Changing the way We Think about Change

Innovation is not strategy; it is a mechanism to enable change in either magnitude, activity, or direction.

Change can involve magnitude, activity, or direction, and the first step toward a clearer vision for change is to clarify what form of change is required; Magnitude: Enhance our execution of the current path. Activity: Adopt new ways of pursuing the current path. Direction: Take a different path.

When to stay in course and when to change direction is a major challenge for any business leaders. There are lot of published research that talk on change management in leadership focusing on key roles of persistence, grit and commitment, which is not about change but about overcoming challenges.

Change is inevitable, but for business leaders to identify the nature, scale and timing of change appropriate to their company’s specific context is a hard task. When the operating environment is dynamic, it amplifies the benefits and risks of change.

There is a fundamental source of confusion among managers and executives in using change to refer three very different strategic responses to business challenges.

Companies like Kodak, Nokia, Xerox, BlackBerry believed the change of magnitude was sufficient instead of a change of activity like adopting new technologies or distribution channels, or a change of direction like exiting the certain business altogether. Certain companies took a larger risk in all three areas even when only small changes were required.  GE’s attempts to be a first mover in green energy, Sony’s move into entertainment content and Deutsche Bank’s efforts to become a global investment bank.

Most of the impressive and successful pivots of the past are from changes of activity, Netflix transforming from DVD-by-mail to a streaming platform; Walmart from physical retail to Omnichannel; Amazon expanding its retail and launch of Amazon Go; Adobe and Microsoft moving from software sales models to monthly subscription businesses.

Decision-makers are still confused with the ill-defined relationship between innovation and change.

For example, the integration of established technologies that been shared via a central network are changes of magnitude and not innovation. The actual innovation is when companies replaced manual and analog processes with digital ones.

To understand how innovation supports each form of change and addresses the ambiguity, let us determine the difference between magnitude, activity and direction when to take the appropriate actions.