The 5 levels of change

We face opportunities and challenges everyday. Taking advantage of the opportunities or managing the challenges involves change and maybe moving workers out of their comfort zone. Each challenge or opportunity requires different management and change level. The following is a spectrum of change levels that will cover almost every challenge faced in business.

Level 1: Improve efficiency

2014-12-19 20.51.12Improve efficiency by determining if workers are putting the right effort at the right place. Take a look at the current work practices and if the workers are doing what they are suppose to do.
Worker competence and willingness to work are two major factors at this level. Superstars in box 1 are those who are competent and willing to work. They are go-getters who you only need to describe the job for them and they will execute it flawlessly. Workers in box 2 are good workers who are willing to work, but not competent enough to execute a faultless job. Training and development are the solution to increase the workers’ efficiency in this box. Competent and experienced workers in box 3 are unwilling to do their jobs for different reasons. Motivation may help improve the efficiency in box 3 but the workers are choosing not to work for different reasons. Workers in box three knows the rules and regulations, knows the lube holes, shortcuts and exceptions. Troublemakers are usually found in this box and the leader or manager should be careful with them. Workers in box 4 are either new workers or older workers who’ve been moved to a new job without proper training. Their unwillingness to work may be affected by their incompetence or the neglect they feel after they have been assigned to their new role. The leader should either replace workers in the box or train and motivate them to do their jobs.

Level 2: High performance.

Importance vs UrgencyExecuting the right business process. Focus on the important and not urgent part of the business before they become important and urgent. Important and urgent businesses are usually executed in a firefighting mood which lead to mistakes or substandard jobs. Organize work by using the right procedures and setting priorities with key performance indicators and milestones. Pareto Principle states that 80 percent of all the things being done are executed by 20 percent of the right effort by the right people. Assign the right workers with the right resources to high yielding part of the business.

Level 3: Improve, eliminate and copy.

Cut or improve some of the steps from the best process recognized for the business. In level 2 we selected to automate processes to conduct the organizational business, but we need to improve or trim some of the redundant steps that take up time and recourses with little or no positive effect. Redesign the business process by eliminating the unnecessary steps, improve vital steps and imbed best practices in the process. Revisit the business process with fresh and unbiased eyes. Some of the steps in the process were put to inflate somebody’s ego. Other steps were useful for many years, but became absolute now. Some activities and regulations are practiced in the organization for no apparent reason. When asked, the workers will say “we always do it this way, but we are not sure why!” Simple questions can reveal a lot of wrong practice. The same simple questions can be directed to top management and floor workers.

2014-12-17 08.53.29Organization’s do not work soon. Competitors with similar products are produced by similar processes or even better. The organization should explore how others are executing their businesses and find ways and means to adapt them in the organization. Change will always have resistance from workers living in their comfort zone. Not Invented Here (NIH) is one of the hurdles that workers used to stop or even sabotage processes or practices they did not develop internally in the organization. Workers ego and selfishness will find faults and difficulties in the new best practices they did not develop. Resistance can be handled by explaining or demonstrating the benefits of the new best practice and how it may help the workers in their daily work.

Level 4: Think out of the box.

Brainstorm new idea nobody thought could be possible or feasible. The new ideas may have a slim chance to succeed, but experimenting with these ideas after careful thought may yield great results. The new ideas may lead to other possibilities worth further exploring. Integration between different tools or technologies can result in different possibilities and products. New ideas are always welcome, but implementing them will face Great resistance. Change management is a major factor in getting the new ideas go through the comfort zone.

Level 5: Breakthrough.

Complete shift in the thinking paradigm. In this level the business owner was exploring new territories that never been explored before. The breakthrough might be in changing the future direction by more than 90 degrees. Intel dropped the memory chip business and pursued the processor business. Steve Job reduced the Apple products from 12 to only fore after his legendary return to Apple.


Bargaining Power of Customers (Porter’s 5 Forces)

Five Forces - CustomerAn evaluation of how it’s simple to drive costs down for the customers. The customer can influence the price and terms of purchase and may request better service and product quality. The customer power is magnified when the market has many sellers and fewer customers. The switching cost from one seller to another is another factor in the buyer’s bargaining power. The buyers switch to another seller if the products are similar and there is no significant cost to switch. The washing machine detergents are almost similar and do the same cleaning. Dental care products are almost the same with different flavors. Online search engines are another example of service similarities. Users may switch because of a delay of a fraction of a second during the search. The customer will buy another toothpaste because of the new flavor of the month. In undifferentiated market, the brand loyalty between the buyer and seller could be the only reason why a consumer sticks with one seller over the other.

The customer may switch to another product if the customer is well-deducted about the product and have price sensitivity. The availability of the product substitute makes the seller weaker relative to the customer bargaining power. Supermarket shelves in most countries are stacked with different bands of a similar product that the consumer can conveniently choose from according to the brand name, price tag, or attractive packaging.

