Insight Article: Strategy Series Question 4 – How are we going to change?

In previous articles we looked at questions 1 – 3 of the Five Key Questions (5KQ) for Strategy Development, namely ‘Where are we now?’, ‘Where do we want to go?’ and ‘What are we going to do differently?’.

‘How are we going to change?’ – the fourth question in the 5KQ series builds on the insights and decisions from the earlier questions, to look at how the organization needs to evolve so as to reduce or eliminate the impediments to change.

These impediments can take many forms, including cultural, logistical and technological. The one thing they have in common is that if they are not addressed properly, it is likely that the organization will fail to implement its Strategies and therefore fail to achieve its Goals.

Identifying The Impediments To Change

A good way to start answering this question is to go right back to question 1 and look at the SWOT analysis and the organization’s statement of Values.

SWOT Analysis – Strengths & Weaknesses

Revisiting the Strengths and Weaknesses in the SWOT analysis will often flag-up the underlying areas where the change is needed.

For example, the Strengths and Weaknesses for our imaginary company, NewTechNow, were:

The answers to these questions contain some clues as to possible areas where underlying change is needed. In particular, the lack of depth in the management team and the unstructured nature of parts of the business indicate weaknesses in the underlying culture of the business.

Kotter’s Eight Stage Change Process

Another way to flush out impediments is to apply a structured change management process. Probably the best known of these processes is the ‘Eight Stage Process’ described by John P Kotter in his book ‘Leading Change’.

If the company’s leadership has been applying this process to their strategy development thus far they will, hopefully have ‘Established a sense of urgency’, ‘Created a Guiding Coalition’ (the leadership team plus some additional stakeholders) and ‘Developed a Vision and Strategy’.

The next stage is to ‘Communicate that change vision’ and then to ‘Empower employees for broad-based action’.

If done properly, these two stages will highlight any underlying changes that need to be made to the business. For example, if the response to the communication of the change vision is either negative or simply muted, it is very important for those doing the communicating to listen carefully and tease-out why people do not believe in the Vision.

Equally, if people are not responding to attempts to ‘Empower employees for broad-based action’ it is important to question why. Natural ‘resistance to change’ is an often-quoted reason for this but, in a world where people embrace continual change outside of work (think streaming services, social media, ecommerce, etc.), it’s clear that people will happily change their behaviour if they feel it is in their interest to do so.

So, it is much more likely that people resist change because their work systems and environment impede change…

For example, we worked with a company that wanted to encourage its staff to become more customer-focussed; this required a number of small changes to the way customer facing staff did their jobs. The company changed their operating systems to make it easier for staff to do this, but people still resisted…

Why?

Because the company’s whole performance management / appraisal system was based around the old way of thinking; and it was only when the HR systems were aligned with the new strategy that people realized the management were serious about the changes!

Culture and Values

Culture underpins all the strategy questions, yet it is one of the hardest elements of strategy to pin down. Most companies will try to codify their desired culture in a statement of Values and, in an ideal world, all staff would study the Values and use them as a guide for their day to day decisions. In practice, of course, this rarely happens, and the culture evolves from the way that the Board and senior leaders behave.

So, in addressing question 4, it is important for the strategy development team to reflect carefully on the organization’s culture and its stated Values. Some questions that can help with this include:

1. What is the culture that this business needs?
2. How close is our current Culture to this?
3. Do our currently stated Values properly describe this culture?
4. Do we, as the senior leadership team, live and work according to these Values? (If we don’t, no-one else will!)
5. How do we establish what our staff really think about the Culture?

Culture change is hard, and requires effort over an extended period of time, so it is essential that the senior team is really honest with itself in answering this.

An example of a large organization which has changed its stated Values as part of an effort to change its culture is Uber which, under the auspices of new CEO Dara Khosrowshahi, dropped a number of its more assertive Values. For instance, ‘Meritocracy and toe-stepping, where the term ‘toe-stepping’, which was meant to encourage employees to share their ideas regardless of seniority but, as described by Khosrowshahi, too often “it was used as an excuse for being an asshole.” However, it is still unclear whether Uber has actually changed its underlying culture and it could be said that here, as in many companies, the actual culture lags behind the stated Values.

The Relationship Between Culture And Strategy

A common quote is that “Culture trumps Strategy”. Whilst there is truth in this statement, it is also dangerous in that it can encourage people to think that one is more important than the other.

In reality, Culture and Strategy are equally important in different ways.

• Strategy is developed from logic and reason and should be clear and concise. It requires companies to have, or develop, Competitive Advantages.
• Culture is much more about emotions, feelings and behaviours; and the right culture is an important Competitive Advantage.

Or, put another way, Strategy is what drives people’s Activities (what they do), whereas it is culture that drives people’s Behaviours (i.e. how they do it).

Technology And Digital Transformation

For non-tech companies, an impediment often identified in question 4 is weak or inadequate technology. Whilst it isn’t appropriate for every company to become a “tech” business, we firmly believe that almost all companies will benefit from being “tech-enabled”.

Unfortunately, we have found that the digital start point for many companies (especially SMEs) is there is a lot of digital “housekeeping” that needs to be done (especially around cyber security) before they can seriously think about becoming tech-enabled.

We will return to the topic of digitalization and strategic digital transformation in a future article.

Next Steps

As with the previous questions, answering the question ‘What are we going to change?’ is an iterative process. Getting to the right answers may involve revisiting some of the points from previous questions and possibly changing some of the decisions that were made earlier. This is fine provided it doesn’t become an excuse for inaction!

The changes identified in this stage will support the Strategies agreed under question 3. ‘What are we going to do (differently)?’ but none of this is of any use if the Strategies are not implemented!

Question 5 in the 5KQ series will look at how to manage the implementation and execution of the agreed Strategies, and how to respond when changes are not going as planned.

If you have an immediate strategy challenge or would like to know more about how SKCI can help you develop your strategy, please contact us.

Published Jan 14th 2020