Rarely is the need to change more critical to success than in companies undergoing transformational activities. Much has been documented on how to lead change management projects when companies understand both the current vision and future state strategy. However, what can leadership do to manage change when the current state is cloudy and the future state is unknown? It all hinges on a few key characteristics.
Consumer taste is one example of a driver that forces companies to operate under uncertainty. The beverage industry is noticing that people are becoming more health conscious as outside groups and politicians are pushing to lower obesity numbers, resulting in a decrease in sales of soda (what used to be a core unit of many industry leaders). The rate of soda intake has declined every year since 2000, while water has risen to become the third highest selling beverage. By 2017, it is projected to outsell soda.
Market players are reacting to this trend. For example, Coca-Cola has adopted an initiative to reduce the number of calories per person by 20% by 2025. In addition, Coca-Cola has decreased its investment in marketing the soda brand. It aims to create a ‘one brand’ approach to reach consumers. As a result, Coca-Cola replaced its slogan from ‘Open Happiness’ to ‘Taste the Feeling’.
Strategically, Coca-Cola changed, but how did it manage and decide on this particular initiative?
Coca-Cola’s approach exhibited key characteristics required to lead through ambiguity. Such characteristics are:
- Actively listening
- Staying informed
- Evaluating risk
- Openly communicating
Coca-Cola decided to listen internally to its leaders. It met with regional executives and questioned the reasons for its struggles in some of its strongest categories, such as soda. This was a significant step as it allowed executives to stay informed, learn from those directly in the market, and evaluate the risk of proposed changes. The net result is a message that becomes more intimate with the consumer but at the same time, less self-righteous. The use of appropriate change management methodology is allowing Coca-Cola to change in a smart and safe manner during a time of uncertainty.
On the contrary, J.C. Penney is an example of a company with a failed strategic overhaul. In 2012, the company hired a new CEO who immediately changed how consumers physically shopped within the store, along with the overall price point. These changes involved the elimination of coupons, along with introducing a new storefront model that closely resembled its competitors. However, J.C. Penney lost focus on its competitive advantage in the marketplace. Ultimately, consumers did not agree nor did they understand the changes.
So, why did J.C. Penney fail from a change management perspective?
J.C. Penney did not lead with some of the key characteristics that were identified in Coca-Cola’s strategy. The new CEO did not listen internally to leadership before making a decision that would affect consumers. In fact, J.C. Penney terminated many of its executives and replaced them with individuals that agreed with the CEO’s line of thinking. The lack of open communication and inability to listen to upper-level management resulted in the CEO making a decision that was risky and uninformed.
These key characteristics of leading through ambiguous times apply to leaders of all industries; whether leadership has to change due to company performance, high turnover, new technology, or evolving consumer tastes. Companies must continue to learn how to adapt in uncertain environments. If companies don’t, then failure should not come as a surprise.
Will you survive?