Changing to a new strategy: Profits and losses

When a company follows the process of change towards a new strategy, it should expect to suffer from losses that cannot be foreseen. Executives must react coolly and efficiently in such a situation. 

By Mia Kollia
Translated by Alexandros Theodoropoulos

Countless hours are spent by a company's managers thinking, discussing and planning their strategies. However, several studies such as this one conducted by consulting firm Bain have found that about 2/3 of business executives report that their planning process does not yield a strong strategy. In exploring the reasons, executives often attribute the failure of strategic initiatives to unanticipated changes in the competitive environment—big, unpredictable events and trends. 

The research came to a clear conclusion: unpredictability is overrated. Instead, it was found that organisations typically fail to anticipate and then proceed with changes that are fairly predictable and deal with ongoing, recurring challenges. Also, there is one key factor that strategic decision makers often neglect: the critical role and impact of loss. 

Hidden priorities and losses

When a company goes through big changes and has new priorities, there are inevitably losses: some parts of the organisation, some people, functions, values ​​and traditions will be degraded or even abandoned in the name of progress. Companies trying to implement strategic initiatives usually hype the benefits and ignore these losses, treating them as a simple technical challenge. This is a dangerous illusion. For any strategy to be successful, executives must identify, understand, and allocate time, attention, and energy to the losses the organisation will face in pursuit of its new priorities. This adaptive challenge must be part of the business strategy, which will help the organisation to come to terms with the new reality and properly "mourn" what has been lost.

Dealing with direct and indirect loss

New strategic priorities require organisational changes. We all embrace change when we believe it will be good for us, but we always fear and resist loss. Therefore, in any strategic planning process, it is essential to understand the relationship between the new priorities and the losses that the various groups within the organisation will face.
Some losses are easy to spot and eventually treat. For example, immediate losses related to power, money, prestige, career prospects, and autonomy quickly enter the table of discussion. More hidden are the skill losses. The fear of having to face new demands can cause significant anxiety. We're not sure we can develop the necessary skills for the changes ahead—and no one wants to feel incompetent. However, adaptive challenges require both experimentation and learning new skills. They require resilience in times of uncertainty, for issues created by a lack of knowledge and related skills.  

Loss of loyalty is another serious issue. No man is an island. We show loyalty to those who share our values ​​and interests. If we are the leader of a group, its members may expect us to stand up for certain values ​​and perspectives. Subverting these expectations can be costly. The fear of eroding trust also prevents the conversations that need to be carried out about work.

Such losses are not evenly distributed and affect groups differently. This explains the different levels of commitment and resistance to change. The good news is that just as we can predict a company's new priorities in the face of a changing context, we can also predict the losses those priorities will cause.
 

Building the adaptation process for change

Understanding the relationship between priorities and losses can help managers make the processes involved in mobilizing learning and change easier. Let's see the way.

Enhancing the environment at executive level

We create an environment where executives can talk openly about what they don't know and what they need to learn to make the process of adapting to new data more effective. In this way we show that we can face the challenges that have arisen and we take care of it. Then we put some time limits, knowing that some issues need to be resolved immediately. We also strengthen the emotional connection, making sure to calm the fears that arise regarding upcoming changes. Before addressing corporate needs, we invite managers to learn more about each other through personal stories of their past and present.

Specific discussion of losses

All systems, including organisations, can develop the capacity to handle all kinds of challenges if only they name them. What we don’t recognise and cannot name it will appear later in numerous forms of resistance. So leaders need to have a conversation that includes the analytics of the strategy and specific names and people who will have to implement, manage, and carry the consequences of the decisions that result from a deep change of approach. Some of these persons are in the upper management ladder. In this sense, beginning to view strategy as an adaptation task allows teams to consider the needs and fears of those who must be involved in implementing the change. This can be an awkward moment, but it's also a relief, because it clears things up.

Mapping of affected groups and losses

We develop a different chart for each strategic priority and the most critical groups affected by it. For each group, we record the contribution, what needs to be kept and what needs to be left behind because of limiting future moves. For example, if one of the strategic priorities is to “accelerate digital transformation”, then we write this initiative in the centre of the diagram and continue with writing the groups or individuals who will be most affected by the transformation. We record for each team their perspective on our strategy change and assess the changes or losses they will have to deal with. 

Throughout the process, we stay close to people and provide face-to-face support. We certainly cannot solve all the problems of each of them, but we can help them adapt to developments. Strategic priorities require deep systemic and individual learning. Fears must be addressed. Deep values ​​will have to be redefined and attitudes will have to change. The bottom line is that the people facing the challenges should be part of the solution.