□ Introduction

In Part A we laid the foundation for an understanding of change from several key perspectives. In Chapter 1 we introduced a number of key concepts, including change work, approaches to diagnosing change issues, disciplines for enacting change and the enquiry–action framework. We then surveyed a range of key concepts and change frameworks to demonstrate that there are different valid ways to understand and approach change. The last of the Foundations chapters introduced innovation as a separate change type and perspective of growing importance.

As we move into Part B, we now turn our attention to a series of chapters on diagnosing change. An excellent place to start is with the concept of context and the way it influences what is useful or useless, relevant or irrelevant. Context is examined alongside the closely related notion of environments, within which context takes on its identifiable forms.

All organisations operate within complex environments. By ‘environment’ we do not just mean the economies or industries in which they operate and compete. The organisations themselves have an internal context made up of numerous interdependent factors. Change agents must focus enquiry on understanding these environments.

There are many different ways of viewing change. Examining change using a context-based approach has considerable practical applications. These include: gaining an overview of the broader change situation; the identification of change priorities across a range of key areas; the development of a high-level map to orient change efforts; and a means to evaluate different approaches change.

This chapter explores different organisational contexts to better understand the complex change environment. A deeper appreciation of an organisation's general and specific circumstances informs both change priorities and approaches. The role of contextual analysis in orienting through mapping and building a shared understanding will also be explored. Some key models of external and/or internal environments will be introduced and compared. Context will be shown as a catalyst that brings to the surface key independencies between organisational dimensions, facilitates enquiry and enables action. Lastly, the chapter will pose some issues associated with adopting a contextually informed approach, including dealing with complexity.

□The complex nature of context

Context may be viewed as the situation within which some things exist or happen, and the means by which those things may be better understood. Context is sometimes referred to interchangeably as the environment. An organisation's context is made up of multiple factors. It has different layers, or levels, and time dimensions.

□ Introduction

Organisations are significantly shaped and influenced by the customers they choose to serve. As organisations seek to grow and develop, they do so by adding increasing value for the customers they currently serve. This can be done by adding new product lines or seeking new ways to add value for customer types that they are yet to acquire. Using some of the diagnostic approaches from the enquiry–action framework (presented in Part A of this book) it can be concluded that change most commonly involves organisations adapting to meet the demands of their customers and positioning themselves to compete effectively within their chosen markets. The need to undergo changes that help match internal organisational arrangements with the external organisational environment is a constant and evolving one. Organisations, however, must choose to continue to serve only current customers or to pursue new customers and challenge new competitors in the pursuit of profitable growth. This is the essential work of business strategy. It is equally relevant, and helpful, to conceptualise such choices in the context of public, voluntary and charitable organisations (See Extended Case: Australian Red Cross). We return to this theme later in the chapter. First we begin by considering two related but distinct changes that an organisation may engage with: choosing and changing customers. In the second half of the chapter we will examine the strategic change associated with changing competitors by entering new markets.

□ Choosing customers

Choosing which customers to serve and in what way is a fundamental strategic decision that can shape an organisation. Smaller businesses may make this choice based on factors related to the founder(s) – their professions, their interests, or it may even be an inherited family business. Entrepreneurs may identify new opportunities to add superior value for specific target groups even in areas in which they have little or no prior experience.

Most successful companies make a deliberate choice in who to serve as the result of considered assessment or detailed analysis. These organisations, large or small, are able to add more value for their chosen groups of customers than less-focused competitors.

□ Introduction

As competition in global business increases, so too does the need for innovation. This is not a new concept, as innovation has been a primary catalyst for growth, success and overall survival of organisations for many centuries. Innovation is a particular, highly coveted type of change. It is a fundamental aspect of business and product strategy, and a source of competitive advantage. Innovation is remarkable in the sense that it is, by its very nature, change, but it is also the source or wellspring of further value-creating changes.