Regional small farmers, selling most of their farm products to a large supermarket chain have little influence on the terms of the sale. The farmer may opt not to sell to the supermarket at the price they set, but then the farmer has to endure the additional transportation cost to sell his products to another market.

Threat of New Entrants (Porter’s 5 Forces)

Five Forces - Entrants

Lucrative markets attract new entrants unless the existing organisations have a strong barrier to entry. If it is easy to make and sell what the organisation is selling then every other organisation would love to jump in and produce the same product and market it to the consumer. The organisation should have barriers to its share of the market to stop the new entrants from taking a slice out of it.

One of the best barriers is the economy of scale. Economy of scale is achieved when more products or services are obtained with the same fixed cost. A good example would be the neighbourhood bakery. The fixed cost for the bakery is the skilled bakers, the oven, and the store rent. The bakery would be losing money if they produce and sell a few items every day, but the bakery will have excellent economy of scale if the bakers work all of the time and the oven is always full of white dough turning to golden cakes and bread. The fixed cost will be distributed over multiple products and the production cost of each unit will be low. New entrant has to achieve this production and selling scale to be profitable otherwise they will not be able to enter and compete with the existing organisation.

Another example of the economy of scale is the Microsoft Excel. Competitors of Excel have to be widely distributed and adopted to be able to compete. The cost of switching to Excel to another spreadsheet software has to be very low, or maybe free to attract new users. Google offered Google Spreadsheets free online and offline for all users and it is making a good gain in the spreadsheet market share. Brand name can be a useful entry barrier when new organisation try to muscle in its way into the market. In the case of spreadsheet market, both Microsoft and Google are excellent brands and will have a fair chance to compete.

Product differentiation and location are strong entry barriers. Using the bakery example above would be a good illustration for these entry barriers. The bakery should have a good location and access to the costumers to make it more attractive for the customers. New competing bakery will have difficulty attacking the costumers if store is located in the back of a shopping mall or in a remote area. The customer will not go to the new bakery unless it has products the other bakery does not offer. The new bakery can specialize in birthday, wedding, and special occasion cakes which will make the costumer reach for it for that special social event.

The pharmaceutical industry illustrates three major entry barriers. Initial capital investment, government policy, and technology propriety (patent). The pharmaceutical industry invents heavily in research and development to generate a promising medicine that they can patent and sell in the market for many years in the future. The pharmaceutical life cycle from an idea to introduction to the market is averaging around 8 years. The FDA takes at least one year to approve the drug and only three out of twenty drugs turn out profitable. The patent may prevent other pharmaceutical organizations from copying the formula, but the customer will find generic products, which have the same effect, in the market within one year after launching the drug in the market.

Read also The Suppliers Bargaining PowerBargaining Power of Customers

The Suppliers Bargaining Power (Porter’s 5 Forces)

Supplier power is an evaluation of how easy it is for providers to drive costs up. The supplier power is driven by the singularity of the product or service; the number of suppliers; relative size and strength of the supplier; and price of changing from one supplier to another.

Located in London and South Africa, DeBeers controls 58 percent of all rough, uncut diamonds sold worldwide until 2004. DeBeers had to pay a $10 million to settle a 10-year-old indictment. The settlement was huge but gives DeBeers a bigger marketing presence and greater legitimacy with U.S. consumers. However, DeBeers market share eroded as new profitable mines were discovered in Russia, Australia, and Canada and those miners started selling to the market directly without the help of DeBeers.

TheFive Forces - Suppliers suppliers power increase if there are fewer suppliers in the market who can form a monopoly or duopoly on the buyers. The same power will decrease if there are alternatives to what the suppliers are selling to the buyer. For example, if natural rubber farmers form coalitions and start raising their prices, then the buyers may switch to synthetic rubber as a suitable alternative. However, if both producers of natural and synthetic rubber form a consortium and start raising their prices then the buyers are forced to accept the higher prices (or pass the additional cost to their customers) until the buyers can find a good and reliable alternative for rubber.

Sometime the alternative is available, but the switching cost from one supplier to another is higher than accepting the original supplier’s prices. Professional video editors are on the look for the latest tools and gadgets to improve their skills and performance. However, the cost of abandoning Final Cut Pro and switching to Adobe Premier Pro maybe too much because of the price they paid to buy the editing software. Another cost to consider is the skill and experience they build up by using one system and they have to re-learn again for the new software. Similar situation is faced by international organisations when they consider switching from Oracle to SAP or for the airline companies to switch from Airbus to Boeing.

The supplier may not decide to raise the price but forward integrate its business. A fishing company that has boats to catch fish in the sea is a supplier to the fish market and the local distributors. The same fish supplier may decide to integrate its business to catch the fish then open stores in the same neighbourhood to sell the fish directly to the customers. The supplier will disrupt the market by taking the distributor’s business and competing with the local fish stores. The same example may apply to Airbus or Boeing if they chose to build the plane and then set up their own airline company.

