Chapter 11
Creating a Built-to-Change Organization

Built-to-Change Insight:
Making the Transition to a B2Change Organization
Is Harder Than Operating One

The need for a new way of competing and organizing is compelling. Who among us can support a way of thinking about organization design that argues, “The world is changing faster and faster every day—I think we should make a long-term commitment to doing one thing really well”? In an increasingly complex world, organizations built on traditional assumptions of stability, equilibrium, alignment, and predictability will, more and more, be out of touch and ineffective. Pursuing the latest management fad that is sold as a way to make organizations more efficient, more agile, more reengineered, or more whatever doesn’t address the fundamental need for organizations to change more quickly and effectively. We can put lipstick on the pig, but it’s still a pig.

The heady objective of this book is to define a new way of thinking about organizations, one that assumes change is normal and that leverages our understanding of individuals and organizational effectiveness. We have outlined the key processes and components of the b2change approach. They include ways of looking at strategic intent, adding value, and organizing that build firms that are constantly changing, but still productive and effective.

Each of the processes in the B2Change Model—Strategizing, Creating Value, and Designing—is more changeable and flexible than the prior one. For example, as part of the strategizing process, the company recognizes its identity—the most stable aspect of a b2change organization—and within a set of potential environmental scenarios, crafts a robust strategic intent that describes how the company expects to achieve its business objectives.

Identity and intent work together to bring an organization into proximity with an unfolding set of environmental demands. Proximity is an important concept for us. It sums up in one word that effectiveness is primarily a function of how “close” an organization’s products and services are to what is demanded by the environment. Because the environment is always changing, firms always need to change to stay in close proximity to it.

Strategizing, in turn, must be orchestrated with the creating value and designing processes. The creating value process determines what an organization can do and is a function of the competencies and capabilities of the firm. Competencies and capabilities must evolve and change in response to new strategies and as a result of organization learning.

The designing process—the way structures, information and decision-making systems, talent management, shared leadership, and rewards are created, configured, and changed—is the most changeable part of a b2change organization. As environmental demands change and new strategic intents emerge, the design of the organization needs to change.

The designing process is the key to developing the competencies and capabilities that are needed to implement a strategic intent. The relationships among strategizing, creating value, and designing over time must remain in a dynamic alignment. Sustained effectiveness in the b2change approach results in a virtuous spiral in which higher and higher levels of performance occur because an organization is better and better able to match the demands of the environment.

In Chapters Four through Ten, we identified the design principles and practices b2change organizations need to adopt. The ultimate question, of course, is “How do you create a b2change organization?” Or, for most executives, “How can you change a traditional organization into a b2change organization?”

The answer is complex, but there is one! Before we provide the answer, we need to establish that not all organizations can or should become b2change organizations. Some may not need to because the rate of change they are likely to experience is not sufficient to warrant investing heavily in a change capability. For example, an energy company or a public utility might want to think carefully about adopting too many b2change principles; the assets in these businesses are long lived and require a long-term commitment to their efficient utilization. Even so, there is a good chance that they can benefit from using some b2change principles. Royal Dutch Shell, for example, successfully employs a world-class scenario planning process—but it may not need to commit to being a b2change organization.

We are realistic about the necessity and ability of many organizations to adopt all of the principles of the b2change approach. Even though they need to adapt to survive, the reality is that many traditional organizations (for example, General Motors, ExxonMobil, and Kroger), simply are not going to become b2change organizations. Their identities are too entrenched. For them, the best alternative is to identify some b2change principles they can use, implement them slowly, and over time hope they become somewhat more flexible. For many other organizations, the b2change approach is exactly what they need, and they can implement it.

In this chapter, we address the most important issues in managing the transition to a b2change organization. Our objective is to describe how to replace traditional assumptions and practices with new beliefs about change and new practices that support change. We recommend a sequence of initiatives that will accomplish two important objectives. First, they will cause an organization to be more focused on achieving critical configurations, proximity, and dynamic alignment. Second, they will set the stage for moving fully to a b2change approach.

The Transition Process

Managing the transition to a b2change organization is more like a traditional change management process than engaging in the dynamic processes that characterize change in a fully developed b2change organization.1 And if you think about it, this makes sense. If an organization is built for stability, it is important to challenge that stability, address resistance, make a business case, and develop action plans to transform it into a b2change organization.

