Resistance to change is nothing new. Management pushes back on employee resistance to change, employees push back on management resistance to change and as much as some people romanticize the good old days, there’s no going back. The only constant is change and when we come back, today’s guest, Rebecca Costa, has some advice for how to combat change resistance at work.

 

This is Business Confidential Now with Hanna Hasl-Kelchner helping you see business issues hiding in plain view that matter to your bottom line.

 

Welcome to Business Confidential Now. I’m your host, Hanna Hasl-Kelchner, and today, I’m delighted to welcome Rebecca Costa to the show. Rebecca is a futurist and a preeminent global expert on the subject of fast adaptation. Her career spans four decades of working with founders, executives, and venture capitalists in Silicon Valley, and she’s also the author of two books, The Watchman’s Rattle: A Radical New Theory of Collapse that was an international bestseller, as well as On the Verge, another top seller.

 

Her work has been featured in The New York Times and USA Today. That’s just to mention a few of the leading publications she’s been in. So, without further ado, welcome to Business Confidential Now, Rebecca.

 

Well, nice to talk to you today,

 

Rebecca, your two books. They represent some really fascinating research about how individuals and organizations can stay ahead of disruptive change. In your experience, what’s the biggest obstacle businesses face when adapting to change? Let’s talk about how change resistance actually shows up in the workplace.

 

Well, I think the best place to start is by quoting the great business educator, Peter Drucker, where he said that culture eats strategy for lunch. And we might want to ponder that because we have a lot of focus on strategy and tactics that surround companies that are innovative and very progressive, but we rarely want to tackle the messy business of culture. And the fact is that organizations, particularly large organizations that are extremely successful have a built-in institutional resistance to change.

 

It’s a cultural resistance to change and that is changing. Any culture is the most difficult job. It isn’t difficult to come up with strategy or tactics, or you know, introduce new technologies to an organization. What’s really difficult is overcoming cultural barriers, things like fear of failure. So, when you stop and think about it, decisions get made in corporations for a lot of reasons, and many of them bad reasons that are driven by whatever the cultural obstacles are in that organization.

 

So, how do we change the incentives so that they can make better decisions and not have that fear factor?

 

Well, that’s where it gets tricky. So, one way to think of organizations is their Pavlov views, right? So, they started out making a certain product or delivering a service, and they began over time perfecting that. They became much more efficient, much more profitable in delivering that product or service. And so the more they did the same thing over and over again, the more they were rewarded by success and profit, right? By a larger market share, by more profitability, to the bottom line, all of these things.

 

So over time, they keep getting reinforced, right? And if you’re a manufacturing company, you want to get more product off the line faster, right? So, you’re constantly aiming toward greater efficiency. So, let’s take a manufacturing company, for example. Along comes somebody, and they have an innovative idea, and it requires you now to introduce a new process into manufacturing.

 

That means shutting things down, retraining people, possibly adding time to manufacturing the product. Now you’re going to have fewer products come off the line that in and of itself is going to face some resistance, never mind the fact that whatever executives are in charge of manufacturing may have their very compensation associated with improving the output of manufacturing.

 

So, you can see that there’s this sort of systemic resistance to wanting to change process to wanting to innovate if your very compensation is such as bonuses and things like that are tied to productivity and output. So, there’s always built in to every organization some resistances. And what you have to do is you have to acknowledge that the very things that made us successful will now cause us to fail.

 

We’ve been so reinforced to do things a certain way. We’ve built in all these systems in our organization to efficiently do things that way, and now we have to change. And when you acknowledge that that it’s going to be really difficult to make that change, then you start to build in institutionalize innovations. In other words, there has to be a countermeasure to institutionalize resistance, and that is what I call institutionalized innovation.

 

You have to build systems that constantly force the company. They have to be efficient systems, they have to be institutionalized, they have to be systemic, and they have to be built in personnel and budget, and all of those things have to be dedicated to innovation as a process.

