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Making Change Work Graham Kittle Managing Partner, Global Business Services IBM Insight Forum 09 Make change work for you

2. Agenda g 1. Future perspectives from CEOs 2. 2 Current climate driving us to be smarter smarter 3. So how do we Make Change Work? g IBM Insight Forum 09 Make change work for you

3. We spoke to 1,130 CEOs and conducted indepth analysis to determine the characteristics of the Enterprise of the Future 33% 36% 31% Global 1,130 interviews 40 NATIONS 78% private sector 22% public sector 32 DIFFERENT INDUSTRIES A/NZ 69 interviews % 70% private sector 19 OF ORGANISATIONS HAVE MORE THAN 50,000 EMPLOYEES 30% public sector 30% % OF ORGANISATIONS HAVE FEWER 22 THAN 1,000 EMPLOYEES Source: IBM Global CEO Study IBM Insight Forum 09 Make change work for you

4. Analysis from the CEOs commentary has led us to five core traits of the Enterprise of the Future Core Traits of the Enterprise of the Future 1 2 3 4 5 Hungry for Innovative Globally Disruptive Genuine, not change beyond integrated by nature just customer generous

imagination IBM Insight Forum 09 Make change work for you

5. Although CEOs are more confident about managing change, the gap between the capability and the challenge ahead is growing The Change Gap* Triples Gap 2006 2008 % 8 % CHANGE GAP* 22 CHANGE GAP* 13% 12% 6% 19% We have seen more change in the 11% 22% 31% last ten years than in the previous 90. 83% Ad J. Scheepbouwer, CEO, KPN Telecom 20% 65% 61% 57% Change Needed Past Change Success No/limited Change No/limited Success Moderate Change Moderate Success Substantial Change Successful S f l Change Needed Past Change Change Needed Past Change Success Success Source: IBM Global CEO Study 2008 * Difference or gap between expected level of change needed and past success in managing change IBM Insight Forum 09 Make change work for you

6. CEOs say the gap is widening because of the accelerating pace of change The rate of change has The The k t Th key to successfulf l increased dramatically. transformation is changing our Customers are demanding mind-set. For large companies, radical change in product g p it is easy to be complacent innovation. Our company will we have to change this.

Our need to greatly increase its company culture must have a capabilities to deal with these built-in built in change mechanism. mechanism demands. Masao Yamazaki, President and CEO, Dennis Jnsson, CEO, Tetra Pak West Japan Railway Company My organisation has not been Change in our organisation is quick enough; change is hard. A not happening fast enough few years ago we were a the gap is opening up. national company, now we're a CEO in Australia global company. CEO in USA IBM Insight Forum 09 Make change work for you

7. Companies that delivered higher revenue p g growth managed change more successfully Underperformers** Outperformers** % 29 4% CHANGE GAP* 19 % CHANGE GAP* 24% 5% 17% 13% 10% CEOs of organisations with outperforming revenue growth are 85% 17% 83% more confident about their ability to 22% implement change 66% 54% Change Needed Past Change Success No/limited Change No/limited Success Moderate Change Moderate Success Substantial Change Successful S f l Change Needed Past Change Change Needed Past Change Success Success ** Performance based on industry comparisons within survey y p y * Diff Difference or gap b t between expected l t d level of change needed and past success i managing change l f h d d d t in i h

sample of revenue CAGR 2003 to 2006 Source: IBM Global CEO Study 2008 IBM Insight Forum 09 Make change work for you

8. Agenda 1. Future perspectives from CEOs 2. Current climate driving us to be smarter 3. So how do we Make Change Work? IBM Insight Forum 09 Make change work for you

