LCOR in Action: Case Studies of Leading Change

Roughly 10,000 executives have attended the ‘Leading Change and Organizational Renewal ‘ (LCOR) program at HBS and Stanford over the past 25 years. Each participant brings a different challenge to solve: “I want to make my company more responsive to change”; “we need to accelerate execution of our strategy”; and, “our growth efforts are start, stop, with new ventures struggling to succeed.” They leave LCOR with a new way of looking at these challenges and a methodology they can replicate to overcome them.

What my co-leader at LCOR, Professor Charles O’Reilly, and I are learning is that the story doesn’t end there. Many of our LCOR participants take the opportunity to use this approach and design new ways for leading change within their corporations. I wanted to showcase a few of these approaches. I can’t share all of the company names, as some of the information is confidential.

LCOR in Action: 4 Approaches

Strategic Leadership forums – executives at firms like CSC, Moody’s, and General Dynamics have turned LCOR into a workshop to align senior leaders around a plan for executing a new strategy. Many CEOs I meet struggle with what one of them calls ‘permafrost’ at the layers of management one or two below the senior team. This workshop gets this population actively engaged in a change effort.

At CSC, the SLF is a multi-day strategy workout in which teams first work to understand the new strategy – a step that’s easy to miss, but crucial to building commitment to the shared goals – and then analyze what it will take to be successful. In these sessions, Charles and I share some of the research on the sources of ‘inertia’ in corporations and how to overcome it. However, the bulk of the time in these forums is focused on applying the problem-solving methodology that we teach to the specifics of how to execute the strategy.

We’ve witnessed real turning points at these sessions, where leadership teams confront tough issues and take collective ownership. This kind of clarity generates momentum quite different to a regular corporate workshop. It’s not appropriate for us to give specific business advice, but in a number of cases, these sessions have made a major contribution to business performance.

Change Sprints – one well-known technology firm has taken application of the methodology to the next level through what they call a ‘Sprint’ process. Sprints break a change program down into manageable components and keep executives motivated to implement them. This particular firm has found that this approach has unleashed extraordinary enthusiasm within middle management – they see it as a way to act on issues that they have known about, but have been unable to do anything about. The Sprint approach contains and directs this energy towards a clear purpose.

At LCOR, we talk about how change programs are frustrated by politics and the power of informal, social networks. The Sprint process appears to have helped this firm to bypass these barriers by making the change program open and inclusive. They’ve done this with transparent reporting of recommendations, achievements, and barriers.

Strategy Process – many firms find that their annual strategy process has a bias toward incremental improvement rather than tackling major, perhaps more risky, opportunities, and that there is very little focus on how to execute the strategy across the organization. A few firms – IBM being the most notable – have elected to embed LCOR directly into the strategy process. The goal is to use the model, which links strategy to execution to business results. It is a framework that allows senior leaders to talk about what is most important, rather than simply going through the motions of writing a strategy white paper.

A strategy process built on LCOR principles starts by identifying the largest performance and/or opportunity gaps that the business faces – these are quantified statements of the key issues that need to be addressed, e.g. “we are losing share to competitors,” or “our new product innovations perform below expectations”. Then they embed the logic of clarifying the strategy and doing root cause analysis on the gaps (i.e. “why do we have a gap?”) This drives an authenticity of conversation that is wholly different to the ‘kabuki drama’ of many annual strategy processes.

Dialogue and Common Language
I should also say that Charles and I have been delighted to take LCOR into companies sharing some of the insights that we teach our students with executive teams. The value of this type of education is that it helps form a common language about how to describe and address some of the major issues facing a corporation.

Conclusion
One of the most exciting things about being an academic is watching people put your ideas into practice and seeing them make a difference. Through SLFs, Sprint Teams, Strategy Processes, and Dialogue that’s what’s been happening. I celebrate the diversity of these approaches and would love to hear from former students and colleagues about what they are doing to renew their organizations and lead the next wave of innovation in their respective industries.

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Bridging Present Capabilities and Future Success with @MichaelTushman Organizational Ambidexterity

Really enjoyed guest lecturing at IESE Business School in Barcelona.

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ASTD Lifetime Achievement Award–Thanks and Thoughts

This week, I received the American Society for Training and Development’s Lifetime Achievement Award. I’m thrilled to accept this award and honored that ASTD would consider me.  As training and development professionals, you play a critical role in the lives of the corporations you serve.  Training and investment in people is a fundamental enabler of everything I’ve taught at Columbia, HBS, and through my work at Change Logic.

That said, I have a challenge for you: we can easily teach formulas and processes, steps, and easy answers to challenges business leaders face.  The real world is full of complexity and uncertainty.  Leaders struggle with how to do things that look and feel contradictory.  How do we drive the social purpose even as we drive the profit?  How can we be entrepreneurial and disciplined? How do we explore into new markets and reinvent ourselves even as we continue to build our core markets.  How do you deal with these tensions? In my work with Change Logic, I’ve seen leaders and firms change;  I look forward to seeing more of you join us on that journey.

