Change: The Work of Leaders
The only constant is change, continuing change, inevitable change.
It is easy to embrace Asimov's sentiment as we look around at the worlds of politics, business, technology, and even sports. It is reasonable, indeed fashionable, to say that things are changing. Everyone seems to acknowledge that change is inevitable. After some thought, almost all of us would agree that change is everywhere; that it is continuous; that it can be either slow or rapid; and that it is sometimes random and other times purposeful. Great people and inluential observers are always reminding us that times are changing, especially when times are tough and we need to be reminded to do something about it:
The dogmas of the quiet past, are inadequate for the stormy present. The occasion is piled high with dificulty, and we must rise … with the occasion, and act anew. We must disenthrall ourselves, and then we shall save our country.
Abraham Lincoln, Message to Congress, 1 December 1862
That is an extraordinary excerpt from a speech by a great leader. Lincoln was inluencing his fellow citizens to take action, to do something different, to change things for the better. And in doing so, he touched on all of the key questions that a leader must consider: Why? How? What?
The readers of this book, engineers and scientists, are in the cauldron of change. Ray Kurzweil, director of engineering at Google, entrepreneur, inventor, and futurist, has said: “An analysis of the history of technology shows that technological change is exponential, contrary to the common-sense 'intuitive linear' view. So we won't experience 100 years of progress in the twentyirst century – it will be more like 20,000 years of progress (at today's rate).”6 This comment about the current rate of technological change underscores the
6 Ray Kurzweil, “The Law of Accelerating Returns,” 2001, retrieved 22 January 2004 from kurzweilai.net/articles/art0134-html?printable=1 need of engineers and scientists to engage in leading change – it offers both an opportunity and responsibility.
Hierarchy of Change
A useful approach to understanding change is in terms of its sweep and complexity. Granted, change is important whatever its magnitude. The point here is that a leader's role will adjust according to the magnitude of the change. The best way to think about this is in terms of three levels of change: incremental, continuous, and transformational.
Incremental change is small but measurable. It is change in some variable that is relatively easy to accomplish. If we are producing widgets in our factory and we have been making yellow, red, and blue widgets and we decide to make a few green widgets, that is an incremental change. It is incremental because the green widgets are a small fraction of the total; thus, little has changed in the mandate of the manufacturing manager and the organization. Little has changed for the factory's future or its role, mandate, or profitability. We can measure the changes in the widget business, but this will have little impact on the business's long-term future. We have made an incremental change – one that is signiicant enough to be measured, but incremental nonetheless. The distinction here is between transactional and transformational change. “Transactional” here refers to asking others to take small, easily understood actions. “Transformational” refers to asking others to see the beneit of major, not so easily understood directions.
Many proit-oriented organizations are content to make incremental changes because their culture sets a high value on stability, control, and regulation. This is often a characteristic of governments as well, and of other organizations that favour transactional over transformational change. It is also common among organizations run by people who are more comfortable managing than leading. Managing is more about controlling present boundaries than seeking new ones. Managers are more likely to launch incremental changes in their role of controlling and improving a current state.
This is not to suggest that incremental change doesn't involve leadership. Indeed, incremental change may require leadership when the task at hand is the irst step towards more aggressive, future-oriented change. That is, leaders may experiment with incremental changes as a way to prepare the ground for more dramatic changes. This can help minimize risk when failure in the early changes could have disastrous effects on the organization and its people and other stakeholders. For example, when considering
changes in a bridge design, if dangerous stresses cannot be completely ruled out, it may be prudent to focus on incremental change. It may even be prudent to bring about more dramatic change through a series of incremental steps, measuring and evaluating changes in the design in an orderly manner along the way to an improved future state.
All incremental changes of this type involve leadership, for they entail managing transactionally with the long-term goal of leading transformationally. Perhaps this is a play on words, but it helps us understand that incremental change can be useful as an interdependent idea when combined with continuous improvement change or transformational change. It also illustrates that organizing effectively requires leading and managing processes, often by the same person.
Continuous improvement goes beyond incremental change. It is change that leads towards a new direction for the organization. It is a systematic and disciplined approach, and it relects a commitment by leaders and the organization to make things better.
As noted, incremental change entails small but measurable steps that may have little impact on the organization's future performance or aspirations. Continuous improvement, by contrast, is large, measurable, and planned. It also has ongoing effects on the organization's future performance as measured by a large number of productivity, quality, and service indicators.
