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Strategy in Action
14: Managing
Strategic Change
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Exploring Corporate Strategy 8e, Pearson Education 2008 14-2
Learning Outcomes (1)
Identify the scope of a requiredstrategic change
Analyse how organisational contextmight affect the design of strategicchange programmes
Undertake a forcefield analysis toidentify forces blocking andfacilitating change
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Exploring Corporate Strategy 8e, Pearson Education 2008 14-3
Learning Outcomes (2)
Assess the impact of the role andmanagement styles of change agents
Assess the value of different levers forstrategic change, including themanagement of organisational routines,political and symbolic processes and otherchange tactics
Identify the pitfalls and problems ofmanaging change programmes
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Exploring Corporate Strategy 8e, Pearson Education 2008
Change complex!!
Always remember - Change
management is complex. Change is
generally resisted and not easilywelcomed - as Mark Twain once said
The only person who likes change is
a baby with a wet diaper
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Exploring Corporate Strategy 8e, Pearson Education 2008
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 thelicence raj and not meeting changing
forces of competition.
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Exploring Corporate Strategy 8e, Pearson Education 2008
Kumar Manglam Birla
KMB discontinued various age old practices.
Rising Sun logo Corporate logo as unification symbol for theGroup.
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 adviseon group strategy.
360 degree feedback, performance appraisal systems, feedbackencouraged, develop leaders for tomorrow through formal trainingetc.
Delegation of authority.
Global expansions
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Forces for 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
2009 Prentice-Hall Inc. All rights reserved. 19-7
E X H I B I T 19-1
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Resistance to Change
Resistance to change appears to be a natural and positivestate
Inertia and Resistance to change is natural people hold on
to existing ways of doing things this often leads to a
strategic drift situationForms ofResistance 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
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Sources ofResistance to Change
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E X H I B I T 19-2
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The Stages of Concern Model - in change
management scenario
1. Information Concerns - What is the change? Why is it needed?What is wrong with what we are doing now? How much and howfast will the change be implemented?
2. Personal Concerns - How will this change impact mepersonally? Will I win or lose? Can I learn new skills needed? Howwill I find time and resources to implement change?
3. Implementation concerns - How will the change beimplemented? How long will it take? How will the structure andsystems change in the company? What happens if there areproblems in the implementation?
4. Impact concerns - Is the change worth it? Will things get betterfor me and for the organization? Will the change make asignificant difference?
5. Collaboration concerns - Who else will be involved in the changeprocess? How will I work with them? Who else should be involvedfor success?
6.Refinement concerns - How can we refine the change and makeit better? Will I be allowed to suggest? How can we leverage onnew opportunities thrown up by the change?
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Tactics for Overcoming Resistance to 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 CONTEXTDEPENDENT
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The Politics of Change
Impetus for change is likely to comefrom outside change agents, newemployees, or managers outside themain power structure.
Internal change agents are mostthreatened by their loss of status inthe organization.
Long-time power holders tend toimplement incremental but not radical
change.
The outcomes of power struggles inthe organization will determine thespeed and quality of change.
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Lewins Three-Step Change Model
Unfreezing Change efforts to overcome the pressures of both individual
resistance and group conformity
Refreezing
Stabilizing a change intervention by balancing driving andrestraining forces
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Unfreeze Move Refreeze
E X H I B I T 19-3
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Lewin: Unfreezing the Status 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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E X H I B I T 19-4
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Kotters Eight-Step Plan
Builds from LewinsModel
To implement change:
1. Establish a sense of urgency
2. Form a coalition3. Create a new vision
4. Communicate the vision
5. Empower others by removing barriers
6. Create and reward short-term wins
7. Consolidate, reassess, and adjust
8. Reinforce the changes
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E X H I B I T 19-5
Unfreezing
Movement
Refreezing
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Action Research
A change process based on systematic collection of data andthen selection of a change action based on what the analyzeddata indicates
Process steps:
1. Diagnosis
2. Analysis3. 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 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 OD 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 FeedbackApproach
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.
