Change Readiness - Conceptualization and an Exploratory Investigation

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Change readiness: an alternativeconceptualization and anexploratory investigation

Yaron Timmor Interdisciplinary Center Herzliya (IDC), Herzliya, Israel, and

Jehiel Zif Center for Academic Studies, Sarnat Business School, Israel and

Hult International Business School, Boston, Massachusetts, USA

Abstract

Purpose – Change readiness (CR) is viewed as a multidimensional behavior that reflects the firm’s

competencies to do three things in response to environmental opportunities and threats in its industry:trigger identification; gearing up to take action (preparation); and the action’s degree of novelty. Themain purpose of this study is to propose and test an alternative conceptualization for CR.

Design/methodology/approach – Data were collected from 217 organizations in 14 countries. Allrespondents were in charge of, or involved with, their firms’ strategic decisions and implementationsthereof and filled out a structured questionnaire.

Findings – It was found that CR is influenced by both internal and external variables, includingmanagement orientation (entrepreneurial, centralization), environmental barriers, and technology andinnovation roles in firms’ business strategies. In addition, a higher degree of CR was correlated withbetter performance and with higher management evaluation of success in coping with environmentaltriggers.

Research limitations/implications – The size and selection of the sample may pose limits ingeneralizing the study findings. Future studies may increase the number of interviews per firm, use

objective assessments of performance and provide more specific information about threats andopportunities, as well as the type of industry.

Originality/value – The proposed CR concept is based on specific behavior rather than on attitude.CR is perceived as a strategy-oriented construct that demonstrates the capacity of an organization torespond effectively to new developments in its environment.

Keywords Management strategy, Interviews

Paper type Research paper

IntroductionThe concept of change readiness has been largely discussed in the managementliterature mainly in the Organizational Behavior domain (Alas, 2007; Chonko et al.,2002; Eby et al., 2000; Jones et al., 2005). These studies focus on organizations’

structures, learning, and personnel’s (managers, employees) attitudes towardorganizational changes (Alas, 2007; Armenakis and Bedeian, 1999; Barr et al., 1992;

Jimmieson et al., 2009; Newman, 2000; Rajagopalan and Spreitzer, 1996). Most studieshave associated change readiness with flexibility, and noted its importance toachieving a strategic advantage in an increasingly turbulent business environment.However, though change readiness is strongly related to business and marketing

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The authors would like to thank Tel-Aviv University for supplying partial funding for this research.

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Vol. 5 No. 2, 2010

pp. 138-165

q Emerald Group Publishing Limited

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DOI 10.1108/14502191011065482



strategy (i.e. how and when to respond to marketing opportunities or threats), studiesof this aspect are limited.

This paper explores the concepts of inertia and change from the aspects of businessand management strategy. As such, it concentrates on the concept of change readiness

(CR) and addresses the following questions:(1) What does it mean to be ready for strategic change in response to

environmental triggers?

(2) What distinguishes organizations that are good at it?

In an attempt to answer these questions, the study’s main contribution lies inproposing and testing an alternative conceptualization for CR. In thisconceptualization, change readiness is viewed as a multidimensional construct thatreflects the firm’s competencies to do three things in response to environmentalopportunities and threats in its industry: trigger identification; gearing up to takeaction (preparation); and the action’s degree of novelty.

We propose that CR is influenced by a set of both internal and external variables,including management orientation (entrepreneurial, centralization), environmentalbarriers, the firm’s resources, and the roles that technology and innovation play in thefirm’s business strategy. We argue that a higher degree of change readiness leads tobetter performance both financial and operational and to higher managementevaluation of success in coping with environmental triggers.

In theory, the proposed CR concept draws on the resource-based perspective, whichfinds firms’ distinguishing competencies to be important in successfully dealing withtheir environments (Barney, 1991; Saini and Johnson, 2005; Sharma and Vredenburg,1998; Tallon, 2008; Timmor and Zif, 2005). In addition, the CR concept draws on theindustrial organization’s viewing the firm’s competitive strategy to beindustry-dependent (Conner, 1990; Grandy and Mills, 2004; Porter, 1985). Lastly, it

largely considers management perspectives and typologies regarding how firmshandle their environments, i.e. being proactive and flexible (Dreyer and Gronhaug,2004; Mintzberg, 1994; Rudd et al., 2007; Segev and Gray, 1990).

The study takes the point of view of an independent organization, or a strategicbusiness unit within a conglomerate. It begins with discussing the meaning of CR,reviewing the major perspectives of CR and their related influence on organizations’strategies. The CR concept is then presented by discussing its various dimensions andtheir nature in the organization’s behavior. The set of hypotheses is based on thefactors that are expected to affect the CR facet of an organization, and the expectedcorrelations between CR and business performance. The paper continues by presentingan empirical study of 217 organizations in the USA, Europe, and Asia that includesmethodology and findings, theoretical aspects, and managerial implications.

The meaning of change readinessTwo related concepts of organizational responsiveness have been discussed in theliterature: inertia and flexibility (Aaker and Mascarenhas, 1984; Hannan and Freeman,1984; Huff et al., 1992; Kelly and Amburgey, 1991; Rajagopalan and Spreitzer, 1996;Rudd et al., 2007; Zhang, 2006). Although both concepts characterize the speed of anorganization’s response to environmental change, they reflect different theoreticalheritages (Ginsberg, 1990; Huff et al., 1992).

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The concept of inertia centers on structural and bureaucratic elements thatorganizations develop over time that tend to limit change and are hence considered“weaknesses” (Rajagopalan and Spreitzer, 1996). Flexibility, on the other hand, may bedefined as the extent to which new and alternative decisions are considered in strategic

planning and execution, enabling positive changes and adaptations to the turbulentenvironment (Combe and Greenley, 2004; Feigenbaum and Karnani, 1991; Grewal andTansuhaj, 2001; Ireland and Hitt, 1999; Rudd et al., 2007). Flexibility focuses onmanagerial and organizational abilities to quickly respond to environmental forces,traits that are considered “strengths” (Hitt et al., 1998; Rajagopalan and Spreitzer,1996).

With the acceleration of globalization and environmental dynamism, numerousstudies have discussed the relationships between flexibility, strategic changes, andorganizations’ performance (Dreyer and Gronhaug, 2004; Ebben and Johnson, 2005;Kessler and Chakrabarti, 1996; Rajagopalan and Spreitzer, 1996; Rudd et al., 2007;Thoumrungroje and Tansuhaj, 2007). Scholars have addressed various types of flexibility such as operational, technological-financial, manufacturing, and structural(Harris, 2002; Harris and Ruefli, 2000; Lei et al., 1996; Mensah and Werner, 2003; Zhang,2006). Most studies have found strategic changes and flexibility to have a positiveeffect on firms’ financial (i.e. profitability, costs) and organizational (i.e. efficiency,productivity) outcomes (Goldhar and Lei, 1995; Hitt et al., 1998; Li, 2000; Li et al., 2005;Rudd et al., 2007; Tan and Peng, 2003).

