Über die Autorinnen und Autoren

Jackson Nickerson is the Frahm Family Professor of Organization and Strategy at the Olin Business School at Washington University in St. Louis. He is also director of the Brookings Executive Education program and a nonresident senior fellow in Governance Studies at the Brookings Institution. Nickerson is editor of the Innovations in Leadership series.

"Jackson Nickerson is the Frahm Family Professor of Organization and Strategy at the Olin Business School at Washington University in St. Louis. He is also director of the Brookings Executive Education program and a nonresident senior fellow in Governance Studies at the Brookings Institution. Nickerson is editor of the Innovations in Leadership series."

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Leading Change IN A Web 2.1 World

How ChangeCasting Builds Trust, Creates Understanding, and Accelerates Organizational ChangeBy Jackson Nickerson

BROOKINGS INSTITUTION PRESS

Copyright © 2010 THE BROOKINGS INSTITUTION
All right reserved.
ISBN: 978-0-8157-0484-3

Contents

Preface...................................................................vii1 Introduction: A New Tool for Leaders....................................12 Managing Change: The Fundamental Test of Leadership.....................193 Why Leading Change Is So Difficult......................................294 Enabling Organizational Change..........................................395 Accelerating Change in a Web 2.1 World..................................596 ChangeCasting Guidelines: The Message...................................697 ChangeCasting Guidelines: The Delivery..................................818 ChangeCasting Guidelines: The Video.....................................919 Technology for Managing ChangeCasting...................................9910 Did ChangeCasting Improve Performance?.................................11111 Should You Adopt ChangeCasting?........................................125Next Steps for Becoming a ChangeCasting Leader............................135Notes.....................................................................137Index.....................................................................143

Chapter One

Introduction: A New Tool for Leaders

After more than thirty years with the same company, Genevieve (Gen) Laneau has gotten her chance to captain the ship. And her ship is neither small nor easy to sail. Production is global, distribution is worldwide, and the Internet, among many distribution channels, plays an important and growing role for both her firm and her competitors. A multi billion-dollar technology enterprise with more than seven thousand workers spread across thirty-five countries, her company is a typical midsize global firm.

Several competitive storms were on the horizon when Gen took over as CEO. Recently consolidated competitors were expanding, growing revenues, and encroaching on the unique market position of her firm, WorldCo. Indeed, WorldCo had once been known as the high-tech leader in its field, but now, customers were turning to Gen's competitors for new products, services, and solutions. The previous CEO had successfully increased margins by focusing on operational excellence, but it was clear to Gen that focusing on cost reductions alone was not going to keep her firm ahead of the competition. She was not alone in her conclusions about the firm's future. Wall Street could see the competitive landscape and had come to the same conclusions. Without new sources of profitable revenue growth the firm's stock price was not going to appreciate. The handwriting was not just on the wall, it was in the analysts' reports.

Gen was facing the leadership challenge of her career. She could see that if she didn't take action, the day of reckoning in the form of stiff competition and low profit margins was fast approaching. She realized she had to change her organization all the way to its core if her company were to overcome stagnant revenue growth and simultaneously maintain its industry-leading return on equity.

William Tracey faced a different challenge. He had joined his manufacturing firm, MandACo, more than fifteen years before being appointed CEO a few years ago, having risen largely through its financial ranks. He shepherded a Fortune 500 firm with more than two hundred plants and thirty thousand employees. William's firm became the industry's largest player through a consolidation strategy that was largely funded by taking on more debt. In the growing economy of the 1980s and 1990s, the firm's mergers and acquisitions grew revenues and profits. Although the debt load was great, economies of scale in purchasing led to profits that far exceeded interest payments.

By the twenty-first century, two trends had taken hold that changed the fundamental environment in which MandACo competed. First, customers began moving production operations to China, where MandACo did not have substantial operations. This shifting of business across the Pacific decreased demand in North America. This shift in demand had the greatest impact on MandACo, the largest manufacturer in the industry. Second, North American customers either remained small "local" customers or had become large "national" accounts. These national accounts created commodity markets by auctioning off their demand and playing suppliers off against each other. Some of MandACo's competitors had chosen long ago to focus on these national accounts and had become low-cost producers. Smaller competitors focused on local customers and differentiated themselves from their competition because of their speed, flexibility, and customized service. MandACo's plants continued to sell to both types of customers, thereby catering specifically to neither type, which put his firm at a competitive disadvantage.

By the time William became CEO of MandACo, the company was unprofitable and its financial condition was actually worsening, resulting in a drop in the stock price of 30 percent from its peak. His first response was to shut down manufacturing facilities and take capacity out of the market, but demand shrank faster than he could close capacity. With little financial room to maneuver and still needing to make debt payments, he was unable to invest in and update production equipment. His multi billiondollar firm was unprofitable and its financial condition was getting worse. As some observers wondered whether his highly leveraged firm would survive, MandACo's survival—and William's career— depended on his ability to fundamentally change and revive his organization.

The Test of Leadership

Managing organizational change is not a challenge for just Gen and William. Organizational change is a common challenge; moreover it is the test of leadership, because failure is so often the outcome. A 1998 study by Wheatley and Kellner-Rogers reported on a survey of chief executive officers who stated that up to 75 percent of organizational change efforts do not yield the promised results. A 2002 study undertaken by Miller estimated that change initiatives critical to organizational success typically fail 70 percent of the time. In a 2004 study, Raps found a 70 to 90 percent failure rate in companies' attempts to implement new strategic plans. These studies and others leave no doubt that leading organizational change is difficult, costly, and risky. Failure is the norm, but the benefits of successful organizational change are great. For some companies it is change or die. For others, successful organizational change can rejuvenate organizations and catapult CEOs into the pantheon of great business leaders who revived their companies' growth and profitability and earned themselves fame and fortune in the process.

Some business leaders already in this pantheon are Allied Signal's Larry Bossidy, Monsanto's Dick Mahoney, GE's Jack Welch, IBM's Lou Gerstner, and Emerson's Chuck Knight. Each of them took a large company that was performing poorly or even losing money and rebuilt it to achieve great market and financial success. Larry Bossidy is well known for taking Allied Signal, a collection of not very successful businesses that was losing money, and turning them around until they were acquired by Honeywell in 1999. Dick Mahoney rebuilt the chemical company Monsanto and repositioned it in the life sciences with...