In today’s dynamic world, the ability to adapt nimbly to the environment is an increasingly important skill for companies. However, some large, more traditional companies find it difficult to implement rapid changes that involve more than incremental improvement. Going beyond continuous improvement and generating radical changes, such as rethinking strategy, adding/removing lines of business, and changing organizational structure and culture, seems to be a major challenge.
We have experienced times of long efforts with high dedication of resources in the planning of strong changes, which end up without implementation or very close to the starting situation. Several studies reflect this reality, for example, John Kotter in “Leading Change” indicates that more than 70% of change initiatives fail, Gartner points out that between 55% and 75% of ERP implementations fail, and a study by the Project Management Institute (PMI) postulates that 44% of strategic transformations fail.
As a result, companies can lose their dominant and/or profitable positions in the market due to the inability to adapt. Moreover, they often fail to adapt despite identifying opportunities and recognizing the urgency of change. For example, Clayton Christensen in his classic book “The Innovator’s Dilemma”, highlights the case of hard disks where in each major market disruption – driven by the decrease in disk diameter and with it the introduction of smaller computers, from mainframes to notebooks – the dominant player, despite having the capacity and laboratory prototypes, was not able to maintain its position in the new markets due to the inertia of its processes and culture.
Why can this happen? In our experience, the pressure for short-term results and budget compliance pushes companies to execute established processes and wait for good results from them, leaving aside the responsibility to try different things beyond continuous improvement. As a consequence, teams live on a day-to-day or month-to-month basis, looking to accomplish what they are asked to do and focused on avoiding making mistakes. This reinforces the valuation of past successes and makes risk-taking and change decisions more costly.
To address this situation, one alternative that more traditional organizations can pursue is to foster learning cultures, based on pilot management and experiments, in which members of the organization act as curious “scientists” to validate or reject hypotheses about how they can do things differently to achieve better results – reinforcing the capacity of the natural “inquisitive” in a controlled environment. We believe, from recent experience, that it requires developing three fundamental aspects:
- Generate safe spaces where teams can propose ideas that challenge the traditional way of doing things and have the confidence to test them.
- Establish accountability over the process of exploring ideas. Experimentation should be structured based on hypotheses and the definition of success/failure parameters that allow measuring the results to ensure learning from each experiment.
- Leave aside “intuition” and phrases such as “we have always done things this way”, “this is the best practice”, “from my experience I think this is the way it is” to justify one option over another.
Successful companies such as Amazon have incorporated this methodology into their DNA, as reflected in the words of its founder and CEO Jeff Bezos: “our success is a function of how many experiments we do per year, month and day”. This means that today, Amazon conducts more than 10,000 experiments per year to define the content of its mailings, format and size of promotions, website layout, among others. In addition to the above, Amazon has developed a particular decision-making process designed to strengthen accountability over processes. For each relevant decision, the teams generate 6-page memos describing the client’s problem and a set of potential solutions explaining how they would help the client. This obligation to get to the heart of each problem and solution in turn forces the organization to show the essence of its proposal, and the decision makers to better define which path to follow.
Hemos visto y vivido con algunos de nuestros clientes, cómo áreas o empresas completas son transformadas cuando empujan prácticas de este estilo. Por ejemplo, con un cliente realizamos pilotos en sus sucursales automotrices, para experimentar tanto con en el proceso de ventas de automóviles como con el de servicio técnico. En este caso probamos d
We have seen and experienced with some of our clients, how areas or entire companies are transformed when they push practices of this style. For example, with one client we conducted pilots in their automotive branches, to experiment with both the car sales process and the technical service process. In this case we tested several changes: adjusting discount approval methodologies, changing the distribution of cars inside the store, facilitating and enhancing the use of test-drives, changing the telesales protocol, modifying the flow of the workshop, incorporating customer visit confirmation calls, among others. As a consequence of the visible results of the best changes, the company implemented them quickly and strongly increased its results and the perception of its customers. At the same time, it managed to empower and motivate its teams to question their work more in order to add more value. In the same way, we invite you to push your curiosity and that of your teams to question your day-to-day and the established practices of your organization.
Publication prepared by Martín Larsen, Project Leader
Think Again – Adam Grant (2021)
The High Cost of Low Performance – Project Management Institute (2014)
ERP Implementation – Gartner Research (2010)
The Innovators Dilemma – Clayton Christensen (1997)
Leading Change – John Kotter (1996)