A New Model for Change

First and foremost, companies that have successfully transformed themselves began by analyzing all aspects of their operations, leaving no stone unturned. Once they identified areas for improvement, they moved quickly, reducing downtime and hand-off periods. They ran transformation initiatives in parallel, not only for speed and efficiency, but also to promote better integration — to take advantage of synergies between different parts of the business. Last, successful companies all had fully committed leadership. Lack of buy-in at the top level, as many others have observed, negatively impacts the transformation effort by stalling the effort and creating, rather than removing, obstacles.

Consider the cases of General Motors and Nissan. Both large automobile manufacturers faced dire circumstances at the turn of the millennium. However, the transformation efforts undertaken by the two companies were drastically different and have had drastically different results.

GM approached change in the old way: a piece at a time, over several years. GM's approach was consistent with its culture, says Jay Conger, a visiting professor of organizational behaviour at the London School of Economics.

"GM has always been a very siloed corporation with all of its different divisions really operating like separate companies," Conger observes. There have been numerous reorganization efforts at GM, and most have not fared well, because of the turf battles and independent nature of GM's divisions."

This lack of integration across the company is reflected in the fact that its transformation initiatives themselves have not been integrated, with the company addressing only a few key issues at a time. At different times, GM has made changes to human resources, information technology and manufacturing lead time, among other functions, without exploring fully how these aspects of the business relate to each other.

Furthermore, cost cutting (a poor long-term strategy) has been a major component of GM's transformation effort. Nearly two years ago, GM announced plans to eliminate 25,000 jobs in the United States — about 17 percent of its US workforce — by closing several plants in the coming years. Aside from the drawn-out time frame for this initiative, GM has encountered tremendous difficulty getting buy-in for the change effort from middle management. The result? GM's income went from a net profit of $US420 million six months after Rick Wagoner took the helm of GM in 2000 to a loss of over $US10 billion in 2005.