Strategy in Action

14: Managing
Strategic Change
 Learning Outcomes (1)

Identify the scope of a required

strategic change
Analyse how organisational context
might affect the design of strategic
change programmes
Undertake a forcefield analysis to
identify forces blocking and
facilitating change

Exploring Corporate Strategy 8e, © Pearson Education 2008 14-2

 Learning Outcomes (2)

 Assess the impact of the role and

management styles of change agents
 Assess the value of different levers for
strategic change, including the
management of organisational routines,
political and symbolic processes and other
change tactics
 Identify the pitfalls and problems of
managing change programmes

Exploring Corporate Strategy 8e, © Pearson Education 2008 14-3

 Change – complex!!

Always remember - Change

management is complex. Change is
generally resisted and not easily
welcomed - as Mark Twain once said
“The only person who likes change is
a baby with a wet diaper”

Exploring Corporate Strategy 8e, © Pearson Education 2008 14-4

 Kumar Manglam Birla

Case – AV Birla group under K.M. Birla

since 1995.
Status when KMB took charge – age
old babu culture, womb to tomb policy,
Partha system, In house recruitment –
focus more towards managing the
licence raj and not meeting changing
forces of competition.

Exploring Corporate Strategy 8e, © Pearson Education 2008 14-5

 Kumar Manglam Birla
 KMB discontinued various age old practices.
Rising Sun logo – Corporate logo as unification symbol for the Group.
Young managers hired and average age of managers reduced group
wide.
EVA model to replace Partha system.
 ABMCL – Mgt. Services group to think out of the box and advise on
group strategy.
360 degree feedback, performance appraisal systems, feedback
encouraged, develop leaders for tomorrow through formal training etc.
Delegation of authority.
Global expansions

Exploring Corporate Strategy 8e, © Pearson Education 2008 14-6

 Forces
Forces for
for Change
Change
 Change is all pervasive
 Nature of the Workforce
– Greater diversity
 Technology
– Faster, cheaper, more mobile
 Economic Shocks
– Mortgage meltdown
 Competition
– Global marketplace
 Social Trends
 World Politics
– Terrorism, the opening of China, emergence of BRIC
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 Resistance
Resistance to
to Change
Change
Resistance to change appears to be a natural and
positive state
Inertia and Resistance to change is natural – people hold
on to existing ways of doing things – this often leads to a
‘strategic drift’ situation
Forms of Resistance to Change:
– Overt and Immediate
• Voicing complaints, engaging in job actions
– Implicit and Deferred
• Loss of employee loyalty and motivation, increased errors or
mistakes, increased absenteeism
• Deferred resistance clouds the link between source and reaction
© 2009 Prentice-Hall Inc. All rights reserved. 19-8
 Sources
Sources of
of Resistance
Resistance to
to Change
Change

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 The
TheStages
Stagesof
ofConcern
ConcernModel
Model--ininchange
changemanagement
managementscenario
scenario

 1. Information Concerns - What is the change? Why is it needed? What is

wrong with what we are doing now? How much and how fast will the
change be implemented?
 2. Personal Concerns - How will this change impact me personally? Will I
win or lose? Can I learn new skills needed? How will I find time and
resources to implement change?
 3. Implementation concerns - How will the change be implemented? How
long will it take? How will the structure and systems change in the
company? What happens if there are problems in the implementation?
 4. Impact concerns - Is the change worth it? Will things get better for me
and for the organization? Will the change make a significant difference?
 5. Collaboration concerns - Who else will be involved in the change
process? How will I work with them? Who else should be involved for
success?
 6. Refinement concerns - How can we refine the change and make it
better? Will I be allowed to suggest? How can we leverage on new
opportunities thrown up by the change?
© 2009 Prentice-Hall Inc. All rights reserved. 19-10
 Tactics
Tactics for
for Overcoming
Overcoming Resistance
Resistance to
to Change
Change
 Education and Communication
– Show those effected the logic behind the change
 Participation
– Participation in the decision process lessens resistance
 Building Support and Commitment
– Counseling, therapy, or new-skills training
 Implementing Change Fairly
– Be consistent and procedurally fair
 Manipulation and Cooptation
– “Spinning” the message to gain cooperation and buy out of the resistance
leaders
 Selecting people who accept change
– Hire people who enjoy change in the first place
 Coercion
– Direct threats and force – closure, transfers, negative performance
evaluations
 Approach to managing change has to be CONTEXT
DEPENDENT
© 2009 Prentice-Hall Inc. All rights reserved. 19-11
 The
The Politics
Politics of
of Change
Change
 Impetus for change is likely to come
from outside change agents, new
employees, or managers outside the
main power structure.
 Internal change agents are most
threatened by their loss of status in
the organization.
 Long-time power holders tend to
implement incremental but not
radical change.
 The outcomes of power struggles in
the organization will determine the
speed and quality of change.

