CHAPTER 1: UNDERSTANDING THE CHANGE – Managing Business Transformation: A Practical Guide


  • Impact of the change is understood from different perspectives
  • Vision of the change is developed
  • Compelling stories that explain the impact of the change are developed for different audiences
  • Understanding the need for change
  • Assessing the environment in which the change will be implemented
  • Creating initial support for the change

Understanding the need for change

The purpose of this phase is to clarify the reasons for the change and to use this to motivate and persuade all affected that the change is beneficial.

Transformational change comes from the desire of the organisation to achieve its strategic objectives. The scope of the change requires an understanding of the capability needed by the organisation to achieve these objectives, and this scope directly impacts the viability of the change as evidenced by the business case.

Figure 1: Analysing and understanding change

The process of understanding the need for change is, naturally, at the start of the business change life cycle. However, it is useful to repeat this analysis at key decision points throughout the change to assess its continuing viability.

Those responsible for implementing the change may not have been involved from the start when the strategic objectives are defined, but they are responsible for developing the requirements for new capability, providing a persuasive answer to the question, ‘What’s in it for me?’

As one of the contributors to this book said when asked what motivated him to implement change:

Well, I don’t go to work every morning just for the chance to make the directors even richer. I change because I want to improve and because I think what I do is valuable to my customers, and I want to give them the best service I can.

This is a typical response – it’s personal. People are motivated to change because of how it affects their world rather than for corporate reasons. Reasons for change have to be translated from business benefits to personal statements, identifying improvements, opportunities and solutions to problems.

In assessing change we are trying to identify what the change means – its impact, its benefits and the outcome for the organisation. These reasons will be used to develop support for it by all stakeholders.

A good place to start hunting out the benefits that the change offers is documentation on the reasons why senior management think it is necessary. Look for a business case, strategy or position paper that sets out the case for change. Use the benefits as reasons why the change is constructive, and use any information about risks or costs as possible challenges to the change.

Another place to start finding reasons for the change is via a PESTLE analysis. This is a mnemonic for identifying the drivers for change:

  • changes brought about by political factors
  • changes brought about by environmental factors
  • societal changes
  • technological changes
  • the need for compliance with legislation and regulations
  • economic and competitive forces.

PESTLE analysis is useful in understanding all the possible reasons for making the change, looking behind the internal factors to consider what is happening in the marketplace that the organisation operates in. The information can provide compelling reasons – a ‘burning platform’ – that is, reasons for jumping to the future offered by the change.

Another type of analysis is called From/To analysis. This provides a comparison of the current state (before the change) with the proposed future state (after the change), and gives an indication of the scale of the change. The ‘To’ statements can be useful in persuading those who are motivated by a move towards a positive future, or who can see that current problems will be fixed.

Translating this high-level information into personalised reasons for change is best achieved ‘bottom up’. Present the benefits, drivers and scope of the changes to every level of the organisation and ask the question, ‘What does this mean to you?’ Individuals provide the details that create credibility amongst their colleagues who recognise the references to, for example, screens and fields in specific IT systems, the activities and tasks from specific processes, or the data on specific reports. Their detailed statements turn bland corporate statements into persuasive, resonant arguments.

Another way of looking at what needs to change is to use Lean Six Sigma, which is a set of processes for eliminating redundant activities and increasing customer value. It identifies where information does not flow freely and where there are bottlenecks; it focuses on changes that will improve the whole system, rather than ones that offer improvements in isolation to parts of the organisation.

One of the most well-known aspects of Lean thinking is the emphasis on the voice of the customer. Change is identified by determining customer requirements, rather than starting from the position of ‘I have a solution’, so let’s find a problem that it will solve.

Using Lean principles, the change is articulated as a series of critical-to-quality (CTQ) requirements, which are positive statements of customer requirements.

Case study

An IT company that supplies help desk services has developed a new service to help companies select and install telecoms equipment. The service began 18 months ago and customer demand is strong.

There is a dedicated team of advisers and installers, but follow-up enquiries are routed through the same help desk as all IT enquiries. The service director responsible for the help desk is effectively running two business lines but has seen no increase in staff. She recognises that help desk technicians are increasingly asked to deal with complex telecom enquiries and she has had to invest in additional telecoms training. However, call waiting times continue to increase and customer complaints are on the increase.

