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John P. Kotter knows a thing or two about change and urgency. The best-selling author—his books include A Sense of Urgency—and former Harvard Business School professor is perhaps best-known for his eight-step process for leading change in companies. So what was the sense of urgency that led Kotter to launch Boston-based advisory service firm Kotter International earlier this month? "I'm impatient," says Kotter. "Typically people think they know all about change and don't need help. Their approach tends to be more management-oriented than leadership-oriented. It's very frustrating."
Kotter and Nancy Dearman, chief executive of Kotter International, recently spoke with Businessweek.com Management Editor Patricia O'Connell about their new company, their dream client, and the power of having "Freds" in an organization. Edited excerpts of their conversation follow:
What are the challenges facing companies now?
John Kotter: The rate of change has been going up steadily, and it seems to be exploding. The two basic drivers on the outside are changes in technology and globalization. The first has had an impact almost everywhere, and the second is interconnecting the world [in a way] that makes everything more unstable. They are producing the need and opportunity for a lot more change inside.
How do you measure the rate of change?
Kotter: One way to measure is product life cycles. You can measure numbers of patents put into the U.S. patent office or M&A activity globally. And these are all going up.
Are companies not responding fast enough?
Kotter: Not at all, and for perfectly understandable reasons. We all behave in terms of what we've learned in the past, and the more you get hit with new stuff, the more you apply what you know. The gap [caused by] what people are able to do because of the methods they've learned isn't shrinking. So many firms are being hit by unnecessary hazards as a result.
What would you consider unnecessary hazards?
Kotter: The most obvious are when you have a whole set of product lines based on technology X and you have a whole lot of little companies sprouting up. Nice bright young people from places like my alma mater, MIT, and they come at you from a direction you don't even notice, and they have products the market wants, and all of a sudden you don't.
Nancy Dearman: And the threat being that you're not able to adapt quickly enough to the changes in the environment.
Kotter: Or even get ahead of the curve.
You of course are well-known for the eight-step process you bring into companies to effect change. Have you had to change or adapt that? Or do you see it standing the test of time—the 10 Commandments of management, if you will?
Kotter: We are always creating new tools and techniques to help people, but the fundamental framework is remarkably resilient, which means it must have something to do with the nature of organizations or human nature.
Dearman: One of the things John found a few years ago is that the first step, creating the sense of urgency, needed more emphasis. That's where most companies fail. The question becomes "urgency about what?" We're learning more and more about how that needs to be framed.
What is the obstacle, then? Is it a lack of urgency, or are people urgent about the wrong things?
Kotter: There are [three aspects of] urgency. One is real urgency. Another is complacency. But when you look into it more deeply, you find a third thing: false urgency. This is [when] people really do feel the hazard or the bosses feel the hazard and [have their] heel on them, and it creates a lot of anxiety and activity that isn't necessarily productivity. People are running around from meeting to meeting, lots of PowerPoint (MSFT) slides. In some ways, I think it's worse than just old-fashioned complacency.
Where does corporate culture fit into this?
Kotter: What I found at least a decade ago is you don't start by saying, we're going to change the corporate culture. That's the end result. It's a very good end result, but it's not where you start, and it's the wrong goal.
Tradition is a very powerful force. You see cases [in which] people work their butts off for a few years, and they do find new ways of doing innovation and marketing, and it works, and then they take their eye off the ball to do something else, and it all starts to creep back toward tradition. It's all about making it stick, and that inevitably changes the culture.
Dearman: And organizations that have been through successful changes see themselves as more adaptive and realize they aren't afraid of it. The ability to change becomes part of their culture.
What frustrates you the most when you go into a company?
Dearman: When senior leadership hands off the process after they have a guiding coalition in place. We have found that they have to be in all the way, all eight steps.
Kotter You wish they could learn it faster and do something with it faster, but you have to go at the pace that people can absorb and do things differently.
What do you think is the difference in the way that senior leaders and the people who work under them perceive the process?
Kotter: When they do [change] right, that kind of feedback is part of the process. Before they start doing this, they don't have the mechanisms to know what people are thinking down there.
One of the things companies are finding is there are a lot of Freds. In Our Iceberg Is Melting [a business fable co-authored by Kotter], Fred is the penguin who sees the danger to the iceberg and convinces the leaders of his colony that something must be done. There are all these middle-level guys who see things that senior management doesn't see, and they ask, "What do I do?"
Dearman: When we are helping companies put together their guiding coalitions, we realize the need to get leaders up and down the organization. If it's a big enough change, you need to get representation at every level.
We emphasize the importance of helping companies find those leaders, and we help them find their Freds. We make sure they have a voice in the process, because it's so critical.
Tell me what would be the top two companies to go into right now? Would you want to go into BP (BP), or would you want to stay far away from that?
Kotter: It's easier to say who you wouldn't want to [work for], because the people in charge of a place that wouldn't want you don't get that they need you. Typically people think they know all about change and don't need help. Their approach tends to be more management-oriented than leadership-oriented.
If you could put me in a time machine and take us all back to one company 20 years ago, I know exactly what I would have picked: GM. It was very, very clear back then they were on a bad path. And they needed some huge transformation.
Here's another one. I would like to be able to work with the Indian government so we can take advantage of the unbelievable opportunities the country has right now. They are blocked less by the economic sector than by the political sector. That's a dream client.
Have you ever gone into a company and not been able to succeed?
Kotter: Not yet.