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julian-birkinshaw's picture

The Cure for Corporate Inertia

We all know that big, established companies struggle to respond to "disruptive" change. Blockbuster, HMV, Nokia, and Yahoo! are all current examples of companies that are struggling with this problem--they are trying to adapt, but are being held back by powerful and often invisible inertial forces.

A recent example of corporate inertia really struck home, and got me thinking about the key role management processes play in preventing change.

In October 2010 I agreed to do a Webinar for a big book publisher. I have done half-a-dozen webinars before, typically for small companies with a subscription-based business model. The process looks like this: they email me, I agree to do it, we arrange a date 2-3 months out, we do a quick technology check the week before, and then the event happens. It is all very easy for me, lecturing to an unseen audience in my own office. Frankly, I am not sure how much the audience gets out of these events, and indeed I sometimes wonder how many people are actually listening. But that is a question for another day.

The process with the publisher was rather different. The person I was talking to suggested a multi-speaker event six months out. The other speakers and I all said yes. He then consulted with his board, who decided it was all a bit rushed, and couldn't be marketed properly, so we ended up delaying by a further six months. We all agreed.

A couple of months later, I received a draft contract--10 pages of detailed legalese, including clauses restricting my use of the presentation materials with other audiences and requiring me to acknowledge them in all subsequent use of the materials.

It finally dawned on me what was going on--the webinar was being treated like a book. You know, one of those bulky paper things we used to take on holiday before the Kindle was invented. And once I had taken out the clauses that restricted my use of my own materials, the final version was then sent to me in hardcopy, by courier. You know, one of those companies that was set up to distribute paper around the world before the Internet was invented.

The publisher had, in other words, taken its century-old process for selecting manuscripts and negotiating rights with authors, and applied it with little adjustment to these new digital and virtual offerings. My realization that this is what happened also explained the mystery around the six-month delay. Every publisher knows that books either get published in spring or fall; that is the way the publishing calendar works. So once our webinar missed the spring window, it obviously had to be bumped to an autumn date.

I know I am being a bit harsh on the publisher here. The people who work there are smart and knowledgeable, and they understand these new technologies as well as I do. But they are being held hostage by their archaic management processes, processes that they themselves curse but are incapable of getting around. The result, in this particular case, is a webinar that has cost a great deal to put on (in management time and legal fees) and with significant delays. It remains to be seen if the size or quality of the audience is better than usual, but I can guarantee the product (my performance) will be exactly the same as the low-cost, low-frills webinars I have done before.

This experience reinforced for me just how inert and inflexible management processes are in most large organizations. A company can change its strategy, replace all its senior managers, outsource half its activities, and even get people thinking differently, but its core management processes--the way it allocates resources, evaluates people, negotiates contracts--will still be running under their own steam, just as they did decades earlier.

Why are management processes the last bastion of resistance when a company is trying to change? I think there are three linked reasons.

  • Management processes are a long way from the action. They support primary value-adding activities, but are often two or three steps removed from the marketplace, so feedback from customers about the need to work differently or more quickly is filtered and lost.
  • There are strong vested interests at play. Board members like to offer advice and make decisions, lawyers like writing contracts. Turkeys don't vote for Thanksgiving. Enough said.
  • Management processes are usually dependent on each other, and together they create a tightly-woven matrix that cannot easily be pulled apart. If you try to change one process, you upset a further two or three others, and pretty soon you are taking on the entire system.

So what's the way forward?

One argument is that systemic problems require systemic change, in which case the whole problem gets tossed back to the CEO: Only he has the authority and influence to rip up the old management processes and start again. Lars Kolind did this, for example, when he created a "spaghetti organization" in Danish hearing-aid company, Oticon.

But I think its a cop-out to hand the problem back to the CEO, and indeed there isn't much evidence that CEOs are any good at re-engineering their management processes anyway (with a few notable exceptions).

So I think we need to explore a more bottom-up approach, one that at least creates some urgency and evidence that will subsequently support a more top-down led change process. Let's call it experimentation:

  • Experimentation is a mindset in which action is more important than analysis; in which the manager's role as a change agent is to maximise learning rather than minimize risk.
  • Experimentation is also a methodology for structuring a small-scale change project with clear objectives and explicit deliverables.

Here is a brief example. The leading general insurance company in Scandinavia is a company called If. During the first quarter of 2011, If launched a set of management experiments, designed to help it increase its agility and responsiveness to changing customer demands.

Like most companies, If has well-established procedures for launching new products and services, and there was a legitimate fear that these processes could suffocate efforts to try new ideas. So, the company formed four teams and gave them carte blanche to act first (within the boundaries of an experimental methodology) and worry about the approval process later. They were given a two month window to design, implement and review their experiments.

One team mocked-up a new and dramatically simpler interface for selling auto insurance to private customers, and did some initial user testing. A second team designed and tested out a new home pick-up/cleaning service for drivers who had had an accident. The third team tried giving "20% time" (a la 3M and Google) to employees in two claims units (one unit also got a brainstorming room to work in), to see if the quality and quantity of new business ideas could be increased. The fourth team designed and ran a disarmingly simple study to test the hypothesis that fast-cycle feedback from customers will lead to a significant improvement in performance from salespeople (it did!).