Following a review, a company restructure has been agreed that will split the help desk into two units. The service director will retain control of both units and will appoint a manager to run each function.

Business case for the restructure


  • Opportunity to exploit potential high-margin business and increase profitability.
  • Re-instatement of previously good reputation.
  • Reduction of stress, sickness and turnover of help desk staff.
  • Increased confidence of the sales team in selling telecoms services.
  • Increased customer satisfaction and positive referrals.
  • Two promotion opportunities for new managers and clearer career development routes for other staff.


  • Customers may have to deal with two different departments when they have a complex IT/telecoms query.
  • Employees that enjoyed the variety offered by handling IT and telecoms enquiries will be demotivated.
  • Investment in training may be wasted if those trained in telecoms work choose to remain in IT, or those highly skilled in IT ask to move to telecoms.

PESTLE analysis for the restructure

Political changes

Continued deregulation in the telecoms industry increases the range of specialist suppliers. Organisations have more choice but they have to procure more than one supplier for the provision of telecoms and data. This is a complicated landscape in which many firms require specialist support and advice.


Environmental concerns have led to legislation governing the disposal of IT and telecoms equipment. The company’s experience in hardware disposal puts it in a powerful position to adapt their service to the disposal/recycling of telecoms systems.

Societal change

The use of mobile technology and social networking requires ever greater access to secure and fast networks. Data available from all telecoms suppliers indicates that this trend will continue to grow in the medium term.

Technological changes

Telephone systems continue to increase in complexity and the need to integrate mobile devices with access to data is growing. Some specialist jobs today did not exist even three years ago. Small and medium-sized firms do not have the capital to hire the wide range of staff needed for telecoms provision and are increasingly turning to outsourcing to access specialist skills.

Legislative compliance

Data protection, system security and access to networks is a complex and evolving area. Establishing telecoms systems that comply with current legislation, and are prepared for future legislation, is a growth area.

Economic and competitive forces

Provision of basic help desk facilities has been commoditised. There are multiple suppliers and strong price competition. It is difficult for any organisation to distinguish itself and charge high prices, and this pressure on margins means that organisations need to look for higher margin business.

From/to analysis for the restructure

Critical to quality statements

  • Customer queries are resolved in a timely manner, i.e. phones are answered within three rings and initial actions are agreed within 1 hour.
  • Each query is owned by a single point of contact from the supplier.
  • All proposed installations have a project plan and a project team approved by the customer.

Assessing the environment in which change will be implemented

To understand the change fully we need to examine the positives and the negatives and compare their relative strengths.

If the positives outweigh the negatives then there is a ready-made energy and momentum for making the change happen. Effectively those impacted will pull themselves towards the new environment. This is often true for changes that reduce customer complaints, or reduce the pressure on individuals to work long hours or in a state of chaos and uncertainty.

Where the negatives are greater, those responsible for implementing the change will have to generate internal energy and motivation to push those impacted towards the new environment. An example would be where changes result from regulatory bodies: the change is mandatory, but it does not improve working practices or conditions.

Lewin1 developed a model of driving and restraining forces to explain this push/pull and warned that we have a natural tendency to restore the status quo, so we need to keep pulling and pushing the change forward until we have broken through our current state to where we want to be. Figure 2 shows what these opposing forces are for our case study.

Figure 2: Driving and restraining forces

It is important to understand the environment into which the change will be implemented:

  • What is the past history of change in the organisation?
  • Is there an expectation that the change will lose energy and focus and never be fully implemented?
  • Do you think employees will feel that they have seen it all before and that this change is no different to the last change that was announced?

The reason for assessing the environment is to understand the challenges that will be faced as you lead people through the change. There are two techniques:

  • Maturity assessment – for assessing the environment at an organisational level.
  • Change formula – for assessing the environment in the team or department where the change will initially be implemented.

Figure 3: Assess the environment into which the change will be implemented

Maturity model

A maturity model is a structured assessment, usually against five levels of maturity, which enables an organisation to benchmark its current capability (in this case for managing change) and to look at the next level for indicators of how it can improve its maturity.

