GROUP PROJECT PAPER

BUSINESS TRANSFORMATION
FROM ONE PILLAR TO EIGHT PILLARS OF
PT ADARO ENERGY TBK.

Team Members:
Arvi Nugraha 2018023541
Dewi Annisa Yakin 2018023547
Fransiskus Allan Gunawan 2018023551
Nagata Wiguna 2018023562
Raihan Alisha Nabila 2018023565

MASTER OF MANAGEMENT
WIJAWIYATA MANAJEMEN 80
SEKOLAH TINGGI MANAJEMEN PPM
JAKARTA
2019
BAB I INTRODUCTION

Research Background
In running its business, condition or performances of the company are influenced by
internal and external factors. These influences can be in the form of threats or opportunities,
that company has to deal with. Company uses several strategies so that this influence has a
positive effect on the company. But there are some influences that have an impact or have the
potential to affect the company significantly, so the company needs a transformation strategy.
Transformations, is the company’s strategy to deal with disturbance from external or
internal factors that affect the company in carrying its business. Transformation can be done
by the company as a reactive strategy against the disturbance or proactive strategy. Where
reactive action is the impact from disturbance accepted by the company, so the impact is an
impulse that drives companies to make transformations, while proactive is the company has
prepared themselves if the disturbance will give an impact on the company, so the impulse
comes from the internal of company to overcome the disturbances so that impacts can be
minimized.
The success of a transformation in the company is affected by several factors, some of
them are the leader which brings the change and how to communicate the urgency of change.
The impetus for transformation is the urgency which has an impact on the company. The form
of transformations depends on the form of urgency. Not all transformation activities can be
done well and right, therefore they provide less optimal results. Decent steps are needed in
carrying out transformation activities.
PT. Adaro Energy Tbk, is a company that runs a coal mining business. This business is
affected by limited natural resources and global scale policies. The coal mining business model
can be included in the short-term business given the limited natural resources and emerging of
scientific development and technological knowledge of renewable energy sources and mining
methods. In the face of potential disturbances, PT. Adaro Energy Tbk, tries to capture the
potential signals for transformation. So, proactive actions can be taken in carried out
transformations.
Proactive action of PT. Adaro Energy Tbk, are done by disturbing their self, which PT.
Adaro Energy Tbk, trying to disrupt itself from the comfort zone, so the companies are more
sensitive to potential changes or disturbances that occur. In This paper discusses how PT. Adaro
Energy Tbk changes with the concept of disrupting itself, and how these steps are linked to
Kotter's theory of change.

Problem Formulation
The formulation of this paper is how we see PT. Adaro Energy Tbk, transform itself by disturbed their
self and how their method linked with Kotter’s theory of changes.

Research Objectives
The Objectives of this research is to understand the form of transformations in PT. Adaro Energy Tbk,
and to get more knowledge about how the implementation of Kotter’s theory of changes.

Research Limitation
This research is limited by the sources of the data and the type of data used in this research. The type
of data this research used is secondary data and the sources are from books, journals and news.
BAB II THEORETICAL BACKGROUND
Leading transformation calls for a deeper understanding of change and a new set of
business skills and strategies. In particular, they must transform their beliefs about people,
organizations, and change its business. They must view transformation through a new set of
mental lenses in order to see the actual dynamics of transformation. And they must alter their
business style and behavior to accommodate the unique requirements of transformation.

Change Management
Change management is a systematic approach to dealing with the transition or
transformation of an organization's goals, processes or technologies (Goncalves, V., &
Campos, C. 2018). The purpose of change management is to implement strategies for effecting
change, controlling change and helping people to adapt to change. To be effective, the change
management process must take into consideration how an adjustment or replacement will
impact processes, systems and employees within the organization. There must be a process for
planning and testing change, a process for communicating change, a process for scheduling
and implementing change, a process for documenting change and a process for evaluating its
effects. Three types of Organization Change (Anderson & Anderson, 2001a):
1. Developmental Change, the improvement of an existing skill, method, performance
standards, or condition that for some reason does not measure up to current or future
needs. There are two assumptions in developmental change. First, people are capable
of improving. Second, people will improve if provided the appropriate reasons,
resources, motivation, and training. Developmental change applies to individuals,
groups, or the whole organization and is the primary type of change inherent in all of
the following improvement processes: training, some applications of process
improvement or quality, some interventions for increasing cycle time, team building,
problem solving, improving communication, conflict resolution, increasing sales or
production, meeting management, role negotiation, survey feedback efforts, job
enrichment, and expanding existing market outreach.
2. Transitional Change, replaces what is with something entirely different. Examples of
transitional change are reorganization, simple mergers or consolidations, divestitures,
installation and integration of computers or new technology that do not require major
 change in mindset or behavior, and creation of new products, services, systems,
processes, policies, or procedures that replace old ones.
3. Transformational Change. Transformation is the radical shift from one state of being to
another, so significant that is requires a shift of culture, behavior, and mindset to
implement successfully and sustain over time. In other words, transformation demands
a shift in human awareness that completely alters the way the organization and its
people see the world, their buyer, their work and themselves. (Figure 2.1)

