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Who: John Kotter is one of the world’s most influential authorities on the topics of leadership and change. Dr. Kotter is a New York Times best-selling author who has written 20 books to date, based on his more than 40 years of research. In his book Leading Change, named by Time magazine as one of the 25 most influential business management books ever written, Dr. Kotter outlined his 8-Step Process for Leading Change. In addition, he is an award-winning thought leader in business and management, entrepreneur, speaker, and Harvard Professor. Kotter’s view of change management is also one of the foundations for our working method, Digital Maturity Matrix.
What: On how to succeed in change work and digital transformation and if there are any differences with ordinary change processes.
Content provider: DigJourney, interview made by Joakim Jansson.
Your research shows that 70 percent of all change efforts fail. What are the reasons for this?
Kotter: The biggest mistakes are made in the beginning of the process. In particular, not having a clear vision and not having a strong enough sense of urgency around that vision and the need for change. I have seen many CEOs who believe they have created a sufficient sense of urgency within the organization, yet were not even close. This is often due to a lack of knowledge or understanding of how things really look at various levels throughout the organization.
I have seen many CEOs who believe they have created a sufficient sense of urgency within the organization, yet were not even close.
– John Kotter
How do you know if you have a sense of urgency?
Kotter: You measure it. There are many ways to do so, but in order to have a sufficient foundation for sustained change, at least 50% + 1 of the organization must have urgency.
The common term regarding change initiatives tends to be change management but you talk mostly about change leadership. How would you describe the difference?
Kotter: Change management is about small, incremental changes to the current system, often carried out by a small group of appointees. It is more focused on planning, budgeting and control.
Change leadership is something else, where a clear vision provides direction, and leaders, rather than managers, identify opportunities and engage a multitude of volunteers to help drive the change. As the world moves faster and faster, we need increasingly bigger changes. We need transformations. Such large-scale changes require change leadership, which is, unfortunately, a rare commodity today. The world must become much better at developing leaders at all levels.
What is the reason for the lack of leaders and leadership?
Kotter: It’s very simple: there wasn’t a need before. The English expression “Necessity is the mother of invention” sums it up well. Communities, organizations and individuals develop skills that they need. In the world we used to live in, with less technological change and less globalization, the ability to drive large-scale change wasn’t necessary and thus there was no need to focus on developing leaders. Yet, despite the increased speed and complexity of the world today, universities still develop managers rather than leaders. The reason for this being that it takes time to develop programs based on and aligned with current research, so in a way, it is fair to say that the academic institutions teach history.
Do you see any differences between digital transformations as compared to other corporate transformations?1
Kotter: If there are such differences, I have – thus far – not managed to find them. As a researcher, I focus on the big picture and there, I see no differences. On the other hand, when you drill into the details, there are always differences between different companies, different countries and so on. However, it could be that digital transformation is the ultimate large-scale transformation. A digital transformation may be gigantic, such as in the newspaper industry where embracing and implementing technology was, and is, critical in fighting for survival.
Ok, let’s say that you were the CEO of a newspaper. What would you have done when you saw the change coming?
Kotter: I know what I wouldn’t have done, and that is outsourcing the problem to McKinsey or another big consulting company, pay a huge amount of money and have them find a solution. 200 PowerPoint slides created by a bunch of newly graduated consultants rarely work, even if the consultants are incredibly smart, as they almost always are. They might come up with some good ideas but how do you then implement them? The research results are clear – it doesn’t work. The solutions must come from within the organization.
To do this, I would set up a whole new parallel organization and allow it to both find and implement many different solutions that would lead the company to a new way of working. Our research shows that this is the best way to successfully drive change. There are few companies working in this way today but this is what I would do if I were CEO of a newspaper.
I know what I wouldn’t have done, and that is outsourcing the problem to McKinsey… and have them find a solution. The research results are clear. The solutions must come from within the organization.
– John Kotter
That brings us to your book Accelerate and your work on updating the 8-Step Process for Leading Change. What was the motivation for the update of the process?
Kotter: My task as a researcher is to keep attention on what seems to be working. Data clearly shows that the world is speeding up. This means that the need for change is now even greater. The fundamental insights of the 8-step process are still valid but companies must now find a new way of working in the midst of constant change and get more employees to come along.
