Global affairs are often unstable. This month, Japanese stock market falters again, capping its worst single-week performance since the global financial crisis in 2008. Japan is not alone in its underperforming markets. Yet, globalization has connected countries through various elements. Financial markets are not an exception. This article explores issues of change in a global environment and discusses the merits of change agents in today’s organizations.
Change comes in many ways for organizations. In Harvard Business Review, author Rod Ashkensas put a framework on how to deal with change: “It’s easy to beat ourselves up over failures in change management and the various studies that show we’re not getting better at it. But we really do know how to execute discrete changes.” The basic type of change in organizations can be categorized as incremental (gradual) and disruptive (radical). Incremental change can be defined as “a small adjustment made toward an end result.” Managers are either aware of the change or have enough notice so that they can react in a controlled predictable fashion.
With incremental changes, organizations can make slow, systematic improvements. If you think about Whirlpool and its appliances, an individual would get a good idea on how organizations reply to incremental changes. Customers, for their appliances, wanted them to reflect societal changes. Given this reality, appliances like refrigerators went from the basic colors of white and black to more unique color combinations. Electronic technology was included to make Smart appliances. Companies now have ample time to react to consumer demand. Disruptive change does not give organizations such a generous reaction period.
Disruptive change is what causes great companies to fail and well respected CEOs to get fired. Organizations cannot afford to misunderstand this type of change. Unlike incremental change which may have some predictability, disruptive change can be classified as unpredictable, irrational, and unstable. All of these adjectives mean higher risks for organizations. Disruptive change speaks the changing nature of our society. Young adults feel comfortable with their technology. We live in an instant society that wants everything now. Disruptive change can provide a market advantage.
Harvard professor Clayton Christensen, author of The Innovator’s Dilemma, coined a term disruptive innovation to explain how an innovation transforms an existing market or sector by introducing simple, convenient, accessible, and affordable to customers.[3] In fact, the produce and service will be quite inferior to the status quo produce or service. A disruptive innovation is an innovation that creates a new market and value network and eventually disrupts an existing market and value network, displacing established market leaders and alliances.
One of the most disruptive innovations to modern education has been distance learning. Traditional universities have attempted to ignore the model with only modest undertaking. The University of Phoenix, a not-for-profit institution of higher learning with over 100,000 students and 112 worldwide campuses, has slowly overtaken the educational market. While the university has come under fire for its business practices and have lost students, no one is saying that the innovative strategy of distance learning and treating students like customers is a faulty model.
Globalization with all of its wonders poses a threat due to disruptive change. Organizations need leaders who are change agents during this time in history not just managers. Dr. Christenson notes the failures of great companies like Sears to unanticipated change: “As we shall see, the list of leading companies that failed when confronted with disruptive changes in technology and market structure is a long one…One theme common to all of these failures, however, is that the decisions that led to failure were made when the leaders in questions were widely regarded as among the best companies in the world.”
What is a change agent? A change agent is someone who ‘helps an organization transform itself by focusing on such matters as organizational effectiveness, improvement, and development. A change agent has a high internal locus of change. That reality means that this person is driven from the inside out. Under adversity, that individual has enough internal drive to overcome external forces. Os Hillman, author of Change Agent: Engaging Your Passion To Be The One Who Makes A Difference, argues that change agents are special people.
In order to shift culture, Hillman notes that an individual needs to be special: “It takes less than 3-5 percent of those operating at the tops of a cultural mountain to actual shift the values represented on that mountain.” Many organizations are stuck in a rut and need a change agent to carry them out. In most organizations, the significant changes do not happen from the bottom-up. The following are characteristics of an effective change agent in a global environment: (1) Courageous, (2) Morally grounded, (3) Global mindset, (4) Visionary, (5) Strategic, (6) Adaptable, (7) Relational, and (8) Committed.
Therefore, the leaders in power need to be change agents in their organizations. Unfortunately, many executives are unwilling to invest their time in developing and promoting change agents in their organizations due to the fears concerning their shareholders and financial pundits. With change continuing to be more rapid and unpredictable, today’s organizations need to equip themselves effectively. They must embrace the recruiting and development of change agents within their organizations.
How has disruptive change impacted your industry and organization? Please state how effective organizations should handle change using your professional and personal experiences.
