Change

The key concepts - Change

“It is not necessary to change. Survival is not mandatory.”
- W. Edwards Deming (1900 - 1993)

In the ever-more competitive business world, organizations have to constantly review their practices and change / adapt accordingly to remain relevant and competitive in the market. However, businesses (and people) tend to find it challenging to adapt to change; it is certainly not very easy for most employees. However, when the rationale for change is presented with clearly and coherently, staff are more likely to accept and embrace the change in a positive manner.

Change refers to the modification or transformation in the way business is conducted as a response to internal factors or external influences. Change arises when factors that influence the operations of an organization do not stay the same. It can often be disruptive and unsettling, so the process must be managed carefully.

Examples of change include: new product development, innovation, market development, product redesign, outsourcing, the product life cycle, organizational restructuring, relocation, external growth and crisis management. Yet without change, there is always the danger of complacency and there can be no progress without change.

As Professor W. Edwards Deming said, it is important for businesses to adapt to change if they are to survive. The external business environment (or the STEEPLE analysis factors) mean that forces of change require the attention of businesses and decision makers to adapt their practices. For example, competition, new technologies and evolving consumer habits and tastes lead successful organizations to adapt their objectives, strategies and business operations.

Business success emerges from the willingness and ability to research and respond to signals in both the internal and external business environment in order to meet the ever-changing needs, wants and preferences of customers. Those that do not embrace and adapt to change simply fail to survive.

For example, in December 2020, after an extremely challenging year for all businesses due to the global coronavirus pandemic, IKEA stopped production and distribution of its physical catalogues. The home furniture retailer had used catalogues for 70 years prior to 2020, and opted for online catalogues instead as an increasing number of customers switched to e-commerce options.

Firms need to change in order to stay relevant

ATL Activity 1 - Then and Now

"You can't go back and change the beginning but you can start where you are and change the ending."
C.S. Lewis (1898 - 1963), renowned British author

What did these well-known firms use to produce? How many of these can your students get right?

Company	What they originally produced
Lego	wooden toys
Nintendo	playing cards
Nokia	pulp mill (wooden fibre boards)
Motorola	battery eliminators (devices powered by an electrical source other than a battery, e.g. solar power)
LG	hygiene and cosmetics products
Wrigley	soap and baking powder
Tiffany & Co	stationery
Colgate	soaps, candles and starch product

Watch this video to see how change can happen right in front of us, without us even noticing:

Students (and teachers!) who have not seen this video before are unlikely to have seen the gorilla if they focus only on counting the number of passes made by the team wearing white t-shirts. Although this concept is based on Psychology, it has direct implications for business organizations who ignore change at their own risk.

The concept of selective attention also applies to many students with their assessments - how many times do they read a question but fail to answer it? This is no different from ignoring the gorilla that is right in front of their eyes...

If you’ve seen this video before, try this one:

Whilst many students may well have seen the previous vide clip (Psychology teachers have used it for many years, as have some TOK teachers), it is less likely they have seen this video. This is more representative of the real world of business, where multidimensional changes occur at the same time in the external business environment (see STEEPLE analysis). Unless a business is aware of changes in the markets in which it operates, it is less likely to remain relevant and competitive. As US Army General Eric Shinseki (b.1942) said, "If you don't like change, you’re going to like irrelevance even less."

And finally, what about this one, where Derren Brown tests the psychological concept of ‘change blindness’ (change that happens in front of our eyes without us even noticing it) on the general public:

Take a look here to see how some of the world's largest car producers have changed their company logos over time, due to changes in the internal and external business environments.

The importance of change for business organizations can, perhaps, be summed up by the words of former British Prime Minister, Sir Winston Churchill (1874 - 1965):

“To improve is to change; to be perfect is to change often."

Case Study 1- The demise of the encyclopaedia

"Progress is impossible without change, and those who cannot change their minds cannot change anything."
- George Bernard Shaw, Irish playwright (1856 - 1950)

The first edition of the Encyclopaedia Britannica was printed in Edinburgh, Scotland in 1768. After 244 years of operation, the Encyclopaedia Britannica went out of print in 2012.

This is the harsh reality of the digital age - and of competition from the Wikipedia.

ATL Activity 2 - Change or Collapse

"Change is not a threat, it’s an opportunity. Survival is not the goal, transformative success is.”
- Seth Godin (b.1960), American entrepreneur and best-selling author

Ask students to investigate which other businesses have faced a similar fate due to the digital age. They should try to come up with at least five other examples.

