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Strategic changes should take context into account

By Bidhan Parmar,

The big idea: Many business leaders struggle with implementing strategic change. When managerial change efforts fail — and research shows they often do — the results include wasted time, effort, money and initiative. Often, the cause of failure is not ill-conceived plans but rather leaders who have underestimated the importance of context in shaping their plans.

The scenario: James Chen was a rising star at Altic Systems, a global business software firm. He was a regional vice president, overseeing sales, marketing and development. When profitability began to dwindle, he created a collaboration strategy intended to align sales and development to reduce costs, increase sales and deliver better products to customers.

After several months, Chen wondered why his plan was so difficult to implement. The sales reps and developers did not work well together; the two groups had different cultural assumptions about competence. Sales managers tended to be more gregarious and looked down on the more introverted developers. Developers found the sales reps to be arrogant.

In addition, performance reviews were done on different timelines and did not emphasize cross-division collaboration. So each group aimed to maximize its own departmental metrics. Finally, the sales and development departments were housed in different parts of the company campus, making collaboration less likely and meetings more formal. Chen struggled to change the entrenched behaviors. In this environment, people weren’t doing their best work.

Chen had to decide whether to stay the course or find another way to restore profitability. He had become the public face of tough strategic change, and changing course would certainly damage his credibility.

The resolution: As an analogy, think about what determines the success of a species moving into an ecosystem. To survive, it needs food, water and a lack of such threats as predators. Successful adaptation is largely determined by the fit between the species and its new environment.

Similarly, Chen’s new strategy is embedded in an existing organizational context, consisting of real people who have habits, problems, solutions, strengths and weaknesses. Before jumping into implementation, Chen needed to understand how organizational context would shape his plans, and this is difficult to do without working with stakeholders. To be successful, change leaders need to develop a deep understanding of their company’s ecosystem: assumptions, artifacts and interactions.

First, identifying assumptions is critical. They frame what stakeholders think and believe about the plan. In Chen’s case, sales reps and developers did not assume collaboration was valuable.

Second, leaders need to pay attention to artifacts, the physical objects in a company that shape behavior. The separate buildings on campus and performance evaluation rubrics made collaboration harder to establish.

Finally, interactions can create opportunities or barriers for change efforts. Acknowledging differences in work style enables leaders to structure interactions better.

The lesson: Chen needed to understand the existing ecosystem of assumptions to design an optimal approach for implementing strategic initiatives. He needed to involve stakeholders earlier not only to increase their commitment but also so that implementation would benefit from their ideas.

— Bidhan Parmar

Parmar is an assistant professor at the University of Virginia Darden School of Business.

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