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STRATEGIC CHANGE

Corporate Level (Jenkins & Williamson, 2016)

The center's role is to ensure that each unit in a corporate portfolio gains the maximum benefit
from being
part of the group. Organizations must cluster their business units within an overall framework
that maximizes the opportunities for synergy and parenting. It is imperative in post-merger or
post-acquisition periods when corporate centers try to reconfigure their organizations. It may be
appropriate to bring units together or separate them. Changes at the business level may impact
the whole organization, with some businesses possibly funding other firms, while other
companies could be given preference for investment over others.
The following are the considerations in implementing strategic change at the corporate level:
 Business portfolio. Managers must identify the changes in the corporate landscape due to
the new strategic options/initiatives of a firm. These changes may relate to the disposal of
companies, the acquisition of companies, company mergers, and new business start-ups.
Careful consideration must be given to the financing of corporate-level change. For example,
some businesses may be sold to fund expansion or improvements in other companies. If
additional investment is required, it is important to identify sources of funds and the impact
that this will have on the organization's financial structure. The long-term consequences of
key financial ratios and the trends in these ratios need to be understood.
 Parenting relationship. Managers must identify changes in the connection between the
corporate center and the individual businesses. The strategic options chosen may require
that the organization's overall governance is changed and that the role of the center and its
relationship to individual business is modified. It may be appropriate for an individual
business to cooperate. A key issue is identifying the parenting relationship between the
center and the individual businesses and the opportunities for synergy across industries.

Business Level (Jenkins & Williamson, 2016)

The impact of strategic change or corporate restructuring has to be managed within the individual
businesses, and the ways that change is managed will be context-dependent. Expanding from
success is quite different from turning around an organization in crisis. The challenge is different
when the proposed change requires alterations in the organizational culture or the way
employees understand their worldview.
The following are the considerations in implementing strategic change at the business level:
 Consumers. Managers must identify if the proposed changes will affect the customers of the
firm’s products/services. It is important to estimate the impact that change has on consumers.
Some impacts are expected to be desirable to consumers, while other impacts may be trade-
offs (undesirable to some consumers). For instance, if products are positioned to have
different features that make them more competitive, the mechanism for communicating these
changes needs to be in place. Suppose new segments are targeted, perhaps in a different
country. In that case, the firm must consider if the distribution and the promotion of the
products are parallel to the current practice or it would require new practices. Also,
companies must note if the proposed changes require the organization's products to be sold
into different markets in different international locations. Above all, impacts on manufacturing,
distribution, and marketing, etc., must be considered.
 Materials. Managers must identify if the resources need to be changed, modified, and/or
increased to implement the new strategy.

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 Business paradigm. Managers must identify if the business unit's worldview (organizational
culture) is compatible with the proposed strategic direction. A strategy that contradicts a unit’s
culture will be challenging to implement. However, if a change in strategic direction is
necessary for long- or short- term organization survival, this may be an appropriate route. As
such, the nature of the situation may be used by organization leaders as a catalyst for
change. The theory of cognitive dissonance indicates that people prefer their beliefs to be
consistent so if they can be convinced that their behavior is inconsistent with their
organization's survival, and hence their security, they will find alternative employment or
change their behaviors.

Figure 1. Product-market resource portfolio matrix Figure 2. Organization paradigm and rate of change required matrix
Source: Strategic management and business analysis, Source: Strategic management and business analysis, 2016, p.
2016, p. 34. 35.

