Change Management is the New Management

In this Q&A, Bhakti Vithalan, Founder and CEO of BigSpring, and Frits van Paasschen, veteran Fortune 500 CEO at Starwood Hotels and Resorts Worldwide, and Coors Brewing Company, tackle the urgent need for agile, change-ready organizations. Frits van Paasschen explains why traditional management is outdated, emphasizing that “agile is the new smart.”

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They discuss the challenges of keeping up with rapid technological advances, and the importance of bottoms-up communication from the frontlines to adapt strategy based on the latest customer market signals.

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McKinsey says 75% of companies quoted in the S&P 500 will disappear in a decade. This conversation offers essential insights for leaders to ensure their businesses are in the 25% that stay relevant and thriving in today’s fast-paced business landscape.

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Bhakti Vithalani (BV): Why is it that so many companies seem to be falling behind when technology should be making them more effective and better at what they do?

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Frits van Paasschen (FvP): I wish that you had walked into my door when we were implementing a digital transformation at Starwood. As at many companies today, we continue to face the same challenge: “How do you create the same sense of purpose and dialogue on a real-time basis?” Senior leaders doing roadshows and that kind of work is so time-consuming and frankly, exhausting. This is where I think BigSpring comes in.

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BV: You talk about creating a sense of purpose and dialogue. Executives are trying to do this at a time where their hair seems to be on fire. I just spoke to an executive recently, who said what keeps her up at night is “how to help people cope with acceleration”. I spoke to another customer who said they found out their sales teams were selling products that had been phased a month earlier. People and businesses are evolving so quickly. How do today's CXOs navigate this? How do today's leaders keep their teams up to speed?

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FvP: It's almost a trope to say this, but there is no such thing as business as usual anymore. Frankly, that was true even before COVID and the lockdown and then came the return and the supply chain challenges and interest rate changes. It's an incredible pace of change. In fact, the line I've heard that stays with me is, "It's not just the end of an era, it's the end of eras."

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We used to talk about ‘change management.’ But today, I think there is ‘no management without change.’Leading change is what we all do now. In a way, intuitively, I know we're all aware of the pace of change from our own experience, but that doesn't mean the challenge has gotten any less daunting. As a consequence of that, the CEO, with the support of the board, has to be both change-aware and ready to transform their organization.

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One lesson from that is, it's not just the fact that change is unpredictable; it's not knowing, therefore, what's going to happen. Rather than making accurate projections, we need to start thinking about being able to react quickly. The way to describe this is ‘agile is the new smart.’

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BV: I absolutely love that. There is ‘no management without change’ and ‘agile is the new smart.’ What are the implications of that for today's teams?

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FvP: It comes down to this: in the past, you could have been clever enough to anticipate what was coming, and you could build a model and a plan that basically projected forward. Today, change is not only happening very fast, it's unpredictable. The better skill here—that's why I say agile is the new smart—is to be able to react to what you're seeing, rather than following a blueprint for change. The practical consequence of that is literally investing less energy and time in plans and planning, and more time on strategic questions: How will we compete? What sets us apart? What is our single most important purpose that we're uniquely trying to fulfill? 

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We used to think of strategic planning as one thing, but now I think what we need to think about is we need ‘more strategy and less planning.’

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BV: You said instead of anticipating, business leaders today need to react to what they're seeing and not follow a blueprint. How can today's CXOs build this muscle and build the capabilities to work in a totally different way, to be more agile, and react fast enough to pick up the right signals at the right time?

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FvP: Here's the thing that I think is both challenging and exciting about what it takes now to lead transformation. We need to connect more directly with frontline workers, especially in distributed workforces. Being dispersed used to apply to multi-local businesses like retail or hospitality. But today, with work-from-home, basically all workforces are physically distributed. The most basic element of communication for leaders in that context is to start with something like, "Here's what's changing in the world around us, here's what it means for our company. Therefore, here are the behavioral changes that we all need to undertake, and here's what I need from you."

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To build on that, it goes beyond that messaging and basically boils down to three types and three flows of communication. First, that top-down one that I was talking about: vision, direction, values—- what we need to do. The second one, now increasingly bottom-up: new ideas that are changing needs and are a wellspring, ultimately, of innovation—because we're learning at the frontline how we need to change. Then finally, the third flow of communication is across different functions, so that we get the triumph of the best ideas and the best practices wherever they come up in the organization.

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To give this a concrete example, think about innovation. The way innovation used to work was it was center-led. You had the smartest people at the center, they were generating new products, they'd go to a meeting—we used to do this at Nike—and you present to the sales force these great new ideas that had come out of the innovation engine at the center.

