April 25, 2024

Accelerating Organizational Transformation and Making It Stick Part 1 (TPL Insights #219)

By Rob Andrews

By Rob Andrews with italicized content from John Kotter’s HBR article summarizing his book Accelerate!

Perhaps the greatest challenge business leaders face today is how to stay competitive amid constant turbulence and disruption. There are hundreds of examples of companies like Borders and RIM, recognized the need for a big strategic move but couldn’t pull themselves together to make it and ended up sitting by as nimbler competitors ate their lunch. The examples always play out the same way: An organization that’s facing a real threat or eyeing a new opportunity tries—and fails—to cram through some sort of major transformation using a change process that worked in the past. But the old ways of setting and implementing strategies are failing us.

The hierarchical structures and organizational processes we have used for decades to run and improve our enterprises are no longer up to the task of winning in this faster-moving world. In fact, they can actually thwart attempts to compete in a marketplace where discontinuities are more frequent, and innovators must always be ready to face new problems. Today any company that isn’t rethinking its direction at least every few years—as well as constantly adjusting to changing contexts—and then quickly making significant operational changes is putting itself at risk. But, as any number of business leaders can attest, the tension between needing to stay ahead of increasingly fierce competition and needing to deliver this year’s results can be overwhelming. What to do, then?

We cannot ignore the daily demands of running a company, which traditional hierarchies and managerial processes can still do very well. What they do not do well is identify the most important hazards and opportunities early enough, formulate creative strategic initiatives nimbly enough, and implement them fast enough.

The existing structures and processes that together form an organization’s operating system need an additional element to address the challenges produced by mounting complexity and rapid change. The solution is a second operating system, devoted to the design and implementation of strategy that uses an agile, network-like structure and a very different set of processes. The new operating system continually assesses the business, the industry, and the organization, and reacts with greater agility, speed, and creativity than the existing one. It complements rather than overburdens the traditional hierarchy, thus freeing the latter to do what it’s optimized to do. It actually makes enterprises easier to run and accelerates strategic change. This is not an “either or” idea. It’s “both and.” I’m proposing two systems that operate in concert.

The whole notion of “strategy”—a word that is now used loosely to cover sporadic planning around what businesses are to be in, and important policies concerning how to compete in those businesses—has to evolve. Strategy should be viewed as a dynamic force that constantly seeks opportunities, identifies initiatives that will capitalize on them, and completes those initiatives swiftly and efficiently. I think of that force as an ongoing process of “searching, doing, learning, and modifying,” and of the eight accelerators as the activities that inform strategy and bring it to life. The network and the accelerators can serve as a continuous and holistic strategic change function—one that accelerates momentum and agility because it never stops. They impart a kind of strategic “fitness”: The more the organization exercises its strategy skills, the more adept it becomes at dealing with a hypercompetitive environment. The network and the hierarchy, functioning as a dual operating system, can produce more wealth, better products and services, and a more exciting place to work in an era of exponential change.

The old methodology simply can’t handle rapid change. Hierarchies and standard managerial processes, even when minimally bureaucratic, are inherently risk-averse and resistant to change. Part of the problem is political: Managers are loath to take chances without permission from superiors. Part of the problem is cultural: People cling to their habits and fear loss of power and stature—two essential elements of hierarchies. And part of the problem is that all hierarchies, with their specialized units, rules, and optimized processes, crave stability and default to doing what they already know how to do. (These characteristics are even more pronounced when you pile one hierarchy on top of another to create a matrixed organization.)

Moreover, strategy implementation methodologies, hung on the hierarchical spine, are not up to the challenge of managing speedy transformation. Change management typically relies on tools—such as diagnostic assessments and analyses, communications techniques, and training modules—that can be invaluable in helping with episodic problems for which there are relatively straightforward solutions, such as implementing a well-tested financial reporting system. These approaches are effective when it is clear that you need to move from point A to a well-defined point B; the distance between the two is not galactic; and pushback from employees will not prove to be herculean. Change-management processes supplement the system we know. They can slide easily into a project-management organization. They can be made stronger or faster by adding more resources, more-sophisticated versions of the same old methods, or smarter people to drive the process—but again, only up to a point. After that point, using this approach to launch strategic initiatives that ask an organization to absorb more change faster can create confusion, resistance, fatigue, and higher costs.

As I reflect on Kotter’s brilliance, which will be continued next week in Part 2, I recall General Stan McChrystal’s book Team of Teams: New Rules of Engagement for a Complex World, a compelling narrative that explores the challenges faced by organizations in today’s interconnected and rapidly changing world. Drawing from his experiences as the former commander of U.S. and international special forces in Afghanistan, McChrystal offers insights into how traditional hierarchical structures are often inadequate for addressing the complex challenges of modern warfare and business.

The book begins by examining the evolution of warfare and the rise of non-state actors, such as terrorist organizations, which operate with agility and adaptability. McChrystal argues that traditional military structures, characterized by rigid hierarchies and centralized decision-making, are ill-suited to confront these dynamic threats. Instead, he advocates for a new approach that emphasizes decentralized decision-making, empowered teams, and a culture of transparency and collaboration.

McChrystal introduces the concept of a “team of teams,” in which small, highly autonomous groups work together towards a shared purpose, while retaining the flexibility to respond rapidly to changing conditions. He illustrates this concept through anecdotes and case studies from his own military career, demonstrating how special operations forces successfully adapted their tactics to counter insurgent networks in Iraq and Afghanistan.

Central to McChrystal’s thesis is the idea of “shared consciousness,” whereby all members of an organization have access to the same information and understanding of the broader mission. This requires open communication channels, the use of technology to disseminate real-time information, and a commitment to transparency at all levels. The book also explores the role of leadership in fostering a culture of adaptability and innovation.

McChrystal emphasizes the importance of leaders who are willing to relinquish control, trust their teams, and embrace uncertainty. He argues that effective leaders must be comfortable operating in a state of “organized chaos,” where they encourage experimentation and learning from failure. Throughout the book, McChrystal emphasizes the need for constant learning and adaptation in the face of uncertainty. He warns against complacency and advocates for organizations to continually challenge their assumptions and seek out new ways of operating.

In the final chapters, McChrystal offers practical advice for implementing the principles of “team of teams” within organizations. He outlines strategies for fostering collaboration, building trust, and leveraging technology to create a more agile and responsive workforce. Stan McChrystal’s mental framework that enabled him to win the war against the insurgency from 2003 – 2008 is very similar to Kotter’s in his landmark work. Accelerate! Stay tuned for Part 2 next week!

Warmest Regards,

Rob