In a  whitepaper by IBM, where after surveying 1,541 global CEOs they found that ‘conquering a growing sense of complexity’ was a key competency CEOs were focused on developing.

IBM noted that in previous studies, “that coping with change was their most pressing challenge.” Whereas now, in this most recent study, complexity is the fundamental challenge. “CEO’s told us they were operating in a world that is increasingly volatile, uncertain and complex.”

Interestingly, of the Banking and Financial Markets CEO’s interviewed, told IBM, “they feel ill-equipped to cope with this drastically different world.” Causing IBM to summarise, “Banking and Financial Markets CEO’s face a ‘complexity gap’ that poses a bigger challenge than any we’ve measured in the eight years of research.”

The whitepaper identifies an overarching philosophy that the most successful leaders adopted to challenge complexity as: “creativity [being] the most important leadership quality.”

This is followed by three core areas of focus to manage complexity:

• Simplifying operations and products
• Increasing dexterity to change the way they work, and
• Manage complexity on behalf of their customers.

Can management emerge from the downturn in better shape?

Some organisations have emerged much stronger businesses post the financial crisis, and IBM identifies that: “people who lead them feel much more prepared for complexity.”

A Banking CEO in hungry tells IBM, that “Decisions need to be guided primarily by customer needs- even the on the CEO level.” And goes on to say “the large majority of, Banking and Financial Markets CEO’s, like other CEOs rely on quick decisions.

A focus on customer intimacy

The whitepaper offers the insight that “the majority of Banking and Financial Markets CEO’s put getting closer to customers at the top of their agendas.”

Plans for simplification: “Banking and Financial Markets CEO’s are especially intent on simplifying their products and delivery processes to better manage complexity more effectively.”

Where, “the most dexterous CEOs are also much more intent on reducing their fixed costs and increasing their variable costs, so that they can rapidly scale up or down.”

How to build strategic and tactical agility in your business

IBM pose several questions to ask yourself and your team in strategic planning, (note that the most successful companies also had defined strategic planning processes that where independent of the annual review cycles.)

Questions to ask

• How will you develop creativity and the ability to handle ambiguity in your leadership team?
• How are you engaging your clients and customers to both help them manage complexity and reduce complexity in service delivery?
• What steps are you taking to design simpler processes and products?
• Are you designing your processes around the soft side of customer interactions?

This morning, at a regular meeting to discuss projects I am consulting on, the senior buyer, and department manager declared it was time to review this meeting. He though it was achieving some goals for him but it was time to review the content and if it could be made still better.

It can be, most definitely.

But that’s not the point.

The point is, this is what good managers do; they review and instigate change when things are successful and working well.  In fact this is the best time to introduce change and innovation, as you have momentum and have far less to lose than when change is forced upon you.

The management process lesson here is this:

1. It’s best to change when you are succeeding
2. Re-examine goals frequently.

If goals and projects no longer make sense; drop them. Add new ones and innovate, and if they are working well, poor the coals to on ‘em.

Bill Gates, in his book, Business at the speed of thought, quotes a study that 42 percent of all business reengineering projects were abandoned prior to completion. This survey was conducted in 1996, and based on my experience I’d say this holds true just as much now as it did then.

Gates goes on to say “Projects of only three to four months’ duration are going to have much lower failure rates.” It was true when he wrote the book in 1990’s as it is now.

“With short projects you are forced to make important trade-offs that will drive you to simplicity and focus. You’ll end up with goals that can be executed.”

Strategically, simplicity and focus, are critically important. I often come across six sigma people who want to rid the world of variation, and find statistical correlation between activities, and revenue generation where logically none can possibly exist. 

For example, I’ve been helping a banking division foreign exchange sales team improve their sales throughput, the common question was how to manage the volatility of the market which causes spikes in inbound customer demand. The short answer is you don’t. It cannot be done.

Instead simplicity is the answer. Maintain a buffer of resources available on any given day in-case there is a spike. Maintaining a buffer is certainly more expensive; however is more than off-set by the increase in revenue by being available during peak periods of demand.