We have concluded that the older and the newer 8-step process can be combined. The former works well for an overall transformation in traditional companies, and the dual operating system can be added at a later stage, when companies have matured in their transformation work. What’s your opinion on this way of looking at it?
Kotter: That’s basically what our consultants2 do. The 8-Step model provides a foundation, but then the parallel network is added. So yes, they can be combined.
Traditional hierarchies are slowly losing importance in favor of more flexible group-oriented decision-making, for example through a parallel network. How far do you think large organizations have come in this transition?3
Kotter: Not far at all. The world has started changing more and more rapidly and organizations are trying to catch up. What is slowing the big companies down is that they have a lot of moat around their castles. For instance, in the form of market shares or brands. This means that they don’t change so quickly after all.
Today, we have companies like Facebook and Google working in agile cell structures and group-oriented decision-making is more prevalent. As these companies become vulnerable to disruption, will they have the abilities required to respond and cope?
Kotter: The typical life cycle of all companies is that they, faster than you can imagine, crush all internal entrepreneurship. In the short term, they can get away with it because they have huge market shares and resources. When these companies begin to act, the typical response to external changes is to buy startups and competitors. That’s how the normal pattern looks. It would, for example, be interesting to see how Google would manage without their extremely profitable search business and large cash reserves. If they would manage it well, it means that they are unique and that they are not following the usual pattern.
It would, for example, be interesting to see how Google would manage without their extremely profitable search business and large cash reserves.
– John Kotter
Kotter: Yes, if they are aware that the trap exists. The smartest leaders constantly seek ways of avoiding this. They do not want to end up like General Motors in a few years and become a joke a few more years further down the road. They think about the legacy they want to leave behind, and they are looking for solutions. Zappos is a good example. They have an incredible organization with a very interesting CEO, Tony Hsieh. At the end of 2014, he introduced a new organizational structure without hierarchy4. The purpose was to try to get closer to the company it once was as a startup. This is an example of a brave guy, trying to find a solution and not get stuck in the trap. However, I think he has already noticed that this solution was a bad one. He will certainly try to get the company to pull itself out of the mess it is in at the moment and then look for other solutions.
The solution is not to crush management. No, both leadership and management are required, as well as both a hierarchy and a parallel network. The evidence in our research clearly shows this.
The solution is not to crush management. No, both leadership and management are required.
– John Kotter
Let’s go back to what we started with, namely the importance of having a sense of urgency. In a company with constant change, how do you keep the sense of urgency alive without creating panic every so often?5
Kotter: Focus on opportunities, not threats. What creates panic is communication about crises and threats. Certainly, this type of communication can wake tired and complacent organizations up. However, it easily leads to anxiety and self-protective behavior. Speak about opportunities instead – they can keep people motivated and committed forever.
When the change occurs from within the company, for example through a parallel network rather than from the top, does this lead to the board of directors having a new role?6
Kotter: Yes, it does. First and foremost, the board must understand the new system, and support it. If they do not, the board will require things of the CEO that will risk ripping the new system into shreds. The board also needs to consider how it can interact with this new part of the organization in a meaningful way.
Do you see any distinct phases for companies undergoing change?
Kotter: Overall, it can be broken down into three phases:
The first phase is when external factors have little impact on businesses and industries, or the positions the businesses have are so strong that they do not need to change.
The second phase is when things are happening in a market that can’t be ignored. In the United States, the car manufacturers found themselves in phase one during the 50s and much of the 60s. Then suddenly, the Japanese carmakers came in the 60s and 70s and they were impossible to ignore. The American producers, therefore, began to change, but the changes were very incremental.
Today they are in the third phase. They struggle with an increasingly globalized and technologically sophisticated industry and they try to adapt to constant change. Fortunately for them, almost all automakers are having the same problem. If any company comes forward and finds the solution for how to act in this fast paced world we live in, the growth of that company will be crazy. I’m sure that Elon Musk wants it to be Tesla!
Yes, probably if Tesla is not an energy company by then …
Kotter: Yes, exactly, they could be. It is, by the way, a good example of how disruptive the transformation is. Let’s say we were to put you in a time machine and bring you 20 years back in time. Then you would try to explain what you just said to the managers or researchers at the time. They would have difficulties understanding or believing that what you said would even be possible at all. Presumably, they would think that you were both naive and stupid. It is a clear demonstration of how rapidly the world has changed.
Foto: Kotter International