© 2009 Prentice-Hall Inc. All rights reserved. 19-12

 Lewin’s
Lewin’s Three-Step
Three-Step Change
Change Model
Model
 Unfreezing
– Change efforts to overcome the pressures of both individual
resistance and group conformity
 Refreezing
– Stabilizing a change intervention by balancing driving and
restraining forces

Unfreeze Move Refreeze

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 Lewin:
Lewin: Unfreezing
Unfreezing the
the Status
Status Quo
Quo
 Driving Forces
– Forces that direct behavior away from the status quo
 Restraining Forces
– Forces that hinder movement from the existing equilibrium

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 Kotter’s
Kotter’s Eight-Step
Eight-Step Plan
Plan
 Builds from Lewin’s Model

 To implement change:
1. Establish a sense of urgency
2. Form a coalition
3. Create a new vision Unfreezing
4. Communicate the vision
5. Empower others by removing barriers
6. Create and reward short-term “wins” Movement
7. Consolidate, reassess, and adjust
8. Reinforce the changes Refreezing

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 Action
Action Research
Research
– A change process based on systematic collection of data and
then selection of a change action based on what the analyzed
data indicates
 Process steps:
1. Diagnosis
2. Analysis
3. Feedback
4. Action
5. Evaluation
 Action research benefits:
– Problem-focused rather than solution-centered
– Heavy employee involvement reduces resistance to change

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 Organizational
Organizational Development
Development
 Organizational Development (OD)
– A collection of planned interventions, built on humanistic-
democratic values, that seeks to improve organizational
effectiveness and employee well-being
 OD Values
– Respect for people
– Trust and support
– Power equalization
– Confrontation
– Participation

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 Six
Six OD
OD Techniques
Techniques
1. Sensitivity Training
– Training groups (T-groups) that seek to change behavior through
unstructured group interaction
– Provides increased awareness of others and self
– Increases empathy with others, listening skills, openness, and
tolerance for others
2. Survey Feedback Approach
– The use of questionnaires to identify discrepancies among member
perceptions; discussion follows and remedies are suggested
3. Process Consultation (PC)
– A consultant gives a client insights into what is going on around
the client, within the client, and between the client and other
people; identifies processes that need improvement.

© 2009 Prentice-Hall Inc. All rights reserved. 19-18

 Six
Six OD
OD Techniques
Techniques (Continued)
(Continued)
4. Team Building
– High interaction among team members to increase trust and
openness
5. Intergroup Development
– OD efforts to change the attitudes, stereotypes, and
perceptions that groups have of each other
6. Appreciative Inquiry
– Seeks to identify the unique qualities and special strengths of
an organization, which can then be built on to improve
performance
• Discovery: Recalling the strengths of the organization
• Dreaming: Speculation on the future of the organization
• Design: Finding a common vision
• Destiny: Deciding how to fulfill the dream

© 2009 Prentice-Hall Inc. All rights reserved. 19-19

 Creating
Creating aa Culture
Culture for
for Change:
Change: Innovation
Innovation
1. Stimulating a Culture of Innovation
– Innovation: a new idea applied to initiating or improving a
product, process, or service