In the transition to a b2change organization there is no “end state” in the traditional sense of the term. Change management models and prescriptions that recommend the creation of a vision or end state reinforce the belief that change is an infrequent and unusual event. We offer no change management gimmicks; we are not encouraging an organization to set “big, hairy, audacious goals” or outrageous stretch targets for achievement as if an optimal organization design could be obtained.

The only end state in a b2change transformation is an organization that is ready to make strategic adjustments—in other words, one that is easier to change. To get there, traditional organizations must engage in a transformation, the riskiest type of change. Becoming a b2change company requires an organization to shift its identity, reconfigure its intent, acquire and develop new capabilities, and redesign itself.

An organization needs to coordinate five key initiatives on the road to becoming built to change. We will discuss them in the order we think they need to be implemented:

  1. Create a change-friendly identity.
  2. Pursue proximity.
  3. Build an orchestration capability.
  4. Establish strategic adjustment as a normal condition.
  5. Create a virtuous spiral.

Pursuing these initiatives is a little like embracing the Dark Side of the Force in Star Wars—forever will it guide your destiny. These are real commitments to very different ways of doing things and (unlike the Dark Side) are aimed at achieving and maintaining a virtuous spiral.

Create a Change-Friendly Identity

Identity occupies a unique place in the b2change approach. It is the most stable part of a company and can be the number one enemy in making the transition to a b2change organization. Companies that have grown up with traditional organization design and management assumptions usually have an identity that resonates with the concepts of alignment, congruence, stability, and predictability. They are built on the notion that organizations need to be controlled by a hierarchical structure, led by omniscient senior managers, and managed according to some strategic “plan” in which growth is the only acceptable goal. Their identity is an important driver and maintainer of the status quo; recommendations for change that don’t fall within a fairly narrow “zone of acceptance” are rejected.

The same characteristics that make identity the biggest barrier to change can make it an organization’s number one asset—if that identity is change friendly. Although it seems paradoxical, identity’s stability makes it a potential enabler of change. Knowing that the firm’s culture and ideology support growth, development, and change enable members of the organization to craft robust strategic intents, develop new capabilities and competencies, and continually redesign the firm. If an organization can develop a change-friendly identity, it sends continuous signals to organization members that they can count on support for their change efforts, and members know how they will be treated when change occurs.

An obvious prerequisite to having a change-friendly identity is knowing the current identity. In some organizations, identity is clear and well known—for example, as we mentioned earlier, Southwest Airlines (freedom), Microsoft (persistence), 3M (innovation), and Wal-Mart (low costs) all have well-established identities. But many organizations do not understand their identity and how it constrains change. These organizations must go through the difficult process of understanding their identity.

Espoused values and beliefs often have little to do with the ones the organization really holds and follows. Often people are reluctant to admit this. For example, we worked with an Internet company that said it valued teamwork, but in fact rewarded only individual effort. This same organization said that it valued innovation, but punished failure.

Somehow an organization must discover the real values and images of its identity. Because they generally are taken for granted, these values and images may be difficult to articulate and can be threatening. For example, it’s often difficult for an organization to admit that its real identity is about “getting work done no matter what” or “shipping it on time and worrying about quality later.”

As we discussed in Chapter Three, one way to understand an organization’s identity is to debate questions about the driving force in the organization. Another excellent, if not profound, way to get at identity is to uncover the basic assumptions underlying the company’s culture. This can be done by gathering diverse groups of organization members—executives, staff, supervisors, and hourly workers; newcomers and long-tenured employees; and representatives from different functions or busi-nesses—to discuss the culture. Adding customers, regulators, suppliers, analysts, and other external stakeholders to this process can enrich it.2

The groups first brainstorm a large number of artifacts, such as behaviors, symbols, language, physical space arrangements, logos, and advertising messages. Participants then use this list to deduce the values and norms that produced the artifacts. For example, many companies have rituals around retirement or stories of how people gave great customer service. These artifacts can be explained by an inferred value of recognizing loyalty and individual achievement.

