Change Impact Simulation
Early management theorist W. Edwards Deming visited a large corporation in the 1980’s where all 22 vice presidents hit their target and the company lost $4 Billion that year. I wish that I could say that this is uncommon, but very frequently, targets and incentives are not directly linked to strategic objectives. Strategic shifts cause disruption across the board, that disruption changes metrics and goals to ensure shift completion.
Apple has been one of the foundational members of the technology industry that helped bring the personal computer to life. Their bread and butter have always been in hardware. With market successes with the iPod, iPhone, iPad, and watches they are kings of technology hardware.
Apple has also seen the writing on the wall in their forecasts that hardware is a limited market. A market that eventually will tap out. Realizing that to compete in the future they needed to shift from hardware to software and services. More specifically in the future of artificial intelligence. Starting early, in the process Apple shook up their leadership team, priorities, and metrics to cement their move from hardware to services and achieve strategic alignment.
Strategic shifts enable transformational change. Another way to say that is that strategy creates chaos. Chaos in the market and chaos internally. Growth means adding revenue at the same pace you are adding resources. Scaling means adding revenue at a much greater rate than cost. Growth is normal but scaling is chaotic and all chaos can’t be controlled, but it can be managed.
Right now, your organization is set in a frozen state operating normally. Before the pieces are put in action, you can forecast the impacts across the organization. Applying a simulation is simply a mental exercise. However, you can add to the insights gained by using the data points collected from the strategic tests that you’ve run.
The United States Army throughout its history has run rock drills. Prior to going into battle, a model of the battlefield would be developed. There the leadership team would walk through their battle plan. Running the plan multiple times through multiple iterations and alterations the team can understand the different potential outcomes. This further refines the teams thinking and understanding of the consequences of their actions.
Embedded in organizations is the natural tendency for the body to resist deviation from the status quo. There is an inertia in companies that restricts them from adapt to changing circumstances. The inertia can kill the strategic shift, or it can push it through to the finish line.
The modern professional typically confuses their jobs with their identity. Major changes can be asking people to change their lifestyle, what they are comfortable with, and possibly who they are. Leadership must take these conversations seriously and handled delicately.
Exploring change in organizations one quickly realizes that resistance is not a generational thing, it’s a human thing. When we complain about the next generation, we’re comparing them to an idealized version of our own past. Instead break your organization down into sections from who loves change to who actively resists it. This creates a spectrum where you can see how much effort to expended to gain the inertia that will take you over the edge.
It’s time to run your simulation. This is a structured dialogue and exercises that will reveal misalignment that could cost your company billions. You will prototype the transformation and help the entire organization mentally process it.
During the simulation you don’t sit in a room and speculate what the disconnects will be. You will bring in the entire organization to understand the strategic shifts. There let them ask the why’s and question your logic. This will not only generate additional support and alignment, but it gives you the opportunity t incorporate their feedback into the strategy.
Then your entire organization can develop a transformation roadmap together. By giving them the authority to decide how to implement the strategy, the change psychologically becomes theirs to own and drive. This then removes the threat of misalignment and mitigates friction typically experienced during implementation.
Alexander the Great held the unique ability to arrive unexpectedly at the battlefield in defiance of all orthodox logistical calculations. Time and time again they risked everything for the surprise, but it was their competitive advantage. The theory still holds true for bringing new products to market.
Napoleon devised that you multiply mass by velocity works tactically and strategically. Bringing your army first to the battlefield and in force puts your opponent in a severe disadvantage. To be able to commit with force your entire organization must be aligned to the strategy.
Researching transformative business models, several similarities repeat themselves. These business models embody personalization, closed loop processes, asset sharing, usage-based pricing, collaborative ecosystem, and agile. They are not strategies held closely by the leadership team. The whole organization lives and breathes it.
Wars and strategy’s come with heavy spending. The recent Global War on Terrorism cost reached over $6 trillion dollars before the conflict reached 20-years. The Greeks created the Delian League in 478 BC to raise the first taxes to support the formation of an Army. This taxation to fund conquests has continued throughout history.
President Calvin Coolidge believed that a country loaded with debt is devoid of their first line of defense. Trying a new tactic, the United States created War Bonds where the citizens could invest in the government instead of simply applying taxation. Either way funding is derived, resources need to be in order before going into battle.
Alongside resources is having general principals of how to overcome issues when they occur. Guiding policies outline an overall approach for overcoming obstacles highlighted by the diagnosis. It channels actions in certain directions without defining exactly what to do. Thinking through the process with simulations to develop those key principals and guiding policies.
Looking at your organization prior to a transformation, these questions arise. Simulating your strategic shifts, you will probably have to raise funds and you probably do not have the luxury of raising taxes or war bonds. You may have to make operational cuts or look for new investors. Next during the simulations, you can identify the guiding policies that will help during the decision-making process. A simulation will not be able to identify each scenario, however it will get your team to align on what the best guiding policies to establish to maintain strategic alignment.
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