Paramita: Hello and welcome to PwC Luxembourg TechTalk. Statistics say that an average organisation has undergone five enterprise changes in the past three years. 73% of organisations expect more change initiatives in the next few years and only a small minority expects the pace of change to decelerate.
But have these companies been able to manage change effectively? For many of them the answer, unfortunately, is no. So what is effective change management? And how to implement a technology change successfully?
Today, I speak with Antonio Marco Ranucci, a change management expert, here at PwC, to try to answer these questions.
And, just a quick note before you listen to this episode, to say that in the middle of our recording we had a slight technical glitch that erased a part of our conversation. So we had to rerecord it. Happy listening.
Paramita: Hello Antonio.
Antonio: Hi Paramita.
Paramita: Thank you so much for being here. We will talk about change management today. The first question that I want to ask you is what is change management?
Antonio: So to keep it actually I think simple, change is simply answering a need. You wouldn't change if you don't have something to do, something you should get better at. And it's the same thing for organisations. So we talk a lot about self-change and self-improvement and we feel all excited about it. We read books about it. We look at YouTube videos about personal development but whenever we talk about organisations, we feel that this is kind of a depressing topic. And actually it's not. And I think that why should we talk about change management is because when you have an organisation, you have a lot of people. So it's not only about convincing yourself, it's about convincing a whole group that you actually should go in a certain direction altogether which is much more difficult than convincing yourself to go on a diet or run the marathon right. So why do you talk about change management...
Paramita: You never know that whether that is more difficult or not believe me. You know the diet point... But anyway go ahead.
Antonio: True but I think if we look at the statistics of books I think personal development books are more successful than change management books. So why do you need to manage this change? It's especially for... exactly for what I said... the thing is when you have an organisation, it gets very complicated listening altogether to the market, understanding what is the change needed and then implementing this change altogether. Moving 100,000 person, ten thousand persons, even one hundred, even ten... it's more difficult than moving alone. But it's actually much more exciting and it's actually easier in a certain way because when you move together you have the others to tell you if you're wrong, if you're going in the wrong direction and if you should take another path. When you do a mistake on your own, you're on your own right. You're going to fall. And that's all.
So why a change management is fundamental? It's also because they often fail. Whenever you go on an Internet blog about change management or you can read books about it. One of the first things is the statistics of McKinsey that say that 70% of change programmes fail. Now the statistics vary a little bit between one company and the other. Strategy talked about 65%. But it's still a big number. So this tells us that if we don't actively and in a good way manage how the organisation moves we're going to fail terribly. And we cannot ignore it. The answer could be yeah well then just don't change. If everything fails, why should we change at all.
Well the thing is the world evolved incredibly. Before, we could you know argue with ourselves OK I think that in five years our organisation should enter a new country and we develop a five year plan. And that's all. And then we implement a plan step by step, milestone by milestone. And that is difficult too but it's more project management related.
Today, you really don't have this choice. The need I was talking about... answering this need. It's not an answer that you find within yourself. It's the world that asks for it. Especially with technology. If you don't change, something will change around you. And the moment you will realise it, either the competition will have discarded you or the customers will ignore you.
Paramita: One question that is related to this, because you spoke about a company opening up somewhere else and how that is more in the realm of project management. So when we talk about change management, do we really talk about anything that evolves in a company? Or just a technology upgrade or a technology evolution?
Antonio: Well I think there are very different kinds of change. I like to talk about two different kinds of change. First of all, there are incremental innovations and there are radical transformations. Incremental innovation is where you start from a base point and you're just adding new practices or you're changing slight things. Radical transformation is when for example your business changes completely and you completely have to change the way you're working. In any case, change needs to be managed in every kind of project. So I've handled financial projects, process improvement projects. And if you don't handle the transformation of people within the client and within your team also because you're changing during the project even if you don't realise it the project will fail terribly. So it gets confusing sometimes. Can you distinguish between project management and change management. Yes and the big distinction is the human aspect. So project management is more about OK this is the scope of the project, these are the times, these are the milestones that we have to achieve and that's the plan. Change management is more about OK what happens to all the people involved. How are we going to bring all these people with us. That's the main difference.
And I think transformations wherever they come from, a new financial regulation or a new technology, we cannot ignore the fact that people will be impacted. And even if we are going more and more towards technology, AI and the human aspect in the organisation is the most important aspect. The people management is always the most important aspect and especially when you are on a project with a client. Bringing these persons from point A to Point B and more importantly when you leave keeping them in the point B it's more a human transformation than a technical one. And it's fundamental to do it in a technical way because it has been proven over time that there are better approaches than others.
