Companies are still facing an era of unprecedented and continuous change. In fact, perhaps the most striking feature of today’s business environment is its dynamic nature. While change is often unexpected and disruptive, companies that adapt quickly can gain a competitive advantage. I’ve said this many times in the past, and it still rings true today. It’s been awhile since my last post, and just when I thought it was safe, they pull you back in again. If you don’t recall, I’ve been heavily engaged in a massive IT transformation project for a very large multinational corporation for the past year and a half. This corporation has multiple business areas with multiple business units under those areas. This creates an environment where the very idea, or mention, of change is extremely scary for a lot of the executives I’m dealing with. I’m finding out quickly that the concept of portfolio management is not a widely grasped concept and is relatively new to many.
Portfolio management processes play a critical role in determining how well an organization responds to change. In addition to enabling portfolio management in organizations, these processes also improve general transparency, discipline, and trustworthiness. Together, they link different business functions to integrate change management capabilities.
Since people are the most critical asset in any organization, I’d like to explore the role that processes play in allowing your people to respond to changes in their environment, individually and collectively.
During the peak of the radical corporate reengineering era of the 1990s, the dominant approach to addressing organizational change was to treat it as a one-time event. One analogy described the organization as normally existing in a stable, “frozen” state; the status quo was “melted” by a change event and then “refrozen” into a new norm. Yet another view described the impact of change and subsequent loss of familiar stability as something akin to adjusting to the loss of a loved one, with periods of denial, grief, and ultimately acceptance.
Clearly, these concepts treated change as a more or less infrequent and often jarring event, followed by a relatively stable period. Because change events were considered relatively rare and unique occurrences, there was little reason to have standard policies and processes to manage them. Today, we view change as a constant reality for modern organizations; we are always in a state of change.
For the past eighteen months, this organization has come to the confidence-shattering acknowledgment that there are certainly abrupt, significant events that severely disrupt or fundamentally transform its businesses. When faced with this revolutionary change, it has mobilized to manage the impact. The challenge here is that its change management processes were pretty much nonexistent; therefore, it has not handled change well, and change has created a lot of animosity and doubt.
Change, of course, has always existed. Historically, the most successful organizations have not only accommodated change, but they have used it to their advantage. However, the amount of change being injected into their business lives has been coming at a rate they have never seen before, and there is no apparent slowdown in sight.
As we conducted workshop after workshop on how to address this, we finally broke through and gained a full group understanding that it is all about operating successfully in a dynamic state in which change is the norm, not the exception. This customer has finally come to an understanding about the following three aspects of change:
- The rate of change has greatly accelerated over the last fifty years. Some product lines that once had a viable lifespan of twenty years or more now have a lifespan of less than seven years, with the lifespan of individual products sometimes lasting less than a single year.
- The scope of change has expanded. An entertainment company no longer focuses on introducing a film for distribution only to theaters in the US. Now it has distribution around the world, and not just in theaters but also on regionalized DVD and now streaming services.
- The enablers of change have proliferated. There are new technologies appearing every day that can help improve internal and external processes; foster new relationships with suppliers, vendors, and customers; and open up new ways of delivering their goods and services. This customer has still not fully embraced the true power of the internet itself as one of the greatest enablers of change, stimulating the digitization of what had previously been tangible goods and services. The fear that is so prevalent in this company around the expanded sources of competitive threats has crushed its capacity for innovation and adaptability.
I have consistently put forth the question to my internal team and to some of the customer executives, “How much change are you capable of absorbing at any given time?” Just as there are limits that constrain change in the physical world, there are limitations to change in the business world. Examples of such constraints include the abilities to acquire and employ funding, analyze and act on new data, access specialized competencies, redirect corporate strategy, and even leverage scientific discoveries for some of its business units.
As individuals, people routinely demonstrate great ability to change. Certainly, as individuals, we are remarkably resilient, adaptable, and flexible, extreme g-forces notwithstanding. When facing personal adversity, given a promotion, changing employers, or embarking on new careers, individuals routinely adapt to new situations in a matter of days or a few weeks, sometimes overcoming seemingly insurmountable challenges.
However, when grouped in an organization, people respond to change in a more complex way. Change in a socialized context takes on a whole new set of dynamics. Why can’t an organization collectively change as nimbly as the individuals within it? The short answer is that change applied in an organizational setting often forces the people affected to simultaneously adapt and adopt new methods to deal with each other, representing the greatest challenge to the organization. When single individuals are faced with changes in a new situation, there is usually an existing foundation of operational norms and support from others around them. Such is not the case when change impacts the entire organization.
Thus, the ability of an organization to evolve is limited in large part by how well its workforce can adapt by retooling itself to work differently. We continued this vein of conversation around portfolio management as a way to manage this change. We showed that portfolio management offers the process framework to communicate changes and reestablish the rules of the new future state. It can offer the workforce the assurance that there is a plan and it is being executed for a purpose.
In all my years of consulting, I’ve come to the conclusion that people require explicit guidance to operate as an efficient unit. In our society, we have guidance through behavioral norms, politics, laws, and social standards. In a business, processes establish the standards, rules, and related methods for communications and teamwork. This company has definitely written policies and processes about how to do operational planning, investment analysis, and work and resource management. However, it isn’t really using portfolios, and it hasn’t really applied them as an organization-wide set of processes.
A measure of the maturity of portfolio-management processes is whether your organization handles change as a normal part of business. No questions, no arguments; it just works. This customer is still a major work in progress, and it knows that it lives in a world of accelerating change. To thrive in this world, it must be able to embrace change quickly, thoroughly, and efficiently. Its traditional enterprise model has always emphasized just the opposite view: that change is not the norm, but the exception. The reality that has smacked it alongside the head is that ever-more-rapid change is the norm, and it must evolve its enterprise model, people, processes, and technology to acknowledge that truth.
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