Change management is one of the ultimate buzzword terms, IMHO. It should mean a lot — all organizations need to change, and oftentimes they need to change more frequently than they’d like — but it’s one of those things that hard-driving executives view as “the domain of HR.” In reality, change management needs to be owned by everyone — HR isn’t empowered to do anything at most companies, and since change is one of the hardest things to achieve at an individual or corporate level, why wouldn’t we want more hands on deck? (By the way, the same thing that happens with change management happens with ‘talent strategy’ too: it’s kicked off to HR, so in reality no one cares about it … but then execs bellow at their subordinates that they don’t have the people to compete globally. Uh, wonder why?).
Alright, but we’re arriving at a sea change with change management now. “Disruption” is a big deal. Here’s how big: about a year ago, I was at the airport and the family in front of me (2 parents, 2 kids under six) was headed to Mexico. They forgot a passport for one of the kids. It was a whole thing. Big scene. Etc. The dad turns around to me and goes “Airlines! They need to be disrupted!”
Now, I’m pretty sure getting into the airline industry would cost someone billions … it’s not exactly the easiest thing to disrupt because you can’t really digitally scale someone flying from New York to Singapore, but hey — what do I really know? My point is: if random dads are yelping at me in airports about disrupting AA, well, disruption’s caught on. And that means a lot for change management.
Change management and business models
This is stellar research from UPenn (Wharton) and others on different types of business models as of 2016. They found basically four types:
- Asset builders: delivering value through the use of physical goods
- Service providers: delivering value through skilled people
- Technology creators: delivering value through ideas
- Network orchestrators: delivering value through relationships
If you’re a visual person, here’s another representation of all this:
Hopefully you’re following along here so far. “Asset builders” are kind of the old-school, traditional companies. You don’t get much traditional than Ford or Walmart, right? “Network orchestrators” are kind of the darlings of business journalism and business school professors now. Those are in there as “disruptive” companies, although I’m not sure anyone would really call Visa that.
The old consultant model was something like “Are you a product company, a services company, or a people company?” That basically evolved to this. It’s the same general concepts but different language. (Funny sidebar: CEO at a recent gig I had literally told the same story in 12 different meetings about how his consultants posed that question to his team and they weren’t sure how to answer at first, then decided together. Good story, but when you hear it the 9th time, it’s a little bit much.)
Alright, so … the point of a business model is to make money, or to create a value plan and stream that will make money. So, knowing that — how do these four types of business models perform in terms of making money? Glad you asked!
As you can see, “network orchestrators” are doing pretty well financially compared to the other three types — and the reason is fairly logical as well. To quote Wharton:
The reasons are intuitive. Physical things do not scale quickly, easily or cost effectively. Building the U.S. interstate highway system took 35 years and an estimated $425 billion (in 2006 dollars). In contrast, Facebook grew to 500 million users in a little more than six years. Digital technology and networks make all the difference.
See, now we come to the fork in the road with change management.
The change management fork in the road
Most people — especially executives of companies — inherently understand the above. Obviously it takes a long time to build highways, and a comparatively shorter amount of time to build Facebook. But there are a number of things being left unsaid in this equation:
- Companies tend to focus their efforts, resources, and best people on the areas that make them money
- For most companies, digital is still not a huge revenue-driver
- This is why we’ve arrived at 2016 and most CMOs have no clue about digital marketing
- So an executive or decision-maker may understand this power of network orchestration, but can he/she actually lead a change management process around it?
That’s the key question, and Wharton gets hit with that too:
When we share this research with executives and board members, most intuitively understand the implications for their organizations. The common refrain, however, is: “How can my team and I make use of this information and become a networked organization using today’s digital platforms, since our organization didn’t start out as a network?”
Ah-ha! The change management question.