The groups can also create a list of the values espoused in mission or vision statements, credos, or other formal planning documents. For example, many organizations espouse values of teamwork, collaboration, integrity, customer focus, and corporate responsibility.

In the final step, the groups attempt to identify and explain any contradictions between espoused and inferred values. This is a difficult conversation, and a great deal of facilitation skill may be required to help organization members see the contradictions. The discovery process should be repeated several times with different groups until a pattern of identity emerges. The output of this process is a statement, metaphor, or short list of core values that define the organization’s identity.

The central issue in becoming a b2change firm is whether the identity is change friendly. When an identity is based on stability, it needs to be “reframed” to include at least one of two features: (1) a focus on the environment and (2) the view that change is natural and necessary.

Before and during the deregulation of the U.S. telephone industry, AT&T and GTE could be characterized by an identity of “We need to meet the numbers our regulators look at.” The regulatory agencies, not the consumer, had become the customer. Years of monopoly regulation had produced a culture in which service excellence was defined by “We’ll be there for a service call sometime between 1:00 and 5:00 P.M.” With deregulation, the identity of AT&T and GTE needed to be reframed to focus on the competitive environment and the changing needs of the consumer.

The best place to start the reframing process is by noting the reasons for the existing perspective. In the case of AT&T and GTE, these cultures existed because regulation protected the business from competition and also because the technology was relatively stable and well understood. When a customer picked up the phone, more than 99 percent of the time there was a dial tone, and a correctly entered number resulted in a placed call. Because the regulators were not concerned about introducing new technology, companies could delay technology changes until they were ready to implement them.

By recognizing the sources of identity, in a sense honoring the past, it is often possible to reframe the existing identity to be one that is accepted by organization members and not seen as marketing jargon or “spin.” The best way to do this is to tie the reframed identity to important changes in the external environment and to how these changes influence the organization’s effectiveness.

An important adjunct to affirming that an organization’s identity is focused on the external environment is ensuring that the organization’s design reinforces an external focus. Each of the chapters on designing mention a number of practices that can help focus the organization on the external environment. Installing some of them is a significant way to establish that the organization’s identity includes a strong external focus.

The following are key elements that support an organization’s focus on the external environment:

  • Information systems that feature the organization’s performance relative to that of its competitors
  • Information about customer satisfaction and performance levels
  • Information about economic and business changes in the external environment
  • Organization structures that give a large number of employees direct contact with the external environment
  • Reward systems that focus on the performance of the organization (for example, profit sharing or stock ownership)

The second characteristic of a change-friendly identity is that employees perceive change to be a natural and ongoing process in the organization. Again, it is one thing to give this idea lip service; it is entirely another to do what it takes to make the idea a reality. An organization that wants to be change friendly must have in place practices and designs that reinforce its identity as a company committed to change. Adopting the following elements will ensure that individuals see change as a natural process in the organization:

  • Organization designs that do not include jobs but that instead focus on tasks being assigned to individuals or teams on a changing basis
  • An employer brand and image stressing that continued employment depends on the need for an individual’s skills
  • Pay systems that reward individuals for the development of new skills, performance, and an understanding of the business
  • Talent management systems that emphasize the opportunities individuals have to apply for new jobs and to learn new skills

Creating a change-friendly identity is a fundamental step in becoming a b2change organization. When the organization sees itself as rooted in changeability and there is an understanding of change as a normal state, organization members are free to pursue changes in strategic intent, capabilities, and design.

Pursue Proximity

Because the performance of an organization depends on how effectively its strategic intent addresses current and future environmental demands, it must have the ability to identify likely future demands. It must also be able to develop an appropriate strategic intent in light of those environmental demands. Without a scenario-planning capability that links strategic intent to environmental change, no organization can respond effectively to a rapidly changing environment.

Despite the practical tools available to help them, most organizations do not utilize scenario planning. We think this is a curious and unfortunate situation. Nobody we know of is publishing books or articles concluding that the business environment will remain stable and increase in predictability. In fact, every statement filed with the financial markets routinely disavows their accuracy.

Every “forward-looking statement” essentially says, “We really don’t know what’s going to happen.” With that kind of uncertainty, it makes all the sense in the world for an organization to immerse itself in the world of scenario planning. Organizations that want to improve their ability to pursue proximity must commit to spending time thinking about the future. Doing so needs to be a major focus of the senior management team, especially the CEO.

