Change: A CEO’s Job In The 21st Century
Tetra Pak president and chief executive officer of Canada and U.S. Brian Kennell provides an opinion on how companies grow in changing environments.
A quick scan of recent top business lingo lists—an attention-grabbing feature frequently posted at sites such as the Harvard Business Review and Forbes—shows that none included some of the most relevant words of the moment: speed, uncertainty and change. Unlike many buzzwords in vogue today (think transparency, actionable, authentic and synergy), these are direct and comprehensible. More significantly, they capture the realities of doing business right now, for the marketplace is changing with breakneck speed and becoming exponentially more complex, diverse and unpredictable than ever before.
This means significant changes are in store–and in many cases already underway—for all businesses.
While this will not always be easy, it is for the good, as change is not only inevitable—it is essential for sustained and healthy business growth. A recent Bain & Company study of more than 2,000 companies indicates that 90 percent fail to achieve and maintain healthy growth objectives. That’s why a successful company needs to deploy appropriate strategies for proactively driving change and sustainable growth.
Challenging The Status Quo To Achieve Greater Success
Pioneering companies proactively embrace change—not on a reactionary basis or simply as inevitability, but as an opportunity to challenge the status quo and achieve greater success. I’m not talking about incremental changes, which are minor fixes for mature or potentially troubled products. I mean big, meaningful and sometimes disruptive changes that can only take place when a company is at the top of its game—or at the very bottom.
There’s no shortage of poignant examples of what happens when companies fail to proactively embrace such change when it’s needed. Consider the examples of Kodak, Rand McNally and Blockbuster.
Kodak suffered one of the most unfortunate corporate implosions in recent memory when it failed to capitalize on the digital technology it invented in 1975 for fear of undercutting its core business in film and processing. Similarly, mapmaker Rand McNally stumbled badly when it failed to make a timely transition from paper to digital content. And think about what has happened to books, newspapers, magazines, encyclopedias, tapes and CDs.
Admired And Innovative Companies
At the other extreme, think of the likes of Apple, Amazon and Google – the top three winners in Fortune magazine’s most recent list of most admired and most innovative companies . All are boldly exploring disruptive possibilities and options beyond their core competencies, investing in fresh ventures—including most recently television technology, drone-to-door delivery and driverless cars. Pundits sometimes scoff at these cutting-edge gambles, however I’m certain that all three companies are on the winning side of their bets.
Hollywood also figured this out years ago. Look at the new, rebooted, multi-billion-dollar franchises for Spider-Man, Batman and Star Wars. Producers have been fearless in reinventing these already-popular series by changing actors, directors and storylines to keep the franchises growing. Dangerous? Certainly. But box office receipts on the latest iterations of these familiar movie brands have proven them right.
Understanding And Driving The Right Change Needed
A key responsibility of the company’s senior management is to proactively identify and drive the right change needed for current and future success–and in certain cases to lead and drive multiple kinds of change simultaneously.
In fact, there are actually three distinct kinds of change:
- Disruptive Change, which creates entirely new business models (http://www.doingwhatsgood.us/tools/fullpost/business-model-generation-how-it-can-help-you#.VDLvW-drmdm) , such as Google, Facebook, Netflix, Wikipedia, Amazon’s Kindle and Apple’s first iPhone;
- Radical Change within existing organizations—as when Unilever doubled-down on its business investments during an economic downturn. Or when Samsung, at the height of its game these days, merged its Engineering division into Samsung Heavy Industries earlier this year to boost its expertise in offshore plant construction and raise operational efficiency;
- Incremental Change, those minor course corrections such as flavor extensions, packaging redesigns and constant upgrades such as moving from the iPhone 4 to the iPhone 5.
Building Support For Change
It’s critical for senior management to foster an organization-wide culture of change. That means building and empowering teams beyond top management who are versatile and nimble, and capable of adapting to, and embracing, an evolving status quo.
Toyota established and embedded a culture of change by flattening its organizational hierarchies and instilling a relentless passion throughout the company for eliminating waste and for constantly seeking out and implementing process improvements. The result was so successful at creating a culture of proactive change that Hyundai has also embraced it, reports Fast Company.
Additionally, Jason Seiken, PBS’s senior vice-president, created a culture of change by accepting failure as an inevitable by-product of risk and good work. “A company that takes three risks, resulting in two successes and one failure, is …still ahead of competitors who take no risks at all,” notes Fast Company blogger Mark Lukens of global management consulting firm Method3.
Separating Culture And Values
Paul Polman would agree. He leads Unilever, the world’s second-largest food producer—and a company that derives 57 percent of its sales from emerging markets. In 2008, when the market crashed, Polman chose a course diametrically opposite most business leaders and stepped up investments.
In a recent interview with KPMG’s ConsumerCurrents, Polman notes that Unilever bucked the trend to invest in IT systems, R&D, new launches in new markets and major acquisitions—gambles that worked in its favor.
Polman says employees bought into the strategy once the company emphasized the point of separating culture and values in the midst of disruptive change. “Culture changes,” he says, “but values remain the same: If [founder] Lord Lever came to this company today, he’d find the same ideals as when he built it. We spend a lot of time making sure that our pioneering work is carried out globally with integrity and respect.”
Putting Your Ideas To Work
Increasingly, we see these ideas at work at the highest levels of business enterprises. When Jeffrey Immelt, chairman and chief executive officer of General Electric Corp., addressed the Detroit Economic Club (in 2009) , he said, “Change can come, but it requires a new way of thinking. It requires a clear and determined plan of action. It requires leaders throughout the economy to take command of events.”
And Immelt is a step ahead of the change game. In the same address, he noted that while GE remains productive and competitive and invests massive amounts in technology, products and services, “we know we must change again,” he notes.
Applying Change Management
No business is immune to the significantly changing marketplace. And in the food and beverage industry, consumers are changing, as are their consumption habits and expectations of the products they consume and the packaging that protects and dispenses those products. As a result, food and beverage suppliers, producers and retailers are also changing.
Tetra Pak understands this, and evolution and innovation are part of our DNA. We started out by introducing a disruptive innovation, the first paper-based liquid food packaging, and built on it, creating product lines that today support growth in 171 countries. But to make that growth profitable, and our market leadership sustainable, we continually challenge the status quo and invest in innovation and change—internally within our organization, and externally to provide our customers, and ultimately consumers, with the packaging and processing systems that meet current and future needs and expectations.
This kind of achievement requires agility in anticipating changes to our business environment, ranging from evolving consumer preferences to competitive threats and other as-yet unknown factors. While no one can foretell the future, we can gain astute predictive insights from being extremely close to the wants and needs of our customers—which is precisely what prompted our organization to elevate its geographically dispersed regional vice-presidents to our Global Leadership Team. This move brings their unprecedented first-hand knowledge of each region to the highest levels of the organization with speed and accuracy, leading to more agile decision-making.
This calls to mind a strategy Warren Buffett cited when he stated “Should you find yourself in a chronically leaking boat, energy devoted to changing vessels is likely to be more productive than energy devoted to patching leaks.”
It’s a CEO’s job to boldly lead a company at the height of its success, with resources still intact, into changes that will have the most sustainable, positive impact in the long-term.
Brian Kennell is president and chief executive officer of Tetra Pak Inc., Canada and U.S. His leadership focus is on driving development and growth through superior product quality, sustainability efforts and customer service. Tetra Pak is a global-leading food processing and packaging solutions company. Further insights are available at www.DoingWhatsGood.ca.