{"id":697,"date":"2019-04-26T18:10:50","date_gmt":"2019-04-26T18:10:50","guid":{"rendered":"https:\/\/pressbooks.ccconline.org\/man4030-org-leadership\/chapter\/success-and-failure-in-change\/"},"modified":"2023-05-19T20:21:06","modified_gmt":"2023-05-19T20:21:06","slug":"success-and-failure-in-change","status":"publish","type":"chapter","link":"https:\/\/pressbooks.ccconline.org\/man4030-org-leadership\/chapter\/success-and-failure-in-change\/","title":{"raw":"Success and Failure in Change","rendered":"Success and Failure in Change"},"content":{"raw":"<h2>Discuss various ways change has succeeded and failed in contemporary examples and organizations<\/h2>\r\nChange is the only constant that a business can count on. The change management techniques in this book have all been in response to change. And there\u2019s nothing wrong with that! Businesses should be able to respond well to change. But what about the steps that businesses take to make sure they\u2019re ready for change.\r\n\r\nBusinesses either conquer change or fall. We\u2019re going to take a look at three different examples of businesses facing change management situations and how they fared. Then, we\u2019re going to take a look at some of the prophylactic measures businesses use to prepare themselves for the changes being thrown at them in today\u2019s environment.\r\n<div class=\"textbox learning-objectives\">\r\n<h3>Learning Outcomes<\/h3>\r\n<ul>\r\n \t<li>Discuss crisis management and process improvement<\/li>\r\n \t<li>Discuss external change management and stimulating innovation<\/li>\r\n \t<li>Discuss internal change management and learning organizations<\/li>\r\n<\/ul>\r\n<\/div>\r\n<h2>Crisis Management<\/h2>\r\n<img class=\"alignright size-full wp-image-1526\" src=\"https:\/\/s3-us-west-2.amazonaws.com\/courses-images\/wp-content\/uploads\/sites\/4568\/2019\/04\/27222416\/Volkswagen_logo.png\" alt=\"The Volkswagen logo, which is a V on a W within a circle.\" width=\"300\" height=\"306\" \/>If you were paying attention to the news in 2015 (or even if you weren't!), you likely heard about Volkswagen and the scandal surrounding emissions testing. In 1999 the United States announced plans to raise emission standards starting in 2004, setting a new limit of 0.7g\/mi, versus 1.0 g\/mi of nitrous oxides, which contribute to smog, acid rain and the destruction of the ozone layer. German automaker Volkswagen responded by removing their diesel-powered vehicles from US markets in 2007 while it awaited technology that would bring their engines up to these standards.\r\n\r\nIn 2008, the company introduced Clean Diesel Cars in the United States. And, wow, were they efficient! So efficient, in fact, that the International Council on Clean Transportation asks the people at VW to help demonstrate the values of US diesel technology, hoping to get Europe to adopt these same regulations. In the process of inviting VW to do this, the International Council on Clean Transportation took a closer look at their Clean Diesel Cars, and what they found wasn\u2019t a high performing, low-emissions engine.\r\n\r\nIf you read the news, you know this didn\u2019t turn out well for Germany\u2019s largest automaker. Complicated and elaborate \u201cdefeat\u201d software, rigged to cheat when it detected emissions testing in progress, had been masking damaging levels of emissions from the company\u2019s diesel engines. The Environmental Protection Agency, on the cue of the International Council\u2019s findings, did their own testing on VW\u2019s engines in 2014 and 2015, and when they told the automaker that their 2016 models would not be welcome on U.S. soil, company leaders confessed to the company\u2019s transgression.\r\n\r\nVehicle recalls, customer restitution and class action lawsuits were just the beginning of Volkswagen\u2019s emissions nightmare. After \u201cDieselgate\u201d hit newspapers in September of 2015, Volkswagen sales slipped, stocks plunged, and company leaders indicated that the 6.5 billion dollars they\u2019d set aside to deal with the issue would not likely be enough.\r\n\r\nVolkswagen found themselves in the midst of crisis management\u2014responding and managing unexpected change.\r\n\r\nTwo CEOs and three years later, Volkswagen, determined to leave the crisis behind them, invited in a new breed of leader: one that believed in sweeping change company-wide. Dr. Herbert Diess was invited to usher in a new era for Volkswagen and set the company on a more ethical, trustworthy path.\r\n\r\nIn one of his first tasks as leader of the company, Diess addressed shareholders in Berlin: \u201cVolkswagen has to become more honest, more open and more truthful. Besides abiding by the rules and obeying the law, the key here is always ethics\u2014a clear moral compass.\u201d But how had Volkswagen gone so wrong as to get to the point where leaders determined it was okay to break the law? And what kind of changes needed to be made to get Germany\u2019s largest automaker back on track again?\r\n<h3>Process Reengineering and Continuous Process Improvement<\/h3>\r\nThree years post-crisis, Volkswagen is looking to infuse their company culture with honesty and ethics, and simplify processes so decision making comes from those \u201cin the know.\u201d Process reengineering was among the first things Volkswagen leaders considered. And, moving forward, this process reengineering should become a part of their change management strategy.\r\n\r\nThe idea behind process engineering is that management starts with a clean sheet of paper and rethinks and redesigns the processes by which an organization does work and creates value. Overall, the process reengineering should look at three different areas:\r\n<ul>\r\n \t<li><strong>Distinctive competencies.<\/strong> These define what the organization does better than its competition: better products, a more efficient distribution system, and so on. Volkswagen leaders needed to review its distinctive competencies to remind themselves of where they wanted to be. In fact, leaders chose to look in another direction for success when they did this\u2014that of electric cars. That\u2019s a far cry from diesel. But this new navigation was definitely going to separate them from past transgressions.<\/li>\r\n \t<li><strong>Core processes.<\/strong> These are the processes that transform materials, information, and labor into products and services for the customer. Volkswagen immediately began making moves that strengthened their goals for electric cars and recognized a need to put decision making back in the hands of the engineers and managers who run their processes. This resulted in an effort to\u00a0.\u00a0.\u00a0.<\/li>\r\n \t<li><strong>Reorganize around horizontal processes.<\/strong> Companies in this stage of the process employ cross-functional and self-managed teams, and focus on process rather than on function. Volkswagen made sweeping changes to their organizational structure to put experts in charge of decisions. By doing away with its rigid organizational structure and its top-down hierarchy, it introduced a new corporate culture\u2014one that could uphold the levels of honesty and ethics that VW promised to its customers by introducing better checks and balances.<\/li>\r\n<\/ul>\r\nThis leads us to continued process improvement.\r\n\r\nBusinesses look to achieve customer satisfaction via the continuous improvement of all organizational processes, recognizing that good is never good enough. Even excellent processes can be improved upon. In Volkswagen\u2019s case, they recognized that their top-down decision making impaired their ability to keep executives honest and processes transparent.\r\n\r\nManufacturing uses continuous improvement processes to increase the uniformity of their products or services. Management often looks to employees for improvement ideas, and this might be an area that Volkswagen could also benefit from, as it enhances trust between employer and employee, a bond that is likely still fragile after these events.\r\n\r\nProcess reengineering and continuous process improvement aren\u2019t change management solutions, but rather initiatives that companies put into place so they don\u2019t find themselves in the same position as Volkswagen. Volkswagen can take steps with these measures today to prevent another crisis management issue in the future.\r\n<div class=\"textbox tryit\">\r\n<h3>Practice Question<\/h3>\r\nhttps:\/\/assessments.lumenlearning.com\/assessments\/14008\r\n\r\n<\/div>\r\n<h3>References<\/h3>\r\n<p class=\"hanging-indent\">Amelang, S\u00f6ren, and Benjamin Wehrmann. \"\"Dieselgate\" - a Timeline of Germany's Car Emissions Fraud Scandal.