Paramita: Doing in a technical way?
Antonio: Yeah. What I mean is it's very human. But it's if you want to handle it scientifically, it's actually very technical.
Paramita: So my next question was... I wanted to ask you what is the role of technology in driving change management? So are we talking about the same thing? Role of technology and technically managing change?
Antonio: No. It's two different things. So the role of technology is one thing, the technical aspect of change management is another thing. What I mean is there's a methodology, a specific methodology to perform change management in a good way. Technology is one of the levers of change. So we can use it in our favour or sometimes it's just a force driving us to change. It can come from outside, it can come from inside. Technology is an enabler and it helps us in this process of changing. So change management has specific steps and technology intervenes in all these steps.
I'll give you a concrete example. The first aspect of change management is always creating a vision of the change. It may sound obvious but it's OK we need to change because something is happening. Financials are going bad. Our competitor did some move. We feel that we are obliged to change. But the first question should be where do we want to go. And this is fundamental. If we don't set a good vision in simple words of where we want to arrive and how we want to get there from the beginning, change is going to fail miserably. How technology helps us in this specific step is that technology is so powerful that now it enables us to envision so many different scenarios that before were inconceivable.
And I can give you an example with data analytics for example. Now we have artificial intelligence that helps us with machine learning...
Paramita: With the results, with predictions right? To give you scenarios where you'll fail and where you'll succeed and all those things?
Antonio: Exactly. So if you go in data analytics and you go on the profitability analysis of a company, 20-30 years ago, the access to data was more limited and the capacity of algorithms was much more limited. Now being able to produce the scenarios at an incredible pace and have a machine learn by itself and suggesting you where you could go and where the profit could rise more... so in country A or in country B, in this way or in another, gives you the possibility to envision the change in so many ways that before was even inconceivable. So technology enables us to build a stronger vision for example.
Then also implementing the change is incredibly helped by technology. And as simple as communicating with all the different departments and units of a multinational was much more difficult in the past and now with technology we are able to communicate and align everybody, all the organisation in the same way, in a much easier and faster pace. So technology is an enabler, is a lever of change. It helps the technical aspects. So the technology helps the technical aspect.
Paramita : OK now we spoke of how technology helps in change management and in implementing change. The next question comes what is technology change management? It's not the same thing as leveraging technology into change management right? It's managing technology a new technology adoption?
Antonio: So I think we can... to answer this question, we can look at the origins of the word technology which is very interesting. So if you look at the Greek word, actually “tekhnē” which means art and "logos" which means to discuss and describe. This is often associated with another word which is "poeisis" which is “production”.
So technology at the end is the art of production. So when you're talking about technological change management, you're talking about the hardest change management that exists. Why I'm saying this? Because you're intervening in an organisation and changing the way people work every day. And people love their routine. So very technically speaking you're changing the way the inputs are put together to produce an output.
And to handle a technological change management is to be very pragmatic or is often associated with very concrete things.
So you install a new software. Let's talk about the simplest one. You're installing new software. The reality of the ground is that operational people will feel lost. Because they were used to click in certain boxes and search certain kind of data and perform certain reports. And you're changing completely their environment. If you don't handle this transition in the right way and again by showing them the vision of the change -- so why you're going there, why it will be good for them, for the organisation and for the future --- you will lose them right away.
Paramita: OK. Let's take a concrete example. Let's say X company wants to, for their internal purposes, go to... they were using a certain kind of emailing and they want to go to a collaborative platform. And they want to implement this change as smoothly as they can knowing that it's a huge structure and there are people that have been working for 30 years. They're used to a certain kind of like you said boxes, ticking the boxes, clicking on certain buttons. So what would your advice be? What would that change management you know an effective change management in that case look like?
Antoni: I think it's a very nice example by the way. So actually it's very interesting because look at the aspect. So let's look. One is email. And one is collaborative platforms. And for example here in PwC now we have Google Hangouts right. And look at the difference between an email and Google Hangout. The main difference --- I don't know if everybody noticed but the history of your conversation disappears. So why I'm saying this? Because if you want to implement such a change I'm sure that technically an IT person will be able to tell you well look these are the steps, this is what we have to change, this is what we have to connect and that's perfect. That's kind of OK. You know you always have bugs but then you know you're going to change and everything is going to work after. But the next question would be OK but what's the cultural aspect of this change? The cultural aspect of this change is that maybe people were used to having emails and history of emails to which they could refer. So before implementing such a change what I would advise is a phase of diagnostic of the culture of that organisation.
