RESIZING Rethinking the company in competitive vertigo
"We cannot direct the wind… but we can adjust the sails…" Anonymous
We will begin the Third Millennium with more and not less change. The changing world context, globalization, strong technological advance, among other reasons, forces companies to make an effort to adapt. And that change is not done well. The average life of the companies does not exceed 50 years (the figure depends on the sample and country). More than 50% of change attempts (mergers and acquisitions, strategic alliances, reengineering or total quality programs, etc.) fail or their benefit does not justify the time and money invested in it.
But companies have no alternative but to change. Argentina as a country is less and less competitive (in the competitiveness ranking of 47 countries carried out by the IMD, in 1997 it was ranked 28, in 2000 it was 41) and many Argentine companies are far from the «best international »internships.
Fortunately, after several decades of success and failure, knowledge of the subject has improved. This article describes a way to face the increase of competitiveness of the company; a way to substantially improve results.
1. THE SUBJECT AND THEIR NAMES
The change has different facets. It can be deliberate (intentional, planned) or accidental (accidental, unplanned). Its magnitude can be large or small. It can affect some or many elements of the company. It can be fast (abrupt, drastic, revolutionary) or slow (continuous, evolutionary). The new state of affairs can have a significantly different nature (fundamental or quantum change) or the new state can have the same nature with new aspects (minor or incremental change).
The fundamental concept, put in short and imperfect words, is that the company needs to bring about a change to improve its competitiveness.
The change has different names. More than 30 different words are used, almost simultaneously, producing semantic and conceptual confusion.
Some of those words are:
Related to the nature of the change.
The magnitude or characteristic of the change is emphasized. Examples: Adjustment, Reconversion, Transformation, Revolution, Salvage, Discontinuous Change or Continuous Change, Refloat, Renovation, Revitalization, Perestroika.
Related to the Change of Strategy.
It is believed that there is no significant change if the orientation, objectives and strategy of the company are not revised. This is supposed to be more important than looking for internal company improvements. Examples: Turnaround, Retrenchment, Competitive Advantages and Core Competencies, Hypercompetence, Re-positioning (Repositioning), Re-locating (Reframing), Migration of Value, Restructuring of Value. Value Added, Co-evolution.
Related to the Change of Structure.
It is thought that there is no significant change without a major change in structure. Examples: Restructuring, Resizing-Downsizing-Rightsizing, Deconstructing (dismantling or de-building), Demolishing (overssing), Creative destruction, Reengineering, Innovation in processes.
New Business Structures.
There are authors who recommend a kind of business structure and a type of management that makes companies do not need adjustment programs on a regular basis. These structures are supposed to adapt to changes in context. An example is: "The Learning Organization" (the organization that learns, raised from the "Fifth Discipline" of P. Senge).
Improvement Programs.
Over time, companies adopt "programs" to improve, with different objectives for change. In the last decades we have seen programs of: Cost Reduction, Value Analysis, Productivity Improvement, Profit Increase, Quality (Quality Circles, Zero Defect, Total Quality, ISO 9000, National Quality Awards, Customer Satisfaction, GMP), Management by Objectives, Time-based Management, Reengineering, Continuous Improvement, Kaizen (continuous improvement), Tatsumaki (tornado).
2. THE BIASCA MODEL
To face a deliberate, articulated, intentional change it is necessary to follow a form of reasoning, that is, to propose a model.
A model that is easy to understand and that serves to analyze, act and communicate has been sought.
This model of business transformation has been proven: it serves to analyze, act and communicate. It is useful for companies of different size and nature.
A variant of the medical analogy was chosen where it is stated that any attempt to improve competitiveness involves three phases:
- Analysis. Are we competitive?
The "diagnosis" should determine the magnitude of competitive decline, the time available for change, and the resources required.
- Ideas. What proposals do we have ?
The "prescription" will vary depending on the diagnosis.
For companies with an acute lack of competitiveness, the remedies (improvement proposals) will be different than for competitive companies.
- Action. How do we change ?
The "treatment" involves transforming ideas into concrete facts. The change is different for companies in crisis, than for companies that only want to maintain the privileged position they have gained.
All three phases are important. A bad diagnosis leads to a bad recommendation. The best proposal is useless if there is no good implementation. Not every time it is clear which is the best proposal. Just as "prevention is better than cure", once competitiveness is restored, the "prevention" phase will come, that is, actions to maintain a good competitive position.