Evidence of maturity will be sought by asking questions about how change is managed in areas such as:

  • skills and competencies
  • processes and procedures
  • governance
  • financial control
  • managing the risk
  • communicating the need, scope and progress
  • resourcing
  • measuring effectiveness.

If the results are positive, then existing structures, including those for governing the change management process, resourcing and communication, can be applied.

If the results are weak, then additional steps will be needed to ensure that a framework for governing the change is implemented. This is a significant piece of work, and when planning any type of transformational change, it is essential to understand the scope.

Implementing change in an organisation that sees change as an integral part of its skills and capability is much easier than having to combine the transformation of the organisation with the establishment of a change management framework.

Change formula

The change formula2 uses a mathematical framework to calculate the likely chance of implementing the change successfully. It assesses support for the change against the perceived effort required. Successful change initiatives will have more support than the effort required.

The actual formula is:

C = [A × B × D] > X


C = change

A = level of dissatisfaction with the status quo

B = desirability of the proposed change or end state

D = practicality of the change (minimal risk and disruption)

X = cost of changing (effort, discomfort, exposure, difficulty, risk).

To apply the formula requires a survey or assessment of those impacted, by developing a series of questions about the current situation (A), the benefits offered by the change (B) and the steps needed to implement the change (D). The answers need to be given a value, and the participants also need to provide their estimate of the cost of changing.

As with many surveys, the answers are the easy part; the difficulties are in creating relevant questions that are self-explanatory and devising a score sheet that enables the interest in the change to be valued in the same way as the cost of the change.

The following example is based on the application of the formula to the implementation of a new patient management system in a medical group of 5 practices, 27 doctors, 38 nurses, and 18 administrators and surgery managers.

To assess the likely support for the change, try using the following questions to understand the strength of feeling about the current situation, whether the change is expected to generate an improvement and whether it is regarded as practical and doable.

To calculate a score for each element use: low = 1, medium = 2 and high = 3.

Add up the scores for every question in the section, and divide by the number of questions to get an average value for that section. This means you can add as many questions to your survey as you like, as it will still result in one value for each element of the formula.

You can calculate the formula for each individual to help you pinpoint individuals who are comfortable with, or concerned about, the change.

You can calculate the formula for all of your colleagues by adding together the scores for each element and dividing by the number of people surveyed. This enables you to include as many individuals in the survey as you like.

Using our change example, the assessment of the change could look like the following table.

Create initial support for the change

Although ‘Understanding the change’ is only the first phase in the business change life cycle, it is still important to build a level of support for it. The next phase is to plan the change and this will require significant work and participation from all those affected. If no attempt is made to generate support, it is unlikely that the participation required for planning will be available.

It’s also worth mentioning that as soon as a change idea is discussed, even at very senior levels, rumours begin to circulate. The sooner positive messages about the change can be disseminated, the less time that those against the change will have for making their negative views.

The first step in generating this support is to communicate what the change is and what the outcome of the change will be. At a very high level, this can be achieved by creating a vision of the change, which is a short explanation written in very positive language. It’s supposed to excite those who hear it, and create a desire to become involved.

What makes a good vision?

Generic criteria

  • Written in present tense (we are rather than we will be).
  • Credible and feasible, and its achievement will be visible and obvious.
  • Capable of pervading every policy, procedure and action the organisation takes.
  • Easily communicated to, and understood by, everyone in the organisation.
  • Developed collaboratively, involving key stakeholders.

Future focused criteria

  • Clarifies purpose of the change and the direction for the organisation.
  • Conveys what the business will look like (in the future).
  • Describes what we want the organisation to look like in n number of years (a preferred and meaningful future state).
  • Describes the organisation’s future in positive terms (instead of describing what the organisation does not want).
  • Describes where the organisation wants to go (but not how the organisation will get there).

Organisational criteria

  • Builds on the organisation’s history and culture.
  • Emphasises the uniqueness of the organisation.
  • Reflects the organisation’s values.
  • Inclusive of the organisation’s diverse population (reflects more than one or two viewpoints).
  • Appeals to the long-term interests of the business, staff, customers and stakeholders.

Inspiring and descriptive criteria

  • Gets people’s attention and inspires them.
  • Captures the desired spirit of the organisation.
  • Provides a motivating force, even in hard times.
  • Generates excitement, and fosters commitment and dedication.
  • Expresses the organisation’s aspirations.
  • Focuses people on what the organisation looks like when it is meeting or exceeding the employees’ and customers’ needs.

