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From Strategy To Organisational Change

Strategy shapes what the organisation needs to be capable of doing. Where existing capabilities are insufficient, organisational change may be required, with learning from that change contributing to the continuing evolution of strategy.

Contents
Introduction

This website maintains that all organisational change should be justified by strategic intent, either to pursue the enterprise’s chosen direction or to adapt to changing circumstances that require reassessing direction, strategy, or objectives.

So how does strategic intent develop through strategy formulation and execution? What are the implications for required organisational capabilities, and when does this necessitate organisational change?

The Strategy Process

The aim here is not to provide a comprehensive overview of strategy, but to focus on aspects of the strategy process that define required organisational capabilities. This process is examined through five related concepts: Strategic Intent, Strategy Formulation, Strategy Development, Strategy Execution, and Emergent Strategy – Learning Through Action. Although presented separately for clarity, these are not sequential stages. Strategy evolves through choices, actions, and learning, with execution experience influencing formulation, development, and even strategic intent.

Strategic intent defines what the organisation aims to achieve or become over the long term. It sets direction without specifying exactly how that direction will be pursued.

Strategic intent sets direction, but strategy requires the organisation to determine how it will pursue that direction.

Strategy formulation is the process by which the organisation assesses its circumstances and makes strategic choices. This involves analysing the external environment, organisational performance, opportunities, threats, capabilities, and constraints to determine where and how the organisation will compete, create value, or achieve its purpose.

Formulation requires making choices and trade-offs. Since resources are limited, pursuing one opportunity may preclude others. A strategy that tries to address every priority is unlikely to offer clear direction.

Terminology for the strategy process varies, and strategy formulation and development are sometimes used interchangeably. This website distinguishes them, as making strategic choices differs from developing those choices into a basis for execution.

Strategy Development translates choices from formulation into a coherent basis for execution. It sets strategic objectives, establishes priorities, identifies required capabilities, considers resource implications, and defines how progress and outcomes will be measured. This process turns strategic direction into a framework for assessing organisational capability and performance.

Strategy execution is the ongoing process of translating strategic intent, choices, and objectives into organisational outcomes. It includes both specific actions, such as acquisitions or market entry, and ongoing activities that utilise organisational capabilities. Through these actions, the organisation delivers goods and services, manages assets, allocates resources, and makes decisions, resulting in organisational value.

Organisational change may be part of strategy execution, specifically to ensure the organisation has the capabilities needed to pursue its strategy and objectives. These capabilities create lasting value when applied. Organisational change should be seen as an enabler of ongoing strategy execution, altering how the organisation creates value.

The previous concepts may imply that strategy is entirely deliberate, moving from intent to formulation, development, and execution. Organisations operate in changing environments where assumptions may be incorrect, and new opportunities or knowledge arise. As a result, strategy can also emerge through action and learning.

Emergent strategy refers to patterns of action that develop over time and may not have been intended in the original strategy. Practical outcomes can differ from expectations, and changes in customers, competitors, technology, or the environment may reveal unforeseen opportunities or constraints. Learning from experience can influence strategic choices and, if significant, prompt a reconsideration of strategic intent.

Emergent strategy is not the absence of direction or deliberate planning. Instead, it recognises that formulation, development, and execution are interconnected and iterative. Strategic intent offers orientation, while learning through action can influence both the path and the destination. Strategy evolves through the interaction of deliberate choices and discoveries made during execution.

This relationship can be depicted as a flow from strategic intent through strategy to required organisational capability, as shown in Figure 1. If current capability is insufficient, organisational change may be needed. Learning from execution and change can then inform the organisation’s evolving strategy.

Together, these processes define what the organisation aims to achieve, how it will pursue that ambition, and the capabilities required. The key question for organisational change is whether the organisation can currently execute its evolving strategy. If not, the gap between required and existing capability determines the necessary organisational change.

From Strategy To Organisational Capability

For organisational change, a key consideration from the strategy process is what the organisation must be capable of doing to pursue its evolving strategy and objectives.

This website examines capability at two distinct but connected levels.

  • At the higher level are the underlying principles and assumptions that shape how the organisation creates value, exercises authority, allocates resources, manages accountability, and makes strategic choices. This is referred to as the organisation’s Governing Logic on this website.
  • At the more tangible level are the organisation’s Culture, Business Model, Value Chain, and Operating Model. Collectively, these form what this website terms the Enterprise System. The Enterprise System expresses the Governing Logic and provides the capabilities through which the organisation operates.

The relationship between the two is not one-way. Governing Logic shapes the Enterprise System, but experiences and behaviours within the Enterprise System can also reinforce, challenge, or change the Governing Logic. They are mutually influential yet analytically distinct.

This distinction is important because a strategy may require capabilities the current Enterprise System lacks. It may also demand new ways of creating value, allocating authority, or making decisions that conflict with the existing Governing Logic. In these cases, organisational change must address both capability gaps and the underlying assumptions.

From Required Capability To Organisational Change

Once the required capabilities for the evolving strategy are identified, they should be compared to current capabilities. If current capabilities are sufficient, organisational change may not be needed. If a gap exists, change may be necessary. Importantly, neither required capabilities nor the gap are fixed; organisational change generates learning that can refine both capability needs and the supporting strategy.