9. Today we face a different kind of downturn traditional responses will not suffice ad o a espo ses o su ce Unprecedented constraints on Long and L d access to credit and capital; Difficult Typical cost unwinding of over-leverage management will Falling demand increased price demand, NOT be enough sensitivity as consumers and enterprises cut back Firms must examine Disruptions in supply chains, working capital & ki it l partner and customer investment arrangements identifying opportunities opport nities to Transformative Restructuring of industries - restructure, reduce, firms fail, sold off overnight and preserve capital as well as streamline New regulatory regimes operations Stress on global inter- dependencies IBM Insight Forum 09 Make change work for you

10. Yet some broader forces are at work Our O world has become ld h b Smaller & Pervasive

connections and communications Flatter Fl tt Emerging markets Open trade Systems-level complexity Riskier Viral spread of information Widening g p between information available, and g gap , information effectively managed Interconnected Smarter Instrumented Intelligent g IBM Insight Forum 09 Make change work for you

11. In 2005 there were 1 3 billion RFID 1.3 tags in circulation by 2010 there will be 33 billion. IBM Insight Forum 09 Make change work for you

12. An estimated 2 billion people will be on the Web by 2011 ... and a trillion connected objects cars, j appliances, cameras, roadways, pipelines comprising the "Internet of Things." IBM Insight Forum 09 Make change work for you

13. Organisations must consider four critical questions My infrastructure is Our resources Data is exploding New business & inflexible and costly costly are limited and it i silos d its in il process demands demands I Need to Work I need to respond I Need I Need Insight quickly Efficiency Smart How can we take How do we drive How can we work How do we create advantage of the greater efficiencies, smarter supported an infrastructure wealth of compete more by flexible and

that d i th t drives ddown information effectively, and dynamic cost, is intelligent available in real respond more quickly processes and secure, and is time from a by taking action now modeled for the just as dynamic as multitude of on energy, the new way people todays business sources to make environment, and buy, live & work? climate ? more intelligent sustainability? choices? Smart Dynamic Green & New Beyond Intelligence Work Infrastructure IBM Insight Forum 09 Make change work for you

14. Enterprise data is projected to explode at 60% growth annually through 2010 Managers spend 2 h M d hours a d searching f i f day hi for information ti 50% of what they find does not meet their needs Information management Predictive capability New Intelligence Engaging the value chain Business optimisation B i ti i ti IBM Insight Forum 09 Make change work for you

15. 70% of CEOs plan major business model changes Gap between CEOs who expect change and those who have the ability to handle change has widened sharply nearly 3 times Agile business model Connected customers Smart Work Dynamic business p processes IBM Insight Forum 09 Make change work for you

16. While 83% of CEOs expect substantial change within their enterprises, only 61% feel confident in their ability to manage it This change gap challenges CIOs to transform highly distributed, fragmented, labor-intensive infrastructures and assets Reduce costs Dynamic Improve Infrastructure service i Manage risk Manage IBM Insight Forum 09 Make change work for you

17. 80% of CEOs view sustainability as i f CEO i t i bilit impacting b d value ti brand l Information technology energy use will double in the next 2 to 4 years Finding the value in green Green & Smart systems Beyond Societal shifts and corporate and social responsibility IBM Insight Forum 09 Make change work for you

18. An analysis of early winners points to strategies for success Top performers during 2008 f ..exhibited three strategies Average Stock Price Change 2008 30% 24% 1. Focus on Value 52 Week % Change 20% 10% C 0 -10% 2. Exploit Opportunities +64% -20% -30% 3. Act with Speed -40% -40% Overall Top Performers S&P 500 (n=61) Criteria for Top Performers: Market Cap >$1.4B 52 week stock price change >5 0% k t k i h >5.0% Source: Google Finance, IBM S&C analysis, Performance period is 12/27/07 to

