Magazine article Industrial Management

Case Studies in Organizational Change

Magazine article Industrial Management

Case Studies in Organizational Change

Article excerpt

Companies face a critical struggle when trying to implement and sustain organizational change, a battle illustrated by thoughts from two towering historical figures, British biologist and naturalist Charles Darwin and U.S. author and humorist Mark Twain.

About survival, Darwin said: "It is not the strongest of the species that survive, nor the most intelligent, but the one that is most responsive to change." In what could almost be considered a reply, the ever-witty Twain once said: "You know, I'm all for progress. Its change I object to."

While organizations know that change is in their long-term interest, as Darwin explained, the short-term resistance, as Twain demonstrated, often prevents successful organizational change. So what do the organizations that succeed do differently?

Case studies of organizational change methods used by IBM, Cancer Treatment Centers of America and Lever Brothers reveal common elements: Selecting outstanding leadership teams, creating a change vision, communicating continuously and honestly, maximizing employee participation and establishing and measuring short-term wins.

When incorporated into a strategy, these key elements can guide companies toward successful organizational change.

Making IBM less blue

In September 1999, IBM CEO Lou Gerstner read a report about a business unit that closed, discontinuing a new, promising initiative. This struck a chord with Gerstner, who wondered why IBM kept missing the emergence of new industries. An internal study showed that the company had failed to take advantage of markets it could have captured 29 times, including products from the first commercial router to speech recognition software.

A detailed internal analysis determined that IBM missed those markets because it focused on short-term results, major customers and markets and improving profitability. So IBM could grow in mature markets but not explore new ones. As a result, IBM developed its Emerging Business Organization (EBO) in 2000. Between the inception of this program and 2005, EBOs increased IBM's top line by $15.2 billion.

This was possible because of how IBM implemented this dramatic organizational change. First, IBM formally identified new emerging business opportunities twice a year by soliciting ideas internally and externally, which often resulted in more than 150 ideas. Small teams analyzed and narrowed this vast array of ideas, and then Bruce Harreld, senior vice president of strategy at IBM, communicated these ideas to senior management and customers to determine acceptance. When they moved forward with developing an EBO, Harreld and a corporate strategy group met monthly to review progress, refine strategy and ensure execution.

The key principles Harreld and his team developed included active and frequent senior-level sponsorship, dedicated A-team leadership, disciplined mechanisms for cross-company alignment, resources fenced and monitored to avoid premature cuts, actions linked to critical milestones and quick start/quick stop. "Organizational Ambidexterity: IBM and Emerging Business Opportunities" in the 2009 California Management Review took a closer look at each of these principles and the EBO efforts success.

The principle of active and frequent senior-level sponsorship was a lesson from IBM's failure to enter new markets: Senior management was not paying attention to new ventures. While understandable, it is dangerous, as new ventures can be overlooked or have their resources taken away. To address this issue, all EBOs were required to have active sponsorship from a senior vice president. The sponsor, Harreld and the EBO leader met monthly to discuss strategy, progress and make sure the EBOs received proper attention and resources.

The principle of dedicated A-team leadership kept away younger managers who lacked the networks necessary to develop EBOs. Harreld emphasized having the best and brightest on EBO teams. …

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