Recently, I was asked to speak at a conference on 'planning in chaotic times'. The conference was well attended. Many of the participants said that their organisations and, in some cases, their whole industries were in turmoil. They also said that conventional approaches, such as planning and budgeting, provided little help in the kinds of crises that they were experiencing. How could they survive and prosper in such an age of uncertainty?
It is often said that we live in a time of change, but what we see at present is more than that. Change implies simply moving on from where we are in a process of evolution.
We are now faced with abandoning many of the things we have done in the past and abandonment is a much more difficult concept to accept than mere change. What we are managing today is not evolution or even rapid change.
We are having to manage transformation.
Preparing for the future has become a serious business throughout the corporate world. The essence of coping with change is anticipation. We all know that the future is unknowable. Yet, that should not be accepted as a cop-out. The prizes will go to those who can see industry trends and then leverage them to their advantage. If you do not dictate the competition, someone else will. And then you will be on the back foot.
Technology will force the pace. Knowledge-age organisations require a different type of leadership from the industrial-age organisation to which we are accustomed. Old habits and beliefs must change. We will need new ways of focusing resources to get maximum value in an age when knowledge moves at the speed of light.
We run a risk if we do something, but we also run a risk if we do nothing.
The ultimate risk is to do nothing at a time when the traditional business itself is undergoing fundamental changes.
Have bold, almost unreasonable, ambitions. In today's environment, old-style command and control structures no longer work. People want freedom, but it must be freedom within a framework.
Organisations, like individuals, need goals. Ensuring that appropriate goals are set is every manager's responsibility. Although currently it is popular to encourage commitment by letting the organisation set its own goals, this approach frequently yields only modest results. More challenging goals, created top-down, can have far more dramatic effects on business performance.
One of the great advantages of shareholder value as a governing objective is that it demands continual improvement. There is no time when you can sit back and admire your achievements. The measurement is obvious to all, inside and outside the company. There is no hiding place.
You can set the bar as high as you like. Having set the target, you can use shareholder value to drive management performance and to raise it.
Few chief executives would deny the value of stretching their organisation by setting the bar higher than people think they can go. If you can generate greater involvement and excitement in the company, you are halfway there.
Setting ambitious goals forces the organisation to dig deeper for creative solutions and to rethink how the business should be run. It doesn't permit incremental thinking. The most successful companies set goals that will give substantial competitive advantage. The objective is to win, not just to improve.
A big benefit to be derived from setting ambitious goals is that the status quo is never enough. The challenge itself brings forth new ideas and new excitement. It encourages out-of-the-box thinking.
In the beginning some may groan and claim that what we are seeking to do is impossible. 'How can we double shareholder value every few years in a mature industry characterised by excess capacity, low growth and irrational competitor behaviour?' Yet, because of the new energy and ideas stimulated by the challenge, the gap between the required and current performance somehow gets filled.
The sheer magnitude of change required to meet the challenge of the new environment helps to change perceptions, which is a prerequisite of any major change programme.
What all this means for our people is enormous change. It has made our organisations less comfortable - and certainly less predictable - places to work in. People like the status quo. They like the way it was. When you start changing things, the good old days look better and better. You have to be prepared for massive resistance. As Tom Peters says: 'In times of turbulence and rapid change, 95% of effort goes into preserving the status quo.'
For a company in turmoil, I cannot over-emphasise the importance of candour - facing reality, seeing the world as it is rather than as you wish it were. People can take the bad news. What they cannot take is deception.
I am often asked when I think business transformation will be complete. The answer is simple: never. In George Orwell's words, the dilemma we face is this: 'The tendency is to make our environment safe and soft; and yet you are striving to keep yourself both brave and hard.'