Curbing your company’s fear of change

July 26, 2011, 2:03 PM UTC

(ManagementInnovationeXchange) — We all know that big, established companies struggle to respond to “disruptive” change.

Blockbuster, HMV, Nokia (NOK), and Yahoo (YHOO) 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 can 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 two to three 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 vacation 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 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 my performance will be exactly the same as the low-cost, low-frills webinars I have done before.

Countering stubborn management practices

This experience reinforced for me just how inert and inflexible management processes are in most large organisations. A company can change its strategy, replace all its senior managers, outsource half its activities, and even get people thinking differently, but the way it spends its resources, evaluates its staff, and negotiates contracts could very well be running just as it did decades earlier.

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

  • Management processes are a long way from the action. They support a company’s primary activities, but they are often two or three steps removed from the marketplace, so feedback from customers is often lost.
  • There are strong vested interests in avoiding change. Board members like to offer advice and make decisions, lawyers like writing contracts.Turkeysdon’t vote for Christmas. Enough said.
  • Management processes are usually dependent on each other, and together they create a tightly woven matrix that cannot be pulled apart easily. If you try to change one process, you upset 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” at Danish hearing aid company Oticon.

But I think it’s a cop-out to hand the problem back to the CEO, and there isn’t much evidence that CEOs are good at reengineering their management processes anyway (with a few notable exceptions).

So I think we need to explore a different approach, one that at least creates some urgency and evidence that will subsequently support a more top-down led change process, where action is more important than analysis, and where the manager’s role is to maximize learning rather than minimize risk.

Putting the corporate playbook aside

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 few management experiments designed to to make the company more responsive 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 (MMM) and Google (GOOG)) 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 (and 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 quickly by circumventing the company’s formal management processes. Under the normal rules, these projects could have taken a year or more and some would have been strangled at birth.

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 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 two months of lead-time, and a clear understanding of what you want to accomplish. How risky would this really be?

Julian Birkinshaw is Professor of Strategic and International Management at London Business School. He is co-Founder and Research Director of the Management Lab (MLab).