Figure 2.1, Transformational Change

Source: Anderson & Anderson, 2001a

Organisational Transformation is a term referring collectively to such activities as

reengineering, redesigning and redefining business systems. The dominant enabling
technology in transforming organization is information and technology. As business model
change rapidly in the financial environment and mergers and acquisition change the face of the
organization. Therefore, there are three types of transformation in an organization (Samantaray,
2006):
1. Improving Operation: To achieve a quantum improvement in the firm's efficiency, often by
reducing costs, improving quality and services and reducing development time.
2. Strategic Transformation: The process of changing strategy seeks to regain a sustainable
competitive advantage by redefining business objectives, creating new competences and
harnessing these capabilities to meet market opportunities.
3. Corporate Self-Renewal: Self-Renewal creates the ability for a firm to anticipate and cope
with change so that strategic and operational gap does not develop.
 Besides the types of transformation in an organization, there is a classification of
transformation based on organization readiness. There are two classifications, specifically
conscious organization and unconscious organization. Being conscious is being aware that
organizations are aware, then unconscious as the opposite of conscious. A common example
of this use of the term “unconscious” is a phenomenon that happens to many people as they
drive down the freeway, especially if they drive the same route regularly. You have likely had
the experience of driving down the high-way and when the sign announcing your desired off-
ramp catches your attention, you realize that you have been driving on autopilot, without any
conscious awareness of your surroundings.
Organizations believe that business need a breakthrough to what we call conscious
transformation. The term conscious signifies a required shift in both business and organization
consciousness regarding how they view and mindset change, and their roles as change leaders.
Consciousness as awareness, especially of something within oneself, and also the state of being
conscious of an external object, state, or fact. Transformation implies a quantum change in
form, nature, or function. Conscious transformation, then, infers that business and organization
alike must become more “conscious” and aware of the deeper and more subtle dynamics of
transformation. The ten principles of conscious transformation (Anderson & Anderson, 2001a):
1. Wholeness. Implications for Business Change, even though the overall transformation
process likely includes numerous people in the organization change initiative
individually, each initiative must clearly support the enterprise’s primary
transformation objective. Employees must overtly experience that all change initiatives
and activities fit into and support the whole transformation, be it the whole entreprise,
a line of business, or a region. Everything must be linked to the overall objective of the
system being transformed.
2. Interconnectedness. Change business must fully attend to the interdependencies of
change processes. Change business must build bridges across functions, processes,
stakeholder groups, and change initiatives to ensure collaboration, information sharing,
and shared accountability. In addition, change business must be sure to establish the
infrastructure and governance systems to accomplish this integration of mutually
dependent components.
3. Multi-dimensional. Change business must be expanded their focus and competency to
be able to attend to not only external reality (content, structure, technology), but to the
internal realities of individual mindset, interpersonal dynamics, and organizational
culture. They must be discern the systems dynamics of their organization at all levels,
 as well as the influence of their marketplace and environment. Furthermore, change
leaders must see the potential impacts between the larger and smaller systems within
their organization. Cognizant of these forces, they must design and implement a
transformational change strategy that attends to the needs of each dimension in an
integrated way.
4. Continuous process through time. Change business must minimize their attempts to
influence transformation with isolated events. Furthermore, they must be planned the
future communications to reinforce the message over time and create further buy-in. In
short, they must think of communications as a continuous process. Transformation is
often accompanied by a sense of urgency.
5. Continuously learn and course correct. Thinking that reality can ultimately be known
cause change leaders to fall into the trap of thinking that their current content, people,
and process answers are fixed and complete. Proactively generate useful information
and feedback and share it across boundaries to promote learning, remove barriers to
sharing information. Because information generation and sharing are integral to
learning, change business needs to build information generation processes that feed
directly into process design and facilitation practices.
6. Abundance. Change business must trust in the future. Think abundantly, whatever is
needed exist somewhere in the system or its environment. Change business must trust
the organizations and the people, provide them with resources, and grant the authority
to use those resources appropriately.
7. Balance planning with attending dynamics. Plan ahead, but be observant and respond
in the moment, alter the desired state and change strategy as new information emerges.
Embrace dynamics that seem to be in conflict, such as business / organizational
pressures, short-term / long-term needs or goals, speed / thoroughness. Let each polarity
be heard rather than champion one extreme, allow the tension between polarities to
resolve and move the transformation forward.
8. Lead as if the future is now. Ensure that business / organization strategy models and
promotes the desired culture. Design the business change process to demonstrate to the
organization that the desired culture already exists.
9. Optimize human dynamics. Change business must incorporate strategies and actions
that support organizations needs throughout the transformation. The transformation
process must generate optimal participation and build collective ownership for the
 change. Account for people dynamics and reactions, plan for people transition, create
meaning that motivates organizations, at any level.
10. Evolve mindset. Change business must provide significant, ongoing, organization
transformation opportunities for themselves and for the people in organizations.
Legitimize the requirement to address mindset and its impact openly. Generate, share,
and use relevant information to transform mindset.

The Change Process Model for Leading Conscious Transformation

The model outlines a full stream roadmap for getting an organization from where it is to
where it wants to be. The model portrays nine phases of activity that represent generically how
transformation takes place in organizations. As a roadmap (Table 2.1), difficult to decide which
destination to pursue or which turns to make to get there, but it does provide guidance regarding
what lies ahead. It outlines the general organization process will take to discover organization
destination and how to arrive as expediently as possible.

Table 2.1, The Change Roadmap

Upstream Change Phase I: Prepare to lead the change:
1. Start up, staff, and create the case for change
2. Assess the organization’s readiness and build capacity for
change
3. Identify and build the infrastructure and conditions to support
the change effort
4. Build the change strategy

Phase II: Create organizational vision, commitment and capacity

Phase III: Assess the situation to determine design requirements

Midstream Change Phase IV: Design the desired state

Phase V: Analyze the impact
Phase VI: Plan and Organize for Implementation

Downstream Phase VII: Implement the change

Change Phase VIII: Celebrate and integrate the new state
Phase IX: Learn and course correct
The Transformation Process
Di word nya Al
BAB III RESEARCH METHODOLOGY

3.1 Research Method

The type of this research is included in descriptive research. This is because in writing,
the researcher describes the results of the aspects studied, namely the application of business
transformation of a company based on the theoretical foundation used. The object of descriptive
research is to portray an accurate profile of persons, events or situations (Saunders, Lewis and
Thornhill, 2009). The type of data used in this study is secondary data where the data is
obtained from sources that are already available or published. The researcher collects related
data from literature studies, scientific publications, annual reports, supporting books and
articles such as news contained in electronic newspapers and internet. The process of analyzing
each stage in the aspects studied is based on the results of group discussion. The analysis
process based on some data that has been officially published so the results of the analysis can
be guaranteed.

