evolution management: managing constant change in organisations

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Managing Evolution. While working for different consulting companies in the corporate restructuring sector, I have heard many different terms for “restructuring a company”. In small and mediumsized businesses, the more serious the crisis becomes, the more the term “turnaround management” is used. Certainly turnaround management suggests some urgency and pressure to change the situation causing the company to struggle. The Turnaround Management Society has quite a distinctive definition of turnaround management. ... “A turnaround transforms a company that has a general lack of resources and/or strategic disposition and/or is in an abnormal period to be profitable enough to support its own operations and to have a strategic chance to survive in its environment on a stable platform for renewed growth.” Most noticeable about turnaround management is the fact that almost no company calls it a turnaround while it is still caught up in this process. Large corporations especially will rarely admit that they find themselves in a turnaround situation because doing so would also imply that something has gone terribly wrong in the past and somebody has to take the resulting responsibility. This, however, does not necessarily have to be true. A turnaround can also be conducted to adapt to changes on the market, even though admittedly there is usually some financial pressure involved. At the same time, there is no shame in getting into this situation as long as management is willing to admit that a turnaround, a change in strategy is necessary. Still, the most frequently used term is “corporate restructuring”, which sounds a lot less urgent and more like “we are just adjusting to a change” on the market or in customer demands. Preferably the trigger is something external, but causes are rarely mentioned, even though they would be very important in eliminating the underlying problems. Corporate restructuring in the sense of adaptations is constantly necessary so any related announcements are less likely to cause alarm. Recently, however, there has been a trend to soften even restructuring and to call it “transformation management”, a term that has even less meaning and an even broader definition. It sounds almost harmless as well as necessary. It is the perfect mask to describe efficiency measures as well as costcutting and process improvements. Don’t get me wrong, a process improvement is a transformation in a sense, but I like clear words that say and describe what is necessary. If somebody asks me if I have had any experience in transformation management, the answer is yes, I certainly have, but who has not had experience in some kind of transformation. The term has become so indecisive that no one is able to define it, nor does anyone really know what it is supposed to mean and describe. I am declaring the need for a clear distinction between the terms. For reasons of simplification, I want to introduce first another term and then show how this

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While working for different consulting companies in the corporate restructuring sector, I have heard many different terms for “restructuring a company”. In small- and medium-sized businesses, the more serious the crisis becomes, the more the term “turnaround management” is used. Certainly turnaround management suggests some urgency and pressure to change the situation causing the company to struggle. The Turnaround Management Society has quite a distinctive definition of turnaround management.

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Page 1: Evolution Management: Managing Constant Change in Organisations

Managing  Evolution.    While  working  for  different  consulting  companies  in  the  corporate  restructuring  sector,   I   have   heard   many   different   terms   for   “restructuring   a   company”.   In  small-­‐   and  medium-­‐sized   businesses,   the  more   serious   the   crisis   becomes,   the  more   the   term   “turnaround   management”   is   used.   Certainly   turnaround  management   suggests   some   urgency   and   pressure   to   change   the   situation  causing  the  company  to  struggle.  The  Turnaround  Management  Society  has  quite  a  distinctive  definition  of  turnaround  management.  ...    

“A   turnaround   transforms   a   company   that   has   a   general   lack   of  resources   and/or   strategic   disposition   and/or   is   in   an   abnormal  period  to  be  profitable  enough  to  support   its  own  operations  and  to  have  a  strategic  chance  to  survive  in  its  environment  on  a  stable  platform  for  renewed  growth.”  