12/18/08 IBM Insight Forum 09 Make change work for you

19. Organisations need to do three things Exploit Focus on Value Act with Speed Opportunities Do more with less Capture share Manage change Cash/capital focus Disrupt weak competitors Clearly communicate simple Flexibility Acquisitions goals Seek and leverage Focus on the core Build future capabilities experience Businesses Protect & acquire talent Initiatives Develop required assets Leadership Get the information to act Re-align relationships Change your industry Set the agenda Financial solidity of Bold moves suppliers, partners and Position globally Risk & Transparency customers Business performance Revisit/renegotiate management & analytics Risk management IBM Insight Forum 09 Make change work for you

20. Agenda 1. 1 Future perspectives from CEOs 2. Current climate driving us to be smarter 3. So how do we Make Change Work? IBM Insight Forum 09 Make change work for you

21. Making Change Work Closing th Ch Cl i the Change Gap G IBM Insight Forum 09 Make change work for you

22. Sample and demographics - A/NZ participation The Making Change Work study investigated real-life experiences of practitioners worldwide from organizations of all sizes, across industries Making Change Work Study 2008 Demographics Methodology Job roles Organizational size OTHERS UP TO 100 6% MORE THAN 7% SUBJECT MATTER EXPERT/REVIEWER 100,000 100 000 Key attributes of the sample 7% PROJECT 14% MANAGER 100-1,000 PROJECT TEAM MEMBER 38% 15% - 1,532 experienced 7% project practitioners CHANGE 10,000- MANAGER 100,000 100 000 - 15 countries worldwide 17% 32% 1,000-10,000 32% INITIATOR/PROJECT - 21 different industries SPONSOR 25% - Companies of all sizes Geographic regions Breakdown by industry y y OTHERS 7% COMMUNICATIONS AMERICAS 29% 17% Methods EUROPE PUBLIC 34% 21% DISTRIBUTION - Face-toface interviews 13% A/NZ participation PROFESSIONAL - Survey SERVICES 12% 8% FINANCIAL ASIA PACIFIC SERVICES (n=183) 37% INDUSTRIAL 16% 18% Source: IBM Global Making Change Work Study, 2008, (n = 1,532) IBM Insight Forum 09 Make change work for you

23. On average, only 41% of projects were considered successful. But the top 20% th Change M t t

20%the Ch Mastersreported an 80% success rate. t d t Average Project Success Rates Change Masters vs. Change Novices PROJECTS THAT EITHER MISSED ALL GOALS OR WERE STOPPED Share of successful projects 15% 80% A/NZ PROJECTS THAT FULLY 17% MET THEIR OBJECTIVES 41% PROJECTS THAT DID NOT A/NZ Average = 35% 41% 95 % SUCCESS RATE INCREASE MEET EITHER TIME, BUDGET OR QUALITY GOALS 8% A/NZ 44% 48% Only 11% BOTTOM 20% AVERAGE TOP 20% Change CHANGE CHANGE Masters in NOVICES MASTERS 44% of all projects failed to meet either time, A/NZ budget or quality goals, while 15 % either stopped The top* 20% of organizations reported p g p or failed to meet all objectives an average project success rate of 80%, reflecting a 95% increase above the Source: IBM Global Making Change Work Study, 2008, (n = 1,532) average share of successful projects Success rate increase is the relative difference * Top and bottom organizations of sample as defined by project success rates IBM Insight Forum 09 Make change work for you

24. The critical barriers to change involve people - what is generally considered the soft stuff is hard Major Change Challenges Soft Factors Hard Factors Changing mindsets and attitudes 58% Key barriers are changing Corporate culture 49% mindsets & attitudes,

Complexity is underestimated corporate culture, and 35% A/NZ underestimated complexity Shortage of resources 33% 43% Lack of commitment of higher management 32% These soft factors are rated Lack of change know how 20% more important than resource A/NZ Lack of transparency because of missing or 18% 34% constraints, illustrating they wrong information are inherently hard to manage 16% Lack of motivation of involved employees and measure even with Change of process 15% sufficient resources Change of IT systems g y 12% Technology barriers 8% Leaders are unrealistic about how change is going to happen. They move ahead anyway and get into problems. Source: IBM Global Making Change Work Study, 2008, (n = 1,532) Change Manager, Energy and Utilities company IBM Insight Forum 09 Make change work for you