\" Clean Energy Wire. April 15, 2019. Accessed May 20, 2019. <a href=\"https:\/\/www.cleanenergywire.org\/factsheets\/dieselgate-timeline-germanys-car-emissions-fraud-scandal\" target=\"_blank\" rel=\"noopener noreferrer\">https:\/\/www.cleanenergywire.org\/factsheets\/dieselgate-timeline-germanys-car-emissions-fraud-scandal<\/a>.<\/p>\r\n<p class=\"hanging-indent\">McGee, Patrick. \"Volkswagen Makes Sweeping Changes to Management and Structure.\" Financial Times. April 12, 2018. Accessed May 20, 2019. <a href=\"https:\/\/www.ft.com\/content\/9a0b092c-3e48-11e8-b7e0-52972418fec4\" target=\"_blank\" rel=\"noopener noreferrer\">https:\/\/www.ft.com\/content\/9a0b092c-3e48-11e8-b7e0-52972418fec4<\/a>.<\/p>\r\n<p class=\"hanging-indent\">McHugh, David. \"Volkswagen Replaces CEO Mueller, Announces New Structure.\" The Seattle Times. April 12, 2018. Accessed May 20, 2019. <a href=\"https:\/\/www.seattletimes.com\/business\/vw-replaces-ceo-mueller-announces-sweeping-restructuring\/\" target=\"_blank\" rel=\"noopener noreferrer\">https:\/\/www.seattletimes.com\/business\/vw-replaces-ceo-mueller-announces-sweeping-restructuring\/<\/a>.<\/p>\r\n<p class=\"hanging-indent\">Rauwald, Christoph. \"VW CEO Urges Corporate Culture Change.\" Bloomberg. May 3, 2018. Accessed May 20, 2019. <a href=\"https:\/\/www.bloomberg.com\/news\/articles\/2018-05-03\/vw-ceo-urges-corporate-culture-change-amid-sweeping-revamp\" target=\"_blank\" rel=\"noopener noreferrer\">https:\/\/www.bloomberg.com\/news\/articles\/2018-05-03\/vw-ceo-urges-corporate-culture-change-amid-sweeping-revamp<\/a>.<\/p>\r\n<p class=\"hanging-indent\">\"VW CEO Mueller's Likely Exit Heralds Sweeping Changes at Carmaker.\" The Business Times. April 12, 2018. Accessed May 20, 2019. <a href=\"https:\/\/www.businesstimes.com.sg\/transport\/vw-ceo-muellers-likely-exit-heralds-sweeping-changes-at-carmaker\" target=\"_blank\" rel=\"noopener noreferrer\">https:\/\/www.businesstimes.com.sg\/transport\/vw-ceo-muellers-likely-exit-heralds-sweeping-changes-at-carmaker<\/a>.<\/p>\r\n\r\n<h2>External Change Management<\/h2>\r\n<blockquote>We believe that Web-based retailing will continue to increase in popularity and market share as a distribution method for physical book, music, and movie merchandise.\u00a0.\u00a0.\u00a0. The shift toward digital formats represents an opportunity for us as we continue to strengthen our Web-based capabilities.\r\n\r\n\u2014The second-to-last annual report filed by Borders for the fiscal year ending in January 2009.<\/blockquote>\r\n<img class=\"alignright size-full wp-image-1446\" src=\"https:\/\/s3-us-west-2.amazonaws.com\/courses-images\/wp-content\/uploads\/sites\/4052\/2019\/04\/27222620\/Borders_group.png\" alt=\"Borders Group logo, which has the name of the group in simple black letters with a horizontal red line in between the words.\" width=\"250\" height=\"101\" \/>Tom and Louis Borders were University of Michigan graduates who developed an inventory management system that was second to none in the world of bookstores. It allowed them to expand their one little bookstore on State Street in Ann Arbor into 21 stores that were ultimately sold to Kmart Corporation in 1991 for $125 million. Kmart combined them with a group of mall stores they had in their arsenal called Waldenbooks and then spun them off with an IPO in 1995.\r\n\r\nThat\u2019s the story of how the country\u2019s second biggest big-box bookstore was born\u00a0.\u00a0.\u00a0. in a quick four years, with a proud history of a management system that could manage physical inventories like nothing else could. Maybe, when you look at it that way, it doesn\u2019t seem so strange that they never saw the internet coming.\r\n\r\nThis is how they didn\u2019t see the future effects of technology:\r\n<ul>\r\n \t<li>In the 1990s, Borders executives chose to invest heavily in music sales, morphing themselves into a multipurpose entertainment retailer. It was around that time that Apple hit the scene with iTunes and iPods. Music was changing, but Borders didn\u2019t see it coming. In fact, Borders developed and tested in-store machines where customers could build their own mix CDs, for a little less than the cost of a pre-recorded album. It was a feeble and misguided attempt to appeal to iTunes users, which included youngsters who were reveling in the notion that buying \u201csingles\u201d was once again an option in a post-CD, post-album-loving world.<\/li>\r\n<\/ul>\r\n<ul>\r\n \t<li>In 2001, after an unsuccessful attempt to launch an online store, Borders opted to outsource their online sales to an up-and-coming company called Amazon. (You\u2019ve heard of them?) Borders-dot-com redirected all their customers to a co-branded site and they invited their customers to shop with Amazon to fulfill all their online shopping needs. What they didn\u2019t anticipate was that Amazon would become the go-to for book shoppers, and that people would literally begin shopping at Borders for a book, and then turn around and buy it online at Amazon for cheaper. Even going through Borders.com, Borders only received a commission on that book purchase. When Borders finally decided to take back their ecommerce business, it was too little too late.<\/li>\r\n<\/ul>\r\n<ul>\r\n \t<li>E-readers became the new way that Amazon built its unwavering customer base. Amazon customers could now have a new book with the click of a button, without going out to the store at all. Sleek, lightweight e-readers allowed reader to hold War and Peace in front of them for hours and their arms wouldn\u2019t get tired. What was not to love? Competitor Barnes &amp; Noble came onto the scene with the Nook e-reader, but it took even longer for Borders to respond with the Kobo.<\/li>\r\n<\/ul>\r\n<ul>\r\n \t<li>Finally, Borders was invested in expanding their global footprint on a national scale. They were opening stores in the UK, Singapore, and Australia. Unfortunately, they were neglectful in responding to new marketing techniques and even providing their domestic stores with the tools to do their jobs correctly. In an article for The Atlantic, business writer and one-time Borders consultant Pete Osnos wrote, \u201cI was startled to find, on a visit to Borders in Madison, Wisconsin, in 2007, that the store still had no Internet access, instead channeling all communications through Ann Arbor.\u201d<sup>1<\/sup><\/li>\r\n<\/ul>\r\nExternal forces for change\u2014this time technological\u2014had turned the book and entertainment industry on its ear during the time that Borders was most vulnerable. The company had become too big too quickly, and couldn\u2019t answer to these changes in time to make a difference. Their customers went elsewhere.\r\n\r\nThere were internal challenges for Borders that further hurt their ability to respond. Executive turnover at the C-level was steep and unmanageable. Store leases left little room for flexibility. And the company had acquired a suffocating amount of debt. Barnes and Noble fared a little better responding to these technological challenges because they did not have the same turnover and debt to deal with.\r\n\r\nWhat could Borders have done to survive from a change management perspective? Perhaps they could have pulled back on international development and restructured their budget and organizational structure to support their own innovation. Brett Clay, author of Selling Change suggests that those \u201cother external challenges\u201d such as inflexible store leases and debt lessened their agility and led to their demise. While managers have traditionally budgeted for return on investment, Clay suggests their focus should be agility instead. \u201cIf you are adapting to a change, you are already in a follower position. As the Borders case demonstrates, that position can be fatal,\u201d says Clay. Borders is an example of what happens to those who do not lead.\r\n<div class=\"textbox tryit\">\r\n<h3>Practice Question<\/h3>\r\nhttps:\/\/assessments.lumenlearning.com\/assessments\/14009\r\n\r\n<\/div>\r\n<h3>Stimulating Innovation<\/h3>\r\nAmong the contemporary change issues that managers face is the challenge of stimulating innovation. Borders may not have realized that they were in a business that needed innovation (libraries and books had been on shelves for users since Alexandria, for goodness sake!) but Brett Clay may have been right that agility and leading change may have produced a very different result for them. And in fact, managers look to stimulating innovation as a change management technique meant to stay ahead of, rather than respond to, environmental changes.