The 5 Greatest Examples of Change Management in Business History
Originally posted by Paul Arnold @ www.managers.org.uk
THE NEED FOR DECISIVENESS AND COMMUNICATION, THE INEVITABLE DISRUPTION, AND WHY YOU’LL PROBABLY NEED TO BREAK DOWN “THE OLD WAYS”... MANAGERS CAN LEARN A LOT FROM THESE CLASSIC CHANGE MANAGEMENT CASE STUDIES.
Change can be the foundation of competitive advantage but, to be effective, a change management programme must identify areas of potential conflict, address the needs of everyone in the organisation and, crucially, bridge the gap between the aspirations of executives, technical project teams and the people affected by the change.
Few organisations do this well. But there are exceptions, such as these outstanding case studies of change.
Shell’s tough love
In 2004 Shell was facing an oil reserves crisis that hammered its share price. The situation was compounded by the abrupt departure of the oil group’s chairman, Sir Philip Watts. The new group chairman, Jeroen van der Veer, believed that in order to survive, the corporation had to transform its structure and processes.
A series of global, standardised processes were identified. These, if introduced, would impact more than 80 Shell operating units. While the changes were vital to survival, they proved unpopular in the short term as some countries stood to lose market share.
The message was a tough one, and many operating units balked.
However, for a change programme of this scale to be successful, everyone had to adhere to the new systems and processes. The leadership of Shell Downstream-One, as the transformation was known, needed unflinching determination and to focus on gaining adoption from everyone involved.
Those leading the change had to ensure that the major players in all their markets knew what was required and why. They needed to be aligned with the change requirement. From the start, it was recognised that mandating the changes was the only way for them to drive the transformational growth they aimed for. This wasn’t an opt-in situation.
The main message of the change team, led by van der Veer, was that simpler, standard processes across all countries and regions that benefited Shell globally trumped local, individual needs. That meant everything from common invoicing and finance systems to bigger more centralised distribution networks. By identifying and rapidly addressing the many areas of resistance that emerged – such as that some influential stakeholders stood to lose control or market share – adoption was accelerated.
The team of experts – made up of senior leaders, in-house subject matter experts, implementation consultants and external change experts – who delivered the change programme were crucial in this phase. They’d been picked because they had both technical understanding and could provide change leadership. They both modelled and drove the new behaviours needed for the change to succeed. They briefed the people who would be impacted by the change; risks and potential problem areas were discussed and mitigated – before any real change was even delivered.
In all major change programmes, there’s always the danger that change management gets delegated; leaders distance themselves from the challenge of implementing the priorities they once championed. That can cause the initiatives to fail. In Shell’s case, however, the change leadership started and finished with Jeroen van der Veer, who never drew back from emphasising how important full implementation of Downstream-One would be.
Shell is in a significantly healthier position than when the transformation started, and by that measure the programme has been deemed a success. And the ramifications of Downstream-One continue to result in ongoing change…
Santander: pulling down to build back up
When in 2008 Santander wanted to establish a stronghold in the UK banking sector, its strategy was to acquire a portfolio of heritage-centric UK financial institutions – Abbey National, Bradford and Bingley, and Alliance and Leicester.
Grupo Santander chairman Emilio Botin felt, however, that the legacy in these UK financial institutions, dating as far back as 1849, had left them incapable of change and, therefore, unable to evolve and grow.
In buying these traditional UK financial institutions and unifying them under the Santander brand, Santander aimed to break down their engrained processes and turn them into a formidable retail bank.
To do this, they would need a fast-track, systems-led banking model. Only this could bring clarity, efficiency and best practice to institutions that had become totally entrenched in ‘their way’ of doing things. For incoming Santander UK CEO António Horta-Osório, his focus would be ensuring that all stakeholders grasped the value of shedding ‘old ways’ and embracing the new era in banking – a revolution, rather than evolution.
There were many opportunities during the change programme for cultural misunderstandings. Counter-intuitively, this can be particularly noticeable when national or linguistic similarities give a false illusion of commonality. In fact, the cultures of the UK acquisitions were very different, they had developed as regional building societies and their footprints, portfolios and client bases were each unique. This meant that forceful and careful management would be needed to integrate the systems, processes and people in the different organisations.
Those who were going to be impacted by the change were fully briefed; risks and issues were discussed and mitigated. In-branch teams, for example, were prepared for a variety of customer responses through the transition phase. Even those who weren’t likely to be impacted by consolidations were given clear messages about the future. The aim of this process was to make sure they didn’t just understand the change, but that they embrace it.