25. Top management sponsorship, employee engagement and honest and p g p p, p y g g timely communication are critical for successful change Factors for Successful Change Soft Factors Hard Factors Top management sponsorship 92% Change Masters have realized Employee involvement 72% that behavioral and cultural Honest and timely communication 70% change are crucial to project Corporate culture that motivates and 65% success and

are considerably promotes change 55% tougher to address than the Change agents (pioneers of change) so-called hard factors, such Change supported by culture 48% as structure, performance Efficient training programs 38% measures and incentives Adjustment of performance measures 36% Efficient organization structure 33% Practitioners place a key Monetary and non-monetary incentives 19% responsibility for successful change right at top managements dt door If you dont have leadership support, youre doomed Project Manager, U.S., Media and Entertainment Source: IBM Global Making Change Work Study, 2008, (n = 1,532) IBM Insight Forum 09 Make change work for you

26. Making Change Work is covered in four broad categories IBM Insight Forum 09 Make change work for you

27. REAL INSIGHTS REAL ACTIONS A realistic awareness of the change challenge and project success are strongly correlated Challenge and Complexity Awareness Lack of early insight leads to a Percentage of successful p j g projects high risk that complexity will be underestimated or even 52% overlooked 43% 35% In particular, the complexity of particular behavioral and cultural change is 25% often underestimated in the early

project planning and scoping stages YES TENDING TENDING NO TOWARD YES TOWARD NO Project success rates drop as Within your organization, do you think there is sufficient awareness of organizations awareness levels the challenges associated with implementing and sustaining change? change? decrease Source: IBM Global Making Change Work Study, 2008, (n = 1,532) IBM Insight Forum 09 Make change work for you

28. SOLID METHODS SOLID BENEFITS Formal change management methods F l h t th d improve project success when applied consistently Having a structured approach to change management alone is insufficient if not applied consistently. When used regularly, the likelihood of project success increases to 52%, compared to less than 40% in other instances. Consistent application of solid methods vs less consistent or none at all Formal change management approach Informal change management approaches There are specific and formal change management 52% procedures which are always followed Although there are specific and formal change Alth h th ifi df l h 39% management procedures, they are often not followed I know someone I can ask 38% Actions are improvised according to the situation 36% Following a good solid methodology that integrates with the project really helps

to make a quicker start Source: IBM Global Making Change Work Study, 2008, (n = 1,532) on the change journey g j y Change Management, Australia, Government IBM Insight Forum 09 Make change work for you

29. The Methods Gap: The difference between the perceived level of SOLID METHODS SOLID BENEFITS formal methods required and the actual level being applied Despite almost 90% of practitioners recognizing th value i using f D it l t f titi i i the l in i formal changel h management methods, in practice the consistent use of a systematic approach is low There is a wide gap between what is thought to be required and what is actually being applied. By employing formal change management methods and using them more consistently, organizations can close this methods gap and increase the chances of project success The M th d G Th Methods Gap Percent answering yes 87% Need Formal 63 % Methods METHODS Use Formal GAP Methods 24% IBM Insight Forum 09 Make change work for you

30. BETTER SKILLS BETTER CHANGE Change Managers improve the rate of project success Deploying experienced and skilled change managers on projects helps to increase the chances of project success The

impact of dedicated change managers Share of successful projects 36% No Professional 19 % Change Managers SUCCESS RATE INCREASE Professional Change Managers 43% Success rate increase is the relative difference Source: IBM Global Making Change Work Study, 2008, (n = 1,532) IBM Insight Forum 09 Make change work for you

