Strategic Change || Business Strategic planning

Strategic Change || Business Strategic planning 

Table of Contents:

Strategic Change

• The nature of change
• Triggers for change
• Consequences of change
• Attitudes to change

Strategic change

1. The nature of change

Change happens continually within organizations and their markets. Strategic development inevitably results in some change, which needs careful management. Change is either planned or unplanned. 

• Planned change (or proactive change) is deliberate and intended. The entity makes the change to move from an existing situation (or way of doing things) to a new situation.

• Unplanned change (or reactive change) happens in response to developments, events, and new circumstances that have arisen. The change is not intended in advance.

With the planned change, the entity might see an opportunity to develop. Unplanned change is often seen as a reaction to a threat or an adverse event.

Change is either incremental or transformational.

• Incremental change is a fairly small change. This type of change happens without the need for a major reorganization or restructuring of the organization and its systems and procedures. The entity should be able to adapt easily to the change.

• Transformational change is a big change. A transformational change requires a major reorganization or a restructuring of the organization and its systems and procedures. The change has a big impact on the entity, and also on the people working in it.

Transformational change requires change management skills from the managers who are responsible for introducing the change (the ‘change managers’).

Change is also either:

•  a ‘one-off’ event, so that the entity moves quickly from the old state of affairs to a new state of affairs, or     
• a continuing process of development and change over a long period.

2. Triggers for change

Triggers for change are the reasons for making a change, or the reasons for the motivation to change. A trigger for change might come from either outside or inside the entity.

External triggers for change

External triggers for change are caused by changes in the environment. The PESTEL analysis of the external environment provides a useful framework for analyzing external reasons for change.

Political reasons for change

• Changes in strategy might be caused by an unexpected political crisis – such as a civil war or major civil unrest – in a country that is either a major source of supply or a major export market.

Economic reasons for change

• Unexpected developments in the economies of various countries might result in a change of strategy on foreign sales or expansion into foreign markets.

Social and cultural reasons for change

• Changing public attitudes and opinions might persuade an entity to alter its strategy. For example, changing public attitudes to food safety following a ‘health scare’ about a food product might persuade a food manufacturer to change its strategy to the design and production of its products.

• Changing public attitudes to retirement age might persuade an entity to change its retirement policy for employees, and its human resource plan.

Technological reasons for change

• The significance of technological development has been mentioned earlier.

Ecological/environmental reasons for change

• Change might be driven by ecological change, such as diminishing supplies of freshwater, diminishing supplies of energy, or factors related to climate change. These changes might force a company to consider how its businesses will continue to survive in the future, and what changes will be needed to make the business sustainable.

Legal reasons for change

• New laws on health and safety at work, laws against pollution, and laws to protect the environment might have an impact on strategy and procedures.

Internal triggers for change

Change might be motivated or caused by developments within the organization.

• Change of senior management. When there is a new senior manager, such as a new chief executive officer or managing director, the new person in charge might want to introduce change because he has his own ideas about how things should be done.

• Acquisitions and mergers. When there is a large acquisition or a merger, major changes will probably be required to integrate the two separate firms into a single entity.

• Demergers and divestments. Similarly, when an entity is split up into two separate entities (a demerger) or when a large part of the entity is sold off (a divestment), changes in organization, management, and systems will be necessary.

• Reorganisation, downsizing, and rationalization. Change might be necessary because the current organization and systems are no longer appropriate and change is needed. This might happen when a loss-making entity needs to close down an operating division or needs to reduce the size of its total workforce. Current operational systems might need to change because they are no longer appropriate and have become inefficient or ineffective.

3. Consequences of change

Transformational change must be managed carefully. It is extremely difficult to introduce major changes without causing disruption. Many changes fail to achieve the planned benefits because of the difficulties experienced with implementing the change.

Change management requires:

• identification of the strategic changes that should be made
• recognizing the need to change systems and organizational structures to make the changes work successfully
• recognizing the effect of change on employees: this aspect of change management is often overlooked but is probably the most common reason why attempts to make major changes are unsuccessful
• careful planning and implementation of the change
• making sure that the changes ‘stick’ and remain in place after they have been made. There are several strategic models for the management of change. All models for change management recognize the importance of people and attitudes to change.

Attitudes to change

Some employees might welcome change and support the changes. More often, however, employees fear change and resist change. Attitudes and culture may therefore act as blockages to change. Here are several reasons for opposing change:

Reasons related to the job

·  Employees might believe that the change will put their job at risk, and make them redundant.

· Employees might believe that their existing skills will no longer be required. This is why employees often resist major technological changes.

·  Employees might fear that their working conditions will change for the worse.

Personal reasons and fears

·         Employees might fear that the change will make them less important to their employer.

·         They might believe that the call for a change is a criticism of the way they have been working.

·         They might think that after the change, their work will be less interesting. They might be reluctant to learn new ways of working.

·         They might fear the unknown.

Social reasons

·         Employees might resist change because they believe it will break up their workgroup, and separate them from the people they enjoy working with.

·         They might think that after the change, they will be forced to work on their own more, and there will be less interaction with colleagues.

·         They might dislike the manager who is forcing through the change.

·         They might dislike the way that the change is being introduced, without consultation with the employees affected.

Change and organization culture

Some entities are more capable of adapting to change than others. The reasons listed above, and the earlier description of the cultural web, might suggest reasons why resistance to major changes could be strong. Some entities, however, are better at adapting to change than others, and in some entities, change might be seen as a ‘good thing’.

The management writer Elizabeth Ross Kanter suggested that there are cultural reasons why an organization might be more change-adept than others. According to Kanter, change-adept organizations have three key attributes:

·         The imagination to innovate. This comes from leadership that seeks new ideas for positive change.

·         The professionalism to perform. The management of the entity is competent at introducing change. In addition, the workforce has been suitably trained and developed and can support its management in introducing change.

·         The openness to collaborate. Change-adept entities share ideas with other entities, such as suppliers and joint venture partners, and can work well with other entities in making changes.

Kanter argued that change should be accepted by entities as something natural, desirable, and welcome. When change occurs as a defensive reaction, in response to a threat, it is not welcomed. However, it is more appropriate to see change as an opportunity for the successful implementation of business strategies.

Entities that welcome change are most likely to be the first to innovate and adapt to new technology, or entities with an ability to create sustainable competitive advantage by creating extra value for their customers. Kanter argued that entities that are change-adept are ‘fast, agile, intuitive and innovative.