The major hurdles of change management
Let’s start with two change management visuals here. Here’s the first, on firm-centric thinking (traditional) vs. network thinking (newer model):
Take that one into account and now let’s try this one, on factors you need for change:
This now becomes the hardest part of change management. If you combine the two graphics above, a lot of the terms are “fluffy” — vision, for example, or mindset — and there’s a lot about strategy and action plan and incentives. It’s very hard to get to those places in most organizations because:
- Day-to-day tasks are overwhelming to most
- There isn’t a lot of alignment around what exactly organizational priorities are
- Even if the executives understand the priorities, that doesn’t mean there’s alignment between that and the daily work
This is, in essence, why change management is hard: executives have one set of beliefs, purposes, visions, and accountability metrics. They set the higher-order “strategy” (which in most cases is just an operational plan, but let’s not split too many hairs here) and then the rest of the company is supposed to follow it. But oftentimes there’s no alignment between what you’re hearing from execs at meetings (“strategy”) and what you’re doing at your desk all day (“execution”). That’s a major disconnect for a lot of people, and it fuels most turnover in organizations — well, that and really bad bosses.
How can you do change management, then — which is inherently taking a bunch of people and moving them in the same new direction — if those people aren’t aligned to even begin with?
Moving change management forward
Dirty little secret: I do a bunch of freelance writing these days, some of it for thought leaders. Whenever a thought leader writes an article about anything — project management, change management, financial metrics, finding purpose, etc. — they always have a section about “needing senior leadership buy-in.” No shit, baby! That’s how hierarchy works. Senior people make the most money, have the most accountability (sheesh, you’d hope), and make the most decisions. So anything new coming down the pike has to start with them, no question. The buy-in must be there. If you scroll all the way up on this post, you’ll see where I talk about talent strategy and how no one gives a shit and kicks it to HR, then bitches after the fact. That’s how most senior decision-making goes. “We care about this, but we’ll pretend to care about this other thing because only caring about the first thing seems shallow.” If you’re not following, “the first thing” is “making money.”
So change management does need to start with senior decision-makers, which is incredibly fraught: these guys (and lady, because there’s usually never more than one woman near the top of an org, sadly) are evaluated differently, bonus’ed differently, and overall perceive the organization and its strengths/weaknesses at a much different level than the people who actually need to be boots on the ground in the change management process.
So how they make decisions doesn’t always equal the best change management processes, and that’s an issue.
I’d argue it really starts with three things:
- Care: Why are we doing this change management process? Why are we doing it now? Is it because we might get disrupted? Are we fundamentally not able to compete anymore? Are we financially behind? What’s the purpose of the change management now?
- Listen: Listen all over the org. Janitors know stuff. Rank-and-file product bloggers know stuff. These people are closer to the end customers, usually. They get the pain points. They know that customers should be assets — see that chart above for more. Too often, we believe hierarchy = formal power (yes, still true) = those people know what’s best. That’s where the logic falls off a cliff. Those people have execution or expertise skills, or they’re good at politics. They don’t know best. They’re trusted to know best, but they can’t possibly — their life is all meetings and conference calls and business trips, and they’re furthest from the customer. It’s impossible.
- Align: Everyone misses this area, and it requires a separate set of bullets. When I say “align,” here’s the deal.
Your organization has goals, right? (Please don’t list your goal as “making money,” though.)
Those goals will look a certain way when achieved, right? (This is commonly called “KPIs” or some such.)
Those KPIs will be worked on by people, right? (And employees are valuable, yes.)
Those people have lives and individual goals, right? (Work-life balance, baby!)
So that’s what you’re aligning:
Organizational goals — > KPIs —- > Employee tasks —- > Employee goals
When you make no effort to align these things, change management collapses. Who’s gonna change their behavior if there’s no alignment between their tasks/goals and what the leaders are saying? Who’s gonna change their behavior if the incentives aren’t in place? Who’s gonna change their behavior if no listening took place and all the decisions came from a vacuum?
Sure, you might bellow at me and say “They have to, because we pay them!” That’s not exactly a network-orchestrator, relationship-building kind of deal, but OK … there’s validity to that. “You never say thank you!” “That’s what the money is for!”
Lemme give it to you straight on change management: it’s no longer a nice-to-have. It’s a need-to-have. Unless you’re CEO of a well-heeled airline, disruption might be coming for you. Network-driven, relationship-based companies with strong platforms and interfaces may overtake 4 in 10 companies by 2020, per some Cisco research I’ve seen. You’re vulnerable, even if you don’t see it.
The heart of becoming more 2016-2020 friendly is effective change management, and the heart of that begins with realization and care. Are you ready?