Is it change? Or is it noise? (Next!).

I'm writing these notes in a McDonald's. I've just finished eating a fish sandwich and some fries, washed down with a Coke. I never go to a McDonald's at home, but sometimes on the road, I need a quick fuel stop that won't kill me, at least not with noticeable speed. And it's familiar. It doesn't change.

Besides, this place has window seats, and I love to sit in a window seat and take notes.

Outside the window, an ancient peasant couple in black and gray sit on the sidewalk, their backs propped against a lamppost, resting and arguing, umbrella propped between them, satchel at their feet. They sit, quiet, in a sea of pedestrians, beyond them the surging tides of bicycles, pedicabs, cabs, trucks, and Mercedes, swirling around the base of the great lowering Qianmen Gate, beyond that the squat bulk of Mao's tomb and the vast open space of Tienanmen Square, thronged now with walkers, lovers, children with kites and balloons, and tourists in from the provinces snapping pictures of each other.

China is the international poster child for change. In Beijing, people are always flipping out cell phones, chattering away on the sidewalk while flagging down a cab. Construction cranes pierce the sky like settling swarms of katydids.

Communism, as a set of beliefs, has vanished like a popped bubble. Mao buttons and caps are sold to tourists as kitsch. Tourists jostle each other to stand for their Kodak moment in the very spot on Tienanmen Gate from which Mao waved to the million Red Guards. The sons and daughters of party bosses make billion-dollar deals through Hong Kong, while the People Liberation Army launches satellites for Loral and Hughes. In the glittering four-star restaurants along Wangfujing Dajie (Beijing's answer to Rodeo Drive), party apparats dine in designer suits with the labels left on the sleeves.

Some analysts are already predicting that, if the 20th was the American Century, the 21st will be the Century of China.

Yet the Party still rules from behind its walls in Zhongnanhai. China's billion peasants live much as they always have, with pits for toilets and their feet for motive power. Even the splash and cash, the glitter and foreign music, the building boom and the fever for things Western, have all been here before, in the decades before 1949.

Is it change? Or just noise? How can you tell?

Getting to the root

In your organization, you are probably experiencing new things at a rapid pace--0new technologies. new ways of organizing, new funding methods and restrictions, new demands for quality and speed, new ways of measuring performance, possibly new partners, new leadership, even new ownership. As an executive, you are likely bombarded with proposals for even more changes from consultants, vendors, potential partners, other parts of your organization. Peruse an industry publication, or visit a convention, and you find hundreds of challenges to the status quo.

To keep your balance and focus on what you are doing, you must somehow ignore 90 percent or more of all the possible changes clamoring for your support. Yet you cannot afford to miss the few that will really make a difference. You cannot afford to merely stonewall all change.

How can you tell the difference between mere noise, and a profound change headed your way? Your gut instincts may not always be a reliable gauge. It takes a long time for most people to become an executive leader. If you are typical, you were raised and trained in a different era, with different expectations. You see things with different lenses. Imagine a former Red Guard trying to evaluate the true return on investment from different joint venture possibilities--then ask yourself whether your gut reactions to the current pace of change are always reliable.

So what can you trust? You can trust first principles. Ask yourself what you know about the reasons that changes are happening in this environment. Then ask yourself about what is being proposed--how does It fit with the roots of the changes in health care and your organization?

Health care is going through changes that are complex, turbulent, even chaotic. Yet the roots of those changes are relatively simple. Several decades of unrestrained, double-digit medical inflation led to demands from government and business for cost controls. New accounting rules forced corporate financial managers to mark down future health care costs for retirees against today's profits. Low inflation and tough global competition left business leaders with no way to hide rising health care costs in rising prices.

The effective result, in health care, was a transfer of power from sellers (health care providers) to buyers (insurance plans, government, business, and individual consumers) and increased competition at every level--between institutions, between insurers, even between individual clinicians.

Three change filters

In 1982 the well-known consultant group McKinsey and Company conducted a study of the financial services, airline, and trucking industries, to determine what had happened to them when deregulation opened them to no-holds-barred competition. They found:

1. Evaluate changes coming your way

* Increased variation In performance between companies, with some rapidly improving while others stood still, or deteriorated under price pressure;

* Increased variation in success, with some rapidly getting larger, while others went out of business;

* Severe price pressure, with the founding in each industry of cut-rate organizations and practices;

* Rapid spread of new products and technologies;

* Cost-cutting, sometimes draconian;

* Greater need for investment capital.

