• Identify external and internal drivers for change
• Appreciate the reasons why organizations fail to learn how to change, or to realize what needs to change
• Identify ways to address organizational complacency

• A trigger or driver of change is a catalyst for recognizing the need for a change to be initiated. Drivers of change can be internal or external to the organization.
• Recognizing the potential need for change can be done through conducting an analysis of the external environmental and an internal assessment of the organization.
• Leaders may fail to recognize the need for change because they pay insufficient attention to what is happening in the external environment. Even if they are aware of what is happening they may fail to recognize the implications for their organization.
• Encouraging innovation can help avoid becoming complacent or entering the ‘death spiral’. 

• Show the slide of the external drivers for change and ask students to share examples of drivers under each of the headings, for example technology.
• Use the case study of Burberry to highlight what can trigger changes within a company. It is worth showing Burberry’s website for the ‘Art of Trench’ and also their Facebook site, to help illustrate the changes that they have made.
• Show the slide of Nadler & Tushman’s ‘Trap of Success’ and ask for examples of companies which students are familiar with, which have entered the death spiral.
• Use the case study of Kodak below to illustrate what can happen to a company when it becomes complacent.
• Use the case study of Oreo Cookies and the discussion questions to illustrate how companies have adapted, particularly across global borders.

• Consider changes in an organization in which they have worked and to identify the following:

o    What triggered the changes?

o    Were they anticipated?

• What are the main internal drivers for change in an organization which you are familiar with?
• Which triggers for change do you feel are the main reason for change in organization?

Kodak has faced an unprecedented magnitude of change. The speed with which Kodak’s core market for traditional silver halide roll-film has collapsed in recent decades is blistering. However, one compelling theory is it was not the speedy pace of the transition that undermined Kodak, which filed for Chapter 11 bankruptcy protection in January 2012, but the fact that it was drawn out over decades. In other words, Kodak first pioneered digital technologies in the 1970s and 1980s but, until relatively recently, the urgency of the challenge was never quite sharp enough to persuade its employees, investors and executives that it had to overhaul, or even sacrifice time-honoured ways of doing business.

In 2000, with Wall Street sceptical about the promise of digital photography, Kodak was still searching for a way to bridge the gulf between its dominance of the highly profitable roll-film business and a lower-margin, highly competitive digital future. Successive chief executives talked up the opportunities, but each failed to break down the structural, cultural and strategic obstacles to change. The company’s dominance of the sector and confidence in its brand and marketing also led it to rest on its strategic laurels. Fujifilm of Japan had successfully dented Kodak’s roll-film dominance in the 1980s. In the 1990s, Fuji was forced to diversify simply in order to achieve the scale to compete with Kodak. It used its film expertise to create components for flat-panel LCD screens, for instance, and when the consumer film market finally dropped off the cliff-edge, these other businesses cushioned Fuji’s fall. By the time Antonio Pérez took over as chief executive in 2005, divisions within the company had started to break down and were heading down a route of intense, possibly futile competition in the printer market. Kodak must encourage and welcome the innovative ideas. Kodak was dragged down by the alluring comfort of being on top. When people are saying that the sky is falling, but the dollars keep rolling in the door, it’s easy to deduce that people are over-reacting.

Randy Ottinger (2013)[37] reviews where Kodak is now and if it has learnt its lessons. Ottinger points out that Kodak has emerged from bankruptcy protection slimmer, trimmer, and with a new business plan. As Kodak enters a more focused space – limited to packaging, graphic communications, and functional printing – they will face tough competition. But, if the company focuses on the customer and its culture, they will be able to pull ahead of the competitors in this space. In order to do this, Kodak must change its ways – going from the behemoth in the industry to a more nimble, engaged, and innovative company. Rather than looking within the organization for small changes, or even within the industry, Kodak needs to listen for the new ways customers wish to use its products. This is the only way they will avoid their past situation where a massive shift was happening in their industry, but they failed to see it because they still had dollars rolling in from their existing products. The new Kodak must engage employees, as innovators who are constantly looking for new and better ways to reach the goal. The new Kodak must root out complacency at every level. It must encourage and welcome innovative ideas. If Kodak follows this approach they can avoid the dangerous place in which they found themselves in the past – the death spiral.

Kraft’s Oreo brand first went on sale in China in 1996. But sales were lacklustre and by 2005 it was clear that one of the world’s largest biscuit brands was falling far short of expectations in China’s fast-growing retail market. Growth was stalling at a time when the biscuit sector overall was experiencing record growth in China. Apart from a small rise in 2003, Oreo sales had been sluggish from the outset, and shipments into China were projected to drop by more than 10 per cent in 2005. To make matters worse, the company was losing money on each Oreo sold. Research revealed that Kraft’s positioning of the brand had missed the mark. First, its sales and marketing strategy had simply been replicated from the USA. Advertising and in-store displays were translated directly, and the pricing structure and packaging were largely the same as in the USA. Second, Kraft had paid too little attention to what preferred. For example, the biscuit was too sweet for Chinese tastes. It seemed that Oreo’s product was dictated by the manufacturing process, not by the market. The company had to take radical action or risk the distinctive black-and-white-layered round biscuits being pulled off the shelves in China.

To address the issues the Oreo China team adopted the following multi-pronged approach:

• It introduced a less sweet version called LightSweet Oreo. The team also convinced headquarters to reformulate the original Oreo, for the first time in its 93-year history, to adapt biscuits on sale in China to local tastes.
• The size of the packet was reduced, while the team also introduced another, smaller packet so consumers could get a first taste of Oreo biscuits at a lower cost. The smaller packets required changes in the manufacturing plant. Similarly, marketing promotions that relied on bonus packs (extra biscuits for the same price in a bigger pack) were replaced with more economical in-store samples.
• The team expanded distribution beyond grocery stores and hypermarkets to include convenience stores, a fast-growing outlet for consumer packaged goods. Carrefour in Shanghai offered to sell Oreos by weight, which gave customers more control over how much to buy.
• Recognizing the popularity of wafers in China, the team introduced chocolate-covered wafer sticks. Convincing senior management to introduce a new product was not easy but Oreo sticks were a big hit and soon gained 30 per cent of wafer sales overall in China.

Manufacturing, packaging, distribution and marketing were aligned with the Chinese market and sales soared from $20m in 2005 to more than $400m in 2012. But the shift in mindset from rigidly relying on orders from the US to harnessing the local team’s sense of consumers’ tastes was also a significant outcome. Oreo’s experience illustrates the dilemma faced by a multinational brand entering a new market. There are different consumer tastes and local sensibilities to cater to but international brands often rely on the parent product’s strategies because they have worked well over long periods in established, familiar markets. By launching new products in China that were recognizably Oreos but were sensitive to local preferences, the brand ensured sustainable growth by balancing traits that made the global Oreo brand successful while adapting to the local market.

• Critically discuss how managers might address complacency to change within an organization.

For the story of Eastman Kodak’s fall, its bankruptcy and how it failed to change, the following is a useful clip to show:

Kodak: From Blue Chip to Bankrupt, on YouTube: www.youtube.com/watch?v=wwfwr8eYP50

For a short video on companies that have failed show:

Top 10 Brands That Failed, on YouTube: www.youtube.com/watch?v=UlgbwGHF8GQ

This can be followed by a discussion on why these companies failed – ask students what the companies could have done differently in order to survive.

What does the future of business look like? In an informative talk, Philip Evans gives a quick primer on two long-standing theories in strategy — and explains why he thinks they are essentially invalid:

Philip Evans: How data will transform business, on Ted Talks: www.ted.com/talks/philip_evans_how_data_will_transform_business