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When Niccolò di Bernardo dei Machiavelli (1469-1527) stated that “there is nothing more difficult to carry out nor more doubtful of success nor more dangerous to handle than to initiate a new order of things," it was in the context of Italy's tumultuous political era of the late fifteenth and early sixteenth centuries.
Today, many business executives find themselves in a similarly tumultuous situation as they face the challenges of the digital transformation. The impact on business of a digitally modified environment is massive. Digitalization not only reshapes but often entirely obliterates the "old order" of markets and industries. New companies with innovative digital business models are emerging to challenge former powerhouses and incumbent brands, which often face huge challenges in transforming their organizations to adapt to the new rules of the game.
In Germany, for example, firms like the retail giant Karstadt-Quelle or the business magazine Financial Times Deutschland have been brought to the brink of bankruptcy or forced to shut down operations. Similar cases of failure in the retail and publishing industries can be found in almost every country around the globe. But these are not the only industries affected. Virtually evey industriy finds itself in the midst of a digital transition– even if their core business model is not as dramatically affected. Digital technologies are radically slashing transaction costs, which not only impacts information-based business models, but communication and decision making styles within all organizations.
Today's executives are thus experiencing what we call a "double digital transformation challenge." They need to transform both their companies, including their business models, as well as their leadership paradigm and organizational design - including, in particular, communication and information strategies. To address the latter, Roland Deiser and Sylvain Newton propose a new framework that defines organizational social media literacy as a critical capability in the digital age, and they highlight the role of social technology as a catalyst for organizational transformation. This inspired us to revisit John P. Kotter’s Harvard Business Review classic “Leading Change: Why Transformation Efforts Fail” which provides a straightforward, robust framework for addressing the challenges of transformational change. We found it interesting to reflect the relevance of Deiser & Newton’s “Six Skills” in in the context of Kotter’s model.
Kotter identifies eight “errors” or “failures” that hinder successful strategic change. Investigating all of them goes beyond the scope of a single contribution to this global dialogue. We therefore decided to create a little series of posts. We will start by discussing the relevance of the sixskills framework in the context of Kotter’s first two “failures”:
(1) The failure to establish a great sense of urgency; and
(2) The failure to create a powerful guiding coalition
Two teams of authors add to this discussion by focusing on five other aspects of Kotter’s framework in subsequent contributions. Ulrich Meister, Rebecca Zimmer, and Rakesh Thadani discuss Kotter’s failures #3 to #5. Jan Kirsten and Holger Neinhaus address Kotter’s failures #6 and #7. The discussion of failure #8 and a brief summary will close this short series.
Relevance of the six skills framework in the context of failure #1: Not establishing a great sense of urgency
Initiating change is a challenging undertaking. It means getting individuals, even an entire company out of their comfort zones.. Obviously, this task is easier if a company faces massive economic pressure. But waiting until sales and profit figures drop is a very risky game. At that point morale might be already down, and budgets for investments in new technology may be limited. Most importantly, change takes time, and companies who wait might realize that they may have missed the boat to a prosperous digital future. Thus, strategic change has to be initiated long before a burning crisis becomes the driving motivation. Kotter states that at least 50% of firms he observed failed in this stage of their transformation efforts.
Social media can play a critical role in creating a sense of urgency. Never before has it been possible for a CEO to engage with so many employees directly, on a continuous level, and through a variety of channels. However, telling a compelling story live on stage at a town hall meeting is different from transmitting the same message via webcasts or livestreams and then engaginge in a virtual dialogue about the rationale for change. To take advantage of these new opportunities the CEO has to be social media savvy.
The executive's role as a producer and distributor is critical in this phase. Communicating a sense of urgency always requires a high degree of personal presence and authenticity. In the same way previous generations of CEOs had to hone their speech and presentation skills, they now have to develop the skills to “produce”messages in a digital environment. They need to feel comfortable in such settings in order to be authentic and convincing.
Relevance of the six skills in the context of failure #2: Not creating a powerful guiding coalition
Even the most charismatic CEO can't generate the necessary energy for change, nor can he succeed in creating sufficient momentum without any support. A guiding coalition, formed of agents of change, must be established to push the transformation efforts forward. According to Kotter, such a coalition needs to grow from an initial core of three to five individuals to a group of twenty to fifty allies. The composition of such a group does not follow the established hierarchy; the team will include experts who are not part of senior management, and, on the other hand, exclude some members of senior management because they do not fully support the change.
In pre-digital times membership in this coalition was often tightly restricted to established relationships or business lines. But today, a guiding coalition can use social media to identify, invite, and efficiently coordinate with a much larger network of experts and change agents that, if orchestrated well, can reach into every corner of a company. Just think of well-known internal bloggers, or of thought leaders in some knowledge areas. These individuals have not been granted authority by a hierarchy; they have earned reputation through their work and command respect among fellow employees. These important opinion leaders often come from outside the firm’s formal management layers. It is part of the the leader’s architectural role to identify those individuals and encourage them to work as change agents by contributing their social media expertise to the new vision.
The relevance of vision in this context is described in a separate contribution on this topic by Ulrich Meister, Rebecca Zimmer, and Rakesh Thadani, which will be published shortly.
Peter Kreutter is Director of the WHU Foundation and Managing Director of the Wipro Center for Business Resilience at WHU – Otto Beisheim School of Management in Duesseldorf.
Andreas Neus is the Head of University Cooperation at GfK Verein in Nuremberg, a non-profit think-tank for the advancement of Market Research and a shareholder in GfK SE, a major international Market Research company.
This section is dedicated to contributions and comments that deal with more than one of the six skills.
It contains also other ideas and experiences related to the impact of social media on large organizations