Stories of change: narratives and transformations

Change management initiatives of HP, IBM, Kodak, and McDonald's

Kotter's Model

Although it is said that the only constant in business is change, the need for change has thwarted many potential corporate superstars of the recent past, including Hewlett Packard, IBM, Kodak, and McDonald's. Although these companies were able to deal with the changes demanded by exterior economic circumstances and internal corporate pressures with varying degrees of success, all met with roadblocks on their way to pursuing change. Kotter's model for successful change suggests that all change entails a certain amount of urgency; a period of coalition building during the pre-change process; the need to create a vision for the change; communicating that vision; removing obstacles; creating short-term wins; building on the change; and permanently anchoring that change in the corporation's culture (Kotter's 8-step change model, 2013, Mind Tools).

HP: Three significant errors

However, in the case of HP, critical errors were made during the change process. The first and most serious one was creating insufficient urgency about the need for change: when HP merged with fellow computer company Compaq, significant organizational players were resistant to the merger, dooming it from the start. Rather than building coalitions, HP CEO Carly Fiorina strong-armed the merger with little concern about generating buy-in amongst other members of the company. Her reorganization of company divisions also generated resistance and even though her principles for doing so were sound, she did not clearly communicate her vision for why this was necessary.

Recommendation

Creating goodwill by proceeding more slowly with the merger (or not undertaking it at all if there was profound organizational resistance and instead attempting to improve what was wrong with HP alone) would have been the wiser task in hindsight.

Change image

HP's strong-armed model of change ultimately failed to generate buy-in

IBM: Three significant errors

In the case of the stalwart computer company IBM, IBM was initially slow to react to the development of the Internet. However, as a result of internal pressure, corporate leaders were able to get members of the organization 'on board' to ensure that IBM was not left out of the loop. Also to generate more organizational cohesion, top management began to erase some of the discrepancies between CEO salaries and members of the general staff. Its CEO eliminated unnecessary bureaucracy and made a strategic, technical acquisition of modest cost to improve service to customers. "Technological advances and globalization have completely changed the rules about how and where things can and should get done, yet many companies still cling to their old models for operating, duplicating the same functions and organizations in various locations" (Van Kralingen 2010). IBM was forced to deal with a new, global economy with enhanced technological capabilities and added additional flexibility to its approach. Eventual total transformation was required. "Companies in a crisis need to look at their entire portfolios, rationally and candidly, and figure out what they have that customers want today and what customers will want tomorrow" (Van Kralingen 2010).

Recommendation

Until IBM embraced the new world economy and reconfigured itself, it remained trapped in its old, inflexible corporate model, unwilling to realize its past formula was ineffective. Change model

Sometimes when a company is very successful, change can be even more difficult, as was the case with IBM, until it finally adopted a successful new business plan, literally enacting change from the ground up.

Kodak: Three significant errors

In contrast to IBM's successful attempts to change, the story of Eastman Kodak is a relatively dismal one. Faced with substantial changes in the industry thanks to the explosion of digital picture-taking, Kodak was forced to reinvest in its technology, shifting from a model which emphasized selling film to making a profit from cameras. However, investors were extremely resistant when they learned their dividends would be slashed during the reorganization. Clearly, Kodak did not create sufficient urgency to communicate the necessity of change. There was also little sense of enthusiasm for the vision of the new company amongst employees who feared losing jobs during a wide-scale downsizing. Kodak was forced to enact change very quickly after long periods of foot-lagging and complacently assuming that its industry would not change. Thus, it was incapable of removing the necessary obstacles for change in the form of resistant employees.

Recommendation

Planning by the company in earlier years with the knowledge that its high-cost film/low cost camera sales model would not survive in the age of the Internet could have made the transition more painful than its 'shock' model of change.

Change model

Kodak's reactive 'shock therapy' model could not sustain it in the 21st century.

McDonald's: Three significant errors

McDonald's too was facing a profound cultural shift in terms of how its product was perceived. Instead of a family-friendly company that had once sponsored the Olympics, McDonald's was now demonized as an organization responsible for childhood obesity. The popular documentary Supersize Me portrayed McDonald's as purveying a dangerous, unhealthy product that could potentially prove deadly to consumers. Concerns about the safety of the product were also impacting sales, and the dollar menu did little to revitalize the fortunes of the failing company. For too long, McDonald's had ignored trends in eating and health-related concerns that made its current menu irrelevant. In response, McDonald's embarked upon a major change initiative, selling salads to attract more female and health-conscious consumers. Mothers that might not agree to take their children to McDonald's because there was nothing for the children to eat could now nibble at lettuce; busy office workers could pick up a salad. In the past, McDonald's had embarked upon revamping the menu, but had done so without a cohesive change focus. It had not altered the overall vision and mission of the company, which remained focused on fast food burgers nor had it made a commitment to institutionalizing the change and making it 'stick.' Now, with the new menu, a focus on healthy options was reinforced throughout the company: supersizing was eliminated; playgrounds were installed in more of the restaurants to emphasize the focus on kids' fitness; and the company tried to cultivate a 'hipper' image with its 'I'm Lovin' It' campaign.