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Recent articles and books have detailed how firms, in an effort to transform themselves, either succeed brilliantly or fail miserably. Academics and consultants have found a large audience for the lessons learned and techniques used at Xerox, Motorola, Ford, General Electric, British Airways, and AT&T, to mention a few. There is equal interest in the most troubled cases, as a Fortune cover story on dinosaurs — Sears, GM, and IBM — makes all too clear.1
In October 1992, we attended a Strategic Management Society conference entitled “Strategic Renaissance— The Transformation of Economic Enterprise,” where presenters discussed everything from the challenges of introducing brand management, to implementing a merger, to a complete reengineering of business processes — all under the heading of transformation. With such a broad range of issues to solve, it is not surprising that the lessons often seemed either inconsistent or “all over the map.” To add to the confusion, there were debates on whether some of the most cited cases like Ford and GE were, in fact, successful transformations.
In our opinion, a consensus on what transformation is will not emerge until it is better defined and given a framework so that firms facing similar issues and circumstances can make meaningful comparisons. Here we propose such a framework and use it to compare some of the best-known transformations. Our analysis is based on a review of dozens of transformation cases and interviews with senior managers, academics, and consultants. We have also relied on our own experiences working with some of the largest firms in Europe, many of whom are in the midst of transformation efforts.
While the goal of all transformations is to improve performance, many efforts to improve performance are not transformational. We propose that to qualify as a corporate transformation, a majority of individuals in an organization must change their behavior. Thus, for most employees, the difference is palpable. Industry after industry is discovering that new capabilities — global quality, continuous improvement, innovation, learning, networking — demand extensive changes in how work gets done, as employees are asked to think globally, cooperate with other units, challenge managers, and show sensitivity for customer needs.
In the mid-1980s, British Airways decided to differentiate itself by focusing on marketing and customer service. The employees had extensive training to change the way they performed their jobs.
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1. C.J. Loomis, “Dinosaurs?,” Fortune, 3 May 1993, pp. 36–42.
2. See N. Tichy, Managing Strategic Change (New York: John Wiley, 1983);
N. Tichy and M. Devanna, The Transformational Leader (New York: John Wiley, 1986); and
R.M. Kanter, B. Stein, and T. Jick, The Challenge of Organizational Change (New York: Free Press, 1992).
3. See G. Hamel and C.K. Prahalad, “Strategic Intent,” Harvard Business Review, May-June 1989, pp. 63–76; and
C.K. Prahalad and G. Hamel, “The Core Competence of the Corporation,” Harvard Business Review, May-June 1990, pp. 79–91.
4. M. Miller and L. Hays, “IBM Posts $8.04 Billion 2nd-Period Loss, Halves Dividend, Plans 35,000 Job Cuts,” Wall Street Journal, 28 July 1993, p. A3.
5. P. Drucker, “A Turnaround Primer,” Wall Street Journal, 2 February 1993, p. A14.
6. Tichy and Devanna (1986).
7. M. Beer, R. Eisenstat, and B. Spector, “Why Change Programs Don’t Produce Change,” Harvard Business Review, November-December 1990, pp. 158–166.
8. Ibid., p. 159.