Change Management

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The Big Idea

HOW
HOW THE MOST INNOVATIVE
COMPANIES CAPITALIZE ON TODAY’S
RAPID
RAPID FIRE STRATEGIC CHALLENGES
AND
AND STILL MAKE THEIR NUMBERS.
BY
BY JOHN P. KOTTER

PHOTOGRAPHY: GETTY IMAGES

HBR.ORG

November 2012 Harvard Business Review 45

THE BIG IDEA ACCELERATE!

Perhaps the greatest challenge
business leaders face today is how
to stay competitive amid constant
turbulence and disruption.
Any company that has made it past the start-up stage
is optimized for e ciency rather than for strategic
agility—the ability to capitalize on opportunities
and dodge threats with speed and assurance. I could
give you 100 examples of companies that, like Borders and RIM, recognized the need for a big strategic move but couldn’t pull themselves together to make
it and ended up sitting by as nimbler competitors ate
their lunch. The examples always play out the same
way: An organization that’s facing a real threat or
eyeing a new opportunity tries—and fails—to cram
through some sort of major transformation using
a change process that worked in the past. But the
old ways of setting and implementing strategy are
failing us.
We can’t keep up with the pace of change, let
alone get ahead of it. At the same time, the stakes—
financial, social, environmental, political—are rising. The hierarchical structures and organizational processes we have used for decades to run and
improve our enterprises are no longer up to the
task of winning in this faster-moving world. In fact,
they can actually thwart attempts to compete in a
marketplace where discontinuities are more frequent and innovators must always be ready to face new problems. Companies used to reconsider their
strategies only rarely. Today any company that isn’t
rethinking its direction at least every few years—as
well as constantly adjusting to changing contexts—
and then quickly making significant operational
46 Harvard Business Review November 2012

changes is putting itself at risk. But, as any number
of business leaders can attest, the tension between
needing to stay ahead of increasingly erce competition and needing to deliver this year’s results can be overwhelming.
What to do, then?
We cannot ignore the daily demands of running
a company, which traditional hierarchies and managerial processes can still do very well. What they do not do well is identify the most important hazards
and opportunities early enough, formulate creative
strategic initiatives nimbly enough, and implement
them fast enough.
The existing structures and processes that together form an organization’s operating system need an additional element to address the challenges produced by mounting complexity and rapid change. The solution is a second operating system, devoted

to the design and implementation of strategy, that
uses an agile, networklike structure and a very di erent set of processes. The new operating system continually assesses the business, the industry, and the organization, and reacts with greater agility, speed,

and creativity than the existing one. It complements
rather than overburdens the traditional hierarchy,
thus freeing the latter to do what it’s optimized to do.
It actually makes enterprises easier to run and accelerates strategic change. This is not an “either or” idea. It’s “both and.” I’m proposing two systems that operate in concert.

hbr.org

Idea in Brief
Although traditional hierarchies and
processes—which together form a
company’s “operating system”—are
optimized for day-to-day business,
they can’t handle the challenges of
mounting complexity and rapid change.

The solution is a second
operating system, devoted to
the design and implementation of strategy, that uses an
agile, networklike structure
and a very different set of
processes. The new operating
system continually assesses
the business, the industry, and
the organization, and reacts

with greater agility, speed, and
creativity than the...
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