 

Well, that’s one way to break the pattern. Can you get a little bit more specific and give me an example of that type of systems? I mean, so that a company knows when there’s a tipping point to recognize? All right, we need to shift gears. We need to start thinking about the next generation, the next iteration, and the changes in the marketplace.

 

Well, there’s a couple of things. You’ve probably heard of the term HIPPO, right? The highest paid person in the room’s opinion wins? When that begins to happen, when you find that the highest paid person in the room is constantly making the decision on behalf of the organization, it’s likely that person’s been around for a while.

 

It’s not likely that they just came in from the outside, although sometimes there’s external hiring, but generally with most corporations, these are people that have been around for a while and know the business, but what they know is how the business succeeded in the past. What they do not know and have no more credentials than anybody else in the organization is how the business will succeed in the future, right? Because remember that the future, there are no facts about the future.

 

There are only statistical probabilities, and you can look at trends, market trends. You could do a lot of analytics and you have a pretty good idea of what future success might be looking like. So, if you start to see HIPPO occurring on a regular basis in meetings at all levels, by the way, at the lowest level, at the facilities manager level, the secretarial or admin level, if you see the highest paid person in the room constantly making the final decision, you really do have probably some institutional resistance in there.

 

Another thing is to remember that as an organization, you have to acknowledge the fact that technology, science, and changes in the market are moving much more quickly than they ever have in the past.

 

And so by the time you learn about a disruptive technology or disruptive pricing structure, disruptive manufacturing technique, you’re already late to the party and you’re trying to catch up. So, while I used to be a global expert at fast adaptation, I tell people even I had to evolve. Fast adaptation isn’t fast enough. And so now, I’ve become an expert at pre-adaptation, being able to look ahead and dedicate resources and processes to look ahead and be able to determine what those changes are going to be and then to start to navigate toward those changes now.

 

Because you can’t wait. You can’t wait for the change to be occurring. That’s a losing strategy. You actually have to get out in front of change, and the way to do that is to formalize a reconnaissance function. For example, with one large Fortune 500 pharmaceutical company, we instigated a new ventures team inside their company and a small group inside that new ventures team, their job was reconnaissance.

 

By reconnaissance, that meant looking at provisional patents in every country around the world, going to trade shows, reading trade journals, watching news programs, scanning, going to universities to look at what kind of research people were doing and trying to get out in front of things that would disrupt their marketplace so that they could get the jump on opportunity ahead of all other competitors, and they could be prepared for negative impacts to their business.

 

That all makes a lot of sense to me. Some of this sounds like traditional risk management. How is it different?

 

Well, it’s different in that risk. Typically, when you’re looking at risk, you’re looking at a steady group of facts, right? You’re looking at exposure and you’re looking at downsides, upsides, and mitigating factors, but what we know right now is that we have so much real time data and that real time data is changing, so even risk analysis.

 

Not long ago, I was asked to do the keynote speech to the Society of Actuaries, and I thought, “Why do actuaries want a technology futurist to talk to them?” Well, I had to think about it for a moment and I thought, “Wow, what an impossible job,” right? Given all the real time data that we’re collecting on human beings and their driving behaviors. Well, think about Fitbit giving you feedback every nanosecond of every minute. Calculating risk is really becoming something that’s dramatically different from looking at trends and getting out ahead of them.

 

So, right now, what you have to be doing is you have to be dedicating resources to go out and look at what the next opportunities and what the next big disruptors are, so that you can start to make those changes now. They’re going to take a while for your organization to incorporate, but you just simply can’t wait. You can’t wait and keep repeating and doing what you were doing in the past.

 

I hear what you’re saying and I couldn’t agree with you more, but in my own corporate experience, I know how hard it is to have people become proactive. And that’s exactly what you’re asking them to do, to think ahead to plan ahead beyond the end of the quarter and the numbers that they’re trying to hit. So, how do you persuade them?