Projects sometime fail. This is because projects – especially reengineering projects – are dealing with uncertainty. Much of the work has never been done before. It’s a bit like renovating a house; building principles are known, but you don’t know what behind the wall your about to knock down. Finding out may change the entire project or stop it all together.

Breaking down projects into smaller chunks gives you strategic agility to manage uncertainty, allowing teams to make changes quicker, and prevent resources being allocated to a doomed project.

Gates articulates it well,

“If short projects fail—and a few do, for a variety of reasons—your loss in time and money is much smaller. It’s far easier psychologically to pull out and redirect your development team when people haven’t spent a year of their lives working on a project that is now going down the tubes.”

Breaking down projects has another benefit, it makes planning easier by reducing uncertainty. In report on factors contributing to BPR success said “Participants overwhelmingly indicated that the planning stage, where scope and roles were set, was the most important phase in the project.”

If you’re about to embark on a large reengineering project, or involved with one now. Consider breaking it down into 3 to 4 month intervals. Focus on delivering value during these periods, giving a two-fold effect of usable value sooner and less risk overall.

‘Helping Leaders build great organisations”

www.DanielLockConsulting.com

(C) Daniel Lock.

Innovation is carried out by many Australian businesses both big and small. The ABS in its summary of IT Use and Innovation in Australian Businesses for 2005-2006, reported that 38.9% of Australian businesses are implementing innovation.

According to the report, approximately 21% of businesses are introducing new operational processes. About the same proportion (19%) is introducing new goods and services, while new marketing methods are being introduced by 14% of businesses. However, most of these are large businesses: 74% of those that implemented innovation employed over 200 people, while only 49% of those with 5 – 19 employees did so.

In terms of broad industry categories, those implementing an innovation during the period were manufacturing (45%), services (38%) and mining (36%)

Facts and Statistics

Results of the ABS 2005-2006 Business Characteristics Survey (BCS) revealed some significant statistics. In this survey, the Health and Community Services and Personal and Other Services were included as additional sectors. It also expanded the survey population by including those with 0-4 employees.

This change in the survey population and the level of stratification made the current results different from those of previous years so data contained in the two years should not be compared.

Innovation can be classified into four. These are product innovation (goods and services), process innovation, marketing innovation and organizational innovation.

Summary of the 2005-06 Survey (Source: ABS, 8166.0)

* Calculated as a weighted average of industries in ANZSIC93 Divisions D to L, O, P and Q.

The basis of these innovation surveys, and the ABS definition of  ‘innovation’, was the Oslo Manual (3^rd edition, 2005, OECD/Eurostat).

“An innovation is the implementation of a new or significantly improved product (goods or services), or process, a new marketing method, or a new organizational method in business practices, workplace organization or external relations.” To be considered an innovation, the process or method must be new or a significant improvement of that already in place.

The Four Types of Innovation

1. Product innovation refers to new or significantly improved goods and services as to their characteristics or intended uses. Examples are significant improvements in components, materials, technical specifications, ease of use, the software involved or any other functional characteristic.
2. Process innovation refers to changes in production or delivery methods, including equipment and/or software and innovative techniques.
3. Organizational innovation refers to new organizational methods that are implemented in workplace organization, business practices and external relations.
4. Marketing innovation involves new marketing techniques that involve changes in product packaging or design, product placement, product pricing or promotion.

In summary, then, a significant number of large Australian businesses are innovative in nature, while smaller companies tend to be less so. Innovation is a must for any business that wishes to retain their market share, or even improve it, in difficult financial times such as these.

Innovation can save money and increase productivity, and there are few doubts that new product designs are attractive to the consumer.

‘Helping Leaders build great organisations”

www.DanielLockConsulting.com

(C) Daniel Lock.

[youtube=http://www.youtube.com/watch?v=JgRbyiVLNJU&hl=en&fs=1]

This 10 part video series “How to Develop a Winning Strategy” was filmed at National Speakers Association Australia event in Adelaide. I will post the 10 video’ here each Friday.

