BIG BANG RARELY WORKS

Transformation can be achieved through a single step or it can be achieved through a more incremental, evolutionary series of steps. The end result can be the same – a transformed business, but the approaches – and implications – are very different.

Our desire to transform businesses radically, in a single step, is strong. It derives from a need to realise the benefits of a future vision as quickly as possible; minimising the pain, disruption and duration of the change process.

This ambition is valid, but we’re sometimes in-denial about our ability to handle radical, one step change effectively, and often get it wrong.

Commentators have pointed out that in reality large scale transformation rarely works; Dr John Kotter (Harvard Business School, A Force for Change) suggests that up to 70% of large scale business transformations fail and Henry Mintzberg (The rise and fall of strategic planning, 1997) argues that wholesale change can only be effectively made in measured steps. They both cite extensive practical research and case material to back up their claims.

So why do we continue to chase the promise of radical one step change despite the wealth of evidence highlighting the risks, what are the alternatives and how do we recognise the right approach to take in a given situation?

How did we get here?

The desire to realise a vision quickly, get the benefits then move on, is clear. But this alone doesn’t explain why big bang transformation remains so attractive given the risks and evidence of failure. This is especially true in the context of major technology projects such as ERP, which have a much higher failure rate when compared to pure business re-structuring. Two additional influences are in play.

Firstly, over-selling by consultants within the procurement process. Most organisations will define a clear need along with constraints, and unless they retain a significant internal capacity, will use this as a basis for procurement of a support partner(s), plus possibly technology and related services. Consultants promise the earth in the heat of competition, with very little practical experience to rely on and very little understanding of the organisation’s culture or structure. The procurement process itself can accelerate this, demanding higher and higher levels of outcome for less and less cost. Winning the deal is more important than providing the outcome, and unfortunately organisations can often take the hype too seriously, to their cost.

Secondly, context within the business cycle is everything. If an organisation faces a dramatic event or performance issue, big-bang transformation may be the only expedient route. In this case the approach is being adopted under duress, which is never a good position to be in.

We’re not as clever as we think we are

Whatever leads us to embark on radical, big bang, transformation – one fact remains; unless we really understand what we’re doing, and the business context provides an appropriate platform, we generally fail to pull it off as expected. There may be something natural in this; as humans we have a tendency to be optimistic about our own performance, and often act in ways which are ‘in denial’ about the facts.

Example: 

In the 1970s, there was a rush to develop wind energy. The US, Germany and the UK failed to develop competitive equipment using a traditional ‘design based’  approach. Denmark, a small country of around 5 million people, became a world leader in this technology using an incremental approach based on its agricultural heritage. US, German and UK windmills looked great on paper, but didn’t work. Danish windmills were less sophisticated but were far more reliable because their DNA had been proven in practice. By 2000 the top three windmill manufacturers in the world were Danish.

This serves to illustrate one fallacy of big bang transformation – that we are capable in all cases of designing the future so clearly and confidently that we can plot a route (the transformation programme) to get us there in one big step. However, this approach remains popular by reason of:

  • It gives us a feeling of control and certainty about the future
  • It gives us a feeling of empowerment
  • It gives us the feeling of efficiency and directness in reaching our aims
  • It supports a rational model of the world we work in – where everything can be explained.

These are feelings rather than facts, and consequently subjective. If we model actual performance we might not be so secure regarding control, cost efficiency, empowerment and understanding. In fact, most of these are illusionary, and provide no real comfort at all.

If the real attraction of radical transformation in some cases is an illusion of control and empowerment, then this is dangerous as it will lead to the wrong approach being selected, and possibly the reported 70% of such initiatives failing.

An alternative – the case for incremental change

Incremental change isn’t popular; it appears slow, complex and expensive, diluting benefits. Certainly, it will be a brave consultant who pitches an incremental programme where others are promoting a big bang and an equally brave organisation that selects a slower and more expensive approach to the same change. But an incremental approach, whilst not applicable everywhere, has some advantages:

  • It’s the natural way things happen; things in the natural world evolve they don’t just pop into existence
  • You can still hold an end vison as an aim  – and use it to guide and control the steps you take
  • You can take a truly benefits driven approach, insisting on tangible benefits at each increment of change
  • You can course-correct if necessary, with minimal cost of change or disruption
  • It may fit better with progressive and emerging business models which are fluid and hard to predict.

The transformational concept is based on a premise that an organisation in a steady state needs to be unfrozen from this state, changed in some way then re-frozen into a better way of working – hence the classic transformational project lifecycle. This may truly apply to only a handful of mature, static and large scale businesses. The majority of businesses exist in a fluid state and need to embrace continuous change as a core competence. For these companies incremental change could be a more natural approach.

Recently, both McKinsey (Insights – build a change platform not a change program) and Accenture (Journey Management: Successfully Managing a Complex Portfolio of Change) have built on J.B Quinn (Strategic change: logical incrementalism) in promoting a more continuous approach to change, focussed on creating a pervasive capability for change, rather than just executing a series of projects or programmes. These commentators support the belief that traditional ‘big bang’ approach to transformation has a high chance of failure.