\r\n\r\nInnovation is a new idea applied to initiating or improving a product, process or service. Jeff Bezos was innovating when he created an online bookstore in 1994. New innovations can be products, services, new production technologies, new structures, new administrative systems .\u00a0.\u00a0. pretty much a new anything.\r\n<ul>\r\n \t<li><strong>Structural variables<\/strong> have been the most studied source of innovation. If you recall from our organizational structure module, organic structures produce the most innovation. But it\u2019s been shown that managerial tenure provides legitimacy and knowledge of how to accomplish tasks and create desired outcomes. And having a lack of resources can also nurture innovation.<\/li>\r\n \t<li>Organizations with cultures that encourage <strong>experimentation<\/strong>\u2014that award successes and failures and don\u2019t punish mistakes\u2014also foster innovation.<\/li>\r\n \t<li>Finally,<strong> idea champions<\/strong>\u2014individuals who take an innovation and actively and enthusiastically promote the idea, build support, overcome resistance, and ensure that ideas are implemented\u2014are also of benefit to organizations that need innovation to stay fresh.<\/li>\r\n<\/ul>\r\nBorders didn\u2019t have any of that. A relatively small company in 1991 with 21 stores, they might have been able to achieve an organic structure, but they got big very quickly, and their hierarchical structure didn\u2019t support innovation. Their C-level managers changed with the seasons, so no one manager could step in and provide the innovative support needed. And Borders\u2019 culture didn\u2019t support innovation either. There was no room for a mistake\u2014their increasing debt did not allow for the time or expense of that kind of culture.\r\n<h3>References<\/h3>\r\n<p class=\"hanging-indent\">Clay, Brett. \"Borders Books Liquidation Shows Change Management Doesn't Work, Says C.\" PRWeb. July 19, 2011. Accessed May 08, 2019. <a href=\"https:\/\/www.prweb.com\/releases\/2011\/7\/prweb8652866.htm\" target=\"_blank\" rel=\"noopener noreferrer\">https:\/\/www.prweb.com\/releases\/2011\/7\/prweb8652866.htm<\/a>.<\/p>\r\n<p class=\"hanging-indent\">Frazier, Mya. \"The Three Lessons of the Borders Bankruptcy.\" Forbes. February 16, 2011. Accessed May 08, 2019. <a href=\"https:\/\/www.forbes.com\/sites\/myafrazier\/2011\/02\/16\/the-three-lessons-of-the-borders-bankruptcy\/\" target=\"_blank\" rel=\"noopener noreferrer\">https:\/\/www.forbes.com\/sites\/myafrazier\/2011\/02\/16\/the-three-lessons-of-the-borders-bankruptcy\/<\/a>.<\/p>\r\n<p class=\"hanging-indent\">Noguchi, Yuki. \"Why Borders Failed While Barnes &amp; Noble Survived.\" NPR. July 19, 2011. Accessed May 08, 2019. <a href=\"https:\/\/www.npr.org\/2011\/07\/19\/138514209\/why-borders-failed-while-barnes-and-noble-survived\" target=\"_blank\" rel=\"noopener noreferrer\">https:\/\/www.npr.org\/2011\/07\/19\/138514209\/why-borders-failed-while-barnes-and-noble-survived<\/a>.<\/p>\r\n<p class=\"hanging-indent\">Sanburn, Josh. \"5 Reasons Borders Went Out of Business (and What Will Take Its Place).\" Time. July 19, 2011. Accessed May 08, 2019. <a href=\"http:\/\/business.time.com\/2011\/07\/19\/5-reasons-borders-went-out-of-business-and-what-will-take-its-place\/\" target=\"_blank\" rel=\"noopener noreferrer\">http:\/\/business.time.com\/2011\/07\/19\/5-reasons-borders-went-out-of-business-and-what-will-take-its-place\/<\/a>.<\/p>\r\n<p class=\"hanging-indent\">Vickers, Amy. \"Amazon Takes over Borders.com.\" The Guardian. April 11, 2001. Accessed May 08, 2019. <a href=\"https:\/\/www.theguardian.com\/media\/2001\/apr\/11\/newmedia.citynews\" target=\"_blank\" rel=\"noopener noreferrer\">https:\/\/www.theguardian.com\/media\/2001\/apr\/11\/newmedia.citynews<\/a>.<\/p>\r\n\r\n<h2>Internal Change Management<\/h2>\r\n<img class=\"alignright wp-image-1448\" src=\"https:\/\/s3-us-west-2.amazonaws.com\/courses-images\/wp-content\/uploads\/sites\/4052\/2019\/04\/27222806\/800px-Amazon_logo.svg_.png\" alt=\"Amazon company logo. The logo has the company name in simple black font with an orange arrow in the shape of a smile under the word.\" width=\"302\" height=\"91\" \/>\r\n\r\nAmazon always seems to be among those companies that we talk about when we want to cite a good example of how to do business. But change looms like a threat in the background even when a company is setting standards for others, and Amazon is no exception.\r\n\r\nIn August of 2017, Amazon purchased Whole Foods Market, and it immediately became a player in the $840 billion grocery industry. Amazon made the move to compete with players like Walmart, who did business both in the ecommerce and brick-and-mortar space. Grocery and retail stocks saw a downward tumble as investors immediately saw Amazon becoming the big fish in this industry. But everyone was surprised, and now, more than a year later, we still don\u2019t hear anything worthwhile coming out of the merger.\r\n\r\n<img class=\"alignright wp-image-1449\" src=\"https:\/\/s3-us-west-2.amazonaws.com\/courses-images\/wp-content\/uploads\/sites\/4052\/2019\/04\/27222932\/Whole_Foods_Market_2018_Logo.png\" alt=\"Whole Foods logo, which has the words Whole Foods Market in a green circle. The o in Whole has a leaf.\" width=\"299\" height=\"299\" \/>What we heard however, were stories about Whole Foods employees crying in the aisles of their stores, responding emotionally and unfavorably to the new rules and regulations imposed upon them by the online giant. Scorecards are used to measure\u2014and even terminate\u2014employees and customers are screaming at the sight of their poorly stocked shelves. A merger that would allow Amazon to grow outside of the ecommerce arena and create additional buying power (and selling power) for Whole Foods looks to be stumbling, if not faltering entirely. What\u2019s the issue?\r\n\r\nThe issue is culture\u2014or, more specifically, the lack of a successful blend of the cultures of two very different companies.\r\n\r\nAs we mentioned earlier, Whole Foods\u2019 organizational structure was team-based, with teams answering to themselves and to each other. Amazon, on the other hand, has a structure that\u2019s rooted in manufacturing bureaucracy, functioning with military-like precision and not leaving much room for autonomy. It should not have come as a surprise that the two cultures would clash.\r\n\r\nWhole Foods is a small part of Amazon\u2019s business but a large part of their future strategy and a lot is riding on their ability to make this merger work. Still, the odds are against them: between 70 and 90 percent of mergers fail and it\u2019s easy to see why considering amount of change has to be managed by the companies involved.\r\n\r\nIf Amazon were to adopt some of the habits of a learning organization and incorporate those behaviors into their change management strategy overall, some of these merger issues could have been avoided, or at least anticipated. Let\u2019s take a look at how learning organizations prepare themselves for change.\r\n<div class=\"textbox tryit\">\r\n<h3>Practice Question<\/h3>\r\nhttps:\/\/assessments.lumenlearning.com\/assessments\/14010\r\n\r\n<\/div>\r\n<h3>Learning Organizations<\/h3>\r\nLearning organizations are the result of looking for new ways to successfully respond to a world of interdependence and change, and the ideal learning organization has developed the continuous capacity to adapt and change. The characteristics of a learning organization:\r\n<ul>\r\n \t<li>There exists a shared vision which everyone agrees on<\/li>\r\n \t<li>People discard old ways of thinking and standard routines<\/li>\r\n \t<li>Members think of all organizational processes, activities, functions and interactions with the environment as part of a system with interrelationships<\/li>\r\n \t<li>People openly communicate with each other across vertical and horizontal boundaries without fear of criticism or punishment<\/li>\r\n \t<li>Personal self-interests and fragmented departmental interests are sublimated to the organization\u2019s shared vision<\/li>\r\n<\/ul>\r\nThis is easier to say than it is to do, but I think we can agree that most of these aspects of a learning organization are not in place where Amazon and Whole Foods are concerned.\r\n\r\nTypical organizations address problems with single-loop learning, where errors are corrected using past routines and present policies. Learning organizations, however, have adopted double-loop learning\u00b8 where errors are corrected by modifying the organization\u2019s objectives, policies, and standard routines.