Readiness for change has been identified with a “cognitive precursor to behaviors of either resistance or support for change efforts” (Armenakis et al., 1993; Chonko et al.,2002). Moreover, CR has been highly associated with the individual’s attitude towardschange as well as her perceptions, feelings, and beliefs surrounding her organization’schange readiness (Alas, 2007; Armenakis et al., 1999; Chonko et al., 2002; Freiberg,1992; Ogbonna and Wilkinson, 2003). In addition, it has been argued that readiness for

change reflects an individual’s unique interpretation (Eby et al., 2000; Spreitzer, 1995;Thomas and Velthouse, 1990). Recent studies have defined CR as more of an activecompetency like “preparation of a gun for immediate aim and firing” (Walinga, 2008). Itwas also suggested that the construct of perceived organizational readiness for change(PORC) should refer to the belief of employees that the organization is engaged inpractices that will lead to successful change (Cinite et al., 2009).

Despite the extensive literature of organization flexibility, inertia, and changereadiness, empirical studies have tended to use flexibility and change readinessintuitively as a clear-cut, universally understood notion (Billet and Garfinkel, 2004).Hence, they do not specify or measure this notion’s attributes, but rather examineindividuals’ assessments and change’s apparent effects on individuals andorganizations’ outcomes (Alas, 2007; Jones et al., 2005; Miller et al., 1994; Neves,

2009; Santhanam et al., 2000). Somewhat of an exception is Zhang’s (2006) studyfocusing on IS support for a few proposed parameters of strategic flexibility and firmperformance. However, it did not measure these parameters directly, but rather studiedIS’s perceived affect thereon, and it also used the term flexibility itself in some of theparameters, i.e. “increased flexibility of business process”.

Two major approaches were proposed in studying Change theories: the varianceand the process. The former focuses on fixed entities with variable attributes and thelater on entities that participate in events and may change over time (Poole and Van de

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Van, 2004; Langley, 1999). Our research follows the line of the variance rather than theprocess approach.

In this paper, CR is perceived as strategy oriented and is used in a more specificsense to express the demonstrated capacity of an organization to respond effectively to

important new developments in its business environment. The proposed CR concept istherefore based on specific behavior rather than on attitude.

CR: a business strategy conceptualizationAccording to this conceptualization, CR is a multidimensional construct consisting of three related activities:

(1) Trigger identification.

(2) Gearing up to take action (preparation).

(3) Action’s degree of novelty.

These elements identify the firm’s competency to cope with opportunities and threats,

that evolve in its specific business environment. Business strategy can be viewed as all activities that involve the monitoring,

planning, and implementing of actions to strengthen the position of the firm relativeto its competitors (Alvesson and Wilmott, 1995; Grandy and Mills, 2004). Strategicchange refers to differences in these activities, i.e. the form, quality, and state overtime of an organization’s alignment with its external environment (Chonko et al.,2002; Rajagopalan and Spreitzer, 1996; Van de Ven and Poole, 1995). Business andmarketing scholars have commonly used Porter’s (1985) SWOT (Strengths,Weaknesses, Opportunities and Threats) to analyze firms’ environmentalopportunities and threats, and how the firm is facing them with its strengths andweaknesses (Hill and Westbrook, 1997; Grandy and Mills, 2004; Lin and Hsu, 2006).It has been argued that amidst the globalization process, firms are more affected by

changes in market opportunities and threats (Frenkel and Peetz, 1998; Kulmala et al.,2002). Furthermore, how a firm copes with these external changes affects itscompetitive position and performance (Hitt et al., 1998; Thoumrungroje andTansuhaj, 2007; Zhang, 2006).

Opportunities and threats are both considered external triggers; however, they arehighly distinct from one another. The former is a highly favorable situation in a firm’senvironment, and is indication of a chance to improve performance substantially. Thelatter, on the other hand, is a highly unfavorable situation in a firm’s environment, andindication of pending deterioration in organizational performance if some action is nottaken (Hill and Westbrook, 1997; Lin and Hsu, 2006; Porter, 1985). While it is true thatin many cases a threat can be viewed as an opportunity and vice versa, mostorganizations tend to identify environmental signals either as threats or asopportunities, and the strategic literature frequently classifies outside events intothreats or opportunities (Ansoff, 1984; Urban and Steven, 1991). Another view of triggers that call for strategic change is their origin:

. A shift in consumer demand toward or away from the organization’sproducts/services (cultural pressure, economic shift, or other causes).

. A technological development that creates either a threat or an opportunity.

. A change in governmental regulations or policies.

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. A major decline/increase in competitive activity.

. An adverse/favorable change in financial sources.

We propose that the first element in a firm’s readiness to cope is trigger identification.

Identification of an environmental trigger with a likely strategic impact on the firm isconsidered a key signal for change action (Chonko et al., 2002; Segev, 1977; Struckmanand Yammarino, 2003; Tichy, 1983). In dynamic environments, it is important toquickly respond to external triggers ( Jack and Raturi, 2002; Li et al., 2005; Zhang, 2006).It has been argued that with rapid environmental changes (i.e. technology, markets,regulations) and globalization, leadership is highly associated with pioneering, andthus requires early identification and quick decision making in the face of externalchanges (Alas, 2007; Golder and Tellis, 1993; Kessler and Chakrabarti, 1996; Mittal andSwami, 2004).

An effective identification mechanism requires certain organizational andmanagerial properties. First is the need to properly monitor the environment andintercept signals for trigger sources. Second, this information should be processed toseparate a meaningful development from random noise. There is also a need to assessexpected likelihood of occurrence, impact, and timing. The third stage requiressubstantial attention on the part of higher management to translate the findings into amanagerial conclusion that some response is necessary or desirable (Barr et al., 1992;Gersick, 1994; Huff et al., 1992; Lant and Mezias, 1999; Li et al., 2005; Struckman andYammarino, 2003; Yetton et al., 1994).

The second element in the firm’s readiness for a change is gearing up to take action(preparation). Recognizing a need, or an opportunity, is a necessary but insufficientcondition for undertaking strategic change. The second variable therefore deals withthe time it takes to respond (Grimm et al. 1993; Kessler and Chakrabarti, 1996; Mittaland Swami, 2004; Tallon, 2008; Zhang, 2006). The time response variable, however, is

not detached from the environment-monitoring variable: If the organization is slow inidentifying an environmental threat, then the time available for preparing action mightbe quite short (Ansoff, 1984). Response time can be assessed by two parameters:

(1) Time to start.

(2) Preparation time.

The first refers to the lag between the recognition of the need to change and the start of active preparation. This lag reflects the organization’s readiness for taking changeaction, i.e. being overly occupied with current projects or crises, or finding it difficult toput aside existing activities, or organizations that tend to postpone making keydecisions are likely to have a long lag prior to the start of action preparation(Leonard-Barton, 1992).

Preparation time can be seen as encompassing two discrete components: the time ittakes for the change, and prioritization policy. The former is content-related, i.e. if anew technology requires an extensive adaptation process, then a long preparation timeis inevitable (Alas, 2007; Laar, 1994; Yetton et al., 1994). The latter component reflectsthe organization’s priority for dealing with the specific strategic changes needed.

