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Executive Interviews: Interview with Michael Beer on Change Management
June 2007
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By Dr. Nagendra V Chowdary
Michael Beer
Cahners-Rabb Professor of Business Administration, Emeritus at the Harvard Business School, Chairman and co-founder of TruePoint a research based consultancy.
In the field of change, we have not
learned to handicap change efforts.
We do not rate them in terms of
difficulty. Consider the stunning
success of Archie Norman at Asda in
transforming this UK grocery chain as
compared to the abject failure of John
Scully in transforming Apple
Computer into a major player in the
computer market in the early 1990s.
Norman's challenge was less difficult
because he was repositioning Asda as
a low-cost value grocer that it had
been. His predecessors had decided to
make it a high-end grocery chain.
None of the stores nor the culture and
skills needed for a high-end grocery
chain was aligned with their new
strategy.
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At the same time, Norman
was very skilful and selected good
change strategies (no top-down
programs, a focus on unit-by-unit
change and an integration of E and O).
On the other hand, John Scully's
efforts to make Apple Computer a
major in the growing computer
business of the 1990s required major
changes in strategy, culture, skills,
organizational structure and
management processes for which
there was no experience and history.
Apple had an innovative structure
unsuited to becoming a mass market
producer of business computers.
Scully also failed because, unlike
Norman, he employed a poor change
strategy (focus on financial control
and structure, and little focus on
learning and change process that
would create fundamental change in
the culture). -
What is Code of Change all about?
What does it take to crack the code of
change?
The "Code of Change" was a
convenient phrase for framing a
challenge that transformation leaders
faced; that challenge of integrating
two equally necessary and
paradoxical change strategies. It
seemed to us there were two
fundamental codes of change, each
with different basic underlying
assumptions about change. Many
failures to develop sustained
improvements in performance and
commitment were due to failures to
manage this paradox. E-driven
changes achieve early financial
returns but do not build an
organization capable of sustained
performance. O-strategies build an
organization and a strong culture, but
unless financial returns meet the
expectations of investors, the leader
will be unable to show short-term
financial results needed to allow the
Many failures to develop sustained improvements
in performance and commitment
were due to failures to manage
this paradox. E-driven changes achieve
early financial returns but do not build
INTERVIEW 6
time to build sustained high
commitment and performance. -
In "Cracking the Code of Change",
you have outlined two theories,
Theory E ("the hard approach") and
Theory O ("the soft approach"). What
do these two theories stand for? What
are their implications for
organizations? What do the letters 'E'
and 'O' signify?
Theory E strategies for change focus
on improving the economic
performance of the firm. This involves
portfolio management buying and
selling businesses based on their
prospects and right-sizing the
business through layoffs and
outsourcing etc. Theory O strategies
focus on building a strong and
effective organization and culture, one
that is aligned with strategy, has high
levels of commitment and is
adaptive all necessary for short and
long term success. While you refer to
theory O as the soft approach, I am not
sure that fully captures the difficult
and hard things that must be done to
accomplish organizational change
these involve structural changes,
fundamental change in standards of
behavior that require confronting
people who do not align their
behavior with the new direction. -
What are the circumstances in
which 'Theory E' has more relevance?
When would 'Theory O' make more
sense?
Theory E is necessary if the firm has
over time, grown fat or added
unrelated businesses that are not
synergistic. An E strategy typically is
the first step that a new CEO must take
to be responsive to pressures from
capital markets. Theory O strategies
are aimed at creating a great
organization with the capacity for
sustained performance, commitment
and ongoing learning and change. E
strategies are easy, says Norman at
Asda, because they are obvious. In a
turnaround, both E and O are needed.
A firm that has ok performance, but
not great performance, requires more
O than E, though a mix of both may
always be necessary.
1.
Change Management Case Studies
2. ICMR
Case Collection
3.
Case Study Volumes
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