– Sources of Innovation:
• Structural variables: organic structures
• Long-tenured management
• Slack resources
• Interunit communication

– Idea Champions: Individuals who actively promote the

innovation

© 2009 Prentice-Hall Inc. All rights reserved. 19-20

 Creating
Creating aa Culture
Culture for
for Change:
Change: Learning
Learning
2. Learning Organization
– An organization that has developed the continuous capacity
to adapt and change
– Learning Types
• Single-Loop: errors are corrected using past routines
• Double-Loop: errors are corrected by modifying routines
– Characteristics
• Holds a shared vision
• Discards old ways of thinking
• Views organization as system of relationships
• Communicates openly
• Works together to achieve shared vision

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 Creating
Creating aa Learning
Learning Organization
Organization
 Overcomes traditional organization problems:
– Fragmentation
– Competition
– Reactiveness

 Manage Learning by:

– Establishing a strategy
– Redesigning the organization’s structure
• Flatten structure and increase cross-functional activities
– Reshaping the organization’s culture
• Reward risk-taking and intelligent mistakes

© 2009 Prentice-Hall Inc. All rights reserved. 19-22

 Premises of
Strategic Change

Strategy matters

Context matters

Different approaches to managing

strategic change are required
for different contexts

Exploring Corporate Strategy 8e, © Pearson Education 2008 14-23

 Exhibit 14.1 Key Elements in
Managing Strategic Change

1. Diagnosis of
context

4.Change 2. Levers
agents for
change

3.Managing
change
programmes

Exploring Corporate Strategy 8e, © Pearson Education 2008 14-24

 Diagnosing the
Change Situation

Types of change Context of change

Culture web Forcefield analysis

Exploring Corporate Strategy 8e, © Pearson Education 2008 14-25

 Exhibit 14.2 Types of Change

Minor changes Planned major

change

Rapid major –
Major cost
avert existence
cutting
threat

Exploring Corporate Strategy 8e, © Pearson Education 2008 14-26

 Exhibit 14.3
Context of Change

Exploring Corporate Strategy 8e, © Pearson Education 2008 14-27

 Organisational Culture

“The
“The basic
basic assumptions
assumptions and and beliefs
beliefs that
that are
are
shared
shared byby members
members of of an
an organisation,
organisation, that
that
operate
operate unconsciously
unconsciously and and define
define in
in aa basic
basic
taken-for-granted
taken-for-granted fashion
fashion anan organisation’s
organisation’s
view
view of
of itself
itself and
and its
its environment”
environment”
Schein
Schein 1997
1997

Exploring Corporate Strategy 8e, © Pearson Education 2008

 Organisational Culture

Exhibit 4.10
Exploring Corporate Strategy 8e, © Pearson Education 2008
 The Cultural Web

Stories Symbols

Rituals/ Power
routines Paradigm
structures

Control
systems Structures

Exploring Corporate Strategy 8e, © Pearson Education 2008 14-30

 The Cultural Web: some useful questions

Exhibit 4.12
Exploring Corporate Strategy 8e, © Pearson Education 2008
 Stories – Stories Symbols – Car
of praising others parking by need
vs. blaming vs. by rank

Routines and
Power Strucutre –
Rituals – Challenge
decentralized vs.
practices vs. avoid
formal organization
change

Controls – Informal Structure of

feedback vs. Organization – Flat
formal controls vs. Hierarchies
Exploring Corporate Strategy 8e, © Pearson Education 2008 14-32
 What is a Forcefield Analysis?

A forcefield analysis provides a view of

change problems that need to be tackled, by
identifying forces for and against change.
What aspects of the current situation aid
change in the desired direction?
What aspects are blocking change?
What needs to be done to aid change?