Possible answers include:

Borders Bookstores.
Blockbuster Video - Video/DVD rentals (see Case Study 2 below); In 2000, Blockbuster Video had 7,700 stores whilst Netflix had 420,000 subscribers. By 2020, Blockbuster had gone bust and there is just 1 store left in the world (more like a musuem), whilst Netflix had more than 193 million subscribers from around the world!
Kodak - Camera film.
Mothercare - British multinational retailer specializing in products for mothers and children.
Payless - US shoe retailer.
RadioShack - Consumer electronics retailer.
Sports Authority - US sports apparel retailer.
Thomas Cook - Travel agency.
Toys R Us - Once the world's largest retailer.

Bonus Activity - Dead Brands Graveyard

"If everything is under control, you are going too slow."
- Mario Andretti (b. 1940), Italian-American motorsports racing driver

This activity works well for the Halloween season. Students work in pairs to contribute to the ‘Dead Brands Graveyard’ classroom wall display.

Each pair selects a brand that no longer exists (reached the end of its product life cycle).
Investigate the main reasons why the brand no longer exists. RIP (Research In Progress).
Use one of the templates from your teacher to decorate the tombstone for your chosen brand. Feel free to decorate the tombstone.
Include a concise paragraph or bullet points underneath to inform the reader why that brand died.
Present your findings to the rest of the class prior to placing your tombstone in the graveyard (the classroom wall display).

There are numerous aspects of the syllabus that connect with this activity, such as:

Acquisitions
Branding
Brand value
Change, creativity, and sustainability (key concepts)
Efficiency ratios (HL only)

Innovation
Insolvency vs bankruptcy (HL only)
Investment appraisal
Market research
Product extension strategies
Product life cycle

Download a tombstone template here, or ask students to create their own. You can use A4 or A3 sized tombstones.

Here's an example of a tombstone for Blockbuster Video.

Students should be encouraged to research their own "dead brand" but some examples could be suggested if need be:

Boarders (books)
Blackberry
Blockbuster
iPod

Kodak
Pontiac
Toys R Us
Yellow Pages

Case Study 2 - The Rise and Fall of Blockbuster

Watch this video from Business Insider that outlines the global collapse of Blockbuster, largely due to its inability to change and to keep up with changes in the industry. Meanwhile, Netflix adapted to changes in Internet technologies, and thrived with its online streaming video services.

In 2004, Blockbuster had over 9,000 stores across the world, but this fell to just a single store at the end of 2019. Netflix was founded in 1997 by Reed Hastings and Marc Randolph in California, USA. Prior to its rapid collapse, Blockbuster's CEO Jon Antioco was given more than one opportunity to buy out Netflix for $50 million. Netflix evolved from a DVD distributor into one of the leading media streaming platforms in the world, driven by its vision statement of “becoming the best global entertainment distribution service”.

In 2019, Netflix had global sales revenues in excess of $20 billion and total assets of $34 billion. In 2020, Netflix reported record sales revenues of over $25 billion due to the coronavirus pandemic causing more people to stay and work from home. This is equivalent to more than $68.49 million per day or in excess of $2.85 million per hour(!) At the start of 2021, Netflix had more than 200 million paid subscribers.

Case Study 3 - Kodak

“No matter how far you have gone on the wrong road, turn back.”
- Turkish proverb

The Eastman Kodak Company (or Kodak for short) was established in 1888. During most of the 20th century, Kodak dominated the photographic film industry. However, the US company began to struggle financially in the late 1990s due to the decline in sales of photographic film and the company's lack of interest and investment in the digital photography industry (despite being the company that first developed the self-contained digital camera).

In January 2012, Kodak filed for bankruptcy protection in the United States. Shortly after, Kodak announced it would stop producing digital cameras, as it was unable to compete with the likes of Olympus, Sony and Samsung. Instead, the company chose to focus on the corporate digital imaging market where it held high market share.

The change from camera film to digital technology harmed Kodak's business

Case Study 4 - IKEA discontinues its iconic catalogues

In December 2020, IKEA, the world’s largest furniture retailer, announced that it would stop printing and distributing its iconic catalogues. The publication reached a peak in 2016 when around 200 million copies were distributed in more than 50 countries - making the IKEA catalogue one of the world's biggest annual publications. The first edition of the IKEA catalogue was produced by IKEA's founder Ingvar Kamprad back in 1951. With 'just' 285,000 copies printed back then, the catalogue was distributed in southern Sweden, where the company was established. However, in keeping with the times, the last edition of the IKEA catalogue is to be printed in 2021, with 40 million copies. IKEA said that its online sales had increased by 45% worldwide during the year of the coronavirus pandemic.

IKEA catalogues have been a key part of the company’s marketing strategy for 70 years. However, with innovations in e-commerce causing consumer habits to change the way they shop, IKEA has adapted its marketing strategy to become more focused on e-commerce.