\r\n\r\nFurthermore, learning organizations are meant to be a remedy for three fundamental problems inherent in traditional organizations: fragmentation, competition, and reactiveness.\r\n\r\nFragmentation refers to the specialization within an organization that creates walls and silos. This fragmentation separates different functions into independent areas that often bicker with one another. Amazon is, in itself, a silo, with a rigid culture based on discipline and prescribed rules and regulations. Rather than reviewing and negotiating Whole Foods\u2019 culture, they went about operating the grocery chain with Amazon rules \u2013 including scorecards and regulations. Amazon has inadvertently created an \u201cus\u201d and \u201cthey\u201d with their actions.\r\n\r\nCompetition in an organization undermines collaboration. Managers compete to show who is right, who knows more, who is the most powerful. Whole Foods workers were used to having a lot of autonomy in their actions, negotiating face-to-face with customers and making educated decisions about how to go about their work. Amazon\u2019s new rules and regulations will spike competition by presenting these new measurements and regulations by which Whole Food employees are evaluated.\r\n\r\nFinally, reactiveness misdirects management\u2019s attention to problem solving rather than creation. It remains to be seen how Amazon will respond to their faltering relationship with their adopted child. Experts agree that performance in 2019 will be key to Amazon\u2019s future success in the grocery space, but will they be able to get this unstable ship moving in the right direction to do so? The managers of both companies have the opportunity to create something new, but if they\u2019re addressing problems at every turn rather than innovating, reactiveness will thwart their efforts.\r\n\r\nOrganizations can make an effort to become a learning organization. Changing an organization to be a continual learner includes:\r\n<ul>\r\n \t<li><strong>Establishing a strategy:<\/strong> a commitment to change, innovation and continuous improvement<\/li>\r\n \t<li><strong>Redesign the organization\u2019s structure:<\/strong> formal structures can impede learning, so flattening the structure and putting teams into place increase cross-functional communication and eliminate boundaries<\/li>\r\n \t<li><strong>Reshape the organization\u2019s culture:\u00a0<\/strong>management must change its behavior as well as its strategy to embrace risk and change<\/li>\r\n<\/ul>\r\nAmazon isn\u2019t going to wake up one morning, look at their faltering brick-and-mortar grocery sales, and say, \u201cHey, let\u2019s become a learning organization and make this work.\u201d Becoming a learning organization isn\u2019t the solution to their problem\u2014skillful change management is what\u2019s needed. But organizations have thought about how to avoid what\u2019s happening with the Amazon\/Whole Foods merger and concepts like learning organizations are what results from it.\r\n<h3>References<\/h3>\r\n<p class=\"hanging-indent\">Gelfand, Michele, Sarah Gordon, Chengguang Li, Virginia Choi, and Piotr Prokopowicz. \"One Reason Mergers Fail: The Two Cultures Aren't Compatible.\" Harvard Business Review. October 02, 2018. Accessed May 20, 2019. <a href=\"https:\/\/hbr.org\/2018\/10\/one-reason-mergers-fail-the-two-cultures-arent-compatible\" target=\"_blank\" rel=\"noopener noreferrer\">https:\/\/hbr.org\/2018\/10\/one-reason-mergers-fail-the-two-cultures-arent-compatible<\/a>.<\/p>\r\n<p class=\"hanging-indent\">Henage, Michael. \"3 Reasons For Amazon To Reconsider Its Whole Foods Strategy.\" Seeking Alpha. February 26, 2019. Accessed May 20, 2019. <a href=\"https:\/\/seekingalpha.com\/article\/4244216-3-reasons-amazon-reconsider-whole-foods-strategy\" target=\"_blank\" rel=\"noopener noreferrer\">https:\/\/seekingalpha.com\/article\/4244216-3-reasons-amazon-reconsider-whole-foods-strategy<\/a>.<\/p>\r\n<p class=\"hanging-indent\">Ladd, Brittain. \"Was Acquiring Whole Foods Amazon's 'Bridge Too Far'?\" Forbes. December 20, 2018. Accessed May 20, 2019. <a href=\"https:\/\/www.forbes.com\/sites\/brittainladd\/2018\/12\/20\/was-acquiring-whole-foods-amazons-bridge-too-far\/#59306e801638\" target=\"_blank\" rel=\"noopener noreferrer\">https:\/\/www.forbes.com\/sites\/brittainladd\/2018\/12\/20\/was-acquiring-whole-foods-amazons-bridge-too-far\/#59306e801638<\/a>.<\/p>\r\n<p class=\"hanging-indent\">Meyer, Pauline. \"Amazon.com Inc.'s Organizational Structure Characteristics (An Analysis).\" Panmore Institute. February 16, 2019. Accessed May 20, 2019. <a href=\"http:\/\/panmore.com\/amazon-com-inc-organizational-structure-characteristics-analysis\" target=\"_blank\" rel=\"noopener noreferrer\">http:\/\/panmore.com\/amazon-com-inc-organizational-structure-characteristics-analysis<\/a>.<\/p>\r\n1. Osnos, Peter. \"What Went Wrong at Borders.\" The Atlantic. January 11, 2011. Accessed May 08, 2019. <a href=\"https:\/\/www.theatlantic.com\/business\/archive\/2011\/01\/what-went-wrong-at-borders\/69310\/\" target=\"_blank\" rel=\"noopener noreferrer\">https:\/\/www.theatlantic.com\/business\/archive\/2011\/01\/what-went-wrong-at-borders\/69310\/<\/a>. <a class=\"return-footnote\" href=\"https:\/\/courses.lumenlearning.com\/wmopen-organizationalbehavior\/chapter\/success-and-failure-in-change\/#return-footnote-945-1\">\u21b5<\/a>\r\n\r\n<hr \/>\r\n\r\n<div id=\"citation-list-945\">\r\n<div class=\"licensing\">\r\n<div class=\"license-attribution-dropdown-subheading\">CC licensed content, Original<\/div>\r\n<ul class=\"citation-list\">\r\n \t<li>Success and Failure in Change. <strong>Authored by<\/strong>: Freedom Learning Group. <strong>Provided by<\/strong>: Lumen Learning. <strong>License<\/strong>: <em><a href=\"https:\/\/creativecommons.org\/licenses\/by\/4.0\/\" target=\"_blank\" rel=\"license noopener noreferrer\">CC BY: Attribution<\/a><\/em><\/li>\r\n<\/ul>\r\n<div class=\"license-attribution-dropdown-subheading\">All rights reserved content<\/div>\r\n<ul class=\"citation-list\">\r\n \t<li>Volkswagen Logo. <strong>Provided by<\/strong>: Volkswagen. <strong>License<\/strong>: <em>All Rights Reserved<\/em>. <strong>License Terms<\/strong>: Fair Use<\/li>\r\n \t<li>Whole Foods Market 2018 Logo. <strong>Provided by<\/strong>: Whole Foods Market. <strong>Located at<\/strong>: <a href=\"https:\/\/en.wikipedia.org\/wiki\/File:Whole_Foods_Market_2018_Logo.png\" target=\"_blank\" rel=\"noopener noreferrer\">https:\/\/en.wikipedia.org\/wiki\/File:Whole_Foods_Market_2018_Logo.png<\/a>. <strong>License<\/strong>: <em>All Rights Reserved<\/em>. <strong>License Terms<\/strong>: Fair Use<\/li>\r\n<\/ul>\r\n<div class=\"license-attribution-dropdown-subheading\">Public domain content<\/div>\r\n<ul class=\"citation-list\">\r\n \t<li>Borders group logo. <strong>Provided by<\/strong>: Borders group. <strong>Located at<\/strong>: <a href=\"https:\/\/commons.wikimedia.org\/wiki\/File:Borders_group.png\" target=\"_blank\" rel=\"noopener noreferrer\">https:\/\/commons.wikimedia.org\/wiki\/File:Borders_group.png<\/a>. <strong>License<\/strong>: <em><a href=\"https:\/\/creativecommons.org\/about\/pdm\" target=\"_blank\" rel=\"license noopener noreferrer\">Public Domain: No Known Copyright<\/a><\/em><\/li>\r\n \t<li>Amazon.com logo. <strong>Provided by<\/strong>: Amazon.com, Inc. <strong>Located at<\/strong>: <a href=\"https:\/\/commons.wikimedia.org\/wiki\/File:Amazon_logo.svg\" target=\"_blank\" rel=\"noopener noreferrer\">https:\/\/commons.wikimedia.org\/wiki\/File:Amazon_logo.svg<\/a>. <strong>License<\/strong>: <em><a href=\"https:\/\/creativecommons.org\/about\/pdm\" target=\"_blank\" rel=\"license noopener noreferrer\">Public Domain: No Known Copyright<\/a><\/em><\/li>\r\n<\/ul>\r\n<\/div>\r\n<\/div>","rendered":"<h2>Discuss various ways change has succeeded and failed in contemporary examples and organizations<\/h2>\n<p>Change is the only constant that a business can count on. The change management techniques in this book have all been in response to change. And there\u2019s nothing wrong with that! Businesses should be able to respond well to change. But what about the steps that businesses take to make sure they\u2019re ready for change.<\/p>\n<p>Businesses either conquer change or fall. We\u2019re going to take a look at three different examples of businesses facing change management situations and how they fared. Then, we\u2019re going to take a look at some of the prophylactic measures businesses use to prepare themselves for the changes being thrown at them in today\u2019s environment.