Think - AT LONDON BUSINESS SCHOOL

How does a company create urgency for continuous change?

Companies must learn to surf the waves of ongoing disruption – but that’s easier said than done, says Costas Markides

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In 30 seconds:

  • The exponential pace of change today means businesses are facing major disruption with increasing regularity
  • But even intelligent business leaders often fail to challenge constraining assumptions
  • Companies must be ready to carry out another major transformation immediately after or even in parallel with the previous one
  • The task of leaders is to create a permanent sense of urgency that sustains the organisation through continuous change

Dealing with disruption
How to convince your employees to see threat as opportunity

  • People are hardwired to see the negative consequences of disruption, particularly because these are immediate while the potential benefits are in the future. You have to work at presenting change as an opportunity, not just a threat. 
  • People need to buy into disruption as an opportunity at an emotional level if they are going to commit to radical, long-term changes. This will require time, resources and investment from the firm. Help your people visualise the reasons for the necessary changes, using storytelling rather than instructions. 
  • The ‘seller’ of change is crucial: they must be seen as authentic, credible and homophilous to the buyers – ‘one of us’. People who feel they are part of a process are more likely to accept its implementation.

Did you know that most people who undergo heart surgery drift back to their old eating and lifestyle habits within six months of their operation?” Costas Markides, Professor of Strategy and Entrepreneurship at London Business School (LBS), pauses for effect.

“It’s incredible really – even the fear of death is not enough to convince people to change for good. Yet this is exactly how most organisations faced with an existential threat react – they try to scare their employees into action by painting a picture of the mortal danger the company would be in if it didn’t change.

“This certainly creates urgency in the organisation to respond to the disruption at hand. But is it the right kind of urgency, the one that leads to sustained change? I would say not.”

Professor Markides happily acknowledges that he has not worked a single day in a company. After an MBA and DBA at Harvard Business School, he joined LBS in 1990. He has taught a range of masters-degree strategy electives and is heavily involved in the Senior Executive Programme, the school’s flagship senior leadership course.

He admits frankly: “What I have learned over the last 30 years, a senior management team could tell me in less than 15 minutes. The problem, however, is that they very often fail to act on this knowledge.

“The importance of smashing bureaucracy to break down silos, to create an agile workforce ready to respond to the unknown, to frame the need for change as an opportunity as well as a threat – these concepts are well known to CEOs and their boards of directors. They know the theory. They know what they need to do. The problem is that, more often than not, they don’t do it!

“Do I know I should do more exercise? That I should visit my doctor for a check-up every year? Of course. Do I do it? No, I don’t. Do my second-year MBA students know the importance of challenging assumptions and thinking outside the box? Yes. They tell me, ‘Costas, you’ve been telling us this for two years – we know.’ So I give them an exercise to test them, and guess what? They mess up! They don’t challenge their assumptions and they don’t think outside the box!”

Cutting an imaginary cake

He delights in highlighting an exercise with an imaginary cake. “I tell them they must cut it four times in straight lines to get the maximum number of slices. Some get eight slices. Some get nine or 11 or 16 if you cut it in half, then put one half on top of the other (didn’t think of that, did you?). But almost nobody gets the right answer. Who said the slices had to be equal? Who said the cake had to be round? The correct answer to the question is infinity, because it depends on the shape of the cake. Nobody ever gets that – not because they’re stupid, but most people just assume the cake is round or that the pieces have to be equal or that the cuts have to be vertical.

“All these assumptions constrain their creativity. We know this and we know the effect that assumptions have on us. The critical point is, how come no one questions these constraining assumptions? Even when intelligent business leaders know they should challenge their assumptions, they don’t!

“Companies today know they need to create new organisational structures, frameworks and workforce behaviours to navigate an uncertain and volatile future. But most of the time, they simply don’t do the things they need to do.”

“Most of the time, companies simply don’t do the things they need to do”

Professor Markides has written eight books so far, but is especially fond of one he wrote 20 years ago, All the Right Moves: A Guide to Crafting Breakthrough Strategy. Despite being “a dry business book, not 50 Shades of Grey,” he notes, “it has sold thousands of copies and is still selling well. That’s because it offers a clear and tangible framework for executives to think about what strategy is and what it isn’t. It spells out to businesses the fundamental questions they must ask and answer to decide on a strategy. Who will they target? What product and/or service will they sell? How will they sell it? This is the framework that I offer – the who, the what and the how. It might sound obvious, but it’s amazing how many companies don’t approach their key business decisions in that way.”

Twenty years later, businesses face new challenges. CEOs, he says, understand that the exponential pace of change means their businesses are facing major disruption with increasing regularity – and that this is a very different challenge to responding to the digital revolution of the early 2000s. “Creating urgency for continuous transformation is not at all the same as creating urgency for a one-off radical change or restructuring.

“Your task now is to create a permanent sense of urgency – a constant unease with the status quo – that sustains the organisation for the unending journey of continuous change. Scaring your people into action will not do the trick here. They need to be energised, not demoralised.”

We are back to the hard “how” questions. Pre-internet companies have spent 20 years adapting and transforming to radically new ways of living, working and shopping. They have moved from hierarchies to networks; from fixed to dynamic pricing models; from close innovation to open innovation; from mass marketing to customised marketing.

In many cases, the transformation has been painful. Longstanding business models have been cut to ribbons. And the journey is only just beginning.

Creating the right sense of urgency

“No matter how disruptive the digital revolution has been over the past 20 years,” Professor Markides says, “new and more disruptive changes are on the way. It is not only technological changes such as AI, robotics, machine learning and virtual reality that are threatening our very survival. Geopolitical shifts (witness the rise of China) as well as macroeconomic, demographic, institutional, environmental and health-related disruptions (think Covid-19) are all combining to create a cocktail of disruption that promises to make the digital disruption look like child’s play by comparison. Companies must be ready and alert to respond to whatever disruption comes their way, and if necessary embark on another major transformation immediately after or even in parallel with the previous one.”

So, how can an organisation prepare to respond to this new normal of continuous radical disruption? How does a business create a positive sense of urgency that keeps its workforce on permanent high alert and also happy and motivated to operate in this way? How to institutionalise into the DNA of the organisation the day-to-day behaviours that will allow the business to identify and respond to change early and quickly? And how to change the firm’s organisational environment through a decentralised change process whereby team leaders and mid-level managers can act with a level of freedom and autonomy within clear parameters?

Nothing surprising

The magnitude of the challenge has dominated Professor Markides’ thoughts for the past decade and is the subject of his new book, Organizing for the New Normal: Prepare Your Company for the Journey of Continuous Disruption. Again, he stresses that “senior executives should find nothing surprising in my book; nothing they won’t immediately recognise. But knowing it is not the same as doing it – or doing it correctly – and doing it can be the difference between success and failure.”

“The contribution of Organizing for the New Normal is not the discovery of an unknown recipe for success. It is, instead, the development of a clear pathway on how leaders can do the things they know they should do, such as creating a sense of urgency or developing the right attitude towards disruption, the correct way.

 

Costas Markides is Professor of Strategy and Entrepreneurship; Robert P Bauman Chair in Strategic Leadership at London Business School. His new book Organizing for the New Normal: Prepare Your Company for the Journey of Continuous Disruption is available now.

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