Paramita : An audit?
Antonio: Sort of.. well sort of more like in process improvement, you would just go and interview people. Actually the most effective management tool that exists is actually talking to people.
And in this case it simply is OK so what's the relationship of an operational person with emails when he sends an email to his manager. Do his managers trust him. Or has it happened in the past that he actually had to take out all the history of the email to demonstrate that he was right. So you may convince him technically because in a certain sense well look in email you have to you know search the address, you have to write the email and then you have to send it. It's not very different but let's say that it's not very productive. In Google Hangout, maybe you already have the name, it appears already. You write and you send and it's OK. Perfect. But the person may say it or not. Then again dependent of the culture, maybe he's scared... yeah but how I'm going to keep track of what I said?
Paramita: Google chat!
Antonio: Perfect. Exactly. And that's the most, actually the most delicate aspect of it. It's just OK what's the fear behind what the person is saying. So it's really about, and again, you can do it normally in a very structured way. Change management for example is often associated with process improvement because when you change a technology, you also have to change how the people collaborate. So the software changes. Sometimes technology even eliminates... actually that's the purpose to become more productive... it may even eliminate certain steps of certain processes. Now in process improvement, there are three phases normally and it's exactly as in change management.
The first thing is building what you call the "as is" situation. So what happens today and what you do normally to perform that phase is two/three rounds of interviews. So you go talking to people. The second step would be OK so I've listened. I understood your concern. These are also the objectives of the organisation. So there's a sort of an alignment between what the organisation's goals are and what their personnel’s goals are. And this is where we want to go. Do you agree. There's a sort of second round of interviews and in this second round of interviews, the employees first of all will say if they understood correctly 100% of what was said, yes or no.
But more importantly the fears will come up.
Paramita: So we're back. We had a magnificent technical glitch and we lost a part of our conversation there. But I'm always happy to talk to you Antonio. So we'll restart from where we left off.
So you were talking about basically the second phase in process improvement where the fears of people, of the employees may start coming up.
Antonio: So we were saying just as a recall we have collected how the organisation works today and with these rounds of interviews, we started collecting these fears if we really listened to the people. After this we are in the second phase of process improvement. And the second phase it's called normally the "to B" phase, from A to point B. So we found out what's the point A and in the second phase we define what's the point B. And when you do that you actually start from the existing, so the "as is" and you start modifying how the process works. By starting to modify this, fears will come up again and even more powerful because you're concretely suggesting that you're going to change their daily routine. But if you really did the interviews in a certain way, you already prepare them for this phase. You will not react in a negative way to this criticism and you'll prepare for the third phase. The third phase is the most delicate one because you're going to talk about how you're going to really get from A to B. So you know what is A, you know what is B. How do we get there. And to get there, you need concrete steps and these concrete steps, the risk is that if you didn't listen and prepare for the criticism of the person who's resistance to the change you will lose part of the organisation. It's not going to be behind you. So you have two choices basically. When you see and you were expecting a certain resistance, you have two choices. The first choice is to abandon that person and say...
Paramita: The rebel...
Antonio: The rebel, exactly. You don't get along with us. Well just stay behind. Or actually you could welcome this criticism and try to get him along. And if you really listened to him in the interviews, you know what are the unconscious fears behind. So as I said if the culture was of keeping track of all my emails... how I'm going to keep track of this. That is the real problem. That's where we have to comfort him. It's not in the technical aspects of the technology. It's more... well don't fear the fact that there's no trust in you because there is... So get along with the change.
Paramita: And like you said that even if it's a technological change management the primordial part is the human aspect.
Paramita: Just to wrap things up here so if I ask you to give me a couple of best practices...
Antonio: Yeah. So just to be very clear there are certain steps that should never be avoided in change management.
Now every organisation is different. These steps should be adapted and these steps should not be interpreted as silos. So they communicate with each other, the steps. But normally the flow goes like this.
First of all, you want to establish the transformation vision. You want to understand where you want to go. So there is a need for change, something is happening in the market, a new technology, a competitor move or something else and you want to get there at the same position to not lose track of your competitors. What is important about the transformation vision so about where you want to go how and how you want to get there is that when you set these objectives, these objectives are appealing enough to your organisation. We said before actually this vision should be poetic enough to bring people along with you.
