U4 AOS 1 BUSMAN

Business Change

Any alteration to a business and/or its work environment.

Proactive Approach to Change

Making changes to structures and processes to avoid a potential future threat or take advantage of a future opportunity.

Reactive Approach to Change

Change initiated because of external forces, usually happening after an event, threat, or opportunity has occurred.

Lewin’s Force Field Analysis

A process to determine which forces drive and which forces restrain a change. Businesses that are attempting to implement change can conduct FFA in order to determine the balancing and restraining forces.

• FOR A CHANGE TO SUCCEED: Driving forces need to balance or outweigh the restraining forces

LFFA Step 1 – Weighting

Identifying driving and restraining forces and assigning them a number based on their perceived importance.

LFFA Step 2 – Ranking

Placing the identified forces in order from the most important to the least important

LFFA Step 3 – Implementing a response

Making a decision and taking action once the business has weighed up the factors

LFFA Step 4 – Evaluating a response

Monitoring the situation to ensure the decision was correct and is achieving the intended goals

Driving Forces

Forces affecting a situation that are initiating and pushing in a particular direction of achievement, supporting a proposed change.

List of 11 Driving Forces

• Owners

• managers

• employees

• competitors

• Legislation

• pursuit of profit

• cost reduction

• globalisation

• technology

• innovation

• societal attitudes.

Restraining Forces

Personal and organisational resistances to change that act against driving forces to block or hinder the process

List of 6 Restraining Forces

• Managers

• employees

• time

• organisational inertia

• legislation

• financial considerations.

Porter’s Generic Strategies

A framework outlining strategic options open to businesses wishing to achieve a sustainable competitive advantage.

Lower Cost Strategy

• A strategy that allows a business to achieve a competitive edge by reducing production or delivery costs.

Differentiation Strategy

Developing attributes that customers find appealing to emphasise the difference between a product and similar ones.

Porter’s Generic Strategies - 2 ways to pursue cost leadership

A business can pursue cost leadership by either:

• Increasing profits by reducing production costs while charging industry-average prices;

• OR Increasing market share by charging lower prices but maintaining profit through cost savings.

PGS - Achieving Lower Cost Leadership

• Asset utilisation (using resources efficiently);

• Low operating costs (high volumes of standardised, 'no-frills' products);

• Control over all departments (bulk buying and checking all areas for savings)

PGS - Advantages & Disadvantages of Lower Cost

Advantages include

• becoming an above-average performer and gaining market share

Disadvantages include

• lower customer loyalty (customers swap brands for price) and a reputation for "cheap" or poor quality

.

PGS - Differentiation Strategy - Key Factors

Uniqueness can be built through:

• product durability, superior support and after-sales service, and a strong brand image

• This allows the business to charge premium prices because cost becomes a secondary consideration for the customer

PGS- Requirements for Successful Differentiation

To succeed, a business needs:

• A target market that is not price-sensitive

• Resources to satisfy needs in ways rivals cannot copy;

• Capabilities like unique technical expertise, talented employees, or innovative processes.

Porter’s "Stuck in the Middle" Warning

Porter stresses that a business should only follow one strategy (lower cost or differentiation)

• Trying to do both results in a loss of focus and competitive edge, as the two strategies appeal to different market segments

.

Restraining Force – Managers

Managers may block change through

• active resistance (refusing to implement)

• passive resistance (failing to support).

This often happens if the change threatens their power, role, or if they lack the skills to manage the process.

Restraining Force – Employees

Employees resist due to:

• fear of the unknown

• being pushed outside their comfort zone

• feeling a loss of personal identity.

If they are not involved in the process, they may return to old practices as soon as possible.

Restraining Force – Time

Time is a scarce resource

If a business does not foresee changes or lacks the lead-in time to implement them while competitors move ahead, time becomes a major force stopping the change

Restraining Force – Organisational Inertia

This is the tendency of a mature business to stay on its well-entrenched path

It is caused by:

• resource rigidity (unwillingness to invest)

• routine rigidity (inability to change underlying patterns and logic)

Restraining Force – Legislation

Unexpected or expensive legal changes can hinder a business’s ability to respond positively.