The third element of the CR construct is the action of response, or more specifically,the degree to which the firm’s response to the environmental triggers is novel orinnovative. In turbulent environments, effective strategic change is highly associated

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with renewal of competencies, product innovations, and diversified and innovativeresponse to external triggers (Huff et al., 1992; Ireland and Hitt, 1999; St-Pierre, 2005;Rudd et al., 2007; Teece et al., 1997; Vardarajan and Jayachandran, 1999). Firms maydefend their market positions with incremental and limited responses such as reducing

prices or launching a “me too” product. However, such activity reflects tacticalflexibility, and may be less effective for the long haul, particularly for organizationslooking to lead dynamic markets (Cannon and St John, 2004; Ireland and Hitt, 1999;O’Regan and Ghobadian, 2005; Timmor and Zif, 2005).

A strategy’s novelty can be measured by its evolutionary vs revolutionary scope.Evolutionary changes have a low degree of innovation: They do not require changes inparadigm or a major shift in managerial behavior; they have been tried before and aretherefore familiar to the organization; they require limited deviation fromorganizational inertia. Revolutionary changes, on the other hand, are based on anew pattern of response. Such changes have to overcome natural resistance both insideand outside the organization (Boccardelli and Magnusson, 2006; Hannan and Freeman,1984). A strong, committed leadership is usually needed to implement action that iscompletely new to the organization and its affiliates. There are of course intermediatesituations, wherein the organization has been experimenting with an innovativeapproach on a small scale prior to its adoption on a large scale.

An organization capable of executing a response that is somewhat more innovativeis assumed to have a high degree of change readiness. This of course does not meanthat a revolutionary response is always desirable (Boccardelli and Magnusson, 2006;Eisenhardt and Martin, 2000): A major deviation from past behavior is more likely tobe needed when the outside threat or opportunity has a high potential impact on thefirm and when the environment is dynamic and turbulent. In this study, respondentswere asked to select strategic threats and opportunities that have potentially highimpact on their firms.

What are the factors that affect a firm’s CR? In this study, based on the literaturereview, we explored five major factors related to the environment, managementorientation, use of technology, and available resources (Poole and Van de Van, 2004;Langley, 1999). Figure 1 exhibits the research chart with the expected influence of thevarious factors on the firm’s readiness for strategic change and CR on the firm’sperformance.

Environmental barriers – the rapid growth of external turbulence and marketdynamism have increased the importance of organizations’ readiness for strategicchange (Chonko et al., 2002; Han et al., 1998; Ireland and Hitt, 1999; Li et al., 2005;O’Regan and Ghobadian, 2005; Zhang, 2006). However, the environment has a dualinfluence on change readiness: On the one hand, as it is dynamic and changing, there isa greater need for the organization to prepare itself for strategic changes and be flexible

in responding to external triggers (Alas, 2007; Hitt et al., 1998; Eby et al., 2000; Li, 2000;Rudd et al., 2007; Tallon, 2008). On the other hand, as the environment can be hostile,complex, and unpredictable, and change readiness becomes a greater challenge, firms’capabilities of adapting their strategies thereto are deteriorated (Kapasuwan et al.,2007; McKee et al., 1989; O’Regan and Ghobadian, 2005), and the likelihood of change incorporate strategy is reduced (Kelly and Amburgey, 1991; Rajagopalan and Spreitzer,1996). Under volatile circumstances, when uncertainty is high, the consequences of strategic changes are hard to predict. Therefore, firms can be expected to respond with

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greater caution in regard to new and innovative actions. Moreover, hostile andconstantly changing markets may induce tactical flexibility within a short intervalsuch as price-chopping or increasing supply rather than long-term strategic changes(Cannon and St John, 2004). This paper views change readiness as a strategic property,and hence considers environmental hostility and complexity to be barriers toorganizations’ CR. We therefore hypothesize that:

H1. Environmental barriers have a negative effect on a firm’s change readiness:The higher the barriers, the lower the firm’s CR.

Management orientation – An entrepreneurial mindset and decentralized strategicdecisions appear to be integral parts of the organizational culture and climate that havea meaningful influence on an organization’s CR (Naman and Slevin, 1993; Zahra et al.,1999). Entrepreneurship has been reported to have a positive correlation to a firm’ssuperior performance and innovative response to dynamic environments (Lumpkinand Dess, 1996; Stopford and Baden-Fuller, 1994). In addition, entrepreneurship can

Figure 1.Research chart andhypotheses

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help a firm acquire new capabilities, enter new business ventures, and create newproducts ahead of its competition (Hamel and Prahalad, 1991; Zahra, 1993). Proactivemanagement trying to shape its environment and managerial willingness to assumerisk are two entrepreneurial variables (Chonko et al., 2002; Gersick, 1994). They are also

two dominant properties of Miles and Snow’s (1978) Prospectors strategic category,whose members look for opportunities to innovate, develop, and enter new markets.Part of an entrepreneurial orientation is the commitment to scanning the environmentfor opportunities and for threats that might be converted into opportunities. As such, itis not surprising to find that a high score on these variables points to an organization’sCR. It is important to understand, however, that CR as defined in this paper refers toresponses to environmental triggers rather than the initiation of entrepreneurial action.The argument here is that an organization committed to initiating change is morelikely to respond quickly and effectively to environmental triggers generated byoutside causes, than is an organization characterized by a purely defensive posture.

H2. Management’s entrepreneurial orientation has a positive effect on a firm’s

change readiness: The stronger management’s entrepreneurial orientation,the greater the firm’s CR.

Is centralized decision making, a help, or a hindrance, in responding to environmentaltriggers? There are occasions, particularly emergencies, when a single decision-makeror a small group responds faster and possibly better. However, under normalconditions, a small decision-making group could, over time, be a hindrance to theacceptance of new trends and ideas. A small group has less chance of viewing externaldevelopments, and may have a tendency to lock out “disturbing” signals delivered by“non-members”. Kanter (1983, p. 281) argued that a company with a diverse group inthe “dominant coalition” at the top is more likely to pick up on more external cues.Decentralized strategic planning and decision making are associated with diversity

and organizational flexibility in responding to environmental changes (Chonko et al.,2002; Jones et al., 2005; Mintzberg, 1994). In a turbulent environment, quick response toexternal triggers is required (Dickson et al., 2001; Ireland and Hitt, 1999; Zhang, 2006).In certain cases, there is a need for learning by doing and improvisation (Dickson et al.,2001; Moorman and Miner, 1998; Teece et al., 1997). Learning strategies are mosteffectively created through a somewhat structured process guided by the topmanagers, yet also take place at the grassroots level. When decision making iscentralized, i.e. only a few people located in the head office make decisions, responsemay take longer, hence losing both timing and pioneering advantage. In many cases,centralization is concerned with bureaucracy, or formal and rigid procedures that forceinertia and hence decrease capability of change and adaptation to the environment(Rajagopalan and Spreitzer, 1996; Rudd et al., 2007; Zeira and Avedisian, 1989).

H3. Management centralization has a negative effect on firms’ change readiness:The greater the centralization orientation, the lower the firm’s CR.