3.2 Data Analysis Technique

Technique of data analysis in this research is qualitative analysis, based on Huberman
(2002) this technique include collecting data, data reduction, data presentation, and conclusion.
1. Data Reduction: delivering the selected, focused and reliable data that have been
analyzed into information for the conclusion.
2. Data Presentation: information that will be presented scientifically, narratively and
systematically.
3. Conclusion: this will be the last step in analyzing data. Researcher concluded the
information that have been analyzed before and aligning with the research objective
and problem formulation.
3.3 Research Flow
Before this research conducted, researcher has been identify the flow in the writing to
make sure this research are scientific and systematic.

The figure above describes the process in conducting this research, first of all we identify the
topic of research, then we find the problem in this topic to formulate the research objective and
then we make the format in writing this research. Next step, we use the theoretical foundation
that are related to the topic that will be analyzed. After that we analyzed the collected data into
information that can be aligned to the theoretical foundation that we use before. Last step, we
present and discuss our results from the analysis so we can make the conclusion based on our
research problem formulation.

CHAPTER IV PT ADARO ENERGY TBK.

4.1. History of the Company

PT. Adaro Indonesia, established in 1982, is a subsidiary of PT Adaro Energy Tbk, and is a
mining company that conducts coal exploration and mining activities. The location of the
operational office is in Tanjung, South Kalimantan Province. While the mining location is
located in Balangan Regency and Tabalong Regency in South Kalimantan, also the crushing
plant and loading port are located in South Barito Regency in Central Kalimantan.
Before the company was founded, the idea of the name 'Adaro' was chosen as the name of the
company by Enadimsa to honor the famous Adarso family, who had been involved in Spanish
mining for several centuries, and PT Adaro Indonesia emerged. The Adaro Indonesia Coal
Cooperation Agreement (CCA) was signed on November 2, 1982. Enadimsa conducted
exploration work in the agreement area from 1983 to 1989, when a consortium of Australian
and Indonesian companies purchased 80% of Adaro Indonesia from Enadimsa. 1
During the first half of 1990, a feasibility study was conducted to lay the foundation for the
development of the project. The most important thing is to choose transportation routes for coal
transportation, and the decision was made to build a coal haul road 80 km west to the Barito
river, rather than the 130 km east to Adang Bay on the Kalimantan coast. The reason because
it would be faster and cheaper, especially to avoid crossing Mount Meratus.
After undergoes feasibility study process, the decision was finally made to start production
from the Paringin deposit because it has a higher heat value than the Tutupan deposit and also
because of overburden containing rock sludge, harder rock suitable for road construction. This
mine construction is tracked quickly to get coal to market as quickly as possible to develop a
customer base. It aims to integrate with the community as much as possible, with all staff,
expatriates or nationalities, who live in local cities, and the focus of recruitment was on hiring
from the local population with the commitment of officers to the main training program. The
use of contractors as much as possible is also the focus of operations, especially local
contractors and local suppliers if necessary.
The first step in developing coal deposits was to raise funds, and in May 1990 a number of
banks were approached to fill the financial project of US $ 28 million. However, all banks
refused to provide funds on the grounds that the problems perceived were related to the quality
of coal because Adaro's sub-bituminous coal had never been traded internationally in
significant volume and because the domestic market was relatively small. There are also doubts
about the plans of hauling road construction mainly due to the fact that the last 27 kilometers
of the proposed road are through marshes which even if technically possible, would result in
high construction costs.

1 http://www.adaro.com/pages/read/6/14/History
4.2. Company Profile
Adaro Energy is a vertically integrated energy company in Indonesia with businesses in
the coal, energy, utilities and supporting infrastructure sectors. Adaro Energy has an integrated
business model consisting of eight pillars: Adaro Mining, Adaro Services, Adaro Logistics,
Adaro Power, Adaro Land, Adaro Water, Adaro Capital and Adaro Foundation. The main
location of Adaro Energy's mine is located in South Kalimantan, where mines are envirocoal,
thermal coal with low pollutant levels.
Adaro Energy also has metallurgical coal assets ranging from semi-soft coking coal to premium
hard coking coal. Although coal remains the company's DNA, Adaro Energy continues to
develop non-coal businesses to get a more stable base of income and offset the volatility of the
coal sector. The company, which started its commercial activities in Indonesia in 1992, is one
of the five largest exporters of world thermal coal shipments via sea and the largest supplier to
the Indonesian domestic market. Adaro Energy produces sub-bituminous coal known as
Envirocoal. This type of coal has high quality, low pollutant levels that contain very little ash,
NOx and sulfur, and has a lower middle heat value of 4,000 kilocalorie / kilogram (kcal / kg)
to 5,000 kcal / kg on gross as received basis (GAR)
Although the coal mining industry has been hit by low coal prices since the late 2000 century,
Adaro Energy has focused more on the electricity generation sector through the construction
of coal-fired power plants. Since the company has access to large coal reserves and Indonesia's
demand for electricity is increasing, the power plant business segment is expected to be a
valuable asset for Adaro Energy because it provides stable income and cash flows, offsetting
the negative impact of volatile coal prices. In the midst of solid economic growth, demand for
electricity in Indonesia is estimated to nearly triple to 17 quadrillion BTUs by 2030 (according
to McKinsey’s forecast).
2

4.3. Vision and Mission Statement

In running the business line of PT Adaro Energy and its subsidiaries, the company has set its
vision, mission and objectives of the company. The vision and mission statement in accordance
with the latest financial statements for 2018 are as follows:3
Vision :

2 https://www.indonesia-investments.com/id/bisnis/profil-perusahaan/adaro-energy/item191
3
http://www.adaro.com/pages/read/6/15/Vision%20Mission
 “To be a leading Indonesian mining and energy company”
Mision :
We are in the business of mining and energy to:
• Satisfy the needs of our customers.
• Develop our people.
• Partner with our suppliers.
• Support community and national development.
• Promote a safe and sustainable environment.
• Maximize shareholder value
Objektives :
“Focus on customer satisfaction”
At the service side of company, Adaro provides assistance to customers by offering technical
capabilities and services. Adaro is ready to help customers get the most valuable coal by
adjusting the furnace operation to minimize environmental emissions levels, improve the
efficiency of the heat level or implement strategies coal blending to obtain the lowest electricity
production costs.

