So, given that underprepared businesses on average fail in 41% of their change initiatives, how can they get better at change?
Introducing the change enablers
Calculating the Australian Business Change Readiness Score allowed us to better understand what it takes to become change-ready. The scores were based on the results of an extensive survey, during which we asked decision-makers to focus on four key areas of their business:
- processes and systems – the way the business works, including systems and procedures
- products and services – the product or service they offer to their customers
- people and culture – the employees and internal culture of a business
- external factors – how a business deals with external pressures.
We asked them questions relating to five attributes for each business area, including:
- need for change – whether the organisation has identified and clearly communicated a need for change in this area
- capability – if the organisation has the capabilities to successfully implement change in this area
- benefit for the organisation – if change in this area will benefit the organisation as a whole
- the benefit for individuals – whether the organisation’s employees understand how change in this area will benefit them and their careers
- leadership support – if senior managers strongly support change in this area.
Based on the respondents’ answers, we were able to identify the specific attributes that businesses can use to improve their overall change readiness. We also created two different measures:
- Performance score: The average readiness score for each enabler
- Importance score: The result of regression analysis showing the relative strength of each enabler in contributing to the overall score.
Building robust, flexible processes and systems
Processes and systems is the most important area of the business for determining change readiness, contributing half (49%) of overall change readiness. Being change ready in this area will have the greatest impact on overall change readiness.
You can put any sort of change you want on top of a strong underlying structure - good end-to-end processes and business models.
Processes pretty much drive the bottom line. So if you can improve these, then firstly, it will enhance your products and services, and secondly, you will meet individuals’ needs inside and outside the organisation
Delivering products and services that customers want
Products and services is the second most important area (26%) in driving overall change readiness. This area of business presents a large opportunity for improvement as businesses are currently underperforming in this area (66%).
All our customers are online and news travels fast. They know more about our stores than we do. We are working really hard to make sure we are keeping up with them
Adapting to the external environment
With market disruption prevalent in many industries, it’s surprising that this area's importance score was only 16%.
High change-ready businesses were 56% more likely than low change-ready businesses to recognise the need to be able to change due to external influences.
Our analysis suggests that a business’s capability in adapting to its external environment is a critical enabler of change.
Change is not technology-led. Perhaps a competitor has used technology to change business processes, but in fact it's the competitive environment that's forcing the change, not the technology.
Change is about searching for ways to encourage customers to talk to you, listening to them, pairing that up with their behaviours, and getting the insights to make changes, so that you can continue to serve your customers in ways that are more and more valuable
Empowering people and fostering a culture of change
People and culture has long been documented as one of the most crucial elements in change. To ensure success in change and change readiness, our research suggests businesses need to address the four areas of the business collectively and people and culture should not be handled in isolation.
By having agile systems and processes in place, high change-ready businesses can empower their people to be responsive and ready for change.
We also found that change-ready businesses were 85% more capable at creating a culture of change and enabling their people to change than their less change-ready counterparts.
People find it hard to change. It's a common human frailty, because change is unknown. So you have to enable people to take a small step first, reinforce the benefits and take away the fear of change.
Leadership support and change
I don’t think we always know how to deal with changes. It can be hard to recognise when you actually need to change and when you can keep doing what you’re doing.
What is the main factor differentiating low and high change-ready businesses? To gain this understanding we assessed performance scores across the five factors and compared high change-ready against less change-ready businesses.
We found strong leadership support to be a defining characteristic of highly change-ready businesses. Organisations that had consistently good leadership support for change initiatives in all four key business areas – processes and systems, products and services, people and culture, and external environment – received the highest overall Business Change Readiness Scores.
The most significant barrier to change is the CEO. I've seen it in a number of corporations where the CEO says: ‘I don't need to change. You're the guys who need to change.’ And in fact, the one person who does need to change is the CEO. So unless CEOs embraces it and they go through the process, it becomes tokenism.
Top areas of focus to improve change readiness:
- rapidly develop the capability to change processes and systems.
- foster a culture of change and empower people to change.
- ensure senior leaders strongly support changes to product and services.
- promote and gain widespread recognition of the need for the business to adapt to external factors.