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A.I. and Change Management

Juan Carlos Pastor, PhDProfessor of Leadership

IE Business School

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Digital Revolution

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Some Statistics

1. O´Reilly 2019 survey “AI Adoption” (1,388 companies):

– 85% of respondent organizations are evaluating AI or using it in production.

– 51% identify as “mature” adopters of AI technologies.

2. Accenture 2019 survey “Reworking the Revolution” (200 C-suite executives):

– 75% say they are accelerating investments in AI right now.

– 72% say they are responding to a competitive forces.

3. McKinsey 2019 “Global AI Survey” (2,360 executives)

– 25% increase in AI adoption compared to 2019.

– 63% of executives report revenue increases and 44% important cost reductions.

– 75% of respondents plan to increase AI investment in the next 3 years.

4. Tata Consultancy 2017 Global Trend Study (835 Executives)

– 68% of Companies use AI for IT Functions, but.

– 70% Believe AI’s Greatest Impact by 2020 Will be in Functions Outside of IT such as

Marketing, Customer Service, Finance, and HR.

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MD Anderson Cancer Institute

• The MD Anderson cancer

institute tried a ‘moonshot’

program to deploy AI for the

detection and treatment of

certain cancers.

• After spending $62m, they

had to stop the program

because of a lack of results.

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Pfizer and IBM Watson

• Pfizer, the American multinational

pharmaceutical company wanted

to use the IBM Watson data

analytics processor to rapidly

identify new drug targets and

more efficiently select patients for

clinical trials.

• It didn’t work out and even IBM

announced it was ending sales of

Watson for Drug Discovery.

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Two Challenges in the Adoption of AI

Technical Capabilities Organizational Capabilities

1.- Hard• Physical Assets

• Computer Hardware

• Data

• Legacy Systems

2.- Intangible• Technical Knowledge

• IT Development

• Collaboration Strategy

with IT Dept.

1.- Strategy

• Adding Value

• Supporting the Strategy

2.- Culture

• Innovation &

• Risk taking

• Collaboration

3.- People

• Skills

• Attitudes

4.- Leadership Talent

• Support for Change

• Leadership Style

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What is the main bottleneck holding back further IE Adoption?

Source: O´Reilly, 2020

4. Data

5. Technical Infrastructure

6. Legal Concerns

1. Culture

2. Business Alignment

3. People

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hDFailure Rate in Change Initiatives

Kotter (1996). The failure rate in

change management programs is

about 70%.

Hammer and Champy (2009).

Between 50 and 70% of

reingeneering programs fail.

Cabrey y Haughey

(2014). Only 18% of

companies say they are

effective managing

change.72%

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Why would People Resist Change?

Substantial

Disagreements

Do not

Understand

Need for Respect Feel Incompetent &

Fear of Failure

Feel Rushed &

Pushed

Others?

Peer Pressure &

PoliticsLoss of

Control

Rewards (WIIFM)

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Ron Leeman “50 Reasons Why We Cannot Change”

Ron Leeman: https://www.linkedin.com/feed/update/urn:li:activity:6381381984496775168

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hDThe Kübler-Ross Change Curve

Perform

ance

Unsuccessful

Change

Successful

Change

Time

WHY?

Dip

Start

Change

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Feeling the Dip

• People might be at

different stages

during the change

process

• How do we lead

people in each group?

DENIAL

ANGER

RESISTANCE

DISORIENTATION

COMMITMENT

EXPERIMENTATION

ACCEPTANCE

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hDTwo Phases to Manage Change

Understanding

Envisioning

Strategy, Objectives

Organizational Design

Engagement

Communicate a

Sense of Urgency

Motivate changes

Consolidate changes

Motivate

Change

Consolidate

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Systems Thinking

Spanish

Opening

Berlin

Defense

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Intrategic Understanding of the Organization

Hard S´s

Soft S´s

McKinsey 7-S Model

Strategy

StyleSkills

Systems

Structure

Staff

Shared

Values

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La OrganizaciónThe High Performing AI Organization

Culture

People Communication

Leadership

HR SystemsIT / Technology

StructureStrategy

AI

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O’Reilly

AI Alignment with the Mission/Strategy

O’Reilly

Functional Area Industry

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AI Alignment with the Organizational Culture

Steep Pyramid

Formal Power

Low Span of Control

Slow Decision Making

Flat Organization

Personal Power

High Span of Control

Teamwork

Increase in Communication

Interpersonal Skills

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Flat Structures: From Teal and Halocracy Structures

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3M Principles to Promote Innovation

The 3 Principles of

William McKnight

1.You have to accept that mistakes

are made.