4.4. Organizational Structure

Figure 4.1 : Brand Logo of PT Adaro Energy

https://www.dealstreetasia.com/stories/adaro-bhp-billiton-enter-120m-assets-sale-agreement-43443/
Figure 4.2 : Organizational Structure starts from December, 2018
(Sources : http://www.adaro.com/)
BAB V ANALYSIS AND DISCUSSION
PT Adaro Energy Tbk. prioritizes the greater public interest. PT Adaro Energy Tbk.
captures some urgency in Indonesia that is closely related to their business. First, the problem
of lack of electricity supply. The capacity of all power plants in Indonesia has only 55,000
MW, starting from Indonesia's independence in 1945. While the population of Indonesia
continues to grow many times over. If in 1945 the population of Indonesia was 61 million, in
2017, Badan Kependudukan dan Keluarga Berencana Nasional (BKKBN) recorded was 264
million. This condition shows Indonesia's electricity consumption per capita are low. The lack
of electricity supply also makes the electrification ratio (the ratio that describes the ratio
between the number of people who have used the electricity with the total population in a
country) seems low, in 2018 Indonesia's electrification ratio was 98.30% (Indonesian CNN,
2019). In contrast to the nearest-neighbouring country which have reached 100% for their
electrification ratio, such as Singapore and Malaysia. The trigger that makes Indonesia's
development is slow, one of which is Indonesia's slow infrastructure development. According
to Kasali (2018) the steps or methods that can be taken by a company not to be disrupted are.
1. PT Adaro Energy Tbk. must be sensitive to catch-up the signals of disruption threat will
come. At present, the disruption signal does not only come from competitors, it can even
come from buyers, suppliers, substitution, and new entries. For example, PT
Pembangunan Perumahan (PP) Tbk. - engaged in construction, are sensitive enough to
catch the threat of disruption due to the development of 3D printer technology. If you pay
attention to 3D printer business like it might not interfere with the construction business.
But in fact, currently the construction business with 3D printer technology is developing.
2. PT Adaro Energy Tbk. must dare to disrupt the business itself, before other businesses
disrupt Adaro’s business. The first step that must be done is to understand Operational
Excellence (OpEx). The key element of the OpEx concept is an in-depth understanding of
the details of each chain from all the links in the PT Adaro Energy Tbk business process.
. Furthermore, PT Adaro Energy Tbk. ensure the utility level of each process. Actions that
can be taken by PT Adaro Energy Tbk. is to use PDCA (Plan, Do, Check, and Action).
Conduct ongoing reviews regularly, with the aim of achieving optimal operational
performance.
Self-Disruption: PT Adaro Energy Tbk.
The actual process of change begins the moment a person or a group of the business
industry hears the wake-up call and recognize that there is a reason to change-an opportunity
to be pursued or a threat to be removed. The wake-up call can be heard anywhere in the business
world. At times, there is grass-roots awareness of the need long before the industry take notice.
However, for a business-wide transformation to mobilize, the leaders of the organization
affected must ultimately hear the signal clearly enough to warrant attention and discussion, if
there is no action. In change-resistant, organization typically do not get or heed wake-up calls
until the signals become so painful and dangerous that they threaten the organization’s very
survival. But the story of PT Adaro Energy Tbk. is different, and do conscious transformation.
The discovery of Shale Gas and Shale Oil in the United States changed the world
geopolitical arrangement. One of the triggers of PT Adaro Energy Tbk. must be transformed
from the mining business into an energy business. PT Adaro Energy Tbk. is engaged in the
mining business and is being transformed into an energy business. Five Factors that disrupt the
mining business, especially coal business:
1. The development of fracking technology
2. The volume of demand has decreased
3. The prices offered for renewable energy are increasingly affordable
4. Energy-efficient building designs are rising
5. The world economics is getting weaker
In the early 2000s, there were events in the global energy industry. Where before 2000
there was an axiom that coal prices would always follow the price of crude oil, but at a lower
level - because oil is the main energy source, while coal is only a substitute. If the price of
world crude oil rises then the price of coal will also go up, and vice versa.

One Pillar to Three Pillars to Eight Pillars

In November 2001, world crude oil prices reached USD 27 per barrel. However, since
then world oil prices have continued to rise, although of course the increase was followed by
fluctuations. So that from 2003 to 2004 the increase in world oil prices continued to strengthen.
The trigger for the incident was the demand for crude oil from countries not affiliated with
OPEC which continued to increase, such as China, India and other Asian countries, even to the
United States. Consequently, in June 2008, the world crude oil price reached the highest rate,
which was USD 159 per barrel.
There are two factors that have the potential to disrupt the sustainability of world
economic growth. First, the policies of the Middle East countries as the main producers of oil
- including the geopolitical issues that occur. Second, reduced world crude oil reserves. Rystad
Energy4 - A Norwegian consultant, said that in 2016 the United States has 264 billion barrels
of crude oil reserves, above Russia with 256 billion barrels of reserves and Saudi Arabia which
is "only" 212 billion barrels of crude oil. If we look at the speed of production now, the world's
oil reserves will only last for 70 years. Whereas the number of motorized vehicles will double
in the next 30 years, due to increasing individual transportation.
This incident made the world begin to switch and reduce its dependence on oil. China
and India then began to divert oil-based power plants to coal-based, natural gas and even
nuclear power. As a result, coal demand continues to increase. Based on statistical data reported
by the February 22, 2018 edition of www.miningglobal.com, 41% of the power plants are coal
based. On the other hand, technological developments have made coal power plants more
environmentally friendly with Clean Coal Technology (CCT), Supercritical Technology (SC),
and Ultra-Supercritical Technology (USC). This condition actually benefits PT Adaro Energy
Tbk.
In this situation, PT Adaro Energy Tbk. realize that favorable conditions will not take
place continuously. Following Transformation Process by Anderson (2001a), PT Adaro Energy
Tbk. catch-up calls for transformation. Businesses run by PT Adaro Energy Tbk. depends on
non-renewable energy and global policy. Forcing PT Adaro Energy Tbk. to disrupt their self
before external elements disrupt their business. The self-disruption carried out by PT Adaro
Energy Tbk. is a business transformation, from one pillars to three pillars. Then, for the
sustainable transformation, PT Adaro Energy Tbk. transform from three pillar to eight pillar.
Their first transformation, start with pit to port to power business. As a mining company,
First pillar of PT Adaro Energy Tbk. is pit business. The second pillar is Service and Logistics
Business. The last pillar for the first transformation is Power Plant.
The second transformation, the first pillar remains the pit business. However, a business
breakdown is carried out for the second pillar, making the logistics business as the second pillar
and service business as the third pillar. So that the power plant, which was originally as the
third pillar, is currently as the fourth pillar. Then, the four new pillars are Adaro Land as the

