Transforming the Company: Manage Change, Compete & Win

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So the company publishes the number as an absolute tally of late deliveries. If 1, packages were delivered late yesterday, everyone can understand that there were 1, customers who were inconvenienced or annoyed. No single initiative offers a "magic bullet" to unfreeze and redirect an organization. What distinguishes success here is consistency among initiatives, as well as their continuing refinement and development. Most companies start their transformation efforts with very broad objectives—say, "to lead the industry in customer satisfaction.

Successful efforts push over time for increasing clarity and specificity in top-down direction as change pushes toward tangibility at the front line.

Organizational Change Management: #1 Key to Digital Transformation Success

At one railroad, for example, the vision and goals started broadly "be the quality leader in the transportation industry" and became more specific "achieve the three Rs of precision execution: right car, right train, right time" as customer needs and operational requirements came into sharper focus. This clarity helped align other change efforts to make it evident how they contributed to the overall goal.

That way, a headquarters taskforce could redesign train scheduling while front-line teams attacked execution problems with individual trains. Although top-down efforts create the focus and the necessary preconditions for transformational change, they alone are not sufficient to achieve it. One of the biggest challenges to overcome is the widely held management view that "all we have to do is tell employees what we want, provide some training and rewards, and change will happen.

But it falls far short when the change requires fundamentally new ways of doing business—like moving from a product to a customer orientation. In these cases, embedded skills, systems, and attitudes are usually so at odds with the new requirements that a much more intensive process is needed to retool the organization to effect lasting change. What's needed, therefore, is to get large numbers of people throughout an organization in operations, support units, and business management teams alike aggressively and creatively working to improve performance. This, in turn, depends on the availability—or the creation—of disciplined processes for identifying opportunities and developing plans to close clearly identified performance gaps.

Many such problem-solving processes exist, most of which are rooted in the Quality movement and share common principles: set goals, determine gaps, understand root causes, brainstorm and try out solutions, monitor results, and make adjustments.

Conducting a DICE Assessment

To be truly effective, however, these approaches must be tailored to the specific challenges, skills, and change readiness of a given part of the organization. This requires, among other things, designing a methodology for setting appropriate goals and performance objectives, developing analytical templates to guide problem solving, and determining specific information needs that, of course, will vary by level and unit. For most parts of an organization, this effort will start simply and become more advanced over time.

Front-line operations will tend to focus on improving the cost, quality, or timeliness of products and services. At one railroad, for example, front-line teams in each terminal analyzed their operational delays and helped move on-time performance from 20 to 79 percent. Staff functions will tend to work on aligning their activities to increase the value of products or services through joint efforts with front-line operations.

Deep Change: How Operational Innovation Can Transform Your Company

At one insurance company, finance and human resource teams redesigned planning and compensation systems to be consistent with desired new agent behavior. Management groups will tend to concentrate on identifying the most attractive performance improvement opportunities and on designing the processes to exploit them. Over a two-year period, a steel company's management team started with relatively simple efforts to improve safety and housekeeping and moved on to design advanced processes to address yields, labor productivity, and throughput time.

The net effect of launching such team-based problem-solving efforts is much like getting a flywheel spinning.

Initially, tremendous inertia exists, and the first cycle can be lengthy and difficult, requiring substantial energy from outside the group to get it started. But if the process continues to be supported and rewarded by management, momentum gradually builds, improvements are achieved, the problem-solving cycle runs a more regular course, and the promise of "continuous improvement" becomes a real possibility.

Tapping the brains and energy of thousands of people is powerful in itself, but there is a second reason for using bottom-up problem solving. In many cases, you already know what needs to be done, but you don't believe that people can change their behavior just because they are told—with good reason—to do so. What does it actually take to create new behavior?

Think, for a moment, about the mechanics of a golf swing. You know you have to set up square to the target. You know you have to take the club head back slowly. You know, because a golf pro has told you at one time or another, each of the fifteen things you have to do to hit a golf ball well.

The anatomy of digital transformations

But knowing is not enough. You have to experience it. You have to be able to try it in a risk-free environment, get the feel of it. In other words, you have to go through the process of finding the right answer yourself.

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For these reasons, bottom-up initiatives go far beyond the familiar "pilot testing and implementation. In most cases, intensive problem-solving efforts ultimately have to spread across an entire enterprise. With pilots, by contrast, the normal pattern is to try them in one or two isolated locations, watch them for a year or so, and then re-evaluate the effort.

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Bottom-up efforts go beyond simply implementing a new solution. They have wider objectives: rapid and sustained performance improvements, development of new skills, increased change readiness, and deeper insights into how an organization must adapt to sustain the improvements. These efforts depend on effective "problem solving for process"—that is, developing creative ways to involve people in improving performance and redesigning their work. Again, this goes well beyond the top-down implementation of a solution defined by others.

Bottom-up activities are not one-off initiatives. They call for successive rounds of effort to improve performance and build skills. There are, however, limits to what can be achieved through both top-down and broad-based efforts that fundamentally operate within existing organizational boundaries. Some opportunities for breakthrough improvements in performance can be addressed only through a cross-functional core process redesign perspective, in which people, activities, and information are linked in new ways.

