Organizing The Change In An Organization Business Essay

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This document talks about the various concepts of strategic entrepreneurship and strategic leadership that leads to change in the environment, strategy, structure and culture of an organization with the support of real life examples.

What is Organizational Change?

As per definition mentioned on MIT website -

Companies that are undergoing or that have undergone a transformation. This keyword should always be used in conjunction with "Success Story" or "Experiment" or "Failed Experiment." (Process) [1] 

Basically, the organizational change can be regarded as organization-wide change, which is not restricted to smaller changes happening inside the organizations. By smaller changes, we mean adding a new module, modifying training programs, etc. Types of organizational changes can be cited as [2] -

Change in mission or vision

Re-designing or implementation of a new process, team or strategy

Re-designing the operations

Mergers and Acquisitions

Implementation of IT in current business processes

Introduction to new technology, etc.

The underlying concept of organization transformation through these changes lead to the arrival of organization change.

Why Organization Change may happen?

Following are the factors that may ask for organizational change -

Market Change - There might be a case that market demands start changing and the older strategy of capturing markets doesn't work anymore. In such cases, the need of hour is to change the existing strategy and look for innovative methods to capture the new market. This eventually leads to organizational level changes in place.

Financial Crisis - There can be another case of financial crunch especially while economic slowdown, when market stops performing well and a lot of stock starts getting piled up. This kind of situations call for salary cut downs, lay-offs, etc and might even lead to change in existing organizational structure and strategy.

New Entrants in Market - Some new entrants in market with fresh ideas about a product might call for a radical shift in the underlying technological system. In such emergent cases to maintain the rapport in market, organizations might be forced to take some new calls and result in change in existing organizational methods.

Mechanistic to Organic and vice-versa - Mechanistic type of structure is majorly found in organizations and the market, both are stable. There might be a sudden change in demand and need of hour may be to increase productivity drastically. In such cases the existing structure mechanistic approach might not work. Hence, organizations may shift their existing approach to their structure towards more organic as compare to mechanistic. There can be cases when vice-versa may also be true.

Change at leadership level - There are many examples, when change in leadership e.g. CEO, etc have brought up changes in the approach and structure of the organizations. The possible reason might be different attitudes and different leadership skills of people lying at the highest post which results in organizational change.

On the similar lines, there are several other reasons which provoke organizational change in the system.

3So broadly, we can classify the forces leading to organizational change in two categories -

Strategic Entrepreneurship - It is all about taking entrepreneurial actions using a strategic perspective. When a firm is engaged in such activities, the firm simultaneously focus on finding opportunities in its external environment that it can try to exploit through innovations. Google Inc. can be cited as the perfect example of applying this concept and leading to constant innovation with flexible organizational culture and structure.

Strategic Leadership - It is the ability to anticipate, envision, maintain flexibility and empower others to create strategic change as necessary that will be extrapolated to organizational level. By word, or by personal example, and through their ability to envision future, effective strategic leaders meaningfully influence the behaviour, thoughts and feelings with whom they work.

Now, how does these factors lead to organizational change what may be the intensity of the impact of their individual contributions will be explained in further sections.

How to bring in change in Organization - Organization Change Management

Organization change management is an established methodology to manage the impact of new business processes induced, changes in organizational structure, design and culture, within an organization. There are two sides of the coin named change management - and Organization Change Management more of deals with people side of the concept underlying. An effective way to approach OCM is of more benefit when change requires people of organization to learn the new skills. Breaking the shatters between employees and firm and inducing the confidence of achieving the set goals and targets in an efficient and systematic manner is what OCM provides. [4] 

Some of the organizational change management steps can be -

No contradictory initiatives - as in a common platform should be established to bring in a common vision for a change

Proper training to the employees about the impacts of the change that can intervene in their daily routine

To communicate clear strategy with reasoning for the change process acquired

A clear cut goals should be defined, either quantity or quality wise per se, so as to measure the appropriate results of the steps to be taken

Incentivise the change management process to encourage the people involved to put their efforts in reaching the defined goals

Upper management usually takes these kinds of projects as the belief is that these changes will bring up positivity in the environment and will be beneficial for the organization. The imposition of such concepts of bringing change to individuals is done on the basis that since it is in everyone's interest and hence the individuals who will come under the purview of the change will endorse the project. Though it's a double edge sword as in some cases it might go wrong and proved to be vital to bring in crisis situation inside organization in case of inefficient deployment.

Four stages involved in implementation of organizational change

Denial - Due to inhibition towards the change, the proposed change especially which requires major lifestyle change inside the organization faces opposition and hence stage of denial. People use to deny any kind of such ideas straightaway, the major reason being they don't want to come out of their comfort zone.