In January 2010, Santander UK was launched against ferocious economic and banking headwinds. By 2013, it had become one the country’s leading retail banks and one of the largest providers of savings and mortgages. And António Horta-Osório had been moved to to lead change at another, even bigger, banking institution: as CEO of Lloyds Banking Group.
Direct Line: disruption brings opportunity
Among leadership teams, there tends to be two views about change. One: change is risky and means disrupting repetitive processes that leaders have been rewarded for improving over time. And two: change is something that can be delegated, like other implementation-based activities such as project management and risk.
Actually, change programmes are most successful when, as a result of external factors, there’s a shared sense of urgency to deliver tangible change.
Following the 2008 financial crisis, RBS Group was ordered to sell its insurance business by European Union regulators, as a condition of RBS receiving £45bn in state aid. RBS’s insurance business, led by Paul Geddes, was tasked with separating its operations from RBS Group into a standalone company, in order to be ready for either a trade sale to a competitor, or listing on the stock market.
It’s a testament to Geddes, and the insurance business’s leadership at the time, that they turned the opportunity into a positive exercise and used the separation process to create a viable, standalone, rebranded insurance organisation, now known as Direct Line Group. It took 18 months to separate out every single strand of the business, from customer data, to independent functions and governance. This was very much a case of operating from a burning platform.
The entire approach had to be one of controlled urgency, there was no plan B and the leadership teams embraced the need to shift their people on to the next step as rapidly and as efficiently as possible. Once the separation had been effected, the focus was on creating a new brand and rapidly building the business into a viable standalone operation.
In 2012 the board went for an IPO that turned out to be the biggest and most successful London stock market listing that year. Its success heralded the start of a new, post-crisis IPO era. The Direct Line Group’s share price has continued to climb since it floated.
Paul Geddes remains the CEO of the quoted business.
Ooredoo, and delivering explosive value through change
The state of Qatar is the world’s richest economy, per capita. In 2005, its state-owned telecom company Qtel, led by chairman Sheikh Abdullah Bin Mohammed Bin Saud Al Thani, and CEO Dr Nasser Mohammed Marafih, embarked on an ambitious acquisition spree; by 2012, Qtel owned 17 telecoms operators in the Muslim world and had become the world’s fastest growing telecoms operator by revenue.
And each of the acquired telcos had been left to operate largely as they had done pre-acquisition.
In 2012, however, Qtel began to shift its strategy away from growth through acquisition towards growth through integration. Sheik Abdullah and Dr Nasser decided to pull all their diverse telecoms brands into one mega-brand, Ooredoo. This would give them the opportunity to focus on what they actually wanted their international telecom company to deliver – transformational change in the telecoms sector.
The change management teams set out to identify what they wanted their brand to stand for. They defined a series of unique branding propositions that would, ultimately, give them standout recognition. They wanted to offer the Muslim world greater freedom of communication and choice and, in particular, they wanted to be seen as helping rural communities and women gain a voice.
They wanted to change their world for the better.
In February 2013 the new global brand Ooredoo was launched from a standing start in a matter of weeks in Qatar, with the iconic footballer Lionel Messi introduced by Sheik Abdullah as the global brand ambassador. It was a stunning success, gaining market share within weeks. With a customer base of more than 95 million people in 17 countries, Ooredoo rapidly became a leading international brand.
Alignment, clarity of purpose and a ruthless focus on implementation showed the world what Qatar and Qataris can do.
Y2K, and making the case for change
In the late-1990s, industries around the world were becoming increasingly alarmed that all software would reset itself on 1 January 2000. Fear spread, and a generation of businesses was set up to address this impending crisis, known as Y2K (Year 2000).
No CEO worth his or her salt could say they wouldn’t address this change. It was a classic Doomsday scenario, driven by the book Computers in Crisis by Jerome and Marilyn Murray. Following publication in 1984, it was picked up in USENET discussion groups and in in the early days of the Internet, and built momentum from there.
In the history of business, no change management programme has galvanised businesses like Y2K. The consequences of inertia were all too clear. In this instance the success of organisational change – supporting the delivery of crucial business strategies – was driven by a common and effective organisational change requirement.
Setting aside the frequent misappropriation and misunderstanding of the term, effective change management enables leadership teams and their organisations to ensure successful growth and swiftly take advantage of opportunities that present themselves. In this instance, the change programme was about avoiding a global disaster.
The emphasis had to be on rapid implementation, and leaders had to avoid the temptation to try to deliver value from change. This was all about ensuring that solutions were found and implemented in time. Organisations had to be agile enough to act at short notice.
While planes never did fall from the sky at 01/01/00, we’ll never know what might have happened had the clocks stopped. Although an estimated $300bn was spent ensuring that nothing occurred, Y2K was the global mobilisation that showed the promise and value of change management.