Nutshell: Understanding change – everything flows

Understanding what change is and how to anticipate as well as react to it is an essential skill for all leaders.

Back in the 6th century BCE, when the ancient Greek philosopher Heraclitus roamed his native city of Ephesus, the internet revolution was still several centuries away. 

But Heraclitus became known for an outlook on life that we may find surprisingly familiar: the idea that change is ever-present, that we – and the world around us – are in a constant state of flux.

“No man ever steps in the same river twice, for it’s not the same river and he’s not the same man,” he claimed. As we navigate a world of work where nothing seems to stand still for long, we may have some sympathy with his idea that “everything flows”.

It’s become almost beyond cliché to talk about change as a constant in our world today. But it’s a cliché for a reason. Whether as individuals or organisations, we stand still and cleave to the status quo at our peril.

We need to adopt mindsets and cultures that help us – Heraclitus style - to adapt and flex to meet the challenges of a future scape that we can only dream of today.

Ambidexterity is the order of the day, the ability to take care of business today while always looking ahead to the next thing, moving from more reactive change to forward-looking change and innovation.

Whether change is incremental, or more transformational, driven by internal factors or external imperatives, it’s simply a fact of organisational life.

The million-dollar question is, of course, how do we know when we need to change and, once we’ve established that we do, how can we make it happen? 

That’s not easy. The world is littered with tales of big companies and top execs who stuck with what they knew, only to be blindsided by ambitious new competitors better equipped to take advantage of a world in flux.

And even when we acknowledge the need for change, the road ahead is still fraught with all kinds of obstacles and barriers that threaten to derail even the best-laid change plans.

It’s unsurprising, perhaps, that so many change initiatives fall short, or fail.

What is change?

That’s why it’s important to understand what change is and how it works.

It’s not just about single, finite events; rather, change is a cycle or process with plenty in common with creative thinking, problem-solving and innovation.

It doesn’t happen overnight or in isolation.

It cannot rely on top-down diktats if we want it to stick.

As leaders, we have to lead and manage this process from soup to nuts, regularly asking ourselves what we should change (or not) and where we should start; creating a compelling vision around why change is needed, its purpose; planning and executing effectively; using our very best collaboration and communication skills to bring our stakeholders along with us.

In this Nutshell, we explore what change is, what might trigger it and look at some models that will help us to anticipate as well as respond to the need for change. In a companion Nutshell, we’ll tackle change management, the process by which we make change happen.  

Types of change

If we are to be proactive rather than just reactive about change, it helps if we understand what we mean by it.

Not all change is about large-scale transformation.  Often, it’s about the small adjustments we make every day:

•  It might be about processes or systems.

•  It could relate to (or impact on) people.

•  It might be about adapting organisational culture.

Or most likely all three in different combinations.

Our approach to change will differ depending on its complexity and scale.

Change experts Dean Anderson and Linda Ackerman Anderson have identified three types of change:

Developmental

This is the simplest type of change. It improves what we’re currently doing rather than creating something new.

That could mean a better system for processing invoices, helping a team member to update their skills, or developing add-ons to an existing product or service.

The changes are likely to be ongoing and incremental and cause little disruption, but, together, they can build into positive returns.

Although they may be less dramatic than large-scale change, they’re crucial: without them, we may be in danger of falling behind our competitors or customer needs and requirements.

Transitional

Transitional change replaces what we currently have or do with something new.

For Anderson and Ackerman Anderson, this means designing and implementing a 'new state' – and making the transition to it. That makes it a more fundamental type of change with the potential for greater levels of disruption.

For example, we might be creating new or replacement products or services, implementing an entirely new tech system or merging with another organisation. There may be implications for jobs or relationships and we may need to reskill and upskill colleagues to make the change work.

A change is transitional when we can define where we want to end up before we start; for example, that new tech system.

That doesn’t mean the transition will be straightforward, but we can at least see what we want to achieve, and it’s usually possible to follow the stages of traditional change models and tools to help with planning and implementation (of which more below).

Transformational

Transformational change is much more challenging because it involves a radically different future state that might dramatically alter an organisation or its purpose and create high levels of disruption.

The future is likely to be less well defined, but emerges through a process of trial and error as we learn more and adjust along the way. We may have an overarching strategy, but we’ll still be operating in the unknown, which can make it difficult to manage.

For example, we might be changing the way we do business or building a new vision, culture and values.

As a result, transformational change requires the implementation of not just new structures, systems and processes, but new behaviours too, what Anderson and Ackerman Anderson call “inner” shifts of mindset and culture.