<\/p>\n<div class=\"textbox learning-objectives\">\n<h3>Learning Outcomes<\/h3>\n<ul>\n<li>Discuss crisis management and process improvement<\/li>\n<li>Discuss external change management and stimulating innovation<\/li>\n<li>Discuss internal change management and learning organizations<\/li>\n<\/ul>\n<\/div>\n<h2>Crisis Management<\/h2>\n<p><img loading=\"lazy\" decoding=\"async\" class=\"alignright size-full wp-image-1526\" src=\"https:\/\/s3-us-west-2.amazonaws.com\/courses-images\/wp-content\/uploads\/sites\/4568\/2019\/04\/27222416\/Volkswagen_logo.png\" alt=\"The Volkswagen logo, which is a V on a W within a circle.\" width=\"300\" height=\"306\" \/>If you were paying attention to the news in 2015 (or even if you weren&#8217;t!), you likely heard about Volkswagen and the scandal surrounding emissions testing. In 1999 the United States announced plans to raise emission standards starting in 2004, setting a new limit of 0.7g\/mi, versus 1.0 g\/mi of nitrous oxides, which contribute to smog, acid rain and the destruction of the ozone layer. German automaker Volkswagen responded by removing their diesel-powered vehicles from US markets in 2007 while it awaited technology that would bring their engines up to these standards.<\/p>\n<p>In 2008, the company introduced Clean Diesel Cars in the United States. And, wow, were they efficient! So efficient, in fact, that the International Council on Clean Transportation asks the people at VW to help demonstrate the values of US diesel technology, hoping to get Europe to adopt these same regulations. In the process of inviting VW to do this, the International Council on Clean Transportation took a closer look at their Clean Diesel Cars, and what they found wasn\u2019t a high performing, low-emissions engine.<\/p>\n<p>If you read the news, you know this didn\u2019t turn out well for Germany\u2019s largest automaker. Complicated and elaborate \u201cdefeat\u201d software, rigged to cheat when it detected emissions testing in progress, had been masking damaging levels of emissions from the company\u2019s diesel engines. The Environmental Protection Agency, on the cue of the International Council\u2019s findings, did their own testing on VW\u2019s engines in 2014 and 2015, and when they told the automaker that their 2016 models would not be welcome on U.S. soil, company leaders confessed to the company\u2019s transgression.<\/p>\n<p>Vehicle recalls, customer restitution and class action lawsuits were just the beginning of Volkswagen\u2019s emissions nightmare. After \u201cDieselgate\u201d hit newspapers in September of 2015, Volkswagen sales slipped, stocks plunged, and company leaders indicated that the 6.5 billion dollars they\u2019d set aside to deal with the issue would not likely be enough.<\/p>\n<p>Volkswagen found themselves in the midst of crisis management\u2014responding and managing unexpected change.<\/p>\n<p>Two CEOs and three years later, Volkswagen, determined to leave the crisis behind them, invited in a new breed of leader: one that believed in sweeping change company-wide. Dr. Herbert Diess was invited to usher in a new era for Volkswagen and set the company on a more ethical, trustworthy path.<\/p>\n<p>In one of his first tasks as leader of the company, Diess addressed shareholders in Berlin: \u201cVolkswagen has to become more honest, more open and more truthful. Besides abiding by the rules and obeying the law, the key here is always ethics\u2014a clear moral compass.\u201d But how had Volkswagen gone so wrong as to get to the point where leaders determined it was okay to break the law? And what kind of changes needed to be made to get Germany\u2019s largest automaker back on track again?<\/p>\n<h3>Process Reengineering and Continuous Process Improvement<\/h3>\n<p>Three years post-crisis, Volkswagen is looking to infuse their company culture with honesty and ethics, and simplify processes so decision making comes from those \u201cin the know.\u201d Process reengineering was among the first things Volkswagen leaders considered. And, moving forward, this process reengineering should become a part of their change management strategy.<\/p>\n<p>The idea behind process engineering is that management starts with a clean sheet of paper and rethinks and redesigns the processes by which an organization does work and creates value. Overall, the process reengineering should look at three different areas:<\/p>\n<ul>\n<li><strong>Distinctive competencies.<\/strong> These define what the organization does better than its competition: better products, a more efficient distribution system, and so on. Volkswagen leaders needed to review its distinctive competencies to remind themselves of where they wanted to be. In fact, leaders chose to look in another direction for success when they did this\u2014that of electric cars. That\u2019s a far cry from diesel. But this new navigation was definitely going to separate them from past transgressions.<\/li>\n<li><strong>Core processes.<\/strong> These are the processes that transform materials, information, and labor into products and services for the customer. Volkswagen immediately began making moves that strengthened their goals for electric cars and recognized a need to put decision making back in the hands of the engineers and managers who run their processes. This resulted in an effort to\u00a0.\u00a0.\u00a0.<\/li>\n<li><strong>Reorganize around horizontal processes.<\/strong> Companies in this stage of the process employ cross-functional and self-managed teams, and focus on process rather than on function. Volkswagen made sweeping changes to their organizational structure to put experts in charge of decisions. By doing away with its rigid organizational structure and its top-down hierarchy, it introduced a new corporate culture\u2014one that could uphold the levels of honesty and ethics that VW promised to its customers by introducing better checks and balances.<\/li>\n<\/ul>\n<p>This leads us to continued process improvement.<\/p>\n<p>Businesses look to achieve customer satisfaction via the continuous improvement of all organizational processes, recognizing that good is never good enough. Even excellent processes can be improved upon. In Volkswagen\u2019s case, they recognized that their top-down decision making impaired their ability to keep executives honest and processes transparent.<\/p>\n<p>Manufacturing uses continuous improvement processes to increase the uniformity of their products or services. Management often looks to employees for improvement ideas, and this might be an area that Volkswagen could also benefit from, as it enhances trust between employer and employee, a bond that is likely still fragile after these events.<\/p>\n<p>Process reengineering and continuous process improvement aren\u2019t change management solutions, but rather initiatives that companies put into place so they don\u2019t find themselves in the same position as Volkswagen. Volkswagen can take steps with these measures today to prevent another crisis management issue in the future.<\/p>\n<div class=\"textbox tryit\">\n<h3>Practice Question<\/h3>\n<p>https:\/\/assessments.lumenlearning.com\/assessments\/14008<\/p>\n<\/div>\n<h3>References<\/h3>\n<p class=\"hanging-indent\">Amelang, S\u00f6ren, and Benjamin Wehrmann. &#8220;&#8221;Dieselgate&#8221; &#8211; a Timeline of Germany&#8217;s Car Emissions Fraud Scandal.&#8221; Clean Energy Wire. April 15, 2019. Accessed May 20, 2019. <a href=\"https:\/\/www.cleanenergywire.org\/factsheets\/dieselgate-timeline-germanys-car-emissions-fraud-scandal\" target=\"_blank\" rel=\"noopener noreferrer\">https:\/\/www.cleanenergywire.org\/factsheets\/dieselgate-timeline-germanys-car-emissions-fraud-scandal<\/a>.<\/p>\n<p class=\"hanging-indent\">McGee, Patrick. &#8220;Volkswagen Makes Sweeping Changes to Management and Structure.&#8221; Financial Times. April 12, 2018. Accessed May 20, 2019. <a href=\"https:\/\/www.ft.com\/content\/9a0b092c-3e48-11e8-b7e0-52972418fec4\" target=\"_blank\" rel=\"noopener noreferrer\">https:\/\/www.ft.com\/content\/9a0b092c-3e48-11e8-b7e0-52972418fec4<\/a>.<\/p>\n<p class=\"hanging-indent\">McHugh, David. &#8220;Volkswagen Replaces CEO Mueller, Announces New Structure.&#8221; The Seattle Times. April 12, 2018. Accessed May 20, 2019. <a href=\"https:\/\/www.seattletimes.com\/business\/vw-replaces-ceo-mueller-announces-sweeping-restructuring\/\" target=\"_blank\" rel=\"noopener noreferrer\">https:\/\/www.seattletimes.com\/business\/vw-replaces-ceo-mueller-announces-sweeping-restructuring\/<\/a>.<\/p>\n<p class=\"hanging-indent\">Rauwald, Christoph. &#8220;VW CEO Urges Corporate Culture Change.