Assessing the product-market resource portfolio matrix in Figure 1 (as similar to Ansoff’s
Matrix discussed previously) and the organization paradigm and rate of change required
matrix in Figure 2, firms may consider the implications of managing change based on its
nature in the organization's resource mix. Changes that are likely to be consistent with the
development of the present organizational paradigm are more likely to occur when the
organization is changing incrementally from a successful position. These changes can
involve maintaining the current worldviews held by all levels of organization members but are
also likely to influence their evolution as initiatives become embedded in the organization.
Managing Change (Jenkins & Williamson, 2016)
The strategic change in four (4) different circumstances are explained below:
Consistent with the Organizational Culture
This situation requires managing change that is consistent with the current organizational
culture. Under this condition, the organization needs to manage change incrementally while
understanding its situation and environment. For example, Box E and F type changes in Figure
1 involve maintaining and developing the organization's present market position and product
portfolio by developing the present competence and asset base. In healthy organizations,
changes will be grounded in present resources, but the organization will learn and grow over
time. It will acquire new assets and skills as current products are produced more effectively, and
new products and markets are developed (Box G and H type changes).
In managing change, firms must consider the factors that affect the nature and structure of
organizations, such as the position of their products in their lifecycle. Moreover, companies must
consider the following factors that may affect their change strategies:

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 Demographic changes. Firms must consider the increased spending power of elderly
people as well as the average age, life expectancy, family structures, birth rates, etc.
 Government policy and legislation. Firms must consider changes in interest rates and
trade, laws and regulations, etc.
 Technical innovation. Firms must consider developments in technology, internet use, new
inventions, advanced and modern ways of doing business, etc.
 Sociological changes. Firms must consider the increasing dominance of one (1) parent
families and the human interactions and relationships that transform cultural and social
institutions.
Healthy organizations adopt a philosophy of continuous improvement (sometimes manifested
through Total Quality Management [TQM] systems). This involves updating products and
processes to align them to evolving customer needs. The continuous development of a firm's
skills allows it to lead and develop customer expectations of value in products and services,
thereby minimizing competition risks. Companies can also build relationships with their
customers and suppliers to become proactive in defining the way their industry develops. In this
situation, the organization's culture is likely to be healthy but evolving to manage the status quo
while innovating in other areas. Under this condition, firms may incorporate both step (a
significant modification in policy or culture) and incremental (a minor alteration in policy or
culture) changes, such as the launching of new products and the opening of new markets, and
the slow and continuous improvement of competences and resources.
In continuous improvement projects, the main players are usually first-line managers,
maintained by middle managers as key links to top managers. In a healthy culture, there would
be open communication throughout the organization. Indeed, the empowerment of individuals
and teams within organizations is the cornerstone of a continuous improvement approach. The
concept of teamwork should involve teams within the organization and across organizations.
Organizations can also build teams with customers and suppliers. Yet, the practice of cross-
organization teams only works if team members believe that customers and suppliers benefit
through teamwork, and there is a shared belief in win-win outcomes. The ability to create
successful teams depends on several factors as follows:
o Team members must want to be part of the team;
o There must be a balance of appropriate abilities in the team; and
o They want the team to succeed.
It is essential that the team be appropriate for the task and that the task being undertaken has
top management support. In addition to having clear objectives, the objectives should be agreed
upon at the start of the project and regularly restated. The team should have a leader who is
concerned with the three
(3) key areas of teamwork:
o The needs of the task.
o The needs of the team.
o The needs of the individual within the team.
The following are the responsibilities of the team leader:
o Ensure that all members understand the task and the plan.
o Lead the team in developing the project plan that accurately reflects the task.
o Allocate tasks within the team.
o Agree on milestones and performance measures.
o Ensure that the team maintains an effective work rate.
o Encourage and discipline the team and individuals.
o Encourage the building of team spirit.
o Minimize tension and reconcile disagreements.
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o Receive information from the wider organization and its environment and disseminate it
to the team.
o Disseminate information from the team to the wider organization.
o Check project outcomes with initial objectives.
o Help the team evaluate its performance against objectives.
Step and incremental changes in this environment are likely to be within the organization
paradigm and are likely to be accepted by organization members as beneficial. This means that
planning in a supportive environment facilitates the implementation process. For example,
teams from sales, research, and manufacturing would plan new product development. To further
improve customer service, the team could include customers.
Various Organization Contexts
This situation requires managing change under different organizational circumstances. Healthy
organizations may also have to accommodate a step change when introducing new products to
new markets, which involves acquiring new resources. If there is a significant difference in the
before and after resource endowments, it may be wise to allow separate developments and new
units within the organization.
The following are the principles along with their indicators when managing change to
accommodate different organization contexts:
Principles Indicators
1. The organization is committed to supporting
the development of its people.
Commitment 2. People are encouraged to improve their own
The organization is fully dedicated to developing and other people's performance.
people to achieve its aims and objectives. 3. People believe their contribution is recognized
4. The organization is committed to ensuring
equality of opportunity (meritocracy).
5. The organization has a plan (strategy)
that everyone understands.
Planning
6. The development of people is in line with
The organization is clear about its aims and
the organization's aims and objectives.
objectives and what people need to do to achieve
7. People understand how they contribute to
them.
achieving the organization's aims and
objectives.
8. Managers are effective in supporting
Action
the development of people.
The organization develops its people effectively
9. People learn and develop effectively.
to improve its performance.