31. RIGHT INVESTMENT RIGHT IMPACT We f found project success rates were higher when moderate investment is made in the change effort Top organizations invested only slightly more in change than others but were rewarded others, with significantly higher project success Our study found that project success rates were 23% higher when the amount invested in h i change was greater th 11% of th project b d t t than f the j t budget Investing for ChangeA little goes a long way Share of successful projects 39% 23 % Investment <=11% SUCCESS RATE INCREASE Investment >11% 46% The ability to demonstrate the benefits of a change program was key in the shift in thinking Success rate increase is the relative difference Source: IBM Global Making Change Work Study, 2008, (n = 1,532) Project Manager, Canada, Life Sciences and Pharmaceuticals IBM Insight Forum 09 Make change work for you

32. Mastering Change: Greater focus on the four facets of the Change Diamond drives project success By concentrating and acting on all four facets of the Change Diamond, Change Masters achieve project success rates of nearly twice the average Change Masters: Greater focus leads to project success 80% The Change Masters g consistently utilized the success factors markedly 95 %SUCCESS RATE INCREASE 41% better than the average organization and were g able to report much higher 8% success rates. Bottom 20% Average Top 20% Change Novices Change Masters 46% 61% 79% Real Insights - Percentage of organizations The Change Novices in having a clear understanding of the change contrast consistently challenge 12% 24% 37% under-utilized the four Solid Methods - Percentage of organizations using formal methods consistently facets driving change 73% 79% 84% Better Skills - Percentage of organizations using success and had to report change managers for change projects an 8% success rate. Right Investment Percentage of project budget 10% 11% 13% invested in change management Source: IBM Global Making Change Work Study, 2008 IBM Insight Forum 09 Make change work for you

33. The Change Diamond - Greater than the sum of its parts Although action on individual facets brings

benefit, only in combination do they result in an outstanding increase in project success success. The individual vs. joint effect of the four facets 19 % 80% Project success rate of Increase in project success Increase due individual facets due to synergy effect of all to synergy four facets together 52% 52% Sum of the four individual facets 43% 43% 41% Average project success When they combined the rate facets, Change Masters attained an 80% project % success rate, a marked Real Insights: Solid Methods: Better Skills: Right Investment: Change increase over the sum of Champions: Awareness of Consistent use of Professional >11% Change Combining All their individual effects Change Challenge Formal Methods Change Managers Budget Four Facets F F t Source: IBM Global Making Change Work Study, 2008, (n = 1,532) IBM Insight Forum 09 Make change work for you

34. Lessons from the Change Masters Filling the diamond with life Consider money spent on change Hook into the history management as an investment Provide change leaders with access to Understand which types of focused historical data, people surveys, culture spending can offer the best return, in terms assessments and war stories, and of greater project success and use these people involved in previous

projects, if investments to minimize the risk of troubled possible. projects. Get the right skills everywhere Enable rapid development of internal Drive consistency skills to keep pace with changes in the Develop and promote a standard change external environment. Consider the method that can be applied establishment of a sustainable change consistently. Communicate this widely management capability within the and monitor its adoption. organization. IBM Insight Forum 09 Make change work for you

35. Is Your Organisation a Change Master or a Change Novice ? Change Novice Change Master REAL INSIGHTS, REAL ACTIONS No reflection or understanding of the reasons past Good anecdotal understanding of why projects have Structured formal post implementation projects have failed or succeeded failed or succeeded in the past assessments of change initiatives and consistent No focus or emphasis placed on the people or Adhoc attention is given to the people & cultural integration of lessons learned into planning of cultural aspects of change aspects of change with a strong focus on the process new change initiatives Change is viewed as a succession of individual and technology Equal emphasis is given to the people, cultural, separate projects There is some alignment between the objectives of process and technological