4 Retrieved July sixth, 2019, from https://internasional.kompas.com/

fifth pillar, Adaro Water as sixth pillar tea, Adaro Capital as the seventh pillar, and Adaro
Foundation as the eighth pillar.
In the mining business, in the first pillar, all of Adaro Energy Group's mining assets
spread in South Kalimantan, East Kalimantan, Central Kalimantan and South Sumatra are
consolidated in a holding division, PT Alam Tri Abadi. Each company holds an agreement -
Perjanjian Karya Pengusahaan Pertambangan Batu Bara (PKP2B). In 2016, PT Adaro Energy
Tbk produced 52.6 million tons coal or experienced a growth of 2% compared to the previous
year. In addition, Adaro also produces metallurgical coal (Metcoal). Throughout 2017, Adaro
managed to produce 0.90 million metric tons (mt) of coking coal and high calorie thermal coal.
Not only in Indonesia, Adaro managed to distribute this type of coal to consumers in Europe,
Japan and China.
The second pillar is companies incorporated in the logistics and services division - 11
companies. In business services or mining services, there are 4 companies, including PT Adaro
Mining Technology (research and development), PT Adaro Jasabara Indonesia (coal
exploration), PT Jasapower Indonesia (crushing and transporting landfill operators) and PT
Saptaindra Sejati or SIS ( mining contractor).
The third pillar is companies incorporated with power and energy division which were
the important core for Adaro which could guarantee the stable and long-term investment
because of coal processing that could be converted into an electrical power and energy. Adaro
Power supervise 3 companies that uses coal energy as a fuel, there are PT Makmur Sejahtera
Wisesa (MSW), PT Bhimasena Power Indonesia (BPI), and PT Tanjung Power Indonesia
(TPI).
After several years, Adaro continues itself for being self disrupted by expanding the
business pillar from 3 into 8 pillars. The past 3 pillars were the same, but in the present those
3 pillars breakdowned into 4 pillars which the logistic and service are separated into own pillars
(1 = mining, 2 = logistics, 3 = service, 4 = energy and power). The 5th until 8th pillars explained
as below :
Fifth pillar is Adaro Land which concern about asset management which focus on land
management. Adaro recruit new qualified employees to fill the head department and
management information system for controlling the land which belong to Adaro that optimal
in utilization. This land utilization business managed by PT Adaro Persada Mandiri.
The CEO has ordered to utilize the mining land that unused until 35000 hectare in area.
For example at BSD which the area of land until 6500 hectare, or in Cikarang which until 5600
in area. The second task is order PT Adaro Persada Mandiri to build new business in that area.
For example was in Lasung Batu Village which built Regional Integrated and Support Area in
area of 150 hectare.
Sixth pillar of business was Adaro Water, which concern on cultivation of waste water
into a ready to use water named PT Adaro Tirta Mandiri. This core business start from Adaro’s
experience for supplying clean water in mining area near South Kalimantan. The Cultivate
water not only used for Internal interest of Adaro, but also transported into society through pipe
in the mining location. This experience that encourage Adaro Water to build a project of waste
water cultivation cooperate with PT Drupadi Tirta Gresik and Water Company (PDAM) in East
Java, also waste water cultivation project in Banjarbaru, East Kalimantan with cooperation of
PT Drupadi Tirta Intan and PDAM Intan Banjar at Banjarbaru.
Seventh Pillar was Adaro Capital which is managed by PT Adaro Strategic Capital which
invest their revenue for long-term business.
Last eight pillar was Adaro Foundation which is managed by Adaro Bangun Negeri
Foundation that concern on local economy, education, health, social and culture. Education
program consists of giving scholarship through poverty, mobile library, and reconstruction of
school building.
One of the best CSR that focused on education was create fun-learning especially in
science to empowering society for better future. The result was 800 local students participate
in science olympiads in Kuark, and also student from Vocational School of Pudak, Tanjung,
South Kalimantan produced electricity from rubber made by sand and passed in National
Science Olympiad in 2015.

Eight-Step Process of Leading Change

PT Adaro Energy Tbk's Sense of Urgency started between 2000 to 2015, Adaro's
prediction is exactly where world’s coal prices fell. The cause of the decline in coal prices is
external factors. A large amount of oil and gas reserves are found, which can replace the
position of bricks. The findings of these resources were able to meet the needs for 100 years.
That way the supply of oil and does not increase. As a result, the supply increases, the price
drops because supply is more than demand. Automatic coal power plant must be change to gas
power plant, because it is affordable. Transition demand, coal demand fell, prices dropped. In
that period coal companies collapsed, including small companies in Indonesia - approximately
140 coal companies went bankrupt. Another factors that cause coal companies bankrupt is the
cost production of shale gas is cheaper than the coal production cost, so many industry use the
gas energy as they resources. And then the pressure from environmental issues that push the
reduction of coal energy used to reduce the environmental impact. This factors was predicted
before by Adaro so they can anticipate the crisis with their transformation initiatives.