Technology and innovation – The importance of technology use and innovations, inboth manufacturing and processing of products and services in dynamicenvironments, has been largely discussed in the management literature (Andersen,2005; Borch et al., 1999; Drennan and McColl-Kennedy, 2003; Miller, 2002; Morgan,2004; St-Pierre, 2005; Timmor and Rymon, 2007; Zahra, 1996). The use of technology is

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key in meeting the requirements of changing markets and new competitive situations(Boccardelli and Magnusson, 2006; Timmor and Rymon, 2007). Technologycontributes to organizational dynamic capabilities (Teece et al., 1997) by facilitatingproduct adaptation as well as new product or service offerings and variations

(Karagozoghu and Lindel, 1998; Lei et al., 1996; Meredith, 1987).The ability to assess and to respond to new threats and opportunities depends on

the current state of knowledge and practice: If a firm maintains updated technologicalcapability in a variety of technical fields, it enhances its ability to read customers’preferences and activate the necessary resources to act. It has strategic flexibility andis in a strong position to respond to serious environmental shifts (Aaker andMascarenhas, 1984; Byed, 2001; Harris, 2002; Rudd et al., 2007). Use of technology canalso speed the firm’s response to changing environmental triggers, by bettermonitoring the environment, identifying new opportunities and threats, andaccelerating new product developments within reduced costs (Lei et al., 1996;St-Pierre, 2005; Zahra, 1996; Zhang, 2006;). We therefore hypothesize:

H4. Technology and innovation have a positive effect on firms’ change readiness:The greater the use of new and innovative technologies in the productmanufacturing and service processes, the greater the firm’s CR.

Resources – Change readiness is a business capability that we suggest gives a firm acompetitive advantage and enhances its performance in turbulent environments.However, in order to develop this capability, a firm needs to invest in its resources.(Boccardelli and Magnusson, 2006; Grandy and Mills, 2004; Helfat and Peteraf, 2003).Moreover, organizations wishing to benefit financially from operational flexibility(Jack and Raturi, 2002) need to plan their resources (Greenley and Oktemgil, 1998;Mensah and Werner, 2003; Rudd et al., 2007; Tan and Peng, 2003). These resources canbe identified by two major factors: facilities and human capital. Facilities, reflects the

availability of equipment and infrastructure such as information systems (IS),computer-aided design (CAD), and flexible manufacturing systems (FMS) (Hitt et al.,1998; Lei et al., 1996; Pacheco-De-Almeida et al., 2008; Zhang, 2006). It can contribute tobetter monitoring markets, greater flexibility in production at lower cost, andincreasing a firm’s speed in introducing new and innovative products. Human capitalis a critical resource on which many core competencies rest and through whichcompetitive advantages are exploited successfully (Ireland and Hitt, 1999). Availabilityof new technologies is not sufficient for strategic changes; personnel need to embracethese technologies and implement them in the manufacturing process (Jones et al.,2005; Powell and Dent-Micallef, 1997; Vankatesh and Davis, 2000). We thereforehypothesize:

H5. Resource availabilities have a positive effect on firms; change readiness: Thegreater the availability of facilities and human capital the greater the firm’s CR.

Performance – Strategic change by itself does not necessarily lead to betterperformance (Kelly and Amburgey, 1991; Rajagopalan and Spreitzer, 1996; Zajac andShortell, 1989). Especially in stable markets, using a proven strategy with slightmodifications can be more effective in maintaining market positioning than can rapidand/or continuous changes. However, CR in this paper relates to a firm’s capability of quickly identifying and adapting its strategy to environmental triggers in turbulent

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environments, and to its response in the event of new and significant triggers(opportunities or threats). Hence recent studies arguing for the positive effect of flexibility and organizational readiness for changes on financial and organizationoutcomes (Ebben and Johnson, 2005; Goldhar and Lei, 1995; Hitt et al., 1998; Li, 2000;

Li et al., 2005; Rudd et al., 2007; Tan and Peng, 2003; Thoumrungroje and Tansuhaj,2007; Zhang, 2006). We therefore hypothesize:

H6. Change readiness has a positive effect on a firm’s performance: the greater thefirm’s CR, the better its financial and organizational outcomes.

Methodology Research procedure and data collectionThe empirical study is based on data collected from 217 organizations in 14 countries.Nearly half of the organizations are headquartered in the USA, 68 percent of the firmsengage in some export activity, and 46 percent make at least half of their sales away

from home. Service organizations account for 36 percent of the firms andmanufacturers accounts for 26 percent, with strong R&D.The research respondents filled out structured questionnaires during their studies

in enterprise, executive workshops, and executive MBA programs. A total of 60percent attended such programs at leading academic institutions in the USA, and 40percent in their home countries (if not US-based). All respondents were key informants(i.e. in charge of or involved with their firms’ strategic decisions and implementationsthereof (Thoumrungroje and Tansuhaj, 2007; Timmor and Zif, 2005)), and 36 percentare senior managers. 30 percent of the respondents are employed by state-ownedenterprises, and 36 percent by publicly traded enterprises (for a detailed sample profile,see Table I).

Self-reported data for firms’ strategy tactics and performance are quite common in

business and marketing research (Cavusgil and Zou, 1994; Grewal and Tansuhaj, 2001;Thoumrungroje and Tansuhaj, 2007). Studies report a high degree of correlationbetween perceptual and objective measures of organizational performance as reportedby questionnaires, suggesting high confidence in the their use (Diamantopoulos et al.,1994; Hart and Banbury, 1994; Murray et al., 2005; Rudd et al., 2007). However, it isimportant to point out some potential concerns regarding self-reporting questionnaires;the danger of biased responses is always present in a study of this kind: Arerespondents likely to admit poor management policies? The response bias in this studyseems to work against finding significant correlations. Systematic errors would havebeen likely to conceal rather than amplify the hypothesized behavior. If managers feltthat they should not disclose their organization’s lag in responding to threats andopportunities, it would have been difficult to find confirmation of key hypotheses. The

respondents did not have prior knowledge of the hypotheses of the study. On the otherhand, non-systematic errors of perception would have likely increased variability andmade it more difficult to find statistical significance.

In two organizations, the same questionnaires were administered to a number of managers in order to explore consistency of response by various managers from thesame firm. The comparison supports the assumption that variability in the content of response from the same firm is much more limited than that between managers indiffering firms.

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The study questionnaireThe questionnaire contained three parts. In part one, respondents were asked to thinkof two separate, recent strategic triggers: one an opportunity, and one a threat. Thispart had six questions: three about the organization’s response and success in dealingwith the specific threat, and three parallel questions about the specific opportunity.

Various examples of environmental threats and opportunities were provided.Part two of the questionnaire was adapted with minor modifications from Segev

and Gray’s (1990) Business Success Expert System (BSES). This part containedquestions dealing with the environment, strategy content and the strategy-craftingprocess, and organizations’ structure, performance, age, and size. Inclusion of this setof variables made it possible to provide each respondent with a separate, confidential,

printed diagnostic assessment of the strategy of her organization based on BSES. As aresult, there was an incentive not only to respond, but also to provide truthful answers

Frequency Percent

Firms’ ownershipGovernment 66 30.4

Public 79 36.4Private (domestic) 56 25.8Private (foreign) 16 7.3

IndustryService 79 36.4Manufacturing with limited R&D 61 28.1Manufacturing with high R&D 56 25.8Product without manufacturing 21 9.6

Firms’ customersFinal consumer 52 24Industrial or institutional 59 27.2Government bodies 63 29.0

Others 43 19.8 Export rate (of total sales)None 70 32.21-20% 60 27.621-50% 50 23.051-75% 29 13.476% þ 8 3.6

Respondents’ positionsTop manager 78 36Middle manager 70 32Lower managerial functions 69 31Missing 1

Location of headquartersThe USA 99 45.5Developing nation 81 37Developed nation 37 17Missing 1

Table I.Sample profile

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in order to receive meaningful interpretation. The promise of quick feedback, whichwas kept, ensured that all responses were 100 percent complete.

