Help Guide: The Crucial Role of Habits in Making Business Transformation Stick

Business transformation is about altering the way an organisation operates, often necessitating a change in established habits and processes. Drawing insights from Charles Duhigg’s The Power of Habit, BJ Fogg’s Tiny Habits, and James Clear’s Atomic Habits, we can understand the profound influence of habits on organisational behaviour.

Understanding Habit Formation

The Habit Loop:

Habits follow a three-part process: cue, routine, and reward. Recognising and altering these components is essential for habit transformation.

Getting rid of a cookie craving: Let’s say every afternoon around 3 PM, you find yourself reaching for a chocolate cookie. You may have recognised that this habit isn’t the healthiest and are looking for ways to change it. The habit loop can be used to understand and subsequently alter this behaviour.

Cue: The clock strikes 3 PM (or you’re feeling the mid-afternoon energy slump).
Routine: You reach for a chocolate cookie.
Reward: You get brief surge of energy and satisfaction from the sugar and the delightful taste of chocolate, before the regret or guilt kicks in.

To adjust this habit in favour of a healthier approach you could change the routine while still addressing the cue and achieving a comparable reward. We tend to overestimate the physiological impact of substances like sugar or nicotine on our energy levels.

A new routine could be as follows:

Cue: As before – the 3 PM slump.
New Routine: Instead of reaching for a cookie (which is out of the way ideally), opt for a healthier snack like a handful of nuts or an apple. Alternatively, you could try a short brisk walk around the office or outside.
Reward: For the healthier snack option: The body gets sustained energy without the crash that often comes after consuming sugary snacks. For the short walk: A break from the monotony, fresh air (if walking outside), and a quick stretch and movement to boost energy and alertness.

Over time, with consistent application, you will form a new healthier habit in response to your mid-afternoon cue. The key is to ensure the new routine offers a reward that is, in some manner, as satisfying as the original. This makes the transition easier and the new habit more likely to stick.

Incremental Changes – The BJ Fogg Principle:

Embracing the idea of starting small can make habit transformation feel manageable and sustainable. It’s about adopting tiny behaviours that are easy to do and can grow into bigger, more significant habits over time.

Consider the goal of leading a more active lifestyle. Instead of committing to an hour-long workout daily, which can be daunting and unsustainable for many, start by doing five minutes of stretching every morning. This small, achievable act doesn’t require a significant time commitment or effort. Over time, as this becomes a routine, the duration or intensity can be incrementally increased, maybe transitioning to 10 minutes of aerobic exercise and then further evolving from there. The key is the consistency and the gradual increase, making the transformation process less intimidating and more achievable.

Compound Growth of Habits:

James Clear’s idea in Atomic Habits is that small changes, when consistently applied, can lead to remarkable results. For businesses, this means that even small procedural or cultural shifts can, over time, result in significant transformation.

For example, a sales team in a retail company had realised their customer feedback scores were below industry standards. Instead of implementing a complete overhaul of their sales process, they decided to make one small change: after every sale, they would spend an additional two minutes explaining the product’s maintenance and warranty details to the customer. Initially, it seemed like a minute adjustment, but over time, this small habit led to increased customer trust, fewer product returns, and a notable improvement in feedback scores.

Successful Business Transformation Through Habits

Alcoa’s Safety First: Paul O’Neill, the former CEO of Alcoa, an aluminium company, started his tenure by focusing on a cornerstone habit: worker safety. Instead of initially concentrating on profits or production efficiency, he believed that by ensuring worker safety, other beneficial habits and organisational transformations would follow. This approach led to not only a dramatic decrease in workplace accidents but also resulted in significant profitability and efficiency gains for Alcoa.

Starbucks’ Emotional Intelligence Training: Starbucks incorporated training programs to help their employees handle stressful and challenging situations, turning these techniques into habits. This initiative was designed to enhance customer service and improve the overall atmosphere in their outlets, which in turn contributed to increased customer loyalty and sales.

Failures in Business Transformation

Sears’ Siloed Structure: Once America’s largest retailer, Sears’ decline wasn’t solely due to external competition or digital transformation. Internally, the company had a notoriously siloed structure. Departments were almost like separate companies, often competing against each other rather than collaborating. This internal competition habit made it challenging for Sears to present a unified, coherent strategy to face external challenges, leading to missed opportunities and a slow response to the shifting retail landscape.

Enron’s Misaligned Incentives and Aggressive Culture: While the Enron scandal is infamous for its financial misconduct, the root of the issue can be traced to its internal habits and culture. The company heavily rewarded aggressive tactics and short-term gains without considering the long-term sustainability or ethical implications of decisions. This aggressive reward system became a habit, leading employees at all levels to hide losses, create fictitious gains, and employ dubious accounting practices. The misalignment of incentives with ethical behavior, combined with an unchecked aggressive culture, ultimately led to the company’s collapse.

In both examples, the internal habits and cultures were ingrained to the extent that they overshadowed the decision-making processes, making it difficult for the companies to navigate challenges effectively.

Institutionalising and Reinforcing Change

John Kotter’s model emphasises making change stick by integrating it into the core of the organisation, which involves embedding new habits at all levels. Prosci’s methodology underscores the importance of reinforcement to ensure that new habits are adopted and sustained.

Conclusion

Habits, both at an individual and organisational level, wield enormous power in dictating behaviors and outcomes. For a business transformation to be lasting, it must transcend superficial strategies and delve into the realm of habits. By understanding the mechanics of habit formation and harnessing them effectively, businesses can set the stage for enduring change.