Posted by: dstieglitz | May 28, 2010

KEEP UP WITH CHANGE OR PERISH

   As leaders in business and government, we must prepare our organizations and ourselves for the changes that are coming. The challenge is that change happens so fast these days it’s hard to keep up. Exciting opportunities lie ahead for those who implement farsighted decisions. On the other hand, those who are blind to change, procrastinate response to change, or are over-whelmed by alternatives may not survive. Since change is inevitable, we as leaders must evaluate the possibilities, select the future we want, and work to realize it. The decisions we make (or don’t make) today have consequences: they determine how we will live and work in the future.

    Humans tend to put off change even if the cost is small. We unrealistically believe we can delay the pain of ending old programs, eliminating marginal positions, and reducing costs until tomorrow. But the potential for pain occurs every time we reconsider a change, so tomorrow never comes. In times of rapid change, this behavior is damaging and often fatal to organizations and careers. For example, the president and Congress rushed to put the stimulus, bank bailouts, and auto company loans in place. Those rescues were easy since they reduced the pain of the recession. On the other hand, paying for the rescues and changing the systems that caused the recession are difficult because the pain is immediate while the payback lies in the future. But that’s what effective leaders do: they create a clear vision and inspire people to invest to achieve it. Great companies are managed that way, and that’s what our country desperately needs today.

    One glaring area where the U.S. has under-responded to change is global trade. We complain that globalization has stolen manufacturing jobs but haven’t taken action to compete smarter. Exports measure how we stack up competitively. Simply put, the volume of our exports indicates whether we are creative and efficient enough to produce goods and services that other countries will buy. Today, U.S. imports exceed exports by nearly $600 billion a year. That means we are consuming $600 billion more than we produce. To gain our fair share of exports and jobs, we must change. If we continue to insist on export restrictions, high tariffs, and high corporate taxes, China will soon become the world’s largest economy and the U.S. will join the ranks of once-prominent countries with a glittering past and a middle-of-the-pack future.

    General Motors (GM) is an example of what happens when a company falls behind change. Steven Rattner’s (original head of Obama=s auto task force) assessment of GM was blunt. He said: “Everyone knew their reputation as an insular, slow-moving culture. But even by that low standard, I was shocked by the stunningly poor management we found.” He added that the company’s strategic plan “evinced a state of denial,” the Board of Directors was “docile in the face of disaster,” and management blamed everyone but itself for the company’s decline. Those are three clear indicators that an organization has fallen far behind a changing world.

    GM’s bankruptcy was expected for so long that no one was surprised when it happened. Stock prices were unaffected, Congress didn’t blink, and the public thought: “They deserved it.” Still, apathy toward the bankruptcy does not reduce its significance: an industrial giant that was a management pioneer in the time of Alfred Sloan and once sold half the cars in the U.S. was gone….it resisted change and died. GM’s collapse contains several lessons about change. First, GM refused to change even as Japanese and German automakers increased their market share and its share dropped below 25%.  GM endured numerous layoffs, plant closings, and loses that in 2008 were $80 million per day, but its responses to change were always too little, too late. GM gradually improved the quality and styling of its cars, but by then Americans had become loyal to Toyotas and BMWs. GM had ignored and alienated its customers.

    The U.S. government spent $50 billion on the GM bailout to save a million jobs that would have pushed unemployment over 20% in some states. Furthermore, it was unthinkable that the U.S. could be without an automaker of the size of GM. But the bailout and cash-for-clunkers program may have just delayed the inevitable. The global auto industry is reducing over-capacity, consolidating car models, cutting costs to the bone, and building cars to sell in emerging markets. Each of those is a gigantic, counter-cultural change for GM. So it remains to be seen whether even bankruptcy will be enough of a shock to get GM, its unions, and its suppliers to lead instead of chase change.

   The U.S. Postal Service (USPS) is second sad example of the consequences of changing too slowly in a rapidly changing world. Expanding Internet use has caused a precipitous drop in mail volume each year for several years. That drop, intensified by the recession, caused the USPS to lose $4 billion in 2009 even after $6 billion in cost-cuts. With bankruptcy looming, the USPS acknowledges that it must change. But the changes focus on eliminating Saturday deliveries, cutting other services, and reducing staff and facilities – such cuts just prolong the inevitable. The core problem is the USPS business model is defunct – it can’t survive in an electronically connected world.

