Tools for Change

“WHEN IN trouble…reorga-nize.” Using those words, spoken with a Solomonic confidence, a long-ago boss of mine opened a meeting. For the next two hours, he prepared the ground for an extensive plan to impose a degree of centralization on three business units, obtaining some economies of scale while leaving each with certain critical dimensions of independence.

When the deed was done, though, everything had changed but nothing was different. Several layoffs, a few months, and many resentments later, the company righted itself and continued on the path that led to its being sold.

It wasn’t until last fall, when senior editor Ellen Peebles and I met Gary Neilson of Booz & Company, that I fully understood what had gone wrong. My old boss’s sin was to rely on reorganization as the primary vehicle by which to carry forward a strategic decision. All his savings were dissipated because the new organization seemed almost inherently unable to make smart decisions about inventory, which left us short of items that were selling and oversupplied with things that were not. As management scholar Robert Burns noted, “the best-laid schemes o’ mice an’ men gang aft agley.”

In a multiyear study, Neilson and his colleagues Karla Martin and Elizabeth Powers have learned the most effective ways to keep such plans on track. This month’s lead article, “The Secrets to Successful Strategy Execution,” presents their findings, and, as you’ve gathered, reorganization doesn’t lead their hit parade. The trio studied 17 kinds of behavior – centralizing versus decentralizing, changing incentives, and so on – and clustered them into four areas, depending on whether they primarily affect structure, decision rights, information flow, or motivation. The two in the middle matter most. Notably, those are the least subject to corner-office diktats. They involve dirty hands and messy conversations.

The picture is complex, however. For one thing, factors interact; for another, interventions that galvanize one corporate culture might paralyze another. You can see how this works at

www.simulator-orgeffectiveness.com, where you can diagnose your organization’s effectiveness at strategy execution, design a change program – and then grade the decisions you make to carry it out.

The 2004 HBR List of breakthrough ideas included “The MFA Is the New MBA,” in which Daniel Pink argued for the importance of an aesthetic sense in business. Time has proven Pink’s prescience. Apple’s resurgence owes everything to the elegance that suffuses every aspect of its business. Our friends at Business Week have taken up design almost as if it were a moral crusade.

Procter & Gamble’s CEO, A.G. Lafley,

hired 150 designers and has made sure their voices are heard by having the head designer report directly to him.

Behind this activity is a revolutionary approach to business called “design thinking.” That’s also the title of this issue’s brilliant article by the CEO of IDEO, Tim Brown, a leading proponent of the movement. Where new products are concerned, design thinking begins not at the drawing board but with an anthropological devotion to what customers do and want to do. Service design isn’t so much about making a hotel lobby look fab as it is about crafting every interaction between a company and its customers in a way that gives them the experience the company intends. Even strategy, one might say, is the residue of design.

IDEO has designed well-known products such as TiVo’s video recorder and the updated Zyliss salad spinner. But Brown has become an adviser to many other chief executives (Lafley among them), because they recognize that the process of design thinking offers a powerful new way to make choices – especially those involving customers.