The following is an updated version of a column that originally appeared in 2007.

Last September, I had the opportunity to speak with two companies about managing the process of change within their organizations.  The firms are of similar size and, in fact, are direct competitors in their industry.  Their approaches to change-management, though, are very different and I don't think they'll be equally effective in achieving results.

The Contenders
Company A was once a powerhouse, in both its industry and region, but suffered in recent years under a series of acquisitions, mergers, and re-organizations.  (For more on the folly of this growth strategy, see “Reorganize THIS!”)  Now, the firm has reassembled the pieces it had when it was a major player, and is repositioning to become fully competitive again.  Its next challenge?  To put the parts back together, develop a business plan, and reestablish its space in the market.

Company B is a subsidiary.  The parent company has global reach and, in several overseas markets, is viewed as a leader.  The subsidiary, though, has always been a second-tier player in the U.S.  Worse, over the past decade, it has undergone considerable turmoil, turnover, reorganization, and lost business.  Recently, the group made significant changes in infrastructure and staffing.  Its new management team has a broader business perspective and is committed to turning things around.  In fact, the company believes it now has all the major components in place — except for a sense of “uniformity” in the ranks.  Management’s goal is to minimize internal conflict and get things moving in the marketplace.

So, both companies have sound reasons to change the way they do business. Will they both succeed? 

Systems — and Pipe Dreams
There are two schools of thought about how to transform an organization. 

The first is what I call the “systems model,” which is typically used in outsourcing and reengineering projects.  Under this approach, the right things will happen when you install the right components, in the right places, accessible at the right times.  Or, as we heard in the film Fields of Dreams, “If you build it, they will come.”

The problem with this view is that, while the model is fine for its intended purpose, it doesn't work well with people.  By nature, people are far more complex than systems and work processes.  People have feelings and biases, they're conditioned by experience, and they retain a sense of institutional memory.  In fact, one of our clients is hampered by a group of employees that still harbors grudges — about a company re-org conducted in 1985!

People are also are shaped by organizational communication (formal and informal) and their personal observation.  And, unlike systems,they modify their behavior based on what’s going on around them.  Since the work environment is never static, neither is employee perception, productivity, or performance. 

For these reasons, the systems model is an organizational  pipe dream.  You may think employees will turn around “if you build it.”  But, in real life, when it comes to change, you never really stop building.  As a result, you have to keep managing.

More Than the Sum of Their Parts
The other school of thought is one I liken to the musical Wicked — the Wizard of Oz story, told from the witches’ point of view.  The most remarkable thing about Wicked is what it reveals about Dorothy.  Though we've grown up believing she was the star of the show, it winds up that Dorothy is merely a peripheral figure.

As Wicked points out, the story of Oz is not really “about” Dorothy.  She’s only one of many pieces in the puzzle.  In fact, Dorothy is just the means — to a much bigger, and far more significant, end.

And that’s why business transformation is like Wicked.  Neither is “about” its individual pieces.

Look Out, Not In
Successful transformation involves a lot more than simply putting the right pieces into place.  Certainly, your firm has to have resources to compete.  But these components are always more impressive to you than they are to your actual customers.

Consider your own situation.  When you go, say, to a doctor, do you stop to admire the decor of the examination room?  Or swoon over how shiny and new the medical equipment is? 

No: What you care about is how your doctor treats and cares for you.  You think about the "components" of care only when they're used to treat your condition.  And your views are based not on how impressive the resources are, but on how effectively the doctor uses them on your behalf.

It's the same with customers of business service.  What matters most is how the offering firm pulls its pieces together into a coherent whole, for the customer's benefit, and, most of all, why this specific combination should matter.

Look at companies A and B.  Their capabilities (components) are highly similar, as are those of nearly all their main competitors.  Given this parity, differentiation, let alone a successful change effort, is likely to hinge mostly on what they do with what they have — and how well they show that the arrangement is better for their customers. 

Ever wonder why, in the professional services industry, firms with lower profiles so often beat the industry giants?  It's because their secret weapon is external focus — seeing that their resources are better aligned with, and more effectively deployed toward, the factors that most influence customer satisfaction.  Instead of being capabilities-based (i.e., "about" the seller), these firms are customer-centric.  Their "story" is therefore more compelling, and provides its own platform for delivering a clear value proposition.

It's Unity, Not Uniformity
To win the change game, a company has to grasp that its primary challenge is cultural, not managerial.  Effective transformation requires not only changing the way people think about the business, and their role in it — but also getting them to want to change.

For this reason, “uniformity” is an enemy, not an ally.  Remember: the ultimate goal of transformation is unity of thought and mission.  But it's only through a range of talents and perspectives that a company can achieve a unified set of customer-satisfaction goals.  In the end, it takes diversity to maintain unity.

Remember the great lesson of Wicked.  The Wizard of Oz is a terrific story — but it’s really not “about” Dorothy.  It’s about what Dorothy helps to achieve — and how all the pieces work together toward that goal.

To learn more about how to manage the process of organizational change, click here, or contact us at info@strategicplanningassociates.com