Innovation is not, however, an end in itself – change for change's sake. Unlike other forms of change, innovation has the inherent quality of novelty or meaningful difference. For this reason change may be described as innovative if it involves a new way of thinking and acting that achieves positive outcomes and provides advantage. Without positive strategic outcomes, including better outcomes for stakeholders, innovation is merely failed experimentation. This chapter looks at how innovation acts as both a trigger and a tool for change. In increasingly competitive and globalised markets, change, innovation, quality, expertise and creativity are concepts that are becoming ever more critical to organisational change. The sections that follow show how change management is a systematic approach involving people and processes, rather than a single, isolated concept.

□Perspectives on innovation and change

Innovation in business is a complex issue and has become a way of increasing functionality, profitability and flexibility within organisations (Strambach, 2001). Innovation is a social, spatially embedded, interactive and dynamic knowledge transfer that is drawn in the context of culture (Braczyk, Cooke & Heidenreich, 1998; Lundvall, 1992; Freeman, 1998). Given the close relationship between knowledge and innovation, it is interesting to note that there is very little literature on the dependence of innovation on knowledge created in the organisation. As Hoffman (1999) argues, continual innovation is the only way a business can beat the competition, and to continually innovate, organisations need to create new markets, products, services and systems which are each contingent upon knowledge. This fundamentally means that orientation to innovation mediates the relationship between organisational knowledge, commitment and innovation. To address the changing landscape of business, leaders must find innovative ways of addressing problems, such as major changes in how the workplace is constructed and operated.

□ Introduction

Classic management theory argues that organisational structure exists primarily to enable coordination and control of work through the division of labour. An organisation's structure is, at face value, one of its most clearly defined and tangible dimensions. It appears deceptively simple – boxes, lines, labels and names on a page. An organisational chart, however, offers a skeletal view at best, and is not the structure itself. Structure is amenable to review, whether internal or external, and is highly visible to all stakeholders. Changes to organisational structure can be driven by strategic, pragmatic or political purposes. As organisations grow and diversify, structural change is essential to ensure effective and efficient coordination and control. Structural change is also associated with declining organisational performance and changes in senior executives, especially CEOs. For these reasons and more, structure is often the focus of change.

LucasArts, headed by George Lucas, was the company commissioned to provide the special effects used in the Star Wars movies, amongst other digital technology products. In the last decade, competition in the special effects industry has increased dramatically, but so too have the opportunities in line with the increasing quantities and qualities of digital games – some of which use techniques that only companies at the top end of the market, such as LucasArts, can achieve (Jones, 2009). However, LucasArts had a problem. They employed a large number of creative digital artists, who would be well placed to take advantage of new market opportunities, but the digital artists worked independently within departments that focused on specialist activities, often communicating only between departments that were geographically remote from each other via video conferencing systems. Lucas decided that it was necessary to restructure in order to change the process and output of the company. He relocated the digital artists into a single site that was designed to encourage interaction. It included open areas, lounges and high-quality communal facilities. He asked them to develop a common digital platform so that people currently working in different departments could potentially collaborate. The operational leaders introduced temporary project teams and challenged the workers to develop new products for both the film and games industries. The result has been an increase in the sharing of skills between individuals and departments.

In the late 1980s Percy Barnevik was CEO of Swedish firm ASEA, an engineering company employing some 71 000 staff globally. He had overseen a dramatic improvement in ASEA's performance, quadrupling sales and increasing profits by a factor of 10. By 1988 he was looking for ways to continue the growth of the firm, and he led ASEA into a merger with a larger Swiss firm, Brown Boveri, which employed around 97 000 staff. At the age of 46 Barnevik became the first CEO of the newly merged company ASEA Brown Boveri, or simply ABB, with a combined staff of some 160 000 people operating in 140 countries and combined sales of $15 billion. From the moment it was formed, ABB became a major player in the global engineering and technology sector.

Barnevik had big plans for the new firm, and within months of taking office as ABB's CEO he held a gathering of a few hundred senior ABB managers to set out his vision for the future. He introduced what he called the ‘corporate policy bible’, which included details of the firm's approach to change. He described the company's strategy at that point as being ‘a two-stage rocket: restructuring then growth’ (Barham & Heimer, 1998). Over the next few years he delivered both restructuring and spectacular growth. Although he was not a native English speaker, Barnevik insisted that English had to be ABB's corporate language, and he created a new corporate identity for ABB to deliver his strategy. He focused hard on making a huge corporate organisation feel like a much smaller one, citing his early experiences in his father's small business, which had employed only 15 people. His mantra was to create small, customer-facing business units in which the entrepreneurial flair of staff could be released. Decentralising and individual accountability through distinct and separate profit centres were the order of the day. What followed was a period of tremendous change in the organisation.