To create a meaningful vision that is effective across the whole organisation requires more than a short paragraph. There needs to be a cascade process that takes the original vision and adds more detail at each level of the organisation. This involves a two-way exchange of ideas between the person originating the vision and the person or team that they first engage with. Otherwise, there is the risk that as the vision is cascaded through the organisation, the additional detail will lose the essence of what was originally said, leading to variations in the approach to change and employees heading in different directions.

Example of a poor quality vision statement for a university:

•  To provide distinctive, high-quality learning in technology, communications and engineering.

•  To be strongly engaged with, and involved in, the UK strategy for technology and communications.

•  To produce entrepreneurial graduates.

This vision does not persuade the reader that the future will be better than the present. There is no emotional persuasion to change the status quo, as it is merely a statement of priorities. It clearly marks the destination that the university has chosen as its future, but does not provide any excitement or inspiration for travelling there. It does not answer the question, ‘What’s in it for me?’

A better approach would be to describe the university’s vision as:

We have built upon our strong foundations in engineering and developed this into a worldwide capability for technology and communications research and development. We are utilising these strengths to play a pivotal role in creating the UK-wide strategy for technology that benefits our students through the creation of employment opportunities and investment in innovation.

The vision is important as it helps people understand where the organisation is heading. In some cases it can motivate them to take part and to plan for themselves how they can contribute to the change, but it is very high level.

Build a compelling story

To create more detail, there needs to be a story or series of stories that enable people to see what is being asked of them and why it is worth their while to take part.

The story must be persuasive, contain relevant information and convince the team that the current state must end, explaining the consequences if the change does not happen.

The story must be clear that this new direction is the right one – that it is the only sensible option and leads to exciting opportunities.

The story must be simple, positive, using plain language, with no management jargon that is open to ridicule. It must inspire, giving a sense of urgency about the need for change and excitement about the enjoyment to be had from the future it describes.

Sense of urgency – why this change is needed now

  • Describe the problems that the change will fix.
  • Explain the opportunities that can be exploited as a result of making the change.
  • Outline the risks if the change is not successfully implemented.

Desirable outcomes – positive description of the result of the change

  • How it feels to work for the organisation.
  • What type of work the organisation does.
  • How it is viewed by customers and suppliers.
  • The reputation it has with regulators and media.

Impact – an acknowledgement of the scale of change

  • List the biggest changes.
  • Identify those who will be impacted the most.
  • Call to action – how employees can participate.
  • Brief description of key actions that senior management is taking.
  • Options for activities that employees can become involved in.

Linking vision and stories

Leaders at each level of the organisation need to work with their direct reports to translate the vision into a story that addresses the desires, fears and motivations of their team members. Figure 4 illustrates this cascade.

Figure 4: Cascade process

This cascade process produces a number of stories that illustrate the vision told from the perspective of specific teams, as shown in Figure 5.

Figure 5: Cascading the stories

The vision and the storytelling combined must:

  • Define clear goals for the next 1–2 years.
  • Communicate transformation as a compelling story.
  • Offer an inspired view of a better long-term future.

The vision and the stories that they lead to are an important part of the communication of change. Delivery of these messages is constrained by the volume of information that a person is able to process at any one time. If you give someone too much information, they become paralysed by ‘cognitive overload’ – the brain stops taking in further information, and the ability to process, analyse and ultimately understand is impaired.

For effective communication we need to consider:

  • What information we provide in each communication – keep communications short on detail, but plan lots of them, each further explaining the change.
  • Consider the way in which the information is presented, matching the seriousness of the message with the seniority of the person giving the message.
  • Give the listener time to make connections between new information and what they already know.

Case study

A large insurance company made the decision to switch one of its insurance brands to an Internet-only platform. The brand offers a form of home contents insurance that targets those aged 35 years or younger who do not own their own home but own significant amounts of high-value technology.

The change is strategically important as this type of insurance has high growth potential, profit margins are high and there is strong customer loyalty. Compelling reasons for the move include a reduction of the cost base through the elimination of salaries from call centres.

