Failure as a Lack of Understanding
A study of common sense approaches to change as well as popular methods from the thought leaders of change management informs managers regarding what should be done, what elements should be known, and finally whom to include in change—all in the effort to minimize risk and maximize the possibility of success. History informs us, however, that change management in practice does not often go well, even when change management frameworks are employed. History also provides endless examples of change efforts that failed not only because known methods were ignored, but serious mistakes were made as well. Such mistakes in change management are more common than one might think. The study of change management mistakes therefore offers clear guidelines for certain change management failure, or stated differently, provide a guide for failure at change management. Having a working knowledge of historical mistakes in change management and then proceeding to do the opposite in practice avoids the certainty of failure and offers the opportunity of successful change. What then should change managers do if they want a guarantee of failure (or avoid so that the possibility exists for success)? To follow there are several examples with accompanying interesting stories. The names of the companies are not revealed. It is of interest to observe that each of these change failures could occur even in cases where a clear process is followed.
Failing to Understand What Needs to Be Changed
There is the old saying that “if all you have is a hammer, all of the world’s problems begin to look like nails.” This saying was applicable to the many global Japanese companies in the late 1990s and early 2000s who sought to compete in the global wireless telecommunications market. Today, no such companies supply products outside of the home country, but from the early 1980s to the end of the 20th century, the story of these players involved repeated attempts at market entry, exiting, trying once more, and finally giving up. Each attempt featured novel attempts at changing the formula in some way in the hopes of gaining traction in the market. Most proposed success formulas introduced by Japanese companies involved two major thrusts: tighter control by the home office and constant focus on cost reduction. The problem with these ideas is not they are bad ideas, but that they were simply not the core issues at the heart of the problem. Newsweek in 2008 (Caryl, 2008) made a keen observation on what Japanese companies would need to change in order to be successful in the global smartphone industry. Japanese companies traditionally experienced great success at incremental continuous improvement and cost control. However, products such as the iPhone evolved from a completely different mindset. For example, Japanese companies traditionally succeeded by taking vertical control of all products produced from components to the final delivered goods. All interaction between functions, such as engineering, marketing, and manufacturing, were managed internally within a single culture. By way of contrast, the iPhone illustrated a dramatically different way of doing business. The Apple business model, unlike the Japanese, was completely horizontal rather than vertical. Apple functioned as the lead in a massive system integration involving multiple companies and functions, widespread geography, and different cultures. Such innovative products required intensive communication and business savvy, which the Japanese companies not only were unable to do, but were unable to imagine as well. As a result, attempts at recovering the global smartphone business failed because of a failure to understand what needed to be changed (Figure 3.1).
Figure 3.1 Horizontal versus vertical product development
The failure to understand what needs to change in an organization can also take place, and often does at the microscopic level. Consider, for example, a general manager who has an operation with one department that is continually underperforming. A cursory evaluation of the situation seems to indicate that the team lacks motivation and energy. Milestones are continually missed without a clear explanation for the delay.
What change is needed to ramp up the performance level of the group? Putting “two and two” together would suggest that leadership is what is lacking and therefore replacing the leader with one who is charismatic and is an excellent communicator. The general manager has just the right person in mind—a good friend in the organization who has long lobbied for a promotion. Further, the general manager made the decision to give the friend his chance, without consulting the rest of the company management team. The current leader of the group is therefore replaced with the charismatic friend of the general manager. The general manager announces the change and waits for the magic to happen and see success achieved within the department for the first time. The senior management team shook their respective heads in astonishment at the choice of replacement for the previous manager. The phrase “why didn’t you run this by me first?” was heard repeatedly in the office of the GM—and of course—the watercooler. Unfortunately, the expected success never arrives, and 3 weeks later, the charismatic new leader of the group is removed. What went wrong? The general manager failed to understand that the leadership problem in the department was not one of form but of substance. What the department needed was a leader who could inspire confidence due to the depth of his technical knowledge. The charismatic new leader was able to “talk the talk” but could not “walk the walk.” The team wanted a leader they could go to for answers and direction—not a motivational speaker. The performance of the department decreased rather than increase and the department employees were in a state of revolt until the new leader was removed.
What specifically needs changing within the organization may also become lost in the debate between “form” and “substance.” These arguments are known to be common in the world of high technology, but the roots of this debate go further back in time. Consider for instance the old canned tuna commercial where it was argued that the public did not want “tunas with good taste,” but rather “tunas that taste good.” This is a form of the perennial argument of “technology versus marketing” as two contrasting approaches for how to approach positive change. It is of interest to observe that the marketing versus technology battle that substitutes for truly understanding what needs to change is fought between former marketing and technology executives. Both tend to view the world through the lens of their personal background. Such a view is likely to obscure the fact that a mix of both approaches—or neither approach—may well make for a better change solution.
Pointers for how to fail:
- Perform a surface analysis of problems faced by the company.
- Adopt a narrow viewpoint while thinking “inside the box.”
- Assume that the application of your traditional strengths and know-how will solve the problem.
- Assume that leadership skills are a cure-all for organizational problems.
- Make a strategic personnel decision without seeking counsel first.
- Propose only change initiatives that are aligned with your functional background.