• Eg) new smoking regulations in restaurants or changes to taxation and consumer law.

Restraining Force – Financial Considerations

Change can be expensive or risky.

Small businesses often face limited access to finance or high interest rates, while large businesses may find the cost of substantial modifications too high to manage.

KPI – Percentage of Market Share

• This measures the portion of total industry sales (units or revenue) a company achieved compared to its rivals.

• Increasing market share means the business is capturing a greater percentage of the customers in that sector.

KPI – Net Profit Figures

Known as the "bottom line

This is the difference between total revenue and all expenses, including costs and taxes.

It determines success based on investor expectations and the business's ability to grow.

KPI – Rate of Productivity Growth

This identifies a business’s ability to use resources efficiently by measuring the change in output produced from a given level of inputs over time.

KPI – Number of Sales

This is the total quantity of products or services sold, allowing a business to determine if it is meeting forecasts or if it needs to change its product mix to increase volume

KPI – Rates of Staff Absenteeism

• A percentage of workdays lost due to unscheduled absences.

• High rates act as a cost to the business and often indicate that staff are unhappy or dissatisfied with the workplace.

KPI – Level of Staff Turnover

• The number of employees leaving permanently who must be replaced.

• High turnover is costly due to recruiting and training needs

• indicates workplace dissatisfaction or a poor reputation

KPI – Level of Wastage

This measures the resources in a production process that are not converted into final output. It is a key indicator of whether a company’s processes are "lean" and efficient.

KPI – Number of Customer Complaints

The count of written or verbal expressions of dissatisfaction. An increase suggests a need for further training or that products/services are not meeting quality standards.

KPI – Number of Website Hits

A count of requests sent to a web server for digital assets. Businesses use analytical tools to measure this traffic to identify potential customer interest and website performance

KPI – Number of Workplace Accidents

Unplanned events interrupting workflow that may cause injury. Monitoring this provides insight into whether a business views employee safety as a priority and helps reduce WorkSafe premiums.

Driving Force – Owners

Owners have a vested interest in the success of the business and must act on trends to ensure long-term performance. Shareholders, as owners, also push for change to increase their monetary investment and receive dividends.

Driving Force – Managers

• Managers are critical to the success of change, providing strategic direction or hands-on implementation.

• They must be prepared for change and send a consistent message to stakeholders for it to succeed.

Driving Force – Employees

If employees support a change, it is much more likely to be successful. Businesses that use participative or consultative management styles often find employees suggest new ideas and innovations.

Driving Force – Competitors

• Highly competitive sectors force businesses to be ready to respond to changes so they do not lose customers or market share.

• Staying ahead of rivals is a primary driver for initiating change.

Driving Force – Legislation

• Businesses must comply with new laws and regulations from federal, state, and local governments.

• Changes in taxation, employment laws (like equal opportunity), or local by-laws (like health regulations) force businesses to adjust their operations.

Driving Force – Pursuit of Profit

• Successful businesses implement changes and improvements to increase sales and profit to ensure long-term growth.

• Pressure from shareholders for high share prices also drives this pursuit.

Driving Force – Reduction of Costs

Pressure to reduce operating expenses in areas like production, marketing, and administration can lead to changes such as bulk buying, outsourcing, or using renewable energy.

Driving Force – Globalisation

The process of increasing interdependence between countries and economies drives change by opening up international markets and distribution systems. It removes economic boundaries, allowing businesses to compete globally.

Driving Force – Technology

Technology is a major driver that impacts every area of a business, including management, production, and customer delivery. Failing to upgrade and streamline operations through technology can result in a loss of competitive advantage

Driving Force – Innovation

Innovation involves introducing new things or methods to improve performance, develop a market niche, and gain a competitive edge. It can include modifying a business model to adapt to the environment or creating dynamic new products

Driving forces - Societal Attitudes

Businesses must adapt to changing opinions, values, and lifestyles within society.

• Eg) demographic shifts like an ageing population or increased demand for flexible work-from-home arrangements drive significant organisational changes.

