Growth Changes at Nestle

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Bartunek and Moch (1987) have written that a first order change is one in which "incremental changes occurring within particular schemata already shared by the client system". Second order changes are "modifications in the shared schemata themselves" and third order changes are "the development of the capacity of the client system to change the schemata as events require." By these definitions, the changes at Nestle have been first order changes. The company moves slowly in response to its external environment. The company grew over the course of decades, and it is by this same pace of incremental change that it continues to grow. Consider the claim that Nestle is "always restructuring" and takes charges on that restructuring every year. This stands as evidence of first-order change. The company already has a system, and the changes within the context of that system are minor and incremental a divestiture here, a new product there. The system itself remains, Nestle as a global conglomerate. The company does have the ability to adapt to its surroundings, but the adaptations highlighted in the case are insufficient to qualify as third-order changes. A third-order change would need to be much more significant, like a substantial change to the nature of the business. If Nestle had switched to making cars in the 1950s and today is a computer OEM in China, that would be a better example of an organization capable of third-order change. Alas, Nestle is essentially the same

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