How to Lead Through Change: 4 Challenges to Pivoting

This article is an excerpt from the Shortform book guide to "Only the Paranoid Survive" by Andrew S. Grove. Shortform has the world's best summaries and analyses of books you should be reading.

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Can your company break with its established ways of doing things? Can you get everyone on the same page as you pivot your business?

Andrew Grove’s book Only the Paranoid Survive shows you how to build a business that’s ready to roll with the punches. Even though you can prepare for market disruptions, you’ll still face major obstacles. Grove walks you through four major challenges to enacting your coordinated crisis response and offers recommendations to address each one.

Let’s take a look at these four challenges and Grove’s advice on how to lead through change.

Challenge 1: Working Against Your Established Ways

The first challenge Grove identifies is working against your company’s established ways of doing things. You enter a strategic inflection point with processes, strategies, and relationships that allowed your company to thrive under the old market conditions. Now that the business environment has changed, you’ll be working against the very things that once brought you success. Grove identifies three specific problems you may encounter.

Your employees may not be trained for their new tasks, and the skills they were hired for no longer useful. You’ll have to invest significant resources in training and education, and some employees might have a hard time adjusting to their new roles.
Your resources might not be allocated in a way that supports the planned response. You may have to shuffle around money and staff to create new departments, new processes, and new partnerships.
The knowledge and wisdom that guided you before may no longer work. Your company succeeded under the old market conditions because your staff understood the challenges and opportunities specific to those conditions. Now that the industry’s changed, yesterday’s common sense may no longer apply.

In a strategic inflection point, Grove notes, successful and established companies may even be at a disadvantage compared to newer startups. A new company, without established processes in place—and therefore none of the challenges identified above—has the flexibility to build an organization adapted to the new market conditions.

Grove’s advice on how to lead through change includes some rather blunt counsel to get through the problem of working against your established ways: Either you and your staff learn new skills, or you hire new staff. He notes that companies often bring in outside hires during transitions, not because they’re better, but because they’re not tied down to the old ways.

(Shortform note: If you’d prefer to keep—rather than replace—your current staff, make sure you’re providing the tools and empowerment they need to successfully learn a new skill set. Paul Marciano (Carrots and Sticks Don’t Work) suggests regularly asking your employees what they need from you, setting aside dedicated training time, and encouraging your employees to share suggestions.)

The Disadvantages of Established Companies

Grove focuses on the ways established companies can struggle in changing their processes. However, it’s worth noting that they’re also at a competitive disadvantage to startups when it comes to implementing new technologies. In The Innovator’s Dilemma, Clayton Christensen explains why.

Christensen argues that disruptive innovations often lack a clear market and customer base at first—a product that doesn’t exist yet is unlikely to have a large group of people waiting to buy it. This puts established companies at a disadvantage in two distinct ways.

Wrong customer base: The established company will try to market the new product to their existing customer base, which isn’t interested in the new product—they’re customers because of the old product. On the other hand, a startup must create a new customer base from scratch anyway, so they will try to build it around interest in the new product. While startups might not have as many customers, a higher percentage of their customers will be interested in the new product, giving these companies a more efficient return on their marketing efforts.

Built for the wrong profit margins: The disruptive product may not yet be profitable because there isn’t an established market for it. New companies that have built a niche for themselves are likely leaner and built to run on tighter margins—and therefore can deal with this lack of profitability. Meanwhile, larger companies may be operating under expectations from investors to maintain profit margins consistent with their old products, which may not be possible in the emerging market.

In both of these situations, the established company is left trying to adapt to new market conditions. The startup, having built itself from scratch in those same conditions, will already be adapted. Since technology is always changing, large companies will likely need to maintain Grove’s stance of vigilant preparedness to keep from being outcompeted by tech-savvy startups.

Challenge 2: Grief

The second major challenge to responding to a strategic inflection point is emotional. When you’ve been part of a successful business for years, you become attached to the people, products, and ways of doing things that have been such a big part of your life—letting go of these often causes a sense of grief. Grove writes that during a strategic inflection point, managers often go through the five stages of grief.

A lot of managers will try to distract themselves and avoid their feelings of grief. Grove writes that, during strategic inflection points, he sees some managers pour all their energy into mergers and acquisitions, philanthropy, side projects—anything to keep them from facing the fact that they must let go of something important. This prevents the manager from putting their energy into the transition, leaving their company at a disadvantage in overcoming the strategic inflection point.

Grove advises you to confront your grief directly. Admit that this transition is hard and accept how you feel. Let yourself grieve, but don’t let your grief keep you from making the changes your company needs to survive.

Steps to Managing Your Grief

Grove stresses the importance of facing your grief and getting through it. That said, Only the Paranoid Survive does not focus on specific actions you can take to get through your grief. Here are five tips psychologists recommend.

1. Recognize your feelings and your loss. Let yourself experience your emotions of grief. Recognize what you have lost, and honor what it meant to you.

2. Don’t rush your grieving process. Some people see grief as a process to get through as quickly as possible. Give yourself time to process your emotions at your own pace.

3. Reach out to friends and loved ones. Grieving is an important time to stay connected with important people in your life. Talking about your feelings and experiences of grief will help you process them.

4. Stay physically active. Exercising plays an important role in your mental and emotional health. Staying active will help you through the grieving process.

5. Seek counseling. Sometimes grief can feel overwhelming. Seek out a counselor in your area if you would like help from a professional who can guide you through your grieving process.

The Five Stages of Grief

While Grove invokes the five stages of grief, he doesn’t specifically discuss each stage and its connection to navigating a strategic inflection point. Here we’ll explain what the five stages of grief are and then illustrate how Grove’s experience connects to each of these stages.