When it comes to focusing on the future, we think Bill Gates is a good role model for executives. Several times a year for the last ten years, Gates has gone off, usually alone, to read about trends in the industry and think about the future of technology. He reads industry reports, “white papers” prepared by Microsoft employees, and articles related to Microsoft’s business. (After getting snubbed by the Chinese government over the way an early version of Windows was localized, he spent a week reading up on Chinese history, culture, and government.) Out of these retreats come notes, comments, and meetings that shape future products and services; more important, Gates’s obvious focus on change, the future, and proximity reinforces Microsoft’s identity as a b2change organization.

CEO Jeff Immelt is another good role model. He has split GE’s strategizing process into two components. The first half consists entirely of conversations among senior executives about future trends that could affect specific businesses. These future-oriented conversations are driven by data about trends in technology, globalization, and competition as well as their interaction. For example, how will trends in oil prices interact with terrorism, global warming, emerging market growth rates, and competitor strategies? GE business unit managers read about regulatory, technical, and other issues, make comments on their readings, develop their own thoughts and perspectives, and put all this information on an intranet portal that is available to the top executives of the company.

After reviewing the material, the management team meets for several days to discuss the information, hear from outsiders about their views of the future, and debate the likely paths their markets and industries might follow. Only then do they proceed to the second component of the process, which focuses on formulating business strategies for each of GE’s businesses.

In b2change organizations, structured conversations like those at GE and Microsoft are major contributors to thinking about the future. But they are not enough. B2change organizations also need to find time to “play” with the future. Unfortunately, most organizations are too focused on current performance to think about doing this. Wall Street, shareholders, customers, and activists conspire to force them into short-term behaviors and thinking. It is hard to break out of the short-term mold, but it must be done even if only incrementally at first. There is no question who has to lead this breakout: it is senior management.

Futurists unanimously recommend against predicting the future; they instead suggest picturing and creating a wide range of possible environmental success paths. These activities should be informed by the use of seemingly unrelated inputs. This process of purposeful playfulness is a source of innovation and new ideas.3 Applied to scenario planning, it involves expanding conversations about the organization’s possible futures by incorporating information that at first glance is unrelated. It’s a little bit like going onto the Internet to find out about European vacation spots and getting totally sidetracked by a pop-up ad that leads to a call to your stockbroker because of a “hot” product you discover.

A software development company, for example, might ask, “What would be the likely impact on our business if the price of oil went to $100 per barrel?” A playful conversation could yield the suggestion that if oil were at $100 per barrel, more people would be encouraged to work at home. As a result, there would be an increased demand for software that monitors at-home workers, allows at-home workers to safely access corporate databases, or allows at-home workers to contact customers. Conversations like this, combined with others, create a variety of alternative, but possible, future scenarios. Some possible futures will be preferred over others because of the firm’s resources and capabilities. An important role of strategic intent is to envision actions for today that will increase the probability that markets and other environmental elements move in the desired directions.

Our belief is that a b2change organization needs to commit to a set of preferred futures, not to the future. When an organization doesn’t play with the future, it can get locked into trying to predict what will happen or attempting to create the one vision of its future that seems most desirable. Too often, it will then construct strategic intents that are narrow and shortsighted, addressing current but fleeting pressures from global financial markets, regulatory threats, or consumer groups. These pressures are real, but they should be addressed tactically, not strategically.

A b2change strategic intent needs to be concerned with identifying the core competencies and capabilities that are likely to lead to success in the future. Playing with and picturing alternative futures is a most practical way to enhance the probability of doing this well, and robust strategic intents are the vehicle. By considering a range of potential futures, an organization can develop strategic intents that will succeed in a number of environments.

Several years ago, the Steinway piano company faced an increasingly competitive international market. Foreign piano manufacturers used production technologies and definitions of quality that were different from Steinway. By considering various levels of domination by foreign manufacturers, various levels of market and customer sophistication, and multiple segments demanding grand or upright pianos, Steinway formulated a variety of possible scenarios.

