Embracing and pursuing change
With the changing expectations of customers, organisations constantly need to adapt to remain competitive. When faced with such pressures for change, managers may look for situations which are familiar to them. This may involve improving the ways in which they operate, but only little by little. This is called incremental change. The danger is that improving little by little might not be enough. They need to adapt to all of the bigger changes in the environment of that business as well. If they don’t, what happens is strategic drift. When an organisation experiences strategic drift, it does not make strong and radical decisions to deal adequately with all of the changes in its business environment. To avoid strategic drift, managers within organisations have to embrace change fully. This means building a responsive organisation. This case study focuses upon AEGON in the UK, part of the AEGON Group, one of the world’s largest life insurance and pensions companies. AEGON owns pensions, life insurance, asset management and adviser businesses in the UK. The case study illustrates the success that embracing and pursuing change has brought to AEGON in the UK. It is helping AEGON move towards its goal of becoming ‘the best long-term savings and protection business within the UK’.
CURRICULUM TOPICS • Business strategies • Change management • External business environment • Business culture
GLOSSARY Incremental change: improving the way in which an organisation meets the external forces within its business environment little by little. Strategic drift: situations in which an organisation’s strategy does less and less to face the changes within the business environment. Asset: something of worth to an organisation e.g. people, cash, financial claims on others, machinery, buildings. Goal: general statement of purpose that falls in line with an organisation’s broader mission.
The AEGON Group has 27,000 employees and over 25 million customers worldwide. Its major markets are in the USA and Netherlands. Since 1994, the UK has become another major and increasingly important market. In 1994 AEGON bought a large stake in Scottish Equitable. Scottish Equitable was a strong brand with a heritage that went back to the 1830s. Since then AEGON’s UK business has grown both organically and by acquiring other businesses. As most of the acquired companies kept their existing identities, awareness of AEGON in the UK remained relatively low. AEGON realised that such low levels of awareness could impact on its ability to achieve its ambitions. Therefore, it needed to combine the global strength of its parent with the experience and reputation of the domestic company brands, like Scottish Equitable, that made up AEGON in the UK.
Heritage: name and reputation associated with the past. Organically: increasing the business through current activites.
External factors influencing change
One of the main challenges for decision-makers is to understand the environment in which they are operating. They can then identify key issues which they need to respond to. Understanding these key issues improves decision-taking and reduces uncertainty. Few industries have experienced as many changes in their external environment in recent years as financial services. AEGON
GLOSSARY Mis-selling: selling inappropriate products to customers. Financial Services Authority: independent non-government authority that regulates the financial services industry within the UK. Stock Exchange: marketplace in which stocks are bought and sold. Investment return: the return on funds invested in the business. Mortgage endowments: mortgage loans for a property in which interest only is paid, with the capital paid off at the end of the period of loan. Consumers: purchasers and users of the products. Brand values: the behaviours, personality and all that a brand represents...