Part three contained classification questions about the respondents, theirorganizations, and their international activities.

MeasurementsThe measurements were adopted from Segev and Gray (1990) and based on recentstudies whenever possible (i.e. Cadogan et al., 2002; Li et al., 2005; Rudd et al., 2007;Timmor and Zif, 2005; Zhang, 2006). The responses to all questions, with the exceptionof the respondent classification data, were rankings on a scale from 0 to 100. Mostquestions were based on a comparison with the industry average of the respondent’sorganization, i.e. a score of 50 (see the Appendix for specific items).

Change readiness – The CR dimension contains three variables:

(1) Speed of identification of an environmental trigger for change.

(2) Response time to start preparing for implementing a change.

(3) Innovation in the nature of the response.

Each variable was used twice in every questionnaire: once for measuring the firm’scompetencies to cope with opportunity, and once for coping with threats. Thus the CRdimension is constructed of six parameters ( a ¼ 0:75) and reflects the calculated meanof each. Since identification of a trigger may depend on interpretation of an evolvingtrend, exact identification time might be vague in many cases. In this paper, thevariable selected to represent the trigger identification time is expressed by a positionon a continuum of early versus late identification of an environmental trigger forchange. This measure was considered clearer for assessment purposes than werealternative formulations.

For statistical comparisons across companies, preparation time is a difficult

variable for two reasons: first because it is content-related, and second becausepreparation could be regarded as an ongoing, continuing activity. A continuousmeasure of “early versus late start of action preparation” might better representresponse time for preparing to implement a change. An early start would meanpractically no lag in starting to prepare for action; while a late start would meanstarting action when there was no other choice.

Management orientation – Two factors were examined: entrepreneurship andcentralization. Entrepreneurship is measured by three items ( a ¼ 0:80): 1.Willingness to commit a high proportion of the organizational resources to riskyprojects; 2. Extent to which the organization is proactive in trying to shape itsenvironment, as opposed to merely reacting to trends in the environment; and 3.Degree of tracking opportunities and threats in the environment in order to craft

strategy. For measuring centralization in decision making, two items were used: thenumber of personnel that make decisions in the organization, and the degree of centralization in strategic decision making ( a ¼ 0.60). Note that for the analysis, thenumber of decision-makers was reverse-scaled, i.e. the more personnel makingdecisions, the lower the degree of centralization. The second item was important,since it is possible that while a considerable number of personnel are involved indecision making; decisions are authorized strictly at the top vs at the lowestmanagerial level.

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Technology and innovation – Three items were measured:

(1) Extent of use of new technology in manufacturing.

(2) Product innovation, i.e. number and novelty of new products introduced.

(3) Extent of use of various technologies in the service process ( a ¼ 0:

74).

The first item reflects the organization’s capability of producing and launching newproducts, whereas the second item reflects the firm’s actual launching of new andinnovative products. The third item is important because the service sector is rapidlygrowing, with its role increasing in the manufacturing sector (Brady and Cronin, 2002;Timmor and Rymon, 2007).

Environmental barriers – Following the literature review, we distinguishedbetween environmental dynamism that can encourage CR, and environmental barriersthat can inhibit and decrease an organization’s motivation to invest in changing itsstrategies. Two items measured such barriers: the assessment of environmentalhostility, and the assessment of complexity ( a ¼ 0:62). Hostility relates to factors suchas nationalization and aggressive competition; while complexity relates to regulationand procedures that hinder new initiatives and actions.

Resources – Two items were used to measure the organization’s availability of resources: investment in production equipment and facilities, and availability of human capital ( a ¼ 0:65). While these items differ somewhat content-wise, one, humancapital is in many cases essential to the use of the other (Jones et al., 2005; Powell andDent-Micallef, 1997; Vankatesh and Davis, 2000).

Performance – To test respondent assessments of their organizations’ performance(Cavusgil and Zou, 1994; Diamantopoulos et al., 1994; Hart and Banbury, 1994; Murrayet al., 2005; Rudd et al., 2007), six parameters were measured. In two of them, therespondents were asked to rate the success of their organizations in dealing with thethreat/opportunity on which they reported earlier in the questionnaire. Threeparameters were used for financial and market performance: growth rate; profitabilityand market share; while the sixth parameter examined operational efficiency. For allfour parameters, respondents were asked to rate their organizations’ performancerelative to its specific industry (Segev and Gray, 1990).

Organizations’ ages and sizes have been discussed in the strategic literature asaffecting inertia as well as firms’ flexibility and readiness for strategic changes (Autioet al., 2000; Feigenbaum and Karnani, 1991; Fombrun and Ginsberg, 1990; Kapasuwanet al., 2007; Kelly and Amburgey, 1991; Rajagopalan and Spreitzer, 1996; Zajac andKraatz, 1993). While age and size are not of main interest in this study, they weremeasured by asking the respondents for their evaluation of their organization’scharacteristics relative to their industry.

FindingsWe applied a logistic regression analysis to examine the differences between firmsperceived to have high vs. low CR. Firms in the high CR category received a scoreabove 50 on the CR factor, while those in the low category got a CR score # 50. Thiscategorization was made for two reasons:

(1) The scale is from 1-100; hence, the score of 50 indicates the mid level.

(2) Following Segev and Gray’s (1990) scaling and the questions’ phrasing, thescore of 50 reflects the average industry rating.

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Following this processing of data, the low CR category counts for 77 cases, and thehigh CR category accounts for 140 cases. The five factors in the research chart that wehypothesized would affect the firm’s CR were used as independent variables. Table IIpresents the logistic regression analysis results.

The model is significant and has a relatively high predictive ability (77.4 percent of the observations were correctly classified). Consistent with the environmental barriersfactor and supporting H1: a significant negative association was found betweenenvironmental barriers and CR. Looking at the variables means and correlations (seeTable I) it can be seen that while environmental barriers correlate with environmentaldynamism, the coefficient is only 0.31 and the mean difference is significant ( p , 0:01).This means that these two variables do not reflect the same content. Supporting H2 and H3, management entrepreneurship and de-centralization were found to have apositive effect on CR. H4 was supported as well: Firms rated high in the technologyand innovation factor were likewise rated high in CR. Firms with greater availability of facilities and personnel were expected to have a higher CR. However, no such

significant correlations were found, hence H5 was not supported.Table III shows the performance results of the firms. The comparative analysisindicates that for all tested parameters, the firms with high CR significantlyoutperformed the firms with low CR, thus H6 is supported.

Table IV presents the age and the size means of the tested firms in the high and lowCR groups respectively. In this study, firms with a high CR score were found to besignificantly bigger than those with low CR scores. No significant differences werefound regarding firms’ relative ages.