Do these sound familiar? Add to them one other effect--large-scale consolidation (which follows largely from the increased need for investment capital, increased price pressure, and widening variation in the viability of different organizations)--and you have a picture of what is happening today in health care.

This is a filter for evaluating changes coming your way. Ask yourself: In this environment, does this proposed change increase the chances of my organization? Does it cut costs? Make better use of capital, or allow us to attract more capital? Give us a new product? Move us faster through technological change? Improve our performance in a way that can be seen and measured?

And equally important: Does this proposed change move us closer to our mission, what we are really here for, or does it move us farther away?

2. How ready is your organization?

The second filter springs from the question: How ready is this organization for change? In an earlier column we talked about the five qualities of an organization that will change easily and profitably. They are:

* Husbanded resources: An organization in good financial shape has more options;

* Abundant relationships: An organization with many, multidirectional relationships has more options than one with narrow, silo-like structures;

* Abundant information: Corporate secrecy and organizational denial make it very difficult to adapt to new circumstances;

* Distributed power: If no one moves until Mr. Big says, "Move," the organization is brittle. If people far from the center can make decisions appropriate to their area, the organization is flexible.

* A common story: An organization whose members are clear about their purpose and history can shift its strategies rapidly.

3. How easy will this change be?

The final filter springs from the question: How likely is it that the organization will easily adopt this particular change? Here the answers can be found in the classic study on The Diffusion of Innovation (Detroit, Michigan: Free Press, 1983) by Everett Rogers. He found five parameters:

* Relative advantage: Does this innovation offer a big advantage over what currently is in use (as, say, the CD did compared to the cassette tape)? Or is the advantage small (as, say, Sony's MD recordable digital disk compared to the CD)?

* Compatibility with existing values and behaviors: Does this innovation require people to think and act in fundamentally new ways? Or does it fit into the ways that they already think and act? (Except for home recording enthusiasts, the CD acted exactly like a cassette).

* Simplicity: Does the innovation require a lot of training, tracking, and hand-holding?

* Trialability: Can people try out the new innovation before committing themselves to it?

* Observability: Are the improved results obvious? Or do they require an expert's interpretation?

Many of the changes proposed for health care violate one or more of these parameters. The improvement they offer is not that great. Or you will never know how big an improvement it will be for your organization until you have implemented it and worked with it for a year or two. Or it's actually more complex than what It replaces. Or it requires people to act in completely new ways.

Health care adds a peculiar element to this diffusion-of-innovation mix: Most health care innovations, especially technological ones, do not replace what came before, but are simply added in as another tool in the bag, often used along with all the others.

These three filters together will help you decide what is a truly important change, how ready your organization is for change, and whether it will adapt to this change with ease or difficulty.

RELATED ARTICLE: Change Filters as Graphic Decision-Making Tools

You can turn these three "change filters" into graphic decision-making tools, either for your own thinking, or for a meeting, quite simply For each filter, draw five lines coming out from a center point Put a "zero" in the center and a "five" at the end of each line. Label each line with the name of one of the five parameters of the filter.

The first filter

For instance, for the first filter, you might label the five lines "innovation," cost-cutting," "quality" "access to capital," and "advances mission." By yourself, or as a group, ask how well the proposed change does along each line. If it is a major improvement, give it a "five," a little improvement gets a "one" or a "two," no improvement gets a "zero."

Now draw lines between the points you have made. The amount of area within the lines shows your feeling for how important a change this could be. A big pentagon shows a highly important, desirable change. A tiny one is unimportant.

One with big spikes in one or two directions needs to be evaluated carefully: Are there ways to tinker with it to make the shape larger and more full? Perhaps it cuts costs and increases quality, but does little to advance the organization's mission. Could some change in approach make it conform more to the mission without decreasing their cost and quality sides?

The second filter

For the second filter, the five lines represent husbanded resources, abundant relationships, abundant information, distributed power, and a common story. Here a big pentagon represents an organization that is capable of easy and powerful change.

The third filter

For the third filter, the five lines represent relative advantage, compatibility with existing values and behaviors, simplicity trialability and observability. Here a big pentagon represents a change that will be an easy sell, a small one a real battle.

Joe Flower is Principal of The Change Project, In Larkspur, California. He has written about change in health care for over a decade. Author of hundreds of articles, he is a Contributing Editor for the Healthcare Forum Journal and New Scientist, a system host of The Well Computer Conference, and a faculty member of HealthOnline. If any of the ideas presented in this column resonate with your experience, drop Joe a line at The Physician Executive, or at [e-mail] on the Internet.