The New Economy is changing the way businesses operate,  changing the way people work within organisations and changing the nature of relationships between organisations.  Four key trends are driving this new era of business: eBusiness / globalisation, technologies, the increasing importance of intangibles and the war for talent.

But you know all that.

Every brochure, every magazine, every email update, every research report will be telling you the same thing - business is changing.  But what’s so ‘New Economy’ about that?  Business has always been changing, always been in the grip of a revolution of some sort.  People tell you your company needs to be ‘innovative’, ‘vibrant’, ‘driven’, but hasn’t that always been the case?  When could a company rest on its laurels and remain static?

But there are differences, the New Economy has engendered dramatic changes to the business landscape - new business models are developing and technology is enabling more and more.  Yet, given this, the companies that are succeeding now, the leaders in the New Economy, still have at their heart characteristics which businesses have always needed, namely Good Fit, Capability and Agility.  The difference simply lies in their relative importance.  Agility was once considered secondary to the operations of the core business - now it is paramount, and the stakes are higher, with companies appearing and disappearing quicker than you can say Boo(.com).

Characteristics of New Economy organisations

These three characteristics are not radical, and they are not definitive categories, but they do provide a framework for understanding some of the challenges that face organisations today.

Good Fit  -  This includes how the organisation’s service offerings match the markets’ needs, how brands and organisational values fit with each other, and how activities align with the vision

 Capability -  This refers to capability in areas such as leadership, teams and people as well as technological capability, encompassing aspects from skill acquisition to software alliances to organisational structure

  Agility -    This incorporates the ability to spot opportunities and act upon them, respond to changes in the marketplace, make decisions quickly and grow in scale

All of these characteristics are vital, however a look at today’s business environment emphasises the particular importance of Agility.  Customer expectations are greater than ever before and competitors (both new and existing) are metamorphosing and growing at previously unheard of rates.  Coupled with continuing technological advances, these necessitate companies becoming more agile and responding quicker than ever before in order to survive.  Organisations are often required to make landmark shifts in their processes, technologies and people, seeking to transform overnight, to survive.  Both the scale and the pace of changes facing organisations have increased beyond recognition.

In short, the New Economy is forcing change: re-formed supply chains, new businesses and rapidly changing organisations. This transformation is of greater scale and more rapid than ever before. It requires great agility, which has to be built and under-pinned with the capabilities that the organisation needs. 

Fundamental capabilities

There are, of course, many components required to build organisational agility. However, we believe there are six key capabilities that are fundamental.  These are leadership capacity, effective decision-making, alliance / relationship management, programme management disciplines, effective communication and HR practices.

We believe these capabilities apply not only to situations when organisations are undergoing significant change at pace, but all successful companies in the New Economy.  Without the existence and application of these capabilities typical and familiar issues arise:

For example, within Leadership Capacity - who has the big picture, where are we heading or who is ensuring that all these initiatives are moving towards the same future?  Within decision-making arenas – who is responsible for making certain decisions and in what timeframes?  Within alliance / relationship management - who understands how relationships with third parties and alliance partners are managed and how conflicts are resolved?  Within project and programme management – who is providing the forums for integrating different areas of work, who is tracking progress and ensuring risks are being mitigated, who is ensuring that programmes are going to be a success?

Similarly, who is leading the communications and ensuring that employees and other stakeholders are involved appropriately and getting the right information at the right time using the right mechanisms?  And within HR practices who is forming the teams, mobilising them effectively, building the support they all need, ensuring key players are motivated and rewarded appropriately? Most importantly, who is responsible for building these capabilities and the agility required so that major change and transformation can be achieved?

You’d be right in thinking that this is all starting to sound like a vicious circle!

 So what can be done?

 Arthur Andersen’s Change Strategy and Architecture best practice

In response to this dilemma, Arthur Andersen has developed a Change Strategy and Architecture (CSA) best practice. This best practice does two things. 

Firstly, it provides the strategy and the supporting infrastructure to deliver lasting change at speed.  For a transition programme, this requires integrating the concurrent projects, organising the resources needed and building the necessary transition structures. 

Secondly, it builds agility by ensuring that the critical capabilities, such as leadership, decision-making, relationship management, programme management, effective communication and appropriate HR practices are developed.  These enable the organisation to deal with major current and future change programmes, and additionally and most importantly, to be agile and survive in the New Economy.