Predictor factor B coefficient (SE)

Environmental barriers 20.027 *(0.009)Technology and innovation 0.035 * (0.012)Management orientation – entrepreneurial 0.038 * (0.012)Management orientation – centralization 20.020 * (0.012)Resources 0.035 (0.012)

Notes: * p , 0.01. Model statistics: 22 log likelihood ¼ 210.501; Chi square (5 df) 88.325 ( p , 0.01);Correct classification ¼ 77.4 percent

Table II.Logistic regressionresults. Categorical

dependentvariable ¼ change

readiness (all variablesare standardized)

Firms’ classification High change-readiness Low change-readinessPerformance variables n ¼ 140 n ¼ 77

Growth rate * 67.92 (18.80) 60.78 (22.36)Market share * * 62.36 (29.45) 49.39 (29.88)Profitability * * 58.52 (24.69) 48.96 (24.79)Operational efficiency * * 61.24 (18.183) 51.17 (22.07)Success of opportunity handling * * 69.03 (20.37) 46.97 (26.728)Success of threat handling * * 63.63 (20.63) 40.45 (21.82)

Notes: * p , 0.05; * * p , 0.01

Table III.Performance of firms

with high vs low changereadiness means (std)

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DiscussionReadiness for change has been identified with a “cognitive precursor to behaviors of either resistance or support for change efforts” and has been highly associated with theindividual’s attitude and beliefs with regard to the organization’s readiness to commit

changes (Alas, 2007; Armenakis et al., 1999; Chonko et al., 2002; Freiberg, 1992;Ogbonna and Wilkinson, 2003). This paper follows recent studies that call to define CRas a more active competence (Cinite et al., 2009, Walinga, 2008) and proposes to viewCR as a multidimensional behavior that reflects the firm’s response to environmentalopportunities and threats in its industry. The following tasks were attempted:

(1) To explain and define the concept as a multidimensional construct.

(2) To show that this concept has a predictive value for a given organization’sperformance ( H6 ).

(3) To examine how CR can be predicted based on organizational andenvironmental variables ( H1, H2 , H3, H4 and H5 ).

The viability of CR as a defined and measurable concept is supported by the findingsof this study. Supporting the research hypothesis, firm performance was found to bestrongly associated with the multidimensional construct of three related CR activities:early identification of an environmental trigger for change; rapid response by startingpreparing for implementing a change; and novelty in the content of response (for bothopportunities and for threats).

In this study, firms’ performance was measured by six different parameters: growthrate; profitability; market share; operational efficiency, opportunity handling; andthreat handling. For all six parameters, the firms with high CR scores outperformedthose with low CR scores. Previous studies have argued for the positive effect of anorganization’s flexibility on its financial (profitability; growth rate) and operationaloutcomes (Hitt et al., 1998; Rudd et al., 2007; Thoumrungroje and Tansuhaj, 2007;

Zhang, 2006). Flexibility, however, is commonly defined as the extent to which newand alternative decisions are considered and made (Ebben and Johnson, 2005; Irelandand Hitt, 1999; Rajagopalan and Spreitzer, 1996; Rudd et al., 2007). In light of thisstudy’s findings, it can be argued that while novelty of action is one component of afirm’s CR, early identification of environmental triggers and speed of preparation forresponse are integral parts of the CR construct that affect the firm’s performance.

In measuring their firms’ perceived performance, respondents were also asked fortheir assessments of their organizations’ success in dealing with the environmentaltriggers that were presented as specific major opportunities and threats. It was foundthat the greater the firm’s CR, the greater its success in handling these triggers. Thesefindings, which support the research hypothesis, are not obvious, since it might be that

Firms’ classification

High change-readinessn ¼ 140

Means (Std)

Low change-readinessn ¼ 77

Means (std)

Firm relative size * 60.68 (22.34) 54.68 (22.74)Firm relative age 65.27 (28.18) 68.77 (26.97)

Note: * p , 0.05

Table IV.Relative size and age of firms with high vs lowchange readiness

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speed and novelty of action could lead to inferior outcomes or even failure in handlingthe triggers.

This study suggests five factors that are hypothesized as affecting firms’ CR, andhence aid in distinguishing between firms with high vs low CR. Hostility and

complexity were identified as environmental barriers, and have been found, ashypothesized, to have a negative effect on CR. These findings differ from those of otherstudies, which have viewed dynamism as an environmental motive for organizations toincrease their readiness for strategic change (Chonko et al., 2002; Han et al., 1998;Ireland and Hitt, 1999; Li et al., 2005; O’Regan and Ghobadian, 2005; Zhang, 2006). Oneexplanation for this might be related to the differing conceptualization that this studypresents of CR: Most studies have approached CR as an attitude toward makingstrategic changes under turbulent conditions, whereas this study addresses firms’actual behavior in regard to environmental triggers. The concept of CR in this studyimplies the consideration of the required effort in making strategic changes, renderingmaking strategic changes under hostile and complex conditions riskier.

Another explanation might lie in the differing meanings of environmentaldynamism and barriers. The former may reflect rapid changes in consumer tastes,technology, and liberalization (Chonko et al., 2002; Han et al., 1998; Harvey andNovicevic, 2002), while the latter may be more expressed in regulations and state action(i.e. nationalization) and political and social constructs that render the businessenvironment complex and hostile. In this study, we asked for respondent assessment toenvironmental dynamism as reflected by the quantity and speed of changes anduncertainty. Partial correlation was found between environmental dynamism andbarrier constructs, and their mean scores were found to differ significantly.

Following the research hypotheses, the study identified key factors that correlatewith CR: Entrepreneurship (risk-taking, proactive management, and constant externalanalysis) and Centralization (number of decision-makers and degree of centralization)

are related to management orientation in process and structure of decision making.While CR variables are defined in terms of response to external triggers, the researchfindings support the notion that high change readiness implies a managerial convictionthat the organization has the internal strength to shape and influence the outside,rather than merely react thereto. CR is also manifested in willingness to commit a highproportion of an organization’s resources to risky projects, and systematically trackingopportunities and threats in the environment in order to craft long-term strategy. Inaddition, it was found that organizations that are positioned defensively to react toexternal triggers are less successful in responding to those triggers than areorganizations that are positioned offensively to initiate change.

The study supports the hypothesis that decentralized decision making is associatedwith greater change readiness. A small top-management team is more likely to reject

external signals that lie outside its comfort zone than is a wider, diversified team that iscapable of raising doubt. Disturbing questions aid learning through improvedinterpretation of unexpected external signals. A broader managerial team might aid inpromoting innovative solutions by rendering deviating from inertia an acceptableactivity.

Consistent with the extensive literature and supporting this study’s hypothesis,technology and innovations, both in the manufacturing/service process and the finalproduct, were found to have a positive effect on CR (Andersen, 2005; Borch et al., 1999;

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153



Drennan and McColl-Kennedy, 2003; Miller, 2002; Morgan, 2004; St-Pierre, 2005;Timmor and Rymon, 2007; Zahra, 1996). The concept of CR in this study is identifiedwith speed and innovativeness of organizations’ responses. Hence, it is not surprisingthat as firms integrate technology into their operations, they improve their capability

of introducing new product and services within a shorter time.In order to develop its competencies, an organization needs to invest in its resources.

It has been hypothesized that firms’ CR is positively affected by availability of bothequipment and facilities, and human capital. Surprisingly, no significant effect on CRwas found for resources. This might be explained by the relatively high correlationfound between resources and technology. In addition, the findings may support thenotion that entrepreneurial orientation is more critical to CR than are resources.

