Change without Pain

1
Change without Pain

• Eric Abrahamson
• Harvard Business Review
• July-August 2000

2
Change or Perish?!

• Many companies change and perish. Change is so
  disruptive that it can tear the organization
  apart.
• Sometimes change is more effective when it hurts
  less.
• Companies should stop changing all the time.
• They should intersperse major change initiatives
  among carefully paced periods of smaller, organic
  change.

3
Change or Perish?!

• By using Tinkering and Kludging processes
  companies can manage overall change with an
  approach called Dynamic Stability.
• Achieving Dynamic Stability is more difficult
  than ramming big, hairy, audacious changes.
• Dynamic Stability allows change without fatal
  pain.

4
The Problem With Change

• Change provoke strong resistance from the people
  most affected
• Change-Fatigue
• Aggressive Cynicism
• CEOs seek maximizing growth as quickly as
  possible
• Finely Kumble, Wagner, Heine, and etc
• General Electric

5
The Problem With Change

• Finely Kumble
• Speedily added partners and associates throughout
  the 1980s
• Stephen Kumble I can take about five minutes of
  my life. I can stand to read only one chapter of
  a book. I cant get through the first act of a
  play. All I think about is getting business.
• Finely Kumble collapsed in 1988 amid huge debts,
  vicious internecine conflict and numerous legal
  improprieties.

6
The Problem With Change

• General Electric
• It wanted rapid change but it also knew when to
  slow down.
• GE engaged in two courses of change
• 1980s creative destruction involving massive
  layoffs, restructuring and divestitures
• 1990s boundarylessness, six sigma quality and
  service additions to products (less disruptive)
• By alternating radical change with more organic
  modifications, Jack Welch has carefully
  buttressed the org stability.

7
Dynamic Stability

• Dynamic Stability is a process of continual but
  relatively small change efforts that involve the
  reconfiguration of existing practices and
  business models rather than the creation of new
  ones. It requires
• Tinkering
• Kludging
• Pacing

8
Dynamic Stability

• Tinkering
• Some of the greatest change masters such as 3M
  and Hewlett-Packard are world class tinkerers.
• They go into the corporate basement, so to speak,
  where they rapidly pull together inspired
  solutions.
• With a little tinkering and a lot of expertise in
  marketing and branded consumer products Dow
  Chemical successfully aimed the product at an
  entirely different market.

9
Dynamic Stability

• Tinkering
• The helicopter producer company
• Extremely small production runs, typically 4
• Customization of each helicopter for a specific
  mission
• Market became much more competitive after the
  cold war
• Intense pressure to achieve economies of scale in
  development and production (need to change)
• A history of big, expensive, failed changes had
  made the employees cynical

10
Dynamic Stability

• Tinkering
• The helicopter producer company
• Managers discovered they already had a very good
  product-development model in the companys
  software division. They believed the model could
  be adapted to helicopter production to minimize
  product-design costs.
• They also realized that they could improve
  production economies by using employees who
  already had experience with mass production in
  the auto industries.

11
Dynamic Stability

• Tinkering
• The helicopter producer company
• Barbie doll, was the new production strategy. It
  built a base helicopter that could be dressed up
  with a set of accessories.
• The strategy allowed the company to reap the
  benefits of both mass production and mass
  customization.
• Nothing brand new was created in this instance.
  The auto industry knowledge and the software
  development processes were already in place.

12
Dynamic Stability

• Tinkering
• It does not guarantee successful change. But it
  is less costly, less destabilizing and quicker
  than creative destruction and invention.

13
Dynamic Stability

• Kludging
• It is Tinkering but it takes place on a larger
  scale and involves many more parts. Some of the
  parts can come from outside a companys existing
  portfolio (as they do in mergers and
  acquisitions) but usually the components of a
  kludge are assets lying around an organizations
  backyard, such as skills in particular functions
  or standard technologies or models. It can result
  in creation of a division or an entire business.

14
Dynamic Stability

• Kludging
• Case of GKN
• In the early 1980s contract cancellation started
  to pose a real problem.
• GKN units began to rent out their idle engineers
  for short assignments elsewhere, pulling them
  back to the organization as needed.
• It proved so successful that GKN created a new
  company to manage the hiring out of its own and
  other companies engineers on short term
  contracts.
• CEDU a sophisticated employment agency

15
Dynamic Stability

• Kludging
• Old-economy companies can use kludging
  effectively.
• Not need to invent from the scratch case of
  Barnesandnobel.com
• Barnes Nobles capabilities plus
• Software from Firefly
• List of potential customers from AOL
• Pricing strategy from Amazon

16
Dynamic Stability

• Pacing
• Orgs that have consistently avoided change may
  need to undergo rapid, destructive change.
  Companies that already have been changing rapidly
  face a different challenge. They must learn to
  shift down from highly destabilizing and
  disruptive change to tinkering and kludging.

17
Dynamic Stability

• Pacing
• Case of Lou Gerstner at American Express TRS
• In his first nine months Gerstner launched a
  massive reorganization of the cards and travelers
  check businesses which was accompanied by a
  widespread shift of managers across those units.
• But he had a genius for knowing when it was time
  to rest. He was alert to early signs of
  change-fatigue.

18
Dynamic Stability

• Pacing
• Case of Lou Gerstner at American Express TRS
• No new products were launched and no new
  executives were brought in from outside for 18
  months after Gerstners initial blitz.
• He tinkered constantly to prevent the company
  from drifting into inertia, by playing with the
  structure, compensation system and product
  offerings.

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Four Operating Guidelines

• Reward Shameless Borrowing
• Noodle with what already exists
• Cultures that value creative imitation and
  condemn invention that is wasteful
• Appoint a Chief Memory Officer
• Avoid past mistakes
• Dual function of Steve Jobs

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Four Operating Guidelines

• Tinker and Kludge Internally First
• 90 of Fortune 500 companies borrowed quality
  circles from Japanese in 1970s and early 1980s
  and by 1982, 80 had rejected it.
• 70 failure rate of acquisitions
• Hire Generalists
• Combine disparate ideas, techniques, processes
  and cultures so they can tinker and kludge
• More open-minded and less biased

21

• Thanks For Your
• Attention And Patience