□Introduction

Organisational culture can be understood as a key dimension of an organisation's internal context, as discussed in Chapter 4. Robust frameworks of organisational context include organisational culture because of its significant influence on and through organisational change. Organisational culture has a powerful influence on leader and employee behaviour. In this chapter we explore different ways of viewing and understanding culture – as an influence on organisational behaviour and performance, and as a focus for change. Lewin's force field analysis is discussed as a framework to understand driving and restraining forces for change. The important topic of resistance to change is explored. Lastly, we will introduce the key idea of organisational learning and its place in culture and change.

□Culture: work as a social phenomenon

Organisations are social settings in which individuals and teams interact in the conduct of business. As they do so they construct meanings associated with their activities and the objects that they use. For example, a large office might symbolise a senior manager's status rather than simply providing a venue for meetings. The meanings associated with such a symbol can vary. Some might regard a large office as something to aspire to and a mark of achievement, whilst others might see it as symbolising the separation of senior managers from the rest of the workforce (as discussed in Extended Case: Sanitarium). The ascription of such meanings is variable and is beyond the control of management, yet it will have an impact on how people behave. For this reason, organisations are often ascribed cultural characteristics as a helpful means of describing what the organisation is like. Some organisations are described as entrepreneurial, others as bureaucratic; some may be aggressive, others collaborative; some may be characterised as innovative whilst others are seen as traditional. Of course, a singular description is unlikely to capture every aspect of the organisation, or to be universally true. Perhaps the most commonly cited and practical definition of organisational culture is ‘how things are done around here’ (Drennan, 1992, p. 3), which resonates with many people's experience and nicely captures a view of what is communicated to those inside and beyond the organisation. If nothing else, such descriptions help us make sense of the organisation, particularly as a newcomer.

□ Introduction

In organisations, much time is spent managing change through the deliberate selection of practices that are hoped to produce particular results. The triggers for such change work may emanate either from within the organisation or from shifts in the external environment. They may be optional or unavoidable, and they may be disruptive, rapid and radical, or slow and evolutionary. There are many tools and techniques that pertain to change situations, but choosing what to do, and how to do it, is not straightforward.

In this book we elaborate on a framework that does not dictate a prescribed path to managing change but, rather, treats the process as one of enquiry and action. This entails being skilled at asking questions so that the circumstances and purpose can be understood and matched to action. In the field of change management, action is normally somewhat experimental, as even the most popular ‘tried and tested’ practices can fail in new situations. Therefore, the approach we advise is to build up a repertoire of options and to be active both in the selection of which action option (or combination of options) to take and in the adaptation and development of change practices. We regard change management as being based on the skills of judging situations, selecting from and adapting prior practices in order to develop new ones, and then being able to understand and evaluate how these actions are working and thus make appropriate adjustments. In short, the change manager is an active learner, engaged in a continuous cycle of enquiry and action.

▄ Foundations of change and change work

We refer to the activities relating to planning, executing and responding to organisational change as ‘change work’. Change is complex. Managing change is very likely to entail some degree of disruption. Often the situations that managers encounter are difficult, perhaps even intractable. It is not that all change is inherently problematic but, rather, that when things are simple and doable there is less call for management intervention. As a result, it is normal for change managers to find themselves in the midst of so-called ‘sticky’ or ‘wicked’ problems that are not easy to resolve. Such problems are composed of divergent perspectives and tensions.

