I’ve truly enjoyed flying in an Airbus A380, when I’ve had the chance. It’s an iconic aircraft, the realisation of a €25 billion idea for the world’s biggest-ever passenger plane. The original concept included onboard shops, restaurants, gyms and casinos. Like a hotel in the sky, perhaps.
But, the structure and economics of the air travel market keep-on changing, and have made producing the A380 unviable. Production will stop in 2021, when the current backlog of orders runs out. Airbus’s investors valued that as a positive outcome: when the announcement was made, together with the financial results for 2018, the company’s share price rose 5%.
Ending production of A380s wasn’t easy for the people responsible for making the choice. “It's a painful decision," said Airbus CEO Tom Enders, "We've invested a lot of effort, a lot of resources and a lot of sweat into this aircraft." I think that’s the same for all of us: it’s hard to exit an idea we’ve believed in, even when the probability of it ever working means that’s realistically the only option we have.
Whether we’re investing in products, shares, or ideas for changing how our enterprise works, there’s one inescapable truth. Some investments work better than others, and some will not work at all. Were we to invest on the basis that every change must succeed, we should expect to lose-out over time. An efficient portfolio is made-up of investments with diverse probabilities of success.
When we’re investing in enterprise change, how do we know if an idea has worked? There are four outcomes to consider: what it contributed to our goals for investing in change; the risks we ended-up taking; the total resources it consumed; and, the impact it has had on our future operating costs.
Why do some ideas we invest in work better than others? Here are some of the potential reasons:
Whenever I run workshops on investing in change, I ask people how – theoretically – we could make sure every idea had a high probability of success. There are, of course, all sorts of answers. But the most common is to invest only in changes we find easy. For most enterprises, this is simply not realistic. With all the changes that keep happening in our markets, plus our own goals and ambitions, we deliberately invest in both challenging and easier ideas, and make enough of them work to achieve all the outcomes we want.
In practice, that means choosing and managing a 'change portfolio' with diverse probabilities of success. In the traffic-light language of performance reporting, we want a healthy combination of greens, ambers and reds. If faced with an all-green portfolio, we would most likely have to find some more challenging ideas to invest in.
Those probabilities of success will continually evolve. Some will fall down to zero (“lights-out”), which means – like producing the A380 – it’s time to exit. So, because it’s hard to give up on ideas we believe in, we need people managing our Change Portfolio who are passionate about its overall outcomes, while dispassionate in assessing the up-to-date probability that each idea we’re investing in will actually work.
Photo credit: G-R Mottez (Unsplash)