It's a paradox that the more successful your organisation becomes, the harder it is to change. IBM in the '80s was a classic example of this. It was a leader in every market it chose to serve and the 'most admired' company in Fortune magazine - yet the organisation that had gone from strength to strength in the golden years of mainframe computing became a prisoner of its own success. The era of PCs and industry-standard components knocked the profitability out of its proprietary architecture, while nimble rivals built businesses out of the software and services that IBM used to give away with the hardware. IBM was caught flatfooted.
As a general manager at IBM at the time, my instinct was to work harder at what had proved successful in the past, reorganising the pieces under my control instead of changing them. Of course, it's easy to see now that we ought to have changed the culture earlier and recognised that we couldn't do it without bringing in a lot of new talent and parting company with a lot of old friends. The lesson to be drawn is that however successful your business, you need to inspire real change, constantly challenging the status quo before it becomes obsolete and trips you up.
When I moved into the travel industry to head up the trade association, Abta, I was in a better position. Coming from outside the industry allowed me to see what was going on and to lead change. Travel companies had relied on supplier commissions and advance deposits to build revenue. It soon became apparent that airlines and others would cut commissions and that booking horizons would collapse, with many consumers choosing to book directly with suppliers on the internet rather than patronise intermediaries. The industry was ripe for consolidation.
It was clear that for commodity products, travel agents would have to become the agent of the customer rather than of the airline, charging fees justified by the value of the services they provided, rather than earning commission.
For more complex services, there was the opportunity to build a niche business that could make sense for the customer of more sophisticated travel experiences, such as cruising or long-haul travel to new destinations. This time, I was convinced of the need for change, but it was hard to get the whole industry to move. Happily, many organisations did and it was good to see them go on to prosper in the new environment. I learned the importance of inspiring a shared vision of the future.
I had been involved with health as a non- executive director of St Mary's NHS Trust for over 10 years, so, on retiring from Abta, I was pleased to be given the chance to chair a Primary Care Trust (PCT). Despite the enormous investment in the NHS, outcomes were still not good, and London compared badly with other leading cities. Clinical experts led by Lord Darzi soon produced a blueprint for reform. It argued for more care at home and in the community. It also pointed to powerful evidence that more specialisation in bigger hospitals can save lives, notably in dedicated stroke and trauma units.
The Darzi review argued that improved services should be focused on individual needs and choices; they should be local where possible and central where necessary; they should encourage prevention; and they should focus on health inequalities and diversity. There should be smaller but more specialist hospitals, with new 'polyclinics' bringing together GPs with community, diagnostic and urgent-care services.
It was recognised that if this review was to succeed, it was vital to empower and enthuse local commissioners. The first step was to ensure that PCTs understood that their future lay in commissioning rather than providing services. To obviate any confusion of roles, PCTs were required from April this year to put their provision of community services into separate units at arm's length, with a plan to fully externalise them by next April.
The second step was to subject all PCTs to a world-class commissioning assurance system, designed to review and score their performance against long-term strategic objectives, using a combination of metrics, evidence-gathering and panel review. My team and I were sceptical of this formal assessment ordeal but, in the event, found it to be a developmental process. Our scores were above average, although less than halfway to where we aspire to be - but we can see how this benchmarking process will help track and encourage progress.
Of all the sectors I have experienced, the NHS has been the most successful in generating an appetite for change and presenting an aspirational vision for local organisations to follow. Our challenge is now to build a coalition of supporters and collaborators to ensure that all our people are inspired and empowered to act. Our hope is that the necessary change can be got under way before the NHS feels the full force of the present economic realities.
In a recession, it's generally accepted that organisations must change to survive. But leaders should remember that change is often needed just as much when things are going well.
Ian Reynolds joined IBM as a DP salesman in 1968, after LSE and an early career with Shell-Mex & BP and Haymarket Press (MT's publisher). Having served in a number of sales and marketing roles, he was a director of IBM UK until 1994, when he became chief executive of Abta, the Travel Association, a position that he held for 11 years. Reynolds is now a non-executive director and chairman of NHS Wandsworth, Citybond Holdings and the Family Holiday Association.