Friday, February 15, 2013

Discontinuous Change and the Leader-Part IV-Building Capability

When there is a major strategic shift in a business....from pure brick-and-mortar banking to one that includes electronic banking...or from oil and gas production to renewable energy...or from running bookstores to operating an on-line, downloadable electronic library as examples... a very different set of capabilities and skills is often required.  In some respects, identifying the opportunity is the easy part.  Building the capability to exploit the opportunity is where the real business value lies.

One approach is to build the capability organically.  By that I mean broaden the portfolio of the existing business to include the new opportunity.  This approach also means re-skilling existing staff and often brings a significant change management challenge.  In addition to or in lieu of re-skilling existing staff one might consider external hiring from successful companies in the new area.  Often, putting a young high-potential leader in charge is another way to bring energy to the effort and attract internal talent.  Convincing high potential staff to take a career risk has its own challenges.

Another approach is to set up an entirely autonomous business unit where those capabilities can be organically built, organizational norms established and new values reinforced if necessary...establish a different culture or sub-culture if you will.

Another alternative, probably the fastest, is through mergers and acquisitions...basically go out and buy the capability that someone else has already established.  This too can be tricky.  Often the company being acquired is a start-up where the employees sacrifice salary for a large equity stake in the company.  When the start-up is acquired, keeping staff who have just become wealthy can be a challenge.  This is why retention agreements of key staff are often a key acquisition negotiating point.

All of this to say, the leader has to be thoughtful and purposeful about how they will build the new capability to doesn't happen automatically as a result of identifying a new high-value opportunity.

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