Change Management Strategy: Don’t be reactive

The failure of a reactive change management strategy

There is nothing more constant than the continuity of change, and technology is changing the economy at a faster pace than ever before. Businesses that have an embedded culture of innovation and have a change management strategy are those that will anticipate economic shifts and grow with them.

The benefits of storytelling in the Change Management Strategy

When creating the urgency for change, it’s necessary to build a vision of the future and communicate that vision. Most commonly, business leaders talk about the positive aspects of making change happen, and there is nothing wrong with this. However, sometimes a story of the negative can be equally inspiring.

When Stephen Elop took the helm at Nokia in 2011, he wrote his famous ‘burning platform’ memo which spoke of the demise of the company if it did not do something drastic to halt its decline. The company dumped its own operating system, replaced it with Windows Phone, and eventually sold itself to Microsoft.

It doesn’t have to be a story of how bad things will be for your organisation if it doesn’t embrace technological change. In fact, using real life examples of failure can drive home the dangers of refusing to embrace change more effectively. Kodak is an often quoted example, of course, but a more recent failure was the catastrophic collapse of Borders.

Borders brought to book by failure to change

The story of Borders is one of failure to change and failure of change management strategy. When founded in the early 1970s, Borders changed the way that books were sold to consumers. Previously, bookshops were small, intimate establishments. Borders brought bookselling into the supermarket age. Its stores were large, bright, and well-stocked. By the 1990s, Borders – and Barnes and Noble – had tied up almost half the market in the United States.

Like Kodak, though, Borders failed to see the digital shift coming. Instead it based its entire business strategy on doing what it had been doing for two decades. When it did change strategy, it was hopelessly out-of-step with the market:

  • It aggressively expanded the number of stores it ran. To do so, it loaded itself with debt.
  • To thrash out the best rental deals, it saddled each of its new stores with extra-long leases with severe penalties on breaks.
  • It then massively upgraded its selection of books, increasing its inventory to unsustainable levels.
  • In 2001, it gave over control of its internet sales channel to Amazon.
  • Looking to turn around flagging sales, it ventured into stationary sales and bought Paperchase.
  • It then broadened its market into CDs and DVDs
  • It ploughed hundreds of millions of dollars on buying its own shares in 2005 onwards
  • It eventually opened its own website to sell books in 2008
  • Eventually it launched its own ebook reader, the Kobo. By this time the company had so much debt that Kobo was hugely under-supported.

From innovation to strategy starvation

When it was founded, Borders was a forward-looking, innovative organisation. It disrupted its market, and stormed to a position of dominance. It was the book market’s equivalent of Kodak. But it became complacent.

It failed to take notice of what its audience wanted, and carried on regardless. When it did notice shifts in its traditional marketplace, it reacted slowly. It had changed from being a proactive organization into one that was fearful of making mistakes. Consequently it did make mistakes.

Borders massively underestimated the consumer shift to all things digital, and then tried to fight fires as the market shifted:

  • It placed a massive bet on paperbacks, at exactly the time the market had begun to embrace electronic books.
  • It placed a second massive bet on stationary, at exactly the time that the consumer was moving to email and electronic cards and businesses were moving to data storage and away from hard copies.
  • Then it began offering CDs and DVDs just as the consumer was becoming excited by digital downloading of music and film.
  • When it eventually opened its own website, it did so after Amazon had released its first Kindle eBook reader.

Learning a lesson on the Borders of change management

Saddled with huge debts from a misplaced change management strategy, Borders could not catch up with competitors who had stolen a march in the new digital age.

The cause of Border’s ultimate demise was its success.

This success made it complacent. It stopped listening to its audience. It became reactive, instead of proactive. And maybe that is the biggest lesson that businesses can learn from failures such as Kodak and Borders.

Reactive organisations will always be behind competitors: ultimately that spells failure.

In my next article, I’ll take a look at a 3 step strategy to be proactive at managing change in your business.

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