Exploring Corporate Strategy 8e, © Pearson Education 2008 14-33

 Exhibit 14.4
A Forcefield Analysis

Exploring Corporate Strategy 8e, © Pearson Education 2008 14-34

 Roles in Managing Change

Change agents Middle managers

Strategic Implementation
leaders and control

Charismatic Sense-making

Instrumental Reinterpretation
and adjustment
Outsiders
Relevance bridge
Advisors
Exploring Corporate Strategy 8e, © Pearson Education 2008 14-35
 Styles of Managing Change

Education/
Communication – why the change

Collaboration/
Intervention – by authoritie
Participation – Involve

Direction – clear vision Coercion – Impose change

Exploring Corporate Strategy 8e, © Pearson Education 2008 14-36

 Levers for Change

Challenging the taken for granted

Changing routines – work practices

Symbolic systems – e.g. open offices

Political systems

Other change tactics – Timing, rewards

Exploring Corporate Strategy 8e, © Pearson Education 2008 14-37

 What are Symbols?

Symbols are objects, events, acts,

or people that convey, maintain, or
create meaning over and above their
functional processes.

Exploring Corporate Strategy 8e, © Pearson Education 2008 14-38

 Rituals and Organisational Change

Rites of passage - Rites of degradation -

Induction Fire
Rites of enhancement - Rites of sense making -
Awards Surveys
Rites of renewal – Rites of challenge- New
Project teams CEO challenges status
Rites of integration - quo
Parties Rites of counter-
Rites of conflict challenge – Work to
reduction - Committees rule

Exploring Corporate Strategy 8e, © Pearson Education 2008 14-39

 Power and
Political Processes

Acquisition Association with

of resources powerful stakeholders

Development of
Symbolic change
alliances

Exploring Corporate Strategy 8e, © Pearson Education 2008 14-40

 Sources and indicators of power

Exhibit 4.6
Exploring Corporate Strategy 8e, © Pearson Education 2008
 What is Turnaround Strategy?

A turnaround strategy emphasizes the

speed of change
and rapid cost reduction
and/or revenue generation.

Exploring Corporate Strategy 8e, © Pearson Education 2008 14-42

 Elements of Turnaround Strategies

Crisis Refocusing
stabilisation Financial
Management restructuring
changes Prioritisation of
Stakeholder critical
support improvement
Target market areas
clarification
Exploring Corporate Strategy 8e, © Pearson Education 2008 14-43
 Aspects of
Revolutionary Change
 Clear strategic direction
 Combined economic and symbolic levers
 Outside perspectives
 Multiple styles of change management
 Work with existing culture
 Monitoring of changes

Exploring Corporate Strategy 8e, © Pearson Education 2008 14-44

 Aspects of
Evolutionary Change
 Empowered organisation
 Clear strategic vision
 Continual change and commitment to
experimentation
 Transitional stages
 Irreversible changes
 Sustained top management commitment
 Winning hearts and minds

Exploring Corporate Strategy 8e, © Pearson Education 2008 14-45

 Chapter Summary (1)

 There are different types of strategic change

which can be thought of in terms of the extent of
culture change required and its nature
 It is important to diagnose wider aspects of
organisational context such as resources and
skills that need to be preserved, the degree of
homogeneity, capability, capacity, readiness for
change, and the power to make it happen
 The cultural web and forcefield analysis are useful
as means of identifying blockages to change and
potential levers for change

Exploring Corporate Strategy 8e, © Pearson Education 2008 14-46

 Chapter Summary (2)

 Change agents my need to adopt different styles

of managing change according to different
contexts and in relation to the involvement and
interest of different groups
 Levers for managing strategic change need to be
considered in terms of type of change and context
of change. Levers include surfacing and
challenging the taken for granted, the need to
change operational processes, routines and
symbols, the importance of political processes,
and other change tactics

Exploring Corporate Strategy 8e, © Pearson Education 2008 14-47

 Key Debate:
Management of Change
from Top to Bottom?
What are the problems associated
with top-down or bottom-up views of
change management?
If you were a senior executive which
approach would you take and in what
circumstances?
Are the different views reconcilable?