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Now you think about it. We've gone through this whole phase of time-based competition like Zara, where companies are reading and seeing what consumers want and responding. Now, we've even gone full circle where we're saying, "I'm going to sell you a product, and through software updates, whether it's your Tesla or your iPhone, I'm going to make that product better after you've bought it."

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The whole model of innovation and organizational learning has gone from cascading down from the center to learning at the frontline and being quick at adapting and doing that. The end result of that is, healthy organizations identify those best ideas and then make quick changes to how they work and roll them out and are constantly and continuously doing that. By the way, I think this is where BigSpring comes in, because BigSpring as a model and a platform is a great way to accelerate all three flows of information.

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BV: You describe shifting from centralized and top-down to instead starting with the frontline. It's almost a completely flipped approach to organizations and strategy, as we've known it. BigSpring is certainly a platform that has enabled businesses to co-create the future roadmap encompassing all key touchpoints in an organization. We’ve also seen that with digitization, these touchpoints are ever so distributed. Today, organizations are really ecosystems with vast and distributed hybrid employees, partners, etc.  And companies need to better engage and connect with all of them. 

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But that said, everyone today also seems completely overwhelmed with technology and with communication. Given that, how can business leaders successfully navigate change and with the sense of purpose you've described?

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FvP: It's really interesting because people are working incredibly hard, especially in service businesses. They seem inundated, they seem stressed, sometimes they seem overwhelmed. All the while, we as customers in so many of those circumstances, feel frustrated.

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I think the reality is—never before have there been so many people in so many new jobs, working in so many new ways, trying to figure out what to do with new standard operating procedures, digital changes to their business from even before COVID. We now need to find ways to get people up to speed faster. How do you get your workforce to feel engaged in a higher purpose? How do you create a change-ready organization where people not only accept change, but they participate in making sure that those changes are the right ones?Those are the challenges that we're all starting to face right now.

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BV: Let’s focus a little bit more on the ‘paradox of change.’ At a time where we have all the technology and all the capabilities ahead of us, you would think we're going to be performing better than ever, but it turns out we're probably performing worse than ever. In December 2023, Jeremy Siegel, renowned economist at the Wharton School, said the US saw its lowest productivity level in 75 years. Help me understand, what do you think is going on over here?

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FvP: This is what I think is so interesting. It's actually fascinating. Here we have all this technology, which, as you pointed out, should be making us, as companies and organizations, better at what we do. Yet, at the same time, companies are failing at a faster rate than they ever had before. I read somewhere that the average life expectancy of a publicly-listed company is down by half, and that half of them will be gone in the next 10 years or so. What is the paradox here? I think it comes down to a few basic things about the way large organizations work. 

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The first is: companies spend too much time trying to defend existing businesses because they've been profitable for a long time. It's very hard to let go of that. That's a natural thing to do. But in defending those old ways of doing business, they're also being resistant to change. That's one piece.

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Another piece comes down to the fact that we as human beings have so many different manifestations of cognitive bias, and something that I call ‘change blindness.’ This comes out in different ways. We all know that we confirm things that we already believe, or we look for information that does that confirmation. It's called confirmation bias. We also tend to overestimate our ability—including to predict the future and what's happening to our business—and we tend to surround ourselves with people who think like we do, and therefore share the same beliefs. This makes it that much harder for us to step back and say, "Wait a minute. If I were a rational, information-seeking, utility-maximizing decision maker, I would seek and look for that information to be able to change what I see happening in the world, and therefore, what happened has to change within my own company."

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Then the third piece of this—as if that weren't enough—is what I would call ‘organizational inertia.’ We've created organizations where certain types of people get promoted and certain kinds of skills are valued. The way we measure and reward success has all been built around the existing paradigm.

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Those three things—defending the base business, cognitive bias, and organizational inertia—really explain why so many companies are failing, when in fact they should be getting better.That starts to make the paradox more clear to people observing this.

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BV: Picking on your point about organizational inertia, I hear companies all the time saying about people, "Look, they don't care. They're not going to engage.” Do you think this is true? Are we just fundamentally creatures of comfort? Why would people in an organization want to engage?

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FvP: The way you just described that to me defines what I call the second paradox of leading change. I just got through telling you why it is that incumbent companies struggle in the phase of change and accelerating disruption. But the funny part is, human beings are not naturally averse to change. It's how change is presented to them that makes all the difference.

