Chapter 1

The Nature of Change

By Suhel Khan

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The chapter:
 Discusses a number of frameworks for categorising

change.
 Explains why, in order to be effective, it is

necessary to understand the differences between

various types of change.

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To:
 Emphasise the complex nature of organisational
change;
 Describe and discuss the multi-dimensional nature
of organisational change;
 Analyse change situations in order to choose
appropriate methods of managing and
implementing change;
 Recognise that there are limitations to the ‘common-
sense’ approach to managing change that assumes
that change can be planned as a logical. Step by
step, sequence of activities.
 This because of cultural, political and leadership
dynamics.

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Strategy is:

the direction and scope of an organisation over the

long term which achieves advantage for the
organisation through its configuration of
resources within a changing environment to meet
the needs of markets and to fulfill stakeholder
expectations.

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 Ansoff & McDonnel (1990) (recap)
 Level 1. Predictable
 Level 2. Forecastable by extrapolation
 Level 3. Predictable threats & opportunities
 Level 4. Partially predictable opportunities
 Level 5. Unpredictable surprises
 Strebel (1996)
 Weak forces
 Moderate forces
 Strong forces
 Stacey (1996) (recap)
 Close to certainty
 Far from certainty

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 Grundy (1993)
 Smooth incremental
 Bumpy incremental
 Discontinuous
 Tushman et al (1986)
 Converging (fine-tuning)
 Converging (incremental)
 Discontinuous or frame-breaking
 Dunphy & Stace (1993)
 Fine tuning
 Incremental adjustment
 Modular transformation
 Corporate transformation

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 Smooth incremental – evolves slowly, in a
systematic and predictable way.
 Bumpy incremental – periods of relative quiet
interrupted by sudden bursts in the rate of
change (e.g. re-organisations).
 Discontinuous – ‘divergent breakpoint’, changes
involving crisis, breakthrough, response to high
turbulence.

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 Discontinuous
Rate
of Bumpy incremental
change

Smooth incremental

Time

Source: Grundy, T. (1993) Implementing Strategic Change, Kogan Page, p. 25

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 Converging (fine-tuning) - trying to do better
what is already being done well.
 Converging (incremental adaptation) - small
changes in response to small shifts in the
environment.
 Discontinuous or frame-breaking – major, rapid
(spread over 18-24 months) and revolutionary
changes in strategy, structure, people &
processes in order to meet radically new or
different circumstances. Also termed ‘upheaval.’
 Most organisations follow a pattern of
convergence/upheaval cycles. This pattern can apply
at all levels (department, unit, corporation).

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 Industry discontinuities, e.g. sharp changes in
the legal, political or technological conditions
which shift the basis of competition
 Product life-cycle shifts, i.e. strategic change to
fit the next stage of the cycle
 Internal dynamics, e.g. new management team,
with different strategy preferences

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 Change of mission or core
values
 Power shifts, resource re-
allocation
 Total reorganization
 New workflow procedures
 New CEO coming from
outside

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1. 1. Fine Tuning.
 At departmental level.
 Making re-alignments to ensure that
there is a match between strategy,
structure, people and processes.
2. 2. Incremental Adjustment.
 Bit by bit changes to match the changing
environment.
 Minor modifications to strategies or
structures…..

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 3. Modular Transformation.
 Major realignment of one or more departments or
divisions.
 Downsizing, re-engineering.
 4. Corporate Transformation
(frame-breaking effecting the whole
organisation).
 As described earlier as discontinuous or frame-
breaking change.
A contemporary research study found that most
organisations have been undergoing types 3 &
4 change.

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 Environmental conditions and types of change
ENVIRONMENTAL FORCES FOR TYPES OF CHANGE
CHANGE

Ansoff and Strebel Stacey Tushman et al. Dunphy & Grundy Stacey
McDonnell (1990) (1996) (1996) (1988) Stace (1993) (1993) (1996)

Predictable Weak Close to Converging Fine-tuning Smooth Closed

certainty (fine-tuning) incremental
Forecastable by
extrapolation
Moderate Close to Converging Incremental Contained
certainty (incremental) adjustment
Predictable threats Bumpy
and opportunities incremental

Partially predictable Modular

opportunities Strong Discontinuous transformation Discontinuous Open-ended
Far from or frame-
certainty breaking Corporate
Unpredictable transformation
surprises

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 Fine tuning and incremental change
are usually also seen as emergent,
‘unfolding as it happens’.
 The organisation, an open system,
engages ‘naturally’ in emergent
change as it tries to maintain
equilibrium with its changing
environment.

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 However, organizations that rely
only on making emergent change
may ignore ‘warning signs’ of the
need for more radical forms of
change, and the organisation will
suffer ‘strategic drift’, i.e. the strategy
and perceptions of the organisation
will become less and less in tune with
the environment.

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 Some theorists argue that PLANNED
CHANGE that is also frame-breaking
may then be necessary as a drastic
remedy to bring the organization
back to health.

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 Quinn does not agree that change is
either emergent or planned. Quinn
believes that although managers
may have an idea of the destination,
they do not really plan change in
‘big chunks’.

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 Quinn says that managers:
 Are flexible about how to get to the destination.
 Arrive at strategic change through negotiation with
stakeholders.
 Allow strategic change to evolve incrementally, although
this is not piece-meal or haphazard because it is based on
agreed purposes and involves constant critical re-
assessment.
 The planned change process involves opportunist
learning as it goes along.
 Logical instrumentalism is both emergent and planned.