The case for an incremental approach to change would not be complete without a quick look at the numbers; a key concern for many will be the fear of long, complex projects with high costs.

Hiding in the numbers – some insights

A quick look at some numbers may serve to challenge the perception that incremental needs to be slow and expensive. Let’s say we have two projects, both cost £1 and have £1 of benefit arising immediately on completion. One project is a big bang transformation taking a year, the other uses an incremental approach and is delivered in five phases over five years. The transformation project has a success rate of 50% (generous given the 30% success rate ascribed by most commentators), and the incremental project 80%. The incremental approach attracts a 20% delivery overhead. In this example failure leads to re-work.

Whilst we shouldn’t take these numbers too seriously as they are made up purely in order to understand any underlying relationships, the following insights appear valid, and supported by common sense;

  • An incremental approach makes costs easier to control through course corrections and adjustments
  • Benefits arise faster for big bang, but net benefits are always better for incremental, even after adding a 20% overhead for phased delivery – eventual benefits are the same (in this case after 5 years)
  • A 5 year incremental project, one phase per year, will have double the net benefits as a 1 year big bang project, after 5 years.

Before we rush to adopt an incremental approach, there are two significant implications to consider; impact on planning and on capability in leadership.

Impact on planning

Planning is far more complex and challenging for incremental change; a series of steady states needs to be planned, releasing benefits and enabling an organisation to continue in operation, while at the same time preparation continues for the next phase of change.

We lack techniques for this, the traditional forward planning approach runs out of steam in complex environments, and we may need to adopt a more ‘reverse engineered’ or backward planning approach, which are more common in strategic planning than project or programme planning. So, new skills may be required.

By way of example, you set out on a year-long holiday only knowing you want to have fun, your fixed budget is £100 (1970’s prices), your first stop is Fiji and you want to end up in Croydon. You then think about all the likely routes you might take from Fiji, working back from Croydon, and discover that (given your budget) at some point you’re in for a long sea voyage. You immediately set about learning how to navigate, sail and swim (even though you don’t need this now – and may never need it – as you’re flying to Fiji). This is reverse engineered planning. Without this approach you’d have a really well planned trip to Fiji, but be up a creek without a paddle (and unable to swim) very shortly after.

Some commentators describe an incremental approach as ‘muddling through’ in contrast to the rational ‘end to end’ approach of big bang transformation. This comparison is flawed; unless we have perfect (or near perfect) information about present and future states of the business, and total clarity about the range of constraints and dependencies which will influence the project over its lifetime, we’re planning in a vacuum. A principle of incremental planning is that we plan as far as our knowledge allows us, facilitated by the shorter timeframes involved.

Capability in leadership

J. B Quinn (Strategic change: logical incrementalism. Sloan Management Review 20 (1), 7–2) argues that an incremental approach is the most appropriate model for most strategic change, because it helps the transformation leader to:

  • Improve the quality of decision making – getting rid of some of the complexity and confusion
  • Deal head on with personal and political resistance
  • Build organisational awareness, understanding and commitment early
  • Develop flexibility in decision making based on constant feedback and reassessment.

In fact, a range of leadership skills much closer to those required to lead a business, not just a transformation, will be required. Strong strategic leadership is vital for an incremental approach to work as the leader needs to make sure of the compatibility of each step with overall aims. This heightened need for strong leadership capability for incremental change stems from the need to embed implementation and adoption from the start, not as an afterthought.

Transformational or incremental change? – Selector

The following selector will help you decide which approach may be appropriate in difference circumstances. It is meant as a guide only and is not intended to be definitive.

Adopt a big-bang change approach where … Adopt an incremental change approach where…
Business model static dynamic
Business cycle mature growth/decline
Business imperative ‘must do’; acquisition, carve out, legislation, performance issue ‘should do’; business improvement, re-structure, technology re-fresh
Type of change pervasive, fundamental continuous, on a road map
Capacity and capability high, mature, practiced low, unclear, unavailable
Attitude to risk risk taker risk averse
Clarity of vision clear range of possibilities
Technology component and/or ERP platform able to accept constraints and conditions imposed with a big bang transformation/release able to accept constraints, integration and process complexity in a phased release
Key constraint time cost

In a nutshell

  • Both big-bang and incremental approaches to change can work, but only if the context is appropriate (the selector above will help you decide)
  • We’re attracted to ‘big bang’ transformations for a variety of reasons, but not all are rational and many are emotional
  • If you’re not >70% confident in the success of a ‘big bang’ transformation, don’t do it, incremental is likely to provide better net benefits with a greater control of cost
  • Whatever approach is adopted, good execution is key, this involves understanding the implications of the approach and managing them
  • A different set of skills may be required to lead incremental change programmes, closer in nature to business rather than project management
  • In making a selection, factor in and evaluate a realistic factor for risk (of success, of re-work) to support a fair comparison
  • Beware of ambitious, over-promising, consultants.

POSTED BY: Paul Clark - Director of People/Chairman

CONTACT: paul.clark@projectone.com

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