Establishing a sense of urgency.

Despite in 2010 coal’s price was increased, in 2011-2016 the coal price was going down
from around USD 120 to around USD 50 (data in trading economics). The declining in world
coal prices, almost all large and small mines have been affected. This found by hundreds of
mining company has gone bankrupt, and also has a negative impact on the business of selling
and renting heavy equipment as a supporter of the coal industry. In 2015, there were 125 coal
mining companies closed, only in the East Kalimantan region. This situation force Adaro to
make another transformation to reduce the impact from coal’s price because the coal industry's
condition was not so encouraging. CEO Adaro Energy argue that “to sustain in business
environment, Adaro can not stop the expansion.” Boy Tohir explained that this expansion is
intended to balancing their income not only from coal mining but also from another revenue
stream. He told that Adaro revenue was targeted from 70:30 to 50:50, so they are not depend
only on coal mining business but also from another new revenue generators. In 2014, Adaro
Energy's gross profit fell by more than 14,1% compared to 2011. That situation also affect their
production capacity, in 2012 Adaro’s coal production is 20,75% compared to domestic coal
production but in 2013, Adaro’s production only 18,7% compared to domestic coal production.
However, domestic coal production in 2013 was increased compared to domestic coal
production in 2012. PT. Bumi Resources tbk. Has their coal production in 2012 around 30%
compared to domestic production, in 2013 their production also decreased to 28,6% compared
to domestic production, but Bumi Resources can keep their sales decreased only -0,84% from
2012 to 2013. from the other hand, Adaro was decreased in their sales -0,11% in 20135.
Five factors of disruption in the coal company that make awareness of Adaro Company Commented [1]: Self Disruption page 21 - 24

to change has risen, i.a the development of fracking technology, the volume of demand has
decreased, the prices offered for renewable energy are increasingly affordable, energy-efficient
building designs are rising, and the world economy is getting weaker and then the pressure
from environmental issues that push the reduction of coal energy used to reduce the
environmental impact.

5 Retrieved July sixth, 2019, from https://www.ceicdata.com/

 If in the past Adaro had focused only in coal company, now they call themselves as an
energy company. Not just coal, but energy. Then, if Adaro's activities were more as a mining
company, then it has now become wider, pit to port to power. Previously Adaro only had one
business pillar, focused on mining. Now Adaro is the owner of three business pillars: mining,
service-logistics, and energy.
In its development, Adaro continued to evaluate this transformation while following its
macro developments. As a result, in the following period, Adaro decided to change while
expanding its business pillars, even though the three pillar concept still showed good growth.
So, Adaro is committed to self-disruption for the second time. They add to the pillars of their
business from three to eight. The urgency of non-renewable energy sources will exhaust soon
that make the Adaro’s decision to transform from coal and mining company into eight pillars
energy company. To be able to continue and survive in the business world, Adaro must expand,
since almost 70% of Adaro Group's revenue comes from mining business. In the transformation
phase Adaro wants business revenue to be balanced between the eight business pillars that have
been formed.
The last factor of business urgency from the internal corporation. Based on the financial
report of Adaro Energy from 2012 until 2014, are US$1,428 millions, US$1,043 millions, US$
744 millions, which means the gross profit of PT Adaro Energy Tbk has decreased.

Creating the guiding coalition.

The first step in putting together the kind of team that can direct a change effort is to
find the right membership. Four key characteristics seem to be essential to effective guiding
coalitions. The position power as the key players on board, must have the various points of
view - expertise. The organization of business have enough people with good reputations in the
firm - credibility. The last one is leadership, the organization proven leaders to be able to drive
the change process.
When creating the changes, the leader need group of people to help them make the
changes successfully in implementation. PT. Adaro Energy Tbk have a coalition to help the
company changes, i.a. Edwin Soeryadjaya, Sandiaga Uno, Teddy P. Rachmat, Benny Subianto
- as commissioner and Boy Thohir as CEO. They are the initiators to transform the business
from mining company to the energy company.

Developing a vision and strategy

 To clear the goal of the changes, the company needs to develop and state the new vision
for the company. The vision for PT. Adaro Energy Tbk, becomes “To be a leading Indonesian
mining and energy company”. This vision is manifestation from company changes to
becomes energy company. To achieve these vision, certainly the coalition need to develop
some strategies, so the vision can be achieved.
In a change process, a good vision serves three important purposes. First, by clarifying
the general direction for change, it simplifies the detail decisions. Second, it motivates people
to take action in the right direction, even if the initial steps are personally painful. Third, it
helps coordinate the actions of different people, in a remarkably fast and efficient way. The
transformation vision of PT Adaro Energy Tbk. is Operational Excellence (OpEx), to help
direct the change effort and developing strategies.
Starting with the first pillar - mining business, Adaro will do the development of change,
to backward business or forward business. In order to achieve efficiency and effectiveness of
the process, Adaro opens a business pillar for logistics and services, which is Adaro developed
the backward and forward business. Furthermore, Adaro also considers business opportunities
by looking at the possibility of fulfilling Indonesia's electrification. Then Adaro formed a new
business pillar, Adaro Power. Only by analyzing the three pillars of the first transformation,
Adaro continues to improve OpEx by developing its business line.
Afterwards, from three pillars to eight pillars, Adaro Land utilizes its former mine, to
minimize environmental issues, due to ex-mining. Furthermore, Adaro power until 2016 is still
using a coal-fired power plant, so as to produce water waste. This adds to the environmental
issues that arise as a result of the business that Adaro operates. So that Adaro installed Waste
Water Treatment Technology, which from waste water is processed into potable water. Starting
from waste water treatment, finally Adaro Water was created. This set of conditions also
applies to Adaro Capital and Adaro Foundation, in order to create OpEx and make Adaro not
dependent on third parties.
The strategies they developed are shown below :
1. Process Efficiency - The goal of this strategy are cost efficiency on process, where PT.
Adaro Energy Tbk, reduce unnecessary cost on operational and use the necessary
process efficiently.
2. Attain OpEx - Operational Excellence (OpEx) is a concept commonly applied in the
manufacturing industry. The concept is implemented so that PT Adaro Energy Tbk. has
operational advantages in every business process when compared to other companies.
The Operational Excellence Basic Principle is the instinct to continue to look for
 improvements. More or less, similar to the principle of continuous improvement or
Kaizen - for sustaining innovation.
3. Acquisition the third party - PT. Adaro Energy Tbk, have a plan to do vertical
integration, where they take controls the process from upstream to downstream.