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Some theorists think that change might
be neither wholly emergent nor wholly
planned.
Instead, change may reflect the
organisation’s LIFE-CYCLE.
Greiner identifies 4 stages or 5 phases
through which organisations go as they
grow and develop.

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Eachof Greiner’s stages contains a crisis
period.
Stage 1 is entrepreneurial - survival
oriented.
Stage 2 is collective - based on division of
labour.
Stage 3 is formalised- based on
bureaucracy.
Stage 4 is elaborated - based on problem
oriented teams.

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 Stages of organisational growth
Phase 1 Phase 2 Pahse 3 Phase 4 Phase 5
Entrepreneurial Direction Delegation Co-ordination Collaboration

Structure *Informal *Functional *Decentralized *Staff functions *Matrix-type

*Centralized *Bottom up *SBUs structure
*Hierarchical *Decentralized
*Top down *Units merged
into product
groups
Systems *Immediate response *Standards *Profit centres *Formal planning *Simplified and
to customer *Cost centres *Bonuses procedures integrated
feedback *Budget *Management by *Investment information systems
*Salary exception centres
systems *Tight
expenditure
controls
Styles/ *Individualistic *Strong *Full delegation *Watchdog *Team-oriented
people *Creative directive and autonomy *Interpersonal skills
*Entrepreneurial at a premium
*Ownership *Innovative
*Educational bias
Strengths *Fun *Efficient *High management *More efficient *Greater spontaneity
*Market response motivation allocation of *Flexible and
corporate and behaviourial
local resources approach
Crisis Point *Crisis of leadership *Crisis of *Crisis of control *Crisis of red tape ?
autonomy

Weaknesses *Founder often *Unsujited to *Top managers *Bureaucratic *psychological

empermentally diversity lose control as divisions between saturation
unsuited to *Cumbersome freeom breeds line/ staff,
managing *Hierarchical parochial attitudes headquarters/field
*Boss overload *Doesn’t grow , etc
people
Source: Clarke, L. (1994) The Essence of Change, Prentice Hall, p.12.

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 Greiner’s model is potentially useful in identifying
what stage an organization is at, and therefore
what type of change situation it is in and will be
in.
 The model may therefore help an organisation to
plan change and predict the next crisis point.

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 Diagnosis of change situations is not an exact
science.
 Various diagnostic methods can be used in
combination, e.g. SWOT, PETS, multi-cause
diagrams.
 Some more methods are now discussed.

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 Strebel has suggested a model that examines the
industry within which the organisation is located,
i.e. the organisation’s competitive environment.
 Two key concepts are:
 the ‘evolutionary cycle of competitive behaviour.’
 ‘breakpoints’, when companies must change their
strategies in response to changes in competitors’
behaviour.

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The cycle involves two main phases.
1. The DIVERGENT PHASE, based on
innovation/variety: beginning when
one organisation discovers a new
business opportunity, the industry as
a whole strives to create differentiated
products and services that add
customer value.

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2. Eventually a breakpoint occurs, as the
emphasis shifts to the CONVERGENT
PHASE, based on efficiency/survival,
which begins with imitation of
competitors’ best features, and then
leads to an emphasis on reducing
costs. Competitors converge on total
quality management, continual
improvement & re-engineering to cut
costs and maintain market share. Only
the fittest survive.
3. Then back to 1, as further savings are
marginal.
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 Progressively, with cycle after cycle, industries
deliver both more customer value through
various generations of differentiation (e.g.
mobile phone technology) each followed by
more cost reduction.
 Industries vary according to the relative emphasis on
divergent phases versus convergent phases

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 High
Customer
Value
new
generation
of products
cost reduction phase

Concern for
 
Innovation &
customer value differentiation
phase

cost reduction phase

   = breakpoints
pioneering/
Low novelty
Customer phase

Value
High Delivery of efficiency & cost savings Low
Costs Costs
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 Spotting the breakpoints.
 Formal Methods include:
 Environmental scanning
 Benchmarking
 Monitoring, data collection and data interpretation
 Detecting when a new divergent phase is about to begin
is more difficult because the new wave of innovation
cannot yet be seen.
 Informal methods include:
 Open-minded attitudes
 Cooperation across the organisation
 Culture supporting innovation and change

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Difficulties. Messes.
 These are characterised  These are characterised by
by ‘hard complexity’. soft complexity.
 There are lots of factors
 People’s description of
events is ambiguous.
and variables.
 There are multiple
 But they can be interpretations and
meaningfully quantified. reconstructions of what the
 Optimal solutions can be problem is.
developed.  Stakeholder groups will see
things according to their
stake in the problem.
 Thus there are many
different ideas about what
kind of solutions there
might be.

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 Difficult versus messy problems
DIFFICULTIES - Smaller scale, well-defined, ‘hard complexity’, multiple variables, cerebral
know what limited priorities
would be a timescale clear
solution

know what limited

the problem is
BOUNDED applications

know what limited can be treated

needs to be number of as a separate
known people involved matter

_______________________________________________________________________________________________________________________________
_
MESSY PROBLEMS - bigger, poorly defined, ‘soft complexity’, multiple perspectives, emotional
longer uncertain
no solutions timescale priorities called
into question
uncertain
but greater
know what UNBOUNDED implications;
the problem is worrying
can’t be
don’t know what more people disentangled
needs to be known involved from its context

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 Diagnosing necessary change and managing
subsequent change is usually not just a matter of
objective calculation.
 Soft problems present various emotional and social
dimensions which demand a broad range of
managerial change competencies and approaches.

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