The nature of the capability gap and the level of uncertainty determine how organisational change should be approached. If the existing Governing Logic remains suitable and required capabilities are clear, changes can be made within the Enterprise System through First-Order Change. If the strategic requirement challenges the Governing Logic, both required capabilities and future configuration may be uncertain. In such cases, Second-Order Change requires more exploration, learning, and adaptation, rather than assuming a predetermined future state.

Organisational change is part of the broader strategy process. It is undertaken to develop the capabilities needed for strategy execution, with understanding of those capabilities evolving through change. Therefore, all organisational change should be traceable to strategic intent. If a proposed change is not connected to organisational goals, the allocation of resources should be questioned.

The Role Of An Enterprise Change Office

Identifying a gap between required and current capabilities does not automatically determine the necessary organisational change. The gap must be understood, its causes analysed, and its implications for the Governing Logic and Enterprise System assessed before deciding on a response. Moving directly from identifying a gap to launching an initiative risks addressing the problem without fully understanding it.

An Enterprise Change Office (ECO) plays a key role here. By collaborating with strategy leaders, operational managers, and specialists, the ECO helps translate capability gaps into well-defined organisational change. It provides an enterprise perspective on strategic requirements and their implications for capability, Governing Logic, and the Enterprise System. The ECO also helps identify boundaries, dependencies, and whether the change is First-Order or Second-Order. It does not make the strategic choices that create these requirements.

For First-Order Change, this may result in one or more Change Initiatives, with the ECO helping to ensure their scope addresses required changes across the Enterprise System, not just the most visible needs. If analysis shows that the existing Governing Logic may constrain the strategic response, defining a conventional initiative too early is inappropriate. Instead, the ECO can help create conditions for Second-Order exploration, where assumptions are challenged and future options are explored before committing to a solution.

The ECO does not set strategic intent, formulate or own strategy, or automatically govern resulting changes. Strategic decisions remain with those who have organisational authority. The ECO provides the architecture, processes, standards, expertise, and enterprise perspective needed to understand the implications of those choices and translate capability gaps into coherent organisational change.

The relationship is also reciprocal. Organisational change generates insights about capabilities, constraints, dependencies, and assumptions that may affect strategy. The ECO ensures relevant learning is shared with those responsible for strategy, informing and challenging ongoing strategic thinking without making strategic decisions itself.

Explore Further

Approaching Second-Order Change

This website adopts a strategy-led framework that examines the relationships between strategy, the Enterprise System, Operational Continuity, Governance Logic, and the Two Orders of Organisational Change.

From Capability Gaps To A Portfolio Of Change

This website adopts a strategy-led framework that examines the relationships between strategy, the Enterprise System, Operational Continuity, Governance Logic, and the Two Orders of Organisational Change.

Structuring The Problem Statement For First-Order Change

This website adopts a strategy-led framework that examines the relationships between strategy, the Enterprise System, Operational Continuity, Governance Logic, and the Two Orders of Organisational Change.

Using Strategy Maps To Structure Organisational Change

This website adopts a strategy-led framework that examines the relationships between strategy, the Enterprise System, Operational Continuity, Governance Logic, and the Two Orders of Organisational Change.
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Does First- and Second-Order Change Still Apply?

A valid question is whether these concepts, developed in a different era, remain relevant today. Organisations now operate in environments described as VUCA – Volatile, Complex, Nonlinear, and Continuously Changing. Recently, BANI – Brittle, Anxious, Nonlinear, and Incomprehensible – has joined VUCA in describing such conditions. Does thinking from the 1970s and 1980s still provide value?

These concepts remain useful because First-Order and Second-Order Change classify what is being changed, not the environment in which change occurs.

An organisation in a highly uncertain environment may continually adapt its processes, structures, technologies, and capabilities, while its underlying assumptions and principles remain intact. Regardless of the extent or complexity, such adaptations are considered First-Order Change as defined here.

At times, environmental changes may challenge these underlying assumptions. When an organisation must reconsider how it creates value, exercises authority, allocates resources, defines its identity, or manages accountability, it enters the realm of Second-Order Change.

This distinction does not require change to move neatly from one stable state to another. Continuous adaptation, experimentation, and emergence can all occur within First-Order Change. The distinction is analytical, focusing on what is changing rather than the timing or frequency of change.

The boundary between these types of change may not always be clear, especially when ongoing adaptation starts to challenge the organisation’s underlying assumptions. However, the distinction remains analytically valuable: it clarifies whether change occurs within the existing Governing Logic or if that logic itself is being reconsidered.

VUCA and BANI offer different ways to describe organisational environments, but they do not replace the need to ask a fundamental question: Are we changing the organisational system within its existing logic, or does that logic itself require reconsideration?

Linda Ackerman and Three Types of Change

Linda Ackerman developed an influential distinction between Developmental, Transitional and Transformational Change in Ackerman (1986). At the time, she was primarily an Organisation Development practitioner and consultant.