2.Do not micromanage your team.

3.Delegate.

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45% 11% 69% 27%

AI Alignment with People

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hDAI Alignment with Leadership Styles

1.- Building Trust & Integrity 2.- Encouraging Innovation

3. Inspirational Motivation 4.- Development - Coaching

Digital Savvy

The Digital Transformational Leader

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La OrganizaciónThe High Performing AI Organization

CultureOpen, Innovative

Sharing knowledge

PeopleCreative, Technology Savvy

Team players

Communication skills

CommunicationFluid and Intensive

Multidirectional

Honest Communication

LeadershipTransformational Leadership

Authentic, Inspirational

Innovative, Coaching

HR Systems1.- Selection: Competencies

2.- Training: Intensive, continuous

3.- PA: Teams, Performance

4.- Rewards: Team work,

Collaboration, Distributive.

IT / TechnologyUpdated Systems

Avoid Legacy Systems.

Strategic IT Department

Integrated in Social Network

StructureAgile, Dynamic,

Flat Structure, Teams

StrategyResearch, IT, Customer Service,

Marketing, Operations ….

AI

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Changing Ford: Inside Mulally´s Mind

Mulally´s vision:

“People working

together as a lean

global enterprise for

automotive

leadership”

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From the Solid and Realizable Organization…

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To the Agile Organization!!

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hDA Vision by itself is not enough

"A dream is just a dream.

A goal is a dream with a plan and

a deadline."

Harvey Mackay

“Action without vision is only

passing time,

vision without action is merely day

dreaming, but vision with action

can change the world.”

Nelson Mandela

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The Importance of execution

“ In the first waves of the

program, I spent 90 percent of

my time designing the program

and 10 percent communicating

it to people. And now I do

exactly the opposite: 10 percent

for the design and 90 percent

for involving people” Julio Linares Executive chairman

Telefonica S.A. (2005)

Juan C

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hDTwo Phases to Manage Change

Understanding

Envisioning

Strategy, Objectives

Organizational Design

Systems Thinking

Engagement

Sense of Urgency

Communicate

Motivate changes

Consolidate changes

Motivate

Change

Consolidate

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Motivate

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Our historical advantage has been eroded by intense

competition and changing customer needs – if we change we

can regain our leadership position and become a great

company.

From Good to Great story

We’re performing below industry standard and must

change dramatically to survive. We can become a top

performer in our industry by exploiting our current

assets and earning the right to grow.

The Turnaround Story

The importance of having a story of change

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A Compelling story of change

32

Impact on Society Impact on our Customers

Impact on the Working Team Impact on “ME” personally

Building a better

society

Developing your

community

Environmental

responsibility

Make their work

easier

Provide superior

service to our

customers

Achieve remarkable

goals together

Creating a caring/high

performing

environment

Learning and personal

development

Salary

Bonus

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NOKIA CEO Stephen Elop in 2011

Nokia Global –All Employees

...there is intense heat coming from our competitors, more rapidly than we ever expected…

…Apple disrupted the market by redefining the smartphone…

…Google has become a gravitational force, drawing much of the industry's innovation to its

core.”

We have some brilliant sources of innovation inside Nokia, but we are not bringing it to market

fast enough.

We poured gasoline on our own burning platform. I believe we have lacked accountability and

leadership. We had a series of misses. We haven't been delivering innovation fast enough.

We're not collaborating internally. Nokia, our platform is burning.

Burning Platform

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Key Opinion Leaders

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Change

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Start Small and Make it Scalable

1. Pilot programs.

2. Revisable (can be reversed).

3. Divisible (carried out in phases).

4. Concrete (tangible).

5. Familiar (past experience).

6. Congruent (fits with organization's goals

and values).

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Consolidate

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Consolidate the Changes

Showcase SuccessRecruitment &

Promotion

Storytelling of

success stories

Rewards (WIIFM)

Continue to review

Monitoring &

FeedbackRealign Systems

Reconsider Goals if

environment changes

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