10. The development of people improves the

performance of the organization, teams,
and individuals.
Evaluation
11. People understand the impact of the
The organization understands the impact of its
investment in people on its performance. development of people on the performance of
the organization, teams, and individuals.
12. The organization gets better at developing its
people.
Table 1. Principles and indicators
Source: Strategic management and business analysis,
2016, p. 38.

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Cultural Change
This situation requires managing change that is not consistent with an organization’s long-term
success (and, in the worst possible case, the firm's short-term survival). Under this condition,
the organization requires realigning. Remedial action can be carried out gradually if the
organization is in the early stages of strategic misalignment. If the crisis is more immediate, the
changes must have an immediate impact on organizational performance.
EXAMPLE 1: The organization has an opportunity to change the way it delivers its present
goods or services because of technological changes that allow these products to be delivered in
more effective ways. If the opportunity is not taken, the organization will find itself at a
disadvantage against competitors who adopt these technologies. The firm has to reconfigure its
value chain or business model. After implementing the change, the organization may find that it
can develop into different products and markets because of the new culture. This has been the
situation facing financial service firms as they adopt information technology (IT).
EXAMPLE 2: In the public sector, government reforms have required change to meet new
performance indicators and adopt different work practices. These changes have not always
been smooth and straightforward and have involved disputes involving hospital consultants,
nurses, college lecturers, and the fire brigade. This suggests that cultures in organizations are
not homogeneous in times of change. Particular groups of workers will have different worldviews
from their managers. For change to be successful, different worldviews in different parts of the
organization have to be compatible.
In these cases, firms may use an eight (8)-step framework for organizational remodeling:
1. Establishing a sense of urgency. This involves initiating a change process to establish the
need for transformation. The next step is to effectively communicate that need to those who
have to implement it. Developing strategies for overcoming resistance to change can be
considered using force-field analysis. The technique considers the change process and the
forces driving and resisting change.
2. Forming a coalition. This involves forming a guiding coalition or project team. This team
will initially review and re-examine the implications of the change proposals to establish their
commitment to the project. Deciding on the composition of the project team is an important
task for senior management. The composition of the team should reflect the nature and
context of the task. The change team must have status (the authority and apparent support
of the organization's leadership). Furthermore, the project team should have the power to
implement change.
3. Creating a vision. This involves expressing the need for change in a clear declarative
statement stating where the organization is heading.
4. Communicating the vision. This involves convincing the employees that the firm’s
objectives are achievable. Employees may have to make sacrifices and tolerate job losses
amongst colleagues. Senior executives must show commitment to change by what they do
and be aware of the symbolic nature of their actions. Writing newsletters about making
sacrifices only becomes credible if the writer is seen to be making sacrifices. Senior
managers must ensure that their behavior supports the rhetoric, or lower-level employees
will become cynical and not support change initiatives.
5. Empowering others to act on the vision. This involves aligning the systems and culture of
the organization to the established vision. The activities of the organization must be
compatible with the vision of the future. A way to aid thinking about change is to draw before
and after models, as shown in Figure 3.

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Present Future
Primary activities Secondary activities Controls and Primary
incentives
activities
Resources
Secondary activities Controls and incentive
Organization structure Organization structure

Figure 3. Before and after activities

Source: Strategic management and business analysis,
2016, p. 41.