Resistance - The denial stage is followed by Resistance. This basically happens when the acceptance of idea has happened, but then people try to come up with lots of cons which can be portrait in negative ways towards implementation of idea. There should be proper convincing plan in place with the top management so as to resist the resistance towards implementation of change, in an effective way.

Exploration - Once the inhibition and doubts about the change concept is removed, then exploration stage arrives. This stage basically involves exploring different ways in which the idea of change can be aligned with the current scenario to get the maximum positive results.

Renewal - Finally, once the exploration is done, the implementation phase arrives which involved substitution of older processes with the newer one in such manner that it doesn't have any negative impact and people can welcome the change by involving themselves dedicatedly. This can also be done by incentivising the changes that are supposed to be implemented.

5The above diagram shows the relation between productivity and time when change in organizations takes place. Initially from current state, the change activities are implemented which results in some momentarily productivity dip due to the required adjustment with the system, people and environment. But with time, if the effective plan is in place, the same graph starts moving towards higher productivity and hence the desired state.

Why people resist the change?

Following can be the reasons of possible resistance towards the organizational change -

Threat of loss of identity, status, pay, etc.

Threat of increased expectation from top management and higher competitiveness amongst peers.

Fear of the unknown future which is proposed and it's difficult to incline oneself towards unknown from a known comfortable life.

The possible defensive strategy adopted by people due to anxiety.

There might be a perception of unfairness that will be brought up into the system due to the proposed change.

Resistance might be intended towards grilling the proposed change to look for the possible alternatives and possibly better solutions.

In a study, it is found that -

15% of the workforce is eager to accept the change

15% of the workforce tries to avoid it in a threatening manner.

70% of the workforce becomes neutral and plays the game of wait and watch.

CASE 1 - 3M: How the change took place in the organization?

Creating a Challenging Environment

When 3M started its operations, it was organized into various product divisions as per the organizational structure. But as the number of divisions increased in size, there came the slowdown in innovation as not much time could be devoted to the new product development work. To eradicate such slow growth, the concept of 'divide and grow' was acquired by organization. What it meant was the new businesses were spun off and different new teams for management purpose were directed towards these units. As a result, these units found it easier to grow quickly as the established divisions started focussing on innovation and developing new products as well as finding new markets for achieving the growth objectives. This mechanism, more of known as 'Renewal' resulted in increased diversification at 3M.

Knowledge Sharing

In addition to providing an environment that stimulated innovation, 3M also took steps to encourage knowledge sharing among its employees. Innovation was successful in 3M because the management encouraged its employees to talk. There were never experienced any communication barriers.

Rewarding Employees

In addition to creating a challenging environment for employees, and encouraging a culture of knowledge sharing, 3M also focused on rewarding employees.

To encourage the spirit of innovation among employees 3M understood that it was necessary to reward them appropriately. The dual ladder career path adopted by 3M, created two career paths - technical and management.

This approach allowed even a technical person to get promoted to the vice-president level without taking on managerial and administrative responsibilities...

Culture Overhaul

By the late 1990s, 3M's growth rate started slowing down. The stock price of 3M dropped and the price-earning ratio (P/E ratio) of the company also declined considerably.

It was felt that 3M was unable to respond to market conditions.

3M announced the appointment of James McNerney as its CEO. For the first time, an outsider was appointed as CEO of 3M.

Jim McNerney was passionate about developing leaders. McNerney was fresh from an enormously successful career at GE. He talked of implementing Six Sigma and shared his view that Six Sigma was not only about process improvement but also a way to develop leaders rapidly.

In 3M's traditionally egalitarian culture, the focus was on developing everyone. Jim changed the focus more formally and openly on the identification and development of the highest potential leaders.

A new set of leadership attributes were created. These were simple and clear, consistent with all McNerney's messages to the organization. Almost immediately, the attributes were held up as the core requirements of all leaders at 3M and reinforced constantly. Individual assessment against the attributes has become an on-going process at 3M. This assessment is used as a major input into the performance appraisal process and the attributes have been further integrated into all HR processes and leadership development programs.


We can see that the changes that occurred at 3M were primarily because of the following reasons:

Need for innovation - In order to be competitive in the market that 3M was in, it had to constantly innovate and come up with new products. Therefore there was a need to devote a considerable amount of time to new product development. This led to the need of organizational level changes taking place which in turn necessitated the steps that have been described above.

Move towards a more organic structure - As described above, the existing structure had resulted in the focus shifting from innovation. Therefore there was a move towards a more organic structure where the focus was on providing a challenging environment, maintaining proper communication channels across the organization and rewards commensurate to one's performance. This resulted in a structure which helped foster a culture of innovation.