You’ve got a burning passion and you want to share it with the world.
The current economic conditions pose opportunities and threat. You need a strategy and you need it quick.
You have no time for theory and jargon, and you don’t need to change the world, just pragmatic strategy that delivers bottom line results.
This seminar will show you tips, and tools so you can develop an effective strategy for your organisation.

Learn tools to help you learn:

• How to identify your strengths
• How to create a ‘Star’ business model
• How to commercialise your skills
• How to make your speaking career into a ‘machine’

For business to thrive in any times, let alone current turbulent times, the leaders must identify the driving purpose. Not only for the business but for themselves. It is “purpose,” the “why we do the things we do,” that is the driving force.

If turbulent times are good for anything, they are good for getting in touch with ourselves and shedding unnecessary weight that we have been carrying.

From our purpose flows, our identity, values, beliefs, decisions and actions. When a smoker simply tries to stop smoking (action) without getting this new behavior aligned to their highest purpose they destined to failure, as they haven’t changed their identity and values.

Say for example, if their purpose is to be a role model for the children so they grow up to be world leaders, then this person will value health, and shift their identity to a non-smoker.

“Be master of mind rather than mastered by mind.” ~ Zen Proverb

So too in business. Getting clear on the purpose for the business at the highest level will set the tone for the values and culture of the organisation. The values and behaviours will change as a matter of course because the employees can see the purpose.

Change programs focused on re-engineering, process improvement and systems design such as Kaizen, Lean, Six Sigma and TQM have a proven track record in revolutionising processes resulting in improved quality, efficiencies and reduced costs. The challenge comes in the implementation, which is the focus of this discussion paper.

Executive Summary
Change programs focused on re-engineering, process improvement and systems design include methodologies such as Lean, Six Sigma and Kaizen for increasing quality and decreasing process costs. They have been used around the world in major organisations including General Electric, Starwood Hotel Group, Motorola, Westpac and American Express with outstanding results.

Six Sigma evolved from TQM in the 1980′s and was first fully implemented by Motorola. It was made famous by Jack Welsh at GE where it was used across all aspects of the business from manufacturing and engineering to finance and television networks.

In my own experience I have seen the power of it first hand when it was introduced at a major Australian bank. In the very first project as manager of three teams combined into one I was responsible for facilitating the change management. By effectively implementing the methodologies we reduced the processing time from 63 days to just three, and reduced the staff from 32 to 23. I personally went on to manage several projects and was intimately involved in the roll-out company wide.

The methodology is only as good as the weakest link. The first challenge is the perception that people don’t like change – change isn’t the problem; it’s the ambiguity that’s the problem. In implementing a change management program the major issues are:

• Developing and Fostering Corporate Culture
• Accountability and Structure

Developing and Fostering Corporate Culture
Implementing a quality program is a self imposed change, as opposed to factors that are forced on the business, such as market conditions. Either way these are dramatic and challenging changes. Having been involved in the rollout of quality programs for a major bank and now as a consultant creating change throughout organisations of all sizes; where the change comes from is no little consequence and the processes to deal with it don’t alter either.

The first challenge is the perception that people don’t like change – change isn’t the problem; it’s the ambiguity that’s the problem. People adapt to change all the time. It’s the employees who will need to change behaviour, reward schemes, and outcomes, work habits and culture.

Typical cultural challenges within larger organisations can be outlined as follows.

• Self Interest of powerful individuals and departmental bickering
• Laziness, Idleness, and apathy
• Ill-defined desired behaviours
• Un–identified motivators and de-motivators
• Not involving team members in the change

To counter these issues lets look at the following:

Leadership & Visibility
Key sponsors are very important. The plan is to be upfront and honest, that the success of the initiative is up to them. The strategy is to minimize work they have to do while increasing their exposure. For example they don’t need to attend every meeting but ask them to stand up and vocalise their support for the projects.

“To survive in modern times, a company must have an organisational structure that accepts change as its basic premise, lets tribal customs thrive, and fosters a power that is derived from respect, not rules. In other words, the successful companies will be the ones that put quality of life first. Do this and the rest – quality of product, productivity of workers, profits for all – will follow.” – Ricardo Semler, from the book Maverick.

