Supply Chains at the Tipping Point, Article Three

Can You Bend Organizations to Your Will?

Patricia McLagan

Nugget:This third article of five distinguishes three types of change – two of them make up most companies’ change management portfolio. Business and supply chain leaders must recognize when to invest in these traditional approaches. But they have new challenges to simultaneously guide the shift into 4th Industrial Era and create new capacity for a future where ongoing transformation will be business-as-usual.

You undoubtedly want to influence change.  Shorten its cycle time and, in frustrated moments, possibly bend it to your will.  All leaders have felt this way at some time.  But you probably realize that rather than controlling it, change is often in charge, pulling your organization into an ill-defined future . Your change understanding and methods must evolve so you can deal with the change speed and complexities of today.

To date, leaders have relied on training, rewards, incentives, project plans, change modules, and even mandates to help contain resistance and convince people to “get on board” with change initiatives.  These have been important techniques in any leader’s toolkit. But even these often costly investments have marginal returns. For example, in spite of big investments in “change management,” executives continue to rate about 2/3 of their change initiatives as failures or disappointments.[1]  Also, even though many new technologies have been installed, only around 20% of product and system features are actually used.[2]

Have traditional change management approaches failed or are they misapplied or incomplete. Maybe the disappointing statistics reflect the inevitability of failure and learning that are part of any change process and should be appreciated rather than punished. Whatever the answers, as you enter Industry 4.0[3] with its smart technology foundations, you probably need to update your view of change and the leader’s role in influencing it.  For example, if your business and supply chain really value agility, resilience, innovation, and self-accountability, and if you find yourself in faster changing, more uncertain times, then the biggest challenge today may be to unleash rather than control the change energy that is already there waiting to be tapped. 

Two Existing Change Approaches – T1 and T2

In the 1970’s computers launched Industry 3.0, dramatically accelerating the rate of change and making “change management” a key strategic concern. Since then, two widely used change approaches have become standard capabilities in a change leader’s portfolio:   

  • Transactional Approach (T1). A transactional change requires doing things better, faster, cheaper, without disrupting major systems or relationships. With the right support, people relatively easily make the behavior changes involved.  Examples: software upgrade, a new project planning approach, switching suppliers.

Transactional change methods include training, incentives, clear communication about new rules, practices and procedures. There may be some employee participation in implementation, but with good communication and support, there is usually not a lot of push back.

  • Transitional Approach (T2). Thisis the choice when changes are complex, high cost, high risk, and affect many parts of the supply chain/business and relationships. But there are best practices to draw on. These are transitions, not transformations because precedents make it possible to envision the “To” state and then “transition” behavior toward it.

Experienced consulting or vendor support is usually available to guide the change process and reduce risk and uncertainty. Think of managing enterprise-wide business processes, MRP, CRM, S&OP, Agile and similar installations. The goal is to support and accelerate a transition from one known state (A) to another (B).

These approaches work best when a change is somewhat “manageable.”  That is, you would place it at the lower end of a volatility, uncertainty, complexity and ambiguity continuum. It’s important to realize that these two change approaches are grounded in deterministic assumptions about people that took root in the 18th Century during the first Industrial revolution: people are rational, progress is inevitable, and people with more knowledge (leaders) can deliberately determine – engineer —  anything, even human behavior.  

You may say, “We don’t try to engineer human behavior?”  But, how often have you or leaders you work with asked: “How can we make this change happen in our business?”  “How can we manage resistance?” “What rewards will ensure the compliance we want?”  “How can we motivate people to act?” “Let’s add a change management module at the end of the project to get people on board.”

Enter Transformational Change: T3

Some transactional and transitional change techniques are useful in transformational change, but transformational change does not generally respond well to deterministic methods.

This is because transformational  changes are high risk, resource gobbling changes without a clear end state. They disrupt guiding mental models and assumptions, and they change power relationships and identities. They need a lot of breathing space, experimentation, and learning as they emerge and engage in battles with the “status quo.” In transformations, everyone must be reborn into the new world that wicked problems, technology, chance, and human ingenuity are helping to create. 