Change at leadership level - Jim McNerney was brought in as CEO from outside. He had some revolutionary ideas which contributed to change within the organization. His whole new theory on how leaders should be trained and developed led to numerous changes which percolated throughout the organization because of a change in policies and practices.

Strategic Leadership

The concept of strategic leadership states how effective strategic leaders meaningfully influence the behaviour, thoughts and feelings with whom they work.

This can be seen throughout the process of change at 3M, under the leadership of Jim McNerney. He had a clear concept of how leaders need to be trained and developed which he implemented within the organization. This led to the changes described earlier which happened throughout the organization.

Effect of Change

The result of all the changes that took place within 3M was a continued focus on innovation and coming up with new products.

3M did go through the four steps in the change process described earlier in the text and also faced the resistance problems described earlier.

But by following the organizational change management methods such as no contradictory initiatives, proper training to employees, defining clear cut goals, communicating the strategy clearly throughout the organization and incentivising the change management process, the organization was able to effectively implement the changes and achieve its desired goals.

Today 3M is considered one of the most successful and innovative organizations in the world which constantly comes up newer products to satisfy consumer needs.

Apple Inc. - A case study on the Change process

"The primary goal of Apple is to make the world's best PCs -- not to be the biggest or the richest. They have a second goal, which is to always make a profit -- both to make some money but also to keep making great products."

Apple facts

42 million iPods have been sold since their introduction in 2001

32 million were sold in 2005, with 24 million sold in the last quarter

In the US, Apple has 82% of the market for MP3 players and about 65% in Australia

Sales through iTunes online music store are heading towards 1billion worldwide.

The share price reached US$80 during 2005, a gain of 2700 % since its US$12 low four years ago

The Apple logo is one of the most recognised in the world

Apple has only 3% of the world market for desktop computers.

Organizational Culture at Apple Inc

Apple Inc., a global computer manufacturing company that was going through major changes in its organizational culture and its organizational structure due to several happenings and changes in its environment. The company grew fast in so little time, that their management found themselves incapable of keeping their operations and finances under control. The company had been forced to re-evaluate and redesign its organizational culture and organizational structure to avoid bankruptcy.

The organizational culture of Apple is one of change, flexibility and innovation; with the drive to outperform and succeed as their major goals. The organizational structure of the company transformed to be more competitive in a critical juncture in the company's history. Apple went through restructuring of its organosation to regain control of its operations and finances to stay competitive in the global market.

The culture of Apple was based on an ideal that self-inspired individuals work harder if they do not have a boss micromanaging every action. This structure of Apple had allowed it to grow and react more quickly to changes than its competitors

Factors that have driven the somewhat bumpy but nonetheless innovative history of Apple to this point can be observed-and they will become even more apparent when examined in the context of the iPod. These factors include:

An internal culture of innovation in a range of product related areas

Strong and constant competitive pressures that at times even threaten business survival

Strategic partnerships and alliances to ease and complement the product development process.

Ref: Ingredients for the success of the Apple iPod: Innovation


As per Steve Jobs, CEO, "You need a very product-oriented culture, even in a technology company. Lots of companies have tons of great engineers and smart people. But ultimately, there needs to be some gravitational force that pulls it all together.

Otherwise, you can get great pieces of technology all floating around the universe. But it doesn't add up to much. That's what was missing at Apple for a while. There were bits and pieces of interesting things floating around, but not that gravitational pull."

Ref: The Seed of Apple's Innovation, BusinessWeek Online; 10/12/2004

Top-down and bottom-up innovation efforts

A way to characterize innovation is to look at how it occurs and percolates through the company, i.e. to distinguish between bottom-up and top-down innovation.

The two types originate from opposite sides and proceed in very different ways and the role of management under each mode is different.

Bottom-up innovation

In this mode, the leader must first create a supportive environment that encourages local entrepreneurs to pursue their dreams and to interact with knowledge holders worldwide. A key driver of bottom-up innovation is, indeed, an organizational culture that allows information exchange, risk taking, experimentation and learning from failures.

Second, the bottom-up innovation leader sets up a process for: filtering the really good ideas from all those that originate; funds them; and coaches the teams that will develop and implement them.

Top-down innovation

In this mode, innovation leaders take the initiative, define the objective and mobilize their employees behind innovative projects. A key driver of top-down innovation is high-level process management that starts with a vision and then adjusts to the marketplace realities. The leadership style required for these kinds of undertakings is, arguably, much more directive and hands-on than for bottom-up innovation.


