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Change Management: Lessons from the Fable and Real-Life Story of Wal-Mart

Let’s temporarily set aside the dry concepts and explore the change management fable by John Kotter and the real-life story of Wal-Mart’s failure in South Korea.

1. The Fable of Change Management – “The Melting Iceberg”

Once upon a time, there was a tribe of penguins living on an iceberg in the cold Antarctic region. Among the tribe, there was a penguin named Fred. Unlike the other penguins, Fred was less sociable and preferred to observe everything around him. Fred discovered that the iceberg on which the tribe lived contained pockets of water. During winter, these pockets would freeze, and as the water turned into ice, it would expand, causing the iceberg to break into pieces. The lives of the entire tribe would be in danger.

Fred became worried because he didn’t know how to warn the tribe. He remembered how his friend Harold was treated when he tried to warn others about dangers. Fred decided to meet with a member of the tribe’s leadership council, Alice, who was known for being practical and action-oriented. After hearing Fred’s concerns, Alice agreed to introduce Fred to the leadership council, where he could present his warning. Fred was nervous, unsure how to convince the elders.

As Fred feared, when he presented his concerns, many council members, especially one named NoNo, dismissed the warning, claiming it was unimportant and there was no need for panic. Not giving up, Fred decided to conduct an experiment. He filled a glass bottle with water and left it outside overnight. Fred confidently told everyone that the bottle would break when the water froze the next morning. When the bottle shattered, the tribe finally believed Fred’s warning.

Once the problem was recognized, some suggested that the tribe’s leader, Louis, should take responsibility for solving it. Others recommended that Louis delegate the task to younger members. But Louis, with his leadership abilities, had his own approach. He decided to form an elite team of penguins, including those with technical expertise. While other penguins continued debating the cause of the problem and how to fix it, Fred quietly observed and reflected. One day, while watching migrating seagulls, Fred came up with a bold idea to change the tribe’s way of life: always look for new lands to inhabit.

This story highlights the importance of proactive leadership, the need for critical thinking, and the ability to adapt to challenges in the face of impending change.

 

 

After identifying the solution, Louis called a full tribal meeting to convey the tribe’s new vision. A group of scouts was formed to explore new lands. However, there were obstacles in providing food for the scout group, as traditionally, penguins did not share food outside their families. NoNo took the opportunity to exaggerate these difficulties, causing confusion among many penguins. Louis decided to use a trick to separate NoNo from the tribe’s preparations. At the same time, Louis also made efforts to involve everyone, including the young penguins, in the reform process.

The scouts worked diligently and kept the tribe updated on the new territories they had discovered. Finally, the tribe chose a suitable iceberg. The penguin tribe successfully relocated to their new home, despite some difficulties. Once they arrived, the tribe continued to search for other lands that might offer more convenient conditions. The “Scout Training” subject was later added to the tribe’s education system. Today, the penguin tribe moves around freely, and almost everyone accepts this way of life.

Through this fable of change management, using the metaphor of the penguin tribe, John Kotter wanted to send a message to leaders of innovation about the process to ensure that change is successfully implemented.

2. The Real-Life Story of Wal-Mart’s Change Management in South Korea

Wal-Mart, the world’s leading discount retail chain, is one of the most successful private companies in the United States. Several factors contributed to this success, one of which is the company’s use of Alexander Osterwalder’s business model framework, which is based on 9 key components: Customer Segments, Value Proposition, Channels, Customer Relationships, Revenue Streams, Key Resources, Key Activities, Key Partners, and Cost Structure.

By applying Osterwalder’s model, Wal-Mart’s value proposition was centered around offering low prices every day. Wal-Mart not only sold convenient, diverse products but also became a one-stop shopping destination where customers could purchase anything, from needles and thread to industrial goods. With this value proposition, customers saved both time and money.

However, Wal-Mart failed in South Korea and had to withdraw from the market.

The main reason for Wal-Mart’s painful failure was a miscalculated localization strategy. In South Korea, Wal-Mart hastily applied nearly 80% of the supermarket model used in Western countries. Western Wal-Mart stores were typically located far from city centers to reduce land rental costs and lower product prices. Since Western consumers visited supermarkets only 1-2 times a week, they were willing to drive to suburban areas and purchase items in bulk to stockpile at home.

In contrast, South Korean consumers were far more dedicated shoppers. The average South Korean visited the supermarket 2-3 times a week because they preferred to buy fresh food daily. The small size of South Korean homes also meant they lacked space to store large quantities of goods, so they typically bought in smaller quantities. Wal-Mart’s supermarkets in South Korea were located in the suburbs, and the products were often packaged in large quantities, which made it difficult for consumers to select items.

Additionally, the goods in these Wal-Mart stores were packaged in a very technical and elaborate way, which made many customers hesitant to examine products closely. In contrast, South Korean stores organized products in a manner that was most convenient for customers to observe and compare items of the same type. Staff members at South Korean stores were also more available to assist customers and answer their questions.

This failure illustrates the crucial importance of understanding and adapting to local consumer preferences when expanding internationally.

 

Change Management Wal-Mart

 

Although Wal-Mart’s strength lies in offering low prices by minimizing costs related to staff and infrastructure, its core value proposition, “Everyday Low Prices,” was designed to deliver value to customers. However, for South Korean customers, with an average income of $24,000 per year and an average working time of over 2,000 hours annually, they needed more than just low prices—they needed time-saving solutions.

Another factor is the high level of loyalty South Koreans have towards local products. They are not easily swayed to change their favorite brands just because of cheaper prices. In Wal-Mart’s stores in South Korea, the shelves were filled with imported Western goods and canned products. Meanwhile, South Koreans tend to prefer local products and fresh food.

Thus, it is essential to adapt and change business models, even for top companies like Wal-Mart, in order to succeed.

3. What is Change Management? Why is it necessary?

From the fable of change management, symbolized by a penguin tribe changing their home—an iceberg—to the real-life story of Wal-Mart’s failure in South Korea due to its attempt to apply a successful business model in the U.S. to the Korean market, both the penguin tribe’s success in relocating to a safe “home” and Wal-Mart’s failure illustrate the result of effective or ineffective change management.

Change management can be understood as the set of management activities that proactively identify, encourage, and direct a company’s process of change in alignment with the shifts in the business environment, ensuring the company’s development in a fluctuating market.

According to P. DeJager, “Change is the transition from an old state to a new state, the removal of the old from the past, and the acceptance of the new for the future.”

Change is understood here as an active reform process aimed at increasing the organization’s competitiveness. Change can range from large-scale actions, such as restructuring organizations, reorganizing departments, or applying new processes and technologies, to smaller changes like altering work styles or improving product quality. Ultimately, for an organization, change aims to improve operational quality, product quality, and competitiveness, thereby increasing the collective benefit of the organization. For individuals, change makes work more interesting, life better, and helps them feel more dynamic, confident, and modern.

The fable of change management through the penguin tribe and the real-world story of Wal-Mart’s failure in South Korea, which adhered to a successful business model in the U.S., show the consequences of managing or failing to manage change properly.

The common answer is that in order to have a successful business model, companies often go through experiences and failures. To minimize risks in the process of changing a business model, companies need a change management process, even involving company restructuring.

As markets become more competitive and fierce, redefining or changing the business model is one of the key questions that every company needs to answer. Whether they like it or not, there is one truth: “The only thing that does not change is change.” The company that identifies and adapts its business model before its competitors will gain a pioneering position and have the opportunity to lead the market.

In the context of global integration and the rapid development of information technology, opportunities are always accompanied by competitive pressure and high consumer expectations for optimized services and products that offer positive experiences. This requires companies to proactively understand market trends, change, and adapt to new conditions and requirements. Change management allows companies to make changes proactively, in the right direction and at the right time. This is essential for a company to survive and thrive in an ever-changing environment.

Additionally, you can refer to these articles:

Sources:

HRDC compilation and sharing.

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