Read also Threat of New Entrants (Porter’s 5 Forces)Bargaining Power of Customers

Another Good Initiative

ImageNew initiatives are important at work to improve the existing work processes or initiate new process. Initiatives can be new products or another sub-product. Organizations usually encourage employees to present new initiatives frequently. Some organizations evaluate their engineers or experts by the number of initiatives they produce every year. I was discussing this issue with a consultant once, and he complained that some organizations evaluate the engineers’ yearly bonus on number of new “money-saving” projects. These organization end up with multiple projects by the end of the year waiting for execution.

The problem with “opportunity” initiatives or “money-saving” initiatives is in their evaluation. Many initiatives promise to solve the organizational problems, save $$$, or introduce found breaking products that will make the organization the best in its market segment. Very few initiatives produce %90 of promised result. Most of the initiatives stray in a side track or end up as an embarrassing memory. Initiatives should be supported with a strong change management  plan and good management support or it will be one of the arrows in the attached figure!

Is Balanced Scorecard easy to do?

custom_life_balance_13780Balanced Scorecard (BSC) is a management tool to measure the organizational implementation of the vision and strategy against the business and operating Key Performance Indicators (Carpenter & Sanders, 2009). BSC transform the strategy into tangible and intangible performance measures that make the strategy a dynamic process (Carpenter & Sanders, 2009). BSC is an innovative method to dissect and direct the strategy into four principles. The principles or categories that each strategy should have are finance, external relations, internal business process, and learning and growth. The vision and strategy can be mapped through the BSC information to give a clear representation of the strategy to the stakeholders and shareholders.

Some organizations think that BSC is a complete waste of resources and takes time to set up the required measures (Linna & Seal, 2009). The measure maybe is outdated and need change within a few months. Success in the internal processes or human resources is sometimes not rewarded (Linna & Seal, 2009); however, the rewards are usually linked to the financial measures only. BSC may be a good performance dashboard if the tangible measures are updated frequently, however BSC will not be dynamic enough when most of the measures are intangible and cannot be updated frequently.


Carpenter, M. A., & Sanders, W. G. (2009). Strategic management. Upper Saddle River, NJ: Pearson Prentice Hall.

Linna, Y., & Seal, W. (2009). The balanced scorecard. Financial Management (14719185), 27-28.

Enhanced by Zemanta

Competitive Advantage

Market imperfections can be in the form of monopoly, externalities or public goods, but sometimes defined as anything that interferes with trade (DeGennaro, 2005). The organizational competitive advantage can be achieved by adapting to the external trends and events and adapt to the changes in capabilities and resources. The organizations can make the competitive advantages by formulating and implementing strategies that help adapting and taking advantage of these changes (Ogrean, Herciu, & Belascu, 2009). Organizations can definitely take advantage of the market monopoly and keep up its position until another competitor force its market penetration. Externalities can be used as a competitive advantage when the organization anticipates and plan for the positive externalities. Over fishing in a place would increase the demand when the fish supplied to the market is less than the demand. The organizations can take care of this externality by anticipating the decrease in the supply and importing enough supply of fish for the consumer in the local market.

Rolls-Royce found out that its automobile business was not competitive and its jet engine market was booming. Rolls-Royce sold its automobile business and concentrated on leasing jet engines to the airline companies (Carpenter & Sanders, 2009). The leasing strategy made Rolls-Royce take larger share of the jet engine business (Carpenter & Sanders, 2009). Xerox had good innovations coming from its research center in Palo Alto, which could have been good competitive advantages. Innovations like personal computers, bit-mapped, desktop, icons, and the use of mouse and menus (Carpenter & Sanders, 2009; Rothkopf, 2000). Xerox did not use these competitive innovations and lost a good chance to be a leader in these markets (Carpenter & Sanders, 2009; Rothkopf, 2000).


Carpenter, M. A., & Sanders, W. G. (2009). Strategic management. Upper Saddle River, NJ: Pearson Prentice Hall.

DeGennaro, R. (2005). Market Imperfections. Journal of Financial Transformation, 14(2005), 107-117.

Ogrean, C., Herciu, M., & Belascu, L. (2009). Searching for sustainable competitive advantage– From tangibles to intangibles. Journal of US-China Public Administration, 6(4), 1-9.

Rothkopf, M. H. (2000). Under the Mike-R-Scope: What happened at Xerox PARC? Interfaces, 30(6), 91-94.