&#8221; Bloomberg. May 3, 2018. Accessed May 20, 2019. <a href=\"https:\/\/www.bloomberg.com\/news\/articles\/2018-05-03\/vw-ceo-urges-corporate-culture-change-amid-sweeping-revamp\" target=\"_blank\" rel=\"noopener noreferrer\">https:\/\/www.bloomberg.com\/news\/articles\/2018-05-03\/vw-ceo-urges-corporate-culture-change-amid-sweeping-revamp<\/a>.<\/p>\n<p class=\"hanging-indent\">&#8220;VW CEO Mueller&#8217;s Likely Exit Heralds Sweeping Changes at Carmaker.&#8221; The Business Times. April 12, 2018. Accessed May 20, 2019. <a href=\"https:\/\/www.businesstimes.com.sg\/transport\/vw-ceo-muellers-likely-exit-heralds-sweeping-changes-at-carmaker\" target=\"_blank\" rel=\"noopener noreferrer\">https:\/\/www.businesstimes.com.sg\/transport\/vw-ceo-muellers-likely-exit-heralds-sweeping-changes-at-carmaker<\/a>.<\/p>\n<h2>External Change Management<\/h2>\n<blockquote><p>We believe that Web-based retailing will continue to increase in popularity and market share as a distribution method for physical book, music, and movie merchandise.\u00a0.\u00a0.\u00a0. The shift toward digital formats represents an opportunity for us as we continue to strengthen our Web-based capabilities.<\/p>\n<p>\u2014The second-to-last annual report filed by Borders for the fiscal year ending in January 2009.<\/p><\/blockquote>\n<p><img loading=\"lazy\" decoding=\"async\" class=\"alignright size-full wp-image-1446\" src=\"https:\/\/s3-us-west-2.amazonaws.com\/courses-images\/wp-content\/uploads\/sites\/4052\/2019\/04\/27222620\/Borders_group.png\" alt=\"Borders Group logo, which has the name of the group in simple black letters with a horizontal red line in between the words.\" width=\"250\" height=\"101\" \/>Tom and Louis Borders were University of Michigan graduates who developed an inventory management system that was second to none in the world of bookstores. It allowed them to expand their one little bookstore on State Street in Ann Arbor into 21 stores that were ultimately sold to Kmart Corporation in 1991 for $125 million. Kmart combined them with a group of mall stores they had in their arsenal called Waldenbooks and then spun them off with an IPO in 1995.<\/p>\n<p>That\u2019s the story of how the country\u2019s second biggest big-box bookstore was born\u00a0.\u00a0.\u00a0. in a quick four years, with a proud history of a management system that could manage physical inventories like nothing else could. Maybe, when you look at it that way, it doesn\u2019t seem so strange that they never saw the internet coming.<\/p>\n<p>This is how they didn\u2019t see the future effects of technology:<\/p>\n<ul>\n<li>In the 1990s, Borders executives chose to invest heavily in music sales, morphing themselves into a multipurpose entertainment retailer. It was around that time that Apple hit the scene with iTunes and iPods. Music was changing, but Borders didn\u2019t see it coming. In fact, Borders developed and tested in-store machines where customers could build their own mix CDs, for a little less than the cost of a pre-recorded album. It was a feeble and misguided attempt to appeal to iTunes users, which included youngsters who were reveling in the notion that buying \u201csingles\u201d was once again an option in a post-CD, post-album-loving world.<\/li>\n<\/ul>\n<ul>\n<li>In 2001, after an unsuccessful attempt to launch an online store, Borders opted to outsource their online sales to an up-and-coming company called Amazon. (You\u2019ve heard of them?) Borders-dot-com redirected all their customers to a co-branded site and they invited their customers to shop with Amazon to fulfill all their online shopping needs. What they didn\u2019t anticipate was that Amazon would become the go-to for book shoppers, and that people would literally begin shopping at Borders for a book, and then turn around and buy it online at Amazon for cheaper. Even going through Borders.com, Borders only received a commission on that book purchase. When Borders finally decided to take back their ecommerce business, it was too little too late.<\/li>\n<\/ul>\n<ul>\n<li>E-readers became the new way that Amazon built its unwavering customer base. Amazon customers could now have a new book with the click of a button, without going out to the store at all. Sleek, lightweight e-readers allowed reader to hold War and Peace in front of them for hours and their arms wouldn\u2019t get tired. What was not to love? Competitor Barnes &amp; Noble came onto the scene with the Nook e-reader, but it took even longer for Borders to respond with the Kobo.<\/li>\n<\/ul>\n<ul>\n<li>Finally, Borders was invested in expanding their global footprint on a national scale. They were opening stores in the UK, Singapore, and Australia. Unfortunately, they were neglectful in responding to new marketing techniques and even providing their domestic stores with the tools to do their jobs correctly. In an article for The Atlantic, business writer and one-time Borders consultant Pete Osnos wrote, \u201cI was startled to find, on a visit to Borders in Madison, Wisconsin, in 2007, that the store still had no Internet access, instead channeling all communications through Ann Arbor.\u201d<sup>1<\/sup><\/li>\n<\/ul>\n<p>External forces for change\u2014this time technological\u2014had turned the book and entertainment industry on its ear during the time that Borders was most vulnerable. The company had become too big too quickly, and couldn\u2019t answer to these changes in time to make a difference. Their customers went elsewhere.<\/p>\n<p>There were internal challenges for Borders that further hurt their ability to respond. Executive turnover at the C-level was steep and unmanageable. Store leases left little room for flexibility. And the company had acquired a suffocating amount of debt. Barnes and Noble fared a little better responding to these technological challenges because they did not have the same turnover and debt to deal with.<\/p>\n<p>What could Borders have done to survive from a change management perspective? Perhaps they could have pulled back on international development and restructured their budget and organizational structure to support their own innovation. Brett Clay, author of Selling Change suggests that those \u201cother external challenges\u201d such as inflexible store leases and debt lessened their agility and led to their demise. While managers have traditionally budgeted for return on investment, Clay suggests their focus should be agility instead. \u201cIf you are adapting to a change, you are already in a follower position. As the Borders case demonstrates, that position can be fatal,\u201d says Clay. Borders is an example of what happens to those who do not lead.<\/p>\n<div class=\"textbox tryit\">\n<h3>Practice Question<\/h3>\n<p>https:\/\/assessments.lumenlearning.com\/assessments\/14009<\/p>\n<\/div>\n<h3>Stimulating Innovation<\/h3>\n<p>Among the contemporary change issues that managers face is the challenge of stimulating innovation. Borders may not have realized that they were in a business that needed innovation (libraries and books had been on shelves for users since Alexandria, for goodness sake!) but Brett Clay may have been right that agility and leading change may have produced a very different result for them. And in fact, managers look to stimulating innovation as a change management technique meant to stay ahead of, rather than respond to, environmental changes.<\/p>\n<p>Innovation is a new idea applied to initiating or improving a product, process or service. Jeff Bezos was innovating when he created an online bookstore in 1994. New innovations can be products, services, new production technologies, new structures, new administrative systems .\u00a0.\u00a0. pretty much a new anything.<\/p>\n<ul>\n<li><strong>Structural variables<\/strong> have been the most studied source of innovation. If you recall from our organizational structure module, organic structures produce the most innovation. But it\u2019s been shown that managerial tenure provides legitimacy and knowledge of how to accomplish tasks and create desired outcomes. And having a lack of resources can also nurture innovation.<\/li>\n<li>Organizations with cultures that encourage <strong>experimentation<\/strong>\u2014that award successes and failures and don\u2019t punish mistakes\u2014also foster innovation.<\/li>\n<li>Finally,<strong> idea champions<\/strong>\u2014individuals who take an innovation and actively and enthusiastically promote the idea, build support, overcome resistance, and ensure that ideas are implemented\u2014are also of benefit to organizations that need innovation to stay fresh.