Business needs to change how it manages change, says McKinsey

Traditional approaches to change management no longer apply in the context of today’s faster business environment with all of its demands for immediate results and no interruptions.

So say the suits at management consulting outfit McKinsey & Company, in a paper called “Changing Change Management”, authored by Boris Ewenstein, Wesley Smith and Ashvin Sologar.

Interestingly, they note, even without the demands of 21st century business cycles and deadlines, change management hasn’t historically been particularly effective at coping with change anyway. Citing things like employee resistance and poor support from management, McKinsey argues that about 70 per cent of change management programs fail to initiate meaningful change at all.

Ironically it’s the consultants and advisors who also have to change, lest the trend of digital transformation render it a self-parody.

Where once firms might have looked at developing strategic plans spanning three, four or five years, that approach is now definitely a thing of the past as reasonable lead times for identifying and responding to market trends have shrunk dramatically.

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Earlier today, for instance, Which-50 contributor Martin Walsh recalled seeing a pitch from a top-tier consulting company to implement a $31 million change program that could effectively be done for a fraction of that cost.

In the contribution entitled “The long overdue conversation about your marketing technology stack” Martin wrote:

Not long ago I read an IT Future report presented to a board of directors, which showed a major Australian management consulting firm proposing a $31 million cost to build what can in fact, now be done for only $3.5 million with a modern, off the shelf marketing automation platform — with a lot less risk, a faster time to market and greater, fully integrated functionality. The proposed cost was stunning and served to demonstrate how out of touch the management consulting firms are and — worse still — how gullible and illiterate Australian organisations are around modern marketing technology.

Today’s companies are under pressure to understand narrow customer segments, even down to individuals, and deliver targeted messaging before their customers click off somewhere else. A troubling byproduct of this is that organisations are engaged in a far more complex juggling act.

Organisations that once enjoyed the luxury of time to test and roll out new initiatives must now do so in a compressed period while competing with tens or hundreds of existing (and often incomplete) initiatives,” note the McKinsey report’s authors.

In this dynamic and fast-paced environment, competitive advantage will accrue to companies with the ability to set new priorities and implement new processes quicker than their rivals.

Digital tools

In response to these challenges, a number of companies have developed various digital tools for helping companies better manage change in the current business environment. McKinsey notes that many harness the real-time collaboration and communication features of emerging B2C technologies such as Fitbits and smart watches to support organisational change programs.

Wearable technology, adaptive interfaces, and integration into social platforms are all areas where B2C companies have innovated to make change more personal and responsive,” note the authors of McKinsey’s report. “Some of these same digital tools and techniques can be applied with great effectiveness to change-management techniques within an organisation. Digital dashboards and personalised messages, for example, can build faster, more effective support for new behaviours or processes in environments where management capacity to engage deeply and frequently with every employee is constrained by time and geography.

McKinsey cites five key areas firms need to ‘digitise’ in support of successful change management programs:

  1. Provide just-in-time feedback;
  2. Personalise the experience;
  3. Sidestep hierarchy;
  4. Build empathy, community, and shared purpose;
  5. Demonstrate progress.

Addressing the first point, McKinsey cites the recent experience of a beverage company losing market share and going nowhere in the highly competitive and geographically vast African market. The board realised that in order to reverse its fortunes it had to motivate some 1000 sale reps to sell more and faster.

In response, it set about implementing an SMS system to keep sales reps — often on the road for weeks — plugged in to the organisation. Two to three times a day the system generates SMS messages containing personalised information as well as customer and market insights. Specific examples include messages with feedback on which outlets had placed orders under target, or messages alerting reps to things like special events or demand trends requiring more stock.

Impressively, rates for cross-selling and upselling jumped to over 50 per cent, up from four per cent, just days after the system went live. Within the first year, gross margins increased by $25 million, turning a 1.5 per cent market share loss into a one per cent gain.

In another example, a rail yard reaped real and immediate benefits via a system designed to create more personalised information for workers. It implemented a system that presented only information most relevant each worker at that moment, such as details on the status of a train under that worker’s supervision, the precise whereabouts of each of the trains in the yard, or alerts indicating which train to work on.

The same system has been effective at supporting more direct communication between workers on specific projects, removing wasted time and resources by bypassing middle managers. “For example, if the person in charge of the rail yard has a question about the status of an incoming train, he or she need only log into the system and tap the train icon to pose the question directly to the individuals working on that train,” say the report’s authors. “Previously, all calls and queries had to be routed through a central source. This ability to bridge organisational divides is a core advantage in increasing agility, collaboration, and effectiveness.

Something which fails to garner enough attention within organisations, in particular in the context of change management, is the importance of instilling empathy and a sense of shared purpose.

Part of the reason is that it’s traditionally been quite difficult to achieve — especially when teams are operating in different locations — but a number of tools are emerging to support better esprit de corps, as McKinsey refers to it.

The report’s authors cite things like shared dashboards, visualisations of activity across the team, “gamification” to bolster competition, and online forums where people can easily speak to one another. Examples of the latter include linking a Twitter-like feed to a work flow or creating forums linked with leader boards, enabling staff to share views on how to improve their rankings.

A leading global bank bolted something similar onto its HR department, developing dashboards identifying vacancies; hiring requisitions made and approved; candidates identified, tested, and interviewed; offers made and accepted; and hire letters issued.

This transparency and openness built a shared commitment to getting results, a greater willingness to deliver on one’s own step in the process, and a greater willingness to help one another beyond functional boundaries,” say the authors.

The fifth element ripe for digitisation in the change management to-do-list is demonstrating progress — something especially important for those not at the immediate front line of a project.

Digital change tools are helpful in this case to communicate progress so that people can see what is happening in real time,” McKinsey notes, adding that the ability to record and present individual contributions can be especially powerful.

We have seen how this type of communication makes the change feel more urgent and real, which in turn creates momentum that can help push an organisation to a tipping point where a new way of doing things becomes the way things are done,” the report’s authors observe.

In short, the sorts of features and capabilities now driving mainstream B2C services and interactions have powerful applications for pulling change management out if its village idiot status amongst the leading business disciplines.

However, McKinsey offers a caveat.

It’s one which applies aptly for most technology-driven endeavours, which is for firms to have a clear idea about the behaviours they are seeking to change and the overall objective, being careful not to let the tool drive the solution.

About the author

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David Binning is the founder and principal director of AwesomTech Media and Public Relations. He is also a former editor and journalist with 20 years under his belt.

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