Dealing with transformational change is a topic we’ll be talking about a great deal on this site and I wanted to start by making a comment on an article in Strategy+Business, one of my favourite online resources.
The article featured an interview with Vijay Govindarajan about the challenges of implementing innovations:
The author described the differences between the core operations of an organization – he calls it ‘the performance engine’ – which is focussed on maintaining and improving excellence in outputs of core products and services as opposed to the work involved in implementing new innovations. In this context ‘innovation’ was the term applied to the start-up of a new business venture to run in parallel with the core business.
This, for me, brings to mind three issues:
- The comparative Levels of Work Complexity between the two business units.
- What the role of the head of the new venture requires in terms of Cognitive Capability and behaviour.
- How the relationship between the two entities is managed.
So, when creating a separate entity like this what is the impact on the organization’s overall infrastructure? For those of you who have already subscribed to my website to receive free articles you will remember from the paper about Organization Design how we differentiate between Levels of Work by time-horizon, using Elliott Jaques’ Requisite Organization model. Following that model, the ‘performance engine’ involves work at Stratum 3 or 4 (creating and refining operational systems and practices) whereas the start-up of a new business unit which transforms the brand and scope of the company is likely to involve a higher level of complexity – Stratum 4 or even 5. (Confused by these terms? Contact us for a complimentary Discovery Session to understand the context and links between organizational structure, levels of work and cognitive capability requirements.)
The example quoted in the article, Infosys, was a very interesting case. It sounds as if the CEO must have recognized these differences in Levels of Work Complexity (either intuitively or perhaps they already follow the Requisite Organization Model?) The new venture, with its experimental focus and unpredictable outcomes, involved tasks with a longer time-horizon – hence the higher Level of Work Complexity and the need to be separate from the framework of the existing core business.
Secondly, there would have been an emphasis on filling the role of Head of Infosys Consulting with someone who was capable of working at this higher level of complexity, whose Cognitive Capability, (as an integral part of overall leadership capability) was matched to the challenges of the intended business transformation. The author speaks highly of Steve Pratt who performed so well in this role and I would place a bet that the CEO, whether using the R.O. Model or his intuition, judged that there was a good capability match here.
Finally, the work that Steve Pratt and the CEO, Nandan Nilekani , conducted in managing the relationships between the two entities clearly paid off in terms of business results and social harmony. Differences in business unit cultures are often overlooked in times of organic growth or acquisition, and yet these so-called ‘soft issues’ often play a critical role in ensuring sustainable success.
So, this seemed to be a great example of successful business transformation – the CEO paid attention to the fundamental principles of structure, staff and role relationships. It’s common-sense and it paid off.