Exploring Corporate Strategy 8e, © Pearson Education 2008 14-48

 Strategic Leadership
It is nothing more than the ability to anticipate, prepare, and get positioned for
the future.
It is the ability to mobilize and focus resources and energy on things that make a
difference and will position you for success in the future.
 It is the courage to think deeply about what you want to do. Applied strategic
leadership is about creativity, intuition, and planning to help you reach your
destiny.
It is nothing more than the ability to anticipate, prepare, and get positioned for
the future. It is the ability to mobilize and focus resources and energy on things
that make a difference and will position you for success in the future. It is the
courage to think deeply about what you want to do. Applied strategic leadership
is about creativity, intuition, and planning to help you reach your destiny.
Strategic people think and act before they have to, before they are forced to take
up a defensive or reactive position. Strategic people think and act before they
have to, before they are forced to take up a defensive or reactive position.

Exploring Corporate Strategy 8e, © Pearson Education 2008 14-49

STRATEGIC
STRATEGICLEADERSHIP
LEADERSHIP––COMMUNICATING
COMMUNICATINGWITH
WITHKEY
KEYSTAKEHOLDERS
STAKEHOLDERS
Convince top management
of a new strategy (e.g., Intel’s shift
to microprocessors)

Upward
Win cooperation of
Managers external stakeholders
Win support of other must sufficiently including customers
units within the firm Across communicate in 4 Outward and distributors (e.g.,
directions
Compaq failed to do
this with retailers)

Downward

Enlist support of
those who implement
Strategic Leadership
 Strategic Leadership
Real strategic leadership means taking responsibility for the future, as
well as for what is happening today.
 A primary goal of a strategic leader is to gain a better understanding of
the business conditions, the environment (the market, customers, and
competitors), and the leading indicators that identify new trends and
situations that may arise.
A leader must be "tuned in" to the signals that provide insight about the
needs and wants of team members, senior management, and suppliers.
As a leader, you must know who your customers are, why they come to
you and your organization, what they will be looking for in the future, and
how your environment is evolving.
A leader must be tuned into the competitors (what products they offer
and how customers see them).

Exploring Corporate Strategy 8e, © Pearson Education 2008 14-51

 Strategic Leadership
There are plenty of legitimate reasons why we pay attention to operational and
short-term issues. In many cases, we get rewarded for it and our job security
depends upon it.
But we must also look to the horizon and identify the signs that indicate coming
changes or disruptions in our world. The challenge we face, is that no one will give
us the time to consider these issues - we have to make a conscious choice to carve
out an opportunity to look to the future.
Strategic leadership requires the ability to see and understand your work
environment. It requires objectivity and an ability to separate you from the challenge
of daily events, and look at the bigger picture.
In short, one may define strategic leadership as the ability of an experienced, senior
leader who has the wisdom and vision to create and execute plans and make
consequential decisions in the volatile, uncertain, complex, and ambiguous strategic
environment.
E.g – GE Jack Welch, Nissan Carlos Ghosn, Procter & Gamble under chief executive
A.G.Lafley, New York City Mayor Michael Bloomberg, JRD Tata

Exploring Corporate Strategy 8e, © Pearson Education 2008 14-52

 Anatomy of a Strategic Leader

Exploring Corporate Strategy 8e, © Pearson Education 2008 14-53

 Strategic Leadership – what
should the possess
Vision, eloquence, and consistency – to give a sense of
direction and communicate the direction (YES WE CAN)
Commitment – walk the talk
Being well informed through formal contacts, MIS,
networks, foresight
Willingness to delegate and empower
The astute use of power – to build consensus, manage
contingencies and manage change
Emotional intelligence

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 Emotional Intelligence

Self-awareness – understand onself

Self-regulation – control self – think and
act
Motivation – passion, energy and
persistence.
Empathy – understand feelings of others
Social skills - friendliness, contacts

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 Challenges to Strategic Decision
Making
Cognitive biases
Prior hypothesis bias – strong prior experience beliefs
Escalating commitment
Reasoning by analogy – simple analogies to resolve
complex problems
Representativeness – generalize from small samples
Illusion of Control
Hubris hypothesis – over confidence
Groupthink

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