Solving the Wrong Problem
“Our company is no longer considered to be leading edge—and the existing company logo reinforces this image…. It is outdated and has the look and feel of a company 20 years ago.” This observation made by a CEO of a technology company led to an intensive consultant-led effort to develop a new logo and tagline. The final logo candidates for consideration were introduced at a company retreat at which point the executive management team voted on the final selection. A few short years later, in spite of the fashionable new logo and tagline, the company went out of business. This example illustrates how a company can go wrong by doing a great job of solving the wrong problem. In the example of the “new logo design,” the logo was apparently not the cause of the company’s failure in the market. But, what was the real problem that needed to be solved? Was an outdated logo the root cause of declining sales and profitability? The evidence suggests that it was not. What then went wrong? The rapidly changing macroenvironment along with the ongoing clash of worldviews between executives, marketing, operations, and engineering personnel make tracing the poor business results to an associated root cause a supreme challenge. Each function in the company views the world through a different lens. The engineering function is likely to view the lack of competitiveness as a failure to spend adequate funding on product development thereby leading to products that are no longer competitive. Executives are likely to view the engineering understanding as “wrong-headed.” The executive may have benchmarked current company R&D spending against competitors and already drawn the conclusion that too much is being spent on R&D. Likewise, marketing is concerned that the real problem is a failure to “get the word out” and that the message being sent to customers has gone stale. Operations managers insist that the way forward is improved efficiency. Executives seeking improvement in business have many potential “traps” into which they can fall leading to a major effort to solve a problem that in the big scheme of things does not matter. It pays to be wary of apparently simple solutions that are based more on perception and pet ideas rather than evidence (Figure 3.2).
Figure 3.2 Solving the wrong problem
The example of changing the company logo as an effort to improve business by changing the image presented by the company is but one classic example of solving the wrong problem. Another such example is the eternal problem of inventory management. Companies have long known to struggle with either not enough or too much inventory, leading to either lost customers or lost profits. This situation often exists in high-tech companies that rely on parts, subassemblies and even products shipped from distant locations. Such a company will typically be staffed with many engineering and marketing personnel involved in developing and launching products. Personnel with this background will continually be faced with inventory problems, but will not necessarily understand what is causing them. There is a temptation for engineers or marketing personnel to say things such as “If I were in charge of inventory—things would be different.” History provides examples of companies who actually listened to a vocal employee with a non-operations/inventory management background chomping at the bit to take over inventory management and fix it. Deming, one of the founders of quality management, informs managers that when problems are observed in the company, 85 percent of the time the problem is related to systems, processes, and policies. Good people tend to perform poorly when they are placed in a system that is not capable of producing good results. However, it is easier for executives to change people rather than make the effort required to improve deeply embedded intangibles such as processes, procedures, policies, and structure. The hard experience of companies who listened to a vocal employee from a different functional discipline and placed him in charge of a complex function such as inventory management is one of failure.
Attempting to solve a problem like inventory management by replacing management with a vocal employee who lacks requisite know-how is but one way to fail in change management.
Another example involves bringing in outside consultants to help a company understand why the company is has too much, not enough, or the wrong kind of inventory along with insufficient inventory turns. The interviews and training sessions between consultants and operations and material control employees appeared to be a classic example of how to initiate and lead change management. What could go wrong? Uncritical acceptance of the proposed solutions from the consultants. After a few days on site, the consultants discovered to their chagrin that the inventory and profitability problem must be related to the fact that material control was responsible for forecasting and entering orders to suppliers so that production could fill orders according to forecast. According to the consultants,
Sales and marketing are responsible for placing demand on the factory. Sales and marketing should therefore provide the forecast to material control, and material control will implement since it is the factory and operations that are responsible for supply—in order to respond to demand presented by sales and marketing.
The problem, it would appear, was solved. However, the wrong problem was solved. When sales and marketing took over the responsibility for the forecast, the inventory ballooned out of control. The problem of insufficient inventory was mitigated, but at great expense. After a few months of growing problems, the material control and operations department started ignoring the input from sales and applied time series methods. The inventory control problem improved in that it was no worse than it was pre-consultant level. However, management came to the realization that inventory is something that will never be exactly right—so no more changes.
It is also common for executives to focus first on senior managers and attempt to implement change initiatives and improvements to the company by bringing together senior managers for a leadership retreat. Retreats such as these involve team-building events and “rah-rah” sessions in which senior managers hear presentation after presentation on the latest and greatest initiatives and new products being introduced by the company. The goal of retreats like this are to get company leaders excited and motivated about the company and its strategic direction. The good thing about these meetings is that they do tend to increase the excitement level of senior managers in the company. However, the excitement and the high energy level fades upon the return of managers to their respective offices. Why? Because once the “rah-rah” is over, it becomes clear that it is “business as usual.” The announced new products are eventually launched—though typically late—while the newly announced management initiatives never seem to fully materialize. Further, the emotion and excitement also tend to drain away when it is discovered that the methodology and framework used to organize the retreat was based on a recent popular book. While the rank and file employees feel that they are engaged in evaluating problems and performing in depth analysis to provide solutions, they now discover that their executives have failed to scratch the surface of the issues and have done little more than buy a popular paperback. The problem in this is not the lack of motivation—that no popular paperback could solve in any case. The problem is that the company needs to perform better by launching new products on time and following through on the many new management and new process initiatives required for improved performance. The problem is one of execution, and raising the excitement and energy level of executives is but a marginal initial step in turning around the company. To make an analogy, it is one thing to pick up a bat and step up to the plate, but quite another to swing, connect with the ball, and successfully arrive at one or more bases. The right problem for focus is on performance and execution. The wrong problem is focusing on the emotional state of senior managers.
Pointers for how to fail:
- Make causal connections that aren’t there.
- Uncritically accept the judgment of consultants.
- Assume that an expert in one field can contribute expert work in a completely different field (especially when the expert is an engineer).
- Address process and execution problems by cheering on management staff.