What does it take to transform an organization? New research details the art of strategic renewal — and the revival of IBM.
How can leaders initiate major transformations before their organizations are in crisis?
That’s a critical question for companies in industries with rapid change or new types of competition. New digital models are putting the strategies of existing companies in jeopardy as emerging markets reshape economies.
Cookie-cutter answers don’t work. “Applying standard formulae to corporate transformations is, at best, ineffective and, at worst, dangerous,” write the authors of “The Art of Strategic Renewal” in the Winter 2014 issue of MIT Sloan Management Review. What’s needed instead, they suggest, is “a new approach that enables executives to transform organizations proactively without resorting to fear.”
Strategic renewal, the authors stress, is not a program or a specific event. Instead, “it’s a set of practices that can guide leaders into a new era of innovation.” Having a strategic renewal mindset is not easy. “Because strategic renewal involves making changes ahead of a crisis, the efforts can be extremely difficult to initiate, fund and lead; many companies, including Xerox, Kodak and Firestone, attempted but failed to move ahead of their respective crises,” write the authors. “The role of senior management is to build strategy, experimentation and execution into the day-to-day fabric of the organization.”
Strategic renewals can be even more complicated to execute than corporate turnarounds, say the authors. The authors, who include Bruce Harreld, who reported to IBM CEO Sam Palmisano from 2001 to 2008, point to IBM’s experience: “In 1999, IBM concluded that while it was once again a stable business following a near-death experience five years earlier, it had lost its ability to innovate, something dozens of new competitors (including Cisco and Akamai) didn’t hesitate to seize upon. Yet over the past 14 years, IBM has become a new company. It has successfully moved away from hardware and software and refocused itself around consulting, analytics and industry-specific solutions.”
Based in part on the IBM experience, the authors developed five principles for strategic renewal that they believe “can be applied to other organizations aiming to renew themselves ahead of market disruption.” Those five principles are:
1. Select growth aspirations that connect with people emotionally.
2. Treat strategy as a dialogue as opposed to a ritualistic, document-based planning process.
3. Use experiments to explore future possibilities.
4. Engage a leadership community in the work of renewal.
5. Apply execution disciplines to the effort.
The authors conclude: “Leaders find it much easier to resist change than to embrace it. Strategic renewal acknowledges this: It is about ‘both, and’ rather than ‘either, or.’”
This article draws from “The Art of Strategic Renewal,” by Andy Binns (Change Logic LLC), J. Bruce Harreld (senior lecturer of business administration), Michael L. Tushman (Harvard Business School) and Charles O’Reilly III (Stanford Graduate School of Business), which appeared in the Winter 2014 issue of MIT Sloan Management Review .