© 2016 by Daryl D. Green
References:
Change Agent: Engaging Your Passion To Be The One Who Makes A Difference by Os Hillman,
“Nikkei Plummets in Japan on Yen Strength” by Jonathan Soble
The Innovator’s Dilemma by Clayton Christensen
“We Still Don’t Know the Difference Between Change and Transformation” by Rod Ashkensas
Nu Leadership Revolution Blog 
Within the global 3rd Party Logistics Industry disruptive change is not only present, it’s a huge contributing factor that drives business in general. Through larger databases, new forms of transportation, advanced technology, and more improved ways to think about logistics on a global scale, things are always changing. In the logistics world you really only have two options, adapt or fail. The industry itself doesn’t just affect how we operate though, when working on a global shipping scale external forces drive everything we do. From foreign governments and policies, to differing customs regulations, and new competitors entering the market with a whole new set of tools changing is just part of everyday culture. I like what Hillman stated about culture, according to Hillman “culture is defined by a relatively small number of change agents who operate at the tops of these mountains. It takes less than 3-5 percent of those operating at the tops of a cultural mountain to actually shift the values represented on the mountain” (p.8). The point is its all about your culture. If you want to be agent of change for an industry, then do so. It doesn’t take an army, it only takes a few with the willingness to see change through.
Hillman, OS. (2011). Change Agent. Lake Mary, FL: Charisma House.
Hi Chris,
Thanks for your contribution on this topic! Culture does play a part in the disruptive change process. Let’s continue to discuss.
Dr. Green
In my line of work, federal rules and regulations are constantly changing. It’s imperative to the success of my company that we educate ourselves on these new rules and regulations in order to stay compliant. Recently my company had to adapt to the new rules and regulations of Dodd Frank. This new regulation affected about 25% of our company’s business. Our options were to either comply or get rid of the affected part of the business. Our company decided it was in our best interest to comply. Similar to the change agents, my company implemented a new task force (Daft, 2014) to fulfill these new demands that were placed on our company. In doing so, my company has created a permanent team (Daft, 2014) to engage in these new endeavors. This in turn results in increased volume because other companies are not willing to comply with these new regulations and my company was able to purchase the other company’s affected business.
Daft, R.L. (2014). Management (11th ed.). Mason, OH: South-Western Cengage Learning
I can see how the ever changing rules and regulations governed by the state federal government can cause disruption in the normal pace of a company’s daily work. Seems changing 25% of company’s business all at one time is more than destructive. However, I can see failure to conform could result in fines and other penalties. Seems like the creation of a task force was a great implementation plan to ensure compliance. Acquiring other company resources due to the disruption may have benefitted your company in the growth process. This goes to show there can be some type of shinning lining in every disruption.
Hello Vi,
Interesting observations! Government rules and regulations are driving forces of changes for many organizations.
All,
How can an organization build in strategic approaches when dealing with ongoing government intervention while reducing its risks?
Dr. Green
Vi
I completely agree with what your stating here. The idea of creating a project team for implementation of a new action item is great. But to keep that team on as advisors is fantastic. According to Daft (2014) “Cross-functional team furthers horizontal coordination because participants from several departments meet regularly to solve ongoing problems of common interest” (p.330). So many companies make improvements or implement necessary changes but them sit on them. They don’t continue the process of continuous improvement, it’s all about preventative maintenance. If you can find a way even to make small improvements in your business you can show great dividends in the end. Even the smallest sacrifice or change can have monumental impact.
Daft, R. (2014). Management (11th ed.). Mason, OH: South-Western Cengage Learning.
Reverting back to my military service disruptive change is a way of life. It drives the basic existence of why the military is needed. Changes in the world represent the need of protectionism. Protecting ones place and values among the thousands of other’s perception on how you should be is disruptive to your own firm. Failure to adapt to each situation is a recipe for failure and future disasters. As stated by Burke, Trahant, and Koonce (2000), “Today’s business world is rife with upheaval and turbulence. In this environment, companies must learn to manage change as never before” (pg. i). Organizations such as the military should handle change as a normalcy to everyday life. Accepting this as the norm prepares you for the unexpected and when the entire groups accepts this; rectification can begin to allow acceptance of the change or prepare yourself to alter the disruption. The latter is more prevalent in the military.
Burke, W. W., Trahant, W. J., & Koonce, R. (2000). Business climate shifts: Profiles of change makers. Boston, MA: Routledge.
Hi Paul,
Another interesting point! The military is often on the front-end of disruptive change. Defending in jungles? Deserts? Water? Air?
Yet, the most difficult problem that most military organizations face is unconventional warfare (i.e. media buzz, terrorists, guerrilla warfare). When you get civilians in the middle of a war in the US, the military and politicians have a publicity nightmare. Thus, politic opinion becomes a driving force.