6. Planning short-term wins. This involves measuring progress against set objectives and
performance indicators. The balanced scorecard provides a framework for translating a
company's strategic objectives into a set of performance measures. This system seeks to
align short-term performance indicators within a long-term perspective. This avoids
organizations having incompatible long- and short-term objectives. The four (4) sets of
performance indicators (financial, customer, internal, and growth) must reflect and
operationalize the organization's mission and strategy. An example of how a strategic vision

Corporate Vision

To be the leader in each of the sectors we operate in

Corporate Strategy

Provide the best customer service Continuously innovate in all To improve financial margins in all
in each sector product offering areas product offering areas

Financial Customer Internal Growth

d cash flow; Improved profitability; Improved return
Service
on capital
improvements;
employed.
Value
Integrate
improvements;
Develop
information
new Introduce
geographic
systems;anareas;
innovative
Product
customer
enhancements;
loyalty system.
Pilot new prod
Implement TQM.

Performance MeasuresPerformance MeasuresPerformance MeasuresPerformance Measures

Cash flowImprove serviceReduce project timesIncrease market share performance index;satisfaction index by 5%;by 6%;by 8%;
Increase return onComplaints ReductionReduce rework by 3%.Increase number of capital employed by 3%.target of 5%.stores open

can be translated into a balanced scorecard is shown in Figure 4.

Figure 4. The strategic vision and the balanced scorecard
Source: Strategic management and business analysis,
2016, p. 43.

Performance measures have to be cascaded down the organization so that managers can
monitor their implementation of performance management. This involves sub-units
identifying their own set of actionable performance indicators in line with the company's
overall strategic objectives. Therefore, the cascading process communicates the strategic
objectives to the managers and employees of the company and acts as a motivational
device because it involves them in selecting appropriate performance measures. These
performance measures and targets can then be compared to the strategic objectives on an
ongoing basis, providing feedback on how the strategic plan is being operationalized and
how it might need to be amended in line with front-line performance.

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In summary, the benefits of integrating the balanced scorecard into the implementation
process enable a company to:
o Clarify its strategic objectives.
o Structure its strategic objectives.
o Measure its progress towards achieving its strategic objectives.
o Communicate its strategy to its workforce.
o Align its corporate and individual employee objectives.
o Highlight the tensions and trade-offs required in meeting its strategic objectives.
o Focus on its critical management issues.
o Review performance to learn about and improve strategy.
7. Consolidating improvements. This involves using enhanced performance figures to
inspire greater efforts from employees. Firms must create a continuous response to the
practices and structures that resist the new corporate vision.
8. Institutionalizing new approaches. This involves embedding successful changes in
systems, practices, and attitudes to the organizational culture. It is also important that
organizations develop cultures that can adapt to change. Moreover, attitudes relating to
continuous improvement must become embedded in the social norms of the organization.
Turnaround Situations
This situation requires managing change during turnaround situations. Under this condition, the
organization should identify the appropriate antidotes for a business decline. The common
causes of decline, along with their antidotes, are shown in Figure 5.
Causes of Decline Antidote
s
Poor management New management and restructuring
Inadequate financial Improved financial control and
control localized
costing and performance measures
High-cost Cost reduction, product-market
structure Poor reassessment Improved marketing
marketing Product market reassessment
Competitive weaknesses Cost reduction
Improved marketing
Asset reduction
Growth by strategic acquisitions
Big projects Asset reduction
Expensive acquisitions New financial strategy
Financial strategy
Figure 5. Causes and antidotes for decline situations
Source: Strategic management and business analysis,
2016, p. 45.

Firms in crisis can only be converted into firms that make above-average profits if strong
product-market positions can be achieved. If this is not possible because the products involved
are declining, it may be possible to sustain the firm in the short term and harvest cash before
final liquidation. A lack of financial resources may also mean that short-term survival can be
achieved by strong financial control and tight management. However, the company will be finally
defeated because of the lack of investment.

Reference:
Jenkins, W. & Williamson, D. (2016). Strategic management and business analysis (2nd ed.).

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Routledge.

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