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Brief

The Power to Change
en
In evidenza
  • Changeability is the primary source of competitive advantage in a business environment forever shifted by Covid-19.
  • Companies can now measure their Change Power relative to others and begin to take focused action to increase it.
  • Our research shows that companies with high Change Power grow faster and have stronger leaders and more engaged employees.

If you could have any superpower, what would it be? Invisibility? Time travel? X-ray vision? As children, we fantasized about possessing the ability to fly (David) and to move objects telekinetically with one’s mind (Kevin). Sadly, for us, no amount of practice has led to a mastery of either.

Superpowers help those who possess them to overcome towering challenges, to restore order and even to make the world a better place. As businesses grapple with the reality of Covid-19, there is one superpower that every CEO longs for—something that can help companies operate effectively in a world of constant transition and rapid evolution—the ability to change.

Not only is change the new normal, it was accelerating even before the coronavirus upended everything. Long before the first case of Covid-19, employees had begun to experience this dramatic increase, weathering more change over the past five years than they had during the prior 50. Even before the pandemic, more than 90% of millennials, half the workforce, reported that they expect to stay in a job for less than three years. And one-third of all US workers have already performed some type of gig work. CEO turnover, too, hit a new record in 2019. Now, we are in the midst of a shocking health and economic crisis that has brought a new level of uncertainty. There will be no return to normalcy—at least, not as we knew it before.

Measuring Change Power

Of course, companies with a high capacity for change are more likely to both adapt to this current crisis and ride out future waves of uncertainty. The measure of a company’s changeability is something we call its Change Power. And the benefits it delivers are impressive. Companies with high Change Power are more profitable, our research has found, with margins twice those of companies with lower Change Power. These change masters also grow revenue up to three times faster, their CEOs and senior management teams earn higher approval ratings, and twice as many of their employees report being very inspired by their jobs (see Figure 1).

Figure 1

Change Power closely ties to and improves business performance

You would think that would be enough to get everyone on board, and yet companies still struggle with change. Why is that? One of the biggest reasons has been our historical inability to simply and reliably measure a company’s ability to change. Executives readily acknowledge the importance of change management but find it difficult to act on. It can feel amorphous and intangible. How can you improve what you cannot measure? Where do you focus? How do you know if you are making progress?

Solving a challenge of this size can unlock incredible value. Cast your mind back a couple of decades to the emergence of customer loyalty as a fundamental source of growth and prosperity. Executives knew instinctively that customer loyalty was important, but existing methods of measurement were data rich but insight poor. There was an existing, well-understood financial currency used to direct monetary investment but no equivalent customer currency. The invention of the Net Promoter System® and associated Net Promoter Score® created that common currency, unleashing a new era of investment, focus and impact on customer loyalty.

We have spent our careers implementing and tracking change, identifying and removing risk, and exploring the patterns of success and failure. But change is different today. The value at stake and the opportunity have never been higher. For organizations across all industries, finding the currency of change has become urgent.

The nine elements of Change Power

What if you could measure the capacity of an organization to adapt? How fast it can change? Where the trouble spots lie? To create that measure, we studied how change is changing and found nine essential elements (see interactive Figure 2). Studying these elements—those that are strong, those that are weak—not only helps management understand its company’s current ability to change but it also creates a blueprint for how to increase it. Together, they determine any company’s ability to change—its Change Power Index℠.

Figure 2

The nine elements that influence corporate Change Power

In this turbulent time of Covid-19 and economic distress, knowing an organization’s capacity to change is both a strategic asset and a highly practical tool. Answering a set of acid test questions about the nine elements, companies come to understand their balance of strengths and weakness, information that management teams can use to benchmark their company against other companies and look for clues as to how to boost their Change Power. Improving a company’s Change Power one decile (for example, moving from the 50th percentile to the 60th percentile) correlates with a margin improvement of 150 basis points and a climb in total shareholder return of more than 250 basis points, our research has found.

Lead change through purpose, direction and connections

Purpose. Organizational purpose has always mattered, but today, it’s taking on new importance. As change becomes more pervasive and companies’ employee bases more diverse, there is a strong need for a unifying anchor that provides context and focus. Purpose holds change together. It creates a sense of belonging and attachment for increasingly disconnected people. Purpose is not a slogan; it defines and guides action.