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It's a fallacy to say that people resist change. Here's what I mean, having thought about this a little bit. The first is, as consumers, by the way, we love change. We want to consume newer and better products. The reason we're comfortable with that is we have in the back of our minds, "If I don't like this new product, I can go back to the old way. I'm opting in to change, it's not being imposed upon me."

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When you think about that from an organizational context, it's really helpful to think of people in your organization as consumers, and as consumers of change. The key is, you can't necessarily give them the opportunity to opt out but what you can do is make them co-authors and engage people in the discussion around change that's happening.

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We can use crowdsourcing, we can use other forms of communication—like, by the way, BigSpring—to hear from people and understand how we might be able to make change more effective. We can also take people who are widely respected in the field and use them as spokespeople for the change. All of these things give people a sense that they're influencing their destiny, that they have a sense of control, and that they feel like they are consumers of change rather than having changed thrust upon them. That's one of the ways to overcome this.

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The other one is coming back to something we talked about a little bit earlier, and that is this idea of shared sense of purpose. Every company needs to know what it is they're uniquely doing and why they exist beyond to make money for their shareholders or other stakeholders: "What problem are we solving?" The example I use here is people defending their country or revolutionaries who are willing to put their lives on the line for their ideals and for what they believe in.

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Obviously, in a business context, you don't want to go quite that far. But the idea that people so believe in what the mission of the company is that when they're presented with a way of accomplishing that mission more effectively, even better than before, it becomes easier for them to be comfortable and more interested in change. I think both of those things overcome this second paradox of change, which is, it's a fallacy that people are resistant to change. It's all about how it's presented to them.

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BV: That’s a powerful framing - enable people to be consumers of change versus having it being imposed on them. Really resonates with our own philosophy at BigSpring. Our whole approach is: ‘connect with the person, not the employee’ and ‘build for the user, not the enterprise buyer.’ Any closing comments?

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FvP: This has been a great conversation, and there's so much to touch on here. What I might summarize with is just going back to this whole idea that if all management is change management today, and if as leaders, what we are doing is driving change, then what we need to do more than anything is create conditions for organizations to learn and spread knowledge.

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In the past, in the industrial era view of what big companies and organizations were, we had this idea of them being centralized, command and control, plan-driven, and the assumption was that somehow the smartest people in the company had made their way to the center. We are completely moving away from that paradigm of how organizations work, to one where we're saying, "No, what we want now are horizontal learning organizations" and that requires a different way of thinking about leadership.

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It's about creating conditions for learning and success, knowing that the best idea may come from somewhere in the field, or it may come from a machine, and that we need to be comfortable having the center to be a platform and a facilitator for improving performance and getting companies ever closer to accomplishing and reaching the purpose that they've set out to accomplish.

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BV: The center becomes the facilitator - what a perfect way to sum up this fantastic conversation. I feel like we're just beginning to scratch the surface. Thank you, Frits.

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About Frits Van Paasschen:

Frits Van Paasschen has been President and CEO of both Starwood Hotels & Resorts worldwide and the Coors Brewing Company.

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He held numerous executive roles at Nike, ultimately becoming President of Europe, Middle East, and Africa. Before that, van Paasschen was a Vice President, Finance at The Walt Disney Company, having begun his career in consulting at The Boston Consulting Group and McKinsey & Company. He serves on the boards of Royal DSM and William Sonoma and previously was a director on the boards of Oakley, Jones Apparel, and Barclays.

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Van Paasschen is an investor and board member of three hyper-growth unicorns, Sonder, citizenM Hotels, and Convene (Chair). He is a frequent keynote speaker and Amazon best-selling author of The Disruptors' Feast.

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About Bhakti Vithalani:

Bhakti is the Founder and CEO of BigSpring AI, a platform that retools people for rapidly changing business needs through practice. Think of revenue as the “game scoreboard”, and BigSpring AI as the practice engine for people to get ready for the game. Google, Pfizer, SAP, Cisco, HSBC, Tata, Liberty Global all use BigSpring AI to equip their ecosystem of teams and partners with the latest innovation to accelerate growth. BigSpring AI has been selected by the World Economic Forum (WEF) as a Technology Pioneer 2020, joining a select group of companies that are poised to have a significant impact on business and society.

Bhakti also serves on the Board of Governors for JA Worldwide. Previously, Bhakti worked as an Engagement Manager with McKinsey & Company leading client engagements for the High Tech and Corporate Finance practices. She started her career as a software engineer with Siebel Systems in Silicon Valley. Bhakti is a Computer Engineer with University Honors from Carnegie Mellon University, where she was among the first women from India to attend. She earned an MBA from The Wharton School, where she was a Joseph Wharton Fellow.

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