All,
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How does the military handle this disruptive change?
Dr. Green
Good question. Personally, the military sits back and waits for someone to make a decision. The leaders of the military are of course Generals serving in all branches of the military. Wonder how many knows the General answered to two individuals. First the Commander and Chief; President Obama. second is the Secretary of Defense which by the constitution has to be a civilian. Does anyone see an issue here? Both are civilians telling the military what to do. The Generals has to educate their own bosses to understand warfare before anything can get done. Now add to the mix politicians and their goals; now we have a disaster. I may be venting but after serving for 22 years I think I am allowed.
Paul,
I agree with the notion that organizations should treat disruptive change as a normalcy. After all, no business or organization is immune to such changes. I also like your point that the leader and organization should “prepare to alter the disruption.” I think by having a plan of attack to consciously and purposefully be a disruptor to the disruption is where true progress and innovation takes place. Of course, in the military sense, this strategy could be used by outside and naturally destructive parties like terrorists. Each situation is going to be different and have its own battles and challenges, but changing the path of thinking to allow disruptive changes to help, not hurt, the organization would open up a world of possibilities for any company.
Thanks for your service.
Brent Burnette
Change in the global environment is inevitable but attempting to lead the change can be challenging. Since disruptive change is considered irrational and unstable, managing this type of change cannot be prevented. When I consider disruptive change from the financial and payment services industry and most recently, I consider the e-commerce environment and fraud to be disruptive partners. There continues to be an unprecedented amount of vulnerabilities discovered that can compromise account and cardholders finances and personal information. In terms of the 4 management functions, our industry attempt to be a change agent from the controlling aspect. The controlling aspect is applied by continuing and providing along with promoting resources to our internal and external customer on fraud and data loss prevention tips.
Daft, R. (2012). Management (10th ed.). Mason , OH : South-Western
Hi Preston, interesting thoughts about disruptive change via the Internet like ecommerce?
What about hacking and online piracy? If it is illegal, can it still be disruptive to industry?
Dr. Green
From an ecommerce perspective, we call hacking and online pirarcy phishing attempts. So, yes it is disruptive. A good example that had a large impact is TJ MAXX a few years ago.
The single-cup brewer transformed the way people brew coffee. Within a decade of the brewer’s introduction, people changed brewing habits. In 2015, 25% of US households own a single cup brewer.
Dr. Clayton Christensen’s disruptive innovation model focuses on companies improving their product provide an opening for a lower tier, less complex product to enter the market (Christensen, 2016). In the food industry, the model often turns upside down. Rather than making product improvements, cost reductions often reduce the product quality or value over time. This allows a competitor, or new entrant, to introduce a better tasting, greater value product.
Using a single-cup brewer, consumers quickly recognized that they could brew café quality coffee at home for less cost per cup. In this food industry example, many branded coffee providers quickly made arrangements to provide pod packages. Another option would have been to recognize the value of the new technology and be early entrants to the market. In this case, the leaders at a small Vermont based coffee company wisely partnered with the upstart brewer developers.
Ackerman, A. (2012, November 16). GMCR’s path to disruptive innovation. Consumer Goods Technology, 21(10), 6-10.
http://www.claytonchristensen.com/key-concepts/
I am guilty of indulging in great coffee and I too own a single cup brewer that makes my life much simpler. It astounds me that within a “decade of the single cup introduction people changed their habits and by 2015 twenty five percent of households owned a single cup brewer”. The ability to change consumer behaviors and habits to better adapt to a product is one of the greatest achievements a company can have. Green Mountain realized the need for more simpler, affordable, and effective ways of providing coffee and tea to its consumers and they did this through their pods packages. This “adaptability provided clever marketing strategies for a competitive advantage in the market place” (Reeves & Deimler, 2011). Change agents in any industry must be able to envision the future of the company and steer it in the direction of success.
Reeves, M., & Deimler, M. (2011). Adaptability: The New Competitive Advantage. Retrieved February 16, 2016, from https://hbr.org/2011/07/adaptability-the-new-competitive-advantage
I really like your example of a single-cup brewer as disruptive change. This product model is able to maintain market effectiveness and tremendously increases product efficiency by taking full advantage of the make-to-order and make-to-stock philosophy. This idea is an incredible example of lean thinking as well, where these companies have combined technology and innovation to meet consumer demands (Daft, 2014). This essentially left any company that wasn’t conforming to this new business model, obsolete. In order for a company to stay competitive, every company now has to change its production models to entertain this new breakthrough idea.