 Most   noticeable   about   turnaround   management   is   the   fact   that   almost   no  company   calls   it   a   turnaround  while   it   is   still   caught   up   in   this   process.   Large  corporations   especially   will   rarely   admit   that   they   find   themselves   in   a  turnaround   situation   because   doing   so   would   also   imply   that   something   has  gone   terribly   wrong   in   the   past   and   somebody   has   to   take   the   resulting  responsibility.  This,  however,  does  not  necessarily  have  to  be  true.  A  turnaround  can   also   be   conducted   to   adapt   to   changes   on   the   market,   even   though  admittedly   there   is  usually  some  financial  pressure   involved.  At   the  same  time,  there  is  no  shame  in  getting  into  this  situation  as  long  as  management  is  willing  to  admit  that  a  turnaround,  a  change  in  strategy  is  necessary.      Still,  the  most  frequently  used  term  is  “corporate  restructuring”,  which  sounds  a  lot  less  urgent  and  more  like  “we  are  just  adjusting  to  a  change”  on  the  market  or  in   customer   demands.   Preferably   the   trigger   is   something   external,   but   causes  are  rarely  mentioned,  even  though  they  would  be  very  important  in  eliminating  the  underlying  problems.  Corporate  restructuring  in  the  sense  of  adaptations  is  constantly   necessary   so   any   related   announcements   are   less   likely   to   cause  alarm.      Recently,   however,   there   has   been   a   trend   to   soften   even   restructuring   and   to  call   it  “transformation  management”,  a  term  that  has  even  less  meaning  and  an  even  broader  definition.  It  sounds  almost  harmless  as  well  as  necessary.  It  is  the  perfect  mask  to  describe  efficiency  measures  as  well  as  cost-­‐cutting  and  process  improvements.  Don’t  get  me  wrong,  a  process  improvement  is  a  transformation  in   a   sense,   but   I   like   clear   words   that   say   and   describe   what   is   necessary.   If  somebody  asks  me  if  I  have  had  any  experience  in  transformation  management,  the  answer  is  yes,  I  certainly  have,  but  who  has  not  had  experience  in  some  kind  of   transformation.   The   term   has   become   so   indecisive   that   no   one   is   able   to  define  it,  nor  does  anyone  really  know  what  it  is  supposed  to  mean  and  describe.      I  am  declaring  the  need  for  a  clear  distinction  between  the  terms.  For  reasons  of  simplification,   I   want   to   introduce   first   another   term   and   then   show   how   this  

Page 2: Evolution Management: Managing Constant Change in Organisations

helps   to   facilitate  differentiation.   I   ask  my   readers   to  be  patient   and  bear  with  me;  there  will  be  a  happy  end.      The  additional  term  I  want  to  coin  is  “evolution  management”.  Just  like  biological  species,   companies   are   subject   to   natural   selection   of   the   fittest   and   best   (see  Darwin’s  popular  thesis).  In  business,  we  call  it  market  selection  and  competitive  advantage.   It  will  not  surprise  anyone  to  hear   that  corporations  need  to  evolve  continuously   from   one   stage   to   the   next   to   stay   up   to   date   with   Porter’s  constantly   changing   five   forces   (also   acknowledge   the   growing   fields   of  organizational  learning  and  absorptive  capacity).      New  competitors  may  put  pressure  on  production  costs;  customers  may  demand  better   quality   or   lower   prices   or   simply   change   their   preferences   and   taste.  Internally,  the  company  needs  to  stay  up  to  date  with  new  developments  in  the  industry.  No   company   can   afford   to   rest   on   its   laurels   for  more   than   a   limited  time.      So   we   can   define   enterprise   evolution   as   the   constant   changes   that   a   company  undergoes  to  keep  its  competitiveness  at  the  same  level   in  the  future,  to  maintain  its  high  market  position  in  comparison  with  the  competition,  and  to  evolve  from  the  status  quo  of  today  to  the  status  quo  of  tomorrow.      Managing   this   evolution   is   becoming   more   and   more   important   as   the  competitive   environment   in   which   corporations   operate   changes   more   and  quickly  every  year.  About  120  years  ago,  American  Bell,   later  At&T  Long  Lines,  built  a  telephone  line  between  New  York  and  Chicago  and  continued  to  use  this  technology   for  more   than  30   years.   Today,  Deutsche  Telekom  and   every   other  phone   company   regularly   replace   their   network   technology   every  3-­‐5   years   to  keep  up  with  technological  evolution  and  the  changes  demanded  by  customers.  This  also  means  that  processes,  workflows,  and  organizational  structures  need  to  change   every   few   years.   On   a   micro   level,   this   means   hiring   specific   talent,  changing   job  descriptions,  and  more  and  more  training   for  employees.  Many  of  the   new  positions   did   not   exist   ten   years   ago…  Today,   there   are   even   signs   in  certain   industries   that   corporate   evolution   is   not   happening   at   intervals  anymore,  but  is  instead  a  continuous  process.    