The goal of CPR is to produce simultaneous, dramatic improvements 25 to 75 percent or more in cost, quality, and time by shifting the focus of work and decision making from hierarchical channels to new horizontal flows across functions, locations, and organizational boundaries. All companies, whether they recognize it or not, have a few three to five core processes that deliver the majority of an enterprise's value to its customers.

In a sense, of course, companies have always had cross-functional initiatives. But CPR takes them much further with its intense performance orientation, its focus on the few processes that drive value and competitive differentiation, and its support for the changes in organization structure, management, and communication systems needed to "institutionalize" new levels of performance. Top-down, bottom-up, and core process activities are not ground breaking in and of themselves. What is important is that they are:. Organizations can perform well with less than perfect strategies, but not with unclear objectives.

Especially during periods of change, it is easy to let attention drift away from tangible performance goals toward a more general concern for effecting the necessary shifts in organizational culture. But this puts things the wrong way around. The best way to change culture is to work on improving performance at the same time. When, for example, management and union are at loggerheads, direct attacks on each other's entrenched position are seldom a constructive way to more forward.

If, however, both sides can agree on new, shared performance goals—better on-time performance, say, or improved customer service—possible areas of cooperation begin to open up. Similarly, GE's "Workout" program may provide secondary cultural benefits in terms of how people work together. But the driving force and primary aim is to get them collaborating to solve a specific performance-related problem.

All three axes are worked on simultaneously and in a way that is mutually reinforcing. Emphasis will fall in different places depending on the problem and the goal. Where the issue is to do with strategic focus or direction setting, the main action will probably be top down; where it is front-line involvement, bottom up; and where it is multiple inefficient handoffs across functions, redesign of cross-functional core processes.

But wherever the main action is, transforming performance levels requires integrated effort along all three axes. Explicit attention must also be given to the relative emphasis paid to each axis. Putting too much weight on top-down efforts risks creating cynicism and confusion; excessive emphasis on bottom-up efforts means people may focus on issues that will not make any difference competitively; and a bias toward cross-functional processes could produce a solution so complex in design that implementing it is beyond an organization's capabilities.

Teams are critical for all three axes. With top-down activities, it is essential to build a leadership team to integrate initiatives and lead the process; in bottom-up initiatives, there will ultimately be hundreds of performance-improvement teams working in every part of an organization; and in cross-functional efforts, process management teams have to come together across functions.

Transformational change is by its nature iterative. Although its phases overlap and interact, sequence does matter. Furthermore, you can also learn from the experiences of path-breaking companies that have preceded you. So a general road map may help managers plot their course or identify missed turnings that may be slowing progress.

The goal of phase 1, which can last anything from two to twelve months, is to kindle an urgent need for change within an organization and to articulate a new sense of direction. The best efforts involve thought leaders throughout a company both to build support and to tap the experience of multiple constituencies in an objective assessment of the competitive environment, the organization's current capabilities, and the outlook for its future.

Whether the outcome is called a new vision, a mission, a strategic framework, or something else, what is crucial is that it states the rationale for change and defines broad performance and organizational objectives. Analyzing both marketplace and organization to highlight the need for change, the barriers to be overcome, and the potential payoff.

Structuring workshops and other forums to help first the leadership group and then the rest of the organization reach a common vision and begin to identify the actions required to make the vision a reality. Examining the experience of other companies undergoing change to help build courage and conviction—and to develop insights about how the organization could evolve. The goal of phase 2 is to translate the change vision into a much more specific set of performance objectives and to design processes that involve all three axes of change in order to engage the organization in achieving these goals.

Senior managers almost always underestimate the importance of this structured planning phase. But it is essential if the change program is not to degenerate into a hodge-podge of well-intentioned individual initiatives. Creating a change organization.


Few companies have succeeded without creating a special group or groups to drive their change effort. Many variations exist, "steering committees," "change czars," and "core teams" among them. The common requirement is that the group must include well-respected line and staff executives each with the depth of personal commitment to risk their careers in order to ensure a successful outcome. Their role is to help line managers focus their change efforts and to provide a forum for objective discussions of progress and lessons learned.

Why Culture Change Is Essential For Digital Transformation

They may also help provide centrally sponsored support for process design, facilitation, and the like. Quantifying specific performance objectives. Broad statements "lead the industry in customer satisfaction" need to be translated into the kind of measurable performance-improvement target "reduce product development cycles from twelve months to two" that individuals or cross-functional teams can tackle.

This task of translation is a central responsibility of the change leadership team. Mapping objectives to organization units. It is often useful to create a "map" of an entire organization that links performance objectives to the groups of people departments, teams, positions, or cross-functional process groups that can most directly affect them. This map can also be used to help decide which projects to launch first. Designing performance-improvement approaches. Working from its organizational "map" and its assessment of the problems and opportunities each unit faces, a change team can design the proper mix of problem-solving techniques to address such questions as: Which units need a tailored analytic exercise?

Which need training?

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