Pivot Capability Written by Ian Pringle

10th February 2016

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Businesses need to constantly scan the environment to detect early signs of change that could impact the business. There are examples all around us of businesses that have failed to recognise these changes until too late and have, in some instances, paid the price. Think of the growth of video and music streaming and the impact that has had on retailers such as HMV or rental firms such as Blockbuster.

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The challenge for the leadership team is to simultaneously focus on the job in hand, delivering this years performance, while at the same time trying to build a different future. The term ‘pivot’, introduced by entrepreneur and venture advisor Eric Ries in an article on Lessons Learned a couple of years ago, is used to describe how smart startups change direction quickly, but stay grounded in what they’ve learned. They keep one foot in the past and place one foot in a new possible future. So how does this idea apply to much larger businesses?

The day job requires a clearly developed and communicated strategy. Business systems, procedures and policies are introduced to ‘de-risk’ the execution and managers and employees work within them to deliver the goals and objectives. Many businesses are good at doing this and there are few that do not have some form of continuous improvement to underpin performance. A level of bureaucracy develops that ensures things happen as planned. Everyone knows what is needed to succeed and it feels like things are under control.

But what happens when you are thrown a ‘curve ball’, and something happens in the environment that threatens the status quo? The strategy is revisited and course corrections are made, often intended to be transformational. Huge energy is consumed as new teams are formed, communication goes into overdrive and quite often a new organisation is created. Experienced managers and employees often see this as ‘moving the deckchairs on the Titanic’. After several months it becomes apparent little has changed; the business, in the main, is still doing what it always did. The change programme is not delivering fast enough and the threat on the horizon is now very evident in the backyard.

Understanding culture and capability is key. As a rugby fan I was shocked by England’s poor showing in the 2015 World Cup. The decision to go for a line out, the traditional power game of England, in the game against Wales, when a 3 point kick would have secured a draw and almost certain qualification for the quarter-finals was disastrous and ultimately cost England a place. The Economist (October 16th) reported that, based on data drawn from tier one matches, the chance of success from a 5 metre line out was 9.8%, however the chance of success from a penalty kick from this range and angle was 70%. The three points would have secured a draw and a 73.4% chance of going through. A very vivid, and painful example of not understanding capability and following a natural reflex when a different approach was better.

How many companies believe, probably passionately, that they can effect change when the numbers (more than 70% of change initiatives fail) clearly suggest otherwise? The culture of the organisation has over time developed to be aligned with the strategy and ‘how we do things around here’. Current performance is what will secure my job and possibly my bonus. For most people, most of the time, their focus will be on doing what they have always done.

James Belasco wrote about how you teach an elephant to dance. In my experience you don’t; elephants were not created to dance. They do not have the elegance, agility or nimbleness to dance. At best they will achieve a comic, clumsy parody imitation. Customers see through ineffectual change efforts. An article by John Kotter, published in the November 2012 issue of the Harvard Business Review, may provide a better answer. In ‘Accelerate!’ he highlights the limitations of hierarchy and conventional change management and argues that businesses need to establish a dual operating model to enable change. As he puts it:

“The solution is a second operating system, devoted to the design and implementation of strategy, that uses an agile, network-like structure and a very different set of processes. The new operating system continually assesses the business, the industry, and the organisation, and reacts with greater agility, speed, and creativity than the existing one. It complements rather than overburdens the traditional hierarchy, thus freeing the latter to do what it’s optimised to do.”

The core of the business continues to do what it always has, perhaps with minor adjustments, while a new organisation is set up to create the new vision. As he says this is not an ‘either or’ option but a ‘both and’.

The new organisation is part of the whole but it is not bound by the bureaucracy that dominates the core business. It is more nimble and agile where strategy is a dynamic force rather than a detailed execution plan. As there is less hierarchy it is less risk adverse. The operating style is ‘searching, doing, learning and modifying’ and as there are less people this is more dynamic and responsive. As it is staffed by ‘volunteers’, managers and employees who already see the need for change and want to be involved, they do not need convincing or motivational strap lines. They can keep the team tight while leveraging the whole organisation for technical skills and information. The emphasis is on leadership rather than management. And most important of all in today’s world, they are quick.

Are you facing change in your business and frustrated by the time it is taking to see real progress? Could a dual operating model make the difference? It could enable you to learn from the past and build a different future at the same time.

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