Ensure management buy-in, the only way to do this is change their objectives. Otherwise the black belts won’t be able to get the air time they need to get around the inevitable road blocks. By aligning the objective and reward systems, focus, attention and behaviour will move in favour of the change effort. But not until. This is a critical point.

Cultivate Zealots
Ordinarily I would say exemplars but for a change initiative such as this, organisations really need zealots. Zealots are people who are passionate about the methodology and the prospective change. They can see benefit for themselves and the organisation as it grows with it. They actively sing the praises and quickly cultivate a positive message.

Look for the following people who, because of organisationally visibility, will have impact.
•    Hierarchical people, eg. Director of Marketing
•    Respected people – top performing sales people
•    People of exceptional expertise, learned individuals throughout the organisations, could also be key clients or customers.

Promote from within the desired culture
The path to promotion into senior positions, be that management or otherwise, must come from having gone through the methodology as a development channel. This could be as a practitioner, or at the very least undergone training and served as a sponsor.

GE set it up this way, and consequently there are possibly thousands of people who have had the training and worked as quality green belts or black belts. This spreads and empathy and understanding on the methodology throughout the organisation.

Communicate, Communicate, Communicate
Communicating to the project team goes without saying, but we must also communicate to the wider department and organisation about what is happening, to build the buzz. Communications is the glue that holds these types of change initiatives together.

But note that too much glue gums up the whole works. My view is to vary where the glue is placed. Communicate frequently and in varied styles. I have found focus groups and feedback forums, work well when combined with email and physical communications.

Don’t forget the one to one and informal corridor discussions. Make sure everyone is singing from the same song sheet and check in regularly on the Chinese whispers. Settle them quickly and decisively.

Cultivate “intrepreneurs”
These are the change agents who, if you don’t give some challenging work will up and leave. Identify these people early and get them onto the initiative.

Give them guidance, and encouragement, in the early days it takes a lot of guts and energy to break through the change barrier. Just like real world entrepreneurs you need people who have tenacity and staying power.

⎝    Small Bites to reduce complexity
How do you eat a chocolate elephant? One bite at a time. Start with the quick wins and build some momentum. And then move on to the more challenging projects.

Quick wins will also generate a buzz and hold off the nay sayer with the burden of proof. It will also help the executive team justify the program.

Start with small processes. And even then break them down. The more steps introduced the complexity increases exponentially. It is frighteningly easy to do once you’re in there looking around.

It is easy to say ‘lets do that while where here’ and then it snow balls and now you’re working on a department wide initiative with the stakeholder list turning the project plan into a 30 page book.

This is an important discipline otherwise the team members who ultimately need to be won over, will become weary and resistant.

Have patience
I say this because whether it is Kaizen or Lean Six Sigma , they are supposed to be reasonably quick implementations, which is the sell. And it is true – for a mature organisation.

For organisations in the infancy of introducing quality, the complicating factors of the organisational learning and change management is extremely challenging. Projects always go over time.

The first project I was involved was the first for the bank and was supposed to take 14 weeks. It took 9 months in the end.

Case Study
The Bank was under tremendous pressure to be more of a ‘gentle hand’ with customers who were experiencing financial difficulty. A team to help with ‘hardship’ existed, and another who provided financial solutions. Both doing more or less the same thing but generating duplication and getting into each other’s way.

Having been asked by the client to review and improve the two teams, investigations revealed it took 63 days for customers to receive an approval for assistance. Meanwhile the account continued to cycle without payment, making it more difficult for declined customers to catch up.

A complete systems review was carried out, eliminating wasted effort from the process and challenging long held beliefs about ‘how things must be done’ (after all this was a bank).

A concurrent change plan was implemented to help manage such a dramatic change, which included focus groups, regular email communications and status reports.

Resulting in a reduction of time to approval from 63 days to just three and an annualised bottom line saving of $300,000.

Accountability & Structure
STRUCTURAL changes support performance and culture changes. Changes such as moving to an open plan office can improve open communications, but usually more lasting and impactful measures are to improve beliefs and attitudes of key people.

