Are there specific events that induce a business to change its strategies and what are they?

What is the nature of organizational change? 

And what drives change?

In this article, we’ll see how the drivers of an organizational change determine the nature of that change.

Then we’ll look at 11 different drivers of change.

The drivers of an organizational change – its root causes – will determine many things about a change initiative, including:

• How the project should be managed and executed
• Optimal solutions
• Risks and potential obstacles
• Potential returns

Among other things.

Let’s dive a bit deeper and look at the specific drivers of organizational change.

The Nature of Organizational Change vs. Change Drivers

In many cases, there is a single root cause – or a set of causes – that drive organizational change.

For instance, competitive pressure may spur the implementation of a new software application.

Customer feedback may fuel the transformation of the customer service department.

In these instances, identifying the root cause of a change is fairly easy.

However, that organizational change may drive other changes.

For instance:

• Competitive pressure may drive a business to develop new a set of services or products
• Launching those products and services may require other changes, such as rebranding or changing the organizational culture
• Those changes, in turn, may require strategic changes or cultural changes

The nature and true drivers of organizational change, therefore, can be complex.

11 Drivers of Organizational Change

Below, we will look at 11 different change drivers.

Some of these are strictly root causes. 

An opportunity for growth, for instance, is a root driver of change. 

However, some of the others covered here – such as rebranding or restructuring – can be two things at once. 

They can be a type of organizational change as well as a driver of change.

To start with, let’s look at some common root causes of organizational change.

Growth Opportunities

According to Altimeter, growth opportunities are a major driver of organizational change.

In today’s digitizing marketplace, this is no surprise.

The online economy has opened up countless new opportunities for growth, including:

• Innovative products
• New markets
• New business processes and practices

To name just a few.

Competitive Pressure

Many people and organizations resist change.

They only change when they have to.

And one thing that pushes people to change is competitive pressure.

This pressure can come in the form of bigger competitors, digital disruptions, new products, and so forth.

Cultural Shifts

Business cultures can be influenced deliberately by an organization, or these changes can occur naturally.

When cultural shifts occur organically, then organizations must respond to those shifts.

For instance, with every generation, cultures change.

These changes demand new workflows, processes, work environments, communication strategies, and so on.

As with every other change driver covered here, the nature of the change will depend on the root cause of that change.

Customer Demands

Customer demands can also fuel organizational changes.

New buying habits, audience sophistication, new technologies – any of these can pressure an organization to make changes.

Those change projects can include everything from new products to new marketing approaches.

Technological Innovation

Today, technology itself is a major driver of change.

The fast-paced digital marketplace is fueling digital transformation across industry after industry. 

The internet, for instance, has spurred the growth of countless markets, channels, and new economies.

Process Improvement

Another basic reason to change is process efficiency.

Inefficiencies can stem from many causes, such as:

• Ineffective communication
• Poor teamwork
• Outdated software
• Inefficient procedures

Likewise, process improvements can come in many forms, from digital adoption to procedural changes.

Strategy Changes

A shift in an organization’s strategy can easily result in organizational change programs.

Organizations that adopt a digital-first business strategy, for instance, will likely undertake a variety of digital transformation initiatives.

A company that begins emphasizing a customer-centric strategy will certainly initiate a number of transformations to their customer-facing business functions.

New Products and Services

New products and services can – like many of the other change drivers covered here – be the result of other causes.

And they can also fuel other changes.

For instance, customer demand may push a company to create a new product. That decision, in turn, can cause a business to engage in other change programs, such as structural changes, strategic shifts, and so on.

Restructuring

Organizational restructuring can involve:

• Reshuffling management
• Changing job duties, roles, or responsibilities
• Relocation

Any time a business is restructured, it will often involve – and fuel – other changes, such as changes to procedures, processes, culture, and so forth.

Rebranding

Rebranding is another type of change that can drive other changes.

It can fuel:

• Cultural shifts
• Changes to customer service
• Shifts in PR strategies
• Changes to marketing strategies

To name a few examples.

Mergers and Acquisitions

Mergers and acquisitions are often large-scale, impactful changes that drive:

• Restructuring
• Changes to processes and procedures
• Cultural changes

And so on.

These complex changes are often driven by other, high-level causes, rooted in business strategy, the business environment, and so on.

Learning Outcomes

• Describe forces of change

The art of progress is to preserve order amid change and to preserve change amid order.

—Alfred North Whitehead

Alfred North Whitehead was a philosopher and mathematician, but with that kind of insight on the subject of change, he could have been a CEO. Today’s business leaders have to worry about addressing customer needs in a fast-paced environment impacted by social, economic, political, and cultural shifts. In today’s business environment, the ever-looming presence of change is pretty much the only thing that stays the same.

The problem is, no one likes change.

Change, like the passing of time, is unavoidable

Organizations and their managers have to learn how to anticipate and implement change effectively. Managers need to find ways to overcome their employees’ natural aversion to change, because managing change effectively can mean the difference between staying in business and becoming irrelevant to their customers. The first step in managing change effectively is to understand what change is and where it comes from.

