Navigating Organizational Change: MNCs vs. SMEs – Part 1: The Foundations

In today's fast-paced business world, change is constant and rapidly reshaping industries. Companies, whether large or small, must adapt to survive. But how do different types of organizations handle these challenges?

Having started my career with Multinational Corporations (MNCs) and later transitioning to a Small and Medium-sized Enterprise (SMEs) after completing my master's education, I've experienced first-hand how managing change can vary drastically between these two types of organizations. Despite having similar missions, the steps I needed to take were entirely different. This journey has inspired me to break down and explain some foundational elements of change management, using some of the most famous real-life examples from the business world.

To illustrate these differences more clearly, I will use the metaphor of two ships in a storm: a large, powerful ocean liner and a nimble sailboat. The ocean liner represents MNCs—steady but slow to change course. The sailboat represents SMEs—quick to pivot but more exposed to the elements. This analogy helps us understand the unique challenges and strategies each type of organization employs in navigating change.

1. The Nature of Change: Scale vs. Speed

Our first port of call is Microsoft, our ocean liner, as it embarked on a cultural transformation under CEO Satya Nadella in 2014. This wasn't just a change in corporate policy; it was a fundamental reimagining of Microsoft's very soul, shifting from a "know-it-all" to a "learn-it-all" culture. Imagine the scale: 181,000 employees spread across 190 countries, all needing to embrace a new way of thinking and working. It was like turning the Titanic—a massive undertaking that touched everything from how meetings were conducted to how success was measured. The results? By 2021, Microsoft's market capitalization had grown from $300 billion to over $2 trillion.

Now, let's sail over to our nimble sailboat: Zoom. When the pandemic hit in early 2020, Zoom was a relatively small player with just 2,500 employees. Suddenly, the winds of change blew fiercely, and Zoom had to adapt—fast. In a matter of weeks, Zoom scaled its server capacity to handle a 30-fold increase in usage, rapidly enhanced security features, and adapted its product for new use cases. The result? Zoom's daily meeting participants surged from 10 million in December 2019 to 300 million by April 2020.

2. Resource Availability: Abundance vs. Flexibility

Our next stop explores how these organizations fuel their journeys of change.

Picture Walmart, a retail giant with vast resources at its disposal, embarking on its e-commerce transformation. Like a well-funded expedition, Walmart invested billions in upgrading its technological infrastructure, acquired e-commerce company Jet.com for $3.3 billion, and retrained hundreds of thousands of employees in new digital skills. The result? Walmart's e-commerce sales grew by 79% in 2020, reaching $43 billion.

Contrast this with Airbnb's journey through the stormy seas of the COVID-19 crisis. With limited resources, Airbnb had to be creative and agile. They swiftly cut costs, paused marketing activities, and refocused on their core business while rapidly developing new products like Online Experiences. Despite the challenges, Airbnb managed to go public in December 2020, valued at over $100 billion.

3. Decision-Making Processes: Layers vs. Agility

As we continue our voyage, let's explore how these different ships make decisions when facing changes in their course.

Imagine IBM, a tech giant with a long history, deciding to split into two companies in 2020. This wasn't a decision made on a whim. It involved extensive analysis, multiple board meetings, careful planning, and extensive stakeholder management. The process took months of deliberation before the public announcement in October 2020, with the actual split completed in November 2021.

Now, let's sail over to Shopify. In May 2020, as the pandemic reshaped the business landscape, Shopify made a swift decision to go "digital by default," allowing all employees to work remotely permanently. CEO Tobi Lütke announced the change via Twitter, and implementation began immediately. This agile decision-making contributed to Shopify's revenue growing 86% year-over-year in 2020, reaching $2.93 billion.

4. Change Management Models: Traditional vs. Adapted

Our journey now takes us to the engine rooms of these organizations, where we explore the models driving change.

Procter & Gamble, another ocean liner, adopted elements of Kotter's 8-Step process for their innovation transformation. Their "Connect + Develop" program was a decade-long initiative involving creating a sense of urgency, forming a guiding coalition, and systematically removing barriers to change. The result? The program now accounts for over 35% of P&G's innovations and billions in revenue.

On the other side, we have Basecamp, a project management software company with about 50 employees. Basecamp adapts lean and agile methodologies for change management, focusing on rapid iterations, direct customer feedback, and continuous improvement. Changes are implemented quickly, often without formal change management structures. This adaptive approach has allowed Basecamp to stay profitable for over 20 years, effectively competing against larger rivals.

5. Resource Allocation: Strategic Investment vs. Lean Utilization

Let's dive deeper into how these organizations allocate their resources during times of change.

Walmart's e-commerce transformation is again a prime example of strategic investment. They allocated substantial resources to retrain employees, revamp supply chain processes, and invest heavily in data analytics and AI. This resource-intensive approach allowed for a comprehensive, multi-year transformation.

In contrast, Airbnb's response to the COVID-19 crisis demonstrates lean utilization. They quickly cut costs by 25%, including laying off about 25% of its workforce. They refocused resources on their core home-sharing business and new initiatives like virtual experiences, leveraging their existing technology platform to rapidly launch new features.

6. Organizational Structure: Complexity vs. Simplicity

Finally, let's examine how organizational structure influences change management.

IBM's decision to split into two companies illustrates the complexity of MNC structures. The process involved carefully dividing assets, intellectual property, and staff across multiple jurisdictions. This complex structure necessitated a methodical approach to change, ensuring all parts of the organization were aligned.

On the flip side, Shopify's flat organizational structure allowed for quick implementation of their "digital by default" policy. The company culture emphasizes flexibility and individual responsibility in adapting to change, enabling rapid transformation across the entire organization.

Conclusion: Lessons from Both Worlds

As we conclude our journey through the seas of organizational change, we see that both our ocean liner MNCs and sailboat SMEs have their strengths and challenges.

• MNCs, with their vast resources and global reach, can implement large-scale, comprehensive changes that reshape entire industries. However, they must navigate the challenges of slower implementation and potential resistance due to organizational complexity.
• SMEs, leveraging their agility and lean structures, can pivot quickly in response to market shifts or crises, often leading to remarkable growth and innovation. Yet, they grapple with limited resources and the need to compete against larger, better-funded rivals.

The key takeaway from our voyage? Effective change management isn't about the size of the ship, but rather about how well it's steered. Both MNCs and SMEs can learn from each other:

• MNCs can strive for more agility and faster decision-making in certain areas
• SMEs can adopt more structured approaches to change as they grow

As we sail into an ever-evolving business landscape, the ability to navigate change effectively will remain a critical skill for organizations of all sizes. Whether you're steering a massive ocean liner or a nimble sailboat, understanding these foundational aspects of change management is crucial for charting a successful course through the storms and calms of modern business.

Stay tuned for the next chapter in our series: Part 2, "Navigating Organizational Change: MNCs vs. SMEs - The Human Element and Digital Transformation," where we will delve into how organizations manage the human aspects of change and leverage digital tools to facilitate transformation.