Implementing a new Business Model

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Implementing a new Business Model
Residential 4 Day 4

• Geoff Eagleson

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Implementing a new Business Model

• Roadmap
• Technical versus Adaptive change
• An overarching framework for the implementation
  of any changethe Change Value Chain
• Illustrated by Woolworths repositioning
• Case Repositioning Orica Mining Services
• Resourcing the implementation of a new Business
  Model
• Leading the implementation

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A Toolkit for implementing a new Business Model

• Implementation Value Chain
• Benefits Realisation Map
• Change Initiative Analysis
• The Agreement Matrix of cooperation tools

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Technical or Adaptive change? The fact is that
some business changes are more dramatic than
others

• TEST Whom do you tell?
• Subordinates
• Peers
• Boss/CEO/Executive Committee
• Customers
• Board
• Market
• The resources needed and the depth of the
  intervention mean that the change is more than
  technical, more than business as usual. At its
  deepest level the change becomes Adaptive
  requiring everyone to change their beliefs and
  behaviours. Implementing a new Business Model is
  an adaptive change.

• Source Heifetx Laurie (1997) Reading 10

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Technical or Adaptive change? The fact is that
some business changes are more dramatic than
others

• Describe to your neighbour an adaptive change you
  have observed.
• Who was responsible for the change?
• What roles did the leader of the adaptive
  intervention fulfill? Illustrate how this was
  done or what opportunities were missed by giving
  examples of
• the provision of a helicopter view
• the framing of the challenge
• the management of distress
• the maintenance of a task focus
• the involvement of the whole organisation in the
  change process (you will need to be clear about
  what is the relevant unit of analysis)
• active listening to everyone at all levels of the
  organisation
• Do you consider the adaptive change initiative
  you have described to have been successful? On
  what basis do you make your judgment?
• What actions by the leader were particularly
  helpful or unhelpful in implementing the
  initiative you have described?

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An overarching framework for dramatic change
The implementation Value Chain

• Treat the implementation of the new Business
  Model can be framed as a business in and of
  itself. In which case it will have a value chain
  that will have to be managed

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An example of a strategic turnaround there was
a time when Woolworths stumbled

• Woolworths profit performance 1982-97

• Source Turner Crawford, 1998

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Woolworths The Change Value Chain Plan the
change First understand the economics of the
business

• Source Livingstone Tigert (1987) Reading x
  in SM1

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Plan the changeChange can be reframed as a
benefits realisation process.

• There is lots of evidence that change initiatives
  do not always provide the results required,
  sometimes because they are not planned with a
  clear benefit in mind.
• In the context of IT projects, DMR (now Fujitsu)
  developed a process to ensure benefits
  realization.
• This process can be adapted to any change
  initiative to improve the planning and
  implementation of the change. In particular the
  DMR process can help in designing an effective
  change program.
• The first step is to articulate the benefits
  sought for each of the stakeholders!

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Plan the change as multiple initiatives
withoutcomes that lead to benefits
10
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Assess the internal context for the change
program

• The time available
• Need for simplicity and clarity
• Degree of understanding and commitment
• Who are the key players? What is their attitude
  towards the change?
• The political and power environment
• The culture, both formal and informal
• The degree of consensus
• What would the internal context in Woolworths
  have been like?

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Assess the internal context with a Change
Initiative Analysis
(Score High5, Moderate3, Low1.)

• Initiative Woolworths repositioning to Fresh
  Food

• Source www.implementer.com

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Energize the organisation

• For the example of adaptive change that you
  described earlier, provide examples of the
• Promotion of dialogue
• Creation of respect
• Encouragement of collaboration
• Support of initiative
• If there were no examples of any of these
  activities, describe what you would have done to
  achieve them.

• Source Kanter (2003) Reading 11

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Engage the organisation by using the appropriate
toolsthe Agreement Matrix
Broad consensus
Leadership Tools
Culture Tools
Extent to which people agree on WHAT THEY WANT
Power Tools
Management Tools
No consensus
No consensus
Broad consensus
Extent to which people agree on CAUSE AND EFFECT

• Source Christensen, Marx Stevenson (2006)
  Reading 13

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Create an architecture for the change.

• Behaviour f(Individual x ENVIRONMENT)
• Create facilitating structures
• A separate Project Office when the new business
  is operationally dissimilar to the current one,
  protected from interference as in an ambidextrous
  organisation (OReilly Tushman (2004) Reading
  x in SM 2).
• Specific control systems (Simons (1994) Reading
  12).

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Summary of Control Lever Usage by Newly Appointed
Top Managers

• Source Simons (1994) Reading 12

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Manage and measure like a start-up. Test
assumptions at milestones and be willing to be
flexible.