Organizational change is the transformation or adjustment to the way an organization functions. Organizations adjust to small changes all the time, possibly looking to improve productivity, responding to a new regulation, hiring a new employee, or something similar. But on top of these little adjustments we make at work all the time, there are larger pressures that loom over us, like competition, technology, or customer demands. Those larger pressures sometimes require larger responses.

What forces create these changes?

External forces are those changes that are part of an organization’s general and business environment. There are several kinds of external forces an organization might face:

• Demographic. A changing work demographic might require an organizational change in culture. For instance, Avon built and grew their business around door-to-door cosmetic sales, with the stay-at-home wife and mother as their primary front line employee. When more women entered the workforce in 9-to-5 jobs, Avon had to shift gears and find new ways to get their products in front of their customers.
• Social. Changing social trends can pressure organizations into making changes. Consumers are becoming more environmentally conscious, a trend which has pushed fast food restaurants to replace Styrofoam containers with paper. Manufacturers of cleaning products changed product formulas to omit phosphorus and other environmentally threatening chemicals. Tobacco companies have buckled under the changing image of smokers, the dangers of their products, and some have started looking into eCigarettes and other smoking alternatives to stay in business.
• Political. Government restrictions often force change onto organizations. This can be something as simple as a change in minimum wage for employees, or as complex as rules and restrictions governing fair competition in business. For instance, when the Affordable Health Care act was put into place, businesses had to change their operations and put steps into place to confirm that all employees had healthcare coverage to comply with the new law.
• Technology. Still have your VHS player? The founder of Blockbuster wishes you did. Technological changes can make or break a business. Whether new technology is introduced industry-wide, as when the laser was introduced to modern medicine, making surgeries easier and safer; or when it’s introduced to end users, as when consumers stopped renting videos to enjoy the cheaper, more convenient streaming services like Netflix, organizations must change to accommodate new technologies or suffer the consequences.
• Economic. During the 2008 recession, consumers lost their jobs and cut back on their spending. These economic downturns had a major impact on businesses. Banks failed. General Motors and Chrysler filed for bankruptcy. Survival meant adapting to change. Companies like Lego, who experienced stagnant U.S. sales during this time, took the opportunity to build their markets in Europe and Asia. Netflix realized the potential of providing in-home entertainment to families that had cut back their entertainment budgets and grew their subscriptions by 3 million subscribers in 2009 alone. Meanwhile, in the midst of spiking fuel prices, gas guzzling Hummers were no longer en vogue and were discontinued.

Companies can also experience internal forces of change, which can often be related to external forces, but are significant enough to be considered separately. Internal forces of change arise from inside the organization and relate to the internal functioning of the organization. They might include low performance, low satisfaction, conflict, or the introduction of a new mission, new leadership.

Low performance within an organization must obviously be addressed with change that facilitates higher performance. When low performance yields low quality or inefficiencies, customers complain and organizations need to change.

Perhaps one of the most famous examples of a company that overcame this situation is Harley-Davison. In 1980, no one wanted a Harley. They were a poor quality bike that even leaked oil on the showroom floor. Their parent company, AMF, couldn’t find a buyer for them, and thirteen Harley managers ended up buying the company.

Dramatic changes were needed, and the new CEO approached them with top-down authority. First, they laid off 40% of the workforce—salaried and hourly alike—and the remaining employees took a 9% pay cut. Their design team built the Evolution Engine and, coupled with the sleek design of their new Softail product line, sales started to improve. Perhaps most significantly, they developed the HOG (the Harley Owners Group) as a way to communicate with their customers. Operating improvements were made, and dealers started looking at Harley as a dependable partner. When they went public in 1986, underwriters were shocked that their IPO raised $25 million more than expected.

Companies often respond to external forces by taking on new missions and new leaders. Facebook’s original mission statement was “Making the world more open and connected.” CEO Mark Zuckerberg spent much of 2017 coming under fire for scandals (including accusations of data breaches and the potential of Facebook influencing the 2016 US election).

As the world continued to divide, he led the company in unveiling a new mission statement. That statement, “Give people the power to build community and bring the world closer together,” was accompanied by the release of new group management tools within the application and a goal to help a billion people join new communities. Zuckerberg also acknowledged that Facebook is no longer a simple platform that connects friends and families, but instead a powerhouse that can have significant influence on individuals and how they interact with the world.

When a company brings on a new CEO, that’s often an internal force for change. In July of 2018, Home Depot veteran Marvin Ellison became the CEO of the faltering Lowe’s, a competing big box home improvement retailer. In his first months as CEO, he set out to improve store productivity and customer service in the stores, closed a division of smaller Lowe’s stores and eliminated $500 million in capital projects to free up cash to return to shareholders. He also let go the company’s Chief Financial Officer and Chief Operations Officer. No doubt, the company was reeling over the changes, but it might prove just what they need to get back on track. Time will tell.

More often than not, these forces of change are outside of an organization’s control, but without exception, they all must be managed if an organization is going to be successful.

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