Finally, the two fundamental properties of age and size, considered to beindicators of organizational inertia (and therefore possibly related to CR): Age wasnot found to significantly differ between the high- and low-CR groups. On the otherhand, the mean size of the firms with high CR scores was significantly greater thanfirms with low CR scores. Advocates of small-size firms’ strategic advantage haveargued for greater flexibility and innovativeness due to less bureaucracy (Fombrunand Ginsberg, 1990; Kapasuwan et al., 2007), while other scholars have found no orpositive effects of firms’ size and age on strategic changes (Kelly and Amburgey,1991; Rajagopalan and Spreitzer, 1996; Zajac and Kraatz, 1993). It may be that thesetwo parameters by themselves do not substantially affect making strategic changes,and need to be meditated by other variables. Their effects however, are yet to beconclusively found.

Conclusions and managerial implicationsIn McKinsey Quarterly (April 2008), executives surveyed worldwide reported that,though most executives recognize the importance of global environmental trends and

changes for corporate strategy, they feel that few companies address thesesuccessfully. Under globalization and increasingly turbulent environments,organizations need to prepare to make strategic changes. However, the right attitudeis not enough: To be successful in responding to outside events, an organization needscertain capabilities in order to act.

This study suggests that firms’ readiness for change should be examined based onthree related elements: their capability to continuously scan opportunities and threats;their timing; and their innovative/varied response. Our empirical research revealedthat managers who ranked their organizations high on this multidimensional constructreported significantly better performance than did those who ranked theirorganizations low. We therefore propose that change readiness can be improved.This study found that management’s entrepreneurial orientation and decentralized

decision-making contribute to CR. Technology and innovativeness, both in theproduction and service processes, also have positive effects on firms’ CR.Environmental hostility and difficulties, on the other hand, were found to deterioratefirms’ CR, yet managers can find ways to overcome these barriers (see Table V).

The increasing changes in the business and technological environments make theconcepts of change readiness more critical. The streams of new opportunities and riskschallenge managers to find new effective response in a way that will preserve andsustain the organization potential for growth.

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M e a n s

S t d

T e c

h n o

l o g y a n

d

i n n o v a t i o n

E n v

i r o n m e n t a l

b a r r i e r s

M a

n a g e m e n t

o r i e n t a

t i o n – e n t r e p

M a n a g e m e n t

o r i e n t a t i o n c e n t r a l

R e s o u r c e s

T e c

h n o

l o g y a n

d i n n o v a t

i o n

5 7

. 3 1

( 1 7

. 9 4 )

E n v

i r o n m e n t a l b a r r i e r s

6 4

. 1 6

( 1 5

. 8 7 )

0 . 0 0 6

M a n a g e m e n t o r i e n t a t i o n

–

e n t r e p r e n e u r i a

l

5 0

. 0 9

( 2 0

. 5 7 )

0 . 4 3 6 * *

2 0

. 0 0 2

M a n a g e m e n t o r i e n t a t i o n

–

c e n t r a l i z a t i o n

5 6

. 6 6

( 1 8

. 9 2 )

2 0 . 3 0 4 * *

2 0

. 0 7 7

2

0 . 3

3 8 * *

R e s o u r c e s

5 6

. 3 3

( 2 1

. 0 1 )

0 . 4 4 5 * *

2 0

. 0 9 1

0 . 3

7 1 * *

2 0

. 1 8 7 * *

G r o w t h r a t e

6 5

. 3 9

( 2 0

. 3 7 )

0 . 3 1 7 * *

0 . 0

8 5

0 . 2

9 3 * *

2 0

. 1 1 2

0 . 3

4 0 * *

M a r k e t s h a r e

5 7

. 7 6

( 3 0

. 1 8 )

0 . 2 0 3 * *

2 0

. 0 0 9

0 . 2

1 0 * *

2 0

. 1 9 6 * *

0 . 3

1 6 * *

P r o

fi t a b i l i t y

5 5

. 1 3

( 2 5

. 0 9 )

0 . 2 7 0 * *

2 0

. 1 8 1 * *

0 . 2

7 8 * *

2 0

. 1 0 2

0 . 2

9 6 * *

O p e r a t i o n a

l e f fi c

i e n c y

5 7

. 6 7

( 2 0

. 1 8 )

0 . 3 7 6 * *

2 0

. 1 7 8 * *

0 . 4

1 9 * *

2 0

. 1 2 2

0 . 3

1 2 * *

S u c c e s s o

f o p p o r t u n

i t y

h a n

d l i n g

6 1

. 2 0

( 2 5

. 1 0 )

0 . 2 8 4 * *

0 . 0

6 6

0 . 2

9 7 * *

2 0

. 2 1 7 * *

0 . 1

7 0 *

S u c c e s s o

f t h r e a t h a n

d l i n

g

5 5

. 4 1

( 2 3

. 7 7 )

0 . 3 3 0 * *

2 0

. 0 0 5

0 . 4

4 1 * *

2 0

. 2 6 9 * *

0 . 2

1 0 * *

E n v

i r o n m e n t a l d y n a m

i s m

5 8

. 7 0

( 1 6

. 1 7 )

0 . 1 0 4

0 . 3

1 6 * *

0 . 0

9 1 * *

2 0

. 1 7 6 * *

2 0

. 0 3 7

G r o w t h

r a t e

M a r k e t

s h a r e

P r o fi t a b i l i t y

O p e r a t i o n a l

e f fi c i e n c y

O p p o r t u n i t y

h a n d l i n g

T h r e a t

h a n d l i n g

M a r k e t s h a r e

0 . 2

7 2 * *

–

P r o

fi t a b i l i t y

0 . 4

2 8 * *

0 . 2

6 1 * *

O p e r a t i o n a

l e f fi c

i e n c y

0 . 3

0 2 * *

0 . 1

6 2 *

0 . 4 1 1 * *

S u c c e s s o

f o p p o r t u n

i t y

h a n

d l i n g

0 . 1

6 6 * *

0 . 0

9 9

0 . 1 7 3 *

0 . 0

8 6

S u c c e s s o

f t h r e a t h a n

d l i n

g

0 . 1

8 5 * *

0 . 0

6 6

0 . 2 5 9 * *

0 . 3

0 0 * *

0 . 4

4 1 * *

E n v

i r o n m e n t a l d y n a m

i s m

0 . 0

8 5

2 0

. 0 9 2

2 0 . 0 7 6

0 . 0

1 6 -

0 . 0

7 2

0 . 1

4 2 *

N o t e s :

* p ,

0 . 0

5 ;

* * p ,

0 . 0

1

Table V.Means, Std and

correlations

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155



Specific implications for managers include the following:

. monitoring the environment informally is not sufficient. The firm has to set up amore formal system to recognize and assess potential threats and opportunities;

.

the second dimension of CR – mobilization for action, is probably a criticalvariable due to the inherent inertia in many organizations. Thus, one needs toquickly translate the knowledge about threat and opportunity to actionableresponse (Kotter, 2008); and

. the third dimension of CR is innovative action.

This requires a change from the natural patterns of response by most organizations.However, innovative action can take time to design and implement that will be inconflict with quick mobilization. It is therefore desired that organizations work ondeveloping a portfolio of innovations in advance. This is in line with the finding thatproduct innovation, use of new technology, and proactive management are positivecorrelated with change readiness.