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LCOR Webinar

This past week, I participated in an LCOR Alumni Webinar with my colleagues Professor Charles O’Reilly and Andy Binns. Participants raised some excellent questions ranging from how to overcome resistance to the increased importance of crowd sourcing. For those of you who were unable to attend, I’ve included some of the more provocative questions here:

Q1)  There are many sources of resistance. But the one that I encounter which I find difficult to tackle, is stealth resistance, meaning paying lip service, but actually doing things that effectively sabotage the change effort. And this goes across all levels: from staff to senior management. Love to hear your comments / suggestions on how to deal with this.

A1) Stealth resistance is the worst kind. On one hand, you go into a meeting, and people nod their heads and say, “Yes, I’m supportive,” and then they go and they either drag their feet or actively resist.  One of the potential solutions is to shorten the feedback loop by asking people to provide a deliverable/result.  It will become pretty clear that those who are not delivering are likely the ones resisting.

Q2) One of the examples used in 2012 session of LCOR at Stanford was crowd sourcing. We found a selective implementation of this idea as one of the ways to change direction in the face on institutional inertia. Much of the work still remains, but it gave us a great start. Could you say a few words about how crowd sourcing contributes to Ambidexterity?

A2) This is a big deal.  The locus of innovation, in many industries and in many conditions, is shifting to the web.  It brings the cost of innovation down, and the extent to which you can deal with identity and cultural issues in collaborating with the crowd, the more effective, and less expensive the innovation can be.  It brings this topic of Ambidexterity to a different level where you have to build different business models within the firm and outside of the firm.

Q3)  Back in 2009, we discussed the “so what’s next” question, i.e. what would companies do once they have moved towards a more customer-centric culture? We said that the next phases for an organization would be about 1) shrinking the core (strategic outsourcing) and 2) expanding the periphery. Did you expand on these recommendations? Do you have any other insights?

A3) Actually, I disagree with the idea of shrinking the core. At Harvard and at Stanford, for example, we’re dealing with the implications of web-based learning.  Our challenge is not to shrink the core–the core here being research–but to strengthen the core.  If we don’t do great research, we don’t have anything to offer.  We need to bolster the core, and work at the periphery because we cannot do it alone.  The Harvard/Stanford collaboration is a great example.  Our challenge is not to shrink the core, but to strengthen the core.

If you have further questions, or would like to continue the discussion, please post in the comments section.

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Re-examine and Re-imagine

I recently came across an article by Peter Cohan on Forbes.com, written in August of this year, that suggested that IBM is slipping in its ability to innovate, and could learn something from Novartis and P&G.  While he makes some interesting points, I couldn’t help but wonder, when he suggested the concept of explore/exploit, why Ciba-Geigy was his prime example.  In fact, IBM was one of the first and most well-known companies to embrace this concept.

In the early 2000s, IBM launched 17 distinct ‘greenfield’ business initiatives under the Emerging Business Opportunities (EBO) banner.  A former senior executive recently told me that these generate approximately 40% of corporate profits. I worked with Professor Charles O’Reilly from Stanford GSB, and Andy Binns, Managing Principal of Change Logic, to support formation of these EBOs. They were led by my colleague at HBS, J Bruce Harreld, then SVP of Marketing and Strategy at IBM.

If IBM is facing a genuine downslope as the Cloud challenges its Services-Software-Hardware business model, it will do well to look at what worked in the past. They may not repeat the great reinvention led by Sam Palmisano, which placed them so squarely ahead of peers like HP. However, they could re-examine and re-imagine their innovation processes, and perhaps be inspired by other companies’ examples of  leading disruptive change. Certainly, I see IBM as a poster-child for reinvention across multiple generations from counting machines to business services. I see no reason to count them out.

What IBM has taught the world is how to incubate new businesses from within and test-and-learn your way to new growth. My Change Logic colleague, Andy Binns, wrote a helpful blog entitled “5 Practices for Corporate Experimentation and Innovation” that describes some of these approaches.

There is every reason to believe that by relearning the capacity to both defend its core and explore new value creation possibilities, IBM will be able to beat digital natives like Amazon and Google, and define yet new areas for growth.

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Victors and Spoils

Prof. Mike Tushman Follow@michaeltushman
Prof. Mike Tushman
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In this weekend’s NYT Magazine, broccoli got a make-over, thanks to Victors and Spoils, a division of Havas Worldwide.  While ad agencies are changing the way Americans eat–for the better–Victors and Spoils is doing the same for its own industry.  What the NYT Magazine article glossed over was that Victors and Spoils is the first agency to apply crowd-sourcing techniques to their process.

V&S is disrupting the ad agency model by bringing mass ideation from crowdsourcing and applying heavy curation.  In 2011, they had over 5000 creative professionals in their database. They take the raw materials from this crowd and then develop the most promising ideas for their clients. Producers are ranked; the more successful you are, the better your reputation within the community. Eventually, those with proven ability get the opportunity to take on new responsibilities and lead projects. Once promoted, creatives get an up-front payment for what they produce.

What’s particularly interesting is that Victors and Spoils will take a brief, determine what type of team they need, and piece together individuals from their database to create the best ad-hoc team.  They are no longer bound to the same x number of  people within their agency. (There’s a great panel discussion on youtube that covers this in more detail).

The crowd-sourcing model has the potential to disrupt other industries as well, and not just start-ups.  Lego is doing it.  Harley Davidson is doing it.  BMW and Fiat are doing it, too.  What are your favorite examples of companies that are using crowd-sourced techniques to transform their industries?

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