 

But not all people. Most people have to focus on what’s on their desk today. They have to focus on the emergency that is immediate, right, and achieving quarterly goals. I mean, that’s what Wall Street has done for us. It has driven us to look at meeting analysts’ expectations, shareholder expectations on a quarterly basis, and that’s fine.

 

But that doesn’t really work in the long run. It works in the short run, and you do need a great deal of your leadership to focus on that, right, but it can’t be 100 percent of your leadership. And this is where I think that institutionally, you have to look at your leadership and say, “Who does reconnaissance?”

 

When I go into many Fortune 500, these are massively global corporations and they’ll bring me into the board or they’ll bring me in at the highest level and I go, “Who is assigned to do reconnaissance?” In the military when we go into a dangerous situation, they don’t just march all the troops in there. They send out reconnaissance to get information about what dangers and what opportunities lie ahead. And in many cases, you’re moving into a new – you’re taking this entire company and you’re now moving them into a new area.

 

You don’t just try to grab all the personnel and say, “All right, we need to be thinking about the future and making future plans. What you do is you send out scouts ahead of time so that they can bring information in and begin indoctrinating the company in one situation. I’ll give you an example of another company that we work with. They said, “Well, we don’t believe we can be objective internally.”

 

“We’d like to hire you and your staff to go out and do all this reconnaissance and then bring us 10 companies.” Every year, bring them in with their products. They could be startups of one or two people, or they could be large corporations. We don’t care, but bring us 10 curated companies into our company, into our headquarters, where our top executives and our board of directors at one level down at the director level can touch, feel, and see these presentations.

 

We don’t want to send people to trade shows anymore where they wander around and hope they bump into something significant and then they have to try to come back and convince the entire company that this is important.

 

We want you to bring these people into our company. We want you to bring 10 companies that we ought to be doing business with, that we ought to acquire, that we ought to license, or that we ought to know more about, and we did that. We did that. We search patents all over the world, universe and all over the world, and we would curate 10 companies that we would bring in every year, and it grew into this massive function for the company.

 

People couldn’t wait, couldn’t wait because a few years ago, they’d heard about virtual reality, but nobody could actually put virtual reality glasses on, and they had never seen an application that had anything to do with business to business. And suddenly, they were touching and feeling this and it wasn’t imaginary.

 

It wasn’t something they read about that might be coming downstream in a magazine. It wasn’t something that they saw in a newsreel and they went, “Yeah, that’s not for another 10 years.” They were experiencing it. It was in front of them. It was undeniable, and in that way, we were altering their cultural perceptions.

 

Indeed, indeed, I can see how that happens. Let me ask you this, though for the smaller business, the main street business, the entrepreneur, the startup, they’re trying to look ahead and trying to get their feet on the ground at the same time. They don’t have the resources that these massive corporations with their boards and X layers of leaders have. How do they stay focused on it? What advice would you have for them?

 

The first thing I would say is, when you have limited resources, your best option is always partnerships and outsourcing. That’s all you got, right? Okay. Because you’ve got limited internal resources, so you’ve got to go out and you’ve got to find partners. Maybe you can get four or five startups together that have similar interests and say, “We’re going to go out and find and hire one individual to bring back to us.”

 

 “What kinds of provisional patents are out there that might conflict with what we’re producing,” right, or what kinds of opportunities? What kinds of partnerships and alliances should we be creating, right, to improve our efficiencies and accelerate our growth, our market penetration, whatever it is? And in other words, a lot of times, we sit back and we go, “Whoa, we’re just a small company.”

 

I can’t tell you how many times I’ve heard that. That is the worst excuse possible because being a small company, you’re more nimble; you’re more agile. You don’t have this long heritage of, “Well, we used to do it that way.” Typically, you don’t have this history that you’re fighting. You’re not fighting institutional resistance. You don’t have layers, layers, and layers to convince to change things. So, small companies are much more nimble.

