That barely 5 years old companies like Harry’s or Dollar Shave Club are able to force a gigantic 100 years old Gillette to do a rethink of its strategy is a clear signal of the shift in world order.
And that Unilever saw a company like Dollar Shave Club as a weapon to take Gillette head on signifies even more.
The global economy is rapidly shifting in favour of companies, small or large, which are digital ready and consumer ready. More often than not, legacy companies are neither and, so, they obviously need to digitally transform in order to survive, remain fit and compete in the new world order.
BMW, whose market positioning revolves around the experience of driving is staring at a future where driverless cars would become the norm. It has become imperative for enterprises to evolve to fit the digital age. And not just digital, but the future as well which is turning into much more than digital.
And companies are increasingly realizing it, making instances of digital transformation among large companies more and more commonplace. Just about a month ago, networking major Nokia signed a multi-year deal with IT services giant Wipro to accelerate its supply chain digital transformation.
But every instance of digital transformation is a case of change management. And historically change initiatives have been high risk ventures with 70% of them having failed to achieve their goals and objectives.
What does that mean for a company like Nokia? Will it be able to achieve ROI?
As it is, change events like the one Nokia is undertaking are complicated. What makes it even more complicated is that Christian Forster, VP of Delivery Operations at Nokia, wants “the digital transformation of its supply chain while maintaining business continuity and operational excellence.”
If achieving the end goals of any change is hard, maintaining productivity during the change process is doubly hard. Failure is the more likely result.
A lot of companies tend to follow a change management plan template that others have others have laid down. But change management success isn’t about emulating what others have done prosperously. If your change management plan generously borrows segments and actions from others’, it’s more likely to fail.
All the companies that have achieved digital transformation or change success did so because they bet on their own unique strengths while surfing and transforming for the digital wave. Netflix sets a great example of this.
Around 2005, Netflix was snail mailing DVDs trying to disrupt the market that Blockbuster had created. At its peak Blockbuster had upwards of 84,000 employees. But a decade on, Netflix has a market capitalization of $141.9bn and consumes a colossal 37% of all the downstream internet bandwidth during primetime in the US while it’s been 4 years since Blockbuster filed for bankruptcy.
It is a no-brainer that Netflix thrived and Blockbuster perished because the former estimated the digital future accurately. But, what is more important is that Netflix continued betting on its data analytics.
Back in the day, Netflix made recommendations which DVDs to order and even today, its power is still in the recommendations it makes to its users.
Netflix never abandoned its core strengths. It just capitalized on the future in the present. But they always had a clear change management plan. They never seemed to slow down during that phase when they switched from delivering content at your doorstep to delivering content on your laptop.
Last year when he was asked about 2030, Netflix CEO Reed Hastings said, “It’s tough to think about entertainment when I’m not sure if we’re going to be entertaining you or entertaining AIs.” He’s not telling but Netflix probably has a change management plan for that too.
Netflix is successful because it reacted to the ecosystem well.
How about Walmart? The retail giant is struggling to compete because it never reacted early enough to changing customer expectations and behavior while Amazon is surging ahead. Walmart is sitting on a huge pile of cash and there is still a decent market for brick and mortar retail so it’s doing okay. For now!
The obvious first step to building a great change management plan is the constant assessment of the current and the future in anticipation of changes, subtle or drastic, in the business landscape.
And the most critical component of the business landscape is a company’s customers and audience. If you don’t know how your customers’ behaviors are changing, you can no longer be attractive to them. Some experts call it opportunity but it really is an imperative.
That’s exactly where the young Netflix succeeded. That’s also exactly where veterans Blockbuster and Nokia (with its mobile phones) failed and Walmart is just about escaping failure.
Truth be told, there is no clear organizational change management plan template. A change management plan has to be unique to every company and every industry vertical. On a side note, here are some great change management questions you should ask before change initiatives and some great change management tools to use during the whole process.
A few years ago, McKinsey conducted a study of successful and unsuccessful companies which went through change. They all probably had prepared change management plans but some of them failed while others excelled.
McKinsey found that great change processes delivered an ROI of 143%. One of the most consistently cited factors in successful change management is the ability of the senior management to convince the workforce that:
Companies that fail at this step are in a big sucking quicksand of failure. It is absolutely critical that employees are convinced of the need for change and transformation. How organizations accomplish this is another matter but they need to.
While planning for change, it’s essential to study what the successful peers have done. But it’s even more important to observe what mistakes the unsuccessful ones made.
McKinsey found that companies which emerged victorious through phases of change had top-down workforce involvement throughout with clear responsibilities for each. Additionally, the workforce also understood the needs for change.
Now, let’s learn from the failures.
McKinsey found that the unsuccessful ones had three things in common:
Another study also found similar reasons for failure pinning the blame on lack of training, accountability and employee buy-in. A third study from 2004 stated that change management failures are most often than not due to poor communication, poor management and poor training.
So now, these factors of failure should be able to clearly define where enterprises preparing for change and transformation should first focus on.
Irrespective of the industry vertical, a company which succeeds with change always does well in communication, end user training and management.
Change is a top down process. The executive team anticipates and prepares to react to the developing business landscape. Once the decision is made, the executive conveys this to the employees either in a layered manner or directly. A overlap of both approaches works better.
Resistance will be there which means communication is not a one time event but happens over a period of time with efforts for as much convincing as possible. A good question is how organizations gauge if the workforce is truly convinced and ready to be invested.
If they are not convinced or invested, for the company, it’s a dilemma between two paths. Both leading to certain failure.
Simultaneously, managers need to start understanding the impact of change and what needs to be done to transform. Which processes in which functions will transform and require change.
Thorough planning is needed here to ensure the organization at the top level, middle level and the bottom level are clear about what’s exactly going to happen. The outcomes may be uncertain but the path and process needs to be clear.
Third and most important: Train employees and provide guidance. A lot of times change could just include migration from one software application to another (companies like HP have faced disaster even in such cases). The new application will require training and guidance for employees to adopt and that has to be delivered both prior to and post go-live.
And such employee training can’t be a one time event or available over a limited period of time. When Walmart realized its customers were not really happy, it closed down for a day to train its employees. Just one day. Quite obviously nothing improved.
Training can be temporary, but guidance and support must be permanent. That’s the mantra companies need to follow.
In today’s business environment, what products a company sells is not the most important because companies are no longer selling just products. They are selling value.
Walmart couldn’t sell the value of buying from Walmart. Amazon could. Blockbuster couldn’t sell the value of buying its entertainment services. Netflix could.
There is much to learn.