Many organizations are unlikely to undertake drastic transformational change. Power, emotion and expertise are vested in the existing organizational arrangements, and when faced with problems, organizations are more likely to fine-tune those structures than to alter them drastically. Thus, in most cases, organizations must experience or anticipate a severe threat to survival before they are motivated to undertake transformational change. Such threats arise when environmental and internal changes render existing organizational strategies and designs obsolete. The changes threaten the very existence of the organization as it presently is constituted.
Transformational change occurs in response to at least three kinds of disruption:
• Industry discontinuities—sharp changes in legal, political, economic, and technological conditions that shift the basis for competition within an industry;
• Product life cycle shifts—changes in product life cycle that require different business strategies;
• Internal company dynamics—changes in size, corporate portfolio strategy, or executive turnover.
These disruptions severely jolt organizations and push them to question their business strategy and, in turn, their mission, values, structure, systems and procedures.
Transformational change is concerned with choices organizations make to improve their competitive performance. To establish a competitive advantage, organizations must achieve a favoured position vis-à-vis their competitors or perform internally in ways that are unique, valuable, and difficult to imitate. Although typically associated with for-profit firms, these competitive criteria can also apply to non profit and governmental organizations. Activities that are unique, valuable, and difficult to imitate enhance the organization’s performance by establishing a competitive advantage over its rivals.
All organizations possess a unique bundle of resources and processes which, individually or in combination, represent the source of competitive advantage.An important task in transformational change is to understand these unique organizational features. For example, resources can be financial, such as access to low-cost capital; reputational, such as brand image or a history of product quality; technological,such as patents, know-how, or a strong research and development department; andhuman, such as excellent labour–management relationships or employees with scarce and valuable skills. An organization’s processes regular patterns of organizational activity involving a sequence of tasks performed by individuals. It also uses resources to produce goods and services. For example, a software development process combines computer resources, programming languages, typing skills, knowledge of computer languages, and customer requirements to produce a new software application. Other organizational processes include new product development, strategic planning, appraising member performance, making sales calls and fulfilling customer orders. When resources and processes are formed into capabilities that allow the organization to perform complex activities better than others, a distinctive competence is identified.
Organizations achieve competitive advantage when their unique resources and processes are arranged in such a way that products or services either warrant a higher-than-average price or are exceptionally low in cost. Both advantages are valuable according to a performance/price criterion. Products and services with highly desirable features or capabilities, although expensive, are valuable because of their ability to satisfy customer demands for high quality or some other performance dimension.
Finally, competitive advantage is sustainable when unique and valuable resources and processes are difficult to mimic or duplicate by other organizations. Organizations have devised a number of methods for making imitation difficult .For example, they can protect their competitive advantage by making it difficult for other firms to identify their distinctive competence. Disclosing unimportant information at trade shows or forgoing superior profits can make it difficult for competitors to identify an organization’s strengths. Organizations also can aggressively pursue a range of opportunities, thus raising the cost for competitors who try to replicate their success.Finally, organizations can seek to retain key human resources through attractive compensation and reward practices thereby making it more difficult and costly for competitors to attract such talent.The success of a competitive strategy depends on the organization’s responses that result in unique, valuable, and difficult-to-imitate advantages.
Transformational change assists organizations in developing these advantages and managing strategic change. It involves reshaping the organization’s design elements and culture. These changes can be characterized as systemic and revolutionary because the entire nature of the organization is altered fundamentally. Typically driven by senior executives, change may occur rapidly so that it does not get mired in politics, individual resistance and other forms of organizational inertia. This is particularly pertinent to changing the different features of the organization, such as structure, information systems, human resources practices and work design. These features tend to reinforce one another, thus making it difficult to change them in a piecemeal manner. They need to be changed together and in a coordinated fashion so that they can mutually support each other as well as the new cultural values and assumptions. Ultimately, these changes should motivate and direct people’s behaviour in a new strategic direction.They are considered transformational when a majority of individuals in an organization change their behaviour.
Three key roles for executive leadership of such change are:
• Envisioning: Executives must articulate a clear and credible vision of the new strategic orientation. They also must set new and difficult standards for performance and generate pride in past accomplishments and enthusiasm for the new strategy.
• Energizing: Executives must demonstrate personal excitement for the changes and model the behaviours that are expected of others. Behavioural integrity, credibility and “walking the talk” are important ingredients. They must communicate examples of early success to mobilize energy for change.
• Enabling. Executives must provide the resources necessary for undertaking significant change and use rewards to reinforce new behaviour. Leaders also must build an effective top-management team to manage the new organization and develop management practices to support the change process.
Dr. Kellen Kiambati holds a PhD in business administration with a focus on strategic management from JKUAT and an MBA from KEMU. She is a certified business associate (CBPA) and a member of the Institute of Human Resource Management of Kenya. She is also the author of business Research Methods and can be reached on firstname.lastname@example.org