Enhanced by Zemanta

Organizational Climate

Organization climate is defined by Shapira-Lishchinsky and Rosenblatt (2009) as “shared perceptions that help employees to comprehend work processes and their organizational surroundings” (p. 720). The organizational climate affects the workers behavior positively and negatively. The workers behavior will be positive when the organization focus on morality and ethics (Shapira-Lishchinsky & Rosenblatt, 2009). Organizational climate is better defined by Hunter, Bedell, and Mumford (2007) as people’s “perceptions of, or beliefs about, environmental attributes shaping expectations about outcomes, contingencies, requirements, and interactions in the work environment.” (p. 70). Organizational climate is different from the organizational culture by being a localized experienced affecting on the individual or group in the organization. The organizational climate is changed esear than the culture because the climate is influenced by peer group and supervisory relations, the level of organization autonomy, management support, reward orientation, and mission clarity (Hunter, Bedell, & Mumford, 2007).
The transformational style is best set for the organization during the climate change process. But the transactional leadership style is needed to force the climate change because some groups in the organization require authoritarian style to force the change. Charismatic leaders are needed to use their charisma to support the climate changes offort. Charismatic leaders are required for their quick influences to score quick wins, but they will not be effective if hired from outside the organization.

Shapira-Lishchinsky, O., & Rosenblatt, Z. (2009). Perceptions of organizational ethics as predictors of work absence: A test of alternative absence measures (Vol. 88, pp. 717-734): Springer Science & Business Media B.V.
Hunter, S. T., Bedell, K. E., & Mumford, M. D. (2007). Climate for Creativity: A Quantitative Review. Creativity Research Journal, 19(1), 69-90. doi:10.1080/10400410701277597

Considering Russia For New Business

Listen to this postRussia has many natural resources with oil and gas are at the top of the list (Ledyaeva, 2009). Most of the goods produced in Russia would be approximately close to European market. Ledyaeva (2009) warns that the legislation and political risk in Russia had increased since 1998.  Geinberg (2008) explain that Russia had good natural resource that made the Russian government accumulate enough cash to invest in the available opportunities.  Foreign investors are shying away from Russia because of the their growing concern that their investments could be seized by the government (Grinberg, 2008). Czech Republic would be a better place for your investment because of its association with the EU. Czech Republic would had lower labor cost and is open for trade but need the capital investment (Janicki & Wunnava, 2004). Kraftova (2005) state that the most promising countries for investment that joined the European Union is the Czech Republic. The rate of youth in the age of 20-24 with secondary education is high, the employment of women is more than 50%.

The Czech Republic would need to increase its labor productivity because it  has productivity lower by %40 than the EU countries (Kraftová, 2005). The Czech Republic need to spend more on the research and development because its research and development effort is lagging behind the EU countries (Kraftová, 2005). New opportunities would be discovered during the research and development work which will benefit. The local governments workforce life time education for the people in the age between 25-64 is lower than EU countries because Czech has %6.3 when EU had %9.5. Czech Republic is part of the EU which is a complex and creative cooperative system of 25 different cultures. This mix would consider the Czech Republic as a potential site for investment if the above points were mitigated (Kraftová, 2005).



Grinberg, M. (2008). Oil and power politics. Risk Management (00355593), 57-57.

Janicki, H. P., & Wunnava, P. V. (2004). Determinants of foreign direct investment: empirical evidence from EU accession candidates. Applied Economics, 36(5), 505-509. doi: 10.1080/00036840410001682214

Ledyaeva, S. (2009). Spatial econometric analysis of foreign direct investment determinants in Russian regions. World Economy, 32(4), 643-666. doi: 10.1111/j.1467-9701.2008.01145.x

Kraftová, I. (2005). Investing in the Czech Republic. Journal of Corporate Accounting & Finance (Wiley), 16(6), 39-45.

How Does It Help Us!

Sharing information in an organizationListen to this postTeams or departments acquire skills, experience and knowledge while doing their daily work and overcoming the new challenges they meet occasionally. The knowledge and experience are learned by the team members or the department employees only. Other employees in the same organization will not learn that important experience or knowledge if it was not documented and shared. However, “knowledge is power” as they say, and many department managers or leaders would like to keep the knowledge or experience confined within their teams or departments. The new knowledge might speed up the work process, prevent mistakes, save money or do these advantages and that’s why some people avoid sharing them. The team is afraid that they might lose there competitive advantage if they share what they have learned. If you approach the team leader or the department manager and ask him or her to share with you that knowledge, they would say something like “how does it help us!” and they mean that they will consume their valuable time and give their competitive advantage when they share their advantages without feeling any direct benefit to them. Not knowing that sharing the information will benefit them indirectly especially if they are working in the same organization. They will benefit a lot when they share. They will have better support from the supporting staff, they will have less mistakes and fewer wrong deliveries and they will have smoother supply chain. The organization will do better and will be more profitable which will generate more capital to invest and grow. When somebody tell you “how does it help us!” you tell them that everybody will serve and cooperate better with them when they share their competitive advantage.


Enhanced by Zemanta
%d bloggers like this: