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Organisations and the pain of transformations

For many grown-up companies, ‘creative destruction’ is essential to survive and prosper in the long term. The transformations of The Gap, Netflix, etc,. are worth reading.

Published: 19th May 2022 12:54 AM  |   Last Updated: 19th May 2022 07:32 AM   |  A+A-

Illustration: Soumyadip Sinha

Organisational transformations are gut-wrenching and painful. There is no shortcut. Do not believe the many books advocating how to achieve a transformational change without pain. In fact, the leadership team must voluntarily seek out the pain to drive their transformation. Several years ago, while writing my first book, I was in search of a metaphor for organisational transformation. I learned a lot from my periodic visits to the Nilgiris and found a metaphor from Nature:  butterflies—they are good ecological indicators.  
In 1986, a scientist and conservationist called Larsen Torben conducted a butterfly survey of the Nilgiris. His study bears his name. He detected the existence of 301 varieties of butterflies in the Nilgiris. In 2018, the Tamil Nadu Forest Department conducted the next survey and added three new varieties. Scientific American (10 August 2012) explained graphically what happens to a hungry caterpillar, which has gorged itself with nutrients—a bit like a start-up—when it begins to morph into a butterfly. 

First, the voraciously overfed caterpillar digests its own body into a soup, rich with enzymes. Second, although this gut-wrenching digestion process leaves behind what looks like an amorphous mess, it is not entirely so. Certain groups of cells survive because they contain the genetic code to grow back the body parts required for a mature life later. These cells are called imaginal discs. Third, these imaginal discs help the animal to reconstruct wings and muscles to break through the cocoon and emerge as the breathtakingly beautiful butterfly.

Apply these lessons from nature to companies. The equivalent of imaginal discs is the embedded organisational culture—the unique characteristics of mindset, behaviours and actions that define the very being of the company and must be preserved. How many start-ups think about the imaginal discs that they must embed in their start-up? How many voluntarily subject themselves to a self-digestion process after they have gorged themselves with growth for a long period? Very few, I reckon, and that is why the survival rate among start-ups is so low. 

Think of grown-up companies for whom such ‘creative destruction’ is essential to survive and prosper in the long term. The dramatic transformations of The Gap (records to apparel), Netflix (DVD rentals to streaming), Tiffany (stationery to jewellery) are worth reading. IBM subjected itself to a gut-wrenching transformation process in the 1990s. It is so well described in Lou Gerstner’s book, Who says elephants can’t dance. IBM survived and prospered. So did Apple in 1997. However, Kodak, Enron, and Lehman Brothers did not. These are a part of the archives in museums.
Jamsetji Tata began his enterprise as a trading and textile company. For growth, he expanded into steelmaking and hydropower generation. For culture, he embedded the mindset and behaviour of social responsibility (imaginal discs) by, among other things, endowing the Indian Institute of Science. His statement is eponymous, “In a free enterprise, the community is not just another stakeholder in the business, but, in fact, the very purpose of its existence.”

His successor, Dorabji, brought to fruition the unfulfilled ambitions of his father in steel and hydropower generation before he diversified the enterprise into cement, construction, banking, insurance, and allied areas. The imaginal discs of corporate philanthropy were strengthened by investments, among others, in cancer research and a hospital. 

Future successors, notably J R D Tata, grew the enterprise into aviation, chemicals, truck-making and thermal power. All through the century, textiles got de-emphasised, and shifted from trading to manufacturing. Entry into the financial services businesses was overtaken by regulatory events. The imaginal discs of social commitment were strengthened through long-term modification of the companies’ articles of association, and the establishment of TIFR, TISS and the NCPA.  

In the most recent years, the group exited textiles, cement, soaps and a few others. The enterprise globalised the business and entered futuristic sectors like information technology, communications, and passenger cars. The enterprise imaginal discs were strengthened through increased funds for the social agenda of Tata Trusts, promoting a national chain of cancer hospitals, and the impactful deployment of company CSR funds. 

While these developments may read like a list of accomplishments, they are mere dots of history. I can state from experience that the process was slow and painful. The inevitable reduction of the portfolio was indeed gut-wrenching, and the new portfolio grew out of the entrepreneurial moves. All through the century and beyond, the imaginal discs helped to promote enterprise, strengthening its distinctive culture of community orientation. 

No transformation can happen without pain.

R Gopalakrishnan
Author and business commentator
(The author was Director, Tata Sons and Vice Chairman, Hindustan Unilever)
(www.themindworks.me)
(rgopal@themindworks.me)



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