Leading Exponential Change

by Erich R Bühler

  Consider this from an economic point of view. At exponential companies, such behavior translates into higher revenues, greater profitability, rapid adaptation, and a faster return of capital invested.

  As we learned in the previous chapter, healthy companies greatly outperform those that are not, and you should keep this in mind when considering future change initiatives.

  I used to work for a “healthy” consultancy in the UK. Their company values were displayed in every office, and every week they’d send an email with the photograph of a prestigious golfer to remind us of the importance of their values. I can only suppose they did this because something wasn’t working properly. I imagine you wouldn’t want a superficial strategy, framework, or process that was only good for people to follow blindly. This is what many companies ask from me, but deep inside, they know they long for a healthier life within the organization.

  Change is Complex

  The following questions will help you think about the change as you take your first steps:

  Who could inspire change or make it contagious?

  How can the company culture help?

  What are the intellectual and emotional factors during an individual’s personal-improvement journey?

  The change should be initiated by someone who inspires, someone people truly admire. This isn’t the same as the person who believes people trust them, and it doesn’t have to be the person with the highest role or salary.

  Don’t worry if you are new to the company or if you feel uncomfortable leading a change initiative. Later in the book, I’ll show you effective ways to create a great impact by implementing minuscule changes (micro-habits).

  A lack of support isn’t an excuse to halt change on the curbside, either. Many consultants wait to carry forward their idea until company leaders fully understand the problem, but this only leads to valuable time lost. I have experienced this on several occasions. I’ve scheduled appointments, or simply waited for the CEO, to talk about the company’s dysfunctions or about adopting the Agile mindset. They often had other priorities, and what was important to me was merely an extra task to them, just something more to do. How could they not see that the world had changed? Why wouldn’t they take the lead?

  There are three common reasons why leaders delay the start of a change initiative:

  They can’t see a clear sense of urgency.

  They want to wait until other large companies demonstrate that the implementation of concepts is successful or that the techniques are mature enough.

  They want to wait until the approach has been studied by academics, there’s sufficient research material in books or conferences, or until same-level peers in other companies begin to talk about the subject.

  They lose months and years looking for the ideal moment. Opportunities are missed, and the organization is excluded from seeing change as something positive and natural. Companies have more than enough heads to decide whether something is good and to adapt appropriately. But on many occasions, what’s required is only a small push and modification in the foundations people use to make decisions.

  Look at the history of Toyota. For over 30 years, Toyota led innovative change in the global automotive industry using Lean techniques. It took American companies that same amount of time to get on par with leading companies and start using the new “mindset.”

  Simply put, every occasion is a good opportunity to carry out a change. All you need is to ensure that your company is healthy and to procure the right tools, processes, or work styles. If these aren’t met at your company yet, Chapter 5 lists modifications to main habits so that the company can become healthier and so that the change can become exponential.

  I’m sure you’re a good communicator, that your colleagues appreciate your help, that you work well with others, and that you’re good at sharing ideas. But what else is needed?

  The following six principles will set you on the right mental path and help change your world:

  It’s always a good time to make a change—another person’s delay is not an excuse to wait!

  Believe in your idea.

  Share your idea.

  Accept feedback and improve how you reflect on it and internalize it.

  Have passion for collectively bringing the idea forward.

  Assume that decisions made by others, who do not support your plan, can always be changed, even if they are firm decisions. Chapter 4 will show you how the brain works, and how to employ techniques that facilitate this point.

  Your company’s culture also has an influence. If you compare the different places you’ve worked, you would probably offer a different solution to the same problem for each of these companies. This is because of the company culture. Culture has a significant impact on the speed of implementation of your change plan. Everything will progress faster if the business supports innovation and encourages healthy habits. And if it promotes communication and encourages individuals to reflect, learn, feel safe to experiment, and even fail, then this is a plus.

  “Change will not come if we wait for some other person or some other time. We are the ones we’ve been waiting for. We are the change that we seek.”

  Barack Obama, 44th President of the United States

  For a change to become contagious—a midpoint state between traditional linear change and the required exponential growth change—employees must be empowered to take ownership of your initial idea, improve it, and make results their own. They must possess enough mental flexibility to set their egos aside and alter course at any time. They need to discover how to deal with their emotional sides and the emotional sides of others in a consistent manner. And they need to recognize that this personal learning journey is a long one.

  You’ll need to first invest in personal preparation and analyze the organizational patterns and attitudes in your favor. Once you understand how to implement the change—I promise I’ll be more specific in upcoming chapters—you’ll succeed at making it contagious first and exponential later.