Paramita: Yes. And I want to, because we lost that part, but I would want you to repeat what you said about the parallelism, the financial parallelism because I asked you know you have to define where you start from and define where you're going, to clearly define the objectives. And earlier you know before we could probably define point A and Point B but now given that everything is changing and evolving so fast, does it make sense to really define the destination or should it be more considered as a journey?
Antonio: So yeah I did a financial parallelism and I'm happy that you liked it. So I'm going to repeat it. It's very simple. I talked about budgets. So this routine that every organisation follows. And sometimes it's emptied of its significance but it's a very important practice. Let's say 20-30 years ago, you could build budgets and business plans and plan the future probably five to 10 years ahead. You could say OK I'm going to enter that market in five years and I'm going to do this, this and this. You would set precise milestones, manage the projects, nominate people responsible and everything would go along. Now today this doesn't make sense anymore for the simple reason that first of all saying in five years I'm going to get into the country, it's a very long time. Now in the budget today what happens is that we start talking more and more about flexible budget. So let's say that I try to motivate my sales force and I tell them look guys next year you have to do 20% more on that product. And along the year, they are doing their best. And a new technology comes out and nobody wants that product anymore. So imagine that you are a producer of fax machines and they invent the email right in the middle.
So it gets a little bit difficult reaching that 20%.
So you have two possibilities. Either you stay rigid and you say no you have to get to that 20%. And probably what will happen is that you will go through a wall because the customer's no longer there anymore. Or you can react flexibly and change the budget and say OK well maybe 20% doesn't make sense anymore and we should take that money to invest into email technology. So you shouldn't punish your organisation because they didn't get to the 20%, you should reward them because they reacted in a flexible way.
That's the important thing about the vision. It's not anymore sufficient to just say OK let's raise our profits up 5%. That is not enough to motivate a whole company and I think it's even dangerous to set a vision for next year only in financial terms. It's not enough for a simple reason. If things change along the year, the technology changes, you want to do something like PwC does. You want to talk about changing the world and about solving problems of society. This is a vision first of all that is more appealing and it's kind of obvious but it's also more flexible. So if during the year, something incredible happens and we have to respond, we can still respect the vision of transformation and follow the new technology and actually maybe this new technology will respond to this vision in a better way and then profits will get along. If you concentrate on your numbers, the 20% I was talking about before on fax machines you will lose the change, you will lose how the world is transforming. Setting something like let's help the world, let's establish our vision in the world, it's much more powerful I think in a change programme.
So what do you do after setting this vision actually is alignment. So what is very important is that the leadership of your organisation are the first persons to follow this change. How do you ensure that?
It's very simple when you have two parents and you have a kid, sometimes parents argue... that's not a problem. The problem is when they argue in front of the kid and especially when is under the request of the kids. So let's say that the kid wants an ice cream right before dinner. Now the parents could be yeah you can have the ice cream. No you cannot have the ice cream. Yes you can. No you cannot. The kid will just be confused. First of all, as we said the kid will probably profit from the situation, sneak behind the parents and go get the ice cream. Well in the short term the kid may be happy. In the long term the damage is that he doesn't know what's right and what's wrong. So what I said before and maybe it's a little bit of a stronger statement is that it's better to be consistently wrong than inconsistently right. It's better that the two parents have the same idea, even if it's wrong. So basically alignment means that all my leadership understand exactly this transformation vision and they agree to it. And again the resistance to change... we should not take for granted the leaders will all agree. If there is and I took the example of a big organisation... Imagine an organisation has 50 or 60 key leaders around the world that see each other maybe once every three months. This is completely a standard situation for many multinationals. Can we take for granted that all understood the same thing and they got the same message and that they understood where we want to go exactly.
So first things first, we have to ensure people in key leadership positions, people who take decisions are OK with it. Simple as that. Why do we need that. Because exactly after alignment we need to engage the organisation and they are on the frontline with their organisation. If don't see their own leaders as a kid sees their parents doing what is right they will not follow the change.
Paramita: Yeah if you're not doing that, I'm not doing that either.
Antonio: Exactly. So if you're not performing what you promised and the engagement starts from leadership alignment. We can have the best communication ever. We can have the best change ever. So even if we're clearly improving the life of people, if they don't see the boss's move they will not move. It's as simple as this.
