David Trafford explores why strategy implementation, transformational change and merger integration continues to be a challenge for many organisations, with a high proportion of these initiatives failing to deliver their intended outcomes. One explanation explored in this article is that such initiatives fail to take an organisation’s default future into account and that the forces controlling its destiny are ignored. Only by addressing these forces and putting in place the necessary conditions for success will organisations be able to move beyond their default future to an improved future.
The past 50 years have seen unprecedented change. Principally driven by technology, there have been remarkable advances in communications, transportation and medical science. As a result people in the developed world enjoy a better standard of living, have access to an ever increasing variety of digital information and entertainment, and have a longer life expectancy than their parents.
Over this period change has become the norm. Yet research indicates that while individuals may be good at responding to change, organisations – irrespective of whether they are commercial enterprises or government bodies – are not. In fact only a small proportion (typically 5%) of large-scale transformation programmes meet their original objectives. Other recent research shows that from a sample of 175,000 projects in the USA with a combined budget of $250 billion, 53% overspent and 82% overran. Across the European Union it is estimated that the cost of project failure is in excess of Euro 142 billion. Furthermore, there is continuing evidence that the majority of mergers and acquisitions actually destroy, rather than create, value.
So why are organisations so poor at delivering successful change when individuals embrace change as part of normal life?
One explanation is that leaders fail to take their organisation’s default future into account when planning change, and ignore the forces that are controlling its destiny. Only by addressing these forces and putting in place the necessary conditions for success will an organisation be able to move beyond its default future to an improved future.
All organisations have a default future
All organisations, individuals, businesses and countries have a default future. It’s the place they will end up if no action is taken, other than that currently planned. If the default future is a desirable destination, then there’s no need to be concerned, just enjoy the journey. But if the default future is unacceptable, then choices need to be made and action taken to create an improved future.
One powerful way of understanding the default future of an organisation is to ask the question: “What would be the consequences of taking no action – other than that currently planned?”
Describing a default future should not be confused with a ‘burning platform’, which describes what is wrong with today, or a ‘business case’, which attempts to quantify the cost and benefit of change.
A default future is determined by its driving forces
All organisations are travelling a path to their default future, a path that is shaped by a number of factors. These factors act as driving forces that ultimately determine the direction of travel. Some of these forces, like economic climate, regulation and customer behaviour, originate outside the organisation, while others, like structure, technology and mindset, are from within the organisation.
Equally, some of these driving forces are easy to observe, like technology and regulation, while others, like mindset, values and culture, are often hidden deep within the organisation and are not apparent to the untrained eye.
Leaders must understand these driving forces, assess their impact and determine those that can be influenced in order to make informed choices about the type of change that will move their organisation from its default future to an improved future.
Two of the most powerful driving forces – technology and mindset – are discussed below.
The influence of technology – present and future – on an organisation’s default future
It’s safe to say that, today, most organisations are critically dependent on technology, especially information technology. For many organisations it’s so pervasive that it’s difficult to think about change without first considering the IT implications. In information-intensive businesses, like banking and insurance, the systems have become so complex – after years of incremental enhancements – that the effort and risk of making further changes is significant.
Complexity is not the only issue. Many of the systems still in use today were designed to support business models of the past, for example they are aligned to business functions and products as opposed to processes and customers. This lack of alignment between the architecture of the installed base and the desire of the business to operate in different ways can significantly constrain the choices leaders have about the future of their business. Past technology choices – made with the best intention in a different context – create what is often called the technology legacy. The reality is that the legacy systems are always the ones that are at the core of the organisation and therefore drive it to its default future. The challenge is to understand the true significance of this legacy and make choices that will lead to an improved future.
But it’s not only legacy technologies that act as a driving force: emerging technologies can have an equally profound impact on an organisation’s default future. With emerging technologies it’s not the case that the organisation itself changes, but the environment or context within which it operates. As a result an organisation can find its default future change significantly very quickly – and often not for the better. A recent example is the impact of digital photography on Kodak. In a very short period the demand for film and its processing shrunk as everyone switched to digital cameras and mobile phones with embedded cameras. The irony is that Kodak was a pioneer in the development of this technology. Some of the emerging technologies that will impact the default future of many organisations in the coming years are described below.
If an organisation is not aware of the potential impact of emerging technologies on its industry – or unaware of how competitors are intending to use these technologies – it could significantly change its default future to one that is not only unacceptable, but one that will arrive sooner than expected.
