managing change

The way that managers now discuss, debate and agonise over change makes it sound like something new. That's obviously absurd. Societies, individuals and organisations of all kinds have always been subject to change, sometimes of sweeping severity. Yet the current perception is that the pace and pressure of change are greater than ever before - and it's not hard to agree, especially in the cauldron of information technology.

The Eighties - to name only three earthquakes - saw the surge of the PC, the overthrow of IBM as lord of the market, the sensational rise of Intel and Microsoft, the triumph of open systems. The 1990s have already seen the quite unpredicted but revolutionary advent of the Internet, which (so the new received view goes) 'changes everything'. No other industry has been through upheavals of this dramatic order in such a short space of time. However, that's only a matter of degree.

All industries have experienced and are experiencing change of unprecedented nature and probably of unprecedented speed. But has the management of change also changed? The challenge to managers is the same. It's a task, however, which established managements have commonly missed: celebrated cases include RCA, the great pioneer of broadcasting, and the largest maker of valves, missing the transistor, and IBM lagging for years after its competitors before entering new sectors - including PCs.

The fast success of its PC invasion stunned everybody into forgetting the previous mismanagement - only corrected by a crash programme, taking a mere 14 months, that has passed into history. That's what change management mainly used to mean. Companies waited until change was not only on them, but past them, and then acted vigorously to catch up. As with IBM's PC, the programme was often a one-off, an exceptional effort implying exceptional means. What's changed is that this wait-and-see strategy is now desperately unsafe.

Matsushita Electrical used to stay Japan's largest electronics group by letting others, like Sony, do the pioneering - and then jumping into the market, using the powerful customer franchise of the Panasonic brand and its position as lowest cost producer to overtake the pioneers. On Matsuhita's own admission, that's no longer a tenable strategy. Those who get in first tend to stay there - like Intel in microprocessors and Microsoft in operating systems.

Not only can managements no longer afford to miss the first bus, and wait for the next: they have to build their own busses. New products and new processes are the gateways to survival, never mind success - and the processes must include those of management itself. The traditional process of pyramided authority, cemented by a control culture and implemented by order-and-obey methods, works reasonably well for stable organisations in unchanging markets. But where can these conditions be found today?

In 1989 I turned a BBC radio series into a book called The State of Industry. It featured 17 companies, all of them heroes of the leaner and fitter era. These were all success stories. Yet by 1995 - a mere six years later - four had been taken over, two had been split in half, and seven had been through notable travail, severe enough in some cases to unseat the chief executive. That left just four of the chosen firms still basking in the sunlight - Glaxo, BOC, Vauxhall Motors and ICL.

The less successful companies had certainly changed internally, primarily to reduce costs (often at the price of contracting to a narrower base as factories and products were abandoned). But they hadn't changed enough in relation to their markets and their changing industries. That indictment even applies to some companies that have spent heavily on 'change programmes'. The managements concerned truly wanted to create a new culture, but tended to behave as if this could be accomplished with words alone.

Alter actions - that is, behaviour - and you change culture in a meaningful way. One chief executive testified tellingly on this crucial point. Asked on video to name his greatest mistake, he admitted that it was his part in deciding to launch a massive change programme without determining what business results it was supposed to achieve. Once that huge failing was corrected, the company, deeply troubled at the time of the confession, soared ahead (though without the chief executive who had launched the original programme).

The first principle of change management, then, is that the reasons for change must be clearly understood, communicated with equal clarity and tied to practical, measurable objectives. But a philosophical commitment comes even earlier: the belief that companies must seek out change, rather than (like most organisations) adapt to change when it hits them amidships. A study of 'fast-growth tigers' by five McKinsey authors showed that successes like Microsoft and the First Direct telephone banking business create their own markets with new products and services that bypass established competition and definitively change their industries.

Ryuzaburo Kaku, the force behind Canon's growth to world stature, acted on the principle that change is always opportunity; he waited for technological breakthroughs (like the perfection of the electronic typewriter) before pouncing on the market. Canon and its Japanese rivals used their typewriter opportunity so effectively that IBM, which lorded it over the electro-mechanical era, was eventually forced to abdicate. IBM's behaviour, though, was characteristic of rich and powerful companies: they are reluctant to change what has brought them wealth and power.

'They' in this context means top management. But resistance to change runs throughout organisations, from top to bottom. Once the leadership has collectively decided on change, its first task is to obtain full support from these reluctant soldiers. Their chief hang-up is fear - and the insecurity isn't always unfounded. For example, radical improvement in processes by 'reengineering' almost always means that fewer people will be needed. Similarly, removing excess layers of management to get flatter, more responsive organisations is often desirable change: but hardly desired by those in the removed layers.

Some organisations which have reengineered the right way, by enlisting the collaboration of everybody affected, have found, to their intense relief, that people have cooperated fully in working themselves out of a job. That's the essence of true change management. You don't impose change, but ask managers and other employees to confront a situation, come up with agreed recommendations and then implement those reforms themselves. That management style is a major change in itself - and many managers at first find it distinctly uncomfortable.

This aspect of change, however, is becoming more and more difficult to resist. Cross-functional, interdepartmental teamworking is demanded by the complexity of many projects and the need to speed up their completion: and teamworking in turn demands the new collaborative, non-hierarchical style. Project teams - forming, disbanding, reforming - are the building blocks of change management, in which people learn how to manage change by actually bringing it about. That lays the foundations for a more difficult task: to build the change ethic into the continuous work of the corporation - for ever.