Change in an uncertain world
I recently did a search of the online journals of the academic publishers Taylor and Francis. This revealed that the phrase “unprecedented change” has been used in reference to many, many topics, including life in rural communities, Italian politics, healthcare, libraries, information technology and education.
It is not surprising, then, that implicit in many management texts, articles on business in newspapers and magazines, and management training courses is the view that the world is changing more quickly than ever. This point is made explicitly equally often. To give but three examples:
- “We are living at a time when the competitive environment has a steep and rapid learning curve. It’s also a time of unprecedented change.”
- “Today, however, companies are in a process of retooling and developing new strategies which will assist them to be competitive at a time of unprecedented change in product and labour markets and technology.”
- “All parts of organizations are going through unprecedented change as a result of the volatile business environment, including such well-known items as exploding technology, globalization, and new work processes.”
In the terms we use at Turris Consulting, this means that the outer context is not stable. This in turn means…. organizational change! So how should managers deal with this instability?
Managing change in the business environment
Is there an economic downturn? Either way, a change in the business environment is one of the prime causes of organizational change. At Turris Consulting, we say that the business environment is part of the external context of change. (Click here to read more.)
Of course, smart organizations are very aware of what is going on in their business world. In this Wall Street Journal article – In Chaos Lies Opportunity – the authors argue that companies can do well even in difficult times if they understand the environment.
For most industries, the optimal time to hit the brakes and downshift was months ago. The questions to be asking now are: Where is the apex of the curve, and how hard should we accelerate to take advantage of competitor mistakes? Who is in trouble and dumping valuable assets in order to survive? Can we add great people who are now available?
What does this mean in terms of organizational change management? It means that good managers scan the outer context of change, and then work out what they need to change within their company so that the company can do well even in in difficult times.
Change in the Pharma Industry
One of the most interesting industries that I have been involved with is the pharmaceutical industry. It is constantly evolving in the face of internal and external challenges which are described below. If you were the head of a pharma firm, how would you deal with these problems?
Three major issues that confront the industry: the rise of generic products, the difficulty in finding new treatments, and the large amount of spending on sales and marketing.
The first challenge is that in most countries, a drug company has a 17 to 20 year period when its product is protected by patent. However, this period does not start when the drug comes on the market, because patents are filed during the research phase. On average, a patented drug is on the market for around 12 years before the patent expires and generic competition arrives. Once the drugs have come off patent, their market share and price premium are significantly reduced, because the generic alternative is less expensive.
Second, there is a general feeling that all the ‘low hanging fruit’ of disease have been picked. The industry relies on blockbusters, which are drugs that bring in annual revenues of $1 billion or more. Evidence suggests that it is getting increasingly difficult – and more expensive – for companies to find new treatments. This has led to a significant change in the basic approach to research. Companies are moving from chemistry-based therapies to biology-based therapies, but since the major pharmaceutical companies tend to lack expertise in this area, they are either buying or forming partnerships with either smaller, more specialised outfits or are forming partnerships with larger drug companies.
The third challenge for all major pharmaceutical companies is that they spend a great deal on sales and marketing. Pharmaceutical companies position themselves as research-oriented organizations. In fact, the actual amount that they spend on research and development is less than the amount they spend on sales and marketing.
Beer, Berlin and Organizational Change Management
I came across this interesting article from last year by Stefan Stern on the Financial Times web site – Bosses with a thirst 
for change. I live in Berlin, so his discussion of how the managers of brewing firms in the former East Germany adapted to the fall of the Berlin wall was interesting for two reasons.
Reason 1 – I like the beer
Reason 2 – the managers showed a great deal of skill in adapting to the changing business environment (what we at Turris Consulting call the external change context).
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Handelsblatt- Wie klingen die Gemälde alter Meister? 6 September
- Zwei Auftaktsiege für deutsche Ringer 6 September
- Kartellamtspräsident: Von Atomeinigung enttäuscht – „Wettbewerb hat keine Lobby“ 6 September
- Bogenschützen enttäuschen in Shanghai 6 September
- Financial Times UK
- September stock surge extends into fourth session 6 September
- BA-Iberia has 12 on takeover target list 6 September
- Pre-Budget report to be ditched 5 September
- Oracle looks to give Hurd leading role 5 September
