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It should come as no surprise that CEOs from the world’s top performing organizations are acutely aware that the organizational ability to change plays a key role in improving operational efficiency, effectively reacting to market demands, leveraging innovation, and ultimately, sustaining competitive advantage. The most successful organizations are nimble, agile, and can rapidly deploy changes across the enterprise.
But increasingly, we are seeing evidence of a shift from the development of organizational capabilities to sustain competitive advantage, to transformation that is linked to survival. It’s no longer about staying ahead of the competition in a fiercely competitive market. Nowadays it’s about keeping the lights on.
More precisely – an increasing number of organizations are no longer in business or find themselves on financial life support because they have failed to innovate and embrace change. We don’t need to look very far to find supporting evidence:
General Motors Corporation (GMC) was the world's 2nd largest automaker and employed almost 250,000 people across 140 countries before it filed for bankruptcy (reporting US$82.29 billion in assets and US$172.81 billion in debt).
Blockbuster, formerly known as the world's largest movie-rental company and the king of video rentals, filed under Chapter 11 listing assets of US$1.02 billion and debt of US$1.46 billion.
These former market leaders also filed for bankruptcy, some on multiple occasions:
Some of these organizations were able to re-emerge after some painful and costly lessons were learned. Some of them are gone forever. And then, there are those who have been successful in transforming their business – the top performing companies.
One of our favorite examples is IBM, who sold their personal computer business to Lenovo in 2005 for US$1.15 billion (+ US$550 million of debt). Three years earlier in 2002, IBM had purchased PricewaterhouseCoopers Consulting division for approximately US$3.5 billion. Nowadays, technology continues to be a large part of the former hardware heavyweight’s business.
In just over a decade the company has strategically transformed into the world’s largest consulting organization with nearly US$100 billion in annual revenue[i]. But even IBM’s transformation is dwarfed by what is undoubtedly, the most notable business transformation in business history.
The reigning king of market disruption turned an entire industry upside down (click to enlarge):
We see that in the span of 5 years industry giants BlackBerry (RIM) and Nokia are plucked from market leader positions and find themselves going the way of the dinosaurs. In the same time frame, Samsung and Apple iPhones enter the market running Android and iOS operating systems, crush the competition and literally take over the market. Depending on how you look at it, the losses or gains were compounded by the fact that the market swelled to 5x its size in those same 5 years (and today is 10x larger than it was in 2007).
So why was Android able to outperform the competition? How it that in 2015, Apple Inc. is worth more than the global coffee industry? Is it fair to say that [lack of] Change Management was solely responsible for BlackBerry and Nokia’s massive performance decline within the global smartphone industry? We say yes - absolutely.
Both Jim Balsilie (co-founder, RIM) and Stephen Elop (former CEO, Nokia) cited their organization’s inability to change as a primary contributor to the dismal performance of previous years. Both leaders saw the change coming and failed to react. The same can be said for Blockbuster and the other brands mentioned previously. The world’s movie rental audiences did not switch from VHS tapes to DVDs to BlueRay disks to online streaming overnight. A company like Netflix is enjoying explosive business performance growth partly due to the innovative nature of its model, and partly because it is exploiting the inability of industry predecessors to change. In other words: the reason for the ultimate demise (or dismal performance) of these organizations can squarely rest on the inability to remain relevant to their customers.
And here is what 1700 other global CEO’s and senior public sector leaders had to say about outperformers (or organizations that surpass industry peers in terms of revenue growth and profitability):
Seventy-three percent [73%] of all outperformers excel at managing change; and eighty-four percent [84%] translate insights into action better than industry peers*[i].
What is your organization doing about change anagement capability?
[i] https://www-03.ibm.com/employment/news/200908_volume3art2_realibm.html
