Leading Strategic Change and Business Strategy: The Increased Use of Internet Commerce by Wal-Mart - Case Study Example

Leading Strategic Change and Business Strategy Introduction The company that has been chosen to apply the theory/models to is the multinational giant Wal-Mart. Consideration will be made of a number of changes in types of technology used within the business: specifically the increased use of Internet commerce that has occurred over the last three years. Theory Change management is one of the most important aspects of any business strategy. The human element of change is often underplayed or frankly ignored within businesses seeking to use the latest models and systems to improve their performance. As Baloqun et al. (2003) suggest, strategic change can move beyond merely the formulation of strategy by a consideration of the whole process from planning through to implementation. Change management does involve "managing" and thus control, but also the realization that change is often an organic process that develops in unexpected manners. Baloqun's most important idea, one that moves beyond traditional change management, is that it should move beyond the "formulaic" and "linear" process that has previously dominated the models. Context-specific analysis is an interesting variation on the normal modeling process, as it seeks to enable the manager to see that which is specific to her company rather than that which fits into the models. The change kaleidoscope involves dissecting the possible ramifications of change, while always keeping in mind the overall strategy that is in place. The manager must develop what Baloqun refers to as "change judgment": that is, the ability to understand the critical features of a specific change context. The important element here is to recognize what is and what is not possible within change implementation. A manager involved in change management first needs to be aware of what exactly is happening at the given moment within the business, and then needs to be able to extrapolate possible outcomes based upon that awareness. The first premise of planning is having as much knowledge as possible. The type of planning which is now occurring has changed radically from that envisioned in the traditional business model. As John Byrne puts it, "gone are the abstraction, sterility, and top-down arrogance of the old model." (Byrne, 1) Now managers in the most successful corporations are part of a system in which "today's gurus of strategy urge companies to democratize the process", and they do this "by handing strategic planning over to teams of line and staff managers from different disciplines." (Byrne, 1) Often young, junior managers who are noted for their creative thinking are teamed with near-retirement, senior managers who essentially have nothing to lose and so can tell it like it is. So from the most junior to the most senior manager there is a role, both for planning within their own specific area of the business, but also for constant consideration of how that may effect longer-term and more far-reaching plans. This is the democratic and enrolling type of leadership that is increasingly seen as the most successful in the modern business environment in which change is constant. Planning is perhaps the central role of all managers, because all the other functions flow from it and must always consider their relationship to it. A business without a plan has no future, and so all the other functions will be redundant. Organization within a business is essential to planning: in one sense it is one of the tools that may be used to realize a plan. Organization is divided into two basic areas: control/co-ordination of tasks, and the management of information flow within the company. Management of tasks and deciding what information needs to be collated and to whom it should go is essential for business growth, particularly for the vital task of leadership development. Organization involves investing in "human capital, the most important asset inside of organizations today." (Carter, xi) Managers, especially at the highest level, must organize the tasks of their employees so they meet with current expectations of productivity and contribute to the goals of the overall planning that is constantly occurring. Tasks must be clearly defined, and yet managers must also allow for individual talent and creativity (which be necessity may create new "tasks" previously not considered) to come to the fore. This is particularly the case with the implementation of a new technology, when the employees of a company may be trained on specific new processes and duties, but must be allowed to bring their own unique perspective to the table. A number of change theories are useful when considering change within a company. The first theory to be discussed here will be one of the first modern attempts to explain change form a theoretical viewpoint. Watzlawick et.al. (1974) published their revolutionary ideas on change based upon past ideas, mainly from mathematics. They offered a theory which explained change in terms of first-order and second-order changes. First-order changes are a variation in the way that processes and procedures have been done in a given system, leaving the system itself relatively unchanged. Examples of these changes include creating new reports, creating new ways to collect the same data and refining