Power Provision Ltd is one of the main generators and providers of electrical and gas power in Europe. It has extensive distribution networks and over 10 million customers. In addition to domestic and business supply, services include municipal activities such as street lighting supply. Power Provision has a long history of generation and had an interest in renewables before most of its competitors. During the last 10 years, this area of activity has been emphasised, and Power Provision is regarded as a leader in renewable energy, although a considerable proportion of its generation is still produced in conventional ways (fossil fuel power stations). Despite the branding and publicity tending to focus on renewables, the strategic aim is concerned with delivering dividends and share price performance to shareholders by having highly efficient operations. Power Provision has been successful in doing this, and over the last five years it has delivered returns that are above those of almost all of its main competitors. Hence, Power Provision can tell a success story, but the changes along the way have not told of its challenges and problematic phases.

Power Provision was formed by merging two companies in the late 1990s. At the time, there was a lot of merger and acquisition activity in the industry. In the case of Power Provision, the integration of two successful companies was portrayed as a merger in which agreement was formed through collaboration. To some extent this was true. The two pre-merger companies operated in different geographical areas, had largely different modes of power generation and served different customer bases. Therefore, there was a clear logic to the merger strategy. However, the two companies were not the same size and were not in the same financial state. The smaller company was more successful financially and had a brand that was more conducive to a market in which customers were becoming more interested in environmental matters. The larger company had more extensive infrastructure and a bigger customer base but was less successful financially. Following the merger, the new CEO and finance director came from the smaller company.

□ Background

Isuzu has a long and successful history as an innovator and manufacturer of diesel engines. Japan's first air-cooled diesel was developed by Isuzu in 1936, and in 1961 it developed Japan's first diesel engine for passenger cars.

Over the decades, Isuzu has become synonymous with diesel engines in Japan, and highly regarded for its advanced technologies around the world. As one of the world's leading diesel engine and commercial vehicle manufacturers, Isuzu produces more than one million diesel engines annually. Its leading-edge technologies have enhanced the environmental benefits of diesel engines, and the integration of these technologies into a new generation of diesel engines has helped accelerate the growing use of Isuzu diesel engines and commercial vehicles in more than 100 countries around the world.

Isuzu Australia Ltd (IAL) has always followed the Isuzu Motors (Japan) philosophy of innovation and, from its inception, its strategic goal, has been to offer new solutions to satisfy ongoing market demand. This has resulted in Isuzu being a market leader in the Australian truck market since 1989.

□ The problem

The IAL Engine Department started business in 2008 with the goal of selling Isuzu's high-quality industrial and marine engine range in Australasia (Australia, New Zealand, Fiji and Pacific Islands). Over the years, the business model evolved from a wholesale operation to a solution–provider concept. To accommodate this evolution, the Engine Department needed to come up with a way to make the complex sales process more efficient.

One of the main challenges in the engine sales process is that the sales people are required to have a high level of understanding of the customers’ specific requirements for an engine. The engine application assessment process involves evaluating the product's working environment, secondary loads, other load factors, ambient conditions, product specification and availability. If the assessment process is not followed precisely by the sales person the outcome or solution may be that the wrong engine is sold for the application, leading to rejection of the product.

Nokia originated in 1865 as a wood pulp mill in Finland, its name deriving from the river Nokia, which ran next to the original mill. Its roots are in paper manufacturing, then rubber and cable production. The company has gone through many changes of growth and decline to become the mobile networks company it is today. Its headquarters are still in Finland and it is listed on the Helsinki, Frankfurt and New York stock exchanges. Nokia had led the explosive growth in mobile phone networks and handsets during the 1990s and 2000s, establishing itself as the premier and dominant consumer brand for mobile devices. Most of the first generation of mobile phone users would have owned a Nokia phone at some stage, especially the early adopters. In 2010, Nokia employed over 123 500 people in 15 manufacturing sites around the world. Serious problems, however, had already arisen with Nokia's competitive position. The company's mission in 2011 was stated as follows:

Having sold its mobile phone handset business to Microsoft in 2013, Nokia was a vastly different company. The company's global workforce was reduced by more than half to 56 000 people. It had refocused around its network infrastructure business, which had been the reliable poor cousin to mobile phone handsets. How did Nokia manage to go from a position of global dominance in mobile phone handsets to selling the business at a fraction of its earlier market value? At its simplest, the industry that Nokia led was destabilised and reshaped by new entrants, who established competing business models that added superior value for customers and rapidly eroded Nokia's market share.