  Exponential means you’ll have a community of motivated people, teams that feel like activists, business partners that are like colleagues supporting your initiative, and a culture that looks more like a social movement than a rigid set of values stuck on a wall.

  Remember, change is a journey that requires you to realize that any modification in processes, policies, or work styles affects people in a very personal manner. Processes can’t be changed, nor work rules or agreements put in place, without forever altering how people think. For this reason, it’s essential that you have the proper tools to accompany you on your journey.

  The Formula for an Exponential Organization

  Amancio Ortega knew little about business when he started working at a clothing store in the city of La Coruña, Spain, at the age of thirteen. Nonetheless, he went on to found a small clothing manufacturing company in 1963, before he’d even reached the age of thirty. In 1977, the success of his designs prompted Ortega to install the first of his Zara factories in Arteixo, a small town of around 31,000 inhabitants. During the next few years, his company, Inditex, began to grow rapidly, reaching a rate of one worldwide store opening per day, including openings for several of their other brands (Pull and Bear, Oysho, Massimo Dutti, Bershka, and eighty more).

  Customers love Ortega’s products, and several of my own friends will attest that they cherish the innovative quality of their designs so much that they can’t live without them. I’d always believed that product quality was crucial in any service, so I was surprised when Zara failed in several areas in a quality test carried out by the Beijing Consumer Association on twenty brands (fourteen Chinese and six international). According to the association, several of Zara’s products had labels that did not correctly indicate fabric composition, and the product faded after its first wash. It seems that people pay less attention to product quality if the produ
cts are innovative or if they fulfill their purpose.

  Is innovation the secret component for an exponential organization?

  Around 1995, the company Artemis presented the WebTV service in the United States. WebTV was a cutting-edge product that allowed people to surf the web on their TVs. The product made it possible to bring the internet into homes that could not afford a computer, thus making web browsing possible for those with limited computer skills.

  This innovation led to Microsoft buying the company in 2001 and renaming it MSN TV. Microsoft appeared to have a brilliant strategy, as it would allow the company to market a cutting-edge product in a familiar market with a million paying subscribers. Microsoft created an updated version of WebTV with a more powerful graphics processor to satisfy users who wanted to make video calls and record television programs simultaneously. This was a success from the standpoint of innovation! But a few years later, Microsoft shut down the service. Among other reasons, the software lacked the expected quality, and a number of issues compromised security for users.

  Perhaps innovation is only part of the formula, and the key to success lies in more-traditional methods, such as having a proven strategy and short customer feedback cycles. Could this be so?

  Coca-Cola has always been a world leader in soft drinks. In 1980, leaders at Pepsi decided to roll out an aggressive marketing campaign to position their drink within youth sectors. That same year, Coca-Cola lost customers until it only held about 24 percent of market share.

  Coca-Cola leaders decided to act. They established a solid strategy that included changing the formula of their star refreshment and creating a product sweeter than Pepsi. Their roadmap was set up with a strategy that validated the new taste with a sampling by 200,000 people. Weeks later, the new product was out, and the original formula vanished from shelves. What do you think happened? Over 400,000 calls poured in from angry customers, and hundreds wrote complaint letters expressing dissatisfaction with the new drink. How was it possible that Coca-Cola could make a mistake in their strategy when market research had yielded positive results? Fifty-three percent of customers had approved and liked the new Coca-Cola!

  The answer? Consumers were motivated by more than just the taste of the drink. When the research was conducted, the premise was that taste was most important. But this isn’t the only component of the success equation. Customers make purchasing decisions based on habits and emotional factors such as nostalgia and loyalty, and this hadn’t been taken into account.

  Concrete numbers are useful because they give the conscious mind something to do, but it’s our emotions that decide what is true and guide our decisions. It took the company less than three months to announce their return to the original Coca-Cola and abandon the tested and innovative product strategy.

  You must consider factors broader than innovation and fast feedback loops with the customer. Many of the executives I speak with have a firm understanding of how and where to reduce costs (cost and efficiency), but we know that wealth is created differently in the new economy and exponential markets. You also need expertise in other areas:

  Being able to create a plan with exponential characteristics (able to expand without physical limitations)

  Having customers as cocreators of the product and understanding their motivation.

  Engaging individuals of different ranks and knowledge within the company with a shared sense of purpose and responsibility.

  Understanding that making a change is simply complicated, as it involves complex feelings and behavior patterns.