existing processes and procedures. Second-order changes occur when the system itself is changed: a "redefinition" or "reconceptualization" (Watzlawick, 1974, p.1) of the business of the organization occurs. This is a very useful model in determining at which stage a particular type of change is occurring. Thus if a company is a t first-order less is changing, and also there is less risk. There is more change and more risk at the second-order. The second model is the idea that cultural change occurs within an organization when any type of transformation or new system is put in place. The implementation of a CQI (continuous quality improvement) system is an example of this. As Ackoff (427) suggests, cultural changes may occur throughout a business even when the initial change is apparently quite small or applies to a limited number of people. The third model is the infomatics model, pioneered by Reed Gardner (1998). He suggests that "the success of a project is perhaps 80% dependent on the development of the social and interaction skills of the developer and 20% or less on the implementation of the hardware an software technology." This model stresses the importance of the human-technology interaction within any change based upon technical innovation. This is very important when considering change of a technical nature within a company as complex as Wal-Mart. The fourth model is the six sigma approach to change management. This involves the use of data and statistical analysis to measure and improve a company's performance by identifying and eliminating defects in, for this example, service related processes (Pande, 2001). The fifth model is the resistance theory, which, as Kusmierek (2001) suggests, is the attempt to understand and addresses resistance from employees within a company to organizational change. This is particularly important within a company such as Wal-Mart, that has had long-established and highly successful business practices. Change may not be seen as needed by employees, and thus may be resisted. Wal-Mart Background Wal-Mart is the largest retailer that has ever existed. It started in Arkansas, USA in the early 1960's. The first Wal-Mart opened in Rogers, Arkansas. It was opened by Sam Walton. By 1967 Wal-Mart had 24 stores with a total of $12.6 million in sales. The company was incorporated in 1969 and steadily grew during the 1970's. By 1975 there were 125 stores in nine states and in 1979 Wal-Mart became the first company to reach $1 billion in sales in just seventeen years of operation. Rapid expansion occurred during the 1980's with several stock-splits and about 1,000 stores by 1990. In 1990 Wal-Mart became America's number one retailer in terms of sales. By 1992 Wal-Mart was in 45 states and its stock was split for the tenth time in the next year. In 1997 it had its first $100 billion sales year and had become the largest retailer in the world. The years since have seen Wal-Mart continue to expand its operations in America and the rest of the world. It currently has 1.7 million employees worldwide, with 1.3 million of them in America. Facts of the Change Wal-Mart first setup on online store in the late 1990's. I was one of the first companies to successfully produce an interface between its physical stores and its online presence. The change involved setting up an online store, training various parts of the Wal-Mart workforce - from senior executives to management - on the use of it, together with how they could refer customers to it when they did not find the items they were looking for in a physical store. In the last year some Wal-Mart employees have been given PDAs in order to have access to the online store for customers within the physical store. The change envisioned by the online Wal-Mart store involves both offering goods and also overall ISP service - especially to those people who have not received it before: On January 6, 2000 Wal-Mart Stores, Inc. and Accel Partners join to form an independent company called Walmart.com Inc. This company will be based in Palo Alto, CA and will be in charge of developing and managing the Walmart.com website. The new company will have it's own board of directors which will include Rob Walton, chairman of Wal-Mart Stores, Inc, Lee Scott, vice-chairman and CEO of Wal-Mart, and James Beyer, managing partner of Accel Partners. The main goal of this venture is to bring current off-line consumers to the Internet. They also want to create "one of the most fulfilling Internet experiences on the Internet." This company will work hand in hand with AOL's agreement with Wal-Mart to provide Internet service. (www.walmart.com) Thus, as the bricks-and-mortar Wal-Marts provide goods at the lowest price possible, so Wal-Mart.com seeks to provide both goods and access to the Internet in the same manner. Theory Applied to the Changes Turning to how each of the five models that were identified and described earlier can be used within the technological changes which took place at Wal-Mart, that of first/second order changes can be utilized as the move from planning to implementation occurs. Thus within the planning and pilot stage of the project little drastic change occurred, and the risk to Wal-Mart was low. At this stage it may be difficult to see great changes within the business. Once second-order changes occur, with the actual implementation of the systems across the company, then