Getting people on board with change is crucial even for the most incremental of changes, but the more complex or far-reaching the change, they argue, the more we’ll need to get people involved and engaged in the benefits of that change – early and often.

These days, organisational-level change is likely to be less fixed or linear and more likely to be transformational, including at least some emergent elements that are hard to predict or anticipate fully at the outset of any change project.

What needs to change – and why

If the need to understand, go looking for and manage change is a given, how do we know what needs to change, why, when and how? Whether we’re fire-fighting or – hopefully – horizon-scanning, we need to be absolutely clear about what needs to change and why.

In fundamental terms, change is necessary either to address a problem or problems or to take advantage of an opportunity or opportunities.

It’s about looking ahead to a new state or desirable future and identifying what will need to change to achieve it.

Triggers for change

Change can be 'triggered' by a whole host of factors, both external and internal. Internal change is often driven by changes to our external environment, and we need to be alert to these and how they may affect us; keeping up to date with our industry or sector trends and maintaining good networks will help us to anticipate what’s coming down the line.

External factors

External influences might include factors such as:

• Demand. Are shifting customer needs and expectations driving changes in demand? Is demand dwindling, or are we struggling to keep up? 

• Competition. Are we facing new or different competitors? 

• Technology. Is technology undermining our offer, and/or providing new ways to do business? 

• Economic conditions. How will fluctuations in the economy more generally affect us? If there’s an economic downturn or recession, what impact might it have? 

• Legislation and regulation. How will the legal frameworks we need to operate within impact what we do? These might relate to everything from how we employ people to how we interact with customers or how we tackle the impacts of climate change.

Internal factors

Change can also be triggered from within an organisation, perhaps when a new leader arrives; when we merge with another team or organisation or when we need to address underperformance.

In the 1990s, academic Roger Stuart grouped these internal factors into seven “primary triggers” for change:

1. Strategic. A change of direction, of purpose and mission

2. Structural. New infrastructures to deliver on that strategy.

3. Systems. Amended or new processes or enabling tech.

4. Skills. The need for new or enhanced capabilities.

5. Staff. Amendments to the size or composition or mix of people.

6. Style. New ways of how we do things (more projects; team working, for example).

7. Shared values. A refocusing on different values (a greater emphasis on customers, perhaps, or sustainability).

Any one of these factors might trigger change – as well as being the result of a change to our external environment. But most change will involve several factors that are interrelated and will have knock-on effects elsewhere.

McKinsey’s 7-S framework

A focus on the interrelationships between change drivers and factors is at the heart of the McKinsey 7-S framework developed by Tom Peters and Robert Waterman in the 1970s.

Peters and Waterman believe that organisations tend to place too much emphasis on strategy and structure when thinking about change.

In their classic article, Structure is Not Organization, they argue that we need to take a more holistic view of the factors that impact on the need for, and the effectiveness of, organisation change.

They identify seven elements that make up an organisation, shown in an interconnected framework.

There is no obvious starting point: every element could be a driver for change. But the framework shows that changing one aspect of an organisation will inevitably impact others too. In a truly effective organisation, all seven elements will work together towards the same goal.

If we think our organisation could be more effective, we can use the framework to help identify the element or elements that need to change first – and work out from there.

The seven elements

The seven elements are split into two categories: 'hard' and 'soft'. 

The three hard elements are easier to identify and describe. They are the foundation of any organisation and can be used to describe its management structure, processes, purpose and objectives:

• Our plan for achieving our purpose and mission.

• How we are organised to deliver our plan.

• The process and systems we use to get jobs and tasks done, everything from IT systems to financial protocols or health and safety procedures.

The four soft elements are more difficult to identify, and constantly evolve. It can be hard to pin them down, and they often overlap. However, they are no less important; without them, organisations will find it hard to perform and deliver. They are:

• Shared values. Our core values.

• Style.  Our organisational culture, including management and leadership styles.

• Staff. Our people, their talents and the way they are developed.

• Skills. The competencies and capabilities of the organisation and its people.

The 7-S framework in action

The framework is a simple tool to help us think about the need for change and the factors and questions we need to bear in mind. As a starting point, for example, we might ask ourselves:

• How do the seven elements operate in my organisation?

• What elements need to change?

• How will changing these elements affect the others?

This will lead to further questioning and planning.

For example, we might decide that our values around creativity and innovation are not best served by traditional hierarchies, and that we need to change our structures and find new ways of working to deliver on those values.

This will also have implications for culture (style), our people (staff) and the skills they need to operate those flatter structures or move to more project-based work.

Or we might know that a specific change is on its way, a merger with another company, for example. In this case, we can use the framework to consider how each of the seven elements can support that change.