The company had to decide how broad a product line to offer (grand pianos only or some combination of grand and upright pianos), what price points to adopt, and what manufacturing processes to use. In the end, Steinway concluded that maintaining its focus on the top end of the market with its unique, handcrafted grand pianos was the most robust choice. If the market for concert grand pianos and other high-end instruments grew, Steinway would obviously be well positioned to maintain its dominance. If the high-end market contracted, the company would be well positioned to move into the higher volume, lower-quality market segments using its brand as an important differentiator.

Attacking the foreign players in the middle markets would have committed Steinway to “the” future of a broad range of offerings. It would have to compete on the basis of productivity (something the company did not have the capability to do) or by defending its share of the upright (middle) market. By maintaining its existing strategic intent and staying true to its identity, Steinway has successfully weathered the industry’s consolidation and maintained its preeminence as the world’s leading manufacturer of concert grand pianos.

Build an Orchestration Capability

Compared to developing a b2change identity and pursuing proximity, the third initiative, building an orchestration capability, is a more complex operational challenge. It requires both financial and psychological investments, and it must be conducted according to the beliefs inherent in a b2change approach. Executives must commit to the belief—and it is a radical one—that the ability to change is the key to competitive advantage. There is little sense in investing in an orchestration capability if senior management believes that pursuing stability and execution is the path to success.

Orchestration is both an element of strategic intent and a capability. Its role in strategic intent is to develop and specify the sequence of events and decisions necessary to implement a particular strategy. This can involve specifying such actions as launching a new product, developing a new performance management system, restructuring the organization, or making an acquisition. The orchestration process may also specify how new capabilities and core competencies will be developed. Because organizations and environments can change at different rates and in different directions, orchestration represents a plan for maintaining proximity.

Orchestration is also a capability. Dynamic capabilities have received a great deal of press and researcher attention recently—and deservedly so.4 Such capabilities as new product development and service processes that consistently exceed customer expectations are important. But the one dynamic capability a b2change organization must have is the ability to execute planned organizational changes.

Orchestration is not only about the plan; it is about the ability to carry out the plan. I may have detailed directions on how to get from one place to another, but I still have to actually get in the car and navigate traffic, look out for pedestrians, and make the correct turns. Similarly, it is not enough that an organization can identify what has to change and how it can be changed; it must also have the capability to execute those changes.

Forward-looking organizations, such as PepsiCo, Intel, GE, and Microsoft, have built their capability to manage change. In light of the environmental signals that having a change capability will be even more important in the future, this is a wise investment.

Building an orchestration capability is not easy. For organizations who want to invest in an orchestration capability, we have a short “must do” list of three items:

  1. Develop change management skills.
  2. Create an organization effectiveness function.
  3. Engage in and learn from change.

Develop Change Management Skills

Any capability requires resources. To build a strong orchestration capability, an organization must develop the change management skills of its people. Today a typical organization’s intellectual capital is mostly made up of skills and knowledge in technical, financial, logistical, and other operational competencies. Knowledge and skills related to change management account for only a small proportion of its intellectual capital.

A workforce that can continually renew itself and deftly orchestrate organizational changes is rare, valuable, and difficult to imitate. As a result, a strong human capital base with change-related knowledge and skills is a major source of competitive advantage.

Hiring professionals with skills in change management and organization development is the most direct way of developing change skills, and doing so sends a clear signal to the organization of the importance of this effort. The second most direct way is to train and develop existing managers and employees. Training courses, like those developed at GE, BP, and Capital One, should focus on diagnostic models and processes, internal consulting skills, intervention design, visioning and consensus-building processes, project management, action planning, conflict management, and organizational effectiveness.

Create an Organization Effectiveness Function

The second step in creating an orchestration capability is to create a center of excellence in organization effectiveness. Traditionally, competencies in change management and organization design have been located in the HR, training, or organization development functions. Strategic management competencies have been located in the planning function.

When change is a rare event and strategizing an annual process, differentiating change and strategy development may make sense. But when strategizing and designing are ongoing routine activities, it is best to have the skills and knowledge associated with orchestration in a single integrated center of excellence.

A fully developed orchestration capability requires merging the strategic planning and HR functions into an organization effectiveness function. In some organizations, this label has been used to identify a group of internal change agents or organization development professionals. But we are proposing a much broader mandate for organization effectiveness than this.