Daft, R.L. (2014). Management (11th ed.). Mason, OH: South-Western Cengage Learning
Hi Frances,
You are quite a student of disruptive change. I like your example of ….a single-cup brewer!
All,
Can you think of other disruptive innovations in society?
Dr. Green
Another industry undergoing disruptive change is paid television, such as cable and satellite providers. In this case, mobile devices and internet based content options are disruptors to the paid service companies. As recently as five years ago, the consumer choices for television and video content were limited. “Consumer expectations are clearly shifting” (Israel, 2015, p.24), requiring traditional paid services rethink content formats and options to remain relevant.
One factor affecting the traditional industry is an increased preference for streaming content. From 2010 to 2015, there was a 70% increase in consumer daily streaming usage (Israel, 2015). This on-demand convenience caters to the consumer’s use of mobile devices. Industry response has been “to provide a full channel line-up, as well as access to video on demand content libraries” (Israel, 2015, p.25).
Israel states the industry would benefit from customer oriented strategies. One recommendation is to institute customer oriented metrics for both improving the quality of services and to measure executive performance. Another proposal is to change corporate culture to be customer centric. In the meantime, internet options for video and television content continues to provide alternatives.
Israel, S. (2015). Rebuilding customer loyalty in a disrupted video marketplace. Retrieved from http://www.cedmagazine.com
Higher education has been shook significantly with waves of disruptive changes. As the video mentioned, online Universities are popping up everywhere making affordable and flexible options for traditional and non-traditional students. As a recruiter, I have spoken with hundreds of traditional and non-traditional students at the undergraduate and graduate level. Though more than half still prefer traditional classroom style instruction, I predict within ten years there will be more online and iTV classes than face-to-face. Not too long ago some older professors did not want the School of Business to offer online classes. Thankfully, there were change agents within respective positions who were courageous, visionary, and adaptive that proceeded with the change. Now, I could not imagine the School of Business without flexible online options for individuals working full time, with families, or from the allotted states. If we did not change our program options to be competitive then many of our online students would have went somewhere else, simple as that. Many people do not like change and “sometimes change is difficult but not changing is fatal” (Llopis, 2014).
Llopis, G. (2014). Every Leader Must Be A Change Agent Or Face Extinction. Retrieved February 16, 2016, from http://www.forbes.com/sites/glennllopis/2014/03/24/every-leader-must-be-a-change-agent-or-face-extinction/#7347cc9e238b
Hello Kayley,
Nice way of thinking! Most seasoned professors do not want to teach online. Thus, who will be the next wave of mavericks teaching distance learning? Adjunct professors? Non-tenured professors?
What is the motivation for professors to teach online? Most professors are paid the same amount of money. Yet, online courses take more time to develop effectively. Could there be another incentive for professors to innovate (i.e. be disruptive)? What could this motivator be?
Dr. Green
Change Management has become an important topic in 21st century. Our leaders need to be ready for sudden or disruptive changes in the organization and in surroundings. The fierce competition, several new disruptive innovations and market full of volatile consumers demand for change management. Change management not only involves profit maximizing, being resourceful and having organizational skills, it insists on connecting the dots when opportunity is available. Change management requires “Change Agents”. Some of the characteristics of the change agents are: Multi-generational influence, Cultural intelligence, Global Market Wisdom, Consumers Demand Much More, Women Leaders are Ready to Drive In, Entrepreneurial Attitude, Technology, Crisis Management, Thought Leadership and Evolution of the Business Model. Change Agent, infused with all these skills can handle disruptive changes as he is ready to act at any level of hierarchy to seize the opportunity fearlessly.
Llopis, G. (2014, March 14). Every Leader Must Be A Change Agent Or Face Extinction.Retrieved from http://www.forbes.com/sites/
Hi Taran,
Good points!
Dr. Green
In the industry I am involved in there has been a large change that has caused a lot of chaos for several bookstores. Nebraska Book Company was bought out by Follett over the summer, which added approximately 200 new storefronts and 200 new contracts to the now largest college bookstore retailer in America. This was going to be a great move for Follett but they stuck with a traditional vertical structure with the transition, bringing on transitional team leads to help move the existing stores into the Follett corporate culture. This strategy to adjust for change was very mechanical in its approach and left a lot to be desired. As Daft points out, there was poor communication across departments and slow responses when stores were in need of help. This left a feeling of “being left to the wolves” by several transitional stores. To top off the way the change was not handled to the best of its abilities, Follett’s FY16 sales were not hitting the projected targets.
