I Could Feel Them Turning Against Me: Strategic change gone awry?

An awkward silence enveloped the class.

I had just announced that: 1) my pairings would replace the project teams they had chosen, 2) I would choose which cases they needed to write up, and 3) that one additional case write-up would be required for each team. All of these changes were justified with clear pedagogical goals.

One student looked particularly disturbed. I called on her — “Lisa, you look uncomfortable, is everything ok?”

“Well actually, it doesn’t seem fair that we have organized our teams and even started to work on cases and now we have to go back to square one.” I could feel the floodgates opening. For the next 10 minutes, students questioned the need for change and offered alternatives to achieve similar objectives. I found out later one had planned to complain to the Dean.

Finally, I chimed in, “Ok everyone take your blood pressure medicine. Today, we are going to discuss the management of strategic change. This was a simulation and now we are going to discuss what just happened here in the room.” I had to talk them down for another 5 minutes to convince them it was an exercise…

I went on to explore GE’s acquisition of NBC. We discussed the major changes GE implemented to double NBC’s operating margin (13% to 25%) and increase revenue by 60%. Then I asked the class to estimate the timing of the gains — laying off 40% of the workforce should take no more than 6 months and so on. They concluded that most of the gains would be in place within 5 years.

In reality, it took 10 years to achieve. And in the first 5 years, everything tanked. This difference in assumptions about timing alters the NPV by $2.2B — quite a lot on a $6.4B acquisition.

They got the point.

Nearly all of my course focuses on strategic decisions. Almost none on implementation. Indeed, this was a topic I just added for the first time — driven mainly by an Exec Ed assignment where I taught a full day on the management of strategic change.

Research on Change?

Aside from this practical significance, the topic is central to strategy theory as well. One cannot have a dynamic capability without a supreme competence in managing continuous change. Indeed any significant strategic move entails change and this is often a driver for performance heterogeneity.

Yet, much of the research on change takes place outside of the strategy field. As a result, it is rarely connected to strategy theory or empirical work in any rigorous fashion.

I have often used Apple as an example of a firm that appears to have a dynamic capability (see Teppo’s ¬†previous post on Steve Jobs). Was their ability to change driven by the culture or Steve Job’s personality? We may not know for sure until the company has introduced some new innovations and created new markets. If the locus of the capacity to change shifted over time, how was this capability transferred from a person to become part of an organizational routine?

This seems like an opportunity. There are many questions along these lines that have not been explored because most strategy researchers have avoided exploring the process of change.

How would you build an agenda that integrates theory from the content areas of strategy to explore the process of change?

8 Comments on “I Could Feel Them Turning Against Me: Strategic change gone awry?”

  1. […] I Could Feel Them Turning Against Me: Strategic change gone awry? – […]

  2. teppo says:

    Russ: I see you are going all OB on us. No doubt, change is critical. I’m not one for practitioner books on this stuff (most of them are horrid) – but the one book on change that I have liked is the Chip Heath book Switch: How to Change Things When Change is Hard.

  3. stevepostrel says:

    It was just an exercise, yeah, that’s the ticket. What does your wife, Morgan Fairchild, have to say about it?

  4. Sounds like Project Runway.

  5. McSavage says:

    The firm I worked for had replaced the chief executive, closed an entire division, and laid off thousands of employees. The new chief executive called a meeting with senior management and asked us if we believed the new direction was working. Just about everyone in the room agreed that the new direction was indeed working. I found myself saying, “I guess the people who disagree with you have already been laid off – did I just say that out loud?”

  6. Per Bylund says:

    What I find both interesting and puzzling is the great interest in Apple (I take Russ’s mention of Apple as an invitation for this kind of comment). Yes, Apple brought new kinds of products to market, and this is interesting. I am not sure they changed all that much, however. They have been working in the same kind of gadget market forever.

    Apple is generally considered the small, flexible, innovative, and change-embracing organization – especially when contrasted with Microsoft. But I think this is very wrong. Microsoft has done some amazing change work. Consider e.g. the case when Internet was “young” and Microsoft invested in the Microsoft Network instead – as an alternative to the Internet. Well, it didn’t work out. Their response? Bill Gate declared that they needed to catch up with and surpass the market in terms of Internet integration in their software. They completely changed all their software applications – it took only a short while to provide the market with software that was Internet-centered and completely integrated. That’s an amazing feat to me, especially since the organization had invested a lot in not using the Internet.

    It seems to me the Microsoft case would neatly illustrate the point. Are there no HBR cases on this? (Thanks for the great idea for simulation, by the way – I love it! I will definitely use it in my own teaching. The question, however, is whether this sort of thing can be repeated again next semester/year or if there is sufficient information flow between students to undermine the effect….)

  7. Vanessa Bocock says:

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  8. hot and cold says:

    Wow, this post is nice, my sister is analyzing such things, thus I
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