<\/li>\n<\/ul>\n<p>Borders didn\u2019t have any of that. A relatively small company in 1991 with 21 stores, they might have been able to achieve an organic structure, but they got big very quickly, and their hierarchical structure didn\u2019t support innovation. Their C-level managers changed with the seasons, so no one manager could step in and provide the innovative support needed. And Borders\u2019 culture didn\u2019t support innovation either. There was no room for a mistake\u2014their increasing debt did not allow for the time or expense of that kind of culture.<\/p>\n<h3>References<\/h3>\n<p class=\"hanging-indent\">Clay, Brett. &#8220;Borders Books Liquidation Shows Change Management Doesn&#8217;t Work, Says C.&#8221; PRWeb. July 19, 2011. Accessed May 08, 2019. <a href=\"https:\/\/www.prweb.com\/releases\/2011\/7\/prweb8652866.htm\" target=\"_blank\" rel=\"noopener noreferrer\">https:\/\/www.prweb.com\/releases\/2011\/7\/prweb8652866.htm<\/a>.<\/p>\n<p class=\"hanging-indent\">Frazier, Mya. &#8220;The Three Lessons of the Borders Bankruptcy.&#8221; Forbes. February 16, 2011. Accessed May 08, 2019. <a href=\"https:\/\/www.forbes.com\/sites\/myafrazier\/2011\/02\/16\/the-three-lessons-of-the-borders-bankruptcy\/\" target=\"_blank\" rel=\"noopener noreferrer\">https:\/\/www.forbes.com\/sites\/myafrazier\/2011\/02\/16\/the-three-lessons-of-the-borders-bankruptcy\/<\/a>.<\/p>\n<p class=\"hanging-indent\">Noguchi, Yuki. &#8220;Why Borders Failed While Barnes &amp; Noble Survived.&#8221; NPR. July 19, 2011. Accessed May 08, 2019. <a href=\"https:\/\/www.npr.org\/2011\/07\/19\/138514209\/why-borders-failed-while-barnes-and-noble-survived\" target=\"_blank\" rel=\"noopener noreferrer\">https:\/\/www.npr.org\/2011\/07\/19\/138514209\/why-borders-failed-while-barnes-and-noble-survived<\/a>.<\/p>\n<p class=\"hanging-indent\">Sanburn, Josh. &#8220;5 Reasons Borders Went Out of Business (and What Will Take Its Place).&#8221; Time. July 19, 2011. Accessed May 08, 2019. <a href=\"http:\/\/business.time.com\/2011\/07\/19\/5-reasons-borders-went-out-of-business-and-what-will-take-its-place\/\" target=\"_blank\" rel=\"noopener noreferrer\">http:\/\/business.time.com\/2011\/07\/19\/5-reasons-borders-went-out-of-business-and-what-will-take-its-place\/<\/a>.<\/p>\n<p class=\"hanging-indent\">Vickers, Amy. &#8220;Amazon Takes over Borders.com.&#8221; The Guardian. April 11, 2001. Accessed May 08, 2019. <a href=\"https:\/\/www.theguardian.com\/media\/2001\/apr\/11\/newmedia.citynews\" target=\"_blank\" rel=\"noopener noreferrer\">https:\/\/www.theguardian.com\/media\/2001\/apr\/11\/newmedia.citynews<\/a>.<\/p>\n<h2>Internal Change Management<\/h2>\n<p><img loading=\"lazy\" decoding=\"async\" class=\"alignright wp-image-1448\" src=\"https:\/\/s3-us-west-2.amazonaws.com\/courses-images\/wp-content\/uploads\/sites\/4052\/2019\/04\/27222806\/800px-Amazon_logo.svg_.png\" alt=\"Amazon company logo. The logo has the company name in simple black font with an orange arrow in the shape of a smile under the word.\" width=\"302\" height=\"91\" \/><\/p>\n<p>Amazon always seems to be among those companies that we talk about when we want to cite a good example of how to do business. But change looms like a threat in the background even when a company is setting standards for others, and Amazon is no exception.<\/p>\n<p>In August of 2017, Amazon purchased Whole Foods Market, and it immediately became a player in the $840 billion grocery industry. Amazon made the move to compete with players like Walmart, who did business both in the ecommerce and brick-and-mortar space. Grocery and retail stocks saw a downward tumble as investors immediately saw Amazon becoming the big fish in this industry. But everyone was surprised, and now, more than a year later, we still don\u2019t hear anything worthwhile coming out of the merger.<\/p>\n<p><img loading=\"lazy\" decoding=\"async\" class=\"alignright wp-image-1449\" src=\"https:\/\/s3-us-west-2.amazonaws.com\/courses-images\/wp-content\/uploads\/sites\/4052\/2019\/04\/27222932\/Whole_Foods_Market_2018_Logo.png\" alt=\"Whole Foods logo, which has the words Whole Foods Market in a green circle. The o in Whole has a leaf.\" width=\"299\" height=\"299\" \/>What we heard however, were stories about Whole Foods employees crying in the aisles of their stores, responding emotionally and unfavorably to the new rules and regulations imposed upon them by the online giant. Scorecards are used to measure\u2014and even terminate\u2014employees and customers are screaming at the sight of their poorly stocked shelves. A merger that would allow Amazon to grow outside of the ecommerce arena and create additional buying power (and selling power) for Whole Foods looks to be stumbling, if not faltering entirely. What\u2019s the issue?<\/p>\n<p>The issue is culture\u2014or, more specifically, the lack of a successful blend of the cultures of two very different companies.<\/p>\n<p>As we mentioned earlier, Whole Foods\u2019 organizational structure was team-based, with teams answering to themselves and to each other. Amazon, on the other hand, has a structure that\u2019s rooted in manufacturing bureaucracy, functioning with military-like precision and not leaving much room for autonomy. It should not have come as a surprise that the two cultures would clash.<\/p>\n<p>Whole Foods is a small part of Amazon\u2019s business but a large part of their future strategy and a lot is riding on their ability to make this merger work. Still, the odds are against them: between 70 and 90 percent of mergers fail and it\u2019s easy to see why considering amount of change has to be managed by the companies involved.<\/p>\n<p>If Amazon were to adopt some of the habits of a learning organization and incorporate those behaviors into their change management strategy overall, some of these merger issues could have been avoided, or at least anticipated. Let\u2019s take a look at how learning organizations prepare themselves for change.<\/p>\n<div class=\"textbox tryit\">\n<h3>Practice Question<\/h3>\n<p>https:\/\/assessments.lumenlearning.com\/assessments\/14010<\/p>\n<\/div>\n<h3>Learning Organizations<\/h3>\n<p>Learning organizations are the result of looking for new ways to successfully respond to a world of interdependence and change, and the ideal learning organization has developed the continuous capacity to adapt and change. The characteristics of a learning organization:<\/p>\n<ul>\n<li>There exists a shared vision which everyone agrees on<\/li>\n<li>People discard old ways of thinking and standard routines<\/li>\n<li>Members think of all organizational processes, activities, functions and interactions with the environment as part of a system with interrelationships<\/li>\n<li>People openly communicate with each other across vertical and horizontal boundaries without fear of criticism or punishment<\/li>\n<li>Personal self-interests and fragmented departmental interests are sublimated to the organization\u2019s shared vision<\/li>\n<\/ul>\n<p>This is easier to say than it is to do, but I think we can agree that most of these aspects of a learning organization are not in place where Amazon and Whole Foods are concerned.<\/p>\n<p>Typical organizations address problems with single-loop learning, where errors are corrected using past routines and present policies. Learning organizations, however, have adopted double-loop learning\u00b8 where errors are corrected by modifying the organization\u2019s objectives, policies, and standard routines.<\/p>\n<p>Furthermore, learning organizations are meant to be a remedy for three fundamental problems inherent in traditional organizations: fragmentation, competition, and reactiveness.<\/p>\n<p>Fragmentation refers to the specialization within an organization that creates walls and silos. This fragmentation separates different functions into independent areas that often bicker with one another. Amazon is, in itself, a silo, with a rigid culture based on discipline and prescribed rules and regulations. Rather than reviewing and negotiating Whole Foods\u2019 culture, they went about operating the grocery chain with Amazon rules \u2013 including scorecards and regulations. Amazon has inadvertently created an \u201cus\u201d and \u201cthey\u201d with their actions.<\/p>\n<p>Competition in an organization undermines collaboration. Managers compete to show who is right, who knows more, who is the most powerful. Whole Foods workers were used to having a lot of autonomy in their actions, negotiating face-to-face with customers and making educated decisions about how to go about their work. Amazon\u2019s new rules and regulations will spike competition by presenting these new measurements and regulations by which Whole Food employees are evaluated.