And if the company needs to reposition itself or renew its capabilities, then all those years will be needed. Harvard University professors John Kotter and James Heskett report that, in 200 corporate transformation cases they studied, the most common time span from beginning to end was five to seven years. Successful transformations — those that don’t produce a backlash, don’t exhaust the organization, and do produce most of the desired results — generally occur in waves. An overall strategy for change taking place through strategic initiatives with relatively concrete goals, each requiring two to three years, tends to provide maximum impact.
As is the case with most other comprehensive efforts to change a large system, several things need to happen at once. A logical starting point is a set of diagnostic questions for the CEO and other key leaders: How do we build and align the top management team? What few initiatives do we need to deliver fundamental change? And how can we equip the organization to develop and deploy the right capabilities to produce the results we want?
The “Why” Factor
During its high-growth years in the early 1990s, the purpose of the computer company Dell Inc. was clear to its leaders and employees. Dell existed to reshape the personal computer hardware business in its own image through its innovations in supply chain management and real-time customization. One critical enabler of this purpose was a reputation for offering the highest-quality customer service and support. When a Dell computer broke, the company’s help desk would often say, “Send it back to us, and we’ll send you a new one.”
Around the time that Michael Dell turned over the CEO role (to then Chief Operating Officer Kevin Rollins) in 2004, the company seemed to change direction. Dell began to focus on cutting costs to beat back Asian competition. Among the casualties was the help desk; customers suddenly began having a much harder time getting their computers fixed, which was intolerable for a business dependent on mail order. In May 2007, New York State Attorney General Andrew Cuomo sued Dell for deceptive business practices and false advertising, mostly related to customer service. By that time, CEO Kevin Rollins had resigned and Michael Dell had returned to the helm.
Why did Dell lose its way? Without a strong corporate purpose, the company did not know how to set priorities. Rather than focusing on those distinctive customer-focused factors that made it the leader of its industry, the company kept cutting prices (in effect, training its customers to wait for discounts) and introducing products, such as large-screen televisions, that required a different business model. Today, Dell is seeking to regain its purpose as a company that once again can reshape and lead the personal computer industry. To accomplish this, its leaders have recognized that they must reach out to individual consumers through more diverse retail channels. And Dell is reportedly rebuilding its customer support as a key component, not just of its value proposition, but of its corporate identity.
That is the power of the “why” factor: a clear, focused explanation of a company’s purpose. Articulating “why we do what we do” allows leaders to set priorities and explain the relevance of their decisions (or, as O’Toole and Lawler put it, to “frame the direction of success”). The answer attracts a higher-quality group of employees, drawn not just to making money but also to meaningful work. In their recent book, The Enthusiastic Employee (Wharton School Publishing, 2005), David Sirota, Louis A. Mischkind, and Michael Irwin Meltzer sum up the research showing the power of purpose in attracting employees, particularly those between 17 and 30 years old. A well-articulated purpose also motivates employees to go beyond “business as usual,” it helps leaders set priorities and balance short-term and long-term measures, and it gives the entire organization a sense of confidence about the future. Most of all, it sets the stage for a focused set of strategic initiatives (also known as campaigns). Not all will be successful, but all will be relevant, in some way, to the company’s ultimate success — if only as failures to learn from.