Ackerman defined Developmental Change as improving existing conditions. Transitional Change involves moving from a current state to a clearly defined new state, with the transition managed over a controlled period. In contrast, Transformational Change results in a new state that emerges over time and is not fully known in advance.

This distinction is important because it makes transformation qualitatively different from continuous improvement or implementing a set organisational design. The three types of change are explored in Figure 2.

Developmental Change Improvement of what is; new state is a prescribed enhancement of the old state. 26_11
Transitional Change Design and implementation of a desired new state that solves an old state problem; requires management of the transition process to dismantle the old state while putting in place the new state; managed timetable. 26_12
Transformational Change

Market requirements force fundamental changes in strategy, operations, and worldview.

New state is unknown - it emerges from visioning, trial and error discovery, and learnings.

New state requires fundamental shift in mindset, organising principles, behaviour, and or culture, as well as organisational changes, all designed to support new business directions.

Critical mass of organisation must operate from new mindset and behaviour for transformation to succeed and new business model or direction to be sustained.

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Figure best viewed on tablet or above

Figure 2: Ackerman’s Classification Of Change

On this website, daschange.info, Ackerman’s Developmental and Transitional Change are considered forms of First-Order System Change, while Transformational Change aligns with Second-Order Transformational Change. This mapping is an analytical interpretation provided by this website, and not part of Ackerman’s original model:

  • Developmental and Transitional Change are treated as forms of First-Order Change, since both can occur while the underlying organisational order remains substantially intact.
  • Transformational Change is associated with Second-Order Change, where that underlying order itself is changing, and the eventual future state cannot necessarily be specified in advance.

Jean Bartunek and Michael Moch and the Orders of Change

The Organisational Development scholars Jean Bartunek and Michael Moch developed the distinction between different orders of organisational change from a cognitive perspective. In Bartunek and Moch (1987), they examined how the concept of schemata could help explain different forms of organisational change.

Schemata are organising frameworks through which people understand and interpret events. Bartunek and Moch described First-Order Change as incremental change occurring within schemata already shared by organisational members. Second-Order Change involves modification of those shared schemata themselves.

They also introduced Third-Order Change, which they described as developing the capacity of an organisation’s members to recognise their existing schemata and change them as circumstances require.

Their work extended the distinction between First-Order and Second-Order Change by highlighting the importance of how organisational members interpret their environment. It demonstrated that fundamental change may require altering the shared frameworks through which organisational reality is understood, not just structures, processes, or behaviours.

Amir Levy and Second-Order Change

Amir Levy was an organisational theorist whose work in the 1980s helped develop the distinction between First-Order and Second-Order Change specifically in relation to organisations.

Levy (1986) distinguished between changes within an existing organisational framework and Second-Order Change, which involves more fundamental organisational transformation. He characterised Second-Order Change as multidimensional, multilevel, qualitative, and discontinuous, involving a shift in organisational paradigm.

Together with Uri Merry, Levy developed these ideas further in Levy and Merry (1986). Their work examined organisational transformation through a range of perspectives, including organisational paradigms, culture, myths, purpose and approaches to managing Second-Order Change.

Levy’s work was instrumental in defining organisational transformation as conceptually distinct from extensive or incremental change. Transformation involves a qualitative shift in the organisation and its underlying paradigm, not just the scale or quantity of changes.

Paul Watzlawick and the Two Orders of Change

Paul Watzlawick was a psychologist, communication theorist and influential figure at the Mental Research Institute in Palo Alto, California. Working with John Weakland and Richard Fisch, he drew on systems theory to examine why attempts to solve problems sometimes leave the underlying conditions that generate them unchanged.

Watzlawick et al (1974) distinguished between First-Order and Second-Order Change. First-Order Change occurs within an existing system: its components, behaviours or processes may change while the rules governing the system remain substantially intact. Second-Order Change alters the system itself by changing the rules, assumptions or relationships through which it operates.

This distinction was further developed and applied to organisational change by Levy, Bartunek, and Moch. Ackerman, meanwhile, introduced a related framework distinguishing Developmental, Transitional, and Transformational Change.

Watzlawick et al. provides an important conceptual foundation for the Two Orders of Organisational Change used within this website.

Ecosystem

The Office of Government Commerce And P3O®

The Office of Government Commerce (OGC) was a UK government body established in 2000 to promote efficiency and best practices in public sector procurement, project management, and programme management. One of its significant contributions was the development of the P3O® (Portfolio, Programme, and Project Offices) framework, first published in 2008. This framework provides principles and guidance on designing and operating effective support structures for delivering change. P3O® was created in response to the growing need for organisations to align their strategies with execution and to standardise the roles of PMOs across different contexts.

In 2014, the stewardship of the OGC’s best practice portfolio was transferred to AXELOS, a joint venture between the UK Cabinet Office and Capita. AXELOS continues to maintain and publish the official P3O® guidance, with the most recent version being “Portfolio, Programme and Project Offices: P3O® Guidance” (AXELOS, 2013).

The guidance outlines a hierarchy of structures, which is summarised in Exhibit 1. It also notes that “projects” can stand alone and do not need to be part of a “programme”.

Exhibit 1: P30® Hierarchy