Let's be clear. None of these experiments was earth-shatteringly original, and none of them had findings that were entirely surprising. But they all addressed real business imperatives, and they did so in double-quick time, by circumventing the formal management processes of the company. Under the normal rules of engagement, these projects could have taken a year or more, and some would have been strangled at birth. But because they were pursued under an experimentation banner, they proceeded quickly and painlessly, with all the questions and concerns put on hold until the results were in.

The company is now taking some of these projects forward, while others are not being pursued. That is the way experimentation works--you don't expect 100% success. But perhaps most importantly, the learning and insight gained from the work was immense. As the old adage has it, to really understand something, you have to try to change it.

So what's my advice to the publisher? Turn the webinar into an experiment--no permissions, no contracts, no lawyers, just a one-off event with a two-month lead time and a clear understanding of what you want to accomplish. How risky would this really be?

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thomas-simon's picture
Help! Been working on transformative change my entire career. See www.myioffice.net  - I am 65 years old, live in rural Iowa  - totally disconnected from resources of capital and management. Yet have self-fiananced and built over 13 years an extraordinary transformative platform. I have a pipeline of clients  - some so large it is head spinning - yet I need help since I am not well heeled - by any means - and virtually shut out from traditional sources of working capital... help! help!  
willy-a-sussland's picture

Dear Prof. Birkinshaw, thank you for your hack of July 26 on “The Cure for Corporate Inertia” in which you called attention to the fact that management processes (M/P) can form a bastion of resistance to change. You showed how a bottom-up approach and experimentation can overcome such road-blocks. Of course, you bring up a very important issue to which I wish to add the following.

Indeed, the bottom-up approach - if properly supported, coordinated, and supervised by the middle-management - can prove very effective as concerns the M/P in the operations.

As you pointed out, all M/P need to interact to ensure the effectiveness of the management-system. And yet, in many organizations, there is a systematic disconnect between the steering-processes, which are entrusted to the top-management, and the business-processes, which are delegated to the operations. And so, the innovation-initiatives that generated bottom-up in the operations hit the ceiling that separates the business- from the steering-processes. Actually, even before the bottom-up innovations hitting that ceiling, the middle-management may fail to support such initiatives if they feel that they butt in some of the steering-processes of the top-management. Thus, in order to innovation to flourish top-down and bottom-up, inside-out and outside-in we have to dismantle the strategic and organizational disconnects.

Moreover, the highly destructive strategic and organizational constraints are not generated by the M/P in the operations, namely the business-processes, but by the M/P that are designed and driven by the top-management, i.e. the steering-processes. Thus, management-innovation may start with connecting the planners in the top-management and the doers in the operations. * To that effect, I have developed “The Model of the Two Rings”, which helps to visualize and to activate the interactions between the 4 steering-processes by sequencing them and by placing them on the outer ring of this model, and the 4 business-processes that are featured on the inner ring. **

Let me recall some of the essentials of “The Model of the Two Rings” and refer later to some of my publications.

The steering-processes are the foundation of the whole construct of M/P. The top –management uses them to provide the organization with the mission and the vision, with the appropriate tangible and intangible resources, with a proficient organizational set-up, and with a suitable system of reviews-valuation-rewards. Thereby, the steering-processes establish company-wide a creative framework for thoughts, behaviors, and actions. Unlike the business-processes, the design and the deployment of the steering-processes is the ultimate responsibility of the CEO, and their effectiveness should be overseen by the board of directors.

Lower management does not have the powers and a comprehensive view of the company’s business-system, and therefore it cannot be expected to redesign the business-model. Moreover, while the business-processes should benefit from continuous innovations, the steering-processes cannot be submitted to constant changes. Organizations need some continuity amidst change or the personnel will march in extended order.

Let me add a few words to underscore the complexity of innovating the steering-processes, which are the foundation of the construct of all the M/P.

The steering-processes are supported by the 5 of the Corporate Capital, which encompasses the strategy-fundamentals, the style of the leadership, the systems of the management, the structures of the organization, the shared knowledge. That does mean that the 5 and the steering-processes are cast in stone, they have to be periodically challenged and - as appropriate - even radically innovated. However, given the complexity of the interactions among the 5 , innovations of the construct of the M/P must be carried out in the frame of high-level programs that engender careful study and resolute implementation top-down. Unlike bottom-up innovations of M/P in the operations, programs of management-innovation do not allow much room for trial-and-error.

Having discussed the disconnect between the steering- and the business-processes, and how such disconnects can stymie innovation-initiatives, let me show the solution that I propose.