Follett is currently working with a more flexible approach to try and figure out how to better understand their newly acquired stores and focusing more on the team based surveying system to address the needs of the stores. Ultimately an acquisition of a company was very exciting for some higher ups but on the store level caused confusion and thus a loss in sales due to how it was handled in a top-down management style.
Daft, R. (2012). Management (10th ed.). Mason , OH : South-Western
Hello Sarah,
Great thought! I admire your knowledge about the book industry.
Do you believe the e-books will be disruptive to traditional textbooks over the next 10 years?
Dr. Green
Currently, in the payment card industry there have been changes that can disrupt businesses that accept credit/debit cards for payment. According to Povey, there is a global migration where magnetic-striped transactions are moving to a more secure EMV (Euro, MasterCard, Visa) chipped transactions. There are changes to technologies, business processes, and overall customer experience that have to be assessed and considered based on the impacts from the card payment model, that are imperative. Due to the amount of fraudulent transactions there has been a global effort to standardize chip read transactions since the late 1990’s (Povey, 2008). At my current employer, Equipment Locator Services, we encounter many business operators that are not aware of the EMV changes or how it impacts their business. Often there are people that have no clue who their processing company is, the ones putting the transaction funds in their bank account! This has put a strain on the organization, having to continuously repeat the same information, often to people that are not even our customers.
Reference
Povey, I. C. (2008). Assessing the impact of EMV migration: A pragmatic delivery approach. Journal Of Payments Strategy & Systems, 2(4), 349-363.
Hello Stephanie,
Excellent points! My wife and I were in Europe last year and found that those countries are much more advanced with usage of the credit cards with chips. Fraud is a huge problem overseas. Why do you think that the US is moving so slowly in this credit card change?
Dr. Green
Disruptive change, unlike incremental change, is quick, unstable, and most importantly unpredictable. Every industry is subject to disruptive change with new innovation, technology, and companies competing for market share. In the highway construction industry, changes in regulations, new products, new equipment, and changes in specifications are some factors contributing to disruptive change. Each of these factors has a direct and quick impact on the industry’s sales force, government compliance, engineers, and customers. A new regulation change can impact jobs on a large scale, costing money and time. Effective organizations should constantly be students of the market and industry to be able to prepare for such changes. All industries will have both disruptive and incremental change, which is a necessity for innovation. Forbes describes the difference between disruption and innovation: “Disruptors are innovators, but not all innovators are disruptors — in the same way that a square is a rectangle but not all rectangles are squares.” A leader, used in this case interchangeably with a “change agent”, will be the one who faces the disruptive change and then communicates a strategy to the organization. Furthermore, the true leader will turn the disruptor into an innovation.
Source:
Forbes contributors. (2013, March 27). Disruption vs. Innovation: What’s The Difference? Retrieved from http://www.forbes.com/sites/carolinehoward/2013/03/27/you-say-innovator-i-say-disruptor-whats-the-difference/#2c1428bcbd79
Great post Brent! I would like to focus on the comment you made regarding regulation. Regulation has been a very disruptive change for many different industries within the past 10 years. Holzhacker and Krishnan state that “Price regulation adds an additional layer of complexity to firms’ cost function choices” (2015, p. 539) which indicates that management has a great deal to work with when there is increase regulation. Regulation has been very disruptive the past decade and needs to be looked at by management when it could potentially have damaging effects on their bottom line.
Holzhacker, M., Krishnan, R., & Mahlendorf, M. D. (2015). The Impact of Changes in Regulation on Cost Behavior. Contemporary Accounting Research, 32(2), 534-566. doi:10.1111/1911-3846.12082
It would be hard to find an industry that has experienced more disruptive innovation than banking. There are many technologies that are always evolving, such as improvements to debit cards, interactive teller machines, and online banking. These are common topics and generally many people know of them so I am going to focus on Peer to Peer lending. A normal financial institution like a credit union or bank, takes in deposits and then loans them to other members or clients. A Peer to Peer institution is a new “process by which capital is raised for a project, initiative or enterprise through the pooling of numerous or relatively small financial contributions or investments, via the internet” (Jefrey and Arnold, 2014, p. 11). This is a very disruptive industry due to the fact that these institutions have lower regulatory costs and can offer more attractive yields for loan customers.
Organizations should handle change carefully. Many individuals like to assume that they can hedge against change or stop change from happening, which can lead to drastic consequences for the business.
Jefery, P., & Arnold, D. (2014). Disrupting banking. Business Strategy Review, 25(3), 10-15.