the organization as a whole will start to transform. It is important to know which stage the company is at so the concomitant opportunities, challenges and risks can be studied. The initial development of Wal-Mart.com was first-order, but it moved to second-order when it was actually implemented. The theory of cultural change will be useful in determining how apparently minor or limited changes will effect the company as a whole. Thus, while only shop level, entry-level workers currently have the PDAs for immediate online purchases, the effects of these changes may spread, ripple-like throughout Wal-Mart as a whole. The cultural change model will be useful in both identifying and then examining these changes that may seem remote form the actual point of origin for the change. Infomatics theory fits in with the previous theory. While a great deal of technical knowledge and planning went into the set-up of the various systems, it is the human element that is the most important. Thus how the customers interact with the new online system, how the employees effectively (or otherwise) implement the PDA system is just as important as the smooth running of the software. This model sees the human and the technological element as unified, not mutually exclusive. Six sigma was useful in identifying how the changes that occurred are actually influencing the bottom line of Wal-Mart's financial results. An objective measure, which allows management to stand back from the situation and view the multiple, complex results of the various systems will be essential to judging their efficacy, as well as future changes that may be needed within them. Resistance theory will be of great use to managers who will need to persuade employees to "buy into" the changes that are occurring. Being able to identify common reasons and patterns of resistance is the first step towards reacting to and alleviating them. Many managers did not see "the need" for Wal-Mart.com, as the company was already the most successful in the world, but presently and in an historical context. Taken as a whole, all five theories provided a useful framework for the development, implementation and study of technological changes within a large company. But how can a manager make sense of the numerous different models and the complexity of the changes that will occur with technological advancements One powerful method is through the cultural web. The cultural web is a means of investigating and revealing the culture of an organization. It represents how culture is expressed and how it manifests itself: A Cultural Web (Williamson, 2003) The central area of the Venn diagram that represents the cultural web is where the paradigm of change occurs. The manager must view this paradigm within the complexity of the web that has been produced by the various factors that go into the individual sectors:- such as "stories", "power", "symbols", and "routines/rituals". All of these are what make up the culture of a company, and, as can be seen from a cursory glance, they are all 'human' variables that will be held within the general culture of the company. Thus the manager needs to consider how the changes being considered will effect this culture and how, perhaps more importantly, the culture will influence them. This can be related to Baloqun's initial idea of considering the context-specific situation that occurs within a company. The change plan must be made to at least fit reasonably easily within the culture that already exists within the company rather than forcing a radical change within that culture. It is clear that sometimes a radical change in corporate culture is needed (Enron might have benefited from such a change before it went bankrupt) but in general change should be incremental and gradual rather than revolutionary and rapid. The implementation of a new type of technology, such as a new type of website for online commerce, is a radical change, but the training and preparation of the staff should occur within an organized and focused plan. This is what Wal-Mart did, and thus why Wal-Mart.com has been so successful. _____________________________________________ Works Cited Ackoff, RL "The Management of Change and the Changes it requires in Management". Systems Practice. 1990; 3 (5): 427-40. Baloqun, Julia. Exploring Strategic Change. Prentice-Hall, New York: 2003. Boak, G. Thompson, D. Mental Models for Managers. Century Business Books, London: 1998. Byrne, John. "Strategic Planning Back in Business Thought". www.htstrategy.com/articles Carter, Louis et al. Best Practices in Leadership Development and Organization Change: How the Best Companies Ensure Meaningful Change and Sustainable Leadership. Wiley, San Francisco: 2005. Gardner, Reed. "Keynote Lecture". Proceedings of the Computer-based Patient Record Institute Conference. CPRI, 1998. Kusmierek, Kristin. "Understanding and Addressing Resistance to Organizational Change". Managing Institutional Change and Transformation, University of Michigan: 2001. Mintzberg, H. Westley, F. "Cycles of Organizational Change". Strategic Management Journal, vol. 13, pp.39-59 Pande, Pete. What is Six Sigma McGraw hill, New York: 2001. Watzlawick, . Change: Principles of Problem Foundation and Problem Resolution. Norton, New York: 1974. Williamson, David. Strategic Management and Business Analysis. Butterworth, New York: 2003. www.walmart.com Read More