Magazine Winter 2014 Research Highlight

The Art of Strategic Renewal

What does it take to transform an organization before a crisis hits?

Andy Binns, J. Bruce Harreld, Charles O’Reilly III, and Michael L. Tushman Reading Time: 9 min 

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Image courtesy of Adriana Cisneros.

The Cisneros Group, a Spanish-language media company with operations across the United States and Latin America, assembled teams from across the organization to explore new ventures.

Image courtesy of Adriana Cisneros.

In recent years, we have seen well-established companies such as Kodak, Blockbuster, Nokia and BlackBerry pushed to the brink by smart competitors and changes in their industries. In each case, there were opportunities to act before a crisis engulfed the organization. At Kodak, for example, CEO George Fisher attempted to move the company into the digital era in the 1990s. However, he was unable to change course quickly enough. Fisher had an opportunity; his successor had a crisis.

What can leaders do before the depth and scope of their companies’ crises come into focus? How can they initiate major transformations proactively? As researchers and managers who have been involved in numerous corporate transformations in recent years, we have learned that applying standard formulae to corporate transformations is, at best, ineffective and, at worst, dangerous. What’s needed is a new approach that enables executives to transform organizations proactively without resorting to fear.

Is Strategic Renewal Right for You?

Strategic renewal is neither an event nor a detailed program. Rather, it’s a set of practices that can guide leaders into a new era of innovation. Because strategic renewal involves making changes ahead of a crisis, the efforts can be extremely difficult to initiate, fund and lead; many companies, including Xerox, Kodak and Firestone, attempted but failed to move ahead of their respective crises. The role of senior management is to build strategy, experimentation and execution into the day-to-day fabric of the organization. Here are four tests for deciding whether your company is ripe for strategic renewal:

1. Your profits are dominated by maturing businesses in which you see limited opportunities for growth.

Nothing breeds complacency like success, and the right time to be paranoid is when you are at the top of your game. In 2007, Nokia was the number one mobile handset manufacturer, and BlackBerry was the “killer app” for mobile email. Now, Nokia’s handset business has been sold off to Microsoft, and BlackBerry is struggling for survival. Executives at both companies were seduced by their success into thinking they had time to react.

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About the Authors

Andy Binns is managing principal of Change Logic LLC, a Boston-based consulting firm. J. Bruce Harreld is a senior lecturer of business administration and Michael L. Tushman is the Paul R. Lawrence MBA Class of 1942 Professor of Business Administration at Harvard Business School in Boston, Massachusetts. Charles O’Reilly III is the Frank E. Buck Professor of Management at Stanford Graduate School of Business in Stanford, California.

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Comments (2)
Muneeb Habib
Very true. There is an urgent need for companies performing strongly in the market presently to guard against the feelings of 'we will manage in the future' by developing a team approach to ensure the hard work done in the past and present in bringing the company to current competitive level is not lost. Survival strategies must be cultivated in the management group to ensure (robust) continuation in the near and distant future.
Andres Echeverry
Great article. Existing firms can be phenomenal innovators and even disruptors when they leverage their considerable assets and position; however, renewal is a very challenging process to introduce into an organization requiring full commitment from the very top. Having observed these processes inside a series of firms in the paper, print, and media industries, I cannot stress enough the importance to disciplined experimentation referred by the authors. Besides ignoring the threats, the temptation to scale prematurely before a new business model is fully proven and understood is perhaps the greatest danger to these efforts given the pressures faced by managers. Leadership, cultural, and organizational elements need to be aligned to give disciplined experimentation the resources and time needed to succeed - especially when the new business models have profit sources and key success factors that are significantly different (or even at odds) with existing operations.