Conventional wisdom would have it that a crisis is the most common trigger for change. A company faces bankruptcy, court proceedings, or sudden, fierce, business-destroying competition. Current strategies aren’t working. Urgent turnaround is needed. And in fact, the perceived threat of extinction is often a prelude to the dramatic entrance of a turnaround artist from the outside, such as Carlos Ghosn at Nissan in 1999, Robert Stevens “Steve” Miller at Delphi in 2005, and Robert Nardelli at Chrysler in 2007. The fate of the company often depends on how well this new heroic figure can draw upon leadership capabilities: his or her own, those of the senior leadership team, and those of people throughout the company.
In our experience, however, only about 15 percent of the companies that voice a need for change are truly in crisis. A far more common situation — involving as many as 60 percent of those companies — is a state of inconsistency. A leader recognizes that, of the half dozen or so strategic initiatives currently under way, one or more aren’t delivering results or living up to expectations. “Why aren’t we getting a better multiple?” asks the leader. “How can we improve our poor performers?” This was the condition of General Electric when Jack Welch was appointed CEO in 1981; he famously dealt with it by decreeing that every business unit would have to be number one or number two in market share in its niche; otherwise, he would “fix, sell, or close” divisions. The number-one-or-number-two criterion doesn’t apply to every company, but the general challenge is much the same: to find a prescient way to distinguish the value of activities and improve or prune the laggards.
Read the rest of the article by Steven Wheeler, Walter McFarland, and Art Kleiner in strategy + business.