I visited a client in Europe recently. It was a very large organisation with a long history of financial success. It had a dominant position in its own domestic market and a strong market for quality products worldwide.
Most of their managers had grown up secure in the knowledge that their company was one of the best in their country to work for. Decades of profitability had allowed them to expand, build an impressive head office and an enviable reputation.
However, in the last five years they have faced increasing competition from China and other parts of the developing world. Prices for their core product have plunged with overcapacity in the global market. For the first time in the last 30 years they made a loss – for three years running.
It’s not an unprecedented story. Globalization and the rate of technical change mean that many formerly successful organizations are faced with the need to transform the way they operate. Some of them find that a long period of success has allowed them to ignore problems and changes that may have been needed for years.
This has implications for their strategy, structure, systems and skills.
Our particular interest is in the way people work together. Matrix management, for example, changes some of the fundamental tenets of management. Line management authority is shared or may be absent; managers become accountable for results when they don’t control the resources they need to deliver them, the old silos of function and geography become less important than the horizontal process of value creation.
All of these require significant changes in behaviours and this is particularly difficult where leaders have traditionally seen other behaviours as successful. If leaders in a traditional organisation have been successful displaying certain behaviours for 20 or 30 years, it’s extremely difficult for them to make a radical change.
The management literature is full of examples of companies that stuck their head in the sands and ignored innovation and change around them. It can be deeply uncomfortable to change long held beliefs and behaviours but as one of our contacts in this company said, “this is not optional, it’s the only way to survive!”
Increasing global integration is imperative to generating synergies across a complex business, sharing resources and leveraging expertise and innovation. We can’t afford to staff each of the silos with its own dedicated resources. We need more flexibility and customer focus and the ability to deliver global products and programs more effectively.
The business logic is compelling but in our experience the major challenge is changing people and culture. This is much more complex than simply aligning your global systems.
Many of our clients have told us that they have had a matrix structure or more integrated strategy for at least the last five years, but now the pressure to integrate is really starting to bite.
It’s no longer a matter of strategy or aspiration, for some it’s a matter of survival!