A small number of companies serve a function that the pandemic has only heightened, and one of those is streaming media giant Netflix. Fueled by home confinement and popular programming such as Riverdale and the Tiger King documentary, Netflix added nearly 16 million new paid subscribers and $5.8 billion in revenue over the first quarter of 2020—all while moving computing-intensive operations from post-production to animation into employees’ home offices, living rooms and kitchens.

Executives credit Netflix’s ability to manage the surge to the company’s culture of local decision making and its employees’ focus on service quality and finding quick, practical solutions to problems as they arise. Netflix’s culture is closely tied to the company’s well-defined purpose to entertain the world. That purpose dates back to the Silicon Valley company’s early days, and it has remained constant as it evolved from distributing and selling DVDs by mail to digital streaming to eventually producing its own films and series. Netflix’s purpose has given it scope to grow and the power to adapt its successful data-driven decision-making model to continually challenge the status quo.

Direction. If purpose defines an aspiration, a future, a reason for being, direction is how you get there. There are many potential paths to take and options to consider, but all should have a singular goal or intention. During periods of rapid change, a bold direction guides an organization to deliver on its strategy.

Among the industries hardest hit by Covid-19 are entertainment, restaurants and travel. The luxury hotel industry, always susceptible to economic downturns, has long had to be resilient and adaptive. Setting a strong direction helped the Four Seasons Hotels and Resorts recover from the 2008 recession. Management created the Four Seasons Compass, outlining three goals for the firm: to rank as guests’ first choice, to be the best employer and to be the industry’s No. 1 builder of sustainable value. This direction got the Toronto-based company back on track, and in the following decade, the company enjoyed not only remarkable levels of employee loyalty but consistently high marks from customers as well.

The strong sense of direction persists at the Four Seasons today, as the company reimagines what hospitality means in a Covid-19 world. At the forefront is its New York hotel, now home to medical professionals working on the Covid-19 front lines in addition to other guests. Nurses conduct temperature checks at the door, check in and check out are only done virtually, and mid-stay housekeeping is on hold. There’s one guest per elevator. The new dining option is premade boxed meals picked up in the lobby.

How much of this will stick and for how long is unknown. The company has not been immune to the layoffs and other costs of the present sharp downturn. A future with more technology and less in-person contact, however, seems certain, and the Four Seasons is moving there with direction and adaptability.

Connection. Change is ultimately social. Commitment is built by keeping people informed and connected and by helping them to be heard. By building social buzz and internal fans of what’s happening, companies help the broader organization embrace change. Influencers are just as important internally as they are in the external marketplace.

Ping An is a Chinese holding conglomerate with insurance, banking and financial services subsidiaries. When Ping An’s traditional health insurance company initially aspired to broaden its ambitions, it started by developing a case for improving healthcare in China, creating Good Doctor, an online health ecosystem platform that combines artificial intelligence (AI) technology and mobile health, in 2014. Good Doctor connects doctors with patients directly, and it creates e-health profiles for patients as well as a personalized health management system. Ping An developed sponsors for the idea by bringing it first to the conglomerate’s existing network and base of supporters and encouraging them to pass it on.

The engagement of this broader ecosystem accelerated Good Doctor’s acceptance. By mid-2018, Ping An had raised more than $1 billion in an initial public offering of Good Doctor stock on the Hong Kong exchange, and the online platform was in use by more than 3,000 hospitals, 1,000 health clinics, 500 dental clinics and 7,500 pharmacies. Consultation of its telemedicine app increased by nine times during the first months of the coronavirus crisis, and Good Doctor is expected to continue to be a critical channel given the continued relaxation of telemedicine regulations. With the support of its network of external partners and supporters, Ping An launched a business that is rapidly becoming central to its growth, including new offerings, such as its recently launched 24-7 English language global app.

Accelerate change by building team capacity, choreography and scaling

Capacity. How much change can your organization sustain and for how long? All organizations, teams and individuals have a finite capacity for change. Signs of overload include slowing productivity, lower morale and increased absenteeism, among others. Once identified, it’s important to address the issue. Some good initiatives or ideas may need to take a back seat temporarily so that a few great ones can flourish. Every success adds confidence to take on the next challenge and ultimately builds an organization’s long-term capacity for change.