In Figure 1, the medical analogy is outlined.
THE BIASCA MODEL
Biasca Model
3. WE ARE COMPETITIVE
How much change do we need? In what time frame?
This is the measurement, comparison, analysis and diagnosis phase. It must be done at multiple levels simultaneously: overall context, markets, the business as a whole, and the key processes of the extended business.
Whatever the depth of the analysis carried out, it is necessary to reach some conclusions that summarize the competitive situation. It is the equivalent of "Am I sick?", Is it serious? "," Is it urgent? "," How are the body, mind and spirit? ". Companies (like people) are born, grow, get sick, recover, mature, grow old, die. They choose, learn, work and feel. They have times of splendor and decadence.
The situation at a certain moment can be classified as:
- desperate.urgent.worry.to correct.optimal.
Companies that are in desperate situation are those that are in crisis (default, etc.) and that fight for their survival. Some disappear (the case of the “Hogar Obrero”) and others revert their situation (like BAESA in recent years). The newspapers often give examples of this type of company frequently. Companies in an optimal situation are those that have good results for the shareholder, whose clients are satisfied (YPF, telephone companies, Cervecería Quilmes, Carrefour, etc.).
In each case, the level of competitive deterioration, the time available to change, the necessary resources and the financial situation are different.
It should be noted, once again, that the competitive situation is a "photo", at a certain moment.
It implies a “benchmarking” (to observe in the key processes the gap between the indicators of the company and those that best carry out this process in the world, those with the “best practices”, or “world-class” companies).
This competitive situation can deteriorate if nothing is done or if the context changes abruptly.
In Figure 2, some examples of Paraguayan companies in October 1997 are indicated. In Figure 3, the different competitive situations are shown. In Figure 4, the diagnosis of small business Argentina in 1999 is summarized.
COMPETITIVE DETERIORATION IN SOME PARAGUAYAN COMPANIES
(October 1997)
| Business |
Approximate Deterioration |
Available Time |
Main Issues to Solve |
| A Paraguayan bank | 8 | 10 months |
|
| American University | 3 | 2 years |
|
Figure 2
THE DETERIORATION OF COMPETITIVENESS
Deterioration of Competitiveness in Argentina
CASE
SMALL ARGENTINE COMPANY IN JULY 99
Category: family business that produces mass consumption products, sells them in supermarkets and retail stores.
DIAGNOSIS
- Declining market share due to external and internal competition Declining prices due to increased competition and pressure from retail trade Increasing technological gap Decreasing profit Financial drowning Increasing collection period. Breach of tax obligations. Access to very expensive credits. Interest is a growing percentage of sales. Family and personnel problems.
Deterioration: 9/10.
Time available to change: 6 months.
Figure 4
WHAT PROPOSALS DO WE HAVE?
4. Discontinuous or Continuous Improvement?
This is the phase of change recommendations, "prescription", "prescription", "therapy."
Having reached a diagnosis, the doctor makes a therapeutic proposal. Imagine the reader a doctor: on the one hand he has his knowledge and experience. Some of that knowledge is represented by the medical promotion books and brochures in your office. On the other hand, there are the "drugs", the hundreds of drugs in the pharmacy. What do you choose? What is the most appropriate combination? Finally he says, 'Take drug X, as many milligrams, three times a day. Follow this diet (explained on a paper) and rest ».
What happens to managers or consultants when, after an exhaustive analysis, they have a diagnosis of a company?
Too much medicine can "kill the sick." The wrong remedy may be ineffective. Recommendations may not solve the problem (we tell the company, for example, to train its people and lower costs, and its problem may be that it needs to launch new products aimed at another market segment).
«Doctors,« healers », consultants, managers, teachers and authors of books propose our« recipes »on the basis of a certain reasoning, on the basis of« models ». We are right and we are wrong.
The "Biasca Recipe" arises from the analysis of hundreds of cases, of own experiences and of the accumulated knowledge in the world on this subject. It is intended to be a useful conceptual simplification for the reader. It is not a minor finding, it is the equivalent of the classifications that doctors make of drugs (analgesics, anxiolytics, etc.) or botanists when classifying plants.