Let's say that everything goes well. So we have defined the vision. We know where we want to go. Everyone, the leaders are all aligned. The organisation is engaged. You will always have resistance... When I'm saying engaged, well it's normal to have a little bit of resistance. Then what you want to do next is OK. So we want to get from point A to Point B. How far are we from point B. That is the is the next question. We took the example of artificial intelligence. So artificial intelligence is a very important technology. And what I said is sometimes leaders that are very knowledgeable you know read an article in Harvard Business Review or see a report on artificial intelligence and feel conquered by it. So what they will do is starting to get informed and when they ask for a transformation strategy to get to AI what we need to understand is that OK but is your organisation near that state of AI?
Paramita: Are they ready for it...
Antonio: Are they ready for it. Yeah. So I took a very simple example. A lot of organisations still work a lot on paper. Yes we are in 2019 but we still work a lot on paper and I wrote my notes on paper that I have in front of me. So paper still exists. But what we have to understand is that if processes still work in certain steps on paper going from hand to hand of different employees, we cannot get from there to AI. It would be much more feasible to start building intermediary steps. So OK let's go digital before. Let's transform the paper into digital. Then from digital maybe we can start understanding can we automate something and talk about RPA (Robotic Process Automation). Then from there maybe we can talk about machine learning. If we don't build the stepping stones, we don't put the stepping stones, we're not going to get from paper to AI. It's impossible. We have to understand the readiness of the organisation. And I'm not only talking about technological readiness because this is an example of technological readiness but it's also of cultural readiness.
So we have to understand how the organisation is ready to move quickly. Let's take another example. We changed the way the remuneration package of the organisation works. This is a very delicate example and let's say that people are normally used to a fixed salary and a little bit of bonus. Let's say that you change it completely and... So let's say that you change it completely and say well let's go more on the bonus side and go on variable schemes. You know this is very difficult culturally. How will you convince people from getting from A to B if you're really saying well look now the bonus doesn't represent 5% anymore of your remuneration. It's going to represent 60% and it all depends on the KPIs of the organisation. It's very difficult. You have to bring the people along and you have to understand why is this vision necessary and you have to engage again the people to make them understand why this is necessary.
So after all this, let's say that everybody's aligned, everybody's engaged, everybody understood, the organisation is ready, we prepare the plans and the milestones and we engage the managers. Now what we have to do is actually implementing it. And to implement it is not only to install this or that software. That's the technical aspect. Sure we have to build the architecture. We have to make sure that data arrives at the right moment. But what's also important is that it's again the human aspect. So the training of people...
Paramita: And you need the right team for that. You need the right people for that...
Antonio: Exactly. What you want is even when you bring change from an external point of view. So you're a consultant and you change in an organisation. What you want is that the day you leave, you actually leave to the organisation that change capability. What you want to create is the will to continuously improve the journey. This is about the journey.
What is traumatic about change is that people think that change is... an incredible transformation happens every once in ten years and then we can stop again. And then in ten years, we're going to talk about it.
It's like saying I'm going to sit on the couch all the day drinking beer and then I want to run the marathon the day after. It's just not going to happen. So just get up from that couch, start walking and then maybe after five months' training, you can run your first marathon.
It's the same thing for an organisation. If you get them used to continuously search for possibilities to improve their daily work and continuously improve the vision of the organisation and then you bring them a transformation initiative, they will not be shocked. Change is part of their routine. This is the thing. So change must become our routine. This is the most important aspect of technology today. And if we want to get along more and more with technology we have to adapt to this way of flow. It's not anymore being it's about flowing.
But concretely this happens by training certain key people what certain call power users. What you want is to actually coach like internal change consultants for the client. So the day you leave that drive is not lost. You want to give them the right tools. You want to give them the right coaching and so that they can repeat this four or five steps all along whenever they will need. That's the real value you can bring with transformation. It's being fit for the next one.
Paramita: You build the groundwork.
Paramita: For even more changes.
Paramita: Well Antonio, thank you so much. And thank you like a million times for bearing with the glitch that we had. I'll be so happy to have you another time.
Antonio: With great pleasure. Actually what I didn't say is that I was happy about the glitch so that I could redo it all again.
Paramita: Oh thank you. That's very nice of you. Thank you so much.
Paramita: So that was Antonio's take on change management and technology change management. Hope you enjoyed the show and I'll see you next time with another episode of TechTalk.
Commmunication, PwC Luxembourg
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