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THE NUMBER ONE ORGANIZATIONAL CHALLENGE While

decades ago innovative organizations were particularly known for their product innovations, nowadays this label is reserved for organizations that are able to adapt to changing landscapes by redesigning their business models. At the turn of the last century globalization was the driving force behind intensifying competition, and large international players were able to change the rules of the game. A decade later, the web-based economy — with powerful players such as Amazon, Alibaba, Netflix, and Google — is again redefining traditional sector boundaries and distribution methods and is forcing incumbents to either play by the new rules or quit. Playing by these new rules means being innovative by quickly adapting the business model and implementing the required changes successfully. Managing change is the number one challenge identified by 48% of the businesses worldwide in a recent study. When organizations don’t respond to developments in the environment their survival becomes threatened. The potential detrimental effect of a lack of organizational change is demonstrated by examples such as Howard Johnson’s, Rexall Drug, Stuckey’s, Blockbuster and Movie Gallery. In 2004, Blockbuster had over 9,000 company-owned and franchised units in the US with almost 60,000 employees. In 2010, it filed for bankruptcy due to not responding to competition from Netflix and Redbox. In 2013, it closed all its remaining company-owned stores and only the 50 franchised units remained open. Movie Gallery was the second largest retail movie rental store behind Blockbuster. It grew through the 2000s through acquisitions and takeovers, acquiring Hollywood Video. The company filed for bankruptcy in 2010 and closed its doors for the same reasons as Blockbuster.

CONCLUSION

Franchise chains occupy a growing segment of the economy. They are unique legally independent units, which jointly form a network with a specific business format that is valuable and recognizable to the customer. As consumers, we are familiar with them worldwide. We are also aware when they are managed effectively and when they are managed badly. We encourage managers to examine the complexities of chain-wide change before implementation; to bring about constructive franchisee responses by involving the franchisees early on in the change process, and to recognize how franchisee responses can change over time and that trust is needed to maintain an effective relationship. The complexities of implementing chain-wide change require a full benefit and cost analysis. In the end, managers and franchisees must clearly understand why and where the change is taking them. We encourage managers to consider the insights provided in this article and how they might be applied at the corporate and unit level in order to deal with current and future dynamic environments. Because ultimately, ‘When you’re finished changing, you’re finished’, Benjamin Franklin (1706—1790).