Ahead of the workshop, Eszter shared a few initial thoughts about risks inherent in change by looking at three case studies that featured in the news recently.
The risks of change: three stories in the news
Over the last few days we’ve spotted a number of news items highlighting the risks inherent in changes and demonstrating important considerations for businesses and their managers.
1. The story of neighbourly generosity and the constitution
One of the most heart-warming stories of this summer was the initiative, started by retired Norwegian geodesist Bjørn Geirr Harsson and garnering significant online support, to gift a mountain top to Finland in celebration of her ‘100th birthday’, the centenary of Finnish independence from Russia. As Finland already contained most of the mountain, Norway would give up a small piece of land on Halti Mount to create Finland’s highest point, while retaining much higher mountains elsewhere.
This week it transpired however that Norway’s constitution forbids such a generous cross-border gesture as it states that the country is ‘indivisible’.
Organisational changes - particularly those involving large scale structural issues such as mergers, acquisitions, management buy-outs - frequently have governance implications. In advance of the change process being put in motion It is imperative that the constitutional and governance implications are fully explored and any necessary adjustments made or, as in the case of Norway, the strategy abandoned.
2. Love it or hate it, the economy is global
The pound may be rapidly losing its value against the dollar and the euro, but the most widely publicised economic impact of Brexit thus far has to be the ’Marmite war’ between Unilever, the manufacturer of the yeast extract spread and Tesco.
Unilever informed Tesco that rising production costs led to an increased retail price. Tesco is said to have refused to change the price on its shelves and suggested that Unilever absorb the difference; the dispute led to a few days with no Marmite on the supermarket’s website.
While the two corporations have now settled their differences and Marmite is once again universally available, this news story highlighted an important business risk stemming from external changes. Marmite is made in the UK with local barley, so the value of the pound may not have impacted its price directly, but for that fact that Unilever faces international competition even for national resources. With weakening Sterling the UK crop became more attractive for buyers abroad, creating added demand, and pushing up the UK price of barley and increasing Unilever’s costs on each jar.
How resilient is your business to external and unexpected changes in its environment? Can it transform alongside, or better yet take advantage of global changes in the marketplace? Have you mapped the risks that result from the connections, levers and networks within your market?
3. CFC and HFC, or problems of our own creation
The October 2016 Kigali deal saw the world agreeing to eventually eliminate hydrofluorocarbons (HFC), a powerful climate warming gas. Used in cooling systems, the rise of HFCs in recent years is linked to increased use of air conditioning, posing particular fears for the future as air conditioning becomes more common in the rapidly developing parts of China and India.
However, HFCs were once seen as the solution, not the problem. The 1987 Montreal Protocol was heralded as a breakthrough in the fight against CFCs, the gas that was destroying the ozone layer. Countries came together and agreed to ban CFCs, found in fridges and cooling systems, with an optimism that they were safeguarding the planet for future generations, protecting everyone from harmful ultraviolet light.
Following the CFC ban, use of ozone-friendly HFCs soared, as air conditioning became commonplace. In recent years the impact of HFCs on the climate had become more appreciated, with them now accepted as significantly more destructive to the climate than carbon dioxide.
This example of unintended consequences highlights that forecasting and scenario modelling are important aspects of change management and crucial for ensuring that by solving one problem we do not create new challenges. We need to ascertain the current and potentials risks which develop as a result of our strategies. While not all risks can be foreseen, awareness and planning for the potential for unintended consequences is a key management skill.
To find out more about how to lead change and manage risk effectively, join us at the workshop on November 21st, 12:45-4:30pm: