Change is inevitable in business and you need to build your business model around it. Hire people who are comfortable in a world of change. Great businesses are able to grow in good times and bad, largely because they’re prepared for the unpredictable.
Indulge me for a moment while I share a quick story about my time at Oracle in the late 1990s. Back then, I was the Executive Vice President of Oracle North America, and the company was on a bit of a tear. In December of 1998, the company announced that its profits were up a record 46 percent in its second quarter, while its revenues from its two businesses — database and applications — had reached an all-time high of $8 billion.
Needless to say, things were good at Oracle. The company was growing in an increasingly competitive market, all while maintaining incredible profitability and its position as one of the top — if not the top — technology companies in the world. With that in mind, what our executive team decided to do in 1999 might surprise you.
We restructured the business entirely.
There was nothing particularly wrong with Oracle. The company was obviously performing well. But we thought the company could do even better if we could somehow improve its historical operating margins. It took some in-depth strategizing and a few fairly drastic changes, but the plan worked. Within a year, Oracle increased its margins by 11 points and the company now expects margins that are nearly double what they were in 1998.
Those are pretty incredible margins for a company that didn’t — and still does not — have a monopoly. Ultimately, the cash generated from those margin increases allowed Oracle to execute its aggressive acquisition strategy (beginning with PeopleSoft) and the business now rakes in more than $37 billion in revenue annually. Not bad for a company that, 14 years ago, had no real motivation to change.
Therein lies the lesson that expansion-stage CEOs and founders can take away from this blog post. In business, change is the only constant you’ll face. And if you don’t handle business change management effectively — in good times and in bad — it can sink any momentum you’ve created.
Ultimately, you need to build your business model around change and prepare for it at every turn. You need to hire people who are comfortable in a world of change and you must adapt when opportunities for positive change (like the one we recognized at Oracle) present themselves. If you don’t, then you will be forced to change when the company’s performance is on a downturn.
If you’re struggling or your market is down, change management is especially critical because growing companies are not afforded the time to weather the storm of down markets or decreased demand. Offensive change when the company is doing well is a whole lot easier to manage than defensive change. I know because I was on both sides of the equation during my time at Oracle.
I’m not suggesting that you overhaul your business entirely — change your mission, vision, and values — or abandon your product strategy with every minor bump in the road. I am suggesting, however, that the best companies — the ones that experience exceptional long-term success — are able to quickly recognize the need to change and make the tweaks necessary to help their business continue its growth trajectory.
So, what does successful change management require? Here are three tips I’ve learned throughout my career:
- Top down support from the CEO level down to the senior executives below the CEO is what ultimately drives successful change. When the changes are major, you need to create a burning platform scenario that will encourage a sense of urgency.
- Clear, consistent, and transparent communication by all executives is critical to explain why the change is necessary. Throughout the change process, it’s important to regularly and clearly communicate the reasons for change and reinforce that message to your team so they understand why you’re taking the hill in front of you.
- Quickly identify the senior team members who don’t buy in and encourage and support them to leave the company if they refuse to embrace change. This means you may lose some very good people who helped you get to where you are, but those people won’t be as valuable going forward if they aren’t willing to help you get to where you need to be.
At the end of the day, business is a little bit like the growth rings on a tree. Every year, something changes — it could be your product, your top competitors, your customers’ preferences, or any number of things. The best companies adapt to those changes, reinvent themselves when change requires it, and find a way to grow in good times and bad.
So, is your company capable of handling business change management? Do you have people in place who will thrive in a world of change, or will they fold when the stakes are at their highest?
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