We may, for example, need to restructure departments or teams; implement new systems and processes; re-skill or upskill our people – and more – if that change is to be successfully navigated.

The framework can also be used as part of a change management process, helping us to map progress and identify where further improvement might be needed, or has been overlooked.

Ongoing change: action research

We’ve already seen that buy-in from the stakeholders who will be impacted by change is an important factor in making change stick. We can also involve them in helping us to identify when we need to change using a process known as 'action research'.

Action research is not a new concept, and has been adapted many times since its origins in the work of psychologist, Kurt Lewin, in the 1940s. Its premise is that change can be achieved by working through a cycle of research and action.

Like the McKinsey 7-S framework, action research can help us to understand and improve organisations and to identify opportunities for positive change.

It’s inherently collaborative (requiring input from key stakeholders), grounded in the real world (focused on our current effectiveness, solving problems and meeting future challenges) and works through a series of iterative cycles.

 In essence, it helps us to answer three key questions:

1. What is the current situation?

2. What are the risks?

3. What shall we do?

An action research process can be prompted by a range of triggers: a new challenge, a specific objective or horizon-scanning.

It’s based on a four-stage cycle, as outlined below. At the completion of the fourth stage the process begins again, with each cycle building on the last.

Observe

The first stage begins by gathering information about our current situation or position. We need to involve a broad range of stakeholders to cover off as many angles as possible. Encouraging everyone to act as a “researcher” and contribute openly and honestly can increase support for any change agreed on.

Reflect

In the reflect stage, participants reflect on what they have learnt: analysing data, comparing answers, and discussing further any areas where there are conflicting viewpoints or information. This is the stage where we identify whether change is necessary and, if so, what needs to change.

Plan

This is where we decide how to change. Various options are discussed and consulted on (and amended as necessary), and a plan for change agreed. Because action research is based on iteration, larger changes can be broken down into smaller change projects that can be assessed as we go along, building into an overall plan implemented over the course of several cycles.

Act

In this final stage, the change is implemented. Because the process has been collaborative throughout, communication around the change should be easier and the levels of engagement greater.

Following implementation, the cycle begins all over again with a return to the observation stage. This time, participants evaluate how their action performed against expectations; what went well and less well and how the change might be modified to make it even better.

Criticisms of action research

Despite its longevity and continuing popularity, action research has been criticised on a number of fronts: as being too simplistic; too time-consuming; for its lack of scientific rigour and the problems of involving stakeholders who do not have the skills to carry out the rigorous and objective research it requires.

But, as a framework for understanding our organisations, generating and testing ideas for change and involving a range of people in the process, it remains a useful tool in our change toolkit.

Focusing on the positive: appreciative inquiry

Another version of the action research approach, developed by American professor David Cooperrider, is 'appreciative inquiry'.

This looks to instigate change by asking positive questions. Rather than looking to tackle problems, appreciative inquiry asks us to focus on what organisation already does well as a base from which to build and grow.

Its premise is that focusing relentlessly on looking for problems to solve can be demotivating; better instead to focus on our strengths as a baseline for further improvement.

It’s also engaging, not only because the process is collaborative, but because people like to talk about their successes and how they can learn from them.

Like other action research processes, it encourages us to use a four-stage cycle to:

• discover what we already do well.

• dream about what could be even better.

• design how we might make that dream a reality.

• deploy: implement the change.

And like other action research processes, appreciative inquiry has come in for its fair share of criticism, often around the quality of implementing the process, but also for its focus on positives to the exclusion of all else; this won’t, critics suggest, make many problems organisations face simply go away.

When framing change, then, appreciative inquiry needs to be used with care, and not to exclude difficult discussions around less positive aspects of an organisation’s status quo, such as a lack of diversity, cultural bias or oppressive systems.

Even if Heraclitus was right, and that every day we’re stepping into a new river, that doesn’t mean that change is either easy or comfortable. We know, though, that it’s a necessary part of how we work today.

Just as we need to get to grips with uncertainty, so we need to understand what change is, the different forms it can take, when to change (or not) – and how.

 Implementing change well means balancing big-picture vision and planning with the interpersonal and communication skills that motivate, create trust and build coalitions.

Whether or not we subscribe to the view that all management is about managing change these days, mastering the art of change will make better leaders of us all.

Test your understanding

• Explain how Ackerman and Anderson Ackerman’s transformational change differs from their transitional change.

• Outline the four stages of the appreciative inquiry model
• Identify two 'hard' and two 'soft' McKinsey 7-S framework factors.

What does it mean for you?

• Reflect on how much horizon scanning you do as part of your role. What more might you do to anticipate potential change and plan for it?