The organization effectiveness function should provide expert advice and execution help in the areas of HR management, change management, organization design, and organization development. All too often, expert advice in these areas is missing from the strategic management process. For historical and now obsolete reasons, most organizations have viewed strategic planning as the “hard” side of business, where financial analysis, quantification, and operations thinking should dominate. We believe, however, that it is time for that to change.

Organization development, change management, and organizational capabilities not only need to be at the strategic planning table; they need to “set” the table. The first order of business is to reorient and focus change competencies into a new function. Simply restructuring the resources, however, will not be sufficient to drive the strategizing and designing processes in the right direction. In addition, executives in this new function need to lobby for the importance of these processes and for making the function a high-visibility C-level activity.

The new organizational effectiveness function does not own the organization’s strategy and design. Executives and line managers must be held accountable and responsible for the development and execution of their strategic intents. What the new function should own are the processes for developing future scenarios, helping line managers and executives conduct strategic reviews, facilitating decisions about strategic change (reorientation or transformation), crafting and clarifying strategic intents, structuring the organization, managing talent, and designing reward systems—in short, orchestrating the firm’s moves.

The second order of business for the organization effectiveness function is to adapt existing change management and planning systems or set up entirely new ones. Some existing processes, such as capital and operational expense budgeting, may suffice as they are. In general, however, the organization effectiveness function needs to develop and refine the strategizing and designing processes so that they support the b2change approach.

The new function needs to train its members in strategy, business analysis, organization design, and change management. It also needs to develop the tools to be used during the processes of change and negotiate its relationship to other organizational units, the budgeting process, and other key processes.

If an organization truly believes that the ability to change is the key to high performance now and in the future, then the competencies associated with that capability cannot be buried in the organization. Building an orchestration competence requires giving power and resources to people who understand and can help the organization manage change.

Engage In and Learn from Change

Capabilities and their development are partly a function of experience. An operations capability must have equipment, materials, and people, but having them is not enough. When those elements actually work together to produce something for the first time, the productivity is awful. Only through experience and learning does the capability become effective and valuable. By the same token, there cannot be an effective orchestration capability without change experience.

To build a change capability, an organization must embrace change and then reflect on its experience. Organizations that seek stability cannot learn to orchestrate change. Similarly, organizations that do not reflect on the change experience will not learn as much as they should. Thus, the organization effectiveness function must be involved in as many change efforts as practical. We are not talking about implementing change just for the sake of gaining practice. We are advocating frequent, planned strategizing and designing activities that involve the organization effectiveness function.

An orchestration capability is the sine qua non of a b2change organization. It allows organizations to reap the advantages of change as a competitive advantage. To purposely pursue change in order to learn from it and build the capability to change is a radical idea. It is to invite chaos, inefficiency, and ineffectiveness in the short run, but it can lead to adaptability, agility, and virtuous spirals in the long run; thus to pursue change is an investment well worth making.

Adopt Strategic Adjustment as a Normal Condition

If we randomly chose a time to observe an effective b2change organization, what would we see? The answer is clear and simple to state: we would see a firm engaged in strategic adjustment. The orchestration process would be working to create dynamic alignment—laying out the proper sequence of activities to bring strategy to fruition, developing existing capabilities or adding new ones to support the strategy, and mixing and remixing organization design elements in response to current and emerging environmental demands.

To become a b2change organization, a firm must shift its members’ perceptions about the importance, frequency, ease, and desirability of change. Further, it must implement changeable forms of each organizational design feature. The key to making change a normal condition in an organization is to create structures, talent systems, and rewards that can be reconfigured to support new strategic intents and new opportunities.

A b2change organization knows that its ability to proactively change is the source of its effectiveness and an important competitive advantage. Therefore it is anxious about being caught unaware. It wants everyone, not just marketing and senior management, to be close to customers, regulators, technology providers, suppliers, financial analysts, and other stakeholders. Putting as many people as possible into contact with the external environment increases the amount of business intelligence available to the organization, giving it the potential to be more flexible and responsive.

