The Hidden Cost of Change (Part 4)

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The Leadership skill the AI era will demand

Introduction

I began writing this series, in an attempt to figure out the full cost of change so that as we navigate the AI accelerated change, leaders are aware of both the hidden and actual cost of change, however the research took me somewhere slightly different.

Across the last three blogs, we explored the hidden cost of transformation, the possibility that some behaviours we describe as resistance may instead reflect depleted organisational capacity, and the idea that organisations might benefit from evaluating change not only in financial terms, but also in terms of the capacity it consumes.

Collectively, these ideas have led me to a different question. If AI makes continuous adaptation the new normal, what will distinguish organisations that continue adapting successfully from those that gradually struggle under the weight of constant transformation?

I am beginning to wonder whether the answer is not better technology, nor better change management programme but perhaps it may be better stewardship of organisational capacity.

The science

Several different bodies of research point in this direction, although none makes exactly this argument.

Dynamic capabilities research suggests that long-term success depends on an organisation's ability to continually renew and reconfigure itself as environments change. Adaptation is not an occasional activity. It becomes an enduring organisational capability.

Research on organisational capacity for change similarly argues that organisations differ in their ability to sustain repeated change over time, and that this capability influences the success of future transformation initiatives.

Implementation science reminds us that introducing change is only the beginning. New technologies and new ways of working only create value when they become embedded in everyday practice.
Meanwhile, theories such as the Job Demands-Resources model, conservation of resources theory and research on organisational attention all suggest that the human resources required to sustain adaptation are finite.

Although these theories originate from different disciplines, they converge around a common idea. Successful adaptation depends on more than strategy. It depends on the human capability available to sustain it.

Key findings

Reading across these different perspectives has left me with a personal hypothesis. The defining leadership responsibility of the AI era is not managing change, it is stewarding organisational capacity.
By organisational capacity, I am referring to the collective human capability an organisation draws upon to understand change, make sense of it, learn, collaborate, make good decisions and continue delivering whilst adaptation is taking place.

Unlike financial capital, organisational capacity is constantly being spent and replenished.

• Every difficult decision draws upon it.
• Every restructuring consumes some of it.
• Every new technology requires it.
• Every successful learning experience can strengthen it.

Leadership, therefore, may be less about persuading people to embrace change and more about ensuring the organisation retains enough capacity to keep adapting.

What this means in practice

If this hypothesis proves useful, I wonder whether leadership conversations might begin to change.
Rather than asking only:
"How quickly can we implement this?"
Leaders might also ask:
"What organisational capacity will this require?"
Instead of asking:
"Why are people resisting?"
They might ask:
"What capacity have we already asked people to spend?"
Instead of celebrating the completion of another transformation programme, they might ask:
"Has this initiative left the organisation with greater capacity than it had before?"

Those questions shift leadership away from managing projects and towards stewarding capability. This feels particularly important in the context of AI. Technology will undoubtedly continue to evolve. What will determine organisational success, however, is unlikely to be technology alone. It will be whether organisations preserve enough human capability to learn continuously, exercise sound judgement, collaborate effectively, adapt responsibly and recover before the next wave of transformation arrives.

This is the leadership challenge we need to understand and support. The organisations that thrive over the next decade may not be those that implement AI the fastest. They may be those that become the most thoughtful stewards of organisational capacity. I suspect that is a very different leadership discipline from the one many of us were taught. And I think we are only beginning to explore what it might look like.

A quote to reflect on
"Technology may determine what becomes possible. Organisational capacity may determine what becomes sustainable."

A question to reflect on
As you think about the next major change in your organisation, what would be different if your primary leadership responsibility was not simply delivering the transformation, but leaving your organisation with greater capacity than it had before?

​Closing thoughts
Every change sends an invoice. The organisations that thrive will be those that learn how to calculate its true cost.
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Further reading

• Teece, D., Pisano, G. & Shuen, A. (1997). Dynamic Capabilities and Strategic Management.
• Heckmann, N., Steger, T. & Dowling, M. (2016). Organizational Capacity for Change, Change Experience, and Change Project Performance.
• May, C. & Finch, T. (2009). Implementing, Embedding, and Integrating Practices: An Outline of Normalization Process Theory.
• Hobfoll, S. E. (1989). Conservation of Resources: A New Attempt at Conceptualizing Stress.
• Bakker, A. B. & Demerouti, E. (2007). The Job Demands–Resources Model: State of the Art.

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