These  changes  within  a  company  that  are  continuously  essential  to  keep  up  with  technological   and   environmental   changes   need   to   be   handled   by   “evolution  

   Corporate  Evolution  100  years  ago  

 Corporate  Evolution  today    Time    Environmental    &  Technological    

  Change    

Page 3: Evolution Management: Managing Constant Change in Organisations

management”   or   a   “corporate   evolution   program”   consisting   of   a   variety   of  projects  and  measures  to  stay  competitive  and  to  prepare  for  the  future.  These  projects   can   lead   to   more   effective   production   processes,   replacement   of  outdated   assets,   new  products,   and   training.  What   they   all   have   in   common   is  that  they  are  a  certain  part  of  a  goal-­‐oriented  program  for  the  company  to  reach  the  next  level  in  corporate  evolution.      Let’s   stick   with   the   example   of   Deutsche   Telekom.   Measures   a   corporate  evolution   manager   (or,   in   this   case,   office)   might   take   to   maintain  competitiveness  would   include   tracking   changes   in   the   industry,  working  with  strategic  management,   and   evaluating  possible   scenarios   for   the   future   so   that  the  company   is  prepared  to  deal  with   them.  But   this  office  would  also  oversee,  and   in   some   cases   even   implement,   needed   changes   such   as   preparing   the  company   for   the   new   LTE   network   standard   that   will   replace   UMTS   and   3G  networks.   But   it   could   also   implement   cost   reduction   measures   to   stay  competitive   or   propose   and   oversee   projects   such   as   merging   departments,  outsourcing,  or  raising  the  level  of  efficiency  of  corporate  processes.      Evolution   management   includes   transformation   projects   and   restructuring  measures,   but   with   the   goal   of   maintaining   competitiveness.   In   terms   of   a  company’s  life  cycle,  it  starts  earlier  than  transformation  management  and  ends  long   before   corporate   restructuring   measures   conclude.   The   key   element  distinguishing   it   from   corporate   restructuring   is   that   there   is   no   immediate  financial   pressure   involved   in   evolution   management.   The   following   graphic  

shows  where   evolution  management,   corporate   restructuring,   and   turnaround  management   start   and  end   in   a   corporate   life   cycle  diagram.   In   its   early   stage,  evolution   is   by   nature   managed   by   the   entrepreneur.   However,   at   some   later  point,  the  entrepreneur  either  leaves  the  company  or  needs  to  focus  on  running  the   company   more   than   on   staying   competitive.   At   this   stage,   evolution  management   takes   over,   or   the   founder   becomes   a   “corporate   evolution  manager”  (CEM)  and  hands  the  business  over  to  an  experienced  CEO.  From  the  CEM  position,  the  founder  can  focus  on  his/her  strengths,  evolving  the  company,  developing   ideas   and   overseeing   their   implementation,   and   keeping   a   fresh,  unconventional   look   at   businesses   processes   with   the   aim   of   minimizing   any  

growth  

Insolvency  

Evolution

 Manageme

nt  

Corporate  Restructuring     Turnaround  

Management  

time  

Corporate  Lifecycle  

Page 4: Evolution Management: Managing Constant Change in Organisations

bureaucracy  which  might  put   the   company  at   risk  of  primarily  managing   itself  instead   of   its   market.   Corporate   restructuring   takes   over   when   the   company  experiences  a  decline   in  core  segments  of   the  business;  once  a  corporate  crisis  giving  rise  to  the  threat  of  insolvency  becomes  obvious,  professional  turnaround  management  is  necessary.      Evolution  management   is   nothing   new,   but   I   would   ask   that   it   be   given  more  attention  so  that  the  necessity  for  turnaround  management  can  be  averted.  After  all,  focusing  on  something  specific  always  starts  with  recognition  of  the  need  and  its  definition.  The  next  step  is  to  specify  actions.