aspects of change change projects underway h j t d Ch Change i viewed as a l is i d long-term transformation t t f ti SOLID METHODS, SOLID BENEFITS in support of strategy No change method is available or used on projects Consistent, tried & accepted change method that is Consistent, tried & accepted change method that No approved business case or identification of sometimes applied is always applied on projects project benefits Approved business case and adhoc measurement of Approved business case and formal tracking of No formal change management workstreams are benefits project benefits (throughout project) established on significant projects Formal change management workstream established Formal change management workstream on all on some significant projects significant projects BETTER SKILLS, BETTER CHANGE Dont believe theres a need to invest in developing Skills are developed on individual projects on an ad hoc Investment in the development of a change change management skills within the org for use basis are are not necessarily used on future projects capability that is leveraged across the organisation across projects j t S Some evidence of T M id f Top Management leadership of t l d hi f A ti Active, involved and visible T M i l d d i ibl Top Management t Passive, hands-off and invisible Top

Management project leadership of projects leadership of projects Formal mechanisms (ie processes & technologies) are Formal mechanisms (ie processes & technologies) There is little to no involvement or feedback sought used on an ad hoc basis to facilitate employee are always used to encourage employee from people affected by the change involvement & feedback involvement & input RIGHT INVESTMENT, RIGHT IMPACT , There is no investment in well trained Change Change Management responsibility is usually Money spent on Change Management Managers assigned to a Project role is viewed as an investment Change management expenditure is seen as a Change mgmt budgets are often set as a % of the Well trained Change Managers are utilised on cost and is not separately budgeted for in projects total project budget, rather than relative to project projects complexity & risk Change management budgets are set relative to a project s projects complexity & risk IBM Insight Forum 09 Make change work for you

36. IBMs Better Change method supports the four facets of the Change Diamond Focus on Strategic Execution Program Leadership and Governance Program Organization Strategy Design and Management Value Realization Stakeholder Culture Engagement and Transformation Communications Skills

& Knowledge Achieved by Focus on People Change IBM Insight Forum 09 Make change work for you

37. Thank you Questions? IBM Insight Forum 09 Make change work for you

38. REAL INSIGHTS REAL ACTIONS However, b i merely aware of change complexity i H being l f h l it is insufficient Does Awareness Lead to Action? Within your organization, do you think there is sufficient awareness of the challenges associated with implementing change? TENDING TOWARD NO TENDING TOWARD YES 26% 33% Yes Tending toward yes NO Tending toward no 13% No Does this awareness of the challenges of implementing change normally lead to the YES introduction of specific measures to 18% 8% support the change? 30% 55% 13% 2% Change Masters take advantage of awareness and insights to better guide actions Source: IBM Global Making Change Work Study, 2008, (n = 1,532) IBM Insight Forum 09 Make change work for you

39. SOLID METHODS SOLID BENEFITS However, change management methods are H h t th d usually informal, ad hoc or improvised Use of formal methods in Change Management vs Project Management Formal methods used consistently

Informal approach (formal methods not used consistently, ad-hoc or improvised) 24% 76% Change Management Project Management 51% 49% Source: IBM Global Making Change Work Study, 2008, (n = 1,532) IBM Insight Forum 09 Make change work for you

40. Each Better Change enabler supports a facet of the Change Diamond Value Realization identifies benefits, tracks Stakeholder Engagement and Communication benefits and realizes benefits spanning the project identifies, classifies, aligns, engages, and effectively lifecycle as costs, requirements, direction and communicates to stakeholders benefits all change to a greater or lesser extent as Culture Transformation aligns an organizations the project progresses culture to support the desired end state Program Strategy & Management sets the change strategy and manages the implementation Program Leadership & Governance builds and Better Change - assembles discrete activities as sustains support among executive leaders and needed for the particular change and provides stakeholders and provides guidance and governance overarching enablers and modules that skilled mechanisms t promote program success h i to t practitioners, creatively using t h l titi ti l i technology,

craft t fit ft to Skills & Knowledge - provides a framework to assess the circumstances and implement required skills and knowledge Organization Design aligns the organization with new or existing business models and strategies to maximize effectiveness IBM Insight Forum 09 Make change work for you