□ Introduction

The question of identity – ‘Who am I?’ – is a deceptively simple question. The answers are manifold and complex. Identity has traditionally been thought of as that which is essential and unchanging – that which pervades over time and in different circumstances. For example, a person who is essentially extrovert may be outgoing both at work and with friends, and may have this identifiable characteristic throughout life. Other aspects of who they are might be more transient; for example, the same person, whilst remaining extrovert, may not think about politics in the same way or associate him- or herself with the same occupational groups throughout life, because he or she is focused on, and influenced by, external sources of ideas and information.

□Change and personal identity

Although there may be aspects of the self that are relatively unchanging, in the context of organisations and work much research has focused on aspects of identity that have degrees of fluidity that are affected by change and that themselves stimulate change. At a simple level, as people move through different roles (for example, team leader, manager, director) they often take on differences in persona. With experience they look at the world in a slightly different way, and they have a different repertoire of skills to draw upon. Equally, as they have experiences, both positive and negative, they can come to think of themselves in new ways and can recognise themselves as members or outsiders of identifiable social groups.

Who people think they are has a significant impact on what they do and how they relate to others. For example, Dan Karreman and Mats Alvesson (2001) tell the story of senior newspapermen, who have a regular meeting to review the front pages and sales figures of the previous month's papers. Although they know at an intellectual level that sales relate to whether there has been a holiday or not, notable events in sport (on the back page) or key political events, such issues are absent from their analysis.

□ Introduction

Chapter 2 highlighted some of the ways in which scholars have tried to classify change depending on the nature of the change – that is, large-scale or small-scale, internally or externally driven and proceeding slowly or quickly. However, this chapter begins to set out ways in which the broad idea of change can be translated into a particular definition of what needs to be changed and how this might be achieved. Since organisations are complex and multifaceted, the process of specifying the change challenge tends to proceed iteratively. It may be attractive to think of a more logical and linear process whereby treatment follows diagnosis, but in organisational change it is not unusual to revisit the specification of the change challenge repeatedly as the change itself unfolds. Of course, this revisiting could be taken to suggest that the change was inaccurately or incompetently specified at the outset. However, in practice, it may simply be that new information has come to light as the change proceeds. There is a need for a purposeful and considered approach to framing change which reflects the context of change, as discussed in Chapter 4. Determining an initial scope and focus for change is common to most formal change methodologies – including step-based models, contextualist approaches and business management systems such as TQM or even downsizing, as outlined in Chapter 9. There is little benefit in finding the right solution to the wrong problem.

□Framing change objectives: what's your problem?

Researchers have long been fascinated by the ways in which individuals frame problems and the consequences of that framing. Karl Weick observed that ‘problems do not present themselves to practitioners as givens’ and that ‘to convert a problematic situation to a problem, a practitioner must do a certain kind of work’ (1995, p. 9). The kind of work to which Weick is referring is one category of change work that involves problem framing or problem setting. This is the conscious or unconscious process by which we define the problem(s) that we will tackle. Donald Schön (1983) suggests that problem setting is what we do when we define the decisions to be made, the ends to be achieved and the means that may be chosen.

Zappos is an online shoe retailer that was a product of the dot.com boom. Zappos is well known to its online customers for its very large collection of contemporary shoes and apparel, the widest range of fittings, and its free shipping and free returns policy. The company was the first online retailer to offer free returns. In the world of business, Zappos is better known for its experimental, if not radical, organisational system known as Holacracy™. Holacracy™ is a branded proprietary model that replaces traditional organisational structures and management control systems.

The company was founded in 1999 by Nick Swinmurn, a young entrepreneur with an unshakeable belief in the power of the internet to sell consumer products such as shoes (Eng, 2012). Swinmurn described his pitch to a venture capitalist Tony Hsieh (pronounced Shay): ‘I told him the US footwear market was $40 billion in 1998, and at that time, 5% of all the shoes sold were sold through mail-order catalogues. So one out of 20 shoes were already sold through the mail before the Internet.’ Hsieh bought the pitch and soon brought the capital, also working directly within the business.