Part way through Intuit’s transformation from a provider of products and services to an online financial services ecosystem for small and medium enterprises and individuals, progress stalled. To regain its momentum, the company focused on what Scott Cook, founder and chairman of the executive committee, dubbed a “do less better” strategy. Top leaders redeployed talent and capital to new growth businesses. To work within Intuit’s capacity for change, the company made tough decisions on what to keep and what to exit, selling off five divisions and product lines, including Quicken, its original business. The company stopped all investment in noncloud platforms. To enhance their own capacity for change, top executives were given research projects into topics well outside their areas of expertise—for instance, personally investigating fields such as AI, finance in China and the online behavior of middle schoolers. Rekindling their own curiosity has helped support experimentation across the company, making it possible to scale new businesses quickly. Today, Intuit’s online ecosystem offers 1,400 apps, and it has become the key growth catalyst for the long-time Silicon Valley giant, helping to increase revenue by $760 million from 2018 to 2019.

Choreography. Change requires both planning and execution. Once those were sequential—plan first, execute second. But in a dynamic environment, companies must be able to pivot quickly and often. As new information comes into focus, some changes may need to accelerate and others stop or be delayed. The change leaders revisit change plans frequently and aren’t afraid to reshuffle the deck.

Charles Schwab’s market value plunged after the Internet bubble burst in 2000, with the company losing more than 80% of its value over the following three years. To climb back, the San Francisco brokerage and investment manager needed the right choreography to balance long-term growth strategies with immediate cost concerns, and pursued a path of thoughtful and deliberate sequencing to do so. First, Schwab sold some of its noncore assets and launched a major effort to cut $600 million in costs. A year later, the company’s leaders agreed to launch the second phase of strategic repositioning, refocusing its organization on two groups of clients: retail and institutional.

Today, Schwab faces other tremendous challenges in the market turbulence and low interest rates that have accompanied the economic disruption of Covid-19. With trade volume spiking, the $26 billion acquisition of TD Ameritrade underway and 95% of employees suddenly working from home, the ability to operate effectively in a dynamic environment has never been more valuable.

Scaling. Scaling is about amplifying innovation and impact. A great idea is a great start, but it’s not sufficient. You must be able to scale it systematically in order to deliver value on an enterprise level. Adopting a test-and-learn, or fail-fast, approach accelerates innovation. Breaking down a big new idea and testing it in smaller micro-battles helps prove the concept, and that proof, in turn, can generate momentum to scale more broadly across the enterprise.

Amazon’s remarkable ability to scale has been put to the test by Covid-19. Under orders to stay home, millions of Americans have turned online for everything from toilet paper to food, and Amazon has responded by hiring more than 100,000 new warehouse and delivery workers in just a single month, and it’s adding another 75,000. There have been challenges, as Amazon Fresh ramped up online deliveries, including delays and stock-outs, and the strain on warehouse and delivery workers has led to safety concerns.

Still, the ramp-up has been a reminder of the company’s well-established track record of creating and managing growth. Even before Covid-19, Amazon Prime membership had grown globally from fewer than 5 million customers a decade ago to more than 150 million customers today—and that’s not to mention Amazon’s many other customers who are not Prime members. Part of the Seattle-based company’s philosophy has been to try new ideas, and if they work, grow them; if they don’t, close them. Founder Jeff Bezos refers to the decisions to take a shot at something as “two-way doors,” meaning they are reversible. Successful ideas that have now grown into important businesses include Amazon Web Services, Prime shipping, Prime Video and Alexa. At the same time, many other ideas (for example, Amazon Wallet, the Fire Phone and the hotel booking site Amazon Destinations) have come and gone.

Organize for change with development, action and flexibility

Development. There is a set of skills that leaders at all levels can build upon to help become agents of change. Continual learning and training should focus on critical skills, including interpersonal and behavioral skills, the ability to cocreate, and proficiency managing both change and emotions. The best companies use change as an opportunity for professional growth and to develop their top talent.

In financial services, AI has begun to eliminate certain roles. Yet, even in the face of AI disruption, executives at South Africa’s Standard Bank continue to see banking as a people-centered business dependent on serving customers individually and with empathy. With its customers moving online and particularly to mobile banking, the bank, over the past several years, has established programs to help employees develop skills to thrive in the new environment. Branches have closed, but more than 4,000 employees have been trained for broader universal banking roles, and nearly 1,500 employees are in programs building highly needed and scarce skills in data science, robotics, behavioral economics and cloud computing.