Change Strategy

This component incorporates the alignment of transformation aims, linking operational changes to strategic direction and ensuring they fit with both the long-term organisational strategy and the external market environment. Change strategy options are identified following assessment of the organisation’s existing capabilities, its processes and its readiness for change.  The options are evaluated considering the risks and value created by each of them, and a supporting business case is developed.  Additionally, the pace and scale of the required change is defined, with key points and milestones presented in a journey plan.

Increasingly, organisations need to manage relationships with more and more external stakeholders such as suppliers, alliance partners and customers. The Change Strategy involves assessing these stakeholders, determining the impact on them and developing relationship plans for the entire change process.

Change Architecture

This component includes designing temporary and permanent organisational structures: change teams, leadership teams and governance structures.  To resource these effectively, the roles, responsibilities and interdependencies between teams needs careful consideration, identifying what capabilities are needed and what capabilities need to be built.  In addition, these teams need to be mobilised and their effectiveness monitored throughout the programme.  Together these teams form the infrastructure that will support the change programme throughout the transition.  Their formation and use will also help build the critical capabilities for the future. 

Additionally, experience has shown that effective decision-making is key.  There are three key requisites of effective decision-making: appropriate accountability and governance structures, processes and forums for making decisions and the criteria that forms the basis of the decision.  Without these, decision-making will inevitably be slow, accountability unclear, consequently adversely impacting the agility required.

Change Implementation Planning and Monitoring

This principally concerns defining the nature and sequence of specific activities, understanding the interdependencies, identifying the scope and cost of the programme and integrating workstreams to ensure a common goal.  An overarching transformation programme plan is developed and maintained, considering how each initiative will affect others.  Amongst other tools, Key Performance Indicators (KPIs) are developed to help monitor progress against the overall plan and trigger contingency actions for identified programme risks.  

Historically, many companies have performed these types of activities through a programme management function, which operated as a separate team, only concerned with monitoring and reporting progress.  However this best practice ensures that this is not the case and the function is heavily integrated with the Change Strategy and Change Architecture activities.

It should be noted that substantial flexibility and dynamism is required in all of the above.  Strategies, structures and procedures need to evolve through the change process – they need to reflect the different phases in a corporate transformation.

So you’re still not convinced…?

New Economy means higher stakes

Major change initiatives can no longer rely just on the low level monitoring and reporting that made up project management in the Old Economy.  Each one of the three CSA components requires focussed attention if today’s complex change programmes are to receive the support they need.  Often, seemingly small aspects of an initiative can have considerable consequences when operating in the wider ‘system’ of a change programme, placing the programme at risk.  Recognising the need to change is one thing, but appropriate actions are required if the organisation is to move from where it is now to where it needs to be.

We have found that a lack of capability in the organisation and experience of undergoing major change initiatives leads not only to poor planning and inadequate risk management, but also to the establishment of ineffective governance structures.  This leads to poor decision making processes, which can jeopardise the overall delivery of the programme.  In turn this results in accountability and commitment issues which are spiral in nature, leading to further negative impacts on the overall delivery of the change.  In an economy where agility is crucial, something as fundamental as not addressing capability issues can be catastrophic.

Summary

Programmes of change have always needed to be managed well, however the stakes are now considerably higher.  Survival is now at stake.

The New Economy is forcing organisations to change and this change needs to be of greater scale and at a quicker pace than ever before.  This requires agility, however companies are finding that this means building certain capabilities within the organisation. 

Therefore a successful change programme does more than just fulfil its operational objectives, it builds capabilities inside the organisation to tackle current and future challenges.  Having effective change strategy, architecture and implementation planning and monitoring activities will build capabilities which not only enable organisations to deliver large-scale change at speed but, in addition, will help build longer term capabilities required for survival in the New Economy. 

Expertise will be developed in project and programme management, effective governance, team formation and communication, to name but a few.  Each of these will contribute significantly to the three characteristics mentioned at the start of this thoughtpiece, namely Good Fit, Capability and Agility - but particularly Agility which is so crucially fundamental in the New Economy.

The time for waiting has passed.

To find out more about how Arthur Andersen’s experience in Change Strategy and Architecture can help your organisation deliver the changes it needs to succeed in the New Economy, please ask any of the contacts below:

 Ibnu A. Mulyanto, Jojo R. Capulong, Greg S. Alberto, Maya Kartika

Human Resources Consulting Group

Arthur Andersen Business Consulting

Wisma 46, Level 25, Jalan Jendral Sudirman Kav. 1

Jakarta 13890