During the period from 2003 to 2005, Zappos achieved large annual growth rates in sales, but their business model was operating on very low margins of just one to two per cent. In 2004, Swinmurn suggested that Tony Hsieh become co-CEO. Hsieh had already been making all the financial decisions for some time. Hsieh took over as sole CEO in 2006 when Swinmurn decided to step out of the business operations. The business then really started to take off. By 2009, Zappos had grown merchandise sales to close to $1 billion. Demonstrating his venture capitalist expertise, Hsieh sold the company to online retailing giant Amazon for $1.2 billion. Then, most unlike a venture capitalist, Hsieh chose to stay, and set to work developing and growing the Zappos organisation.

One of the most significant and extensive changes to Australian local government was possibly that of the reforms introduced during the Kennett Government in the mid- 1990s (Aulich, 1999). These reforms included a rationalisation of the number of councils from 210 to 78 with unprecedented forced council amalgamations. The main outcome sought by the Government for these amalgamations was cost savings and efficiency improvements (Chapman, 1997). The Kennett Government claimed that local councils were inefficiently run and that local government needed to be revamped so that the community could benefit from any cost savings (Hallam, 1998). Other fundamental changes included fixed-term contracts to senior officers with no guaranteed renewal and the introduction of compulsory competitive tendering.

A qualitative research project was completed concerning the effect of the reforms on the City of Mayfair and this case study presents and discusses the results. The City of Mayfair had existing project practices were that adequate for the successful delivery of the typically smaller council projects. The delivery of major projects, however, required more advanced project management practices than were traditionally used by the City. The need for the City to be able to deliver more significant projects resulted in the acquisition of additional professional resources and improvements to project-management practices. The injection of experienced staff into the organisation led to improvements in its project-management knowledge base.

The study of the City's practices included data collection by interviewing respondents from within the Council. Participants were selected from project delivery departments within the organisation. Care was taken to choose participants by their level of experience and term of employment so that in-depth information could be obtained. Participants were also selected by their knowledge and familiarity of the project capital delivery area, so that relevant and essential information could be gathered for the study.

To help improve the quality of the evidence and data collected a process of triangulation was also used (Stake, 2010). Participants were selected from a number of different levels within the organisational hierarchy so that individual perceptions could be recorded. The interview respondents were each given the opportunity to review and comment on a draft copy of the interpretation of their interview transcript.

□ Introduction

When change is instigated by either positive or negative pressures, it is important that managers understand how certain changes can affect their employees. This can be achieved by gathering evidence on how members in the organisation construct meaning within their organisation.

□The concept of evidence in change

The concept of evidence in most cases is unfortunately problematic. Some research traditions challenge the very idea of what it means to ‘claim to have evidence’ if one is operating with a view that our experience in the world is a socially constructed and relational phenomenon (Berger & Luckmann, 1966). However, the view that reality is socially constructed does not mean that ‘reality’ is any less ‘real’ in how people experience it. In some of our own research we have discussed the ways in which those managing an organisation relate to evidence about aspects of that organisation, in that there are ‘areas of interaction between the fantasised and the experienced’ (MacIntosh & Beech, 2011, p. 31). Hence, what to one individual or group within the organisation might be taken as straightforward and factual might be seen by others as either untrue or as a fantasy that is being used for political ends. Our own view is that a constructionist and dialogic perspective offers a useful means of looking at both how views come to be held (for example, that some aspect of a change process is important or unimportant) and how those views might impact on future action.

On a related note, Scott Cook and John Seely Brown (1999) offer an excellent discussion of the distinction between knowledge and knowing. They use the example of riding a bicycle to suggest that there are aspects of our abilities that we nonetheless struggle to articulate. Theoretically, it would be possible for people to specify in great technical detail the mechanics of how to ride a bicycle even if they were unable to do so themselves, but most of us who know how to ride a bicycle could not offer a solid explanation of the process. As a result, the tacitness of how we know something and the social process by which we construct explicit knowledge are both problematic.