Why Great Companies Prepare For Change Now, Not TomorrowJuly 11th 2017
Leading organizational change is hard, and it has many risks. And unfortunately, most companies fall short of their transformation goals due to poor planning, competing priorities, change fatigue and lack of team buy-in. One of the fundamental reasons buy-in, support and participation aren’t achieved is because key team members and leaders across the organization aren’t included in the planning process. And the companies that win at change, do so because they anticipate it and are well-prepared.
In the Navy SEAL teams, the mission planning process is straightforward but designed to leverage the information and expertise that everyone on the team brings to the table. When a mission comes down the pipe we start by first analyzing the information so that we can understand the overall intent and goal. What are we trying to achieve? We then identify our existing personnel, resources and time frame. But most importantly, we decentralize the planning process by empowering key leaders and team members to analyze possible courses of action and develop the plan.
This process not only allows us to gather as much data and opinions as possible, but also simultaneously gains team buy-in. How? Because everyone has a voice in developing the strategy and tactics. But Navy SEALs and the best business organizations in the world successfully navigate change because they are well-prepared. Planning is great, but preparedness is imperative. Proactively choosing to take risk, anticipate obstacles and make strategic moves is how the best leaders drive their organizations to greatness.
And while it’s always good to learn from our mistakes and the mistakes of others, let’s take a look at a company that’s been getting it right for many years. I was recently came across a company with a great story about successful transformation and taking calculated risk. I had an opportunity to chat with one of their senior executives about the company’s history and how they have been able to lead change in their organization. The company, MBX Systems, has defied the odds in an extremely competitive space by making dynamic moves proactively, not reactively, and engaging the team in the mission planning process.
MBX designs and manufactures server appliances for some of the world’s largest and most demanding independent software vendors and service providers. But they didn’t start out that way. Founded in 1995, the company used to sell motherboards and other computer components – their customers mostly small businesses. As the company approached the early 2000’s, motherboards and servers were becoming commoditized. Selling to end users no longer made sense. Change was coming!
Knowing that they were going to have to make some fairly bold moves in order to survive, the senior leadership team surveyed key team members from across the entire organization to gather as much input as possible. They had always been diligent in protecting the company culture and had a good track record of leveraging cultural strengths when faced with unique challenges. One of those strengths was their employees’ deep appreciation for their customers. But one thing that became apparent very quickly, was that they were going to have to move away from small business customers and replace that revenue with larger OEM (original equipment manufacturer) customers.
At the time, about 30% of their revenue came from these small business accounts. After going through an in-depth planning process, they gradually parted ways with those customers, finding them new homes with trusted partners, and replaced that revenue as they went. Employees understood why they needed to make this move because they had been involved in the decision. They took time and care in moving their customers to other providers and were able to protect the company’s great reputation.
We went through a similar process at my last company. It feels strange to walk away from millions in revenue in order to restructure how you do business but can often mean the difference between winning and losing in the long run. Downsizing the number of customers allowed MBX to increase efficiencies and work with fewer customers that were more aligned with the new strategy.
In 2008, when the recession hit, they did the opposite of what many companies did. Instead of slashing costs and cutting heads, they invested in growth. While many of their competitors went out of business, they actually increased revenue. They had successfully shifted into the OEM space and dramatically reduced their number of customers while doubling revenue. Key team members from across the organization had been part of the planning and execution of this strategy. The buy-in allowed them to manage fear and cultivate a culture accepting of risk. And it prepared them for the changes they would face down the road.
In 2011, the senior leadership team concluded that another transformation effort was needed in order to grow the business without increasing headcount exponentially. Again, they put a team together and dove into the numbers. The data gathered by the transformation task force revealed that 82% of their revenue was coming from only 15% of their customers. This was a risky position to be in. Another positive aspect of their culture that they leveraged was their transparency in communicating the financial realities of the organization. They let everyone know what was happening and what needed to change. By showing everyone the numbers they immediately supported the “why” behind the new strategy.
The plan was to remove 65% of their customers. You’d think that people’s heads would spin right off their shoulders when seeing the plan. But they didn’t because inclusion and transparent communication happened throughout the planning process. They transitioned those customers to new vendors and never saw a decrease in revenue. The result? A dramatic increase in efficiencies and revenue per employee. Quality and on-time delivery improved as did average revenue per customer.
The conversation with my client then turned to culture and values. I asked her how they managed these things during these major transformation efforts. What she told me proved my theories about culture-driven transformation. They intentionally created cultural experiences designed to help execute their change strategies. They leveraged the positive elements while simultaneously fixing the negative aspects. They led book clubs and set goals for being ranked one of the best places to work. They shifted away from referring to their core values as “values.” They renamed them “habits.”
Because great leaders know that values are only as good as the behaviors everyone in the company embodies every day. Values only matter if people actually live them. They only become part of the culture when the values-driven actions become habits. And those habits are openly rewarded.
By creating a culture that accepts risk, embraces transparency and includes everyone in the planning process, MBX continues to dominate their market and increase in value. And what’s more, they have never used lay-offs as part of their transformation strategy. In 2016, they achieved their goal of landing on two ‘Great Places to Work’ lists. By planning for change now and empowering everyone in the organization, they continue to be a role model for successful – and lasting – transformation.
This article was originally featured in Forbes.