Limitations and future researchThere are a number of limitations to the study. For most firms, there was only oneresponding manager from each organization, and the threats and opportunities wereself-selected. Though self-reported data for firms’ strategic tactics and performance arequite common in business and marketing research, it may raise concerns regardingpotential biases. The size and selection of the sample may pose limits in generalizing thestudy findings. Future studies should attempt to include a larger sample of organizationswith more respondents from each, and to perform separate analyses by type of industry,with more specific information about environmental threats and opportunities. It wouldalso be useful if survey data could be supported by observation of actual behavior infield studies. Yet in spite of its shortcomings, the study has explained interesting

variations in response patterns and in the successful handling of environmental changes.

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Further reading

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AppendixThe measuresChange readiness. Think of a relatively recent specific strategic opportunity faced by yourorganization (i.e. an increase in demand, decline in competition, new course of capital, a newregulation that has a positive affect for your organization, a new potential product or service foryour organization):

(1) Did your organization identify this opportunity at the earliest possible time (score 100),or very late after the opportunity was quite obvious? (score 0) _________

(2) Did your organization start preparing to deal with this opportunity immediately (score100), or when it was almost too late? (score 0) ________

(3) Did your organization take an incremental and familiar action in response to thisopportunity (score 0), or did it take a totally innovative response that differed from pastbehavior? (score 100) ________

Think of a relatively recent specific strategic THREAT faced by your organization (i.e.a decrease in demand, incline of competition, an adverse change in financial resource, anew regulation that has a negative affect for your organization, a new potential productor service which competes with your own).

(4) Did your organization identify this threat at the earliest possible time (score 100), or verylate after the threat was quite obvious? (score 0) ________

(5) Did your organization start preparing to deal with this threat immediately (score 100), or

when it was almost too late? (score 0) ________

(6) Did your organization take an incremental and familiar action in response to this threat(score 0), or did it take a totally innovative response that differed from past behavior?(score 100) ________

Management orientation Entrepreneurial

(1) How would you rate the extent to which top management is willing to makecommitments that involve a high proportion of your organization’s resources to riskyprojects (business, marketing, financial, or political risk)? A low score indicates a highlyconservative approach; 50 is average across all industries, and 100 indicates arisk-preferring approach _________

(2) How would you rate your organization’s ability and resource commitment tosystematically track opportunities and threats in the environment in order to craftlong-term strategy? An organization with a highly external environmental analysis andforecasting abilities is scored 100. The average across all industries is 50. _________

(3) How would you assess the extent to which your organization is proactive in trying toshape its environment, as opposed to merely reacting to trends in the environment? Aproactive organization continually trying to shape its environment should receive a scoreof 100; a business that merely reacts to trends in the environment should receive a scoreof 0. ________

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Centralization

(1) How would you rate the number of main strategic players or decision-makers in yourorganization? An exclusively one-person show is scored 0, three to five strategic playersis scored 50, a highly dispersed decision-making team (about 30 persons, or in smaller

units, 30 percent of the staff) is scored 100. __________ (2) How would you rate the degree of centralization in your organization? When

decision-making authority is strictly at the top (score 100), the organization iscentralized; when decisions are delegated to the lowest managerial level (score 0) theorganization is decentralized. 50 is the average level of decentralization. __________

Technology and innovation

(1) How would you rate the progress of your organization in terms of the number andnovelty of new techniques used in producing existing products? A score of 100 indicates

the highest possible progress in your industry; 50 would be an average, and 0 is thelowest. __________

(2) How would you rate the product innovations of your organization in terms of the number

and novelty of new products introduced? The industry score level is 50. _______ (3) How would you rate the relative number of core technologies employed in service

processes? A score of 100 indicates the highest possible use of different technologies; 50would be an average; and 0 is the lowest. __________

Environmental barriers

(1) How would you rate the extent of hostile environmental factors negative to yourorganization? A score of 100 indicates a completely hostile environment; a score of 0indicates a highly benevolent environment; 50 is for a neutral one. ____________

(2) How would you rate the number and complexity of external elements with which yourbusiness has to contend? A score of 100 indicates the most complex environment; 50 anenvironment of average complexity; a score of 0 indicates a very simple environment.

___________ Resources

(1) How would you rate the availability of human resources in your organization? Anorganization with abundant resources is scored 100; an organization with depletedresources is scored 0; an average resource level is 50. __________

(2) How would you rate the amount and frequency of investment in production equipment

and facilities? A score of 100 is given to with the most equipment- and facility-richorganization in the industry; an organization with the least equipment and facilitiesranks 0; 50 is average in the industry. __________

Performance

(1) The average profitability on the return of equity of your industry is 50. How would you

rate the profitability of your organization relative to your industry? _________ (2) The average operational efficiency of your industry is 50. How would you rate the

operational efficiency of your organization relative to the industry? _________

(3) The average rate of growth of your industry is 50. How would you rate the growth rate of your organization relative to the industry? ________

(4) How would you rate the relevant market share held by your organization? Monopoly oran industry leader is scored 100. Other business units’ scores are their sales as apercentage of the leading competitor’s sales. __________

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(5) How would you rate the success of your organization in dealing with this opportunity? Ascore of 100 would mean the highest rate of success; a score of 0 would represent afailure. __________

(6) How would you rate the success of your organization in dealing with this threat? A score

of 100 would mean the highest rate of success; a score of 0 would represent a failure. ___________

Note: Questions 5 and 6 appeared in the questionnaire after the CR section, questions 3 and 6respectively.

Environmental dynamism

(1) How would you rate your environmental uncertainty? Complete uncertainty about theenvironment is 100, an average uncertainty level is 50, if there is no uncertainty (a raresituation), assign a value of 0. _________

(2) How would you rate the rapidity and the amount of change in your environment? A scoreof 100 indicates a quick and total change in the wider environment as well as in yourindustry; 50 is the long-term average across all industries. _____________

Firm’s characteristics

(1) How would you rate the size of your organization relative to your industry? Size could beassessed by sales, assets, and personnel in the organization. An average for yourindustry will rate 50. _____________

(2) How would you rate the age of your organization relative to your industry? The oldestorganization in the industry is given a score of 100; the newest 0; and the industrymedian is 50. _____________

About the authorsYaron Timmor is the academic head of the International Business Studies and MarketingCommunication Program at the Arison School of Business, the Interdisciplinary Center Herzliya.

Prior to joining IDC he served as a Marketing Lecturer at Hebrew University and Tel AvivUniversity. He consults for Israeli and international firms and his professional record includesbeing a supervisor in an advertising agency and a marketing manager of an import andmarketing company. His research interests are in the areas of business strategy, internationalmarketing strategy, marketing communications, and services policy. Yaron Timmor is thecorresponding author and can be contacted at: [email protected]

Jehiel Zif is a member of the faculty of the Center for Academic Studies, Sarnat BusinessSchool in Israel and Hult International Business School in Boston. For many years, he was amember of the Faculty of Management at Tel-Aviv University. He has lectured in executiveprograms at Harvard, Wharton and Northwestern and in other MBA and executive programs indifferent countries. He has been the professional director of Ziv Consulting and Training Ltd, afirm with 20 years’ experience in marketing and management assignments. Previously, he wasthe president of a start-up US firm in the field of educational simulations.

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