Determining Porter’s Generic Strategy (The Three Steps)

• Step 1: Carry out a SWOT analysis (identifying internal strengths/weaknesses and external opportunities/threats).

• Step 2: Conduct a Five Forces analysis (examining supplier power, buyer power, competitive rivalry, threat of substitution, and threat of new entry).

• Step 3: Compare the analyses and select the strategy that offers the strongest set of options.

Characteristics of Effective KPI Data

For a business to accurately evaluate performance, the data gathered via KPIs should possess specific characteristics:

• Relevant: Provides the specific information required.

• Valid: Collected correctly.

• Reliable: The source of the data is known.

• Valuable: The information is useful for decision-making.

• Comparative: Able to track changes over time.

Efficiency vs. Effectiveness

• Efficiency: How well a business uses its resources to achieve an outcome (e.g., minimum time and effort).

• Effectiveness: The degree to which a business achieves its specific objectives

NAB The Concept of Business Change- Reactive

• NAB’s transformation was primarily initiated by the Royal Commission, which investigated misconduct in the industry.

• Former CEO Andrew Thorburn described the RC as a "burning platform for change," forcing the bank to react to systemic failures and customer overcharging.

NAB The Concept of Business Change- Proactive

Proactive Change: Since the Royal Commission, NAB has shifted toward proactive change, specifically through "The Customer Brain". This project aims to use AI to anticipate customer needs and flag issues, like late payments, before they become problems, rather than waiting for a customer to complain.

NAB Key Performance Indicators (KPIs)

• Net Profit Figures: Remained strong but fluctuated, recorded at $6.960 billion in 2024.

• Number of Customer Complaints: This is a critical KPI for NAB; complaints in Australia increased significantly from 207,583 in 2021 to 536,378 in 2024, indicating a need for the "customer-centric" change.

• Level of Staff Turnover: Improved (decreased) from 15.5% in 2022 to 9.6% in 2024, suggesting higher employee satisfaction following change implementation.

• Number of Workplace Accidents: NAB tracks "workplace injuries resulting in a colleague being absent for at least 1 full shift," which was 0.44 in 2024

NAB Lewin’s Force Field Analysis (FFA)

proposed change: "Should NAB become more customer-focussed?".

• Weighting and Ranking: In the study, Driving Forces (Total: 29) outweighed Restraining Forces (Total: 17). The highest-ranked driving forces (Weighted 5) included FSRC criticism and overcharging customers, because of the ethical implications and reputational damage.

• Implementing and Evaluating: NAB implemented "The Customer Brain" to address these forces. They evaluate success by measuring against established KPIs like customer satisfaction and engagement levels.

NAB Driving and Restraining Forces

• Driving Force – Legislation: The Commonwealth government’s commitment to taking action on all 76 recommendations of the FSRC forced NAB to change its accountability and governance standards.

• Driving Force – Technology: AI and machine learning are the drivers behind "The Customer Brain," allowing the bank to process 36 billion pieces of data to understand customer behavior.

• Restraining Force – Time: Implementing complex IT across a major bank can be a restraining force. However, NAB mitigated this by moving from 0% to 75% of customer interactions in less than 24 months.

• Restraining Force – Financial Considerations: The cost of such a massive technological overhaul is high. While often a restraint, NAB bypassed this by fully investing in the project as a priority.

NAB PGS Lower Cost Strategy - UBank

NAB uses a dual-brand strategy to avoid being "stuck in the middle".

• UBank is a digital-only brand with no physical branches, no ATMs, and only 600 staff

• These low overheads allow it to offer more competitive home loan interest rates to its 18–35-year-old target demographic.

NAB PGS Differentiation Strategy – NAB Full Service

NAB uses a dual-brand strategy to avoid being "stuck in the middle".

NAB Full Service: NAB differentiates itself through "The Customer Brain". It uses AI to provide a personalized, customer-centric experience that "knows" the customer (even remembering birthdays) and proactively solves their problems. At this stage, the source notes no other Australian bank has developed such a sophisticated tool, giving NAB a unique competitive edge.