When we talk about productivity, we are referring here to productivity in the generic sense, as input that generates output. Examples include inancial productivity, measured perhaps by sales revenue per employee; social productivity, measured as the percentage of a country's people living above the poverty line; and innovation productivity, measured as the number of new products the company has launched in the marketplace each year or the number of recent hires for its engineering department as a percentage of total hires. In other words, productivity includes many important measures relating to the organization, the industry, and the country. Let's consider our widget factory again.
Let's say that the leader sets a direction that commits the organization to becoming the most productive widget manufacturer in North America. Furthermore, she deines productivity in terms of revenue over cost – that is, as sales revenue from widgets sold over the cost of buying the raw materials, making the widgets, marketing them, and so on. By this deinition of productivity, the direction she has set amounts to a commitment to ongoing change for the factory business – a direction that she, as a leader, has set.
Many, many businesses engage in continuous improvement. The idea grew out of the Total Quality Management movement of the 1970s and
1980s, though its roots go back even earlier to the Deming-inspired quality revolution in Japan's auto industry.
A company, especially a large and complex one, requires strong leadership in order to generate continuous improvement – to set a direction and guide the actions of all those involved in carrying out that direction, whether as individuals or as team members. And after that direction has been set, strong management is required in order to foster the environment that must exist to get all projects started, to keep the company on track once change begins to occur within it, and to prepare the company's people for further change.
In an environment of developmental continuous improvement, success can be measured in a number of ways. In fact, measures are visible almost everywhere that enable all members of the organization to see and understand their contributions to the change effort as they go about their daily tasks. During major continuous improvement efforts, there will be many distinct and important projects throughout the organization. Each project will be distinguishable from the others in terms of who is leading it, which people are assigned to it, how its success is measured, and what it is contributing to the company's overall targets.
Transformational change goes well beyond incremental change in terms of the size of the change and its impact on the organization's future. Transformational change is major, innovative, disruptive, and dificult; it also takes a long time and results in an entirely new future for the organization. In many ways, transformational change is less measurable than incremental change or continuous improvement. It is visionary, conceptual, and vague but also clearly directed. An example is the transformational change that is under way around the world in the energy sector: vast and multiplying innovations, new companies, and new government programs. These changes are dedicated to the same vision – the replacement of fossil fuels. This is global transformational change.
But transformational change can also be discussed at the level of the individual irm or organization. Under our deinition of transformational change, I would offer as an example an acquisition by our widget company that doubled the size of the company and that changed its technology base. That acquisition would be a transformational event for the company, especially if it moved the company into a different product line or a different industry sector. Recall from our earlier example that this was quite similar to Carol's solution to the threat facing her Package BU.
It is the leader's role to initiate transformational change. The great leaders throughout history and into the present day have based
their reputations on the transformational change they have imagined and carried out. History is full of transformations in companies, governments, and institutions of all kinds, many of them positive, some negative. There is no end of transformational leaders who could be called on as examples: in politics, Mohandas Gandhi and Margaret Thatcher; in technology, Edwin Land of Polaroid and Steven Jobs of Apple; in health, Francis Crick and Margaret Sanger; in the arts, Charlie Chaplin and Ansel Adams. These people changed the world and inspired and inluenced countless others.
Still other business leaders were innovators of processes. Two of the most prominent among these were engineers associated with the American auto industry of the early twentieth century: Henry Ford and Alfred Sloan. Henry Ford revolutionized manufacturing by developing the automated, conveyor assembly line, which reduced by 90 per cent the time it took to manufacture a car – an enormous transformational change that allowed most people to buy their irst car. This in turn drove a whole series of transformations of the U.S. economy.
Around the same time, Alfred Sloan built General Motors into the world's largest automaker by changing how cars were marketed. It was Sloan who persuaded car buyers to pay more for luxury and prestige instead of opting for the simple “car for the masses” that Ford was producing. Sloan and his organization changed forever the industry – indeed, the whole world – by inluencing people to pay more for a luxurious Cadillac and to pay more for the colour they wanted when buying a less expensive Chevrolet. This new marketing approach, known as “product differentiation,” generated enormous proits for GM and was rapidly taken up by other companies and industries.
One inal point: The strongest leaders are highly motivated to make major transformational changes. But they achieve those changes through a series of continuous improvement projects, which in turn are composed of many and varied incremental change steps. All of these efforts are focused on the transformational goal and implemented through a disciplined, systematic, and highly integrated set of work processes.