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A paradigm shift for managers: Focus on the journey, not the destination
GABRIELE ROSANI AND PAOLO CERVINI
Managing change has always been part of the leadership toolkit. Shifts in markets and industries require strategy and product repositioning with implications for organizations and processes. Although challenging, change has traditionally been perceived as something manageable. With the right tools in place — a thorough analysis of the root causes, a structured definition of the expected future state, and a detailed plan for implementation — the organization can navigate the tides of change.
Take the case of a newly appointed CEO announcing a transformation initiative with a new strategy and organizational redesign. The CEO could once rely on a well-established theory of change based on three stages: unfreeze, change, refreeze. Within this theory, classic management tools like Gantt charts, RACI (Responsible, Accountable, Consulted, or Informed) matrices, organizational diagrams, and KPIs (key performance indicators) helped implement and monitor the change. But this is no longer the case.
A traditional approach was only effective in situations where change happened as a discrete event. It offered a process to facilitate the transition from one stable condition to another, not a continuous flow. However, in today’s economy, change is perpetual and ubiquitous: there is no such thing as unfreeze or refreeze; the transformation is ongoing and fluid. Consequently, most of the frameworks and tools that might have worked in the past now fall short.
The implications for management are enormous. Strategy formulation and planning require high fluidity to cope with dynamic ecosystems and disruptive trends. Digitalization drives a continuous release of products and calls for high flexibility and adaptability of processes. Organizations continually evolve toward more liquid and agile shapes. Decision making and control systems need to foster empowerment and reduce bureaucracy.
Executives may find themselves with little support for such daunting challenges. In our work as consultants, we often hear requests from clients for new frameworks and tools to simply replace the old ones that no longer work. We believe there’s something fundamentally wrong with this mindset.
The very notion of management tools needs to be rethought. Tools tend to be static, mechanical, biased, and prescriptive. They are static because they simplify a complex and dynamic context into a fixed reality; mechanical because they are often applied without real thought and discussion to derive a formulaic solution; classic tools like spreadsheets or linear charts are also often biased as they favor the status quo, mistakenly relying on buried assumptions that remain unchallenged; and, finally, they are prescriptive, limiting the freedom and good judgment of managers who feel they are bound by a given structure and rules.
Today, rather than a new toolkit, managers need a new mental model to navigate the transformative journey, one that is essentially more explorative and experimental. Such a shift is not easy as it demands that we unlearn most of the traditional tools entrenched in management practices, and try relatively untested new approaches, offering guidelines rather than well-honed tools.
Leveraging our recent research and projects, we have experimented with new approaches to deal with perpetual transformations covering several important management fields: from strategy to organization to processes (summarized in the table below).
Strategy formulation
In a more stable past, it was normal to hear managers saying: this is my industry, this is my product segment, these are my competitors, this is the value chain. Today these simple notions are becoming problematic. The boundaries between sectors are becoming increasingly blurred, so these traditional lenses of stability are of little help to navigate the new landscape. A more systemic view is required.
We advise strategists to shift from market thinking to ecosystem thinking.
The ecosystem, as the name suggests, is a living system that evolves continuously depending not only on the moves of any individual organism but also on the ones made by all the other organisms that coexist with it. This creates an evolutionary direction of change that is hard to predict due to the complexity of the whole system. Companies in different sectors from Enel (utilities) to DBS (banking), to John Deere (agriculture), to Haier (smart appliances) have already shifted their strategy formulation toward an ecosystem approach. Instead of focusing on the As-Is analysis, benchmarking competitors, to derive a To-Be positioning, this approach fosters creativity around a few strategic hypotheses and scenarios generating a Could-Be view of the world.
Strategy implementation
Used for planning implementation and monitoring, the ubiquitous Gantt chart is perhaps the most used (and abused) tool in management. Geared as it is to transforming As-Is thinking into To-Be solutions, it can be toxic in situations of continuous change and perpetual transformation (Could-Be). We recommend that strategists and executives embrace a more fluid and experimental approach when implementing strategy. Rather than a plan of detailed initiatives, managers should list the main strategic hypotheses of the Could-Be and articulate what to test and how to test via learning experiments. Insights and evidence from these experiments will bring learnings and iterations on the original strategic scenarios.
For example, a specialty chemical company we worked with envisioned two different ecosystems for its paint additives business. The company rapidly tested the strategic assumptions for both: the first one (initially the favorite) found negative evidence from potential partners, while the second scenario, partly due to the consumer shift caused by COVID-19, proved more favorable and quickly became prioritized.