Most new technologies like beyond the iPad, cloud computing, NFC (Near Field Communication), flexible screens, TV everywhere, voice control, second screen experiences, 3D printing, RFID, HTML5 and Watson are already present.
Some will be successful and create their own demand and some will fall by the wayside.
To quote William Ford Gibson, the American-Canadian writer; “The future is already here – it’s just not very evenly distributed”.
The influence of mindset on an organisation’s default future
If culture is the way things are done around here, then mindset is a major driver of culture. Mindset defines the context by which we see the world. Based upon a set of assumptions, mental models and accepted norms it defines the criteria by which we judge what is acceptable and not acceptable. Mindsets are often so established that they create a powerful incentive to continue to adopt or accept prior behaviours.
Mindsets develop over time and become embedded through a number of unwritten rules that people come to believe are truths, which in turn drive their decisions, actions and behaviours. As a result mindset often acts as a powerful force driving an organisation to its default future.
Mindsets can be changed, but rarely through rational argument. People need to experience and learn new ways of acting and behaving, discover new intrinsic and extrinsic motivators, and develop a new set of beliefs, truths and unwritten rules, which will guide their actions and behaviours. Only then will the organisation be able to escape its default future and successfully travel to its improved future.
An improved future must not only be better, but achievable
Defining an improved future involves more than describing a vision with audacious goals. It involves making choices about what is possible based upon an assessment of the influence of the driving forces discussed above. The reality is that not all of these forces can be controlled. Often external forces like regulation and the economic climate are beyond the influence of most organisations. To ignore these forces, or assume that they can all be controlled, significantly increases the probability of failure.
For people to be enthusiastic about an improved future, and sufficiently engaged that they give up their discretionary energy to travel the journey, they must be able to understand it in enough detail to be able to mentally model being in that future. Mental modelling the improved future triggers emotions. These emotions lead to conclusions about whether people want to be part of that future – and whether it’s possible to achieve that future. In turn, these conclusions ultimately result in behaviour. The more compelling the improved future and the better it is understood, the greater the chances of people ‘volunteering’ to travel the journey.
A powerful way of understanding an improved future is to imagine it is the present and describe it through articles, videos or an ‘experience’ studio. The aim is for people to be able to see what the future will be like. Not only will this build commitment to the journey the organisation will need to take, it will also enrich the understanding of the improved future and make it more robust through the questions, discussions and challenges that should be encouraged.
Change programmes also have default futures
Up until now we have talked about the default future of organisations, but change programmes also have a default future.
If the default future of a change programme is unacceptable, as the expected outcomes are unlikely to move the organisation to its improved future, then action needs to be taken to establish the necessary conditions for change success.
Establishing the conditions for change success
One of the best ways to explain the importance of putting in place the necessary conditions for success is to draw upon a gardening analogy. Successful gardeners know that certain conditions need to be in place in order for their garden to flourish; fertile soil being the most obvious. They also know that some of these conditions can be controlled and others cannot. For example they know that soil quality can be improved, but the climate cannot. They know that particular plants will never flourish in certain types of soil and that some plants need to be pruned in spring and others in autumn. If these conditions are not understood, or are ignored, gardening can be a costly and disappointing pastime.
It’s the same when delivering change. If the necessary conditions for success are not established and maintained, then change will simply not happen. Understanding the forces driving your organisation to its default future is one of the necessary conditions for success. Others include having clarity of the target improved future; project, programme and portfolio management capability; governance and committed leadership.
Establishing and maintaining the necessary conditions for change success reduces the risk of failure and increases the chances of an organisation successfully moving to its intended improved future.
Putting in place the capabilities to ‘pull’ the organisation into its improved future
One of the forces driving an organisation to its default future is its organisational capabilities. Often these capabilities are so deeply embedded in the culture that they are not apparent or explicitly managed. If an organisation wants to move to an improved future then one of the conditions for success is having the capabilities in place that will ‘pull’ the organisation into its improved future.
It’s worth noting the intentional use of the term capabilities as opposed to competencies. Competencies tend to be held by individuals and capabilities by the organisation, hence the use of the term organisational capability. Obviously individual competencies are important, but in the context of moving to an improved future, having the right organisational capabilities in place is key. The power of organisational capabilities is that they form part of an organisation’s DNA, they are embedded in the way things are done and are not lost when people leave. Furthermore they are based upon shared mental models, frameworks, language, processes, tools and beliefs.
The role of leaders
Understanding the default future for which we are accountable is one of the most important roles – and legacy – of leadership, as is deciding what actions to take to create an improved future. The remainder of what we do as executives is management.
I welcome your thoughts.