It’s funny how things can turn out. We’re heading in a particular direction, focused on the future and things somehow go awry. We try in vain to get back on track, but instead we end up setting out in a new direction, exploring avenues we scarcely knew existed. Before we know it, we’ve gotten to a place we never dreamed of.
Many people experienced this during the pandemic. They took up a hobby, moved their place of residence, changed their job—or even switched careers. Others were diverted by a life-changing experience or a heartbreaking disappointment. John Lennon put it, “Life is what happens to you, while you’re busy making other plans.”
That is, in a nutshell, how Digital Tonto started 15 years ago. It was in the middle of the financial crisis and I was sitting in my apartment in Kyiv, wondering what I would do next when I came across an article about writing a business blog. I launched a few days later. Thanks for 15 years of support! Here are some of my favorite articles from the past year.
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Lou Gerstner, writing about his legendary turnaround at IBM, said, “Culture isn’t just one aspect of the game, it is the game. In the end, an organization is nothing more than the collective capacity of its people to create value… What does the culture reward and punish – individual achievement or team play, risk taking or consensus building?”
Most business gurus would readily agree with that, but if you’d ask them what culture actually is they would be hard pressed to give a coherent answer. Anthropologists, on the other hand, are much more rigorous in their approach and most would agree that three essential elements of a culture are norms, rituals and behaviors.
In a positive organizational culture, norms and rituals support behaviors that honor the mission of the enterprise. Negative cultures undermine that mission. A common problem with many transformation initiatives is that they focus on designing incentives to alter behaviors. Unfortunately, unless you can shift norms and rituals, nothing is likely to change.
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Peter Drucker was the quintessential management visionary.” He was often decades ahead of his time, developing concepts like knowledge worker and management by objectives long before they were on anybody else’s radar. It was for good reason that the corporate elite hung on his every word as if they were supplicants getting an audience with an ancient oracle.
Yet when he first met Thomas J. Watson, IBM’s now legendary CEO, Drucker was somewhat taken aback. “He began talking about something called data processing,” Drucker recalled, “and it made absolutely no sense to me. I took it back and told my editor, and he said that Watson was a nut, and threw the interview away.”
We tend to think in linear terms and expect current trends to shape the future. Yet what we don’t see are the nascent ecosystems forming out of our field of vision. Things connect in nonlinear ways until some crucial link triggers a genuine inflection point. That has less to do with technology or economic trends and much more to do with how humans solve problems.
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Managers are trained to lead operations, not change. You usually get promoted to management by being good at your job. You try to keep things running smoothly, service your customers, develop talent, take care of your employees, and improve things where you can. It’s often a struggle to keep the trains running on time.
So when the need arises to pursue a transformational initiative, an organizational change management team is usually brought in, either from a consulting firm or from a vendor. They will usually bring a formal change management model like Kotter’s 8 steps, Prosci’s ADKAR or something similar, formulated internally.
Don’t get fooled by fancy charts. These models are notoriously unsuccessful and you shouldn’t just accept them. McKinsey has found that 69% of transformation efforts fail. A more recent study by Bain found that only 12% succeeded and 75% had mediocre results. Change is an investment and, like any other, you need to ask good questions. Here are three:
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In 1984, Michael Dell launched his eponymous company in a college dorm room with a simple idea: Bypass the dealer channel and sell customized computers directly to customers. It not only gave Dell a cost advantage by eliminating reseller’s markups, but also allowed him to receive payment before paying suppliers, achieving negative working capital.
This direct model was a simple idea and a clear competitive advantage, but none of the incumbent industry giants, such as Compaq and HP, were able to adopt it. It wasn’t for lack of trying. The advantages of Dell’s model were highly publicized, well known and understood and there were a number of initiatives to copy it.
Yet change is never just about selling an idea. It is always a strategic conflict between that vision and the status quo, which has sources of power keeping it in place. That’s why efforts that rely primarily on communication and persuasion usually fail. To bring genuine transformation about, you need to understand the forces that are supporting the status quo.
