EDGE: There is a lot of hype around business transformation. Is it just a trendy buzzword, or is there something behind it?
MURRAY: I don’t think it is a trendy buzzword. Long-term success is all about changing well in advance of being forced to do so. A lot of organizations change incrementally; they tinker at the edges and they are comfortable with that. Where they get absolutely blind-sided is in the area of transformation. The incremental stuff within an existing core business, everybody gets, but the big-step changes are what is difficult.
EDGE: What is an example of a company that didn’t recognize the need for transformation?
MURRAY: I was just teaching a class about Eastman-Kodak in the camera/film business. It was absolutely clear that the world was going digital, and had they really got their act together, they wouldn’t be in the situation where they are today, laying off thousands of employees and basically shrinking the company significantly.
EDGE: What about organizations that are in a constant state of flux? Can you go to far with this?
MURRAY: There is a flip side. If you are transforming yourself all the time, this is not a good thing either. Sometimes organizations are always recreating themselves simply because they want to rather than they have to. There’s a balance between finding a core business and finding a business model that works, and then incrementally inventing around that core business, making money, making margins and reinvesting so you can fund a transformation. In some industries where the business cycle is very short, you have to be able to change more quickly. The wireless industry is a good example of that.
EDGE: What is the role of the leader in all this?
MURRAY: Visionary leaders are important, but they are only one ingredient. Visionary leaders become important because they can imagine what could be possible. They see around the corners and have the ability to raise the bar and figure out the new rules of the game. And then they can get the resources organized to move forward. But, for a lot of organizations, it is dangerous to rely on one person.
EDGE: Is there a method or system that you can use to determine if you need to change?
MURRAY: Think about the concept of a radar screen. The first thing is you’d better be able to recognize the signals out there that indicate it is time for change. The second thing is, you have to have the ability to pay attention to those things. You see them, now you make sure you are going to debate the merits of the signals and what they are trying to tell us. I often use the analogy of Pearl Harbor. They had a radar screen, there were signals on the radar screen that said the world is about to change, but they inaccurately understood what those signals were telling them. It wasn’t a flock of birds, it wasn’t their own aircraft, it was incoming enemy aircraft. When you talk about transformation, it often starts with recognizing the signals in your environment and that the status quo is no longer viable.
EDGE: Why don’t organizations want to be more open to change? Is it denial?
MURRAY: There is a lot of denial going on. Change is scary for people. There is a tendency to stay at a steady state and there is a lot of risk inherent in change so what you find is that people are very uncomfortable with risk. Often times, when you are changing before you have to, it means you are dealing with uncertain or ambiguous information. You have enlightened self-interest, people who are out protecting their turf. There are many motivations and many reasons why organizations fail to change at the right time.
EDGE: Once you identify the fact that you need to transform, who should be identified as the key players in this change?
MURRAY: We talk about something called the 20-70-10 principle. Let’s assume that you are in a small group looking at the radar screen and you see the signals, and you have that moment, “Oh my God, we have to do something dramatically different and transform ourselves.” It is highly unlikely you are going to be able to convince everybody in the organization immediately and it’s actually foolish to even try that. Typically what happens is that you have a small group trying to get the message across to 5,000 employees and it doesn’t work. You will find 20 per cent of a group of employees, and this is people at every level of the organization, and they will see the world in exactly the same way as you do. They will do anything to move forward. That’s the good news. The more challenging news is the people in the organization who are on the fence. They are not resistant, they are simply uncommitted. They say things like ‘I don’t like risk,’ ‘I don’t understand what you are talking about,’ a whole variety of reasons. Then you have the 10 per cent who we call the arsonists and the saboteurs, they will work against what you are trying to do no matter what. From a leadership perspective, we know it’s important to find the 20 quickly, because they give you leverage to convert the people who are on the fence. What you hope is you get 90-10, and you don’t even have to deal with the 10 per cent. There is an element of speed here. If you don’t get to the fence-sitters fast enough, and before the 10 per cent get to them, you could end up with a 50-50 proposition.
EDGE: Do these percentages vary much?
MURRAY: If you look across a large sample size, it’s 20-70-10, and the categories are not related to hierarchy. It’s a vertical slice. In each category you find very junior people and very senior people. It’s surprising, some of the more senior people you will find in the arson category. These are often passive-aggressive, they will pay lip service to what you try to do, but will work behind the scenes. You have people in any organization with a power base built on the status quo and if you change, that, what do they have going forward. It’s all about people.
EDGE: Do you manage change or do you inspire it?
MURRAY: That’s a very good question but the answer is you have to do both. The inspiration piece only works for some people. For a small segment of the fence-sitters, the inspirational transformational leader will work. There will also be the small group who says, ‘I want to see the CEO look me in the eye and tell me this is the right thing to do, and then I’m there.’ I lot of people will say, ‘I’ve heard that before, talk is cheap, I want to see proof.’ Leadership is critical and a necessary, but insufficient, piece of the puzzle.
EDGE: Most companies seem to prefer incremental to transformational change. Is it really possible to distinguish between the two?
MURRAY: Sometimes the changes are small such as, we are going after a different customer group. There is the more significant change where you are going after an entirely new market such as doing business in China or India. The reality is you need all those different element of change from continuous improvement and the more incremental stuff versus business process reengineering which is more often around transformation. These are only buzzwords. At the end of the day, you need to think about incremental change versus more radical change, it’s the difference between evolving and revolutionizing.