How businesses can design a successful transformation program

To design a successful transformation program and tailor it to the circumstances of your organisation and your professional context, you should not only acknowledge that transformation is hard, you should also understand why it’s hard. It’s only by understanding the causes of these difficulties that you can design the strategies and actions to overcome them.

There are three reasons why transformation is difficult:

• the status quo never has to argue its own case
• many corporate factors actively resist change
• many corporate personalities actively resist change.

Status quo never has to argue its own case

I remember learning about Sir Isaac Newton and his three laws of motion in my year 7 science class. As a quick recap, Newton proposed three laws that describe the relationship between the motion of an object and the forces that act upon it. These laws, first published in 1687, can be paraphrased as follows:

• law 1: a body continues in its state of rest, or in uniform motion in a straight line, unless a force acts on it
• law 2: a force acts on a body and moves it in such a manner that the time rate of change of momentum is the same as the force
• law 3: two bodies exerting forces on each other are equal in magnitude and opposite in direction.

I wasn’t that good at physics in year 7, or anytime really, so these technical descriptions are not exactly clear to me. Thus, I decided to reference Physics4kids.com for a simpler explanation. Their explanation is that Newton’s first law of physics basically says that an object at rest stays at rest, or an object in motion stays in motion, unless something happens. If you’re going in a specific direction, unless something happens to you, you will always go in that direction. Forever.

What we can interpret from this is that something stays in its current state unless something is done to change it. It won’t — or can’t — typically change of itself. In other words, the status quo, or current state, will tend to remain the status quo.

Let’s have a crack at turning the first Newtonian law into a statement about organisations and transformation projects:

• Law 1: a body company or organisation continues in its state of rest, or in uniform motion in a straight line, unless a force transformation project acts on it.

In a company, the current state that delivers the business-­as-­usual outcomes associated with the normal manufacture of a product, the generation of revenue, the supporting business functions, and so on, will all tend to remain quite static unless someone or something implements an action to change them.

In most corporate cases, especially for those in mature industries, it takes a lot of work over many years to actually create the status quo. Year after year, extra layers are added — a little like the growth rings of a tree — as the minutiae of small, incremental day-­to-­day decisions and actions play out, all of them adding weight and mass. People come and go, as one retires and another is promoted, each adding to the flavour of what’s important and what’s not, their personalities and personal biases signalling what’s focused on and those things that can go through to the keeper. Over time, the processes and enabling systems also undergo small customisations and upgrades, typically under the radar screen of management.

These business-­as-­usual processes, systems and structures continue to deliver, day after day, year after year, unless change is actively and formally implemented. Someone has to actually do something to make it change.

And when that someone eventually turns up and proposes a change, their proposal will be evaluated. Some will rejoice and support it, others will dig in and obstruct it. Their proposal will be poked and prodded, tested for its pros and cons, and compared against other options. It may even be compared with the status quo: the ‘do nothing’ option. All the while, as the evaluation plays out, the ‘status quo’ will be busy plodding on, doing what it’s always done, unaware of all the new and recent activity and the discussion about whether it needs to change or not.

Status quo bias in the minds of people is a real thing. The website Behaviouraleconomics.com explains this well:

Status quo bias is evident when people prefer things to stay the same by doing nothing (or by sticking with a decision made previously). This may happen even when only small transition costs are involved, and the importance of the decision is great.

Never forget that, even when a decision is actually made — or when the decision is deferred, or more information is requested — the status quo proceeds onwards, undistracted by all the new noise. The status quo is like some kind of Arnold Schwarzenegger Terminator-type force that will just keep going and never stop unless someone actively stops it. For now (and quite literally, forever), the ‘do nothing’ option is the one with actual momentum. Things don’t change when a decision is made — they change when defined and determined action is taken.

At Harvard Business School, the lecturers continually alluded to ‘CEO-­itis’, a peculiar disease that caused those afflicted to think that just because they said something should happen or change, it would actually happen or change. Things change only when formal actions are taken to redesign and implement new processes and enabling technologies, and to hire, fire or redeploy people. Without action, the status quo remains.

While this is perhaps self-­evident, it’s at the core of why transformation is difficult: the status quo never has to argue its case.

Many corporate factors actively resist change

The status quo, or current state of a corporation, has its own unique inertia that makes change difficult. There are also several factors hardwired within most organisations that actively resist change, including:

• difficulty in identifying sometimes weak signals
• competing investment priorities and the power of last year’s budget
• corporate relativism
• unwritten assumptions
• sunk cost bias
• cultural signals
• talented people on the move.

Let’s examine each of these factors to understand them and just how they actively resist change.

Difficulty in identifying sometimes weak signals

Potential disruptions to a corporation do not typically show themselves to the executive team with an advertisement in the Australian Financial Review. Disruptive forces might start off as a largely unnoticed quirky news story, or only make true sense when viewed with the benefit of hindsight. Sometimes — rarely — the disruption actually turns up in your boardroom and presents itself to the executive group. An example, as we’ve already seen, is when CEO Reed Hastings offered to sell his Netflix streaming idea to Blockbuster for $50 million in early 2000 and Blockbuster laughed him out of the boardroom. The rest, as they say, is history.

Many corporations also lack the resources, or do not see the need to allocate a budget, for a continuous scan of the external environment to identify potential disruptions. It would be hard to sell a job description during budget time titled ‘External environment watcher’. Instead, people might assume that the strategy function of large corporations will always be on the lookout for disruptions, and then be perfectly placed to identify the threat and craft the action required. This is rarely the case.

Unfortunately, the pull of business-­as-­usual operations, involvement in the setting of budgets, administration of the investment slate for capital decisions, and identification of potential acquisitions or divestments and their subsequent implementation, all serve to occupy the time of the strategy team. This leaves little time to actually scan the world and the rapidly changing environment.

And even if the disruption signals are picked up, as noted in the book The execution premium by authors David Norton and Robert Kaplan, ‘[many] companies generally fail at implementing a strategy or managing operations because they lack an overarching management system to integrate and align these two vital processes.’ Sometimes the strategic evangelist who actually sees the change coming cannot communicate the threat effectively, or people just don’t want to know.

Ironically, disruptive warning signs become even harder to see the more successful the organisation becomes. This is because if the organisation is successful, it can seem as though the good times will last forever, and the potential warning signs identified by the constructively paranoid executive can be dismissed by the ‘if it ain’t broke, don’t fix it’ mindset of the less strategic or reflective executives who believe their own bullshit.

In any case, the signals are missed, nothing happens and the organisation continues through the water oblivious to the looming icebergs.

This article is an extract from the book Great Change: The best way to get big strategy done by Adam Bennett.

Author Adam Bennett is the principal of Great Change Consulting and an adjunct professor (industry) at the University of Technology, Sydney.