Decision making and control
Where there is a Gantt chart, typically there are also gates and steering committees, to vet and make formal decisions. Gates and steering committees are among the most critical barriers for companies in a scenario of perpetual transformation: the intrinsic linearity, hierarchy, slowness, and inflexibility they represent makes them unfit for continuous change. But cracking the system is possible. Some pioneers like Netflix and Handelsbanken are paving the way for shifting from the traditional preventive control to new models (like post-detection, guiding principles, boundary conditions, peer review, sounding board, social control, etc.) to free up the energy and the imagination of the organization without losing control.
The new set of decision making and control models are helpful when rethinking critical processes in a more fluid way. Rather than reengineering the processes (an approach which is itself intrinsically heavy and bureaucratic), we advise executives to try a different mental scheme, one that is more creative and experimental. Look at the big picture and identify key decision points where new control models can be applied — and then test them with small learning pilots. For example, a large utility company rethought its business development process to fit an increasingly dynamic ecosystem, shifting from traditional stage gates and steering committees to a more agile and empowered model with ample autonomy within clear guidelines, peer pressure and boundary conditions.
Organizational design
Organizational charts that use boxes and lines to represent the organization in a pyramid shape are also popular tools of traditional management. Again, this mental model of organizations is unfit for today’s world. Even though many companies claim to be adopting more agile approaches, in most cases the organizational chart retains its traditional design. However, if agile teams are surrounded by hierarchical and functional structures that maintain power, budget, and decision making, only a limited fraction of the agile potential can be unleashed. In our experience, few firms have truly embraced a model of organizational agility based on autonomous multidisciplinary teams as the core unit of their organization. Yet, companies like Bosch, Roche, and Haier, each with its own style and culture, have shown that a fully agile transformation is possible and brings significant benefits.
Culture and leadership
Another stereotype of traditional management is the manifesto or value statement. The manifesto may change from time to time, typically in conjunction with important organizational transformations when new values are needed to match the new strategy. One of the problems with such an approach is that values can often appear to be abstract. They offer a statement of good intent, not an action.
Rather than defining vague values communicated on posters in the corridors, leaders should agree on a set of concrete behaviors they want their people to adopt (or behaviors they want them to stop), which are valid for the current situation. We call this approach ‘behaviors in action,’ following a principle of dynamic adjustment to the real circumstances of business. This approach was applied, for example, at a major pharmaceutical company. The leadership decided to focus on candor and collaboration as key elements to promote an innovative and transformational culture, not as abstract values but by identifying a set of specific behaviors for different layers of management, which are periodically reviewed and discussed in retrospective sessions.
Change management
In perpetual transformation, change is no more an episode happening between two long periods of relative stability. In such an environment, change is the normal condition. The question is how to deal with a situation where the company is always unfreezing and never really refreezing, where the onus is on remaining liquid and only some blocks being refrozen. So, how can a company exist in a semi-liquid state, where it is always mutating and reshaping?
In practice, we suggest organizing project outputs as continual releases of ‘versions’ of the organization that are constantly evolving: some versions may change often, other may last longer, some may even be terminated. The focus is on the journey and how the versions unfold.
One of our clients, an advanced materials company based in the U.S., wanted to rethink its new product development approach to make it more fluid, fast and agile. Rather than designing a To-Be state, the company identified a combination of three solutions as version 1.0 to be tested. Gantt charts were banned, and all the effort was put into articulating and testing a few core assumptions. As evidence became available through talking with customers and partners, initial versions evolved and in some parts were pivoted. Underpinning this approach was a shift in mindset, whereby the company does not plan to refreeze the new process and make it stable, but they will continue to revise versions over time. The result is a sort of living change process.
Perpetual transformation is the new normal for business. It appears to be a daunting challenge for executives as old-school tools do not fit well and sometimes are even counterproductive, limiting strategic creativity, freedom and flexibility.
To help managers shift paradigm we advocate the use of radically different approaches in key areas of management, from strategy formulation to processes and organization. The proposed approaches are evolutionary and iterative in nature, following the transformative journey as it evolves. The experimental condition is a fundamental part of the mindset shift. To thrive in a world of perpetual transformation, managers should stop thinking and acting prescriptively, and rather embrace a liquid style, where adopting a systemic view, hypotheses, experimentation, testing and learning become the new core of management.
About the authors
Gabriele Rosani is a senior manager at ECSI Consulting.
Paolo Cervini is an associate partner at ECSI Consulting.