The vision of the change outlined by the chief executive

To meet the needs of our fast growing customer base for TecSafe we will be moving all sales, marketing and customer support for the brand to an Internet-only platform. Customers will be given full access to their own account, enabling them to update their cover, amend payments and print their own insurance certificates and account statements at a time convenient to them.

The story developed by the directors

The move to an Internet-only platform meets the needs of our customer base. Online sales have risen 57% in this year, and 48% in the previous year. Access by individuals to their own account details is the biggest single request for brand improvement from the customer survey, with 72% of customers rating it important or significant. The costs associated with an Internet-only brand are anticipated to be 22% lower than the current cost base for TecSafe.

Customer services and marketing will need to be restructured as they are not currently configured to support an Internet-only brand, and IT changes will be required to provide sufficient online access, security and customer support.

This is a new style of business and there will be many opportunities for staff in marketing and IT to develop new skills to maintain our innovative reputation.

In the marketing department, the story will need to address the winners and the losers – anyone currently involved in online development is likely to be safe in any restructuring, but those responsible for print or event-based marketing are likely to lose their jobs or be asked to retrain in online marketing. This story needs to inspire the ‘winners’ with the increased opportunities and inspire the ‘losers’ about other opportunities within the company. Failure to do so risks the loss of those staff who are critical to the success of the brand.

The story created by the marketing director and her direct reports

TecSafe™ is moving to an online only platform, and as a result there will be a significant increase in the proportion of revenue given over to the marketing budget. The current cost base for TecSafe™ is 32% for marketing but this is expected to rise to 65% when we move totally online. Even with a 22% reduction in spend, this is a significant increase in importance for marketing.

Marketing will be expanding its online functions and there will be new roles in Google Analytics, social media brand management, banner design, online copywriting and e-campaign management.

Whilst print and event media are to be reduced, the skills used in copywriting, trend analysis and event origination will still be applicable, and all required training will be provided to ensure that the transition is handled smoothly.

There will be workshops held next week to discuss the new structures. An online survey will be sent to all of you tomorrow asking for your ideas about how you would like to see us expand our marketing services.

The story created by the manager of the events department and his team leaders

There is going to be significant growth in the number of marketing roles available at TecSafe in the next few months. Whilst we are stopping our current exhibitions events from the end of the year, this will be replaced by an online events diary that takes us into new areas.

Our responsibilities are going to move to the creation of webinars, online communities and focus groups of key customers for each business line. This is not an exhaustive list and we will be working in our teams to create an innovative and exciting online events diary.

We will continue to provide trend analysis to the business in customer demand for product and promotional events and competitor analysis, although we will be redrawing the list of target competitors to better reflect online providers.

All of us will have the opportunity to learn new skills and your managers and I will be working closely with Emma in training and development to create individual development plans for each of you.

I am very keen to hear your ideas and would like to invite you to a lunchtime discussion on Friday to air your concerns and ask me as many questions as you want. If you would like to submit questions before Friday, please e-mail me and I will ensure that we post all the answers on the intranet after Friday.

These stories can be used to check the progress and direction of the change throughout the change life cycle. Once a change is under way, it’s easy to become focused on the tactical activities set out in the change plan and to lose sight of the end goal. Successful change managers incorporate a regular review of the vision/story into their work. When they have a setback, they can put it in the perspective of the bigger picture, where it will often not feel as significant, and which gives them the motivation to pick themselves up and start again. This regular review of the vision also provides an opportunity to compare up-to-date knowledge about what is happening in the marketplace against the desire for change that may have been conceived in different circumstances and to ask the question: ‘Will this change still deliver the benefits we anticipate?’

Techniques for regular review included one participant who had the vision as a poster on his office door that he used to look at every day. One manager held monthly review meetings where he opened proceedings by reading out his assessment of where he thought the change initiative was in relation to the change story, and then chairing an open discussion to hear the views of his team. It gave him a framework for reviewing the bigger picture each month but also forced his team to lift their eyes above the plan and look towards the future they were supposed to be creating.

1Further explored in Resolving Social Conflicts / Field Theory in Social Science, Kurt Lewin, American Psychological Association; reprinted edition 1997.

2Further explored in Organizational Transitions: Understanding Complex Change, Richard Beckhardt and Reuben T. Harris, Addison-Wesley 1987.