Change Agents

As you probably know by now, most firms resist change in any form or dimension.  There is a sense of inertia that settles in and Newton's laws are followed - objects at rest stay at rest.

What forces firms to change?  A legal change  that may cost the organization millions or send the CEO to jail.  You know there was real change implemented by Sarbanes-Oxley, since the CFO is now liable for errors in reporting.  A rule violation that clearly identifies that a product or service has failed some standard.  In the pharmaceutical manufacturing industry, firms live in fear of Form 483, which indicates violation of Good Manufacturing Practice (GMP).  Often, the recognition that competitors have changed will create a need for change.  In the heyday of the SAP implementation craze, I worked with firms that justified implementing SAP, costing millions of dollars and significant distractions to their firms, because other competitors had implemented SAP.  Finally, the dramatic loss of customers or market share (see Ford acknowledging that its model "no longer works").  No kidding.  It hasn't worked for over 10 years, it just seemed no one wanted to admit it.

These are reasons for change that will actually get attention and create change in firms.  It is exceptionally rare that other rationale will create sustainable, lasting change in a business.  That's why new CEOs who want to install significant change are always talking about a "sense of urgency".  Face it - Definite pain always trumps future possibility.  That's why change usually happens around desperation rather than based on some nice neat plans.

Another factor which influences change is the strategic objective or positioning of any firm.  In any industry, one firm is the innovator, one is the customer service and intimacy champion and one is the low cost leader.  All the rest are in second or third place on one or more of these axes, and trying to hold their own.  Once a firm has staked out a particular differentiation, it is hard to change and especially hard to change and differentiate along a different factor or axis.  It's tough enough to do one thing well, much less continue to do what you've done well in the past and add new capabilities. A firm's differentiation may in itself create barriers to change, beyond the factors of simple inertia.

These reasons are why so often change is led by people who seem slightly off-balance and singularly focused, on quixotic missions.  They are the only people crazy enough and focused enough to actually overcome all the inertia and create change.  How do you create change in an organization?

Demonstrate that your firm faces a significant problem.  Gain consensus on the recognition of the problem.  Look at the alternatives available to solve the problem and evaluate their impacts against the impacts of doing nothing.  Achieve a decision and implement your plan.  To continue to pick on Ford, let's walk through these steps.

Anyone who drives a car could see Ford had a problem with its lineup over a decade ago.  Ford was crushing the competition in SUVs, but didn't have a minivan or any really compelling car.  Suddenly, every automobile manufacturer has an SUV, and Ford hadn't updated the Explorer or dramatically improved its baseline cars.  However, rather than focus on this problem, Ford bought Jaguar and Volvo and other car manufacturers, adding other brands that had the same problems but not solving any of its existing problems.  The challenge Ford (and other US automobile manufacturers) faced was obvious - too much reliance on trucks and SUVs, no compelling cars or minivans.  Were there people who voiced concerns at Ford?  Were there actions taken to create great new cars and minivans?  Who is implementing change at Ford?  Certainly Ford has looked into the abyss and recognized its problems.  You can bet that change is on the way now.  The real question is why it took so long.