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 a customer achieve their job-to-be-done better and faster, most perceive delivery, service, and support as an unfortunate drawback.
Customer Success Agents
We’ve identified that the problem is that customers, once created, are generally left at their own devices. If firms want more loyal customers, companies should proactively assist customers to achieve their goals, sooner rather than later. Software-as-a-service (Saas) vendors are already committed to Customer Success to onboard, satisfy, and thereby retain more customers. Mind you, you don’t need to onboard every customer extensively: focus on the 20% of customers that contribute 80% to the company’s profit.
TIP: If you have multiple product groups, each with a dedicated sales team, selling to the same key accounts, you may want to consider introducing Corporate Success Management (compare: corporate account management). Once the new business cycle commences, you may want to shift back to corporate account management to focus on growth.
Next to establishing a Customer Success department, to retain your most profitable customers, you need a more agile organization. After all, we live in very disturbing times. Opportunities and threats are omnipresent. So, additionally, firms need to create a cross-functional platform where staff and management can share ideas, discuss customer cases, address problems that need to be dissolved, and discuss new product opportunities to build new business ventures while overseeing the capabilities, gaps, traps, and constraints of the entire operation.
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™. Roundtables offer the psychological safety needed for people to speak out and to debate issues that cross the mental and functional silos. This allows opportunities and threats to be considered from a transdisciplinary perspective (as they should) to drive change initiatives.
If anything, Change Circles™ need to provide the why of change. If people understand why they need to change, they are far more likely to go along with the what and how. And if 15% of people commit to the change, the rest will 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 so they could initiate a Change Action Plan (CAP), supported by a senior management member (CAPtain).
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. It’s a trap that’s easily missed.
How to Deal with Problems
Ackoff was a pioneer in the field of 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.
- No problem can be solved without affecting others in the system of which it is a part.
- A solution to a problem taken separately can create a much more serious 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 that has 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:
A good way of solving 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 originally 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 roundtables also need to be able to practice critical thinking. 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 ideas, arguments, and findings represent the entire picture and are open to finding that they do not.
Change versus Improvement
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 PLAN for improvement. More about Deming’s PDSA Cycle can be found here.
Systemic versus Integral Change
Systemic change is the result of challenging ourselves to deal with problems in the most effective and efficient manner ─ in Ackoff’s terms, by dissolving problems. In other words, by redesigning the system in such a way that the identified problems won’t reappear (= systemic change) ─ or by choosing a better system (= transformative change).
However, by focusing on redesigning the system ─by which we mean changing the existing processes, procedures, protocols, and so on─ we’re bound to overlook two critical components of change: the individual, the team, and leadership. For change to succeed, we may need to reskill employees, raise an individual’s emotional and social intelligence to improve teamwork and collaboration, help the leadership team to guide people toward the new situation, or even restructure (parts of) the organization.
Looking at change from the whole person, the whole team, and the whole system is what can be referred to as Integral Change.
Let’s look at our Framework, ROUNDMAP™. We’ve identified four Mastery aspects: Vision, Strategy, Purpose, and Mission. These are the four ‘cornerstones’ of business success. If any of these aspects are missing, too vague, or misdirecting, the business is bound to fail.
Harvard’s Heidi K. Gardner Ph.D. found in her research 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 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 as well as on this website, employees have narrowed down their expertise while the conditions business leaders are facing 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.
While both the business as well as the professionals themselves benefit greatly from cross-silo collaboration, getting people to actually work together is hard. The ‘stars’ in the organization often thank their success for acting individualistically. Why would they want to change their behavior? Furthermore, functional silos gave rise to subcultures, with their own nomenclature, heroes, reward system, and allegiances.
Many books have been written on tearing down the silo walls, however, we believe change should start by focusing on those who want to change, not by fighting those that want to oppose it. If we can prove collaboration leads to positive change, those that oppose it will follow, causing the silo walls to come down naturally.
This perception of focusing on those that want to change led us to develop the concept of Change Circles™. Change Circles are roundtable sessions where staff from diverse backgrounds discuss opportunities for improvements through change, based on actual customer cases, changes in market conditions, and so on.
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 afford to go through a tedious process of cultural transformation to get people to work across the silos.
And yes, we are aware that problem resolutions are not the best solution but they are effective. We can immediately begin to solve complex problems while at the same time starting a program leading to cultural change.
Commercial versus Operational
Change Circles intent to drive commercial performance, for instance, by improving customer value, creating seamless customer experiences, or increasing customer loyalty. You might be familiar with its more traditional counterpart, Quality Circles, which focuses on improving the quality of production to drive operational performance.
In the following image, we’ve combined our concept of Change Circles™ with Ackoff’s four ways of problem handling (absolve, resolve, solve, and dissolve). We’ve also included the four ‘cornerstones’ to explain where to locate the roundtables and how the zones of influence overlap.
P.s. If your company doesn’t have a Quality Circle in place, we recommend setting up a separate Operational Roundtable.
Similar to the formal organizational structure, the three roundtables are hierarchically structured:
- TOP – Business Roundtable
- MIDDLE – Operational Roundtable (instead, you could incorporate your Quality Circles)
- BOTTOM – Commercial Roundtable
Change Requests could originate from all three levels: they may trickle down, 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 instance, when customers are needlessly frustrated by recurring installation problems because subcontractors haven’t shared any feedback with customer service or product development. However, Change Requests can also originate from the middle, for instance, when broken supply chains can’t immediately be fixed, thereby requesting the frontline operation to stay clear from causing more delays.
Change Action Plan (CAP)
Upon validation and approval, a Change Request can be turned into Change Action Plan (CAP). We recommend either appointing a CAP Officer or setting up a CAP Office, to make sure the CAP is properly executed. If a CAP is transformational to the business, you may want to hand over the CAP to a Transformation Officer or a Transformation Management Office.
Find Common Ground
A recent post by Greg Satell is spot on: “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®
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 has been accepted worldwide to explain the change process. 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.