<\/p>\n<p>Finally, reactiveness misdirects management\u2019s attention to problem solving rather than creation. It remains to be seen how Amazon will respond to their faltering relationship with their adopted child. Experts agree that performance in 2019 will be key to Amazon\u2019s future success in the grocery space, but will they be able to get this unstable ship moving in the right direction to do so? The managers of both companies have the opportunity to create something new, but if they\u2019re addressing problems at every turn rather than innovating, reactiveness will thwart their efforts.<\/p>\n<p>Organizations can make an effort to become a learning organization. Changing an organization to be a continual learner includes:<\/p>\n<ul>\n<li><strong>Establishing a strategy:<\/strong> a commitment to change, innovation and continuous improvement<\/li>\n<li><strong>Redesign the organization\u2019s structure:<\/strong> formal structures can impede learning, so flattening the structure and putting teams into place increase cross-functional communication and eliminate boundaries<\/li>\n<li><strong>Reshape the organization\u2019s culture:\u00a0<\/strong>management must change its behavior as well as its strategy to embrace risk and change<\/li>\n<\/ul>\n<p>Amazon isn\u2019t going to wake up one morning, look at their faltering brick-and-mortar grocery sales, and say, \u201cHey, let\u2019s become a learning organization and make this work.\u201d Becoming a learning organization isn\u2019t the solution to their problem\u2014skillful change management is what\u2019s needed. But organizations have thought about how to avoid what\u2019s happening with the Amazon\/Whole Foods merger and concepts like learning organizations are what results from it.<\/p>\n<h3>References<\/h3>\n<p class=\"hanging-indent\">Gelfand, Michele, Sarah Gordon, Chengguang Li, Virginia Choi, and Piotr Prokopowicz. &#8220;One Reason Mergers Fail: The Two Cultures Aren&#8217;t Compatible.&#8221; Harvard Business Review. October 02, 2018. Accessed May 20, 2019. <a href=\"https:\/\/hbr.org\/2018\/10\/one-reason-mergers-fail-the-two-cultures-arent-compatible\" target=\"_blank\" rel=\"noopener noreferrer\">https:\/\/hbr.org\/2018\/10\/one-reason-mergers-fail-the-two-cultures-arent-compatible<\/a>.<\/p>\n<p class=\"hanging-indent\">Henage, Michael. &#8220;3 Reasons For Amazon To Reconsider Its Whole Foods Strategy.&#8221; Seeking Alpha. February 26, 2019. Accessed May 20, 2019. <a href=\"https:\/\/seekingalpha.com\/article\/4244216-3-reasons-amazon-reconsider-whole-foods-strategy\" target=\"_blank\" rel=\"noopener noreferrer\">https:\/\/seekingalpha.com\/article\/4244216-3-reasons-amazon-reconsider-whole-foods-strategy<\/a>.<\/p>\n<p class=\"hanging-indent\">Ladd, Brittain. &#8220;Was Acquiring Whole Foods Amazon&#8217;s &#8216;Bridge Too Far&#8217;?&#8221; Forbes. December 20, 2018. Accessed May 20, 2019. <a href=\"https:\/\/www.forbes.com\/sites\/brittainladd\/2018\/12\/20\/was-acquiring-whole-foods-amazons-bridge-too-far\/#59306e801638\" target=\"_blank\" rel=\"noopener noreferrer\">https:\/\/www.forbes.com\/sites\/brittainladd\/2018\/12\/20\/was-acquiring-whole-foods-amazons-bridge-too-far\/#59306e801638<\/a>.<\/p>\n<p class=\"hanging-indent\">Meyer, Pauline. &#8220;Amazon.com Inc.&#8217;s Organizational Structure Characteristics (An Analysis).&#8221; Panmore Institute. February 16, 2019. Accessed May 20, 2019. <a href=\"http:\/\/panmore.com\/amazon-com-inc-organizational-structure-characteristics-analysis\" target=\"_blank\" rel=\"noopener noreferrer\">http:\/\/panmore.com\/amazon-com-inc-organizational-structure-characteristics-analysis<\/a>.<\/p>\n<p>1. Osnos, Peter. &#8220;What Went Wrong at Borders.&#8221; The Atlantic. January 11, 2011. Accessed May 08, 2019. <a href=\"https:\/\/www.theatlantic.com\/business\/archive\/2011\/01\/what-went-wrong-at-borders\/69310\/\" target=\"_blank\" rel=\"noopener noreferrer\">https:\/\/www.theatlantic.com\/business\/archive\/2011\/01\/what-went-wrong-at-borders\/69310\/<\/a>. <a class=\"return-footnote\" href=\"https:\/\/courses.lumenlearning.com\/wmopen-organizationalbehavior\/chapter\/success-and-failure-in-change\/#return-footnote-945-1\">\u21b5<\/a><\/p>\n<hr \/>\n<div id=\"citation-list-945\">\n<div class=\"licensing\">\n<div class=\"license-attribution-dropdown-subheading\">CC licensed content, Original<\/div>\n<ul class=\"citation-list\">\n<li>Success and Failure in Change. <strong>Authored by<\/strong>: Freedom Learning Group. <strong>Provided by<\/strong>: Lumen Learning. <strong>License<\/strong>: <em><a href=\"https:\/\/creativecommons.org\/licenses\/by\/4.0\/\" target=\"_blank\" rel=\"license noopener noreferrer\">CC BY: Attribution<\/a><\/em><\/li>\n<\/ul>\n<div class=\"license-attribution-dropdown-subheading\">All rights reserved content<\/div>\n<ul class=\"citation-list\">\n<li>Volkswagen Logo. <strong>Provided by<\/strong>: Volkswagen. <strong>License<\/strong>: <em>All Rights Reserved<\/em>. <strong>License Terms<\/strong>: Fair Use<\/li>\n<li>Whole Foods Market 2018 Logo. <strong>Provided by<\/strong>: Whole Foods Market. <strong>Located at<\/strong>: <a href=\"https:\/\/en.wikipedia.org\/wiki\/File:Whole_Foods_Market_2018_Logo.png\" target=\"_blank\" rel=\"noopener noreferrer\">https:\/\/en.wikipedia.org\/wiki\/File:Whole_Foods_Market_2018_Logo.png<\/a>. <strong>License<\/strong>: <em>All Rights Reserved<\/em>. <strong>License Terms<\/strong>: Fair Use<\/li>\n<\/ul>\n<div class=\"license-attribution-dropdown-subheading\">Public domain content<\/div>\n<ul class=\"citation-list\">\n<li>Borders group logo. <strong>Provided by<\/strong>: Borders group. <strong>Located at<\/strong>: <a href=\"https:\/\/commons.wikimedia.org\/wiki\/File:Borders_group.png\" target=\"_blank\" rel=\"noopener noreferrer\">https:\/\/commons.wikimedia.org\/wiki\/File:Borders_group.png<\/a>. <strong>License<\/strong>: <em><a href=\"https:\/\/creativecommons.org\/about\/pdm\" target=\"_blank\" rel=\"license noopener noreferrer\">Public Domain: No Known Copyright<\/a><\/em><\/li>\n<li>Amazon.com logo. <strong>Provided by<\/strong>: Amazon.com, Inc. <strong>Located at<\/strong>: <a href=\"https:\/\/commons.wikimedia.org\/wiki\/File:Amazon_logo.svg\" target=\"_blank\" rel=\"noopener noreferrer\">https:\/\/commons.wikimedia.org\/wiki\/File:Amazon_logo.svg<\/a>. <strong>License<\/strong>: <em><a href=\"https:\/\/creativecommons.org\/about\/pdm\" target=\"_blank\" rel=\"license noopener noreferrer\">Public Domain: No Known Copyright<\/a><\/em><\/li>\n<\/ul>\n<\/div>\n<\/div>\n","protected":false},"author":7,"menu_order":2,"template":"","meta":{"pb_show_title":"on","pb_short_title":"","pb_subtitle":"","pb_authors":["graduate-studies"],"pb_section_license":"cc-by"},"chapter-type":[48],"contributor":[61],"license":[52],"class_list":["post-697","chapter","type-chapter","status-publish","hentry","chapter-type-numberless","contributor-graduate-studies","license-cc-by"],"part":702,"_links":{"self":[{"href":"https:\/\/pressbooks.ccconline.org\/man4030-org-leadership\/wp-json\/pressbooks\/v2\/chapters\/697","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/pressbooks.ccconline.org\/man4030-org-leadership\/wp-json\/pressbooks\/v2\/chapters"}],"about":[{"href":"https:\/\/pressbooks.ccconline.org\/man4030-org-leadership\/wp-json\/wp\/v2\/types\/chapter"}],"author":[{"embeddable":true,"href":"https:\/\/pressbooks.ccconline.org\/man4030-org-leadership\/wp-json\/wp\/v2\/users\/7"}],"version-history":[{"count":2,"href":"https:\/\/pressbooks.ccconline.org\/man4030-org-leadership\/wp-json\/pressbooks\/v2\/chapters\/697\/revisions"}],"predecessor-version":[{"id":887,"href":"https:\/\/pressbooks.ccconline.org\/man4030-org-leadership\/wp-json\/pressbooks\/v2\/chapters\/697\/revisions\/887"}],"part":[{"href":"https:\/\/pressbooks.ccconline.org\/man4030-org-leadership\/wp-json\/pressbooks\/v2\/parts\/702"}],"metadata":[{"href":"https:\/\/pressbooks.ccconline.org\/man4030-org-leadership\/wp-json\/pressbooks\/v2\/chapters\/697\/metadata\/"}],"wp:attachment":[{"href":"https:\/\/pressbooks.ccconline.org\/man4030-org-leadership\/wp-json\/wp\/v2\/media?parent=697"}],"wp:term":[{"taxonomy":"chapter-type","embeddable":true,"href":"https:\/\/pressbooks.ccconline.org\/man4030-org-leadership\/wp-json\/pressbooks\/v2\/chapter-type?post=697"},{"taxonomy":"contributor","embeddable":true,"href":"https:\/\/pressbooks.ccconline.org\/man4030-org-leadership\/wp-json\/wp\/v2\/contributor?post=697"},{"taxonomy":"license","embeddable":true,"href":"https:\/\/pressbooks.ccconline.org\/man4030-org-leadership\/wp-json\/wp\/v2\/license?post=697"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}