The last in the sequence of the four steering-processes, namely “The process of strategic and organization deployment”, connects the steering-processes on the outer ring and the business-processes on the inner ring of my model. It expands on the Japanese Hoshin Kanri, and it combines a vertical and a horizontal deployment. On the vertical, the strategic deployment establishes targets/ means as a result of cycles of top-down/ bottom-up/ and top-down interactions across levels and functions. On the horizontal, the organizational deployment features negotiations at each of the levels of strategic deployment in order to distribute the roles, the responsibilities, the resources, the reviews/evaluations, and – last but not least – the rewards. For the evaluation of performances, I advocate “The Return on Total Resources”, an original approach that takes into account both tangible and intangible resources as well as their working-cycles.

In a nutshell, let me say that “The Model of the Two Rings” helps to provide transparency over the whole process of management so that all concerned see where they stand and where the others are going. It establishes a system of negotiations across the levels and functions, which and it enhances commitment, cooperation, and collective creativity. It encourages a constant flow of challenging and creative discussions top-down and bottom-up as well as inside-out and outside-in.

I stress to address complexity with conciseness. But, I hope you find some food for thought, and I will welcome your feed-back. I also wish to take the opportunity to thank you for the many valuable insights provided by your publications.

Kind regards, Willy A. Sussland, PhD

* W. A. Sussland “Connecting the Planners and the Doers” Quality Progress 2002
** W. A. Sussland “Innovate out of Crisis - Second Edition” Create Space 2010
*** W. A. Sussland “From Total Quality Management to Total Innovation Management”

MIX 06/08/2011

luis-alberola's picture
Julian, Very interesting. I agree that management experimentation is both a mindset and a methodology. We call it "beta mode" management. What is difficult is applying this methodology to central management processes. While we have used this approach for three years, evaluation, budgeting, strategic planning have sept out of our scope. I would love to know whether you have used experimentation in making management processes evolve. Some of our work I have described in this store : http://www.managementexchange.com/story/coaching-goliath-how-we-are-buil...
patty-tanji's picture
Julian,

Agreed.  When I interviewed Cali Ressler of Cali and Jody (ROWE) fame and Traci Fenton of Wordblu, both on the list to the MiX Inspired by list to the right, there was no legal language exchanged.  I was grateful for their generosity and continue to promote the great work of both those organizations in my social media outlets.  I can't even fathom having to get lawyers involved.  The whole experience would have been tainted and distasteful.

Thanks for the post.

Patty Tanji, patty.tanji@myopenworkplace.com

andrew-armour's picture
Hi Julian,

Very interesting piece - and I agree (and well recognise) all your examples and points.

However, my build is that there is a 'complexity and paradox' type element at work in the situation you mention too. At best it is stifling (i.e. - creates inertia) and its worst, it's completely destructive.

I see a paradox loop, that goes like this;

1 - Senior leaders are under more pressure to build and innovate - quicker and quicker.

2 - This leads to a climate of urgent continuous development and creation - but with a still powerful under current of always monitored release dates, performance results, metrics, revenue, growth.

3 -  The result is often poor market orientation, hurried development, a lack of customer thinking, declining customers, revenue threats, startlingly agile new competitors. It is magnified by an almost constant stream of competing metrics and analysis - from multiple perspectives.

4 - So the business leaders decide that more innovative approach is needed and so heads for another round of reinvention - with everyone using the ridiculous examples of referring to Apple and Google as the guide to all business model development ..

5- Go back to step One.

This loop is fuelled by a belief that technology and development are what drives product success & marketing innovation. Most new products, built with innovation fanfare - fail.  What has been lost? The heart, sould and original mission; to think first of of helping the consumer, the customer, solving a problem for someone, delighting them, creating something long term, nurturing, offering more value to them. I would argue that the focus for many marketers, developers and senior executives is often to just 'release something' or 'create a product story' and secure their position as 'an innovator' - and this iteself has become the focus.

It is almost as if we have created an X-factor style model for marketing process and innovation. Hurry, shout a lot, get it out, does not matter if was not as good as we first thought, we're only experimenting. Ditch that now - not as good as we thought. Something else will come along. 

It always looks different and is quite exciting - but increasingly, its the same old thing repeated.

In the publishing example you mention - I am sure the lawyers and product managers actually felt that they were being innovtive - by being involved in the future of publishing - the webinar. Its a paradox. The more everyone seeks to be involved within 'innovation', the more layers, discussions, rushed and re-hashed projects are launched. Then dropped. There is no 'art' (as Seth Godin puts it) - to really create something that has value.

I think the cycle can only be broken by introducing genuine catalysts for change and additional drivers. My approach (and as its my speciality - I am biased) - is that marketers and developers need to ditch the clique office and internal culture - and build relationships external to the business, with allies, key suppliers, most valuable customers, critical channels.  As Theodore Zeldin says 'a new conversation does not just reshuflle the pack, it creates new cards'. Genuine conversations with partners opens the discussion and offers insight to build true innovation, which is more than just a loop of technology tinkering..

The alternative? Go to Step One above.

Thanks -

Andrew Armour
www.benchstone.co.uk
www.andrewarmour.com

For more on partnerships and marketing innovation see www.benchstone.co.uk