 

They can change faster for them to be able to look out ahead. There are many, many ways that they can wind up doing that. One other tip I have for smaller companies, but it also works for large companies is don’t be so focused on your own industry. Sometimes, we’re myopically focused just on our industry and what’s going on in our industry, but we lose opportunities when we do that. And I’m going to give you a really specific example so that this doesn’t sound – I’m getting a little too theoretical here and I don’t want to.

 

I was working for a number of years in the agricultural area and trying to bring technology more into agriculture because that has been the biggest disruptor to that industry ever. And you don’t think of farmers as being tech savvy, but boy, are they now. The largest producer of food in the world is Dole Fresh Foods, and they had brought me in and they were talking a little bit about the fact that their supply chain, they were having supply chain issues and things were moving too slowly.

 

We did a big analysis. And at the end, we came in and we grabbed all the executives and we asked them to get in these little minivans and we drove them to an emergency room. And we said, “You need to look at the technologies and the processes that an E.R. uses because when you cut a vegetable out of a field, it’s dying. It begins dying at that moment, and your job now is to try to get it to the store before it dies, before the leaves turn brown and you make no money on it.”

 

And that is the exact same problem that an ER has. An ambulance picks up a patient, and their sole concern is to get that patient in the best physical health that they could to the ER so that the ER can treat them. And I said, “I think you need to look at that logistics in the emergency room and borrow those technologies, right, in order to improve your supply chain speed and efficiencies.”

 

And that made a huge difference because the executives said to me, “Well, we don’t think of our food is dying. We don’t use that terminology. We talk about them as products or produce.” And I said, “Yes, but I think you need to think about the product is dying. It’s a patient dying and your job is to save it for as long as you can.”

 

That’s an interesting comparison. I’m wondering for the small…

 

Rebecca: [00:20:37] Sometimes, you just got to tilt your orientations. And even if you’re a small company, look outside your own industry for models that you can use.

 

Transferability is a really powerful thing, whether it’s looking for models or looking for technology and new applications. I’m wondering though if there are two or three tips you could give our entrepreneurs and small business owners about the types of things that they should be alerted to about, “Hey, the ground is shifting here,” and you need to do that reconnaissance that you’re talking about because in the early stages, they’re so busy trying to establish their market demand for their good or service.

 

They may not be in manufacturing where their provisional patents being filed on anything as if they even have the resources to hire somebody to do those searches and interpret what they’re finding. So, for the smaller businesses, they’re may be service oriented because as you say, change affects everything, and Drucker is absolutely right. Culture eats strategy for breakfast. What kinds of things can they be looking out for? Just generally to keep their head above water as they’re getting their sea legs?

 

Well, they can look at a number of things, a number of litmus tests that they can use on their own culture. I mentioned, it’s the highest paid person’s opinion in the room always wins that that would be a sign of some institutional resistance. Do they have anybody doing reconnaissance? If they don’t, then assign that to someone and formalize the process.

 

So, let’s say that you do that and somebody comes in and says, “This is a really great opportunity. We found some university students that are developing this. This is a perfect match to our product or our service, right, or something that we’re working on and hope to introduce in the future. And I think we should try to lock in an exclusive partnership, license, or something along those lines.”

 

Let’s say you do that. Well, then you have to have a budgeting process, right?

 

And then you have to have a way to assign resources. One other thing that you want to think about is that as you’re going out and you’re looking for these opportunities and you’re trying to overcome institutional resistance by formalizing these processes, I mentioned bringing in 10 companies into a major company and saying, “You’re foolish if you don’t pay attention to these things because they’re coming your way,” right? You can try to ignore them. You can pretend like they’re not happening, but now it’s in your face.

 

You’ve touched, felt, seen that it’s real and you’ve talked to the makers of the product, right? So, sometimes you might have to do something like that. And actually, you don’t want to always be talking about them. You don’t always want to be putting PowerPoint slides up. Sometimes you just got to bring the people in and bring the product in and make it real.