Structures with maximum surface area not only put more people in touch with the environment but also encourage people to focus on what the organization can do (capability) and should do (intent). Small business units are good examples of such structures. They allow people to see more of a whole business; employees are not physically or psychologically “far away” from the organization’s capabilities or its work. The result is that there is much more focus on getting work done.

Small business units with maximum surface area also support the “no job descriptions” principle. At a gut level, b2change organizations don’t believe in jobs. Jobs and job descriptions imply predictability and assume stability; b2change organizations believe in teams and individuals taking on changing bundles of accountabilities and activities. There is a sense that people need to, and will, take on the collection of tasks that need to be done, that this collection changes all the time, and that when it does change it isn’t a big deal.

Anyone familiar with the TV series The West Wing will have a sense of how a jobless structure can work. Each hourly episode depicts how the White House deals with a variety of planned and unplanned events while trying to move the country forward according to the president’s agenda. Although people have titles and specialties, everyone is focused on getting work done. Task assignments vary, and anyone can bring an issue up for action.

Every week on the show, whenever a terrorist attack, new piece of legislation, visible case of domestic violence, or upcoming election emerges as the issue du jour, there’s an immediate vetting of the event by an appropriate mix of people. What does it mean? Who will be, or needs to be, involved? Who will be affected? How does it fit with our agenda? Does it challenge our administration’s goals or who we are as a country? At what level should this issue be addressed—should the president be involved, can it be handled by senior staff or delegated to interns? Where does it sit in the priority queue? What tactics should we employ? How should we bring about success?

From time to time, unplanned and highly visible events seem to push the White House staff off of their shared agenda. They find themselves reacting to events or issues instead of carrying their message to the Congress or the American people. At times like these, the White House staff finds a way, with the president but also often without him, to stop action and say, “Look, we aren’t doing ‘our’ thing, we’re doing somebody else’s thing. Let’s stop that and get our agenda moving forward again. Let’s be the initiators of change.” In other words, let’s allow identity and intent to drive action.

Having structures with maximum surface area and work assignments based on activities that need to get done is not enough to create dynamic alignment. If organization members don’t have access to information and can’t perform the tasks that need accomplishing, the possibility for chaos exists. Dynamic alignment requires that all of the elements in the designing process be coordinated. In addition to the right structures, an organization must be populated with the right people and systems.

In the 1980s and 1990s, efforts to increase employee involvement and empowerment successfully tapped into a long-held value about the importance of people and an emerging belief that people are more adaptable than most organization designs.5 It is time for organizations to leverage and apply the lessons from these efforts. To do so requires organizations to push down decision-making responsibility, look for leadership at all levels, share relevant information widely, give people the right skills and knowledge, and reward the right things. Throughout an organization, individuals must possess the willingness and ability to initiate strategic reviews, suggest new product ideas and ways to increase operational efficiency, and figure out what work needs to be done. They must have business information, and they need to feel recognized and rewarded for their initiative.

Nordstrom provides a provocative example of empowerment; it is not the easiest place in the world to work. The organization, formally and informally, differentiates between its best and worst performers. The people who succeed work extraordinary hours, seek out loyal customers, send thank-you notes, provide superior customer service, get large commission checks, and learn to influence and persuade colleagues, managers, and customers. People who can’t live under the system don’t last long.

Nordstrom consistently operates at high levels of effectiveness because many if not most of the individuals who work there have the necessary information, the knowledge and skills to process the information, the incentives to make things happen, and the power to make decisions. Information coming into the system in the form of customer requests and new fashion trends is processed by employees who understand the organization’s identity and strategic intent. The information is acted on without an extensive senior management approval process. The “employee manual” consists of a single phrase: do what’s right for the customer. Individual decisions—perhaps even more than management’s strategic decisions—greatly influence and determine Nordstrom’s performance.

The Nordstrom system is not without its detractors and provides ample evidence of the difficulty of operating a b2change organization. It puts enormous pressure on the clarity of the organization’s purpose; the design of its structures and systems; the way people are hired, developed, and retained; and perhaps most important, the faith of management in the people of the organization. But it is also a powerful example of leveraging an involved workforce. Nordstrom pays for people and performance, not jobs. It puts many people in touch with the environment, gives them lots of relevant information, and gives them with authority to make decisions.