Ref: Different leadership skills for different innovation strategies

Jean-Philippe Deschamps

Apple suffered problems in regional areas in the accountability of spending and in fiscal decision-making. The "top-down" ideology that helped Apple grow also opened the door for some serious financial losses. With employees at different levels making decisions, it became difficult for the corporate office to keep track of spending and purchasing.

Ref: Offermann & Spiros, 2001, pp 376-92

There are three phases in a technology cycle: (1) the era of ferment, (2) the era of incremental change, and (3) the era of turbulence. The first phase is "the era of ferment." The dominant design persists until the next phase, "the era of incremental change," and the innovation shifts from product-based to process-based. Incumbents are advantaged since the dominant design is clear such that they can put the capabilities into reliable organizational routines. However, when "the era of turbulence" prevails, it forces incumbents and new entrants to redefine the dominant design of products and processes.

As described by the figure above, many incumbents fail to maintain their competitive advantages and lose to new entrants owing to three main reasons:

Organizational inertia

Structured routines

Less absorptive capacity

Ref : Managing Discontinuous Innovation

By Eddy Junarsin

Apple follows a culture which encourages entrepreneurship and innovativeness among its managers. Managers need a model that rewards risk-taking and provides incentives to those who develop intellectual capital.

They also need a model that steps aside from the corporate bureaucracy and enables them to negotiate with entrepreneurs inside the company or that may approach them from outside. The growth template should leverage the intellectual property, distribution networks, and cheap, easy access to capital made available by the parent organization. It should also facilitate strategic expansion, new product development, new market entry, and cultural change to the parent organization. Further, the approach encourages the same cost-oriented, value creating, entrepreneurial mind set and spirit of a small company.

Ref: The strategic entrepreneurial growth model

Ref: The 3 Keys to Empowerment: Release the Power Within People for Astonishing Results

By Ken Blanchard, John P Carlos, Alan Randolph

Apple Inc. adopts S3- participating leadership style and requires D4 Development level with High competence and commitment.

The adoption of personnel policies led to lot of benefits to the personnel, company and society generally. Specifically personnel have the opportunity to work from its home a fact that allows dealing with other facilities too as well as it influence individual's behaviour at work. It allows people to be more productive by working from their homes. Another benefit of Personnel policies is the creation of better communications.

IBM - How the change took place in the organization?

The character of a company -- the stamp it puts on its products, services and the marketplace -- is defined and evolves over time. It shapes. It deepens. It is expressed in an ever-changing corporate culture, in transformational strategies, and in new and productive offerings for customers. IBM's character has been formed over nearly 100 years of doing business in the field of information-management. Nearly all of the company's products were designed and developed to record, process, communicate, store and retrieve information -- from its first scales, tabulators and clocks to today's powerful computers and vast global networks.

IBM has helped pioneer information technology over the years and it stands today at the forefront of an industry that is revolutionizing the way in which enterprises, organizations and people operate and thrive.

The pace of change in this industry, of course, is accelerating, and its scope and impact are widening. In the next few sections, we would describe the change from the earliest antecedents of IBM, to the most recent developments. We shall be discussing the entire IBM continuum from the 19th century to the 21st -- the key events that have led to the IBM of today.

1880s - 1937

Early Ambitions

A merger of three companies-the Tabulating Machine Company, the International Time Recording Company and the Computing Scale Company of America-created the Computing-Tabulating-Recording Company (CTR) on June 16, 1911. CTR is the forerunner to IBM. Thomas J. Watson Sr. joined CTR in 1914 and worked hard to define IBMs strategy to be a leader in innovation and technology. His favourite slogan related to the word "THINK" and because of its motivational potential, it soon became synonymous with IBM. He implemented a series of very powerful and efficient business tactics: a focus on the end customer, insistence on the grooming of the salespersons and focus on the employee to the tune of turning him loyal to the company. The name was changed in 1924 to International Business Machines Corporation (IBM), after the firm had started going multi-national. The product categories ranged from scales to tabulators. But the underlying phenomena that defined IBM from the very start was its forward looking culture and friendly management practises. This along with an adherence to vision and values guided the company through the difficult times of the Great Depression and the company did well - was able to provide employment and even added engineers and other staff on its rolls. IBM was among the first few who provided its employees with life insurance and paid vacations. IBM also played a vital role in enabling the U.S. Government's Social Security Act of 1935, which was defined as "the biggest accounting operation of all time." In 1914, the company's revenues were around $9 mn.