Communicating the changes

PT Adaro Energy Tbk. do the effective communication to all of the people in the
organization with leadership by example - behavior from important people that is inconsistent
with the vision overwhelms other firms communication. The explanation of seeming
inconsistencies - unaddressed inconsistencies undermine the credibility of all communication.
To get the powerful communication, PT Adaro Energy Tbk. apply two-way communication -
give and take.
To implement changes successfully, the leaders and the coalition must be able to
communicate the changes without disturbing the former vision and mission that states for all
stakeholders, especially that have a direct connection on company performances. PT. Adaro
Energy Tbk CEO communicate the change by disruptive action start from taking over Adaro’s
share from New Hope, Australia until the implementation of disruptive mindset to every
employee at Adaro Energy. This only can be done by disruptive leader who could adapt and
grow in uncertainty, also guide every person to resolve chaos that happens in the company.

Empowering Employees for Broad-Based action

Adaro implement the new concept of business such as vertical integration and
Operational Excellence (OpEx) concept in order to create new strategies from both the
production and supply chain process in estimating the coal cost.6
This OpEx mindset includes end to end problems, not to blame people but the process,
there is no best process, but better process. Every problem caused both from human error,
miscommunication, and technical accident never be hidden, because the problem is an
opportunity for them to learn and evaluate the better change. This framework implemented to
all employees which work in every core of business in Adaro Energy and requires detailed
understanding of each manufacturing business process chain so that the company can ensure
that all the best performing links.

6 http://koran-sindo.com/page/news/2018-07-01/0/7/Berani_Mendisrupsi_Diri_Sendiri
 A simple step taken by Adaro is reducing spending on business travel facilities. Initially,
Adaro's line of managers and executives always used business classes to conduct business trips.
However, the disruption action was carried out by the CEO of Adaro by using economic class
for business travel. This small step actually requires all levels of employees, both from holding
and subsidiary companies, to start a cost efficiency movement. Then, the action makes the habit
of thinking effective and efficient for all business activities and decisions.

Generating Short-Term Wins

Adaro Land. Recruit a number of new employees to handle assets in the form of managed
land. In addition, Adaro also recruited employees who handled management information
systems (MIS) for Adaro's lands. The land use business is managed by PT Adaro Persada
Mandiri. The company is responsible for preparing a plan to utilize the potential mining area.
Where the ex-mine area is 35,000 hectares. Much larger than the area of the city of Bumi
Serpong Damai satellit in Serpong which only reaches 6,500 hectares. In addition, PT Adaro
Persada Mandiri is responsible for cultivating new businesses.

Adaro Water. This business includes processing raw water into consumable water. This
business is managed through PT Adaro Tirta Mandiri. The water is not only used for internal
interests of Adaro Indonesia. Excess water production, then piped to the community around the
mine area. According to Adaro's records, there are 5,521 people spread across 13 villages in
Tabalong Regency. There were 1,363 family heads in 9 villages in Balangan District who took
advantage of Adaro's clean water.

Consolidating Gains and Producing More Change

Adaro Land. The business of utilizing ex-mining land is managed by PT Adaro Persada
Mandiri. Prepare a plan to utilize 35,000 hectares of unused mining land. Furthermore, the
land will become an area that has areas for settlement, tourism, education, agriculture, and
health. In order to form a new satellite city.
Adaro Water. Experience in treating wastewater and supplying clean water as a platform
for the sixth pillar, in 2016 Adaro Water decided to work on two clean water projects under the
build operate and transfer (BOT) scheme, two of these projects are processing clean water in
Gresik with a capacity of 400 liters per second managed by PT Drupadi Tirta Gresik with
PDAM East Java, as well as a clean water treatment project in Banjarbaru, East Kalimantan
with a capacity of 500 liters per second in collaboration with PDAM Banjar in Banjarbaru.
Anchoring New Approaches in The Culture
According to the CEO (Garibaldi Thohir), he said that the way of disrupting themselves
is by setting Opex as a culture to continually evaluate and change ourselves when unpredictable
changes occur. So when the new problems come, they get used to solve every problem in there
even the conditions are really difficult. Garibaldi also said that the vision of the business not
only for creating profit, but also give contribution to our country. 7
The company was forced to operate with new business models and leadership so that the
level of efficiency was high. They are forced to apply the opex concept until it becomes the
habit and culture of the . As a result, Adaro has become one of the lowest cost coal producers
in the world.

7 Self Disruption by Rhenald Kasali page 31 - 33

BAB VI CONCLUSION AND RECOMMENDATION
In the process of transforming PT Adaro Energy Tbk. the company has done well. This
was supported by Adaro's awareness to change before being disrupted by externals. The
changes were made through the development of one pillar for three pillars, and three pillars
for eight pillars. The addition of four business pillars is Adaro Land, Adaro Water, Adaro
Capital, and Adaro Foundation. That way the company can survive in a crisis. The
recommendation that can be given for the progress of research is by comparing the
transformation process between PT Adaro Energy Tbk. with competitors, such as PT United
Tractors Tbk or Bumi Resources.
BAB VII SELF-REFLECTION

Arvi Nugraha
My reflection in this life transformation began in 2015, when i was in my bachelor degree i
realized that i will be graduated from my college and be a fresh graduate, but i think i don’t
have enough preparation for this and for my future career. I need to develop my skill,
knowledge and experiences. Then i saw a video from Handry Satriago, CEO of General
Electrics Indonesia. He told that this time many businesses are facing the VUCA (Volatile,
Unpredictable, Complex and Ambigue) so the world is changing, and we need the candidate
that are suitable for this situation. From that point, i decided to transform my life for my better
future to be suitable for the candidate that can lead the big company in Indonesia.