Transformation to improve competitiveness can be seen as a set of projects for restructuring, strategic rethinking, change in human resources and management, innovation in processes and technology, improvement of productivity and quality, and financing of the change effort. Symbolically:
Productive Transformation
In Figure 5 the "transformation formula" that Argentine companies have used in recent years, successfully (according to the report in the magazine market in January 1998) are indicated.
WHAT RECIPES DO SOME SUCCESSFUL ARGENTINE COMPANIES USE?
| BUSINESS | Heading | Sales in Millions of US $ | "Growth formula" | Equivalent to the general formula of the "Biasca" recipe. |
| TELEPHONE
from Argentina |
Communications. | 93: 1,784
97: 2,995 |
|
R
R AND TO P |
| PRESERVE | Supermarkets. | 93: 450
97: 1,300 |
|
R / A
AND TO TO $ |
Figure 5
The general formula takes different variants depending on the situation of the company, be it desperate, urgent, worrying, to be corrected or optimal (see Figure 6).
Once the company improves, it moves from a situation to the left of the diagram to the right. Thus, a "desperate" company will go to "urgent", "worrisome", to "correct" and finally to "optimal". Once competitiveness is restored, the phase of maintaining that position will come (the "evolution.") On the left, the change is of great magnitude. On the right the change is of lesser magnitude.
When the deterioration is great, the change is abrupt, drastic, revolutionary, rapid, of great magnitude, fundamental, quantum. In the 1990s, M. Hammer's "Reengineering" approach (radical innovation in processes to obtain substantial improvements in the critical performance indicators of the company) was very widespread. When the deterioration is small, the change is of a lesser magnitude, incremental, slow, continuous (this approach is closer to the concepts of Total Quality)
The formula may be different according to the country. See later.
Not all projects have the same impact. It is suggested to classify them into LEVEL 1 (essential), LEVEL 2 (important and immediate) and LEVEL 3 (complementary).
In Figure 7 the transformation formula used for small business mentioned in Figure 4 noted.
THE «BIASCA RECIPE»
Biasca Recipe for Competitive Companies
Clarification. In each specific formula according to competitive deterioration, the topics that are of special importance have been indicated.
The letters have the following meaning:
R. Physical and organizational restructuring.
E. Strategic stakeout.
A. New administration.
P. Productivity, Quality, Technology.
$. Financing.
Transformation Formula
|
Initial emphasis . T = A + $ Shortly after. T = R + E + A + P + $ |
BIASCA model
5. HOW DO WE CHANGE?
Revolution or Evolution?
This is the phase of "change", "action", "implementation", "treatment". It involves transforming ideas into concrete facts.
Organizations abound where you know what to do and ideas are not carried out.
CHANGE MANAGEMENT
Find information on change management at: www.change.management.org
In any implementation, at least three dimensions must be considered:
- The stages. All change follows definite stages and in a certain sequence. The methods that can be used to modify individual and organizational behavior. Competitive decline.
The stages are:
- Launch and mobilization Organization of change and restructuring Implementation through projects Consolidation of change and renewal to achieve a lasting company
Resistance to change occurs at all stages, regardless of how they are defined. Recognizing and accepting the different perceptions of reality that each person has, the weapons that are possessed to fight against resistance to change are:
- Leadership, change in expectations, new objectives Explicit and implicit communication Participation Examples and new reference models Rapid success Change of processes and organizational structure Review of reciprocal obligations between organizations and employees. New criteria for hiring and firing staff Intrinsic stimuli and empowering (decisions at lower levels) Coercion.
In family businesses, resistance to change is complicated by the interaction between family and business aspects.
The implementation of the change may be different in different countries (see below)
There are stages and methods for modifying behaviors that are similar for companies in desperate situation (non-competitive, deterioration 10) and those in optimal situation (competitive, deterioration 0). There are others that are particularly different. This explains, among other things, the different recommendations of different authors.
6. TRANSFORMING COMPANIES IN DIFFERENT COUNTRIES
In mid-2000, the countries in which I have studied / worked total 20; The countries that I know are over 50. Through my studies or jobs I have had interaction with teachers and managers from other countries that I do not know (for example, I know how some Africans and Asians from countries where I have not been) reason.
Having to work and present concepts with people who are from different cultures has made me reflect (and doubt) about the universal validity of certain management concepts. In a world of increasing globalization, where a Chilean manager of an electricity company goes to work in Argentina, an Argentine manager of an oil company goes to work in Venezuela, a manager of a Brazilian company Embraco (compressors) goes to work in Italy or China… etc., understanding cultural differences becomes a growing need. It is not necessary to travel, those Argentine managers whose companies were bought in recent years by European or American companies, have seen the issue very closely. The issue is less novel for companies that have had a multinational activity for decades.