Watch this short video clip that reports on IKEA’s decision to discontinue its iconic catalogue, as customers prefer to shop online instead. This ended IKEA's use of catalogues, which had been a key part of the company’s marketing strategy for 70 years.

ATL Activity 3 - What's in a name?

"Only diversity makes change and progress."
- John Dewey, Democracy and Education (1916)

The Walt Disney Company is the world's largest entertainment company. Founded in 1923, the company was originally called "Disney Brothers Cartoon Studio" (1923 - 1926). It has since changed its legal name numerous times, to "The Walt Disney Studio" (1926 - 1929) and "Walt Disney Productions" (1929 - 1986). Amazon was originally called "Cadabra" until one of lawyers working for Jeff Bezos misheard the name "cadaver"(!) Jeff Bezos had also registered the company as "Relentless" but changed this after listening to the feedback/criticisms from his friends.

Change can, and should, be a good thing. Consider these well-known companies that have changed their names, as shown in the table below. How many of these can your students get right?

Hint: the answers appear in alphabetical order.

Company	Previous name
About.com	The Mining Co.
AOL	Quantam Computer Services
Best Buy	Sound of Music
BlackBerry	Research in Motion
Compaq	Bridge Gate Computers
eBay	AuctionWeb
Firefox	Firebird
Google	Backrub
Hertz Rent-A-Car	DrivUrSelf
IBM	Computing Tabulating Recording Corporation
Instagram	Bourbn
L’Oréal	Cosmair
Nike	Blue Ribbon Sports
Nintendo	Marafuku Company
Nissan	Datsun
PayPal	Confinity
Pepsi Cola	Brad’s Drink
Sony	Tokyo Tsushin Kogyo (Tokyo Telecom. Engr. Corp.)
Starbucks	Il Giornale Coffee Company
Subway	Pete’s Super Submarines
UPS	American Messenger Company
Yahoo!	Jerry’s Guide to the World Wide Web

Teachers can download a PDF version of this quiz to use with students in class. It can be used to link the key concept of change with content covered in Unit 4.5, such as aspects of branding (AO2) and the importance of branding (AO2).

ATL Activity 4 - The threat of the Internet

Watch this short video of goods, services and businesses that have been killed off by the Internet.

This will help some students who may have struggled with the above task / activity.

The world of fashion undergoes change in more ways than most other industries. The need to be ahead of the times and creative in meeting the unknown desires and preferences of customers means being successful in this industry is extremely challenging.

ATL Activity 5 - Video documentary: Ralph Lauren

Watch this 25-minute Bloomberg Game Changers video, which showcases the career of creative fashion designer Ralph Lauren. The video explores the American fashion designer's meteoric rise as an ambassador for America, as well as his personal and professional set-backs.

Questions

According to Bloomberg, what is the most recognisable one-man brand on the planet?
What was Ralph Lauren’s birth name and what year was he born in?
Who was the boyhood friend of Ralph Lauren?
What did Ralph Lauren ask Warren Helstein’s father to do when he was a teenager?
Who interviewed Ralph Lauren on his Ranch in Colorado in 2011?
Who is Ralph Lauren’s brother, and what did they do when Ralph was in his late teens?
Where did Ralph Lauren get his inspiration for the name “Lauren”?
Where did Ralph Lauren work and what was his job, upon targeting New York’s fashion industry?
What is the name of the former CEO and President of Bloomingdale’s?
Upon being called back to Bloomingdale’s, how much did Ralph Lauren make from his ties within a year?
Who was a protégé of Ralph Lauren and what is his occupation?
What award did Ralph Lauren win in 1970 for his product line?
How much did Lauren use for his own personal savings, to invest into his company in order to keep it going?
What was Peter Strom’s occupation at Ralph Lauren when he was working there?
How much did Ralph Lauren spend to open a standalone flagship store in 1986?
What was the reason why Ralph Lauren held back his tears during a fashion show at the St. Regis Hotel and who knew about this problem?
When was the “Upscale Purple Label” label introduced?
When did Ralph Lauren decide to take his company public?
Focusing on international sales, name three cities that Ralph Lauren opened stores in.
How many of Ralph Lauren’s vintage cars were featured in a promotional video, announcing a Paris exhibit in 2010?

Download a PDF version of these questions to use with students by clicking the link here.

Answers

Video timings are shown in brackets for reference.

1. According to Bloomberg, what is the most recognisable one-man brand on the planet? 1:02

An easy one to start with - Ralph Lauren, of course!

2. What was Ralph Lauren’s original name and what year was he born in? 1:36

Ralph Lipschitz, born in 1939.

3. Who was the boyhood friend of Ralph Lauren? 2:31

Warren Helstein - They watched their first polo match together, which spurred Ralph Lauren to develop an elegant and high-class brand (which later became known as Polo Ralph Lauren).

