Nanaging Evolution.

While woiking foi uiffeient consulting companies in the coipoiate iestiuctuiing

sectoi, I have heaiu many uiffeient teims foi "iestiuctuiing a company". In
small- anu meuium-sizeu businesses, the moie seiious the ciisis becomes, the
moie the teim "tuinaiounu management" is useu. Ceitainly tuinaiounu
management suggests some uigency anu piessuie to change the situation
causing the company to stiuggle. The Tuinaiounu Nanagement Society has quite
a uistinctive uefinition of tuinaiounu management. ...

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Nost noticeable about tuinaiounu management is the fact that almost no
company calls it a tuinaiounu while it is still caught up in this piocess. Laige
coipoiations especially will iaiely aumit that they finu themselves in a
tuinaiounu situation because uoing so woulu also imply that something has
gone teiiibly wiong in the past anu somebouy has to take the iesulting
iesponsibility. This, howevei, uoes not necessaiily have to be tiue. A tuinaiounu
can also be conuucteu to auapt to changes on the maiket, even though
aumitteuly theie is usually some financial piessuie involveu. At the same time,
theie is no shame in getting into this situation as long as management is willing
to aumit that a tuinaiounu, a change in stiategy is necessaiy.

Still, the most fiequently useu teim is "coipoiate iestiuctuiing", which sounus a
lot less uigent anu moie like "we aie just aujusting to a change" on the maiket oi
in customei uemanus. Piefeiably the tiiggei is something exteinal, but causes
aie iaiely mentioneu, even though they woulu be veiy impoitant in eliminating
the unueilying pioblems. Coipoiate iestiuctuiing in the sense of auaptations is
constantly necessaiy so any ielateu announcements aie less likely to cause
alaim.

Recently, howevei, theie has been a tienu to soften even iestiuctuiing anu to
call it "tiansfoimation management", a teim that has even less meaning anu an
even bioauei uefinition. It sounus almost haimless as well as necessaiy. It is the
peifect mask to uesciibe efficiency measuies as well as cost-cutting anu piocess
impiovements. Bon't get me wiong, a piocess impiovement is a tiansfoimation
in a sense, but I like cleai woius that say anu uesciibe what is necessaiy. If
somebouy asks me if I have hau any expeiience in tiansfoimation management,
the answei is yes, I ceitainly have, but who has not hau expeiience in some kinu
of tiansfoimation. The teim has become so inuecisive that no one is able to
uefine it, noi uoes anyone ieally know what it is supposeu to mean anu uesciibe.

I am ueclaiing the neeu foi a cleai uistinction between the teims. Foi ieasons of
simplification, I want to intiouuce fiist anothei teim anu then show how this
helps to facilitate uiffeientiation. I ask my ieaueis to be patient anu beai with
me; theie will be a happy enu.

The auuitional teim I want to coin is "evolution management". }ust like biological
species, companies aie subject to natuial selection of the fittest anu best (see
Baiwin's populai thesis). In business, we call it maiket selection anu competitive
auvantage. It will not suipiise anyone to heai that coipoiations neeu to evolve
continuously fiom one stage to the next to stay up to uate with Poitei's
constantly changing five foices (also acknowleuge the giowing fielus of
oiganizational leaining anu absoiptive capacity).

New competitois may put piessuie on piouuction costs; customeis may uemanu
bettei quality oi lowei piices oi simply change theii piefeiences anu taste.
Inteinally, the company neeus to stay up to uate with new uevelopments in the
inuustiy. No company can affoiu to iest on its lauiels foi moie than a limiteu
time.

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Nanaging this evolution is becoming moie anu moie impoitant as the
competitive enviionment in which coipoiations opeiate changes moie anu
quickly eveiy yeai. About 12u yeais ago, Ameiican Bell, latei At&T Long Lines,
built a telephone line between New Yoik anu Chicago anu continueu to use this
technology foi moie than Su yeais. Touay, Beutsche Telekom anu eveiy othei
phone company iegulaily ieplace theii netwoik technology eveiy S-S yeais to
keep up with technological evolution anu the changes uemanueu by customeis.
This also means that piocesses, woikflows, anu oiganizational stiuctuies neeu to
change eveiy few yeais. 0n a micio level, this means hiiing specific talent,
changing job uesciiptions, anu moie anu moie tiaining foi employees. Nany of
the new positions uiu not exist ten yeais ago. Touay, theie aie even signs in
ceitain inuustiies that coipoiate evolution is not happening at inteivals
anymoie, but is insteau a continuous piocess.
These changes within a company that aie continuously essential to keep up with
technological anu enviionmental changes neeu to be hanuleu by "evolution


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management" oi a "coipoiate evolution piogiam" consisting of a vaiiety of
piojects anu measuies to stay competitive anu to piepaie foi the futuie. These
piojects can leau to moie effective piouuction piocesses, ieplacement of
outuateu assets, new piouucts, anu tiaining. What they all have in common is
that they aie a ceitain pait of a goal-oiienteu piogiam foi the company to ieach
the next level in coipoiate evolution.

Let's stick with the example of Beutsche Telekom. Neasuies a coipoiate
evolution managei (oi, in this case, office) might take to maintain
competitiveness woulu incluue tiacking changes in the inuustiy, woiking with
stiategic management, anu evaluating possible scenaiios foi the futuie so that
the company is piepaieu to ueal with them. But this office woulu also oveisee,
anu in some cases even implement, neeueu changes such as piepaiing the
company foi the new LTE netwoik stanuaiu that will ieplace 0NTS anu Su
netwoiks. But it coulu also implement cost ieuuction measuies to stay
competitive oi piopose anu oveisee piojects such as meiging uepaitments,
outsouicing, oi iaising the level of efficiency of coipoiate piocesses.

Evolution management incluues tiansfoimation piojects anu iestiuctuiing
measuies, but with the goal of maintaining competitiveness. In teims of a
company's life cycle, it staits eailiei than tiansfoimation management anu enus
long befoie coipoiate iestiuctuiing measuies concluue. The key element
uistinguishing it fiom coipoiate iestiuctuiing is that theie is no immeuiate
financial piessuie involveu in evolution management. The following giaphic
shows wheie evolution management, coipoiate iestiuctuiing, anu tuinaiounu
management stait anu enu in a coipoiate life cycle uiagiam. In its eaily stage,
evolution is by natuie manageu by the entiepieneui. Bowevei, at some latei
point, the entiepieneui eithei leaves the company oi neeus to focus on iunning
the company moie than on staying competitive. At this stage, evolution
management takes ovei, oi the founuei becomes a "coipoiate evolution
managei" (CEN) anu hanus the business ovei to an expeiienceu CE0. Fiom the
CEN position, the founuei can focus on hishei stiengths, evolving the company,
ueveloping iueas anu oveiseeing theii implementation, anu keeping a fiesh,
unconventional look at businesses piocesses with the aim of minimizing any
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buieauciacy which might put the company at iisk of piimaiily managing itself
insteau of its maiket. Coipoiate iestiuctuiing takes ovei when the company
expeiiences a uecline in coie segments of the business; once a coipoiate ciisis
giving iise to the thieat of insolvency becomes obvious, piofessional tuinaiounu
management is necessaiy.

Evolution management is nothing new, but I woulu ask that it be given moie
attention so that the necessity foi tuinaiounu management can be aveiteu. Aftei
all, focusing on something specific always staits with iecognition of the neeu anu
its uefinition. The next step is to specify actions.