In 2019, the bank launched a pilot test of a cloud-based micro-learning program. The program evaluates participants’ current skills and creates a learning curriculum for them to attain the new skills that they will need to meet their career goals. Leadership, too, is adapting, with some managers studying for a certificate in the skills needed to manage people and operations in an increasingly ambiguous work environment. While the economic impact of coronavirus has already begun to affect the bank, the shift to digital has made it possible for Standard to continue to serve customers even as many must shelter at home.

Action. A change-oriented culture has a bias for action and behaviors that support it. Organizations don’t change; people do. It’s critical that companies think about and put in place actual ways to change people’s behavior; printing fancy posters won’t cut it. In addition to implementing the appropriate foundational elements, such as training and tools, it’s just as important to ensure that your staff receives positive reinforcement from the people in the organization who matter most to them. That’s what will ingrain change into the fabric of the organization.

With more than 150,000 employees in more than 200 countries around the world, Microsoft operates on a scale that makes cultural change daunting. Nevertheless, the ambition of Satya Nadella, who became CEO in 2014, is to transform Microsoft’s culture to one of continuous innovation. He has instilled an action-oriented mindset by encouraging employees to be more curious and customer-obsessed, less technology-centric. Its Azure cloud business, for example, focuses on asking probing questions about customer needs and building from that. It’s a big shift from an employee mindset trained on the technology-centric mantra of “get a computer on every desk” to instead aim to “empower every person and every organization on this planet to achieve more.”

The work has paid off. Azure is Microsoft’s fastest-growing product, a critical contributor to the company’s strong income growth, and in an especially positive sign for its future, clients consistently say that Azure has enabled them to create, deliver and manage better digital experiences for their own customers. Of course, Microsoft, too, will feel the economic repercussions of Covid-19, but the hard work of reorienting its culture toward nimbleness and action will serve the company well in a future typified by rolling waves of change.

Flexibility. To support constant change, an organization must be able to reconfigure itself. Tapping into gig workforces or an ecosystem of best-in-class partnerships are ways to build flexibility into once-rigid structures. Creating a dynamic and reconfigurable organization is a complex undertaking, but an organization that is nimble, fast and flexible (light on its feet) is better able to handle and adapt to change.

Amsterdam-headquartered Here Technologies provides mapping and location services, an industry reinvented by digital technology that continues to evolve rapidly. To keep up with the pace of change, Here needed more flexibility, more employee mobility and a better way to move talent across functions. The company built a platform called Hitch that uses machine learning to tap into the company’s existing talent pool, pairing employees with projects that allow them to sharpen or develop new skills. Employees can be matched with experts in a topic, who act as mentors and take time from their regular responsibilities to work on these projects. Here has enjoyed both savings of $14 million and a notable increase in promoters—that is, employees who say that they would recommend the company to a friend. Critical to its future progress will be its ability to form project teams in a highly flexible manner.

Where to go from here?

We live in unprecedented times. Our challenge is to build businesses that will thrive in a world of unpredictable and accelerating change. Had there been any lingering debate on this point, the coronavirus certainly settled it. So, if changeability is the new superpower, what should you do about it?

Here are three smart moves any company can make now:

  • Get a baseline of where you stand and where your competitors are. Identify specific levers that you can and must improve. Don’t wander in the dark, speculating. Be conscious and intentional. Small moves now are better than big ones later. We live in a world of test and learn—or, at least, we should.
  • Disrupt your transformation. The playbooks of the past need to be updated. Similar actions will yield similar outcomes, so approach your current and upcoming change in a new and different way. See it not as a project but as an organizational shift. Invest to build lasting muscle in all the most important factors that will drive success.
  • Mobilize your leaders. Embracing a new approach and consciously working to improve the critical change levers will require a team effort. Organize around a shared ambition and action plan to disrupt old patterns and reach your business’s full potential.

Even before the extraordinary events of recent months, it was already clear that change is changing. That may feel intimidating, even incapacitating, but it’s also a remarkable opportunity. With a better understanding of your leaders’, teams’ and broader organizations’ capacity for change, you can test new approaches and track their effect on your company’s Change Power.

What would it look like if changeability became your company’s new superpower?

The authors would like to acknowledge the contributions of Laura Hollister and Melissa Burke to this research and brief.

Results Delivery® is a registered trademark of Bain & Company, Inc.

Net Promoter®, Net Promoter System®, Net Promoter Score®, NPS® and NPS Prism® are registered trademarks and service marks of Bain & Company, Inc., Fred Reichheld and Satmetrix Systems, Inc.

Change Power Index℠ is a service mark of Bain & Company, Inc.

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