The application of management concepts in different cultures is receiving increasing attention in Business Schools and little by little publications are appearing that try to clarify the subject.
Cultural aspects cast doubt on the existence of a "universal wisdom" and the possibility of transferring "the best practices" of which so much has been said. In a way, this transfer implies accepting universality.
There are certain countries that are more likely to incorporate and adapt business management concepts from others. Japan, Poland, Thailand and some Latin American countries have incorporated models from others. Germany has been very resilient.
The important thing is to understand that some concepts, which work in some countries, cannot always be adapted in others. The proposal to use work teams may be rejected by managers from Eastern Europe, for example.
All this would lead to writing our general transformation formula as:
T = a (R + E + A + P + $)
Put another way: if, ideally, you could have two exactly the same companies, with the same context problems, the transformation formula would not be exactly the same, it would be affected by these cultural aspects. That difference would be greater, the greater the cultural difference. It wouldn't be much if the countries were the US and Canada; It would be very great if those countries were Sweden and Mexico. In Latin America, the differences are not great, but they do exist. Are not the same recommendations for a company of Guatemala, Uruguay or Venezuela.donde to , is the cultural factor affecting the selection of proposals for change.
Even in small countries there are important differences that must be recognized. In Ecuador, there are significant differences between companies in Guayaquil ("coastal") and those in Quito ("la sierra").
7. SYNTHESIS
The Certain Change
- Various investigations show that the average life of companies is short and business magazines continually show cases of companies with unsatisfactory results. This is no accident: companies do not always assess their competitive decline well and use formulas that are sometimes not effective. Even with the support of the best consultants, companies are wrong.
There are numerous opportunities for improvement, even in successful companies.
- Interest in the subject is high and growing. New books and articles appear constantly. There is an overwhelming amount of information on the Internet. The accumulated knowledge increases and little by little it becomes clear what to do and what not to do.
- Numerous courses, seminars, conferences deal with different aspects of the subject. In this work the «Biasca model» is summarized. The Figure 9 condenses. Each company must seek in it, the precise change that substantially improves competitiveness.
- Cultural differences between different countries cast doubt on the existence of "universal wisdom" in business management issues. To some extent talking about "best practices" implies accepting universality.
These cultural differences affect processes, organization, human resource management and the selection of business strategy.
All this would lead to writing the general transformation formula as T = a (R + E + A + P + $), where a is the cultural factor that affects the selection of proposals for change. The greater the cultural difference (example: Sweden vs. Mexico) the greater the possibility that the recommendation will be different.
Some research shows that not everything is different depending on the country and, therefore, many concepts can be used in different countries.
- The reader interested in deepening the subject can turn to the bibliography mentioned in Figure 10.
| BOOK | Authors | Editorial | Year |
| Change Management. Third edition.
Conventional book. e-book. |
R. Biasca |
Biasca Press www.e-libro.net |
2000 2000 |
| "Resizing" (Sixth Edition) | R. Biasca | Macchi | 1998 |
| "Jack Welch and the GE Way" | R. Slater | McGraw-Hill | 1999 |
| "Re-Creating the Corporation" | R. Ackoff | Oxford
University Press |
1999 |
| Driving Change | J. Wind
Main |
Free Press |
1999 |
| «Action Management» | S. Redwood
C. Goldwasser S. Street |
J. Wiley & Sons | 1999 |
| «The New Global Leaders» | M. Kets de Vries
EF Treacy |
Rule | 1999 |
| Champions of Change | D. Nadler | Jossey Bass | 1998 |
| "Competing on the Edge" | S. Brown
K. Eisenhardt |
Harvard
Business School Press |
1998 |
| "Straight from the CEO" | G. Dauphinais
C. Price |
Simon & Schuster | 1998 |
| «Leading Corporate Transformation» | R. Miles | Jossey Bass | 1997 |
___________
This document is an extension of the article that appeared in the Collection of Fascicles:
LEADERS of the THIRD MILLENNIUM
Thematic axis: Management
Published by Mercado Magazine (www.mercado.com.ar) and Clarín Newspaper in Buenos Aires, Argentina on August 5, 2000.
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