Seek Virtuous Spirals

The final initiative in becoming a b2change organization is to bring all of the prior processes together into a virtuous spiral. Virtuous spirals—periods in the life of an organization—are characterized by critical configuration, proximity, and dynamic alignment. They are built and sustained by a series of temporary competitive advantages. B2change organizations compete over time; they consciously balance the short and long runs.

To translate the b2change approach into performance, the economic logic of strategic intent must support the belief that change will yield a higher level of effectiveness over time than a single advantage. Pursuing virtuous spirals challenges the traditional economic logic of commitment and efficiency as sources of sustainable competitive advantage. Looking at that logic helps in understanding why and how a b2change organization will outperform one that focuses on stability and efficiency.

The logic of commitment and efficiency encourages the belief that slack is bad. For example, when traditional organizations consider investing in an orchestration capability, they run into a “logic trap” of important questions about efficiency and long-term effectiveness: How can we justify an investment in a capability that is not directly adding value? Aren’t we committing to an investment in (not a reduction of) slack resources? These are good questions that cannot be satisfactorily answered using traditional business logic.

B2change organizations pursue a logic that calls for spending money on learning how to change. Although change is often neither efficient nor pretty, b2change organizations believe that the ability to change is more valuable than efficiency, or at least that effective change is much more valuable than the alternative. Every organization is going to spend money on change; the only questions are when, how much, and will there be anything to show for it.

B2change organizations employ a logic of entry and exit, or “hit and run.” They expect that success will result from identifying future opportunities, organizing to gain the most revenue from them, and then changing to take advantage of the next opportunity.

In HP’s early days, when it was in the “small instruments” business, there was a clear entry and exit logic that propelled the organization. Through their “bootstrapping” innovation process and the HP Way culture, they created products to meet important needs, manufactured and marketed those products at high prices to early adopters, and, when the market was recognized by others, reduced their participation as price competition emerged. Remember HP calculators?

Because b2change firms look for a series of temporary advantages, their paths can change frequently as they seek to maintain proximity with an unfolding environment. Organizations that obsessively pursue the logic of commitment and efficiency are likely to overinvest in a single advantage, leaving them vulnerable to obsolescence and the inability to change quickly. The research results on downsizing, reengineering, mergers and acquisitions, and other corporate restructuring is clear: the relentless pursuit of cost reduction, efficiency, and fewer slack resources frequently does not result in a virtuous spiral.6

Conclusion

Stringing together a series of temporary competitive advantages clearly distinguishes the b2change organization from the traditional firm. In combination with the other distinctive features of b2change organizations, virtuous spirals, critical configurations, and dynamic alignments support both short-term performance and long-term adaptability. Creating long-term virtuous spirals is supported by the following features:

  • A clear and change-friendly identity that gives the organization a reason to learn and develop
  • A sophisticated strategizing process that includes a strong focus on the external environment and the creation of alternative future scenarios
  • The ability to craft robust strategic intents
  • A strong orchestration capability that promotes a clear understanding of the strategy; provides information about relevant aspects of the environment and the organization; and develops the processes for keeping strategy, capabilities, and organization design elements in dynamic alignment
  • A creating-value process that develops the core competencies and organizational capabilities that enable strategy implementation
  • An organization design that maximizes the number of people who interact with the external environment and are held accountable for business results
  • Information and decision-making processes that move decision making to the place in the organization where action can be taken and information is available
  • A system of talent management that hires, develops, and retains people who thrive on change and seek out work assignments based on their understanding of strategy
  • Reward systems that focus on skills rather than on positions
  • Rewards tied to the right combination of individual, team, and business performance
  • Constant strategizing and a simultaneous focus on short-and long-term performance

Taken together, these features form an approach to organizational effectiveness that establishes the ability to change as the foundation on which organizations can build a virtuous spiral. This b2change approach is a new way of competing that responds to the realities of today’s rapidly changing world. While it is easy to say that demographic changes and global political trends will affect organizations in the future, it is hard to know how they will affect them. What is next is anybody’s guess. What we do know is that the best way for an organization to prepare for whatever is next is to confront and abandon the assumption of stability and to embrace the principles that create b2change organizations.

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