    As it operates in today’s world, the USPS is about as relevant as a rotary phone or cassette tape. It must recreate itself to offer services that attract customers, which seems unlikely as long as it is a quasi-government agency governed by Congress. Maybe the USPS needs to be broken-up and sold much like AT&T was split into the Baby Bells. Two obvious buyers are FEDEX and UPS who in some ways duplicate the services offered by the USPS. They might transform the USPS into a digital mail system where your address was your username. That way the USPS could allow us to eliminate physical delivery (unless we wanted it) like banks eliminated returned checks. Will the USPS change or will taxpayers be forced to fork-over ever-increasing subsidies?

    The failure to respond adequately to a rapidly changing world is by no means limited to businesses – the malady is widespread in government, most notably Congress. We didn’t expect miracles President Obama was elected, but we did expect him to guide key changes through Congress. We were lead to believe the wars in Iraq and Afghanistan would be curtailed, the prison in Guantanamo Bay would be closed, health care would be reformed, we would get a national energy policy to combat global warming, and we’d do a better job with immigration. But Congress doesn’t seem to see the urgent need for change. A mediocre health care bill was enacted after a titanic, 9-month battle, but little else has been passed. Voters are angry about the lack of change which limits their opportunities and hurts their pocketbooks. Congress’ inability to change is making the November 2010 mid-term election very interesting indeed!

    On a personal basis, each of us also must change or perish – in some cases literally. For example, the Bureau of Labor Statistics reported that work-related suicides in the U.S. rose 28% in 2008. But suicide is just the tip of the job-frustrations iceberg. Many people feel stagnant in their jobs because the work they do is unfulfilling and there’s little hope of advancement. However, such people cling to their jobs and claim they will find a better job when the economy recovers. Meanwhile, few take action to expand their skills, knowledge or relationships for a new job. As they wait for the economy to improve, change in the form of new technologies, productivity enhancements, and shifts in the global economy is eliminating jobs faster than any recession ever could – and creating new ones at the same time. If you’re in this group, take action today to escape the epidemic of frustration!

    In order to change personally and organizationally, understand that your mind (the mind of an organization is its culture and accepted behaviors) has two independent sides:

(1) The emotional side that experiences pleasure, pain, and fear; and

(2) The logical side that evaluates alternatives, makes plans, and measures progress.

Think of your emotional side as the horse and your logical side as the rider. Most of the time, the rider holds the reins and leads the horse. But the horse is so large that it will take over when it gets spooked by its surroundings or the rider seems indecisive. If you resist change, it’s often because your emotional horse is in the lead. She lives in the moment and seeks instant gratification. Most changes involve short-term investments (which seem like sacrifices to the horse) to gain future payoffs. But don’t judge the horse too harshly because, after all, she also provides the passion, energy, and determination to succeed when the logical rider falls into analysis-paralysis. In order to change, the result of the change must appeal to both sides of your mind.

    Picking the best path in times of rampant change is tricky even for the most experienced professionals. There are always competing alternatives and limited resources. Relative to organizational change, the path to new capabilities, services and products usually involves a combination of the following actions:

(1) Enhance your staff through recruiting and internal training,

(2) Invest in R&D and skunk works projects,

(3) Use new technologies to streamline business processes, and

(4) Form strategic partnerships with other organizations.

The path to personal change involves an analogous set of actions to improve yourself:

(1) Enhance your skills through training and academic degrees,

(2) Do something you’ve never done before – even if you start at the bottom,

(3) Learn to use the latest technologies, and

(4) Network to build new relationships.

   Most people agree that we can’t predict the future, but we can come remarkably close by watching economic trends and emerging technologies. Moore’s Law says that computing and communications capabilities will double every two years, which is quite daunting. So daunting that it’s hard to imagine how much business will change in the next 10 years or the opportunities those changes will produce. One thing is for sure: individually and organizationally, it’s unlikely that 10 years from now you’ll be doing what you are doing today (unless you’re doing nothing). Are you developing your organization and yourself fast enough to survive the inevitable changes coming your way?

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