How most companies get it wrong by not realizing the difference between Change Managment and Transformation

Over the last years we have come to realization what change is and how to best manage it. Given the amount of research that businesses have dedicated to understanding change management, the number of books and articles published on the subject, and the investment that companies have made in consultants and training, one would think that we would be doing better by now.

But there is still a problem and in my opinion the underlying problem is that companies do not differentiate between change and transformation. Change management means implementation of a finite process or an initiative that may or may not go across the organization. The focus is on the way things work. Over the years with the help of change consultants and books companies have been able to work out this problem.

For example, when a large company integrated specialized engineers into its regional sales teams, there were shifts in roles, client coverage, compensation, goal setting, and teamwork. The change affected hundreds of people. By applying well-known change management principles and tools — such as making the business case, building a coalition of leaders, getting early results, engaging stakeholders, executing with discipline, etc. — the new sales approach was implemented successfully, and is generating improved results.

We could talk about a number of other companies with similar initiatives in process re engineering, In Finance, Procurement or customer service which are shifts in business processes which requires a heavy lifting in change management but in all these cases the focus is a discreet objective or a goal that is well defined.

Transformation on the other hand is completely separate creature. Unlike change management, it doesn’t focus on a few discrete, well-defined shifts, but rather on a portfolio of initiatives, which are interdependent or intersecting. More importantly, the overall goal of transformation is not just to execute a defined change — but to reinvent the organization and discover a new or revised business model based on a vision for the future. It has a much higher risk and it is much more unpredictable but the value is much higher. It leads to new thinking and new structures with in the organizations.

To give you an example lets look at Novell the network company of the early Internet vs Oracle. Both companies started with a single focused product for Oracle it was their Data Base and for Novell it was their Network application. Both at the time were considered the best in their segments. Later Oracle started a Transformation process to diversify its portfolio by acquisition as well as building new products on top their database system. Novell stayed stagnant and they are no longer in existence. Oracle launched a Transformation strategy with a goal of figuring out a more sustainable model. It included a number of major “must-do” initiatives: get more immediate revenue from the current product, create a leaner support organization, shift from internally-focused to externally-partnered product development, and ramp up the search for acquisitions and adjacencies.  The transformation also called for a new set of principles and a new culture. While each of these initiatives on their own required change management leaders also had to learn a broader set of transformational leadership capabilities, such as more flexible and dynamic coordination of resources, stronger collaboration across boundaries, and communication in the midst of uncertainty. And since so many people were engaged in the changes alongside their day-to-day jobs, managers also had to figure out how prioritize and stop lower-value activities.  And while they knew that the goal was to make the company look very different, nobody knew for sure what the final outcome would be. In other words, the transformation was as much a process of discovery and experimentation as it was of execution. Success wasn’t guaranteed no matter how effective the change management skills.

Companies that take on transformation have to understand that it requires not just change management but a new way of thinking from the top leadership. They have to make bold plays in face of uncertainty. Transformation happens when you have leaders that are committed to transforming the company culture and not only technology and/or process.

We have seen a number of companies that have been leaders and refused to transform with the times that not only have lost leader status in their markets, some of them no longer had the revenue to support a transformation.