4. What did Ralph Lauren ask Warren Helstein’s father to do when he was a teenager? 3:47

To make Lauren one of his first suits.

5. Who interviewed Ralph Lauren on his Ranch in Colorado in 2011? 4:15

Oprah Winfrey - for one of the final episodes of her show, and said at one point during the interview that it took her 25 years to get an interview with Mr. Lauren.

6. Who is Ralph Lauren’s brother, and what did they do when Ralph was in his late teens? 4:34

Jerry; Opted for a name change.

7. Where did Ralph Lauren get his inspiration for the name “Lauren”? 4:57

Lauren Bacall (1924 - 2014); she was known as a style icon as well as a good actress.

8. Where did Ralph Lauren work and what was his job, upon targeting New York’s fashion industry? 5:34

He became a salesman for Brooks Brothers (the oldest retail brand and clothier in the US, founded in 1818).

9. What is the name of the former CEO and President of Bloomingdale’s? 6:57

Marvin Traub (Bloomingdale’s is an American luxury department store chain, founded by Joseph B. and Lyman G. Bloomingdale in 1861).

10. Upon being called back to Bloomingdale’s, how much did Ralph Lauren make from his ties within a year? 7:45

US$500,000.

11. Who was a protégé of Ralph Lauren and what is his occupation? 9:10

John Varvatos (born 1954), an American contemporary menswear designer.

12. What award did Ralph Lauren win in 1970 for his product line? 9:34

1970 Kody Award

13. How much did Lauren use from his own personal savings to invest in his company to keep it going ? 10:17

US$100,000

14. What was Peter Strom’s occupation at Ralph Lauren when he was working there? 10:35

President and Vice Chairman of Polo / Ralph Lauren Corp.

15. How much did Ralph Lauren spend to open a standalone flagship store in 1986? 11:52

US$30 million.

16. What was the reason why Ralph Lauren held back his tears during a fashion show at the St. Regis Hotel and who knew about this problem? 14:31

He was diagnosed with a brain tumour, those closest to him.

17. When was the “Upscale Purple Label” label introduced? 17:19

1994 - Purple Label is the luxury menswear fashion label of the Ralph Lauren brand, available exclusively at Ralph Lauren and high-end department stores.

18. When did Ralph Lauren decide to take his company public? 19:10

June, 1997

19. Focusing on international sales, name three cities that Ralph Lauren opened stores in. 21:19

Milan, Tokyo, and Moscow

20. How many of Ralph Lauren’s vintage cars were featured in a promotional video, announcing a Paris exhibit in 2010? 22:36

60 cars

Change - Integrating the key concepts with the syllabus

“Why resist change when it’s the main source of your growth.”
- Robin Sharma (b. 1964), Canadian author

Examples of content from the IB Business Management syllabus that allows for the exploration of change as one of the four key concepts include the following:

Unit 1.1 - How might change create both challenges and opportunities for starting up a business?
Unit 1.3 - Explain the importance of change when setting or reviewing business objectives?
Unit 1.4 - Use example to explain why change can often bring about conflict among different stakeholder groups.
Unit 1.5 - Use the concept of change to explain the reasons for businesses to stay small and the reasons for businesses to grow.
Unit 2.2 - Examine the changes that cause businesses to restructure their organizational structure.
Unit 2.4 - Discuss how change in the internal and external environments can alter our understanding of motivation and demotivation in the workplace.
Unit 2.7 (HL only) - Explain how change can initiate or intensify conflict in the workplace.
Unit 3.2 - Discuss how change leads to a need for different sources of finance for an organization.
Unit 3.7 - Explain the importance of change management in order to prevent a situation of bankruptcy or insolvency.
Unit 3.9 (HL only) - Explain the relationship between change, budgets, and variances in business decision-making.
Unit 4.2 - Examine the role of change in the marketing planning process.
Unit 4.4 - Examine the relationship between change and market research.
Unit 4.5 (Product) - Discuss how change has influenced the product life cycle for an organization or brand of your choice.
Unit 4.5 (Promotion) - Examine how developments in social media platforms could change an organization’s marketing strategies.
Unit 4.6 (HL only) - Discuss how international marketing strategies may evolve in response to a change in customer preferences.
Unit 5.4 - Examine the relationship between change and reorganizing production, both nationally and internationally.
Unit 5.7 (HL only) - Explain how change can affect the outcome of crisis planning and crisis management.
Unit 5.9 (HL only) - How might Data analytics reveal changes in the external business environment?
BMT 5 (Business plans) - How do business plans help organizations to manage change more effectively?
BMT 3 (STEEPLE analysis) - Using real-world examples, discuss the connections between change in a business context and STEEPLE analysis.

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