Organizations have dealt with civilization-rattling transformational forces before.  In the shift to previous Industrial eras, massive changes happened in society, economics, and the political sphere.  Let’s call these era-shifting transformations – T3 changes.  Some local transformations do occur from time to time, situationally and in bursts, disrupting many aspects of institutions, they may shake implicit assumptions, but they leave the deepest guiding paradigms intact. These transformational bursts are  small “t” transformations, or t3.  This diagram shows how to think about the relationship between T3 and t3

t3 changes occur from time to time within the bigger operational paradigms. And, as I pointed out in the second article of this series, t3 changes have helped build transformational muscle that you can draw on as your supply chain and business move into Industry 4.0.  For example, some early, uncertainty-fraught changes occurred in the 3rd Industrial Era that we are leaving. MRP and CRM and other enterprise-wide, computer-enabled implementations — started as t3 transformations. Later, when the shape of the changes became clear and replicable, they could be managed as Transactional changes with T2 approaches.

These changes that start as t3 transformations, and then become routine, have an early high energy, high uncertainty, high failure and investment phase where traditional rules and structures are suspended. Change teams form and often are taken out of the mainstream business so they can create, fail fast, learn, and self-organize without operational constraints.  Then, when the start-up mission is complete, the initiative turns operational and team members return to the mainstream business.  

I think of the years preceding NASA’s first moon shots.  The teams were initially steeped in transformation dynamics. They self-organized in school gyms or anywhere they could find to solve urgent problems. They experimented and had spectacular failures as they learned about moving things into space. Their budgets continually changed, and they created multiple redundant systems to absorb some of the massive risk of the unknown and to accelerate to their goal. 

But once the transformational learning and discovery about near space happened and they got people to the moon, NASA’s space programs moved into a more operational mode.  Many NASA engineers (not so fondly) called this new era of the Shuttle and Space Station,  the “space bus business.” Transactional and transitional change approaches became common,  budgets tightened up, and management systems and controls were set up to make operations more efficient. I saw this firsthand when I helped design their first Agency-wide leadership development program to help managers operate under the new rules.

Today, NASA is entering a transformational time again as they explore new public/private partnerships and a future of people on planets with different atmospheres than ours. It’s another exciting, scary, heady, electric, creative and transformational set of initiatives that may eventually move into a more operational mode.

A Transformation within the Human Mind

A once in a century transformation — into the era of Industry 4.0 — is happening on a global scale right now. And it is more than an industrial era shift. Everyone will be challenged to think differently, to realign their relationships with work, each other, the world, and even within themselves.  This is not hyperbole.  The singularity (machines as smart as people) may occur as early as 2150. Humans are already physically and mentally merging with technology or using it to expand capacities. The boundaries defining organizations, suppliers , customers and other stakeholders continue to blur.  Technology’s effects on society, the environment, the political sphere and even personal relationships proliferate while we struggle to ensure they don’t run amuck in devious directions.

For the last half-century, transactional (T1) and transitional (T2) change approaches have evolved to help accelerate innovations in business. But these are transformational times that can’t be managed or controlled in traditional ways.  Business and supply chain leaders must simultaneously recognize the difference among change challenges, lead T1 and T2 changes, help their businesses move (transform) into 4th Industrial Era, AND prepare for a time when ongoing transformation will be business-as-usual.

It’s a rapidly transforming world and workplace. Supply chains are key drivers of this T3 transformation. How are supply chains doing this and what does it mean for the business as a whole?  The next article – the fourth – in this series, will explore the answers to these questions. .

[1] 2018 Gartner survey of 6500 global leaders.

[2] Pendo and Product Collective Study, “State of Product Leadership 2020,” A survey of 600 technology product management executives and managers from software and enterprise companies headquartered in the United States, Canada, United Kingdom, France and Germany.

[3] Klaus Schwab, “The Fourth Industrial Revolution: What It Means, How to Respond. World Economic Form website, 14 Jan 2018.  Steam and mechanical equipment launched Industry 1.0; Electricity and mass production shaped Industry 2.0 ; IT and automated production defined Industry 3.0. 4.0 is emerging as various disciplines combine and information processing speed and machine intelligence reshape us and our world.

Nugget: SUMMARY: Business and supply chain leaders must recognize when to invest in traditional approaches, while simultaneously guiding the shift into 4th Industrial Era and creating capacity for a future where ongoing transformation will be business-as-usual.

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