 

So, I think there are a lot of things that companies can do to overcome institutional resistance. One of them that’s really key is to look at how you treat failure when somebody attempts to innovate, right? When somebody attempts to do something differently and it doesn’t work, what happens? What happens to that person’s career? What happens to their opportunities?

 

Take a good look at how failures are treated. Now, there are some failures you don’t want, but there are some failures, such as developing prototypes, running pilot tests on things, going out and doing market tests on potential opportunities. You really want to take a look at, “Okay, how do we manage failure?” How do we, as an organization, treat that? Because you were back to talking about risks, you’re not exactly going to encourage people to take risks.

 

Be open minded. The innovation focus if the penalty for failure of any type is too great. So, that would be another cultural marker that you want to really pay attention to.

 

Awesome. I think that has a lot of value, even for the smallest startup, because yeah, how do you handle failure? But also, I think your comment about what are other startups, small businesses doing in your area and if you live in an area where there are universities.

 

Entrepreneurship is just huge among students these days, and some of them may have a little sparkle in their eye thinking they can create the next Google between now and spring break. And then they’ll be millionaires by the time they come back from the beach. But even without that, there could be some really good ideas that may complement your existing business, where they could be eager for some type of partnership or working together in some capacity.

 

So, I think those could also be low-cost points of entry where they may not come to you at your particular office or wherever you work, but all of these schools typically have some kind of a pitch contest, if nothing else, where at the end of the class, these students are being given an opportunity to pitch. Now, they think they may be pitching in the future to venture capitalists or to angel investors, and maybe they will, and maybe they will get funding.

 

But if you can get in there and start a conversation, you might just be the easiest choice for them, depending on other pressures that may be on them. As with graduation approaching and their parents may be wanting them to have traditional jobs as opposed to –

 

Well, you make a great point. And by the way, this is not a money issue. I went to one of those pitches not too long ago down at the University of Florida. There was a student there. He had a pretty good idea. I don’t think it was well thought out and I’m an experienced business person. So, I looked at his business plan and it was what you would expect from a second-year college student and all of that.

 

But the idea was very interesting. And so, I said, “Well, what would you need to get this to a point where you could have actually something to show?” And he said, “Well, it’s going to be a lot of money.” And I said, “Well, what’s a lot of money? I like to talk in specifics.” And he said, “$10,000.00. We’d have to have at the very least $10,000.00.” Yeah. And to him, that was a tremendously large ask, right?

 

But to a large corporation, $10,000.00, that’s a really good bet, right? So, sometimes you want to see a lot of those. Think about doing ten $10,000.00 seeds and then let those young people bring it to a certain level. Right? So that in a way, you’re acting like a venture capitalist, but at a very, very low financial risk. Exactly.

 

And odds are, yeah, if you use venture capital mathematics, 15% or 20% of those will probably turn out. They’ll turn out to be something that you want a license or you want to buy, or you might even hire the student to work for you in your R&D lab. You have a lot of options where universities are concerned and their research is concerned.

 

But the cost to engage in those opportunities, I think, are –  so maybe you create a university reconnaissance and venture fund or something. Again, the more you institutionalize these and you formalize them and you actually assign personnel to oversee these programs, the more you have a counterbalance to resistance.

 

Exactly. So, I thank you, Rebecca. Your insights are certainly food for thought when it comes to how to conquer change resistance. And if you’re listening and are looking for more information about how to do that or maybe stress test your own organization to see if it’s too resistant to change and being able to manage going into the future successfully.

 

Rebecca’s contact information will be found in the show notes at BusinessConfidentialRadio.com, along with the links to both of her books: The Watchman’s Rattle and On the Verge. And if you know someone who wants their organization to be more change ready, tell them about Rebecca Costa and this podcast episode. Share the link.

 

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Thank you for listening to Business Confidential Now with Hanna Hasl-Kelchner. Have a great day and an even better tomorrow.