  Noting that the solution to a problem needs to be considered from different viewpoints, utilizing different forms of reasoning (reframing).

  Using short cycles to experiment and change rapidly.

  Ensuring that people feel safe.

  Always having a definition of minimum and acceptable product quality (Definition of Done) that is nonnegotiable in the face of market pressures, so that the quality of the product or service remains constant and high.

  Reframing is a powerful set of cognitive techniques that allow us to analyze a problem from different points of view, guiding us to temporarily think as the person with the problem or from the perspectives of those who observe the problem. This makes it possible to reach different conclusions, with different assumptions. This practice encourages new neural connections and results in innovative ways of thinking that help the company evolve.

  Today, innovative solutions and ideas are needed to replace simple transactions that focus merely on a small portion of what we can observe. When an honest focus is placed on clients, they feel exhilarated. A focus on the client helps build bridges, the client becomes a cocreator, and the organization can better understand how he or she thinks.

  When you treat employees as potential clients, it provides a safe space where they can feel part of the organization. This results in employees who further contribute to the creation of an exponential company.

  Techniques for reframing and brain functioning, applying neuroscience for change, are fundamental, as they help executives use different forms of reasoning. When this is achieved, individuals begin to listen more, and information gains new relevance. The result is constant improvement and products that are ahead of the competition.

  FIGURE 2.2: Speedometer of an exponential company

  All plans require interrupting linear forms of work and technologies to replace them with exponential habits and tools. Otherwise, you won’t be able to adapt your plan when the business goes from growing 10 percent to 10^2. In addition to leaders who can expand processes rapidly, you will also require technologies, work and learning styles, increased interactions with the client, and much more. The speedometer in Figure 2.2 helps us see the relationship between these areas

  Technologies that need to move from the linear to the exponential.

  Structures used to engage the client and the way that those structures scale up.

  Structures used to engage employees and the way that those structures scale up.

  Later, you will see how knowing more about neuroscience (Chapter 4) and understanding the five habits before starting a change initiative (Chapter 5) will allow your company to become exponential.

  The art of Predicting the Future

  When I travel, I often bring along my racing bike. I generally use a special sports transportation bag to protect the frame and wheels, especially in the airplane cargo hold. I’ve taken it upon myself to include instructions, in several languages, stating that nothing should be stacked on top of the bag. But more than once it has ended up at the bottom of a pile of heavy suitcases. The story repeats itself over and over: When I return from the trip I have to take the bicycle in for maintenance and I pretty much already know what parts will have to be repaired or replaced.

  But unless we’re talking about machinery, with elements that fit and work together using predictable and repetitive tasks, it’s difficult to forecast the future. In modern companies, much can vary. Companies are exposed to global markets with constant innovation, political surprises, cybersecurity issues, changes in world geography, diseases, and a whole array of events that affect us all.

  In the past, plans were set to reduce and contain variability and to secure a constant workflow. But in the same way that a teenager needs to be in contact with the world to learn faster, a company needs to use such variability to its advantage. Without rapid changes, you cannot create differential business value or achieve greater innovation, and this would ignore the economic importance of the success formula. We mustn’t focus only on stability. Instead, we must learn to observe what surrounds us with a different lens.

  Around the end of 2017, a telemarketing company conducted a market study to capture opinions on a mobile-banking application belonging to one of the largest financial institutions in Catalonia, Spain. A high number of respondents expressed dissatisfaction and ra
ted the software poorly. As a result, the bank probably invested time and effort trying to create an endless list of possible reasons, which led to new objectives and a change in the vision of their mobile product.

  In reality, though, Catalonia was in a process of potential separation from Spain, and those opposed to Catalonian independence were impulsively responding negatively to the mobile product survey—their answers did not really reflect their feelings toward the software. Cases like this remind us that we must analyze many factors to understand the source of variability. This implies that we must be able to understand that we are facing complex—but not complicated—scenarios.

  The Complication of Being Complex

  A change within a company is a complex problem, and to solve it you need to think differently. It’s useful to recognize a fundamental distinction made by those of us dedicated to helping and promoting change. The terms complex and complicated are often confused. They are used interchangeably in company conversations: “The company’s processes are very complex!” or “The organization’s strategy is complicated!” or “The solution to this grave matter is complicated!”

  A complicated problem is one with a definitive and correct solution. We may not know what it is, but if someone, perhaps the subject matter expert, finds the solution, the result will be immutable over time. The following are complicated problems: