Leadership

Change Management: It's the Strategy, Stupid

By Steve Tobak

Updated on: July 24, 2009 / 5:27 PM EDT / MoneyWatch

I'm going to go out on a limb here and say that you probably thought I was just tossing out a controversial idea when I wrote Why Change Management Fails. Au contraire. I'm methodically building a case against conventional change management wisdom, and this is the next installment.

Big consulting firms like McKinsey are in the weeds with their analysis of why two thirds of change programs fail. When it comes to mission-critical change, failure has far more to do with flawed and high-risk underlying strategy - courtesy of the CEO - than the change process itself.

Here's a mountain of empirical evidence that supports my position - ten well-known examples of corporate change that had everything to do with strategy, not change process:
Repositioning / Restructuring

Sony. By attempting to reinvent the company as a media giant, Sony took its eye off the ball and, in all likelihood, forever lost its leadership position in consumer electronics to the likes of Apple, Nintendo, Panasonic, and Samsung.
HP. Under Carly Fiorina, failure. Under Mark Hurd, success. Same company, same products, same everything. One CEO was a rock-star with big plans (including change management), the other knew how to drive operational excellence.
Yahoo. Under Jerry Yang, the company floundered because, well, Yang didn't know what he was doing. Carol Bartz came in, dismantled Yahoo's bloated and confusing matrix management structure, streamlined decision-making and cut expenses. Simple.
Intel. Having failed to reposition the chip giant as a communications company by investing billions in startups and technologies, Intel finally abandoned that effort and got back to basics.
Gateway. Outflanked by Dell and HP-Compaq, Gateway attempted one flawed strategy after another: retail stores, consumer electronics, then no more stores, etc. It failed because it had lost its value proposition.

Mergers
In Most Mergers Fail. So Why Do Them? I provided ten reasons why mergers fail, and none of them had anything to do with change process. Here are five notable examples:

AOL - Time Warner. Dumb idea based on irrational exuberance, CEO hubris, and not much else. Megamergers make my skin crawl.
MCI - WorldCom. The lunacy of a dysfunctional CEO (Bernie Ebbers) with a board and Wall Street in his back pocket; an epic tragedy acted out on the corporate stage.
Daimler Benz - Chrysler. Where was the synergy? What was the strategic reason behind this merger? I never got it.
Alcatel - Lucent. A common occurrence: two flailing, declining companies merge to form one slightly bigger flailing, declining company.
Borland - Ashton Tate. Delusions of taking on Microsoft highlighted Philippe Kahn's limitations as a CEO.

Look, I can't literally prove my point; that's just not feasible. And I'm not going to tell you that change management process is immaterial. That said, I'm a little tired of big consultants making big bucks off the backs of shareholders and employees on the flawed principal that it's all about the change process and they've got a better one than the other guy.

My advice to boards and executive management teams: if you want to improve the odds of mission-critical change, focus on common sense risk analysis of the CEO's strategy and basic operational execution. You'll get far more bang for the buck than change management "experts" would have you believe.