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Six OD Techniques (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 ofan 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
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Creating a Culture for Change: 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
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Creating a Culture for Change: 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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E X H I B I T 19-6
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Creating a Learning Organization
Overcomes traditional organization problems: Fragmentation
Competition
Reactiveness
Manage Learning by:
Establishing a strategy
Redesigning the organizations structure
Flatten structure and increase cross-functional activities Reshaping the organizations culture
Reward risk-taking and intelligent mistakes
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Exploring Corporate Strategy 8e, Pearson Education 2008 14-23
Premises of
Strategic Change
Strategy matters
Context matters
Different approaches to managing
strategic change are required
for different contexts
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Exploring Corporate Strategy 8e, Pearson Education 2008 14-24
Exhibit 14.1 Key Elements in
Managing Strategic Change
1. Diagnosis of
context
4.Change
agents
2. Levers
for
change
3.Managing
change
programmes
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Exploring Corporate Strategy 8e, Pearson Education 2008 14-25
Diagnosing the
Change Situation
Types of change Context of change
Culture web Forcefield analysis
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Exploring Corporate Strategy 8e, Pearson Education 2008 14-26
Exhibit 14.2 Types of Change
Minor changes
Major cost
cutting
Planned major
change
Rapid major avert existence
threat
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Exploring Corporate Strategy 8e, Pearson Education 2008 14-27
Exhibit 14.3
Context of Change
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Exploring Corporate Strategy 8e, Pearson Education 2008
Organisational Culture
The basic assumptions and beliefs that are
shared by members of an organisation, that
operate unconsciously and define in a basic
taken-for-granted fashion an organisations
view of itself and its environment
Schein 1997
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Exploring Corporate Strategy 8e, Pearson Education 2008
Organisational Culture
Exhibit 4.10
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Exploring Corporate Strategy 8e, Pearson Education 2008 14-30
The Cultural Web
Stories Symbols
Structures
Power
structures
Controlsystems
Rituals/
routines Paradigm
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Exploring Corporate Strategy 8e, Pearson Education 2008
The Cultural Web: some useful questions
Exhibit 4.12
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Exploring Corporate Strategy 8e, Pearson Education 2008 14-32
Stories Stories ofpraising others vs.
blaming
Symbols Carparking by need vs.
by rank
Routines andRituals Challengepractices vs. avoid
change
Power Strucutre decentralized vs.
formal organization
Controls Informal
feedback vs. formalcontrols
Structure of
Organization Flatvs. Hierarchies
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Exploring Corporate Strategy 8e, Pearson Education 2008 14-33
What is a Forcefield Analysis?
A forcefield analysis provides a view ofchange problems that need to be tackled,
by identifying forces for and against change.
What aspects of the current situation aidchange in the desired direction?
What aspects are blocking change?
What needs to be done to aid change?
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Exploring Corporate Strategy 8e, Pearson Education 2008 14-34
Exhibit 14.4
A Forcefield Analysis
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Exploring Corporate Strategy 8e, Pearson Education 2008 14-35
Roles in Managing Change
Change agents
Strategic leaders
Charismatic
Instrumental
Outsiders
Middle managers
Implementation and
controlSense-making
Reinterpretation and
adjustment
Relevance bridge
Advisors
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Exploring Corporate Strategy 8e, Pearson Education 2008 14-36
Styles of Managing Change
Education/
Communication why the change
Collaboration/
Participation InvolveIntervention by authorities
Direction clear vision Coercion Impose change
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Exploring Corporate Strategy 8e, Pearson Education 2008 14-37
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
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Exploring Corporate Strategy 8e, Pearson Education 2008 14-38
What are Symbols?
Symbols are objects, events, acts,
or people that convey, maintain, or
create meaning over and above their
functional processes.
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Exploring Corporate Strategy 8e, Pearson Education 2008 14-39
Rituals and Organisational Change
Rites of passage -Induction
Rites of enhancement
- Awards Rites of renewal
Project teams
Rites of integration -Parties
Rites of conflictreduction -Committees
Rites of degradation -Fire
Rites of sense making
- Surveys
Rites of challenge-New CEO challengesstatus quo
Rites of counter-challenge Work torule
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Exploring Corporate Strategy 8e, Pearson Education 2008 14-40
Power and
Political
Processes
Acquisition
of resources
Association with
powerful stakeholders
Development of
alliances
Symbolic change
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Exploring Corporate Strategy 8e, Pearson Education 2008
Sources and indicators of power
Exhibit 4.6
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Exploring Corporate Strategy 8e, Pearson Education 2008 14-42
What is Turnaround Strategy?