Dewi Annisa Yakin

The transformation course requires me to learn a transformation process in a business, whether

in a private business, public business, non-governmental organization or non-profit
organization. The most important part is that every individual must be sensitive to be aware of
the possibility of interference and opportunities in the future. As individuals, they must
continue to find out and sharpen their sensitivity to change. Thus, individuals can capture the
signals of change, and act immediately to make changes.

Lesson Learned (Fransiskus Allan Gunawan)

After learning this transformation method based on Kotter’s 8 change steps (Leading Change
book by John P. Kotter) and analyze the change steps which Adaro uses to transform the
company, I have learned that making a change needs to be done from small things gradually
starting from ourselves as leaders both for ourselves, family, business, and companies with the
aim that the habits we form are in line with our desire to change for the better. with our habits
that have been formed and are in harmony with the changes we want, then indirectly changes
will occur to the people around us. So that changes in yourself will also automatically instill a
new culture in ourselves and also the people around us who closely influence what we do.
In my life, change occurred when I decided to take part in a series of Young on Top (YOT)
events and join the millennial community of Young on Top. YOT CEO named Billy Boen
always holds small and large seminars and trainings to train millennial soft skills by inviting
renowned speakers and experience in their fields such as Andy F. Noya, Najwa Shihab, Chelsea
Islan, and Basuki Tjahja Purnama.
In addition, Billy Boen also made the work in the form of a motivational book one of which is
the book "Y". The contents of this book explain that millennials realize what their purpose is
to live and realize that everyone needs to process and change because every year, the situation
around us also changes in any way. Therefore, transformation in terms of attitude, soft skills,
and self-resilience is needed to face the challenges of changing times that we cannot predict
the changes.
The second is a book from the famous Christian Pastor Rick Warren, titled “Purpose of Driven
Life”. This book tells me about how to stay transformed in the unpredicted era based on the
Bible. The purpose of this book is for me as a Christian to realize that the aimless
transformation in God will not last long and lead to my ambiguity in achieving the goals of
transformation. One of the best Rick Warren’s Quotes that keep me to transform more better
than in the past even my life always in happy or sad moments was :
“Transformation is a process, and as life happens, there are tons of ups and downs. It’s a
journey of discovery and there are moments on mountaintops and moments in deep valley of
despair.”
 (a). (b )
Figure (a) : “Y” Book by Billy Boen
(b): Purpose of Driven Life by Rick Warren

Nagata Wiguna
The most Crucial factor that drives people to changes are their internal forces or factors.
Where the external factors gives a strong effect on ourselves, without a determined will or
strong internal forces, it is hard to change ourselves. For myself, what is considered as keypoint
on changes is how strong the feeling or will to changes. Even the society or environment gives
push to changes, if we are reluctant to change, then the change is not going to happen. For
myself, internal factors itself actually could not stand independently as a single factor to droves
the changes. We still need the drove from external factors, but for me not as the main sources
but as a trigger to stimulate the internal factors. For me, the forces from external factors, like
economic and social, driven the internal forces in myself to deal with it. So in the end, both of
forces give their own proportion on changes, whether some considered external drives them
the most, for myself it is internal forces that decided the flow of the changes. For closing, here’s
a quote “If you want to change the world, start off by making your bed”. - William H. McRaven.
Raihan Alisha Nabila
My Transformational change started after I read the biography of Chairul Tanjung as the
owner of CT Corp. It really inspired me to go out from my comfort zone, because change will
only start from myself. Before having an empire of business, he started selling some food on
the bus and doing the business of garment industry. After entering the life as a university
student, he started to sell some tools for the dentistry students. Not only doing that, he also
created the business of doing the photocopy for his colleagues. Before entering the final year
of university, he managed several businesses until at one point he was appointed to develop a
bank that in the future turned into Bank Mega, one of the very first milestone was, Bank
Mega did not disappear after the 1998 incident. He also started developing his business as a
media mogul. Starting from Trans TV, he transformed it to be available for people in the
segmentation of modern or middle income to higher income audiences. From Chairul
Tanjung Story I learnt that the urgency to change was because of his unfortunate condition
and it was kind of the same with me. Coalition was done within myself, family and friends
around me who always support me to do anything for the sake of my future. We should make
a clear vision of what we want to achieve in the next one year, five years, ten years and
fifteen years. Clear goals with comprehensive strategies of how we are able to check the to-
do list will lead us to neglect some barriers that might discourage us to change to be better
especially in business or life. Developing our visions to be flexible should be empowered by
the short-term wins we gain along the way. Seeing some short-term wins encourage us to do
more because we are on the track to success. One other thing that should be noted is we have
to have strong leadership within ourselves. If we do not believe in ourselves, who will? Hard
works will be paid off in the future if we are consistent and persistent. We also should
remember that we are not in this alone, we are not successful alone, there must be supporting
people in our lives that have some contributions in our transformational change. He inspired
me to start my own snacks business from small segmentation and currently I am sure that I
am going to make a larger market for my own snack brand.

Bab ini berisi refleksi masing-masing anggota kelompok mengenai faktor pemicu perubahan
yang paling berpengaruh untuk mengubah dirinya dan alasannya. Pada bab ini, setiap anggota
kelompok wajib memberikan satu gambar/foto yang mewakili pemikirannya tersebut.
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