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Pixar founder Ed Catmull once wrote that “early on, all of our movies suck.” The trick, he pointed out, was to get them to go “from suck to not-suck.” It’s a quote that I’ve always loved not only because it’s honest, but because it’s so revealing of how the creative process works. Ideas don’t start out fully baked. They begin incomplete.
The simple truth is that to bring about anything new and different, you need to supplant something old and entrenched. Ideas that change the world always arrive out of context, for the simple reason that the world hasn’t changed yet. Breakthrough concepts arrive as ugly babies that need to be protected and nurtured, which takes care and patience.
That’s one reason that most organizations can’t innovate. They are designed to optimize, to reliably and predictably execute complex processes, which is a great thing. It takes talent, skill and dedication. However, it’s a different thing than creating something new. When you’re operating in the realm of the new and different, you need to move slow to go fast.
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The story of Blockbuster video is one that is often repeated, but rarely understood. The CEO, John Antioco, did not, as is frequently assumed, ignore the Netflix threat but devised an effective strategy to meet it head on. However, tensions with shareholders eventually boiled over, a salary dispute led him to resign and the strategy was abandoned.
Antioco’s mistake wasn’t a lack of a market strategy, but a lack of a resistance strategy. He would later tell me, “throughout my career, I had learned that whenever you set out to do anything big, some people aren’t going to like it. I’d been successful by defying the status quo at important junctures and that’s what I thought had to be done in this case.”
Simply pushing through resistance isn’t enough, though. You need to actively anticipate and devise plans to overcome it. That’s why when we start working with an organization on a transformational initiative one of the first things we do is go through a detailed resistance inventory, identifying five major categories of resistance and how they are likely to play out.
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In 2005 W. Chan Kim and Renée Mauborgne published Blue Ocean Strategy, which found that “blue ocean” launches, those in new categories without competition, far outperformed the shark-infested “red ocean” line extensions that are the norm in the corporate world. It was an immediate hit, selling over 3.5 million copies.
Around the same time, Bain consultants Chris Zook and James Allen’ published, Profit from the Core. They found that firms that focused on their ”core” far outperformed those who strayed. For example, they warned that Amazon was putting itself in peril for expanding its business beyond books and predicted dire results.
Clearly both theories can’t be true. The truth is that there is no secret formula. Success is highly context dependent. What works in one set of circumstances will likely lead to failure in another. That’s why we need to become adept at mode shifting from one set of principles to another. There are no silver bullets. Solutions need to fit problems, not the other way around.
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When I was 27, I moved to Warsaw, Poland to work in the nascent media industry that was developing in the wake of the fall of the communist regime. I had some experience working in media in New York, so I was excited to share what I’d learned and was confident that my knowledge and expertise would be well received.
It wasn’t. Whenever I began to explain how a media business was supposed to work, people would ask me, “why?” That forced me to think about it and, when I did, I began to realize that many of the principles I had learned and taken for granted were merely conventions. Things didn’t need to work that way and could be done differently.
Yet I would never have known that if I had stayed in New York. Surrounded by people who thought like I did, my ideas about “the way things work,” would have never been questioned, but constantly reinforced. That’s why it’s so easy to get disrupted, because we get locked into bad ideas embedded in our networks and aren’t able to shift away from them.
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It is a simple truth that change initiatives usually fail. Study after study finds that roughly three quarters of change initiatives don’t succeed. That’s a failure rate that we wouldn’t accept in any other aspect of our professional lives, but has become routine with transformational initiatives. It doesn’t have to be this way.
One of the reasons change fails so consistently is that change leaders apply a manager’s mindset rather than a changemaker mindset. Executives become successful by leading everyday operations, which requires building consensus, creating an environment of predictability and focusing on execution.
Yet applying that manager mindset to a transformational initiative is a sure way to fail. To succeed, you need a coalition, not consensus; you are operating in an environment of uncertainty, not predictability; and you need to focus on exploration more than execution. That’s quite a shift, yet it can be done. The best way to start is tackling these three elements.
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