A turnaround strategy emphasizes the
speed of change
and rapid cost reduction
and/or revenue generation.
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Exploring Corporate Strategy 8e, Pearson Education 2008 14-43
Elements of Turnaround Strategies
Crisis stabilisation
Management
changes
Stakeholder
support
Target marketclarification
Refocusing
Financial
restructuring
Prioritisation of
critical
improvement areas
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Exploring Corporate Strategy 8e, Pearson Education 2008 14-44
Aspects of
R
evolutionary ChangeClear strategic direction
Combined economic and symbolic levers
Outside perspectives
Multiple styles of change management
Work with existing culture
Monitoring of changes
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Exploring Corporate Strategy 8e, Pearson Education 2008 14-45
Aspects of
E
volutionary ChangeEmpowered organisation
Clear strategic vision
Continual change and commitment toexperimentation
Transitional stages
Irreversible changes
Sustained top management commitment
Winning hearts and minds
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Exploring Corporate Strategy 8e, Pearson Education 2008 14-46
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
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Exploring Corporate Strategy 8e, Pearson Education 2008 14-47
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 tochange operational processes, routines and
symbols, the importance of political processes,
and other change tactics
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Exploring Corporate Strategy 8e, Pearson Education 2008 14-48
Key Debate:
Management of Change
from Top to Bottom?
What are the problems associatedwith top-down or bottom-up views of
change management?
If you were a senior executive whichapproach would you take and in what
circumstances?Are the different views reconcilable?
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Exploring Corporate Strategy 8e, Pearson Education 2008
Strategic Leadership
It is nothing more than the ability to anticipate, prepare, and get positioned forthe future.
It is the ability to mobilize and focus resources and energy on things that make adifference 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 yourdestiny.
It is nothing more than the ability to anticipate, prepare, and get positioned forthe future. It is the ability to mobilize and focus resources and energy on thingsthat make a difference and will position you for success in the future. It is thecourage to think deeply about what you want to do. Applied strategic leadershipis about creativity, intuition, and planning to help you reach your destiny.Strategic people think and act before they have to, before they are forced totake 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.
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STRATEGIC LEADERSHIP COMMUNICATING WITH KEY STAKEHOLDERS
Strategic Leadership
Across Outward
Managers
must sufficiently
communicate in 4
directions
Upward
Downward
Convince top management
of a new strategy (e.g., Intels shift
to microprocessors)
Enlist support of
those who implement
Win cooperation ofexternal stakeholders
including customers
and distributors (e.g.,
Compaq failed to do
this with retailers)
Win support of other
units within the firm
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Exploring Corporate Strategy 8e, Pearson Education 2008
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 betterunderstanding of the business conditions, the environment (themarket, 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 insightabout the needs and wants of team members, seniormanagement, and suppliers.
As a leader, you must know who your customers are, why theycome 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).
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Exploring Corporate Strategy 8e, Pearson Education 2008
Strategic Leadership
There are plenty of legitimate reasons why we pay attention to operational andshort-term issues. In many cases, we get rewarded for it and our job securitydepends upon it.
But we must also look to the horizon and identify the signs that indicate comingchanges or disruptions in our world. The challenge we face, is that no one willgive 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 thechallenge 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 andmake consequential decisions in the volatile, uncertain, complex, andambiguous strategic environment.
E.g GE Jack Welch, Nissan Carlos Ghosn, Procter & Gamble under chiefexecutive A.G.Lafley, New York City Mayor Michael Bloomberg, JRD Tata
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Exploring Corporate Strategy 8e, Pearson Education 2008
Anatomy of a Strategic Leader
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Exploring Corporate Strategy 8e, Pearson Education 2008 Copyright Houghton Mifflin1 - 54
Strategic Leadership what
should the possessVision, eloquence, and consistency to give a
sense of direction and communicate thedirection (YES WE CAN)
Commitment walk the talkBeing 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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Exploring Corporate Strategy 8e, Pearson Education 2008 Copyright Houghton Mifflin1 - 55
Emotional Intelligence
Self-awareness understand onself
Self-regulation control self think andact
Motivation passion, energy andpersistence.
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 resolvecomplex problems
Representativeness generalize from small samples
Illusion of Control
Hubris hypothesis over confidence
Groupthink