The five stages of grief are a framework for understanding the emotions experienced during the grieving process. This model was developed by Swiss-American psychologist Elisabeth Kubler-Ross and includes denial, anger, bargaining, depression, and acceptance. These stages are not necessarily experienced in order, nor does every grieving person go through all five.

1. Denial: A grieving person in denial refuses to accept the loss, defending themselves by discounting or minimizing the news. In Grove’s experience, when the first accounts of Japanese production capacity, pricing, and product quality reached Intel executives, they dismissed these as rumors.

2. Anger: Once the reality of a loss sets in, many people respond with anger and frustration. In your company, you may find employees’ tempers growing shorter. They may take this frustration out on each other and create unnecessary conflicts. In Grove’s account, a lot of irritation and anger within upper management would be directed toward each other. He writes that their debates would sometimes become heated, frustrating, and bitter.

3. Bargaining: In the context of grief, bargaining is often associated with a sense of guilt and an effort to regain control over the situation. During the bargaining stage, employees in your company may entertain “what if” and “if only” questions, trying to imagine how this painful situation could have played out differently if only they had seen it coming sooner.

4. Depression: This stage brings the emotions people most often associate with grief, such as despair and hopelessness. In your company, employees may seem down and undermotivated. They may withdraw and lose interest in their roles. Grove frequently described enduring Intel’s transition as walking through a “valley of death.”

5. Acceptance: Acceptance occurs when the bereaved accepts that their world has changed and realizes they will be okay in the new order. When your employees reach this stage, you can expect them to feel relieved, calm, and ready to make the significant changes your company needs. Grove writes that when Intel finally committed to their decision—moving out of a period of pain, confusion, and ambiguity—staff and business partners felt an enormous sense of relief.

Challenge 3: Confusion

The third challenge you face when responding to a strategic inflection point is confusion within the company. The period between suspecting that a strategic inflection point is happening and fully committing to a decisive action is often characterized by misunderstandings between the departments and layers of management. When employees begin to sense something is wrong, they’ll naturally try to figure out what’s going on and anticipate the future of the company. This leads to staff second-guessing the messaging they receive. Additionally, as your management team debates the future of the organization, each department leader may be planning for the outcome they expect. The company just isn’t “in sync” with itself.

Grove identifies two major problems this confusion presents for navigating a transition.

1. Demoralization. When employees aren’t sure what’s going on, it becomes easier for them to lose trust in the company and its leadership. This can be very demotivating, as your staff may lose sight of—or stop believing in—the company goals they’re contributing to. It’s hard to get anything done with demotivated employees.

2. Inefficiency. If your departments are confused about where your company is going, they may invest a lot of resources in projects that don’t have a future. For example, Intel maintained their operations in memory chip design and production well after most of the team had decided they were going to pull out of the market.

Grove’s Advice on Addressing Confusion

Grove offers two pieces of advice on dealing with your company’s internal confusion.

1. Be transparent with employees about the dilemmas your company faces and the changes you plan to make. If they start asking uncomfortable or difficult questions, challenge yourself to answer directly and honestly instead of deflecting with a boilerplate response.

2. Commit fully and don’t look back once you and your team settle on a response to your strategic inflection point. This advice may seem obvious—essentially, to deal with the confusing interim period by simply getting out of it as quickly as possible. However, Grove notes, in the face of uncertainty, it’s easy to get bogged down in endless discussion and debate. Remember the end goal: moving ahead to give employees a clear idea of where the company is going.

Role Ambiguity

Grove’s perception—that employee confusion leads to low motivation, poor performance, and burnout—is backed by strong empirical research.

Psychologists have developed a rich literature defining and demonstrating the effects of “role ambiguity.” Role ambiguity occurs when employees are uncertain about their responsibilities and rights within the organization. In short, they just don’t know what to do with themselves. This creates a lot of additional stress, as most employees feel that they ought to be contributing to the company. Choosing tasks then creates anxiety: Employees risk conflict by stepping on another’s toes, and they risk failure by selecting the wrong tasks.

Additionally, this desire to feel like they’re contributing will drive employees to create unnecessary tasks that waste company resources—which, for some employees, only increases anxiety.

Challenge 4: Leadership

In a large company, you probably won’t be able to sit down and have a one-on-one conversation with all your employees to explain the company’s transition. This creates a fourth challenge to navigating a strategic inflection point: Your reach as a leader is limited. To address this, Grove encourages you to think broadly about the kinds of messages you send to employees, especially when it comes to your actions. Grove insists you must lead by example—you signal your company’s priorities by setting your own.

Grove specifically encourages you to look at your own schedule and consider the message you’re sending by the way you spend your time. If you tell your employees to focus all their energy on a transition but you focus your time on unrelated activities, your staff will get the message that the transition isn’t serious. On the other hand, if you spend most of your time meeting with engineers, suppliers, and customers to hammer out the details of the transition, everyone understands that the company is moving in a new direction and that’s where they should focus their energy, too.

Leading by Example Remotely

Grove’s specific actionable—using your own schedule to signal priorities—focuses on companies housed in an office, where most of your staff can see what you do on a daily basis. However, today many companies are led remotely—making this particular piece of advice a bit more challenging to implement.

Fortunately, there are still ways that remote managers can signal a company’s priorities.

Consider your meeting agendas, especially for an all-hands meeting if your company has one. The more time you devote to a given topic, the more you signal its importance.

Demonstrate the importance of new skills and knowledge by learning about and talking about them yourself. Online, this could take the form of chat channels, working groups, or even organized professional development workshops. Share learning resources you’ve found and encourage your employees to do the same.

Lastly, you can still set an example by how you devote your own time and energy, but you’ll have to be a lot more direct in communicating about it. Tell your employees what you’ve been working on to signal the company’s new direction.

How to Lead Through Change: 4 Challenges to Pivoting