The purpose of this essay is to understand and identify why an organization fails to adapt to changes. Studies reflect that replicating what was done in the past will never fetch the same result in the future (Adelaide university, N.D). Therefore this essay is formulated using various theories & examples, to extract out a conclusion about the factors that prevent organizations to change.
Why Adaption is a must for an organizations success
An organization acts as a 'social entity' where activities are controlled in a systematic manner to meet the defined objectives, with consideration to the external environment (Draft, 2010); comprising of factors (Political, Economic, Social, Technological, Environmental, and Legal) which are irrepressible in nature (Johnson et al., 2009) and must be monitored to supersede the competitors (Masterson & Pickton, 2004). For an organization to achieve sustainable competitive advantage, strategists have publicized that the key elements such as customers, government and competitors must be studied upon to formulate an effective corporate strategy (Lynch, 2007), which would help in adapting the changes caused by these entities.
Theories defining failure to change
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Scholars have identified two factors that cause failure to change, first being the bounded rationality which is prominent when management has partial understanding of how an organization functions, resulting in failure to respond to the needs of the external environment. Hannan & Freeman, 1997, 1984; Aldrich, 1979; Mc Kelvey 1982 on the contrary believes that some organizations fail to adapt change because of scarcity of resources and inability to gather them (cited in Aunno & Price, 1985). For instance a company could have a breakthrough idea but having limited resources could lead to its failure (Nobel, 2011). Whereas having ample amount of resources could also lead to inertia as people resist change, because they fear failure (Haberberg & Rieple, 2010). For instance, Microsoft having abundant resources failed to innovate and ward-off Apple from becoming the leader in the respective industry (Govindaranjan & Trimble, 2010). Aldrich and Auster (1986) stated that any upcoming organization faces challenges to survive, whereas established organizations need to transform in a strategized manner (cited in Thornhill and Amit, 2003). For instance, Motorola was one of the leading players in the mobile handset market, but its resistance to transform and enter the digital market with new designs after having all the necessary resources to compete led to its downfall in the industry (Anders, 2009).
Companies falling in the trap of inertia
One of the biggest challenges is to proactively respond to the changes occurring in the environment; but it has been argued that the problem for organization failure is not just the inability to react but the inability to react accordingly. This tendency of a company to barricade itself from moving out of its comfort zone leads to its failure (Sulla, 1999).
Researchers believe 'inertia' is a determination towards existing structure, capability and successful past experiences; making an organization immune to adapt change & giving birth to organizational inertia. For instance, in the 70s General Motors failed to improve its productivity even after collaborating with Toyota, resulting in Chrysler and Ford grabbing the opportunity. It's not how an organization is able to implement change, but with time how smoothly it is able to adapt it (Rumelt, N.D).
Organizational inertia branches out to cognitive and active inertia. Cognitive inertia relates to change agents which allow limited information to seep in and with transformations in the environment, reduces adaptability. Further cognitive conflicts occur when there are knowledge disparities within departments like the conflict between the top and middle management at Polaroid's digital image (Tsai, N.D).
An organization when abides a set pattern of behavior, even when the external environment expects it to change causes active inertia. It has five elements, which state the strategic frames convert into blinders, the process become routines, relationships ending as shackles, resources change into millstones and values become dogmas; together the inability to transform these, causes its failure. Firestone being an influential player in 1970, failed to adapt new techniques to succeed in the competitive market. Whereas Laura Ashley (women apparel brand) continued to compete post the death of its founder with its outdated designs not matching the changing trends, leading to its failure (Sullb, 1999; Sull, 2005).
Roadblocks leading an organization towards inertia
Always on Time
Marked to Standard
Kotter a long time ago had predicted that "the rate of change is not going to slow down anytime soon. If anything, competition in most industries will probably speed up even more in the next few decades" (Kotter, 1996). For instance, India was once considered to be the hot-spot for Business Process Outsourcing (BPO) activities, but with recession impacting at the global level India lost its advantage to other nations like Philippines (Steve, 2012).
Milliken (1990) studied that various organizations across industries perform within a change driven environment either 'small or dramatic'. But can't predict these for business sustainability as they do not thrive themselves to move beyond the habitual surroundings (cited in Lin & Hui, 1997). For instance, Eastman Kodak was the only company to introduce digital cameras and enjoy a profitable position for decades. But, soon it failed to transform its offerings with advanced technology, lack of foresighted management and its inability to capture new emerging markets (Economist, 2012).
Time: a boon or a bane for change
Time is considered to be a valuable resource for an organization, but the flipside is that companies aren't able to react within a stipulated time span (Rothwell & Sullivan, 2005). Management believes "the longer an initiative carries on, the more likely it is to fail" (Sirkin et al., 2005); hence to be the first to crack the record is a sign of success. For instance, Toys 'R' US was once considered to be a threat for others in the industry, but its failure to react on time to new entrants like Wal-Mart and Target led to its failure (Newman, 2010).
Organizations fail to innovate
Innovation is considered to be a successful tool for managing change and when implemented effectively, results in achieving competitive advantage over others (Dobni, 2008). Researchers believe that for a business to sustain in the market, it should make use of its capabilities on a continuous basis. But for instance, Boeing failed to grab the opportunity vacant in the outside world of defense contracting and soon lost to Airbus (Reilley and Tushman, 2004).
Internal processes not aligned with the changing environment
Researchers have observed that an organization's failure to sustain within a given environment is not only because of the external factors but also internal factors. Porter, (1980, 85) studied that for a firm to achieve sustainable competitive advantage, strategies that help in leveraging our strengths in alliance with the external forces and minimizes threats by reducing weakness must be put into practice (cited in Barney, 1991). For instance, in the case of IT companies if all the essential resources aren't aligned with the external scenario the business loses its stand in the market (Mattox, 2012).
Leader's inability to understand an organization culture
An organization to adapt with change transforms its culture completely, causing a disaster because the management overshadows their existing strengths to achieve competitive advantage. For instance, Arthur Andersen (an accounting firm) relapsed because it failed to understand its culture (Katzenbach et al., 2012).
Coming to the closing statement, it has been observed that organizations can never perform activities in seclusion because there are factors which are constantly changing with time and expecting an organization to adapt them and change itself with the dynamic environment. Based on the arguments illustrated in the essay, it can be seen that various factors causing change are not only external but internal in nature as well and an organizations failure to overcome these barriers to change causes its failure to exist within the industry. Further it looks upon the fact, that organization fails to adapt change because they resist themselves to change and later although they may be having the capability to compete and become a leader to success, they lack foresighted nature trapping them in the game of inertia. Further, if a company strives to be successful, in the long run it needs to make sure that it does not become stagnate with its on-going success factors, but should keep innovating its product and service designs, revamp its strategies over the time, the leadership should always be updated with these changing trends so that they understand the business well and can even help the employees to achieve the goals of the organization; and at-last they should have processes that are either superior or at par with the market.
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