1938 to 1951

Increasing Influence

Although many businesses were severely affected by the Second World War, IBM was able to expand its operations and opened manufacturing facilities in New York, Washington DC. The company did not only grow commercially but it also undertook a lot of projects of social significance. It added a lot of women, disabled and people from minority groups and gave them ample opportunities for growth. In 1943, IBM hit the $100 mn mark in revenues and it hired its first sales representative in 1946, 18 years before the Civil Rights Act of 1964.


Focus on modern Computing

The period began with the change in leadership with Thomas J. Watson Jr. replacing his father. He saw the future of IBM into Computers and transformed the company from a maker of tabulating equipment to a leader in computer manufacturing. IBM became the first company to put all its part time employees on rolls. Watson Jr. also implemented the "open door policy" envisioned by his father that enabled employees to discuss issues with the senior management. In 1962, he formalised the unwritten principles of IBM into 3 categories - respect for others, focus on customer and desire for excellence. In his own words, "We want to give the best customer service of any company in the world…. can make a great deal of difference in its (company's) destiny". He also implemented "Equal Opportunity Policy" in 1953 whereby he urged the different departments of IBM to give equal opportunity to every individual with no differences based on caste, colour or creed. By 1957, revenues of IBM had crossed $1 bn and its workforce had reached the 100,000 mark.


The 360 Revolution

Watson Jr. changed the manner in which IBM used to market its technology products. They used to sell hardware and software as different packages. He "unbundled" these packages and allowed the individual units to sell. This gave birth to the multi-billion dollar software and services industry that we see today.

Also, compelled by the threat of growing competition, Watson "bet the company" on replacing all of IBMs current computers with System/360 family of computers. A program written for one system would now work on the other too, unlike earlier. It was a vision for the future and it introduced the world to a new concept in computing - compatibility. But it involved three key challenges - technical, coding and component. The effort took 2 years and cost $5 billion - dubbed by Fortune as "IBM's $5 bn gamble" but the results were so outstanding that after its success, IBM's competitors were referred to as "The Seven Dwarves". "A new era was opening up", explained Watson Jr. IBM also helped NASA in its mission to land the first man on the moon in 1969. In 1967, IBM topped 200,000 employee mark with over $5 bn in revenues.

1971 to 1992

Computing Gets Personalized

Watson jr. stepped down as CEO in 1971 and Frank T. Cary took over the company in the year 1973. During this period, it solidified its position in the IT industry and continued its innovation streak. IBM introduced floppy disk magnetic storage that allowed easy and flexible transfer of data between systems. In 1990, IBM joined other firms in an initiative to improve the environment management practices. It also created an initiative that funded the medical care of employees' dependents - a $25 million initiative, the largest of its kind ever. It also introduced several portable and and personal computers along with laptops like 5100, 5150, IBM PCJR and Thinkpad 700C. John Akers became the CEO of IBM in 1985. His focus was on increasing the efficiency of the company through streamlining operations and redeploying resources. During his tenure, five of its researchers were awarded three Nobel Prizes in Physics during this period. By 1977, IBM's workforce had crossed 300,000 mark and its revenues topped $50 billion.

1993 to present

e-Business Stride

During this period, IBM faced stiff challenges from the back-to-back revolutions - PC entered households and hostel rooms and secondly, the client/server revolution aimed at linking all of the PCs with a central hub. IBM faced difficulty since its business model focussed on businesses rather than individuals and its strong foothold in its area could not have provided it some competitive advantage in the current scenario. As a result, its performance dipped and the losses reached a record $8 bn mark in 1993. Time was apt for a leadership change and this time someone from out of the ranks was needed, felt experts. As a result, Louis Gerstner took over as CEO in April, 1993. Gerstner was a strategic leader in the sense that he took dramatic actions to stabilise the company. He revamped the IBMs product line and downsized the organization. Despite the pressure to split IBM into component businesses, Gerstner decided to follow the less preferred route as he felt that IBM's core advantage was its ability to provide integrated solutions to its clients. With the rise of Internet in the latter half of the decade, customer focus shifted back on integrated business solutions - IBM's core strength and it had mastered it when combating against the client/server revolution. Recognising that network computing would drive future growth, Gerstner acquired Lotus Development Corp and Tivoli Systems Inc. In regards to achieving multinational growth, IBM formed eight cross functional task forces representing Asians, Hispanics, bisexuals, lesbians, gays and people with disabilities to generate interests among all employees and to continually exploit the best of talents.

As the decade came to an end, we observed the e-business revolution. IBM moved confidently into the new century undaunted by its rivals as it had established itself as a leading IT innovator. IBM, till date has exited commoditizing businesses - hard drives in 2002, PCs in 2005 etc and has shifted its focus to high-value segments. This has led to doubling of profits from Software and Services combined during 2000 to 2008. It has also acquired around 100 companies during this period.