The pay structure and reward and recognition systems are critical. I was helping to introduce a new sales process with a client and I was getting enormous push back from the sales manager. I inquired into his remuneration plan and found the reason; he would have been disadvantaged under the new system. His structure had to change and the difficult decision was taken to re-align it with the business goals.

Other structural issues can be the bean counters, risk and compliance people. They serve a purpose but compliance is meant to be a check and balance not the driver of change.

Unions. Some companies have such poor relations with unions that any change no matter how beneficial to the employees will be rejected. Reach out early and often, these are smart people, who when involved in the process and are made aware of the benefits in their self-interest will come around. Further they are at the coal face and may have some of the best ideas.

Establish Clear Indicators of Success
By establishing clear indicators of success, you create a vision for your people. Something they can buy into and get excited about. Something they can see themselves enjoying and that serves a great purpose outside of the self.

It needs to be measurable in some way. Behaviour change is driven first by attitude, then beliefs, in that order. But changing someone’s beliefs is very difficult to do. Instead drive at the behaviours you would like to see through clear indicators.

When others are being rewarded and enjoying success their beliefs that might be OK will change, and then their attitude toward the change will improve.

Reward Results
Introducing wholesale change to organisation requires guts and is ultimately very challenging and stressful for anyone involved. Typically in larger organizations there will be a lot of resistance. Change the KPI’s and objectives to reflect the behaviours and results you want to see and reward those who hit the bar. Do this early and often. Word will get out as there will be tangible evidence of company commitment to the process. Soon this will cascade into an enterprise wide culture change.

Ultimately you must appeal to people’s self-interest. That is their rational self-interest. People will embrace change when they see it is in their best interest. There maybe some new learning, contribution, promotion and so on. Look for people who have the ability to embrace others in their value systems and cultivate them as change agents.

Meetings are incredible time wasters in organisations, and especially during change programs. To reduce meeting times, increase objectives. Strangely the more objectives and clearer they are stated the quicker and less meetings you will have.

Develop Accountability
In any change effort you must hire the right people, train and develop them properly, give them the right tools, before you can demand accountability and generate the results. The first three steps in that order must be followed.

The Accountability Process

1. Hire the right people
2. Train & develop
3. Provide the right tools
4. Demand accountability
5. Generate results

Take Prudent Risks
The conditions for success from a change or innovative effort will never be perfect.  But we must leap anyway. The perfect solution doesn’t exist. Develop a culture that allows people to make mistakes. If people aren’t making mistakes they aren’t trying anything new.  And they certainly aren’t growing and stretching themselves.
The Pareto principle says that 80 percent of the results come from 20 percent of the inputs. Conversely 20 percent of the unknowns in a project will be far too expensive and time consuming to fully comprehend and if you insist on knowing everything in advance you will never begin.

Change and innovation has its inherent risks, and while I am advocating change, I don’t mean with reckless abandon. We must take prudent risks. The downside of risk is often overstated. Gather as mush information as possible, make the jump and cover your bases, start small, test, then leap.
This quote from Mike Dikta an NFL coach says it all: Success isn’t permanent, and failure is seldom fatal.

Be a learning organisation
A great deal of organisational learning will occur as you progressively implement a series of projects. Ultimately you must learn from every project and engagement. To do this, set objectives for the learning. Have the leadership team review these pre and post projects, and hold de-brief sessions after completion.
Provide assistance to the projects team to implement the learning outcomes from each project and provide assessments of the impacts of the learning up the line.

Summary
Depending on the size of your organisation the time taken to fully imbed this, as a way of doing things around here is likely to be two to three years at the minimum. So know your strategy – GE called it the GE Way. Is this intended to be ad-hoc as systems and processes become problems, in which case you bring in a consultant in? Or are you intending to reap the powerful rewards of embedding this into the culture? If so, commit strongly and early. Obviously a pilot will be required, from experience there is little doubt about the ROI that will be attained, but if this isn’t being discussed at board level then it simply will not work. It requires focus and commitment from the top down.
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For further articles
Daniel Lock Consulting website: http://www.DanielLockConsulting.com
Insights on Business & Success Blog: http://DanielLock.wordpress.com

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