• Monitor interactively as a feed forward process
  to inform the development of an emergent
  strategy.
• Focus on a few critical drivers even if they have
  to be assessed qualitatively rather than
  quantitatively.
• Assess performance against trends that are
  compared with historical data rather than
  targets.
• Use the logic of the business to generate
  hypotheses that can be tested at milestones,
  coupled with a continual assessment of the
  deal-breaking assumptions that lie behind the
  plan.

• Sources McGrath MacMillan (1995), and
  Govindarajan Trimble (2004)

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What would you advise a CEO about to begin
implementing a new Business Model?

• Orica Mining Services case

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Resourcing the implementation of a new Business
Model

• Read the case and individually record
• your ranking of the three most important
  selection criteria
• then your choice of candidate and
• finally the reasons for your choice
• In your syndicate group first choose a General
  Manager and then a secretary. Discuss your
  individual decisions and come to group agreement
  about
• the ranking of the three most important selection
  criteria
• the choice of candidate
• the reasons for the choice

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Results ofResourcing the implementation of a
new Business Model
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Once the organisation is engaged and energized,
the twomost relevant leadership activities are
those focused on Task and Relations.

• Relations Leadership
• Building Trust
• Motivating
• Supporting People

• Task Leadership
• Setting Goals
• Initiating Structure
• Maintaining Standards

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Leading to the demand for theHeroic (9, 9)
leader

• Source Blake, R.R. Mouton, J.S. (1985)

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Which is supported by experience
success rates of project managers
52
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16
6
Low T Low R (n 220)
Low T High R (n 220)
High T High R (n 271)
High T Low R (n 192)

• Source Misumi, J. (1985)

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BUT what happened when a hotel chain decided to
reposition itself around customer service?

• The new Business Model was based on the ideas of
  Albrecht (1990). Though never explicitly
  defined, through archival research and interviews
  it was found that hotels had been asked to
  implement ten components.

• Establish a quality mission
• Involve middle management
• Improve communication
• Gain employee commitment
• Reward employees for goodcustomer service

• Establish a steering committee
• Organise service circles
• Train front-line staff in problemsolving
• Identify customer needs

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Outcomes sought from the transformation

• The top management team takes responsibility in
  an active way for the service levels
• There is a clear focus on customer service which
  is based on hard information about customer needs
• The service levels provided are obtained through
  commitment to formalised problem solving at the
  front-line
• Management consciously rewards employees for
  service provision

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Association between program components and
outcomes

Number of hotels
Sample size 42
20
9
15
15
Components Score
13
5
0
6
8
0
Outcomes Score

• Source Waldersee Eagleson (2002)

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Impact of leader behaviour observed in the
steering committee
of sample achieving
Good Components
14
40
63
83
69
None
R
T
RT
R T
(n7)
(n5)
(n8)
(n6)
(n16)
Good Outcomes
0
0
25
33
100
None
R
T
RT
R T
(n7)
(n5)
(n8)
(n6)
(n16)
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Managerial implications of the hotel study

• The two leadership functions focus on different
  resultsbut both are needed.
• Very few of us can provide both leadership
  functions at the same time yet we typically
  operate within a team.
• So why not encourage Shared Leadership?

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The leadership team Why think that one person
has to do everything?

• Complementary areas
• Responsibilities
• Expertise
• Cognitive (Sensate vs. Intuitive)
• Role (Task vs. Relations)

• Made effective by
• Common vision
• Common incentives
• Communication
• Trust

• Source Miles Watkins, (2007)

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Takeaways from Implementing a new Business Model
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References

• Blake, R.R. Mouton, J.S. (1985). The Key to
  Leadership Excellence.Gulf Publishing Company,
  Houston.
• Govindarajan, V. and Trimble, C. 2004,
  Strategic innovation and the science of
  learning,Sloan Management Review, Winter, Vol.
  45, No. 2, pp.67-75.
• McGrath, R. and MacMillan, I. 1995,
  Discovery-driven planning, Harvard Business
  Review, Jul/Aug,Vol. 73, No. 4, pp.4-12.
• Miles, S. A. and Watkins, M. D. 2007, The
  leadership team complementary strengths or
  conflicting agendas?, Harvard Business Review,
  April, vol. 85, no. 4, pp. 90-98.
• Misumi, J. (1985) The behavioural science of
  leadership An interdisciplinary Japanese
  research program. University of Michigan Press,
  Ann Arbor.
• Turner, D. and Crawford, M. 1998, Change Power
  capabilities that drive corporate renewal,
  Business and Professional Publishing, Warriewood,
  NSW.
• Waldersee, R. and Eagleson, G. 2002, Shared
  leadership in the implementation of
  re-orientations, Leadership and Organizational
  Development Journal, vol. 23, no. 7, pp. 400-407.